Legal Clouds Gather over E-Cigarette Industry

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1 Legal Clouds Gather over E-Cigarette Industry By Yakov P. Wiegmann July 8, 2015 Casetext.com Less than a decade since their introduction in the United States, e-cigarettes, vape pens, personal vaporizers, and other Electronic Nicotine Delivery Systems (ENDS) have gained widespread popularity as an alternative to traditional tobacco cigarettes. ENDS are battery-powered devices that are designed to mimic cigarettes by vaporizing a nicotine-laced liquid that is inhaled by the user. This allows the user, or vaper, to inhale nicotine without the combustion process found in traditional cigarettes. These devices have become very popular as an alternative to smoking. As the market for ENDS grows, so does the potential for tort litigation. The risks and benefits of ENDS are the subject of heated debate among the medical, scientific, public health, and regulatory communities. While most researchers acknowledge that ENDS are safer than traditional cigarettes, there is no consensus on how much safer they are. With no current federal regulation and an ever-evolving patchwork of state and local rules, vapers and ENDS suppliers have struggled with questions who may purchase ENDS, where the devices may be used, how they should be packaged, and what warnings, if any, should be placed on them. Health Effects ENDS are the subject of a number of ongoing studies, but due to their relative novelty their long-term health impacts are largely unknown. In a 2013 study published in Tobacco Control,the leading ENDS researcher Maciej Goniewicz and his colleagues found that although e-cigarettes release some carcinogenic compounds, they do so at levels far lower than traditional cigarettes. However, scientists from Portland State University contended, in a January 2015 letter to the New England Journal of Medicine, that e-cigarette use may carry a risk of cancer 5 to 15 times greater than smoking traditional cigarettes. That conclusion is based on data showing vapers may inhale formaldehyde-releasing agents. They estimated a vaper s daily exposure to formaldehyde could be more than 4.5 times that of a pack-a-day cigarette smoker.

2 Meanwhile, public health researchers have also been exploring the potential risks ENDS pose to non-users. A study published in March in conjunction with the FDA s second public workshop on e-cigarettes claimed that bystanders may be exposed to aerosol particles smaller than 1,000 nanometers, similar in size to tobacco smoke and diesel engine exhaust. The aerosol, according to the study s authors, contains nicotine, glycerin/glycols, artificial flavorings, and preservatives. Other scientists have disagreed with what they see as an alarmist interpretation of the results. And a 2014 Drexel University study found no evidence vapers were exposed to levels of hazardous substances in excess of recognized workplace exposure standards. Furthermore, vaping activists at the December 2014 FDA e-cigarette public workshop cautioned against misconstruing the outcomes of research to create false fears, arguing that many researchers are unfamiliar with the products and fail to base study protocols on real-world vaping practices. Sean Gore of the Oklahoma Vapor Advocacy League also emphasizes that ENDS help smokers quit, and unlike combustible cigarettes, ENDS do not pose a danger of second-hand exposure, in part because of the absence of side-stream smoke. Research into the potential risks (if any) of ENDS use is in its early stages. Even less is known about the effects of secondhand e-vapor exposure. Yet this research and the way that its findings are interpreted by the media and regulators may have the greatest potential to shape the products vapers turn to in their search for a safer alternative to smoking. Regulations Although there are growing concerns about the safety of ENDS, there are no federal regulations governing these products, and sales to minors are not prohibited in some states. Furthermore, most local and state smoke-free laws were enacted before ENDS were on the market, so while such laws do not explicitly mention ENDS, many feel the laws should encompass them as well.

