“Consumer fraud” – Cannabis Industry

July 29, 2024July 29, 2024 by Seth A. Goldberg

Cannabis/Hemp Product Mislabeling Creates Legal Risk

A recent study by ASTM International’s Journal of Testing and Evaluation published a study entitled Market Audits Combat Cannabis Misinformation demonstrates through “off the shelf” testing that the labels of cannabis products are very often materially inaccurate with respect to THC potency, microbial contaminants, and heavy metals. While the study advocates for using periodic off the shelf testing and forensic data from seed-to-sale tracking systems to identify bad actors and police such conduct, the public safety risks from mislabeling raise the likelihood of products liability and consumer fraud lawsuits as another check on mislabeled cannabis (including hemp) products.

A number of consumer fraud class action lawsuits have been filed in California and other states arising out of the alleged mislabeling of infused pre-rolls. Such claims assert that consumers were duped by the THC potency claims on packaging and labeling, and should be compensated for being duped. In contrast, a products liability action would result from a physical injury caused by an improperly labeled cannabis product. Improperly labeled THC potencies, microbial contaminants, and heavy metals could all lead to such injuries, and state laws would give rise to claims for damages, including punitive damages, for such injuries.

Manufacturers who sell and the labs who test products that are labeled inaccurately are exposed to this litigation risk, and should consider incorporating risk mitigating compliance protocols into their quality assurance and control programs.

October 31, 2022November 1, 2022 by Seth A. Goldberg

Cannabis Industry Sees Rise in Consumer Fraud Class Actions, With More To Come With Interstate Sales

Consumer Protection

Cannabis products – such as vapes, pre-rolled joints, tinctures, gummies, and beverages – are consumer packaged goods that are required under state law to be marketed with packaging and labeling that demonstrates their safety to consumers. Although the U.S. state-licensed cannabis industry has been one of the fastest-growing industries in the U.S. over the past decade, consumer fraud lawsuits arising out of alleged packaging and labeling problems, which are a common risk for CPG manufacturers in other industries, have, until now, not been a major consideration for the cannabis supply chain. However, that is changing. As three recent lawsuits suggest, consumer fraud class actions may be on the rise in the industry. Given the media attention cases like these attract, and the potential for damages for thousands or millions of potential consumers, the cannabis supply chain should take notice. As we discuss in the full text of this post, this is going to be especially true once cannabis products are permitted to be sold interstate.

To read the full text of this post by Duane Morris partners Seth Goldberg, Gerald L. Maatman, Jr., and Jennifer A. Riley, please visit the Duane Morris Class Action Defense Blog.

May 19, 2021 by Seth A. Goldberg

Cannabis Products Liability/Consumer Fraud Litigation and CBD Regulation

Yesterday, a California court federal court judge did not follow other federal courts in staying a consumer class action brought on behalf of CBD product consumers on the basis of the FDA’s primary jurisdiction over the regulation of CBD products. The Court in Rodriguez v. Just Brands USA Inc. et al., 2:20-cv-04829, C.D. Cal., determined that claims that CBD product maker Just Brands’ labeling did not accurately state the amount of CBD in its products could give rise to state law claims for breach of warranty and fraud that should not be stayed because, according to the Court, the FDA’s forthcoming regulations would not alter the expectation that CBD product manufacturers would accurately convey the amount of CBD in their products.

The decision in Rodriguez should be on the radar of the entire cannabis industry, as it demonstrates how products liability and consumer class action lawsuits may be brought under state statutory and common law to seek damages for improperly labeled cannabis products. Cannabis – hemp and marijuana – product manufacturers should be sure to build into their internal compliance safeguards against such claims.

Relatedly, on the radar for hemp-derived CBD is legislation proposing to categorize CBD as a dietary supplement under the FDA’s regulatory regime for drugs, dietary supplements and foods and beverages under the Food, Drugs and Cosmetic Acts. That bill will be introduced today by Sens. Ron Wyden (D-Ore.), Rand Paul (R-Ky.), and Jeff Merkley.