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Hearing Date: No hearing scheduled
Location: <>
Judge: Calendar, 3
FILED
10/3/2022 5:14 PM
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS IRIS Y. MARTINEZ
COUNTY DEPARTMENT, CHANCERY DIVISION CIRCUIT CLERK
COOK COUNTY, IL
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
2020CH04183
CITY OF CHICAGO, a municipal ) Calendar, 3
corporation, ) 19742781
)
Plaintiff, )
Case No. 2020-CH-04183
)
v. )
Hon. Allen P. Walker
)
JUUL LABS, INC., et al., )
)
Defendants. )
DEFENDANT JUUL LABS, INC.’S SUPPLEMENTAL BRIEF IN OPPOSITION TO
THE CITY OF CHICAGO’S MOTION FOR PARTIAL SUMMARY JUDGMENT
Pursuant to the Court’s rulings during the September 12, 2022, oral argument, Juul Labs,
Inc. (“JLI”) submits this supplemental brief addressing the recent report served by JLI’s age-
verification expert Ken Allen. Mr. Allen’s report underscores why the City’s Motion for Partial
Summary Judgment should be denied. With over 20 years of experience developing and
implementing age- and identity-verification and fraud systems for large financial institutions,
Mr. Allen provides expert opinions and analysis further demonstrating that JLI’s age-verification
procedures and processes were effective and went beyond any relevant government or industry
standards and that the evidence the City cites in its Motion fails to establish that JLI made any
online sales to underage users. JLI maintains that Mr. Allen’s opinions affirmatively refute the
allegations underlying the City’s Motion; however, at a minimum, they create disputed issues of
material fact that render summary judgment inappropriate.
As is documented in his report and accompanying CV, Mr. Allen has extensive experience
with age-verification systems, including serving as the Senior Vice President of Identity, Fraud,
and Compliance for Equifax from 2017-2021; the Senior Vice President of Fraud and Debit
Operations at Capital One Bank from 2013-2014; and the Head of Payments and Fraud for Western
1
Union from 2004-2013. Based on that experience and his analysis in this case, Mr. Allen
concludes that (i) JLI’s age-verification procedures met or exceeded government and industry
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
standards at all times; (ii) the categories of “data mismatches” identified by the City and its expert
are not indicative of and do not present a material risk of sales to minors; and (iii) the City and its
expert misunderstand the limitations in JLI’s online sales data, which—for a variety of reasons—
do not conclusively establish any online sales to minors. Mr. Allen’s opinions further demonstrate
that the City’s Motion for Partial Summary Judgment should be denied.
ARGUMENT
I. Mr. Allen’s report further demonstrates that JLI implemented an industry-leading
age-verification system.
One of the fundamental pillars of the City’s Motion is its contention that JLI’s age-
verification system was inadequate and that JLI “fail[ed] to sufficiently verify that consumers met
Chicago’s minimum age requirement before selling them JUUL products.” Mot. at 9. As Mr.
Allen explains, the City’s assertions regarding the adequacy of JLI’s age-verification are
inaccurate.
According to Mr. Allen, JLI implemented an industry-leading age-verification system.
Ex. 1, Expert Report of Ken Allen (“Allen Rpt.”), at 17-19, 26. JLI’s age-verification procedures
were consistent with those of credit unions, commercial banks, and other financial institutions that
are subject to high levels of regulation—and went well beyond the age-verification standards in
the Electronic Nicotine Delivery System (ENDS) industry. Id. at 6, 11-12. As just one example
of its industry-leading age-verification measures, Mr. Allen describes how JLI hired Veratad, a
well-known age-verification vendor that had significant experience creating and implementing
processes and procedures for multiple customers in various industries selling age-restricted
products. As Mr. Allen documents in his report, the record shows that JLI relied on Veratad to
2
recommend appropriate age-verification processes and oversee JLI’s age-verification protocols.
Id. at 5, 8. Mr. Allen further opines based on his review of the age-verification processes Veratad
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
put in place for JLI that they successfully blocked sales to underage individuals while enabling
age-appropriate customers to purchase products if they successfully age-verified. Id. at 22.
Further, Mr. Allen explains how JLI implemented specific practices—such as date of birth and
Social Security number checks, adult signature upon delivery, and reviewing scanned and
uploaded driver’s licenses—that the majority of internet tobacco vendors selling e-cigarettes did
not use. Id. at 22-23. To corroborate his expectations about how JLI’s robust system operated in
practice, Mr. Allen also reviewed JLI’s age-verification pass rates over the years. Id. at 20-21. In
doing so, he found that JLI “
.” Id.
II. Mr. Allen’s expert opinions further demonstrate that the City has failed to
demonstrate any sales to underage users in the City of Chicago.
Mr. Allen’s report also demonstrates that the City has failed to conclusively establish that
JLI made any sales to underage customers in the City of Chicago. In its Motion, the City cites
approximately 37,000 transactions involving the online sale of JUUL products to individuals
residing in the City of Chicago. These transactions fall into three categories:
1. 35,712 transactions where the purchaser’s billing address did not match the shipping
address;
2. 1,408 transactions where the purchaser’s billing name did not match the shipping
name; and
3. 165 transactions where JUUL products were purportedly sold to underage consumers.
The City claims that the first two categories constitute “unfair practices” under M.C.C. § 2-
25-090, and the third category constitutes both unfair practices and a violation of the Chicago
ordinance prohibiting the sale or furnishing of tobacco products to minors.
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The opinions and analyses in Mr. Allen’s expert report show why these three categories of
sales do not violate any ordinance or public policy. At a minimum, his report further demonstrates
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
that the City’s Motion raises disputed questions of material fact that render summary judgment
inappropriate.
A. As Mr. Allen demonstrates, JLI age-verified the purchaser for the 35,712
transactions where only the billing and shipping address differed.
