Today's Paper Obits Digital FAQ Newsletters Coronavirus 🔴 Cancellations 🔴NWA Screening Sites Virus Interactive Map Coronavirus FAQ Crime Razorback Sports Today's Photos Puzzles

Juul Labs Inc.'s founders used a $12.8 billion investment from Altria Group Inc. to enrich themselves, a minority shareholder in the e-cigarette maker claimed in a lawsuit.

The board broke laws that govern its obligations to shareholders, according to the lawsuit, which singles out the company's co-founders, Adam Bowen and James Monsees. The suit, filed in California state court last week, says each sold $500 million in stock after the Altria deal while denying similar opportunities to minority shareholders.

"Bowen and Monsees are using their control of the company to cause the board to rubber-stamp their self-dealing conduct," according to the plaintiff, Daniel Grove. The suit seeks to block Juul's board from approving further transactions involving its members and to make the company hold annual meetings. It also seeks to represent others as a class of plaintiffs.

Juul's board should have used the Altria money to invest in the company's controls to avoid a $19 billion loss of value as Juul was beset by lawsuits and regulatory actions, Grove claims.

After negotiating the investment by Altria, which was made in December 2018, Juul's directors paid themselves a special dividend and bonus, taking liquidity out of the company that could have been used for general corporate purposes, Grove says. The board also put restrictions on stock sales by minority shareholders that didn't apply to its own members, he says.

Juul said in a statement that the suit is "without merit and filled with factual inaccuracies."

"We remain focused on resetting the vapor category in the U.S. and earning the trust of society by working cooperatively with attorneys general, regulators, public health officials, and other stakeholders to combat underage use and convert adult smokers from combustible cigarettes," it said.

The suit adds to a growing number of legal actions against San Francisco-based Juul. They include parents who say the company's sleek devices addicted their teens and school districts that argue they're bearing the financial burden of widespread addiction. Juul has already scaled back its business, pulling most of its flavored vaping products from the market and curbing much of its advertising and lobbying.

The complaint was reported last week by legal news service Law360.

In a suit of its own, filed against Grove just before his filing, Juul seeks to stop him from gaining access to its books and records, saying he signed a waiver of his rights to do so.

Grove's lawyer said his client is seeking information about payments to Juul board members related to the Altria deal and that under California law he didn't sign away those rights. The lawyer said Juul's lawsuit against Grove is "without merit."

Business on 01/14/2020

Print Headline: Juul founders sued over investment

Sponsor Content


COMMENTS - It looks like you're using Internet Explorer, which isn't compatible with our commenting system. You can join the discussion by using another browser, like Firefox or Google Chrome.
It looks like you're using Microsoft Edge. Our commenting system is more compatible with Firefox and Google Chrome.