In re Juul Labs, Inc. Antitrust Litigation

Background

JUUL Labs, Inc. and individual defendants Nicholas Pritzker and Riaz Valani moved to compel arbitration of the claims brought by two named Direct Purchaser Plaintiffs, Jake Sieber and Robert Thompson. JUUL separately moved to dismiss the request for injunctive relief in Count Three of the Third Amended Consolidated Class Action Complaint.

The arbitration dispute concerned purchases made through JUUL websites. The court had previously found that some earlier website designs did not provide enough notice of the arbitration provision, while later designs did. Sieber and Thompson allegedly logged onto the JUUL website after July 2019 changes and before April 2021 changes. The relevant page placed a disclosure below the “SIGN IN” button stating that, by proceeding, the user agreed to JUUL’s linked Terms and Conditions.

Arbitration ruling

The court held that the website’s design provided sufficient constructive notice. Constructive notice means notice the law treats a person as having received based on the circumstances, even without proof that the person actually read the terms. The court compared the page with Ninth Circuit decisions involving sign-in pages that placed a warning about linked terms near the sign-in button. It found no material difference between the page used by Sieber and Thompson and designs previously found adequate.

The court therefore granted JUUL’s motion to compel arbitration of Sieber’s and Thompson’s individual claims. The directors had joined the motion and argued that the same arbitration agreement covered the claims against them. The plaintiffs did not respond to that argument, and the court granted the directors’ motion to compel as well. The court did not decide the alternative argument that the class allegations should be struck under the class-action waiver. It also stated that the effect of a previously discussed shortened limitations period was for the arbitrator to decide.

Injunctive-relief ruling

JUUL argued that the plaintiffs lacked standing—an Article III requirement that a plaintiff show a legally sufficient injury and a basis for the requested relief—to seek an injunction. JUUL relied on public records showing that Altria had exercised its option to be released from the challenged non-compete provision, relinquished its ownership stake in JUUL, and purchased a JUUL competitor.

The plaintiffs identified requests for a declaration that the transaction agreements were invalid and unenforceable, relief addressing alleged anticompetitive effects, and an injunction against continuing the alleged conspiracy or agreements. They argued that JUUL and Altria could recombine in the future and that they should not have to allege an intent to make future direct purchases because doing so could expose them to arbitration.

The court granted the motion to dismiss the request for injunctive relief. It found that, given the unwinding of the challenged agreement and Altria’s interest in a JUUL competitor, the risk of a future combination was too implausible to establish standing. The dismissal was without prejudice. The court stated that the claim could be realleged with leave of court if evidence of changed circumstances or other facts made a potential recombination plausible.

Disposition

Judge William H. Orrick granted the motion to compel arbitration as to Sieber and Thompson and granted the directors’ motion to compel arbitration. He also granted the motion to dismiss the claim for injunctive relief, without prejudice.