By far the largest category of transactions that the City asserts were “unfair practices”
involves sales where the billing and shipping addresses differed but the name of the consumer was
the same (i.e., purchasers shipped the product to themselves but to an address different from their
billing address). The City argues that these transactions are unfair practices because JLI did “not
figure out how old those consumers are.” Ex. 2, 9/12/22 Hr’g Tr. at 55:9-12. According to the
City, this purported failure to “verify that [] consumers meet the minimum age requirements”
violated an implicit public policy the City reads into M.C.C. § 4-64-345. Id. at 49:8-14.
Contrary to the City’s assertions, and as discussed in Mr. Allen’s report, each of these
consumers was age-verified consistent with JLI’s industry-leading age-verification processes. As
Mr. Allen explains, under the age verification procedures Veratad established for JLI, age-
verifying the person who purchases the product also age-verifies the person who receives the
product if, as here, the names are the same and the only difference is the shipping address. Ex. 1,
Allen Rpt. at 7. This makes logical sense and is standard practice in the industry: the person who
receives the product is the same person who was age-verified.
Mr. Allen further opines that, for these transactions, “
.” Id. As he observes
based on his experience,
4
.” Id. at 30. Thus, age-verifying the purchaser—which JLI did for each of the 35,712
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
sales—“ .” Id. at 7. And
the City presents no evidence to the contrary with respect to any one of these sales.
Accordingly, as is illustrated in Mr. Allen’s report (and contrary to the City’s argument),
JLI did “verify that [] consumers meet the minimum age requirements.” And, as Mr. Allen’s
analysis and opinions confirm, there was no “unfair practice” here because JLI age-verified the
purchaser and recipient for these transactions. At the very least, whether JLI engaged in an unfair
practice turns on whether JLI’s age-verification processes (1) were immoral, unethical, oppressive,
or unscrupulous; (2) caused substantial injury to consumers; or (3) offended public policy—some
of the most hotly disputed issues in this case and issues that should not be decided at the summary
judgment stage. See Robinson v. Toyota Motor Credit Corp., 201 Ill. 2d 403, 417-18 (2002)
(identifying the elements of an unfair practices claim); see also Siegel v. Shell Oil Co., 612 F.3d
932, 935 (7th Cir. 2010) (whether a business practice is unfair is a fact-intensive inquiry that
requires “a case-by-case analysis”).
B. Mr. Allen further demonstrates that the 1,408 transactions where billing and
shipping names differed do not evidence a material risk of underage access,
much less show that there was any actual underage use as a result of these
transactions.
Mr. Allen’s report further demonstrates that the City has not established any actual
underage sales or even a “material risk” of such sales with respect to the second category of
transactions the City cites: the 1,408 transactions where the account/billing and shipping names
differ. Mot. at 5-6. The City again argues that sales with billing and shipping name mismatches
created an “unwarranted health and safety risk among young Chicagoans,” which the City
maintains satisfies the substantial injury prong of its unfair practices claim. Ex. 2, 9/12/22 Hr’g
5
Tr. at 11:24-12:11. However, as Mr. Allen notes in his report, these transactions do not evidence
a “material risk of underage access,” much less establish that there were any actual sales to
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
underage users. Ex. 1, Allen Rpt. at 39-40. Moreover, Mr. Allen demonstrates that the “implicit”
public policy the City claims JLI violated is not the public policy applicable to age-verification,
and JLI’s industry-leading system does not violate the actual public policy.
1. Mr. Allen demonstrates that the industry-leading procedures JLI
employed did not create any “material risk” of underage use.
In support of this opinion, Mr. Allen explains how JLI’s age-verification procedures have
proven effective at preventing youth access. For example, even when an individual purchases a
JUUL product and ships it to a different name, the purchaser is necessarily an age-verified adult
under the procedures implemented by Veratad, which are consistent with industry standards, and
that adult is obligated to follow the law; as a result, allowing such a transaction “
” according to Mr.
Allen. Id. at 7.
As Mr. Allen also observes, beginning at product launch in June 2015, JLI required adult
signature upon delivery of its products. Id. at 9-10. This practice applied to sales sent to a person
other than the purchaser for almost the entire period at issue, providing additional underage access
protections for shipping recipients. JLI Opp’n Br. at 6-7.
Mr. Allen also discusses procedures that JLI implemented to ensure its age verification
systems were working. As he discusses in his expert report, JLI funded a 2018-2019 audit where
an independent vendor recruited 301 minors who JLI challenged to defeat its age-verification
process by any available means. Ex. 1, Allen Rpt. at 16. Only six participants (less than 2%) were
able to defeat JLI’s system. Id. These results objectively demonstrate a high degree of
effectiveness, including when compared with other companies selling products in age-restricted
6
industries. Moreover, as a direct result of the audit, JLI required its age-verification vendor to take
additional steps to address the auditors’ use of high-quality fake IDs to circumvent the system. Id.
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
Beyond these more general opinions based on JLI’s robust age-verification processes,
Mr. Allen’s report also analyzes potential underage access risk based on the specific name
mismatch transactions identified by the City’s expert, Dr. Rebecca Williams. In her report, Dr.
Williams identifies 4,085 order records where account/billing and shipping names purportedly do
not match. Id. at 29. But, as Mr. Allen observes, Dr. Williams’s analysis was flawed at the outset
because several of her transactions did not have name mismatches at all, and the actual number of
mismatches was far lower than Dr. Williams calculated. Id. at 29-30. Of the 4,085 transactions
identified by Dr. Williams, Mr. Allen determined that 1,673 had identical billing and shipping
names when accounting for extra or missing spaces (e.g., “Greg ” (with a space) instead of “Greg”
(without a space)). Id. at 29. Mr. Allen’s manual review of the remaining orders found that an
additional 978 transactions had matching names, but fall into one of four categories that would
cause the type of automated matching process Dr. Williams relied on to fail: the use of a nickname
(e.g., Alexander vs. Alex), the use of a middle name (e.g., vs.
