By: Jessica Wasserman, Partner
As we have discussed in a past blog, the threat of litigation for CBD manufacturers remains a high concern as long as FDA does not establish a clear legal pathway for CBD. CBD manufacturers now operate in a gray area when producing and marketing ingestible CBD products, including food and supplements.
Over the past months the threat of class action litigation has become a reality as several cases work their way through the courts and as demand letters are becoming more common. Three recent lawsuits have been brought based in large part on FDA’s position that CBD is illegal in food and supplements. FDA has taken this position in public statements while FDA works toward “a pathway for regulation” as it has promised in numerous public statements, including on December 20, 2018, the day the 2018 Farm Bill, which removed hemp and hemp derived CBD from the Controlled Substance Act Schedule as a prohibited drug.
The Warning Letters issued by FDA to CBD companies, with the most recent batch issued in November, have highlighted illegal drug claims but have also emphasized that CBD in ingestibles is per se illegal under the statutory provisions governing food and supplements. The governing statutes include provisions that preclude an “article” a molecule, such as CBD, from being an ingredient in a food or drug once the article has been in the process of approval as a prescription drug active ingredient. At the same time FDA has issued online statements highlighting possible harm (liver damage, drug interaction, male infertility) from CBD. Taken together, FDA’s statements are attracting class action suits. Recent suits in California, Florida and Massachusetts allege that had consumers known that the products were illegal or that the claims not substantiated, they would not have purchased the CBD products. The causes of action in these cases have included false advertising, deceptive business practices, and fraud among others.
Defenses have included that the Food Drug and Cosmetic Act preempts and doe not allow a private right of action so that only the US Government can enforce. Another defense is that the FDA’s position that CBD is not legal in food and supplements is merely policy decision and not the law. Defendants allege that FDA has the legal authority to override the so called preclusion provisions of the statute and can by agency action allow CBD in food and supplements. Defendants also have asked that the court stay the proceedings while FDA continues its rulemaking process for CBD. In fact, defendants in a recent Florida case were successful at obtaining a stay.
There are compliance and business strategies that CBD companies can take to significantly reduce the risk of litigation.
Prop 65 Update
While companies are not vulnerable until January of next year, 2021, CBD companies are planning for compliance to avoid California Prop 65 class action litigation. While there is a year long compliance grace period, as of January 2020, THC and marijuana smoke were added to California’s list of chemicals known to the state to cause reproductive toxicity for purposes of Prop 65. In about a year, companies selling CBD in California will be subject to Prop. 65 warning requirements and will face significant litigation risks if they don’t comply with this state law. Prop 65 disputes are primarily enforced by class action suits, which is why compliance is key to the long-term success of your business.
For about half the thousands of chemicals listed under Prop 65 include an established minimum level below which warnings are not required. However a minimum level has not been established for THC in CBD products and this is unlikely to be set within the grace year. Plaintiffs would likely take the position that mere presence constitutes exposure and requires a warning. We encourage manufacturers, producers, packagers, importers, suppliers or distributors of CBD products to contact us for further information and to discuss litigation avoidance strategies or to be directed to our litigation department.
About Greenspoon Marder
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