This case involved the City of Chicago bringing an enforcement action against two Minnesota corporations, Equte LLC and Juishy LLC, as well as Jeffrey Evenmo. The City alleged that the Defendants violated several sections of the Municipal Code of Chicago related to the sale of tobacco and electronic cigarette products. 

The City conducted an investigation which revealed that the corporate Defendants made 600 sales of electronic cigarette products and 100 sales of flavored liquid nicotine products to minors under the age of 21 in Chicago, in violation of city ordinances. The City then referred the case to the Corporation Counsel, which filed the enforcement action.  This enforcement action consisted of motions for partial summary judgment filed by both the City and the Defendant as well as the Defendants’ motion to exclude the testimony of City’s expert Sherry Emery about unfair marketing practices the Defendants engaged in by marketing tobacco products and accessories to minors in Chicago.

Equte and Juishy were both Minnesota corporations with their principal places of business in Minnesota. Equte, which Evenmo created between 2013 and 2014, sold e-cigarettes, vaping products, and other nicotine products on a website with the domain name vapes.com. Equte had its own bank accounts, filed corporate tax returns between 2016 and 2018, and issued profit and loss statements between 2017 and 2019. Evenmo could not recall when he founded Juishy, which marketed and sold flavored liquid nicotine products on vapes.com and Juishy.com. Although Juishy also operated social media pages, it did not generate as many sales as Equte. Juishy never had its own bank account, owned any domain names, or employed anyone. Although Evenmo was the final decisionmaker for the Corporate Defendants, he did not oversee day-to-day operations at their warehouse. On February 17, 2021, before the City served Defendants with process, Evenmo, the Corporate Defendants’ sole owner and CEO, administratively terminated Juishy. Then on May 11, 2021, also before the City served Defendants, Equte sold its domain page vapes.com to an unrelated party.

Public Health Expert Witness

Sherry L. Emery serves as a Senior Fellow in the Public Health Group and Director of the Health Media Collaboratory at NORC at the University of Chicago. She obtained her undergraduate degree in Political Economy from John Hopkins University. Dr. Emery went on to earn an MBA with a concentration in Business Economics from Columbia University. She later completed her PhD in City and Regional Planning at the University of North Carolina at Chapel Hill. With well over 100 articles published in peer-reviewed journals, Dr. Emery has established herself as a nationally recognized expert in tobacco control, media, and public health policy research.

Discussions by the Court

The Defendants moved to dismiss the case, arguing the Court lacked jurisdiction and that the claims were barred by the statute of limitations. The Court denied the motion, finding jurisdiction was proper based on diversity of citizenship and the amount in controversy, and that the statute of limitations did not apply due to the City’s immunity when asserting public rights.

After the parties completed fact discovery, both sides moved for partial summary judgment. The Defendants argued the Court should reconsider its rulings on jurisdiction with the benefit of a full factual record. The Court declined to reexamine its initial decisions. Defendants also raised a challenge related to the statute of limitations, claiming that the City’s allegations were time-barred. The Court determined that though the Municipal Code of Chicago allowed for the imposition of a fine, the City’s claims were not time barred. The Court also agreed that though Evenmo was properly subject to its jurisdiction, he could not be held personally liable for any fines assessed against the Corporate Defendants under the theory that he was their alter ego or the Corporate Defendant’s violations of the Municipal Code of Chicago.

The City conceded, and the Court agreed, that the undisputed facts showed the Corporate Defendants violated the ordinances prohibiting sales of tobacco and flavored nicotine products to minors. Thus, the Court entered judgment for the City on those claims. The City also moved for summary judgment on its unfair business practices claim, arguing the corporate Defendants’ use of automatic age verification systems allowing sales to under 21 year olds violated the ordinance. The Court, however, found that the Corporate Defendants’ use of automatic age-verification systems cannot constitute an unfair business practice under the Illinois Consumer Fraud and Deceptive Business Practices Act and denied the City’s motion on that theory.

The Defendants filed a motion to exclude the testimony of Sherry Emery, an expert retained by the City to opine on the Corporate Defendants’ marketing of electronic cigarettes and vaping products to youth online and on social media. The Defendants argued that Emery’s report and testimony were irrelevant to any material issue in the case. 

The Court explained that under the Federal Rules of Evidence and Daubert, an expert’s testimony is admissible if the expert is qualified, the methodology is reliable, and the testimony is relevant in that it will help the trier of fact understand the evidence or determine a fact at issue. The party seeking to admit the testimony must show it meets these requirements by a preponderance of the evidence. The Court noted that Daubert‘s specific factors for assessing reliability do not necessarily apply in every case, and that courts have wide latitude in performing the gatekeeping function for expert testimony.

The Defendants claimed Emery’s opinions were irrelevant because the City’s unfair business practices claim under the ordinance was limited to the code violations and failure to implement adequate age verification. The Court found this “misread” the City’s claims, as the City never acknowledged such a limitation and explicitly reserved the issue of whether the marketing violated the Municipal Code of Chicago for trial.

The Court explained that Emery’s report and opinions would help the jury determine whether the Corporate Defendants improperly marketed their products to minors under 21. The report extensively discussed the history of e-cigarette use, how companies leveraged social media to promote their products to youth, the use of flavors and themes that appeal to adolescents, and provided opinions that the Defendants’ social media marketing was potent with a youth audience. This would assist the jury in determining if the marketing efforts constituted an unfair business practice. 

The Defendants pointed to Emery’s admission that she did not review sales or age data. The Court found she did not need such data to opine on the nature of the advertisements and social media marketing. The Defendants could challenge the conclusions on cross-examination, which is the appropriate means to attack admissible but shaky evidence.

Held

In conclusion, because Emery’s report and testimony were relevant assess whether or not Defendants engaged in unfair marketing practices by marketing tobacco products and accessories to minors in Chicago, the Court denied the motion to exclude her as an expert witness under Daubert and the Federal Rules of Evidence 702. The Court declined to reexamine its initial decisions but held that that Evenmo cannot be held personally liable for any fines assessed against the Corporate Defendants. The Court granted in part and denied in part the City’s motion for summary judgment stating that Corporate Defendants’ use of automatic age-verification systems did not violate the City’s ordinances.

The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.

Key Takeaways:

The Court applied the Federal Rules of Evidence 702 and Daubert standard to determine the admissibility of Emery’s expert testimony. Under this standard, the proponent of the expert evidence must show the expert is qualified, the methodology is reliable, and the testimony is relevant to issues in the case.

Emery’s testimony was deemed relevant because her opinions on the Defendants’ social media marketing efforts which targeted the youth would help the jury evaluate whether the marketing practices in question constituted an unfair business practice that violated the city ordinance.
The Defendants argued Emery’s opinions were irrelevant because of perceived limitations on the claim for violations of Municipal Code of Chicago. But the Court found the City did not actually place such limitations on the claim.
The fact that Emery did not review sales or age data did not render her opinions irrelevant, as she opined on different issues regarding the nature of the marketing. Any limitations could be addressed on cross-examination.

Because relevance was established, the Court denied the motion to exclude Emery as an expert witness. Her opinions were found admissible under the Rules of Evidence and Daubert standards.

Tag: e-cigarettes