), the addition of C/O shipping instructions (e.g., vs. C/O ),
and typos (e.g., vs. ). Id. Mr. Allen ultimately concludes that
only 1,434 of the 4,085 transactions identified by Dr. Williams contain name mismatches. Id. 1
Importantly, Mr. Allen opines that, after accounting for Dr. Williams’s mistakes, the number of
transactions with name mismatches (1,434, similar to the City’s claimed 1,408) is “
” in a data set as large as JLI’s Chicago online
1
Mr. Allen further determined that, according to Dr. Williams’s analysis, 1,619 of the 4,085 name mismatch orders
also contained address mismatches, while the rest were shipped to the billing address. Ex. 1, Allen Rpt. at 29.
After performing the same analysis as he did on the 4,085 transactions, Mr. Allen concluded that only 689 of
these 1,619 transactions had mismatched names. Id. at 29-30.
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sales spreadsheet. Id. Mr. Allen’s opinion reinforces that simply identifying mismatches does not
satisfy the City’s burden to establish a substantial risk to underage consumers and cannot form the
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
basis for summary judgment.
Mr. Allen further concludes that the number of sales with billing and shipping name
mismatches “ .” Id.
at 40. In fact, the sales Dr. Williams identifies involve just 77 unique shipping recipients,
representing less than 0.018% of the total sales in JLI’s Chicago online sales spreadsheet. Id.
Based on his experience, Mr. Allen opines that, even if Dr. Williams’s numbers were correct, “
” Id.
Moreover, as Mr. Allen observes, “
.” Id.
Indeed, as Mr. Allen demonstrates, JLI adopted the same procedures that Dr. Williams
found to be effective in her academic research. Id. at 14-16. In Dr. Williams’s own studies, data-
based age-verification procedures used by e-cigarette retailers (of which there were few prior to
the launch of JUUL products), such as date of birth and Social Security number (the kind of
information that JLI required), were effective in blocking underage purchases. Id. at 14. Dr.
Williams’s research also concluded that JLI’s age-verification vendor Veratad was one of the few
vendors whose age-verification processes successfully blocked underage sales. Id. at 15.
Accordingly, Mr. Allen opines that Dr. Williams’s own studies
” Id. at 16.
8
2. Mr. Allen also demonstrates that the City identifies the wrong public
policy applicable to age verification, and that JLI’s industry-leading
age-verification system did not violate the pertinent public policy.
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
Mr. Allen further opines that the City’s contention that these 1,408 transactions violated an
“implicit” public policy to “verify that [] consumers meet the minimum age requirements” is at
odds with industry standards. Ex. 2, 9/12/22 Hr’g Tr. at 49:8-14. 2 As Mr. Allen explains, this is
not the public policy applicable to age-verification, and it not found in M.C.C. § 4-64-345. Rather,
as Mr. Allen describes in his report, based upon federal standards set by the U.S. Department of
Commerce’s National Institute of Standards and Technology (“NIST”), the applicable policy for
age-verification is that retailers are only required to form a reasonable belief about a customer’s
identity. Ex. 1, Allen Rpt. at 5, 17. These federal standards expressly encourage retailers to use
data matching algorithms, such as the ones JLI’s vendor Veratad used, to form a reasonable belief
about a customer’s identity based on customer-submitted information. Id. at 17. Those same
standards expressly recognize that “
” and therefore certainty is not the standard. Id. at 18. For that reason, several
states that have enacted far more explicit online age-verification statutes than M.C.C. § 4-64-345
have expressly refrained from requiring the account name and the shipping name to match. See,
e.g., 940 CMR § 21.04(4)(a) (Massachusetts) (requiring age-verification of the purchaser through
a commercially available database and adult signature of the recipient upon delivery for internet
sales); Va. Code Ann. § 18.2-371.2(C) (Virginia) (same); N.C. Gen. Stat. § 14-313(b2) (North
Carolina) (requiring age-verification for the individual ordering tobacco products).
2
Neither M.C.C. § 4-64-345 nor any other Chicago ordinance prohibits an of-age individual from purchasing an
age-restricted product online and having it shipped to another adult and/or a different address from the purchaser’s
billing address. Contrary to the City’s arguments, it is the Chicago City Council’s duty, not this Court’s, to create
policy. See City of Chicago v. Purdue Pharma L.P., 211 F. Supp. 3d 1058, 1075 (N.D. Ill. 2016) (the
“determination of public policy is primarily a legislative function”).
9
Accordingly, Mr. Allen’s opinions demonstrate that the City has failed to demonstrate that
there was anything inappropriate about JLI’s industry-leading procedures for age verification,
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
much less that they created any “material risk” of underage use. Moreover, whether the public
policy alleged by the City actually exists, and whether JLI’s conduct runs afoul of that policy,
cannot be divorced from the level of risk the conduct at issue creates. Mr. Allen’s opinions
demonstrate that online sales of JUUL products where the billing and shipping names do not match
do not create a material risk of underage access. These opinions at a minimum create a disputed
issue of material fact that cannot be resolved on summary judgment.
3. Mr. Allen further demonstrates that the City has failed to show that
any of the 1,408 transactions resulted in any actual underage use.
In addition, Mr. Allen notes that the City has failed to demonstrate that any of the 1,408
transactions in which there was a mismatch between the accounting/billing and shipping names
show any evidence that there was any actual underage use of JLI products. As he notes in his
reports, “
” Id. The names in these transactions could belong solely to adult
users, and neither the City nor its expert provide any evidence to the contrary. It is the City’s
burden to establish sales to underage consumers, and, in accordance with Mr. Allen’s analysis,
simply identifying name mismatches in the spreadsheet does not satisfy that burden.
