Tuesday, September 21, 2010

A Case of Legalized Extortion

I started to write this article in August, right after California Attorney General Edmund G. Brown Jr. announced a settlement with Sottera, the corporation that markets the NJOY electronic smoking alternatives. http://ag.ca.gov/newsalerts/release.php?id=1965 Unfortunately, I was sidetracked by more pressing issues, and I let the matter drop.

Recently, however, it became clear to me that this issue needs to be addressed when I read a forum entry that cited the settlement as proof that the company has been engaged in wrongdoing. The writer argued:
“Why would Sottera/NJOY settle/agree not to sell to minors and to discontinue advertising smoking cessation claims/health claims with the CA AG office (and pay $85,000 in fines) if they had not previously been caught doing so?”

I pointed out that a lawsuit constitutes an accusation, not legal proof, and that the most logical explanation for signing a settlement was that Sottera’s attorneys provided an estimate of what taking the case through the California court system would cost. The total was probably much higher than the $85,000 extorted by Brown. Were this the only legal battle Sottera faced, it might be worth while to go the distance. However, Sottera is engaged in a lengthy and costly legal battle with the U.S. Food and Drug Administration (FDA) in the Federal court system.

And it is this legal battle at the Federal level that is at the core of Brown’s suit. Late in 2008, the FDA began seizing incoming shipments of electronic cigarettes as unapproved new drugs. Smoking Everywhere filed suit against the FDA, asking for an injunction against product seizures. Sottera, which had also had large shipments seized, joined the suit as an Intervenor Plaintiff.

Apparently piqued at the audacity of the two companies for suing the FDA, the director of Action on Smoking and Health (ASH) decided to take matters into his own hands. He sent a letter to all 50 Attorneys General of each state, asking them to take legal action against Smoking Everywhere and NJOY

California’s Brown and Oregon Attorney General John Kroger apparently saw a PR opportunity and filed suit against both companies. The filings repeated the unfounded accusations from the ASH letter. Neither Attorney General bothered to conduct any type of investigation regarding the truthfulness of the accusations.

Had either AG even bothered to visit the NJOY web site, they would have seen that visitors are asked to verify that they are of legal smoking age before proceeding. The accusation that the products are targeted to non-smoking minors is further belied by text on the package of replacement cartridges:

"NJOY products are intended for use by those of legal smoking age and older, not by nonsmokers or children, nursing or pregnant women, or persons with or at risk of heart disease, high blood pressure, diabetes, or taking medicine for depression or asthma."

Nevertheless, the California Consent Judgment requires Sottera to promise not to market its products to minors. It should be noted that the Consent Judgment stipulates, “The Parties enter into this Consent Judgment without a trial. It does not constitute evidence of an admission by the Defendant regarding any issue of law or fact alleged in the Complaint.” http://ag.ca.gov/cms_attachments/press/pdfs/n1965_sottera_consent_judgment.pdf

Bottom Line: Signing the Consent Agreement does not constitute an admission of guilt on the part of Sottera/NJOY.

Most of the other items stipulated in the Injunctive Relief section of the Consent Judgment involve Sottera promising to begin performing actions that it has been doing ever since the business started, or promising to stop doing things it never did in the first place.

“Defendant shall have and maintain a system for quality control of Covered Products to ensure that they are manufactured to appropriate specifications,” reads the Consent Judgment. “TESTED IN THE USA. GLOBALLY DISTRIBUTED. MADE IN CHINA,” reads the NJOY package text.

“Defendant shall not advertise Covered Products as smoking-cessation devices unless or until they have been approved by the Federal Food and Drug Administration as such under its authority to regulate drugs, devices, or tobacco products,” reads the Consent Judgment. “NJOY products are not a smoking cessation product and have not been tested as such,” reads the NJOY package text.

“Defendant shall not sell Covered Products containing vitamins or other substances intended to portray that using Covered Products will improve one’s health, without competent, reliable scientific evidence to support the implied health claim,” reads the Consent Judgment. This requirement is not too difficult for NJOY to implement, in view of the fact that the company has never sold cartridges containing anything other than propylene glycol, water, and flavoring, with optional nicotine.

Some of the provisions of the Settlement Agreement are downright absurd. The requirement, “Defendant shall not make claims about Covered Products having no tar without competent reliable scientific evidence to prove the claims,” illustrates ignorance of basic science. Numerous laboratories have tested the content of electronic cigarette vapor, but none has ever bothered to test for the presence of tar—for very good reason. Tar is created by the process of combustion. Nothing is burned in an electronic cigarette.

The most absurd requirement of all is “Defendant shall not make claims about Covered Products containing no tobacco without competent reliable scientific evidence to prove the claims.” It does not require a rocket scientist to look inside an electronic cigarette cartridge to verify that there is no tobacco present.

So what do you call it when the AG extracts a "fine" of $85,000 from a company that has committed no wrongdoing? Some would call that extortion. It adds insult to injury for the AG’s press release to malign the company by implying that wrongdoing has been committed in the past.

1 comment:

  1. I'm not a lawyer, but I would venture to say that Sottera has a clear case for libel against the AGs on this. The wording of the agreement specifies actions the company will NOT take (e.g. selling e-cigs to minors). The agreement says **NOTHING** (from what I have seen of it) about "stopping" the practice -- probably because Sottera never engaged in it or admitted/found-guilty-of engaging in it.

    The AG statement seems to treat the question as a "Have you stopped beating your wife?" question.

    Since it sounds like Sottera "settled" to pay that $85k there's probably nothing they can do to change that. However, a libel suit against the AGs for ten times that amount would sound reasonable.

    Michael J. McFadden
    Author of "TobakkoNacht -- The Antismoking Endgame"