Voters in the five states where the legalization of marijuana was on the ballot voted in favor.
In the populous states of New Jersey and Arizona, voters legalized marijuana for recreational use by adults over the age of 21. Given New Jersey’s proximity to New York and Pennsylvania, where medical marijuana programs have been popular, legalization in New Jersey could have a domino effect in the northeast, especially considering the tax revenue that will be gained by New Jersey from New York and Pennsylvania residents who travel there every day for work, the Jersey shore and casinos, and other reasons.
Voters in South Dakota and Montana also voted to legalize marijuana for recreational purposes, South Dakota voters also approved medical marijuana, and voters in Mississippi voted to legalize marijuana for medical purposes to treat 22 qualifying health conditions.
Duane Morris partners Seth Goldberg and David Landau have been named to the American Trade Association for Cannabis and Hemp (ATACH) Task Force, which will focus on the harmonization of laws and regulations that contribute to the bifurcated treatment of hemp and marijuana, as well as the evolving regulatory landscape for cannabis industry participants. Mr. Goldberg, a team lead for the Duane Morris Cannabis Industry Group, joined ATACH president Michael Bronstein and Gary Kaminsky of Acreage Holdings in their meeting with the White House’s Office of Management and Budget in August.
Seth Goldberg, partner and team lead of Duane Morris’ Cannabis Industry Group, and Justin M. L. Stern, Duane Morris associate, authored the Cannabis Industry Journal article, “Consumer Class Actions Against CBD Companies Are Hitting a Snag.”
Excerpt from the article:
Over the past year, more and more consumer class actions have been filed against manufacturers and distributors of CBD-infused products. These actions typically assert claims based on how the product is marketed, such as whether it (i) contained the advertised amount of CBD, (ii) contained more THC than it should have or (iii) has the ability to provide the therapeutic benefits touted. The marketing of these products is subject to regulation by FDA, which has yet to issue pertinent regulations that have been expected since passage of the 2018 Farm Bill legalizing hemp and CBD products derived therefrom. Thus, in recent months, a number of federal courts have stopped these class actions in their tracks pending further guidance from FDA as to how CBD-infused products should be regulated. This growing body of precedent should be welcome news for the CBD supply chain, as it may provide a disincentive to the plaintiffs’ bar to expend their resources on similar actions until the regulatory framework is clear.
As awareness of the health benefits of CBD grows, professional athletes are voicing their support for the supplement as a safe substitute to help reduce inflammation and manage pain—and many are even investing in CBD or launching their own brands. Despite the World Anti-Doping Agency (WADA) removing CBD from their list of prohibited substances in 2018, many professional sports leagues continue to ban CBD, resulting in market and regulatory complexity for the sports world. This panel discussion will explore the legality of CBD use for professional athletes and provide an overview of the consumer and investor markets for CBD in the sports nutrition and recovery industries. The presentation will be followed by a lively discussion around the role of CBD in professional sports with NBA Hall of Famer Dominique Wilkins, who currently serves as vice president of basketball and special advisor to the CEO of the Atlanta Hawks.
Chris Howard, Vice President, General Counsel & Chief Compliance Officer, E-Alternative Solutions
Dominique Wilkins, Nine-Time NBA All-Star; NBA Hall of Fame Inductee; and Vice President of Basketball and Special Advisor to the CEO, Atlanta Hawks
About the Duane Morris Cannabis Industry Group
Duane Morris attorneys in offices throughout the U.S. and internationally have extensive experience with the wide array of issues attendant to legal cannabis business activities, including licensing for cultivation, processing and dispensing; litigation; banking and finance; raising and deploying capital; mergers and acquisitions; protecting intellectual property; real estate development; public company representation and SEC filings; land use and zoning; healthcare and research; taxation; and cross-border transactions. In addition to advising participants in the medical and adult-use cannabis and hemp/CBD industries, as the industry has grown, Duane Morris attorneys experienced in cannabis-related issues frequently advise clients in other sectors whose businesses intersect with the expanding regulated cannabis sector.
About the MGO | ELLO Cannabis Practice
The MGO | ELLO cannabis practice provides a collaborative professional services offering that delivers world-class financial, tax and advisory services focused on empowering cannabis and hemp industry operators and investors to achieve their business goals. Its subsidiary ELLO Capital, a boutique investment bank, provides M&A, capital raising and strategic advisory services to companies and investors in cannabis, hemp and impacted industries. Together the cannabis platform delivers a suite of proven solutions to help operators, regulators and institutional investors navigate these complex industries.
