Another Reminder For Cannabis Manufacturers to Remain Vigilant

RICO, historically used by federal prosecutors to deter acts of crime syndicates, recently was used by private citizens to form the basis of a class action lawsuit filed in the United States District Court for the Eastern District of Arkansas, alleging that an Arkansas marijuana cultivator and testing lab were engaged in an enterprise where THC potency test results were inflated by twenty-five percent on average. Although RICO claims against Cannabis companies have largely been unsuccessful thus far, this lawsuit seeks an injunction to shut down the medical marijuana industry for the entire state, and also seeks the certification of a class on behalf of the named plaintiffs and other patients who have purchased medical marijuana in Arkansas.  The lawsuit also contains one count for fraud based upon the Defendants’ violation of the Arkansas Deceptive Trade Practices Act.

The Defendants’, by selling Plaintiff’s “Regular” marijuana for a “Premium” price, caused the Plaintiffs economic harm. The Cultivator Defendants’ met the Complaint with a Motion to Dismiss, arguing that dispensaries are the ones that sold the medical marijuana to the plaintiffs, the cultivator-defendants had no control over the prices the dispensaries charged thus defeating any causal link between the alleged RICO violation and the Plaintiffs’ harm. Without that causal link, Plaintiffs lack standing to bring the claims.

This is another example of the type of claims, and another styled class action complaint brought against a cannabis cultivator. In Oregon, two class action complaints stemmed from Curaleaf’s mix-up of CBD and THC, which allegedly resulted in unwanted “highs” and economic loss. These lawsuits should always be central to a cannabis manufacturer’s focus about their own products, including proper safety protocols, proper testing procedures, proper employee training, and strict adherence to all statutes and regulations.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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