2019-10-10 - mystic juice complaint.pdf - govdelivery

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1 IN THE CIRCUIT COURT OF PULASKI COUNTY, ARKANSAS CIVIL DIVISION STATE OF ARKANSAS, ex rel. LESLIE RUTLEDGE, ATTORNEY GENERAL PLAINTIFF v. CASE NO. ___________ MYSTIC JUICE USA, LLC AND CHRISTOPHER A. SCHMITZ DEFENDANTS COMPLAINT The State of Arkansas, ex rel. Leslie Rutledge, Attorney General (“the State”), for its Complaint against Mystic Juice USA, LLC (“Mystic Juice”), and Christopher A. Schmitz (“Schmitz”), states: I. INTRODUCTION 1. This is a consumer protection action brought to redress and restrain violations of the Arkansas Deceptive Trade Practices Act, Ark. Code Ann. §§ 4-88- 101 through 115 (“ADTPA”). 2. Mystic Juice is a Minnesota-based manufacturer, retailer, and wholesale distributer of e-cigarettes, e-juice, and other types of products associated with electronic nicotine delivery devices (“ENDS”). In addition to its brick and mortar locations across the United States to which it distributes nicotine products, Mystic Juice operates online stores located at drmcvapes.com, mysticjuiceusa.com, ELECTRONICALLY FILED Pulaski County Circuit Court Terri Hollingsworth, Circuit/County Clerk 2019-Oct-10 09:42:52 60CV-19-7239 C06D16 : 52 Pages

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1

IN THE CIRCUIT COURT OF PULASKI COUNTY, ARKANSAS

CIVIL DIVISION

STATE OF ARKANSAS, ex rel.

LESLIE RUTLEDGE, ATTORNEY GENERAL PLAINTIFF

v. CASE NO. ___________

MYSTIC JUICE USA, LLC AND

CHRISTOPHER A. SCHMITZ DEFENDANTS

COMPLAINT

The State of Arkansas, ex rel. Leslie Rutledge, Attorney General (“the State”),

for its Complaint against Mystic Juice USA, LLC (“Mystic Juice”), and Christopher

A. Schmitz (“Schmitz”), states:

I. INTRODUCTION

1. This is a consumer protection action brought to redress and restrain

violations of the Arkansas Deceptive Trade Practices Act, Ark. Code Ann. §§ 4-88-

101 through 115 (“ADTPA”).

2. Mystic Juice is a Minnesota-based manufacturer, retailer, and

wholesale distributer of e-cigarettes, e-juice, and other types of products associated

with electronic nicotine delivery devices (“ENDS”). In addition to its brick and

mortar locations across the United States to which it distributes nicotine products,

Mystic Juice operates online stores located at drmcvapes.com, mysticjuiceusa.com,

ELECTRONICALLY FILEDPulaski County Circuit Court

Terri Hollingsworth, Circuit/County Clerk

2019-Oct-10 09:42:5260CV-19-7239

C06D16 : 52 Pages

2

and vapejuiceusa.shop. It also uses eBay to sell its products without the use of age

verification systems using one or more seller names.

3. While conducting business online with Arkansas consumers,

Defendants engaged in a scheme using eBay to sell e-cigarettes and e-liquids to

circumvent the legal-minimum-age-to-purchase requirements. Further, Defendants

failed to adequately conduct age verification and illegally shipped e-liquids on

multiple occasions to consumers, including at least one minor, into the State of

Arkansas.

4. The State seeks an injunction, disgorgement of funds, an order

imposing civil penalties, and such other relief against Defendants.

II. PARTIES

5. Plaintiff is the State of Arkansas, ex rel. Leslie Rutledge, Attorney

General. Attorney General Rutledge is the chief legal officer of the State. Pursuant

to Ark. Code Ann. §§ 4-88-104 and 4-88-113, the State may seek civil enforcement of

the ADTPA.

