San Francisco Wins $3M Settlement Over Flavored Nicotine

Case Background

In late 2024, the City and County of San Francisco initiated a significant legal battle against several major tobacco and nicotine product distributors. San Francisco City Attorney David Chiu filed a lawsuit alleging that these companies had systematically targeted young residents with addictive flavored nicotine pouches. The legal action came at a time when health officials grew increasingly concerned about a new generation of "nics" or "Zyns" that had skyrocketed in popularity among teenagers. Investigators discovered that despite strict local bans on flavored tobacco, these companies continued to ship fruity and minty nicotine products directly to San Francisco doorsteps through online sales. The lawsuit aimed to halt these illegal distributions and protect the public from what the city described as a "gateway to nicotine addiction".

Cause

The city based its case on the violation of specific public health and business laws. Specifically, the Plaintiffs alleged that the Defendants flouted San Francisco Health Code Section 19S.2, which strictly prohibits the sale or distribution of flavored tobacco products within the city. Furthermore, the city claimed these illegal sales constituted "unlawful business practices" under California’s Business and Professions Code Section 17200. The core of the legal cause was the Defendants' use of internet platforms to bypass local regulations, effectively allowing restricted flavored products to reach a vulnerable youth market.

Injury

While the case focused on regulatory violations, the underlying "injury" cited by the city involved the long-term health of San Francisco’s youth. The complaint highlighted that nicotine exposure during adolescence can permanently harm the developing brain, negatively impacting learning, memory, and attention. The city argued that by making these products easily accessible and attractive through flavors like berry citrus and peppermint, the companies were creating a new wave of nicotine dependency. Beyond individual health, the city contended that the Defendants’ actions threatened decades of progress in reducing youth tobacco use and placed an undue burden on the public health system.

Damages Sought

The People of California sought several forms of legal relief to address the alleged violations. First and foremost, they requested a permanent injunction to immediately stop the Defendants from selling or distributing flavored tobacco products to anyone in San Francisco. In addition to stopping the conduct, the city asked for substantial civil penalties. They sought $2,500 for each violation of the Business and Professions Code and an additional $1,000 for each violation of the San Francisco Health Code. The lawsuit also demanded that the Defendants cover the city’s attorneys' fees and the costs associated with the extensive investigation.

Key Arguments and Proceedings

The litigation involved a detailed look at the marketing and distribution tactics of modern tobacco giants. The city presented evidence from undercover investigations, showing how easy it was for residents including minors to order restricted items online.

Legal Representation

Plaintiff(s): The People of the State of California and the People of the City and County of San Francisco

• Counsel for Plaintiff(s): Yvonne R. Meré | Ronald H. Lee | Nancy E. Harris | Julie Wilensky | David Chiu.

Defendant(s): Rogue Holdings, LLC | Swisher International, Inc | Northerner Scandinavia, Inc | Lucy Goods, Inc.

• Counsel for Defendant(s): Rohit A. Sabnis | John A. Conkle

Key Arguments or Remarks by Counsel

The City Attorney’s office argued that the Defendants intentionally marketed nicotine pouches as "discreet" and "smokeless" to help users avoid detection by parents and teachers. Counsel emphasized that these pouches deliver a high concentration of nicotine—often more efficiently than traditional cigarettes—making them particularly dangerous for non-smokers. They noted that the low entry price and "candy-like" flavors were a deliberate strategy to hook a new generation. In response, counsel for the Defendants generally denied the allegations and argued that the city’s characterization of the law was overly broad.

Claims

The legal team for San Francisco organized their case around two primary legal pillars.

Violation of the San Francisco Health Code

The city argued that the Defendants violated the local flavor ban by selling products like "berry citrus" and "peppermint" nicotine pouches. They pointed to specific transactions where investigators successfully purchased these items from the Defendants' websites and had them shipped to San Francisco addresses.

Unfair Competition and Unlawful Business Practices

By breaking the health code, the city alleged that the companies gained an unfair advantage over law-abiding local retailers. This claim allowed the city to seek penalties under California’s broad "Unfair Competition Law," which targets any business act that is forbidden by law.

Defense

The Defendants filed formal answers to the complaint, challenging the city's standing and the specifics of the allegations. Lucy Goods, Inc., for instance, admitted it was a Delaware corporation but denied that it operated out of the headquarters location listed by the city. The defense argued that the city's investigator's single purchase did not constitute a widespread pattern of illegal behavior. They also contended that some of the city's allegations were "legal conclusions" rather than facts, and therefore did not require a detailed response in Court.

Settlement

After facing the city’s evidence and the prospect of a lengthy trial, the parties entered into settlement negotiations. The City and County of San Francisco reached a comprehensive resolution with the Defendants to end the litigation. Under the terms of the agreement, the Defendants collectively agreed to pay a settlement amount of $3,000,000. This payment served as both a penalty for past conduct and a fund to support local youth anti-smoking and nicotine prevention programs. Beyond the financial payment, the Defendants committed to permanent changes in their business practices, including implementing stricter age-verification systems and halting all sales of flavored nicotine products to San Francisco residents. The settlement concluded the city’s effort to hold online tobacco retailers to the same standards as local brick-and-mortar shops.

Court documents are available upon request at jurimatic@exlitem.com