C. Mr. Allen further refutes the City’s contention that it has established that
JUUL products were sold to underage users in 165 transactions identified in
its Motion.
Finally, Mr. Allen further refutes the City’s contention that there are 165 transactions where
(i) the consumer was underage based on JLI’s own sales data, and (ii) JLI “does not genuinely
dispute” the recorded dates of birth. City’s Reply at 2. As Mr. Allen demonstrates in his report,
the City is wrong on both counts. As he explains, the City and its expert misunderstand the data
10
they cite, which does not demonstrate that there were underage sales and does not purport to
reliably record dates of birth for the consumers at issue. As Mr. Allen confirms, summary
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
judgment is inappropriate because of significant factual disputes regarding the interpretation and
meaning of the data the City relies upon.
The City and Dr. Williams argue that these transactions are per se underage sales solely
because of the dates of birth listed in JLI’s Chicago online sales spreadsheet. As Mr. Allen
explains in his report, however, this approach overlooks important limitations in the data, as well
as JLI’s industry-leading age-verification process that each purchaser had to pass before they
successfully ordered any JUUL products.
Specifically, Mr. Allen’s report offers an example of an individual who completed one of
the 165 purportedly underage transactions: . Though the City claims Mr.
was underage, his order was age-verified by Veratad after he submitted his driver’s
license (as is demonstrated by documents that were produced to the City long ago). Ex. 1, Allen
Rpt. at 34. Mr. Allen also analyzes the circumstances surrounding another individual the City
identified as one of the underage consumers: . Mr. ’s order was canceled
by Veratad before it was sent out. Id. Mr. is thus not an example of an underage sale, but
instead a demonstration that JLI’s age-verification system works. Both of these examples clearly
raise disputes of material fact about the 165 purportedly underage examples and demonstrate why
summary judgment is inappropriate.
More generally, Mr. Allen notes that the data in the spreadsheet that the City and its expert
cite as evidence of underage sales is from a “relational database” that does not provide an accurate
and reliable snapshot of the consumers’ ages at the date of purchase. As Mr. Allen explains, Dr.
Williams “
11
.” Id. at 26. But in such a “relational database,” the data is available only as it
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
exists today. In other words, while the spreadsheet accurately represents data in JLI’s database as
it existed at the time the spreadsheet was created, the database cannot provide a snapshot of what
information was available and/or used for age-verification at the time a user opened an account or
made a prior purchase. Id.
For example, if a purchaser initially entered a date of birth that complied with the minimum
age requirements, but later made a typo when re-entering the date of birth that would suggest she
is underage, the spreadsheet data may only reflect the last-in-time date of birth that inaccurately
suggests that the consumer was underage. Id. at 26-27. Mr. Allen also explains that data migration
and formatting issues in the database may have impacted historically-stored information when JLI
migrated its eCommerce platform from Magento to Solidus in 2018. Id. at 27. The spreadsheet
only captures the data as it appeared after the migration.
Accordingly, as Mr. Allen opines, the spreadsheet the City and its expert cite cannot
conclusively establish that JLI sold and shipped JUUL products to any underage individual in
Chicago. Id. at 33-34. The data in the spreadsheet changed over time and could have been
overwritten or changed during the migration process. Accordingly, as Mr. Allen opines, the
spreadsheet does not provide a reliable basis for establishing underage sales of JLI products.
Moreover, as Mr. Allen further observes, the procedures JLI had put in place at the time
would have prevented such underage sales. Mr. Allen notes in his report, for example, that
” Id. at 28. JLI
emphasized at oral argument that this alone creates an issue of fact: an underage consumer could
12
not have used the underage date of birth in JLI’s spreadsheet and passed age-verification based on
that data alone. Ex. 2, 9/12/22 Hr’g Tr. at 50:11-20. For the majority of the orders that make up
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
the purportedly underage transactions, for instance, there was a lock in place as part of JLI’s age-
verification process that required would-be purchasers to entere a year of birth that matched
information in a public database establishing that the user was of legal purchasing age. Id. at
17:20-18:14. As a result, those purchasers could not have completed JUUL purchases based on
an underage date of birth.
For these and other reasons described in Mr. Allen’s report and JLI’s prior briefing, the
City cannot establish that any of these 165 transactions were in fact underage sales based on the
spreadsheet the City cites. Any sales to underage users would have been blocked or cancelled
under the procedures JLI had in place at the time. Moreover, as Mr. Allen establishes using
specific examples, because of the relational nature of the database from which the data was derived
and the subsequent migration, the data does not necessarily reflect the purchaser’s age at the time
of purchase. Accordingly, the City has failed to demonstrate that there were any actual sales of
JLI’s products from JLI’s website to underage consumers in Chicago. At a minimum, Mr. Allen’s
report further demonstrates that there are disputed issues of material fact that warrant denial of the
City’s Motion for Partial Summary Judgment.
CONCLUSION
For these reasons, and for the reasons stated in JLI’s Opposition and during oral argument
on the City’s Motion, the City’s Motion for Partial Summary Judgment raises disputed issues of
fact and should be denied.
13
Dated: October 3, 2022 Respectfully submitted,
/s/ William E. Arnault
FILED DATE: 10/3/2022 5:14 PM 2020CH04183
Renee D. Smith, P.C.
William E. Arnault
KIRKLAND & ELLIS LLP
300 N. LaSalle Street
Chicago, IL 60654
Telephone: 312.862.2000
renee.smith@kirkland.com
warnault@kirkland.com
Taj J. Clayton, P.C.
KIRKLAND & ELLIS LLP
1601 Elm Street
Dallas, TX 75201
Telephone: 214.972.1774
taj.clayton@kirkland.com
Attorneys for Defendant Juul Labs, Inc.