6. Defendant Mystic Juice is a Minnesota limited liability company

registered with the Minnesota Secretary of State with its principal address listed as

4170 Monarch Court, Lake Elmo, Minnesota 55042.

7. Defendant Schmitz is the managing member of Mystic Juice and

serves as its registered agent for service of process. The registered agent address is

206 West Clay Street, Lake Elmo, Minnesota 55042. Schmitz is also the nameholder

of an assumed name filing for “Mystic Juice USA” made to the Minnesota Secretary

3

of State dated January 25, 2016. His principal place of business address for the

assumed name is 206 West Clay Street, Lake City, Minnesota 55041. On

information and belief, the Lake City address is Schmitz’s former residence.

Defendant Schmitz is a controlling person of Mystic Juice within the meaning of

Ark. Code Ann. § 4-88-113(d). As such, he is personally liable not only for his own

personal acts in violation of Arkansas law, but also for the acts of Mystic Juice and

its employees or agents thereof.

8. Defendants hold a Tobacco Distributor license with the Minnesota

Department of Revenue. The address associated with the license is 7300 Hudson

Boulevard North, Suite 175, Oakdale, Minnesota 55128-7144. Defendants are

licensed to distribute tobacco products in Minnesota. According to the license

applications Defendants manufacture tobacco products labeled as “Mystic Juice

USA Brand E-Juice.”

III. JURISDICTION

9. This Court has jurisdiction over this matter pursuant to Ark. Code

Ann. § 4-88-104 and the common law of the State of Arkansas.

10. Defendants operate at least three websites that advertise ENDS

products available for sale into the State of Arkansas. Defendants also advertise

their products on eBay for sale into the State of Arkansas. Defendants have

shipped e-liquids and related products to consumers who reside in the State of

Arkansas.

4

11. Venue is proper pursuant to Ark. Code Ann. §§ 4-88-104, 4-88-112, and

the common law of the State of Arkansas.

IV. FACTUAL ALLEGATIONS

12. On August 27, 2019, an investigator with the Attorney General’s office

purchased an e-liquid product containing nicotine using the online platform eBay

from the eBay seller drsjuice. The product purchased was described as Mystic Salt,

Strawberry Milk, 70 mg and was identified by eBay as Item Number

352756539581.1

13. The eBay transaction required the buyer’s name and a shipping

address. There was no requirement for the buyer to produce a government-issued

identification indicating the buyer’s age. There was no third party age verification

service used to complete the transaction. Further, the investigator used an

anonymous pre-paid Visa gift card to complete the $13.41 transaction.

14. On September 3, 2019, the investigator received a package delivered

by the United States Postal Service (“USPS”). The package showed a return

address of “Dr. McVapes” at 7300 Hudson Boulevard North, Suite 175, Oakdale,

Minnesota 55128.2

15. Inside the package from “Dr. McVapes” was a bottle of Strawberry

Milk flavored e-liquid matching the description from the August 27, 2019, eBay

order. The bottle had the required Food & Drug Administration (“FDA”) warning

1 The order confirmation for the Strawberry Milk e-liquid is attached as Exhibit 1.

2 A photograph of the package delivered on September 3, 2019, is attached as Exhibit 2.

5

label marking the product as containing nicotine.3 The bottle also indicated that it

was manufactured by Mystic Juice USA, 7300 Hudson, Oakdale [Minnesota]

55128.4

16. Also inside the package received from “Dr. McVapes” on September 3,

2019, was a magnetic business card-sized advertisement for Mystic Juice. The

advertisement included a 15% coupon code and listed the website

mysticjuiceusa.com.5

17. On September 4, 2019, an investigator with the Attorney General’s

office again purchased an e-liquid product containing nicotine using the online

platform eBay from the seller drsjuice. The product purchased was described as

Mystic Salt, Blueberry Cheesecake, 70mg and was identified by eBay as Item

Number 352756539581.6

18. The second eBay transaction required the buyer’s name and a shipping

address. There was no requirement for the buyer to produce a government-issued

identification indicating the buyer’s age. There was no third party age verification

service used to complete the transaction. Further, the investigator used an

anonymous pre-paid Visa gift card to complete the $19.69 transaction.

