Recently, NJOY LLC filed a complaint in the U.S. District Court for the Central District of California against more than 30 foreign and domestic defendants that manufacture, market, distribute, and sell tobacco products in an (indirect) effort to force them to comply with federal and state laws. R.J. Reynolds Tobacco Company and R.J. Reynolds Vapor Company (collectively, RJR) also recently filed a complaint with the U.S. International Trade Commission (ITC) against more than 25 foreign and domestic manufacturers, distributors, and retailers (collectively, the respondents) that seeks to prevent the import and resale of certain tobacco products. These lawsuits serve as two examples of how industry is trying to take independent legal action to target allegedly noncompliant actors and force them to comply with applicable law.
The NJOY Complaint
The NJOY case specifically involves flavored, disposable electronic nicotine delivery systems (ENDS). NJOY generally alleges that the defendants are unlawfully manufacturing, marketing, distributing, selling, and/or marketing their flavored, disposable ENDS because (1) they are not authorized pursuant to FDA marketing granted orders as part of the premarket tobacco product application process; (2) California bans the retail sale of flavored ENDS; and (3) the defendants do not comply with the Prevent All Cigarette Trafficking Act’s (the PACT Act) delivery sale age-verification, registration and filing, record keeping, tax payment, and labeling requirements.
To have standing to bring the lawsuit, NJOY relied on personal rights of action under the California Unfair Competition Law, the California False Advertising Law, the Lanham Act, and the PACT Act. In other words, NJOY alleges that the defendants are making false and misleading statements, either directly or indirectly, about their legal authorization under federal and state law to sell their products in California and are violating the PACT Act. Furthermore, NJOY alleges that these statements and noncompliance have allowed the defendants to increase their market share of ENDS in California at the expense of NJOY’s lawfully marketed ENDS products. As a result, NJOY asks the court to enjoin and restrain the defendants from marketing, distributing for sale, or selling any flavored, disposable ENDS in California that violate the state’s flavor ban; importing, marketing, distributing for sale, or selling any flavored, disposable ENDS in the U.S.; making false and misleading statements when selling, offering for sale, promoting, advertising, marketing, or distributing flavored, disposable ENDS; and competing unfairly with NJOY in any other manner. NJOY also asks the court to provide appropriate restitution for harm suffered by NJOY as a result of defendants’ unfair competition; require defendants to account for and pay all profits received by defendants from their acts to NJOY; require defendants to account for and pay NJOY damages to which the company is entitled to as a result of the defendants’ false and misleading statements; award NJOY actual, compensatory, incidental, and consequential damages; award NJOY enhanced, treble, and/or punitive damages; and award NJOY reasonable attorneys’ fees and the costs of this action.
The RJR Complaint
Like the NJOY complaint, the RJR complaint only focuses on flavored, disposable ENDS. RJR generally alleges that respondents import and sell products that are not FDA authorized, are falsely advertised and marketed as authorized for sale in the U.S., fail to comply with federal registration and reporting requirements, and violate U.S. Customs laws regulating imported goods. RJR further alleges that respondents’ actions harm it because adult consumers are buying respondents’ products rather than products from manufacturers who are complying with federal laws. RJR also claims that traffickers of respondents’ products intentionally and systematically market those products to youth.
For these reasons, RJR alleges that respondents engage in unfair competition and unfair acts in violation of Section 337 of the Tariff Act. RJR asks the ITC to (1) issue, at a minimum, a limited exclusion order directed to each of the respondents, prohibiting all flavored, disposable ENDS that are manufactured abroad, sold for importation, imported, or sold in the U.S. after importation from entry into the U.S.; and (2) issue permanent cease and desist orders that prohibit respondents and their affiliates from, among other things, engaging in the importation, sale, sale for importation, marketing, advertisement, distribution, offering for sale or lease, use after importation, sale after importation, licensing, packaging, transfer (except for exportation), or distribution of all unfairly traded flavored, disposable ENDS.
While litigation is an option for manufacturers to seek enforcement of regulatory requirements, there may be other options for addressing noncompliant competitors. For example, industry members can encourage federal or state agencies to take enforcement action. One such way an industry member can do this is to conduct a private investigation with the goal of providing resource-strapped government agencies the evidence they need take enforcement action. In any event, the NJOY and RJR cases are worth monitoring going forward, as it remains to be seen whether their legal strategy of indirectly forcing their competitors to comply with federal and/or state law will be successful.