A new lawsuit has been filed against the e-cigarette manufacturer Juul Labs over allegations that the company is executing business maneuvers that unfairly benefit certain long-time investors in violation of their fiduciary duties. In a lawsuit made public on Oct 24, a group of investment funds, including D1 Capital Partners, accused the company of converting debt to equity in a way that allows some investors to “plunder” the company according to Bloomberg Law.
The lawsuit alleges that certain investors, such as Hyatt Hotels heir Nick Pritzker, are receiving favorable terms from Juul’s restructuring that would allow them to make profit at the cost of the company’s ability to keep its fiduciary duties. The plaintiffs have requested an injunction to bar Juul Labs from converting $1.9 billion in notes held by the company into equity that is allegedly worth “a fraction of its value.”
Juul Labs does have a history with certain investors that makes these allegations more than simple conjecture. For example, Nick Pritzker was one of Juul Labs’ largest initial shareholders before the e-cigarette company was purchased by the Altria Group Inc. in 2018. At that time, Pritzker made over $1 billion from Altria’s purchase of a 35% stake in Juul Labs according to the Wall Street Journal. Additionally, in a time when Juul’ future seems increasingly volatile and uncertain, Nick Pritzker and another long-time investor from California, Riaz Valani, have floated the idea of putting up money to cover Juul Labs’ operating costs and some legal costs in the near future.
Riaz Valani is a veteran investor in Juul Labs who shared the title of Juul’s largest investor with Pritzker before Altria bought its plurality share. Additionally, both Valani and Pritzker have also been longtime directors at Juul Labs. This close association with the company, the lawsuit argues, has led to them influencing the way in which Juul Labs restructures itself in order to allegedly provide a way for these individuals to profit even as the company itself flounders under the weight of hundreds of lawsuits over Juul’s advertising practices.
If the plaintiff’s allegations are found to be verifiable at trial, this may mean that Juul Labs has breached its fiduciary duty to its investors. According to the law, Juul Labs is required to wisely and responsibly manage investor money in order to get the best possible outcome to all parties without favoring any one stakeholder over another. Where this case will end up depends on what comes of the pretrial and discovery phases.
If you or a loved one have been harmed by e-cigarettes, defective drugs, harmful medical devices, or dangerous consumer products, you may be eligible for financial compensation. Contact Medtruth today for a free, no-obligation case review and begin your journey to justice.