3 The FDA has proposed regulations such as requiring a listing of ingredients, barring the use of terms such as light or low, and prohibiting free samples, but these rules have yet to take effect. However, according to a letter signed by more than two dozen state attorneys general, the FDA s proposed regulations do not go far enough. These state officials have urged the FDA to adopt stricter regulations aimed at limiting the availability and appeal of these products to children. First, they have urged the FDA to prohibit the use of flavors other than tobacco and menthol in e-cigarettes, similar to the restrictions on traditional cigarettes found in the 2009 Tobacco Control Act. This would ban flavors that some fear may appeal to children, such as cherry, bubblegum, coffee, and chocolate. Second, the state attorneys general argue that ENDS should face the same advertising and marketing rules as traditional cigarettes, such as the restriction of television commercials (currently, e-cigarette companies advertise their products on a number of TV networks, including MTV, VH1, Comedy Central, and ABC Family). The FDA has yet to take final action on these proposed regulations. In addition, many researchers have expressed concerns about product uniformity, material quality standards, and user-modified products. At the FDA s first public workshop on e-cigarettes, Dr. Goniewicz suggested minimizing risk by using USP-grade solvents and pure nicotine; testing inhalation toxicity of flavors and additives; employing good manufacturing processes; and using inert, airtight, light-resistant containers and sealed packaging to ensure product purity and prevent modification by retailers and users. Many fear, however, that a push against user-modified products may disadvantage smaller players in the market, who specialize in customizable open systems, and that extensive regulations may give large traditional tobacco manufacturers an edge over less wealthy competitors. However, in the past the FDA s attempts at regulating the e-cigarette industry have failed. In 2010, a landmark case named Smoking Everywhere was brought in the U.S. District Court for the District of Columbia (Smoking Everywhere, Inc. v. FDA, 680 F. Supp. 2d 62 (D. D.C. 2010)) by two e-cigarette distributors. They filed the case after shipments of their e-cigarettes were denied entry into the U.S. by the FDA. The FDA claimed their agency had authority to regulate e-cigarettes because under the Food, Drug, and Cosmetic Act ( FDCA ) they have authority to regulate articles that are drugs, devices, or drug/device combinations. The FDA argued that nicotine is a drug that affects the structure or function of the body, and that, as a nicotine delivery mechanism, e-cigarettes are medical devices. Conversely, the plaintiffs argued that e-cigarettes are not a drug, but instead the same as traditional cigarettes in their use and purpose.

4 The plaintiffs sought an injunction against the FDA regulating e-cigarettes as a drug-device combination and from denying entry of those products into the United States. The plaintiffs argued the FDA s authority over e-cigarette products did not extend beyond that of the FDA s more limited authority over traditional cigarettes. The district court agreed with the plaintiffs and granted the injunctions. The FDA appealed and the D.C. Circuit Court of Appeals affirmed the lower court s ruling. If e-cigarettes had been classified as nicotine-delivering medical devices, the products would require the FDA s premarketing approval, and would be required to demonstrate their safety and effectiveness, as well as be subjected to a number of other regulatory requirements. On the state level, New York Governor Andrew Cuomo proposed a ban on e-cigarettes throughout the state, wherever traditional cigarettes are banned. Governor Cuomo also wants to add e-cigarettes to the NYS Clean Indoor Air Act, which restricts where people can smoke traditional cigarettes. The proposal would also ban sales of all flavored nicotine for e-cigarettes. Are E-Cigarettes the New Mass Tort? Lawsuits related to the health effects of ENDS have, so far, mainly focused on state false advertising/deceptive practices statutes relating to claims that ENDS are being misleadingly marketed as a healthier alternative to tobacco cigarettes. But as this thriving ENDS industry grows it may soon generate mass tort personal injury litigation. Plaintiffs attorneys have already created web pages seeking to recruit potential claimants. Nor is potential litigation limited to the risks ENDS allegedly pose to users. Lawsuits may also allege poisoning caused by the ingestion of the highly concentrated liquid nicotine contained in e-cigarette cartridges. A number of such poisoning incidents have been reported, spurring calls for safer and child-resistant packaging. Product liability claims may also involve accessories such as chargers, which have been reported to malfunction, causing fires.

