Altria Group, Inc.
“Altria knew that JUUL was intentionally marketing to children.”
Michael J. Wernke
Michael J. Wernke
In an important victory for investors, Pomerantz and co-lead counsel reached a $90 million settlement agreement with defendants on behalf of investors in Altria Group, Inc. The settlement represents one of the largest recoveries ever achieved in a securities class action in Virginia and the Fourth Circuit.
Altria manufactures and markets cigarettes, smokeless products, and wine in the United States. JUUL is an e-cigarette company.
On December 20, 2018, Altria and JUUL issued mirrored press releases announcing that Altria had closed a $12.8 billion investment in JUUL -- a 35% economic interest in the e-cigarette company -- with JUUL purportedly remaining fully independent. In its press release, Altria claimed that the related service agreements would accelerate JUUL’s mission to switch adult smokers to e-vapor products and bluntly represented that “[JUUL’s] intent was never to have youth use JUUL products.”
The complaint alleges that, between December 20, 2018 and September 24, 2019, the defendants misrepresented their business operations and prospects while failing to disclose to investors that JUUL’s marketing scheme was directed at minors and JUUL’s products were harmful and not for tobacco cessation.
On March 12, 2021, the Honorable David J. Novak of the United States District Court for the Eastern District of Virginia denied defendants’ motions to dismiss the complaint.
Judge Novak notably upheld allegations against both Altria and JUUL (as well as each company’s senior executives), holding that even though the plaintiffs purchase Altria securities (not JUUL securities) JUUL “can face liability for its own statements that Altria investors may have relied upon.” The court found the alleged statements material, holding that “[p]laintiffs have alleged an abundance of facts showing that JUUL targeted youth and sufficient facts that Altria and JUUL knew of this marketing scheme and the risks that it posed to JUUL and Altria. However, they chose not to inform investors about these risks,” which disclosure “would have altered the ‘total mix’ of information available that a reasonable investor would have considered.” In so holding, the court notably rejected defendants’ truth-on-the-market defense because “[d]efendants actively denied that it intended to target youth with its marketing,” and the defense requires a factual finding inappropriate at the motion to dismiss stage.
Judge Novak upheld plaintiffs’ scienter allegations, stating that, “Plaintiffs allege that Altria desperately wanted to acquire JUUL, regardless of the risks, and wanted investors to react favorably to the news of the investment. Essentially, [p]laintiffs allege that Altria staked its future on JUUL, increasing the need and incentive to omit or misrepresent the serious risks created by JUUL’s marketing to youth.”
Judge Novak upheld plaintiffs’ scheme liability allegations, holding that “[p]laintiffs allege that [d]efendants acted in concert to deceive the FDA into not regulating mint so that they could continue to target youth with the mint product, including submitting falsified data and studies,” and “rather than apprising investors of the risks associated with the effort, [d]efendants continued to publicly deny JUUL’s intention of targeting youths in an effort to avoid further litigation or regulation that could curb their values.”
Pomerantz’s Altria litigation was led by partners Michael J. Wernke and Jeremy A. Lieberman, along with co-lead counsel.
Klein, et al. v. Altria Group, et al., No. 3:20-cv-00075 (E.D. Va.)
Class Period: December 20, 2018 to February 21, 2020, both dates inclusive
For violations of the Securities Exchange Act of 1934