3 See 21 C.F.R. § 1143.3 (2016).

4 A photograph of the contents of the package delivered on September 3, 2019, is attached as Exhibit

3.

5 A copy of the advertisement is attached as Exhibit 4.

6 The order confirmation for the Blueberry Cheesecake e-liquid is attached as Exhibit 5.

6

19. On September 9, 2019, the investigator received a package via USPS.

The package showed a return address from “Dr. McVapes” at 7300 Hudson

Boulevard North, Suite 175, Oakdale, Minnesota 55128.7

20. Inside the package from “Dr. McVapes” was a bottle Blueberry

Cheesecake e-liquid matching the description from the September 4, 2019, eBay

order. The bottle had the required FDA warning label marking the product as

containing nicotine. The bottle also indicated that it was manufactured by Mystic

Juice USA, 7300 Hudson, Oakdale [Minnesota] 55128.8

21. The website mysticjuiceusa.com lists a contact address as 7300 Hudson

Boulevard North, Oakdale, Minnesota 55128. Additionally, it provides a phone

number of (763) 688-2799.9

22. The website mysticjuiceusa.com offers for sale a variety of e-liquid

products made under the label Mystic Juice. There are numerous flavors with

obvious appeal to youth including Cinnamon Roll, Skittles, Fruity Loopy,

Bubblegum, Cake Batter, Jolly Hard Candy, Fruit Stripe Gum, Peppermint, Peanut

Butter Cup, Cookies & Cream, Vanilla Cupcake, Blueberry Cheesecake, and

Strawberry Milk.

7 A photograph of the package delivered on September 9, 2019, is attached as Exhibit 6.

8 A photograph of the contents of the package delivered on September 9, 2019, is attached as Exhibit

7.

9 A screenshot of the Mystic Juice website with the company’s address and telephone number

displayed is attached as Exhibit 8.

7

23. An internet search for “Dr. McVapes” revealed a website located at

drmcvapes.com selling e-juice using a similar format and design as

mysticjuiceusa.com.10

24. Like the Mystic Juice website, the Dr. McVapes website also lists its

address as 7300 Hudson North, Oakdale, Minnesota 55128 and also lists the phone

number (763) 688-2799.11

25. The Dr. McVapes website offers for sale a variety of e-liquid products

made under the label Dr. McVapes. The bottles of e-liquid offered by Dr. McVapes

appear to be of the same variety as those offered by Mystic Juice. Additionally, the

flavors offered by Dr. McVapes appear to be substantially similar, if not identical, to

the ones sold by Mystic Juice.12

26. The Strawberry Milk e-liquid sold by eBay seller drsjuice is available

on the Dr. McVapes website.13

27. Both mysticjuiceusa.com and drmcvapes.com have policy sections that

include the following statement:

“By agreeing to these Terms of Service, you represent that you are

at least the age of majority in your state or province of residence, or

that you are the age of majority in your state or province of

10 Screenshots of the Mystic Juice and Dr. McVapes websites are attached as Exhibit 9.

11 A screenshot of the Dr. McVapes website with the company’s address and telephone number

displayed is attached as Exhibit 10.

12 Screenshots of the flavors offered by Mystic Juice and Dr. McVapes are attached collectively as

Exhibit 11.

13 A pictorial comparison of the Strawberry Milk purchased from drsjuice on eBay and the

Strawberry Milk available on the Dr. McVapes website is attached as Exhibit 12.

8

residence and you have given us your consent to allow any of your

minor dependents to use this site.”14

28. Both the Mystic Juice and Dr. McVapes websites appear to use the

third party age verification company AgeChecker.Net.15 AgeChecker.Net requires a

potential purchaser to enter his or her birthdate, full name, complete address, and,

in some instances, requires the purchaser to send a photograph of his or her

government-issued identification via a smartphone before the transaction may

proceed.

29. Although Defendants appear to use age checking services on these

websites, Defendants avoid the use of such services, or any attempt at age

verification, by selling their products on eBay.