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Preview
Hearing Date: No hearing scheduled Location: <> Judge: Calendar, 3 FILED 10/3/2022 5:14 PM IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS IRIS Y. MARTINEZ COUNTY DEPARTMENT, CHANCERY DIVISION CIRCUIT CLERK COOK COUNTY, IL FILED DATE: 10/3/2022 5:14 PM 2020CH04183 2020CH04183 CITY OF CHICAGO, a municipal ) Calendar, 3 corporation, ) 19742781 ) Plaintiff, ) Case No. 2020-CH-04183 ) v. ) Hon. Allen P. Walker ) JUUL LABS, INC., et al., ) ) Defendants. ) DEFENDANT JUUL LABS, INC.’S SUPPLEMENTAL BRIEF IN OPPOSITION TO THE CITY OF CHICAGO’S MOTION FOR PARTIAL SUMMARY JUDGMENT Pursuant to the Court’s rulings during the September 12, 2022, oral argument, Juul Labs, Inc. (“JLI”) submits this supplemental brief addressing the recent report served by JLI’s age- verification expert Ken Allen. Mr. Allen’s report underscores why the City’s Motion for Partial Summary Judgment should be denied. With over 20 years of experience developing and implementing age- and identity-verification and fraud systems for large financial institutions, Mr. Allen provides expert opinions and analysis further demonstrating that JLI’s age-verification procedures and processes were effective and went beyond any relevant government or industry standards and that the evidence the City cites in its Motion fails to establish that JLI made any online sales to underage users. JLI maintains that Mr. Allen’s opinions affirmatively refute the allegations underlying the City’s Motion; however, at a minimum, they create disputed issues of material fact that render summary judgment inappropriate. As is documented in his report and accompanying CV, Mr. Allen has extensive experience with age-verification systems, including serving as the Senior Vice President of Identity, Fraud, and Compliance for Equifax from 2017-2021; the Senior Vice President of Fraud and Debit Operations at Capital One Bank from 2013-2014; and the Head of Payments and Fraud for Western 1 Union from 2004-2013. Based on that experience and his analysis in this case, Mr. Allen concludes that (i) JLI’s age-verification procedures met or exceeded government and industry FILED DATE: 10/3/2022 5:14 PM 2020CH04183 standards at all times; (ii) the categories of “data mismatches” identified by the City and its expert are not indicative of and do not present a material risk of sales to minors; and (iii) the City and its expert misunderstand the limitations in JLI’s online sales data, which—for a variety of reasons— do not conclusively establish any online sales to minors. Mr. Allen’s opinions further demonstrate that the City’s Motion for Partial Summary Judgment should be denied. ARGUMENT I. Mr. Allen’s report further demonstrates that JLI implemented an industry-leading age-verification system. One of the fundamental pillars of the City’s Motion is its contention that JLI’s age- verification system was inadequate and that JLI “fail[ed] to sufficiently verify that consumers met Chicago’s minimum age requirement before selling them JUUL products.” Mot. at 9. As Mr. Allen explains, the City’s assertions regarding the adequacy of JLI’s age-verification are inaccurate. According to Mr. Allen, JLI implemented an industry-leading age-verification system. Ex. 1, Expert Report of Ken Allen (“Allen Rpt.”), at 17-19, 26. JLI’s age-verification procedures were consistent with those of credit unions, commercial banks, and other financial institutions that are subject to high levels of regulation—and went well beyond the age-verification standards in the Electronic Nicotine Delivery System (ENDS) industry. Id. at 6, 11-12. As just one example of its industry-leading age-verification measures, Mr. Allen describes how JLI hired Veratad, a well-known age-verification vendor that had significant experience creating and implementing processes and procedures for multiple customers in various industries selling age-restricted products. As Mr. Allen documents in his report, the record shows that JLI relied on Veratad to 2 recommend appropriate age-verification processes and oversee JLI’s age-verification protocols. Id. at 5, 8. Mr. Allen further opines based on his review of the age-verification processes Veratad FILED DATE: 10/3/2022 5:14 PM 2020CH04183 put in place for JLI that they successfully blocked sales to underage individuals while enabling age-appropriate customers to purchase products if they successfully age-verified. Id. at 22. Further, Mr. Allen explains how JLI implemented specific practices—such as date of birth and Social Security number checks, adult signature upon delivery, and reviewing scanned and uploaded driver’s licenses—that the majority of internet tobacco vendors selling e-cigarettes did not use. Id. at 22-23. To corroborate his expectations about how JLI’s robust system operated in practice, Mr. Allen also reviewed JLI’s age-verification pass rates over the years. Id. at 20-21. In doing so, he found that JLI “ .” Id. II. Mr. Allen’s expert opinions further demonstrate that the City has failed to demonstrate any sales to underage users in the City of Chicago. Mr. Allen’s report also demonstrates that the City has failed to conclusively establish that JLI made any sales to underage customers in the City of Chicago. In its Motion, the City cites approximately 37,000 transactions involving the online sale of JUUL products to individuals residing in the City of Chicago. These transactions fall into three categories: 1. 35,712 transactions where the purchaser’s billing address did not match the shipping address; 2. 1,408 transactions where the purchaser’s billing name did not match the shipping name; and 3. 165 transactions where JUUL products were purportedly sold to underage consumers. The City claims that the first two categories constitute “unfair practices” under M.C.C. § 2- 25-090, and the third category constitutes both unfair practices and a violation of the Chicago ordinance prohibiting the sale or furnishing of tobacco products to minors. 