Colorado high court rules the state can’t hold executives of vape maker JUUL personally liable for marketing.

Colorado may not hold four executives of vape manufacturer JUUL personally liable for the company’s allegedly deceptive marketing practices to adolescents and young adults, the state Supreme Court ruled Monday.

Although the Colorado Attorney General’s Office warned a decision in favor of the high-level JUUL representatives would amount to immunity for any corporate officers who initiate nationwide marketing campaigns that violate state law, the Supreme Court insisted that was not the intent of its decision.

“Here, the State never alleges that JUUL identified Colorado as a priority or that defendants visited Colorado for business purposes,” wrote Justice Richard L. Gabriel in the Sept. 26 opinion. “Instead, the State contends only that defendants participated to some extent in JUUL’s nationwide efforts to market its product.”

The Supreme Court’s ruling reverses a Denver trial judge who believed the attorney general’s allegations were “quite specific” about how Adam Bowen and James Monsees, co-founders of JUUL Labs, Inc., and board members Nicholas Pritzker and Riaz Valani worked as a group to target the company’s marketing toward Colorado youth.

Lawrence Pacheco, a spokesperson for Attorney General Phil Weiser, did not address the broader implications of the court’s ruling, but confirmed the lawsuit would proceed against the company itself.

“The Department of Law’s efforts to hold JUUL accountable are unaffected by this opinion from the court,” Pacheco said. “Attorney General Weiser will continue to press forward with the state’s lawsuit to remedy the harm the company caused with its deceptive marketing and messaging campaign that targeted youth and downplayed the health risks of its e-cigarettes.”

Weiser’s office filed a lawsuit against JUUL in July 2020 alleging it violated the Colorado Consumer Protection Act by recklessly engaging in deceptive marketing practices, advertising its “addictive, ultrahigh nicotine product” to young adults and adolescents.

“JUUL unfairly and unconscionably, knowingly and recklessly, downplayed the presence of nicotine in its product to make it more appealing, particularly to youth,” the government wrote.

Then in September of last year, the attorney general’s office submitted an amended, 141-page complaint adding Bowen, Monsees, Pritzker and Valani to the lawsuit, referring to them as the “management defendants.” The government accused them of orchestrating JUUL’s overall strategy of youth marketing, including the hiring of young models as “brand ambassadors” for its electronic cigarette products and hosting more than 60 promotional events in the Denver metro area.

In the view of Weiser’s office, JUUL and the management defendants were responsible for escalating the percentage of Colorado high school students who had recently used an e-cigarette to more than a quarter by 2017, twice the national average for teen vaping.

The management defendants sought to dismiss the claims against them, arguing that as California residents, they had no contact with Colorado or aimed any of their allegedly-illegal activities toward the state.

In January 2022, Denver District Court Judge J. Eric Eliff turned down the motion to dismiss, even while conceding the attorney general’s office had failed to single out the specific actions of the individual JUUL officers.

The government “nowhere attempts to connect the individual defendants directly to Colorado,” Eliff wrote. Nonetheless, the lawsuit “is quite specific regarding the actions of the group of them.”

Eliff added Colorado has an interest in addressing harms to its consumers, and the government had alleged the management defendants directed and controlled the deceptive marketing tactics “partially directed to Colorado.”

The management defendants turned directly to the Supreme Court, which then exercised its authority to hear an appeal straight from a trial court under rare circumstances. They told the justices that allowing corporate directors to have personal liability simply if their company sold products in Colorado or any other state would have “significant public policy implications” by deterring people from serving on company boards.

“Second, it would naturally drive up the costs of doing business in Colorado,” their attorneys wrote.

The attorney general’s office countered that if the defendants prevailed, it would immunize corporate officers for their fraud as long as they targeted multiple states, and not just Colorado. The Colorado Trial Lawyers Association also submitted a brief in support of the government.

“Corporate directors who believe they will be shielded by the corporation and avoid personal liability will not be deterred from misconduct. As corporate directors directly profit from their corporation’s tortious acts, they should share in the responsibility of compensating individuals harmed by their actions,” wrote the group.

While noting the parties had cited to court cases from outside of Colorado that bolstered each side of the argument, the Supreme Court ultimately sided with the management defendants. Gabriel, in the court’s opinion, identified only three activities that had a specific connection to Colorado: First, the “sampling events” JUUL held with brand ambassadors in Colorado. Second, JUUL used youth-oriented images in its Colorado marketing. Third, JUUL’s chief executive authored a letter to the editor about youth vaping that The Denver Post published.

But it cannot be the case, the court concluded, that corporate managers can be held personally liable when a nationwide marketing campaign reaches, but does not target, a particular state.

“A defendant can certainly target multiple states simultaneously, and had the record shown that these defendants individually targeted Colorado, among other states, then our conclusion might have been different,” Gabriel wrote. “And we perceive nothing in our analysis that can reasonably be read to immunize these defendants from their alleged actions.”

Attorneys for the management defendants did not immediately respond to a request for comment. The Centers for Disease Control and Prevention warns that e-cigarette and nicotine use can expose young people to harmful aerosols and alter their brain development.

Earlier this month, JUUL agreed to a $438.5 million settlement with 34 states and territories that also addresses the company’s vape and e-cigarette marketing practices to those under 35 years old. Colorado was not a party to the settlement.

Justice Maria E. Berkenkotter did not participate in the case.

The case is Colorado v. JUUL Labs, Inc. et al.