30. On September 10, 2019, under the supervision of a high school

principal, school resource officer, and staff of the Attorney General’s Office, a

sixteen-year-old minor who resides in Arkansas purchased a bottle of Blueberry

flavored e-juice from eBay seller vldub42 on eBay using a computer located in the

office of the high school principal.16

31. For the purchase, the minor used the PayPal account belonging to an

employee of the Attorney General’s Office. Thus, the billing address and shipping

address for the purchase did not match.

14See Terms of Service, MysticJuiceUSA.com, https://www.mysticjuiceusa.com/policies/terms-of-

service (last visited October 8, 2019); Terms of Service, DrMcVapes.com,

https://www.drmcvapes.com/policies/terms-of-service (last visited October 8, 2019).

15 Screenshots of the AgeChecker.Net popups on the Mystic Juice and Dr. McVapes websites are

attached collectively as Exhibit 13.

16 The order confirmation is attached as Exhibit 14.

9

32. That evening the minor received an email confirmation from eBay

seller vldub42. The message from the seller included the following:

10

33. As assured by eBay seller vldub42 to the Arkansas minor, a search on

eBay using the terms “100% Authentic Premium Made in USA” produced listings

for numerous e-liquid products. These listings show photographs of bottles of e-

liquid with a label indicating it was made by Mystic Juice USA. The listings show

that the product ships from Saint Paul, MN.17

34. The eBay seller vldub42 instructed the Arkansas minor by email to

shop online at vapejuiceusa.shop. That website is similar in design to

drmcvapes.com and mysticjuiceusa.com. It also offers e-liquids in the same, if not

identical, flavors as both of those websites. The website shows bottles that have a

label indicating they were made by Mystic Juice USA.18

35. Further, the website vapejuiceusa.shop also includes a governing law

provision which links the website to Lake City, Minnesota, where Schmitz is

believed to have resided until 2018.19

36. On September 11, 2019, the e-juice purchased by the minor from eBay

seller vldub42 was shipped from Saint Paul, Minnesota to Arkansas by USPS.

However, the address provided by the minor was not recognized by the USPS office

and was returned back to the shipper’s address in Saint Paul, Minnesota.20

17 A screenshot of the results of an eBay search for “100% Authentic Premium Made in USA” is

attached as Exhibit 15.

18 See Vape Juice USA, https://www.vapejuiceusa.shop (last visited September 26, 2019).

19 The Terms and Conditions from the Vape Juice USA site are attached as Exhibit 16. Section 18

provides that the terms of service are governed by and construed in accordance with the laws of 704

West Lyon Avenue, Lake City, Minnesota.

20 The USPS tracking history is attached as Exhibit 17.

11

37. Pursuant to eBay’s Tobacco Policy, tobacco products, including e-

cigarettes and vapes, cannot be sold or advertised on eBay.21 Yet, eBay sellers like

drsjuice and vldub42 brazenly violate eBay’s rules by selling e-liquid with no age

verification, which increases youth demand and access to tobacco products.

V. VIOLATIONS OF LAW

38. The Arkansas Deceptive Trade Practices Act (“ADTPA”) sets forth the

State’s statutory program prohibiting deceptive and unconscionable trade

practices.22

39. The business practices of Defendants constitute the sale of “goods” or

“services.”23 The same business practices constitute business, commerce, or trade.24

40. It is against the law to provide tobacco products, vapor products,

alternative nicotine products, e-liquid products, and cigarette papers to a minor.25

41. All retail sales of tobacco products, including vapor products,

alternative nicotine products, and e-liquid, must occur in transactions in person and

over the counter.26 Online sales of such products are, accordingly, prohibited in the

21 See Tobacco and e-cigarettes policy, ebay.com, http://pages.ebay.com/help/policies/tobacco.html (last

visited September 25, 2019).