3 The opinions and analyses in Mr. Allen’s expert report show why these three categories of sales do not violate any ordinance or public policy. At a minimum, his report further demonstrates FILED DATE: 10/3/2022 5:14 PM 2020CH04183 that the City’s Motion raises disputed questions of material fact that render summary judgment inappropriate. A. As Mr. Allen demonstrates, JLI age-verified the purchaser for the 35,712 transactions where only the billing and shipping address differed. By far the largest category of transactions that the City asserts were “unfair practices” involves sales where the billing and shipping addresses differed but the name of the consumer was the same (i.e., purchasers shipped the product to themselves but to an address different from their billing address). The City argues that these transactions are unfair practices because JLI did “not figure out how old those consumers are.” Ex. 2, 9/12/22 Hr’g Tr. at 55:9-12. According to the City, this purported failure to “verify that [] consumers meet the minimum age requirements” violated an implicit public policy the City reads into M.C.C. § 4-64-345. Id. at 49:8-14. Contrary to the City’s assertions, and as discussed in Mr. Allen’s report, each of these consumers was age-verified consistent with JLI’s industry-leading age-verification processes. As Mr. Allen explains, under the age verification procedures Veratad established for JLI, age- verifying the person who purchases the product also age-verifies the person who receives the product if, as here, the names are the same and the only difference is the shipping address. Ex. 1, Allen Rpt. at 7. This makes logical sense and is standard practice in the industry: the person who receives the product is the same person who was age-verified. Mr. Allen further opines that, for these transactions, “ .” Id. As he observes based on his experience, 4 .” Id. at 30. Thus, age-verifying the purchaser—which JLI did for each of the 35,712 FILED DATE: 10/3/2022 5:14 PM 2020CH04183 sales—“ .” Id. at 7. And the City presents no evidence to the contrary with respect to any one of these sales. Accordingly, as is illustrated in Mr. Allen’s report (and contrary to the City’s argument), JLI did “verify that [] consumers meet the minimum age requirements.” And, as Mr. Allen’s analysis and opinions confirm, there was no “unfair practice” here because JLI age-verified the purchaser and recipient for these transactions. At the very least, whether JLI engaged in an unfair practice turns on whether JLI’s age-verification processes (1) were immoral, unethical, oppressive, or unscrupulous; (2) caused substantial injury to consumers; or (3) offended public policy—some of the most hotly disputed issues in this case and issues that should not be decided at the summary judgment stage. See Robinson v. Toyota Motor Credit Corp., 201 Ill. 2d 403, 417-18 (2002) (identifying the elements of an unfair practices claim); see also Siegel v. Shell Oil Co., 612 F.3d 932, 935 (7th Cir. 2010) (whether a business practice is unfair is a fact-intensive inquiry that requires “a case-by-case analysis”). B. Mr. Allen further demonstrates that the 1,408 transactions where billing and shipping names differed do not evidence a material risk of underage access, much less show that there was any actual underage use as a result of these transactions. Mr. Allen’s report further demonstrates that the City has not established any actual underage sales or even a “material risk” of such sales with respect to the second category of transactions the City cites: the 1,408 transactions where the account/billing and shipping names differ. Mot. at 5-6. The City again argues that sales with billing and shipping name mismatches created an “unwarranted health and safety risk among young Chicagoans,” which the City maintains satisfies the substantial injury prong of its unfair practices claim. Ex. 2, 9/12/22 Hr’g 5 Tr. at 11:24-12:11. However, as Mr. Allen notes in his report, these transactions do not evidence a “material risk of underage access,” much less establish that there were any actual sales to FILED DATE: 10/3/2022 5:14 PM 2020CH04183 underage users. Ex. 1, Allen Rpt. at 39-40. Moreover, Mr. Allen demonstrates that the “implicit” public policy the City claims JLI violated is not the public policy applicable to age-verification, and JLI’s industry-leading system does not violate the actual public policy. 1. Mr. Allen demonstrates that the industry-leading procedures JLI employed did not create any “material risk” of underage use. In support of this opinion, Mr. Allen explains how JLI’s age-verification procedures have proven effective at preventing youth access. For example, even when an individual purchases a JUUL product and ships it to a different name, the purchaser is necessarily an age-verified adult under the procedures implemented by Veratad, which are consistent with industry standards, and that adult is obligated to follow the law; as a result, allowing such a transaction “ ” according to Mr. Allen. Id. at 7. As Mr. Allen also observes, beginning at product launch in June 2015, JLI required adult signature upon delivery of its products. Id. at 9-10. This practice applied to sales sent to a person other than the purchaser for almost the entire period at issue, providing additional underage access protections for shipping recipients. JLI Opp’n Br. at 6-7. Mr. Allen also discusses procedures that JLI implemented to ensure its age verification systems were working. As he discusses in his expert report, JLI funded a 2018-2019 audit where an independent vendor recruited 301 minors who JLI challenged to defeat its age-verification process by any available means. Ex. 1, Allen Rpt. at 16. Only six participants (less than 2%) were able to defeat JLI’s system. Id. These results objectively demonstrate a high degree of effectiveness, including when compared with other companies selling products in age-restricted 6 industries. Moreover, as a direct result of the audit, JLI required its age-verification vendor to take additional steps to address the auditors’ use of high-quality fake IDs to circumvent the system. Id. FILED DATE: 10/3/2022 5:14 PM 2020CH04183 Beyond these more general opinions based on JLI’s robust age-verification processes, Mr. Allen’s report also analyzes potential underage access risk based on the specific name mismatch transactions identified by the City’s expert, Dr. Rebecca Williams. In her report, Dr. Williams identifies 4,085 order records where account/billing and shipping names purportedly do not match. Id. at 29. But, as Mr. Allen observes, Dr. Williams’s analysis was flawed at the outset because several of her transactions did not have name mismatches at all, and the actual number of mismatches was far lower than Dr. Williams calculated. Id. at 29-30. Of the 4,085 transactions identified by Dr. Williams, Mr. Allen determined that 1,673 had identical billing and shipping names when accounting for extra or missing spaces (e.g., “Greg ” (with a space) instead of “Greg” (without a