5 Lastly, in California e-cigarette companies are currently coming under fire from both the state and non-profit groups who claim that vaping products should carry warning labels pursuant to the state s Proposition 65 consumer protection law. Potential Liabilities False Advertising/Consumer Fraud Proponents of ENDS have presented them as an alternative to cigarettes and a way to help people quit smoking. However, the FDA has not recognized ENDS as an approved nicotine cessation aid. As a result, ENDS suppliers face the threat of class action litigation alleging false advertising and consumer fraud. Fumizer LLC, an e-cigarette manufacturer and seller, was sued in September 2014 in a California state court consumer fraud class action (Joseph Sheppard v. Fumizer LLC., case # BC558408, Superior Court of California, County of Los Angeles). The consumer s complaint alleged the company made false marketing claims that its vaporizers could help users quit smoking or lead to healthy smoking. Another class action was filed in Orange County California Superior Court against Lorillard Tobacco in April 2015, again claiming that the company falsely advertised their Blu brand e-cigarette as a safer and healthier alternative to tobacco cigarettes. (Larry Diek v. LOEC, Inc. et al., case # 8:15-cv-01026, Orange County California Superior Court). Plaintiffs law firms have posted online ads soliciting consumers to join in other class action litigation regarding ENDS. Nicotine Poisoning The rise in popularity of ENDS has been accompanied by an increase in calls to poison control centers and visits to emergency rooms related to liquid nicotine poisoning, which has been recognized as a growing safety concern among children 0 to 5 years old. The number of e-cigarette poisonings in children increased from seven in 2012 to 154 in Part of the problem has been identified as the marketing of liquid nicotine in a variety of bright colors and flavors that are appealing to children. As a result, in June the FDA put the industry on notice that it intends to start requiring nicotine exposure warnings and child-resistant packaging for liquid nicotine and nicotine-containing electronic cigarette liquid products. Suppliers that fail to give adequate warnings and provide safe packaging also face tort liability. The current lack of uniform standards for packaging and warnings presents a challenge to ENDS companies. Battery and Charger Fires ENDS use lithium-ion batteries and chargers, which can fail and cause fires if the built-in safety devices do not operate properly. Safety advocates have raised concerns that many low-cost ENDS products may lack safety devices altogether. The majority of ENDS used in the U.S. are imported from China, where most of these devices are manufactured without any regulations or safety standards. The U.S. Fire Administration ("USFA") issued a report in October 2014 that identified 25 e-cigarette fire incidents reported in the news media between 2009 and August The report concluded most of the incidents occurred while the battery was charging. The USFA also concluded most of the fires reported in the media were likely caused by the devices being connected to a charger that did not come with the device. This can lead to the battery being subjected to an excessively higher current, causing an explosion or fire. The report emphasized, however, that fires or explosions caused by e-cigarettes are rare. In January 2015, concerns about battery fires led the FAA to warn airlines that they should require passengers to pack e-cigarettes in carry-on bags rather than checked luggage. The FAA cited recent incidents in Boston and Los Angeles where e-cigarettes were blamed for causing fires. California s Proposition 65 Consumer Protection Law In California, the state Department of Public Health issued a 32-page report declaring e-cigarettes a community health threat and calling for them to be treated like traditional cigarettes. The report warned that the nicotine in e- cigarettes is just as addictive as in traditional cigarettes, and that the secondhand exposure that comes from e-

6 cigarettes includes at least ten chemicals on California's Proposition 65 list of substances known to cause cancer, birth defects, or other reproductive harm. The plaintiffs bar was not far behind. In February, the Center for Environmental Health (CEH) sued nineteen companies that sell e-cigarettes and e-liquids for failing to provide consumer warnings under Proposition 65 (Center for Environmental Health v. Space Jam Juice LLC., et al., case # RG , Alameda County California Superior Court). In bringing legal action, CEH states they expect to pressure the e-cigarette industry to conform to legal requirements for labeling, create mandatory product safety standards, and stop marketing practices that target children and teens. A previous CEH lawsuit ended tobacco advertising near California schools and required companies to donate 500 billboard months of advertising space to carry anti-smoking messages targeted at young people. Takeaways As the multi-billion dollar ENDS industry continues to grow, it will be the subject of intense scrutiny not only from regulators and public health advocates, but also from the tort plaintiffs bar. The current scientific and regulatory environment provides little guidance on issues such as marketing, warnings, packaging, and electrical component safety. This uncertainty compounds litigation risk. Because many states impose product liability on all businesses in a product s chain of distribution, the threat of mass tort litigation affects not only ENDS manufacturers, but also distributors, retailers, and suppliers of ingredients and accessories. Reproduced with Permission of Casetext.com Schiff Hardin LLP This publication has been prepared for the general information of clients and friends of the firm. It is not intended to provide legal advice with respect to any specific matter. Under rules applicable to the professional conduct of attorneys in various jurisdictions, it may be considered attorney advertising material. Prior results do not guarantee a similar outcome. For more information visit our Web site at