22 Ark. Code Ann. §§ 4-88-101, et seq.

23 Ark. Code Ann. § 4-88-102(4) and (7).

24 Ark. Code Ann. § 4-88-107.

25 Ark. Code Ann. § 5-27-227.

26 Ark. Code Ann. § 26-57-203.

12

State of Arkansas. This prohibition exists in order to ensure that minors do not

obtain these products.27

42. The FDA also prohibits sales of covered tobacco products, including e-

cigarettes and e-liquids, to minors. The FDA also requires the age of the

prospective purchaser be confirmed prior to sale.28

43. It is a violation to engage in unconscionable, false, or deceptive acts or

practices in business, commerce, or trade.29 Defendants have engaged in prohibited

conduct by:

a. Failing to confirm the age of prospective purchasers of e-cigarettes

and e-liquid products;

b. Using a third party sales platform to distribute its products in order to

bypass the age verification requirements imposed by state and federal

law; and

c. Shipping covered tobacco products to consumers in the State of

Arkansas in non-face-to-face transactions and absent meaningful age

verification.

PRAYER FOR RELIEF

44. The Attorney General may bring a civil action to seek to prevent

persons from engaging in the use or employment of prohibited practices.30

27 See Arkansas Tobacco Control Bd. v. Santa Fe Natural Tobacco, Inc., 360 Ark. 32, 100 S.W.3d 656

(2004).

28 See Deeming Rule, 81 Fed. Reg. 28,974-01 (May 10, 2016).

29 Ark. Code Ann. § 4-88-107(a)(10).

13

45. Likewise, the Attorney General may bring a civil action to seek to

restore to any purchaser who has suffered any ascertainable loss by reason of the

use or employment of the prohibited practices any moneys or real or personal

property which may have been acquired by means of any practices declared to be

unlawful, together with other damages sustained.31

46. The Attorney General may seek an injunction prohibiting any person

from engaging in any deceptive or unlawful practice.32

47. Any person who violates the provisions of the ADTPA may be assessed

a civil penalty of up to $10,000 per violation.33

48. In addition, any person who violates the provisions of the ADTPA shall

be liable to the Office of the Attorney General for all costs and fees, including but

not limited to, expert witness fees and attorney’s fees, incurred by the Office of the

Attorney General in the prosecution of such actions.34

49. A “person” is an individual, organization, group, association,

partnership, corporation, or any combination thereof.35

50. Mystic Juice is a “person” who has engaged in an unconscionable, false,

or deceptive act or practice in business, commerce, or trade.

30 Ark. Code Ann. § 4-88-113(a)(1).

31 Ark. Code Ann. § 4-88-113(a)(2)(A).

32 Ark. Code Ann. §§ 4-88-104 and 4-88-113(a)(1).

33 Ark. Code Ann. § 4-88-113(a)(3).

34 Ark. Code Ann. § 4-88-113(e).

35 Ark. Code Ann. § 4-88-102(5).

14

51. The State will exercise its right to a trial by jury.

WHEREFORE, the above premises considered, the State of Arkansas, ex rel.

Leslie Rutledge, Attorney General, respectfully requests that this Court:

a. Issue such orders, pursuant to Ark. Code Ann. §§ 4-88-104 and 4-88-

113(a)(1), as may be necessary to prevent the use or employment by

the Defendant of the practices described herein which are violations of

the ADTPA;

b. Impose civil penalties pursuant to Ark. Code Ann. § 4-88-113(b), to be

paid to the State by the Defendants in the amount of $10,000.00 per

each violation of the ADTPA proved at a trial of this matter, the full

amount of which will exceed the amount necessary to establish federal

diversity jurisdiction;

c. Issue an order, pursuant to Ark. Code Ann. § 4-88-113(e), requiring

Defendants to pay the State’s costs in this investigation and litigation,

including, but not limited to, attorneys’ fees and costs; and

d. For all other just and proper relief to which the State may be entitled.