space)). Id. at 29. Mr. Allen’s manual review of the remaining orders found that an additional 978 transactions had matching names, but fall into one of four categories that would cause the type of automated matching process Dr. Williams relied on to fail: the use of a nickname (e.g., Alexander vs. Alex), the use of a middle name (e.g., vs. ), the addition of C/O shipping instructions (e.g., vs. C/O ), and typos (e.g., vs. ). Id. Mr. Allen ultimately concludes that only 1,434 of the 4,085 transactions identified by Dr. Williams contain name mismatches. Id. 1 Importantly, Mr. Allen opines that, after accounting for Dr. Williams’s mistakes, the number of transactions with name mismatches (1,434, similar to the City’s claimed 1,408) is “ ” in a data set as large as JLI’s Chicago online 1 Mr. Allen further determined that, according to Dr. Williams’s analysis, 1,619 of the 4,085 name mismatch orders also contained address mismatches, while the rest were shipped to the billing address. Ex. 1, Allen Rpt. at 29. After performing the same analysis as he did on the 4,085 transactions, Mr. Allen concluded that only 689 of these 1,619 transactions had mismatched names. Id. at 29-30. 7 sales spreadsheet. Id. Mr. Allen’s opinion reinforces that simply identifying mismatches does not satisfy the City’s burden to establish a substantial risk to underage consumers and cannot form the FILED DATE: 10/3/2022 5:14 PM 2020CH04183 basis for summary judgment. Mr. Allen further concludes that the number of sales with billing and shipping name mismatches “ .” Id. at 40. In fact, the sales Dr. Williams identifies involve just 77 unique shipping recipients, representing less than 0.018% of the total sales in JLI’s Chicago online sales spreadsheet. Id. Based on his experience, Mr. Allen opines that, even if Dr. Williams’s numbers were correct, “ ” Id. Moreover, as Mr. Allen observes, “ .” Id. Indeed, as Mr. Allen demonstrates, JLI adopted the same procedures that Dr. Williams found to be effective in her academic research. Id. at 14-16. In Dr. Williams’s own studies, data- based age-verification procedures used by e-cigarette retailers (of which there were few prior to the launch of JUUL products), such as date of birth and Social Security number (the kind of information that JLI required), were effective in blocking underage purchases. Id. at 14. Dr. Williams’s research also concluded that JLI’s age-verification vendor Veratad was one of the few vendors whose age-verification processes successfully blocked underage sales. Id. at 15. Accordingly, Mr. Allen opines that Dr. Williams’s own studies ” Id. at 16. 8 2. Mr. Allen also demonstrates that the City identifies the wrong public policy applicable to age verification, and that JLI’s industry-leading age-verification system did not violate the pertinent public policy. FILED DATE: 10/3/2022 5:14 PM 2020CH04183 Mr. Allen further opines that the City’s contention that these 1,408 transactions violated an “implicit” public policy to “verify that [] consumers meet the minimum age requirements” is at odds with industry standards. Ex. 2, 9/12/22 Hr’g Tr. at 49:8-14. 2 As Mr. Allen explains, this is not the public policy applicable to age-verification, and it not found in M.C.C. § 4-64-345. Rather, as Mr. Allen describes in his report, based upon federal standards set by the U.S. Department of Commerce’s National Institute of Standards and Technology (“NIST”), the applicable policy for age-verification is that retailers are only required to form a reasonable belief about a customer’s identity. Ex. 1, Allen Rpt. at 5, 17. These federal standards expressly encourage retailers to use data matching algorithms, such as the ones JLI’s vendor Veratad used, to form a reasonable belief about a customer’s identity based on customer-submitted information. Id. at 17. Those same standards expressly recognize that “ ” and therefore certainty is not the standard. Id. at 18. For that reason, several states that have enacted far more explicit online age-verification statutes than M.C.C. § 4-64-345 have expressly refrained from requiring the account name and the shipping name to match. See, e.g., 940 CMR § 21.04(4)(a) (Massachusetts) (requiring age-verification of the purchaser through a commercially available database and adult signature of the recipient upon delivery for internet sales); Va. Code Ann. § 18.2-371.2(C) (Virginia) (same); N.C. Gen. Stat. § 14-313(b2) (North Carolina) (requiring age-verification for the individual ordering tobacco products). 2 Neither M.C.C. § 4-64-345 nor any other Chicago ordinance prohibits an of-age individual from purchasing an age-restricted product online and having it shipped to another adult and/or a different address from the purchaser’s billing address. Contrary to the City’s arguments, it is the Chicago City Council’s duty, not this Court’s, to create policy. See City of Chicago v. Purdue Pharma L.P., 211 F. Supp. 3d 1058, 1075 (N.D. Ill. 2016) (the “determination of public policy is primarily a legislative function”). 9 Accordingly, Mr. Allen’s opinions demonstrate that the City has failed to demonstrate that there was anything inappropriate about JLI’s industry-leading procedures for age verification, FILED DATE: 10/3/2022 5:14 PM 2020CH04183 much less that they created any “material risk” of underage use. Moreover, whether the public policy alleged by the City actually exists, and whether JLI’s conduct runs afoul of that policy, cannot be divorced from the level of risk the conduct at issue creates. Mr. Allen’s opinions demonstrate that online sales of JUUL products where the billing and shipping names do not match do not create a material risk of underage access. These opinions at a minimum create a disputed issue of material fact that cannot be resolved on summary judgment. 