Altria
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As Juul announces mass layoffs, a new lawsuit alleges it shipped a million contaminated pods
A lawsuit filed a by former Juul executive alleges that the company knew a batch of contaminated e-liquid had been used in about one million pods shipped to retailers earlier this year, but did not inform customers. The lawsuit, first reported by BuzzFeed, was brought by Siddharth Breja, former senior vice president of global finance at Juul from May 2018 to March 2019, who alleges he was fired after complaining about the contaminated pods.
News of the lawsuit comes the same day as Juul’s announcement it will lay off about 500 people, or 10% to 15% of its workforce, and the departure of four executives, including chief financial officer Tim Danaher. Juul is currently under scrutiny by the Food and Drug Administration, which claims the startup made misleading statements about its product and targeting of teens.
In the lawsuit, Breja claims that during a meeting on March 12, he learned a contaminated batch of mint e-liquid was used to make 250,000 refill kits, or a total of one million pods, that had already been shipped to retailers.
Breja alleges that when he complained about Juul’s refusal to issue a product recall or health and safety notice, Danaher said doing so would cost the company billions of dollars in lost sales, hurting its then-$38 billion valuation. About a week later, Breja says the company fired him, telling him that it was because he had misrepresented himself as former chief financial officer at Uber. In the lawsuit, Breja says the claim was “preposterous,” and that he had accurately represented his former position as a chief financial officer of a division at Uber.
In the lawsuit, Breja also claims that Juul wanted to sell pods that were almost a year old and when he asked the company to include an expiration or best by date, or a date of manufacture on the packaging, he was told by former CEO Kevin Burns that “half our customers are drunk and vaping like mo-fos, who the fuck is going to notice the quality of our pods?”
In an email, a Juul spokesperson said “Mr. Breja’s claims are baseless. He was terminated in March 2019 because he failed to demonstrate the leadership qualities needed in his role. The allegations concerning safety issues with Juul products are equally meritless, and we already investigated the underlying manufacturing issue and determined the product met all applicable specifications. The company will vigorously defend this lawsuit.”
TechCrunch has contacted for comment the law firm representing Breja. In a statement to BuzzFeed, Breja’s attorney Harmeet Dhillon said “Mr. Breja became aware of very concerning actions at the company, and he performed his duty to shareholders and to the board by reporting these issues internally. In exchange for doing that, he was inappropriately terminated. This is very concerning, particularly since some of the issues he raised concerned matters of public safety.”
Burns was replaced in September by K.C. Crosthwaite, a former executive at Juul’s largest shareholder Altria . A replacement for Danaher has not been announced yet.
Updated with statement from Juul.
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FDA chief summons Altria and JUUL to Washington to discuss teen vaping
The head of the U.S. Food and Drug Administration is calling Altria and Juul to meet in Washington to discuss their tie-up and how it impacts the companies’ plans to combat teen vaping. Earlier this year, Altria href=”https://techcrunch.com/2018/12/20/juul-labs-gets-12-8-billion-investment-from-marlboro-maker-altria-group/”>invested $12.8 billion investment in Juul.
“After Altria’s acquisition of a 35 percent ownership interest in JUUL Labs, Inc., your newly announced plans with JUUL contradict the commitments you made to the FDA,” Commissioner Scott Gottlieb wrote in a strongly worded letter addressed to Altria chairman and chief executive, Howard A. Willard III.
“When we meet, Altria should be prepared to explain how this acquisition affects the full range of representations you made to the FDA and the public regarding your plans to stop marketing e-cigarettes and to address the crisis of youth use of e-cigarettes,” Gottlieb wrote.
The commissioner sent a similarly worded message to Juul’s chief executive, Kevin Burns.
As part of that deal, Juul is getting access to Altria’s retail shelf space; the company is sending out direct communications pitching Juul to adult smokers through cigarette pack inserts and mailings to the company’s database of customers; and the two will combine the power of their respective sales and distribution backend which reaches roughly 230,000 retailers across America.
The recent deal comes only months after Juul released its plan to combat teen vaping — something the FDA had required of the company.
In the commitments it made last year, the vape manufacturer and retailer said it would expand its secret shopper program to make sure underage buyers weren’t getting access to its products; pull its campaigns from social media; and limit sales of non-traditional cigarette flavors (menthol, mint, Virginia tobacco, and “classic” tobacco) to the company’s website — which requires age verification.
Gottlieb isn’t the only one who has a problem with Juul. We’ve written about how the company has lowered the barrier to entry for nicotine addiction.
For Gottlieb, the addition of Altria’s marketing firepower and network of 230,000 retail locations likely isn’t an indicator of a company that’s willing to winnow down access to its products.
“I am aware of deeply concerning data showing that youth use of JUUL represents a significant proportion of the overall use of e-cigarette products by children. I have no reason to believe these youth patterns of use are abating in the near term, and they certainly do not appear to be reversing,” Gottlieb wrote. “Manufacturers have an independent responsibility to take action to address the epidemic of youth use of their products. My office will contact you to arrange a meeting to discuss these issues. Pursuant to your request, we intend to schedule this as a joint meeting with both Altria and JUUL.”
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