In addition, as with other consumer goods, having insurance for products liability claims is critically important for those producing and distributing cannabis products for human consumption.
The Oregon Liquor and Cannabis Commission (OLCC) is conducting an ongoing investigation into Curaleaf regarding an alleged mislabeling of a nonpsychoactive cannabidiol (CBD) product, which actually contained psychoactive delta-9 tetrahydracannabinol (THC). Curaleaf operates 101 retail cannabis dispensaries in 16 states. The OLCC investigation revealed that the alleged mislabeling resulted from an employee’s confusing the CBD bottles with the THC bottles in preparing the Curaleaf cannabis products at issue. The incident caused consumers ingesting those products to have experienced a “high” they did not anticipate, and ultimately led to the recall of approximately 500 bottles of tincture from the Oregon market. At least three of those consumers went to the emergency room due to the high, one consumer was hospitalized and one consumer’s estate brought a claim for wrongful death.
The above incident resulted in 13 nearly identical product liability lawsuits filed in Oregon federal court naming Curaleaf as the defendant. Each assert one count for products liability arising out of the allegation that Curaleaf was negligent by making its Select CBD Drops with THC and by not having the required THC warning label. The complaints also allege that Curaleaf failed to warn or properly instruct the plaintiffs about the condition of the Select CBD Drops. One of those lawsuits settled for $50,000, nine have reached confidential settlements and three are still pending. The wrongful death trial is scheduled for May 2023.
Cannabis products are being produced and distributed in an increasing number of forms while a growing variety of cannabis-infused foods and beverages are being marketed in growing number of states with legal recreational cannabis. The investigation is a reminder to those in the cannabis product supply chain―such as cultivators, processors, labs and dispensaries―that, due to their human use and consumption, cannabis products, like other consumer goods, must be manufactured and distributed in accordance with SOPs, protocols and standards intended to mitigate the risk of adverse health events. In addition, as with other consumer goods, having insurance for products liability claims is critically important for those producing and distributing cannabis products for human consumption.
The products liability claims described herein also depict a unique aspect of the cannabis market that, for the time being, makes such claims against the cannabis supply chain different than similar claims asserted for other consumer goods. Due to the federal prohibition of cannabis, products containing marijuana, which is still a Schedule I controlled substance, may not be distributed interstate. Such products are necessarily produced and sold in the same state under that state’s cannabis laws and regulations. Thus, unlike a producer of a noncannabis consumer good, who may have products liability exposure for products distributed regionally or nationally and resultant exposure to mass tort and/or class action claims due to the broader impact of an alleged product defect, the intrastate nature of cannabis goods limits product liability exposure for the cannabis supply chain to a degree―as demonstrated by the recall of the just approximately 500 Curaleaf products at issue, all of which were made, sold and consumed in Oregon.
However, over the past few years there have been an increasing number of product liability and consumer fraud claims asserted in different states that allege that the mislabeling of the amount of THC or CBD in a product caused either a physical injury, such as an unanticipated high, or resulted in the product not providing the effect or benefit advertised in the packaging and labeling. Once the federal prohibition of cannabis ends, or other changes to the laws are made to allow for interstate distribution of cannabis products, exposure for cannabis-related products liability claims will increase in number and value, as such claims will likely pertain to products distributed regionally or nationally. Thus, participants in the cannabis supply chain should now be incorporating best practices and compliance measures into their businesses that will mitigate the risk of such exposure.
For More Information
If you have any questions about this Alert, please contact Seth A. Goldberg, Ethan R. Feldman, any of the attorneys in our Cannabis Industry Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.