3. Mr. Allen further demonstrates that the City has failed to show that any of the 1,408 transactions resulted in any actual underage use. In addition, Mr. Allen notes that the City has failed to demonstrate that any of the 1,408 transactions in which there was a mismatch between the accounting/billing and shipping names show any evidence that there was any actual underage use of JLI products. As he notes in his reports, “ ” Id. The names in these transactions could belong solely to adult users, and neither the City nor its expert provide any evidence to the contrary. It is the City’s burden to establish sales to underage consumers, and, in accordance with Mr. Allen’s analysis, simply identifying name mismatches in the spreadsheet does not satisfy that burden. C. Mr. Allen further refutes the City’s contention that it has established that JUUL products were sold to underage users in 165 transactions identified in its Motion. Finally, Mr. Allen further refutes the City’s contention that there are 165 transactions where (i) the consumer was underage based on JLI’s own sales data, and (ii) JLI “does not genuinely dispute” the recorded dates of birth. City’s Reply at 2. As Mr. Allen demonstrates in his report, the City is wrong on both counts. As he explains, the City and its expert misunderstand the data 10 they cite, which does not demonstrate that there were underage sales and does not purport to reliably record dates of birth for the consumers at issue. As Mr. Allen confirms, summary FILED DATE: 10/3/2022 5:14 PM 2020CH04183 judgment is inappropriate because of significant factual disputes regarding the interpretation and meaning of the data the City relies upon. The City and Dr. Williams argue that these transactions are per se underage sales solely because of the dates of birth listed in JLI’s Chicago online sales spreadsheet. As Mr. Allen explains in his report, however, this approach overlooks important limitations in the data, as well as JLI’s industry-leading age-verification process that each purchaser had to pass before they successfully ordered any JUUL products. Specifically, Mr. Allen’s report offers an example of an individual who completed one of the 165 purportedly underage transactions: . Though the City claims Mr. was underage, his order was age-verified by Veratad after he submitted his driver’s license (as is demonstrated by documents that were produced to the City long ago). Ex. 1, Allen Rpt. at 34. Mr. Allen also analyzes the circumstances surrounding another individual the City identified as one of the underage consumers: . Mr. ’s order was canceled by Veratad before it was sent out. Id. Mr. is thus not an example of an underage sale, but instead a demonstration that JLI’s age-verification system works. Both of these examples clearly raise disputes of material fact about the 165 purportedly underage examples and demonstrate why summary judgment is inappropriate. More generally, Mr. Allen notes that the data in the spreadsheet that the City and its expert cite as evidence of underage sales is from a “relational database” that does not provide an accurate and reliable snapshot of the consumers’ ages at the date of purchase. As Mr. Allen explains, Dr. Williams “ 11 .” Id. at 26. But in such a “relational database,” the data is available only as it FILED DATE: 10/3/2022 5:14 PM 2020CH04183 exists today. In other words, while the spreadsheet accurately represents data in JLI’s database as it existed at the time the spreadsheet was created, the database cannot provide a snapshot of what information was available and/or used for age-verification at the time a user opened an account or made a prior purchase. Id. For example, if a purchaser initially entered a date of birth that complied with the minimum age requirements, but later made a typo when re-entering the date of birth that would suggest she is underage, the spreadsheet data may only reflect the last-in-time date of birth that inaccurately suggests that the consumer was underage. Id. at 26-27. Mr. Allen also explains that data migration and formatting issues in the database may have impacted historically-stored information when JLI migrated its eCommerce platform from Magento to Solidus in 2018. Id. at 27. The spreadsheet only captures the data as it appeared after the migration. Accordingly, as Mr. Allen opines, the spreadsheet the City and its expert cite cannot conclusively establish that JLI sold and shipped JUUL products to any underage individual in Chicago. Id. at 33-34. The data in the spreadsheet changed over time and could have been overwritten or changed during the migration process. Accordingly, as Mr. Allen opines, the spreadsheet does not provide a reliable basis for establishing underage sales of JLI products. Moreover, as Mr. Allen further observes, the procedures JLI had put in place at the time would have prevented such underage sales. Mr. Allen notes in his report, for example, that ” Id. at 28. JLI emphasized at oral argument that this alone creates an issue of fact: an underage consumer could 12 not have used the underage date of birth in JLI’s spreadsheet and passed age-verification based on that data alone. Ex. 2, 9/12/22 Hr’g Tr. at 50:11-20. For the majority of the orders that make up FILED DATE: 10/3/2022 5:14 PM 2020CH04183 the purportedly underage transactions, for instance, there was a lock in place as part of JLI’s age- verification process that required would-be purchasers to entere a year of birth that matched information in a public database establishing that the user was of legal purchasing age. Id. at 17:20-18:14. As a result, those purchasers could not have completed JUUL purchases based on an underage date of birth. For these and other reasons described in Mr. Allen’s report and JLI’s prior briefing, the City cannot establish that any of these 165 transactions were in fact underage sales based on the spreadsheet the City cites. Any sales to underage users would have been blocked or cancelled under the procedures JLI had in place at the time. Moreover, as Mr. Allen establishes using specific examples, because of the relational nature of the database from which the data was derived and the subsequent migration, the data does not necessarily reflect the purchaser’s age at the time of purchase. Accordingly, the City has failed to demonstrate that there were any actual sales of JLI’s products from JLI’s website to underage consumers in Chicago. At a minimum, Mr. Allen’s report further demonstrates that there are disputed issues of material fact that warrant denial of the City’s Motion for Partial Summary Judgment. CONCLUSION For these reasons, and for the reasons stated in JLI’s Opposition and during oral argument on the City’s Motion, the City’s Motion for Partial Summary Judgment raises disputed issues of fact and should be denied. 13 Dated: October 3, 2022 Respectfully submitted, /s/ William E. Arnault FILED DATE: 10/3/2022 5:14 PM 2020CH04183 Renee D. Smith, P.C. William E. Arnault KIRKLAND & ELLIS LLP 300 N. LaSalle Street Chicago, IL 60654 Telephone: 312.862.2000 renee.smith@kirkland.com warnault@kirkland.com Taj J. Clayton, P.C. KIRKLAND & ELLIS LLP 1601 Elm Street Dallas, TX 75201 Telephone: 214.972.1774 taj.clayton@kirkland.com Attorneys for Defendant Juul Labs, Inc. 14