On July 21, 2020, the U.S. Food & Drug Administration (FDA) issued draft guidance outlining the agency’s current thinking on the development of drugs containing cannabis or cannabis-derived compounds. The new guidance is disappointing to many in the cannabis industry because it does not provide insight into the FDA’s views on the marketing of nondrug, hemp-derived CBD products.
Three decisions staying CBD class actions in two months may signal a trend, especially considering that the Courts in these cases refer to the other’s decisions. Such a trend may keep the plaintiffs’ bar at bay, as it would cast doubt on the viability of consumer class actions asserting CBD violations, or at least it could make the cases less appealing to the plaintiffs’ bar because a stay makes the timing of a settlement or resolution even more uncertain.
Consumer class actions regarding CBD marketing are on the rise. In recent months, a number of federal judges have placed lawsuits concerning the marketing of CBD-infused products on hold because the U.S. Food & Drug Administration—tasked with regulating those products under the 2018 Farm Bill—still has not issued regulations governing how they can be marketed. This further complicates the already confusing federal-state regulatory structure concerning the treatment of CBD products.
As a commercial litigator who has handled a broad range of claims in highly regulated industries over the past 20 years — particularly in complex matters such as class actions involving claims brought by consumers and shareholders — and given my experience spearheading the development of Duane Morris’ cannabis industry group, which has included providing regulatory and business advice to a number of businesses and individuals with cannabis-related interests, I have been expecting the maturing cannabis industry to eventually mirror other industries when it comes to using commercial litigation to resolve disputes between businesses and to address claims of injury allegedly experienced by aggreived consumers and shareholders. It appears the time has come. Now, as opposed to even just a few months ago, not a day goes by when the daily legal news outlets that report on litigation matters filed in federal and state courts around the country do not include matters pertaining to adult use marijuana, medical marijuana, and/or hemp.
Today alone, legal news outlets are reporting about a shareholder deriviative action being filed against the manufacturer of cannabinoid-containing transdermal patches, a maker of mobile hemp dryers suing a distributor for alledgedly stealing trade secrets, a publicly-traded company that owns cannabis brands being sued for breach of contract by an MSO arising out of a failed merger agreement. Claims like these are among the many product liability, stock-drop and securities fraud, tradmark infringement, FLSA, and employment litigation matters to be filed in 2020 relating to cannabis; not to mention the federal and state regulatory cannabis-related enforcement actions also commenced. Just as in other industries, COVID-19 is likely to spur litigation in the space because of strains on resources and performance caused by business disruptions and the slower economy. To be sure, the plaintiffs’ bar has cannabis on its radar.
Thus, now more than ever, it is critically important for cannabis businesses to implement the necessary compliance measures, including making sure appropriate insurance coverage, e.g. premises, products, and D&O, has been obtained, that could protect their businesses from the cost and disruption of commercial litigation. Likewise, cannabis-specific nuances, such as the enforceability of contracts and jurisdictional questions, require careful evaluation by experienced counsel advising plaintiffs and defendants who are considering filing, or who have been brought into, a commercial litigation.
On April 20, the FDA issued warning letters to two CBD companies – BIOTA Biosciences and Homero Corp., dba Natures CBD Oil Distribution – directing them to remove statements from their labeling and advertising on websites and social media claiming that CBD can cure opioid addiction among other illnesses. I am attaching the FDA’s warning letter, as it provides very useful information to the market as to the FDA’s current views of CBD products. As set forth in the warning letter, the FDA continues to view CBD as (1) an unsafe food additive; (2) not satisfying the definition of a “dietary supplement,” and (3) as unapproved new drugs if marketed as “intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease and/or intended to affect the structure or any function of the body.” In the case of Homero, the CBD products were advertised with the following claims, among others:
“Natures Pure CBD Oil has been effective in the treatment and eradication of opiate use.”
“CBD Oil Inhibits the reward-facilitating effect of morphine”
“Vaping CBD Oil to Treat Asthma . . . Your best best [sic] to combat Asthma is by vaping CBD Oil.”
“Natures Pure CBD is a strong anti-oxidant that can alleviate lower epileptic seizures, psychotic disorders, and has neuroprotective qualities.”