Respectfully submitted,

LESLIE RUTLEDGE

ATTORNEY GENERAL

By:______________________________________

Charles Saunders, Ark Bar No. 03117

Assistant Attorney General

Arkansas Attorney General’s Office

323 Center Street, Suite 200

Little Rock, AR 72201

15

(501) 683-1501

[email protected]

By:______________________________________

Shannon Halijan, Ark Bar No. 2005136

Assistant Attorney General

Arkansas Attorney General’s Office

323 Center Street, Suite 200

Little Rock, AR 72201

(501) 683-1509

[email protected]

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3>?@ABC�()�D�?E4CF>3�@B�@>GH3�BI�3>G*A?>J6/�1+K�8-L0-7�M<-�N6OM�1/88-KM�L-8O06K�6=�M<-�@-8NO�6=�3-8L01-�+M�+K;�M0N-�+M�M<0O,+P-Q�R-�8-O-8L-�M<-�80P<MS�+M�6/8�O6T-�90O18-M06KS�M6�/,9+M-S�1<+KP-�68�8-,T+1-�+K;�,+8M�6=M<-O-�@-8NO�6=�3-8L01-�:;�,6OM0KP�/,9+M-O�+K9�1<+KP-O�M6�6/8�7-:O0M-Q�AM�0O�;6/88-O,6KO0:0T0M;�M6�1<-1U�6/8�7-:O0M-�,-806901+TT;�=68�1<+KP-OQ�J6/8�16KM0K/-9�/O-�6=�68+11-OO�M6�6/8�7-:O0M-�68�M<-�3-8L01-�=6TT670KP�M<-�,6OM0KP�6=�+K;�1<+KP-O�M6�M<-O-@-8NO�6=�3-8L01-�16KOM0M/M-O�+11-,M+K1-�6=�M<6O-�1<+KP-OQ3>?@ABC�&'�D�?BC@4?@�ACIBGH4@ABCV/-OM06KO�+:6/M�M<-�@-8NO�6=�3-8L01-�O<6/T9�:-�O-KM�M6�/O�+M�0K=6WL+,-X/01-/O+QO<6,DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD

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Tracking Number: 9400111899220342774058

Your item has been delivered to the original sender at 11:49 am on September 16, 2019 in SAINTPAUL, MN 55128.

DeliveredSeptember 16, 2019 at 11:49 amDelivered, To Original SenderSAINT PAUL, MN 55128 

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September 16, 2019, 11:49 am Delivered, To Original Sender SAINT PAUL, MN 55128  Your item has been delivered to the original sender at 11:49 am on September 16, 2019 in SAINT PAUL,MN 55128.

September 16, 2019, 6:26 am Arrived at Post Office SAINT PAUL, MN 55128 

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EXHIBIT 17

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September 15, 2019 In Transit to Next Facility

September 14, 2019, 5:59 am Arrived at USPS Regional Origin Facility SAINT PAUL MN NETWORK DISTRIBUTION CENTER 

September 12, 2019, 8:51 pm Arrived at USPS Regional Destination Facility LITTLE ROCK AR DISTRIBUTION CENTER ANNEX 

September 12, 2019, 10:36 am Return to Sender Processed PERRYVILLE, AR 72126 

September 12, 2019, 9:00 am No Such Number PERRYVILLE, AR 72126 

September 12, 2019 Rescheduled to Next Delivery Day PERRYVILLE, AR 72126 

September 12, 2019, 8:12 am Out for Delivery PERRYVILLE, AR 72126 

September 12, 2019, 7:40 am Arrived at Post Office PERRYVILLE, AR 72126 

September 12, 2019, 7:29 am Arrived at USPS Facility PERRYVILLE, AR 72126 

September 12, 2019, 5:49 am Departed USPS Regional Facility LITTLE ROCK AR DISTRIBUTION CENTER 

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September 12, 2019, 5:05 am Arrived at USPS Regional Facility LITTLE ROCK AR DISTRIBUTION CENTER 

September 12, 2019, 4:46 am Departed USPS Regional Facility LITTLE ROCK AR DISTRIBUTION CENTER ANNEX 

September 12, 2019, 4:01 am Arrived at USPS Regional Destination Facility LITTLE ROCK AR DISTRIBUTION CENTER ANNEX 

September 11, 2019, 12:21 am Arrived at USPS Origin Facility SAINT PAUL, MN 55131 

September 10, 2019, 11:06 pm Accepted at USPS Origin Facility SAINT PAUL, MN 55128 

September 10, 2019, 7:28 pm Shipping Label Created, USPS Awaiting Item SAINT PAUL, MN 55128 

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