Class actions against CBD companies proliferate under federal and state law

Class actions against CBD companies proliferate under federal and state law

Class actions against CBD companies proliferate under federal and state law

On the heels of FDA sending out a tranche of warning letters to sellers of cannabidiol (CBD) products, enterprising plaintiffs lawyers have filed a spate of consumer class actions over these types of products. The complaints put forth a number of different theories tied to the current illegality of these products due to FDA regulation. These include allegations that companies:

  • misled consumers by marketing their products as dietary supplements,
  • inaccurately listed CBD dosages or product content; and
  • made unsubstantiated claims about CBD’s ability to treat, prevent, or cure human disease.

Is it worth the risk?

Hemp-derived CBD was legalized in 2018 under the Agriculture Improvement Act of 2018, or Farm Bill. However, according to the federal Food, Drug & Cosmetic Act and FDA regulations and guidance, CBD products cannot be marketed as food additives, dietary supplements, or for therapeutic uses and treatment of diseases.

Plaintiffs filed two[2] of these lawsuits in California, with one involving a company that received an FDA warning letter. These California suits allege violations of the California Unfair Competition Law, California False Advertising Law, California Consumer Legal Remedies Act, breach of express and implied warranties, and the state’s Declaratory Judgment Act. Plaintiffs claim damages in excess of $5 million.

Other cases were filed in Colorado, Florida, Illinois, and Massachusetts. These  jurisdictions are among the few that have legalized Marijuana-sourced CBD for both medical and recreational uses, with the exception that Marijuana-sourced CBD remains illegal in Florida for recreational uses. Plaintiffs seek damages comparable to those in the California suits.

As these cases are all in the early stages, we do not have a sense of likelihood of success, or the magnitude of any potential settlements.

Can regulation mellow it out?

FDA’s inaction in implementing clear regulations for the production, labeling, testing, and sale of CBD products has facilitated a largely unregulated marketplace that is ripe for consumer class actions. Product testing and sampling protocols are not uniform across the country, and scientific data supporting the safety and efficacy of these products is under-developed. This uncertainty across the country leaves manufacturers and sellers open to the types of consumer protection claims we see in these cases.

To bring order to the chaos, federal statutory revisions or regulations could be imminent. In January 2020, a bipartisan group of representatives introduced H.R. 5587, a bill that would provide the FDA the authority to regulate CBD as a dietary supplement and food additive, and would require a study and report from the U.S. Department of Agriculture.

One court has even shelved a class action pending FDA regulation. In Snyder v. Green Roads of Florida LLC, 2020 WL 42239 (S.D. Fla. Jan. 3, 2020), a suit alleging the company misrepresented the amount of CBD in its products, the Florida district court held that the public interest in the litigation justified a stay in the case. The judge explained that the regulations currently in place provide little guidance with respect to CBD labeling requirements, but “the FDA rulemaking process is ongoing, [and] the FDA is under considerable pressure from Congress and industry to expedite the publication of regulations and policy guidance regarding CBD products.”

And, just last week, a California defendant in a CBD class action filed a motion to dismiss on the grounds that the plaintiffs’  claims are preempted by federal law. In its motion, the defendant asked the court in the alternative to stay the case since the FDA is actively considering how to regulate the CBD marketplace.

Unless and until the regulatory status of CBD as a therapy or dietary supplement is settled, everyone in the CBD-infused product business is at risk of a run in with a consumer class action as well as FDA enforcement.

Class actions against CBD companies proliferate under federal and state law

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