Coats Rose: Staying CBD Lawsuits Pending FDA Regulation

Authored By: Lisa L. Pittman

Lisa L. Pittman

Plaintiffs’ attorneys across the country are seizing the opportunity to sink their teeth into the vulnerabilities faced by unregulated CBD companies by hitting them with class action lawsuits. The FDA and FTC provide additional fodder through their enforcement actions. CBD companies are using the FDA’s lack of direction to their advantage to pause the crescendo of lawsuits against them for now.

The past year has seen a crop of lawsuits based on mislabeling, misrepresentation, and related claims. But, because the FDA has not determined yet how CBD will be regulated nor issued guidelines for labeling, content, and marketing of CBD products, courts are abating and dismissing these cases until the FDA releases its regulations, invoking the primary jurisdiction doctrine. The consumer lawsuits typically make three claims: (1) the CBD products are illegal drugs, foods, or dietary supplements that violate the FDA guidelines; (2) the CBD products make impermissible health claims; and/or (3) the CBD products are mislabeled in terms of their curative properties, CBD content or dosage information, and the products would not have been purchased if it had been known the products were unregulated.

CBD are requesting stays or dismissals, resulting in consistent rulings from courts. In January 2020, the Southern District of Florida in Snyder stayed a class action relating to the marketing and sale of CBD products until the FDA designates a legal path for the manufacture, sale, and marketing of the products.[1] The court concluded a judgment was premature because “FDA regulations currently provide little guidance with respect to whether CBD ingestibles, in all their variations are food, supplements, nutrients or additives and what labeling standards are applicable to each iteration,” and thus, deemed the existing regulatory framework inadequate to resolve these issues. What follows is a brief survey of these cases.

Courts faced with considering whether CBD products are mislabeled have reached similar temporary resolutions. Courts explain that although the FDA expressed its position about CBD products in warning letters, these letters do not amount to final agency action and the FDA has yet to formally express its position on the regulation of these products.[2] The Court in Collete also wrote “the number of CBD class actions currently pending in the federal district courts makes clear the danger of inconsistent adjudications.”[3]

Since January 2020, multiple federal district courts have stayed false advertising cases involving CBD products at the pleading stage on primary jurisdiction grounds.[4]  “The primary jurisdiction doctrine allows courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency.”[5]  It “is a prudential doctrine under which courts may, under appropriate circumstances, determine that the initial decision making responsibility should be performed by the relevant agency rather than the courts.”[6]  “It is useful . . . in instances where the federal courts do have jurisdiction over an issue, but decide that a claim requires resolution of an issue of first impression, or of a particularly complicated issue that Congress has committed to a regulatory agency.”[7]

Regulating CBD products is complicated and implicates the Food Drug & Cosmetic Act. As these courts have explained, resolving these claims requires “consistent guidance” from the FDA on whether “some or all CBD products are food additives, supplements, or nutrients that can be safely marketed to the public and, if nutrients, whether the labelling standards and requirements for CBD products will be different or the same as for other nutrients.”[8]   FDA’s steps to study the CBD market and its public statements are viewed as evidence the agency has “an active interest in regulating the manufacture and marketing of CBD products.”[9]   These courts have therefore elected to pause litigation challenging CBD-product advertising “until the FDA completes its rulemaking regarding the marketing, including labeling, of hemp-derived ingestible products.”[10]

A class action was filed in the U.S. District for Illinois against Charlotte’s Web, alleging the products were labeled as dietary supplements and did not contain the amount of CBD claimed on the label.[11] The motion to dismiss without prejudice was denied, but a stay was granted in September 2020, requiring periodic status reports on the FDA’s definition of ‘hemp extract,’ at issue regarding dosing expectations.

Another class action filed in the Northern District of California against Colorado-based Elixinol, alleged its CBD capsules, tinctures, and dog treats were “illegal” to sell.[12] Elixinol argued the FDA’s position on CBD products remains “in a state of flux” and therefore the products are not “illegal.” After briefing on Elixinol’s motion to dismiss, including attacks on the sufficiency of plaintiffs’ pleading, the plaintiffs dropped all claims after the court stayed its claims pending the FDA’s conclusion of its rulemaking process.[13]

In Massachusetts, a class action determination was stayed over allegations that over 1,000 CBD edible products did not contain the potencies listed on the labels.[14] The court cited the other stayed cases and held the “FDA is in the best position to determine whether CBD is a legal product in the forms marketed by defendant, whether those products are required to contain certain dosages of CBD, and how those products should be manufactured, tested, and labeled to ensure compliance with FDA requirements.”[15]

In a class action against Hemp Bombs filed in the U.S. District Court of Massachusetts, the complaint asserted breach of express warranty, breach of contract/common law warranty, and Magnuson-Moss – breach of express warranty.[16] The plaintiff alleges that “independent laboratory testing, commissioned by plaintiff’s attorney, confirms that the CBD products do not contain the amount of CBD as advertised.” This is becoming prevalent in laboratories: attorneys are sending products in for testing solely for lawsuits. This court issued a stay under the primary jurisdiction doctrine to await the FDA’s promulgation of regulations.

Federal legalization of hemp has brought with it the ability to sue in court. These first mover lawsuits could yield substantial settlements and have long ranging effects on the strategic decisions of CBD companies, far ahead of the release of FDA regulations.

Contact Lisa: https://www.coatsrose.com/attorneys/lisa-pittman/

 

REFERENCES & SOURCES

[1] Snyder v. Green Roads of Florida, 430 F. Supp. 3d 1297 (S.D. Fla. 2020).

[2] Colette v. CV Sciences, Inc., No. 2:19-cv-10228-VAP-JEM(x) (Cent. California); Glass v. Global Widget, LLC, No. 2:19-cv-01906-MCE-KJN (East. California).

[3] Colette v. CV Sciences, Inc., No. 2:19-cv-10228-VAP-JEM(x).

[4] See Snyder v. Green Rds. of Fla. LLC, No. 19 cv 62342, 2020 U.S. Dist. LEXIS 1145, at *2 (S.D. Fla. Jan. 3, 2020); Potter v. Potnetwork Holdings, Inc., 2020 U.S. Dist. LEXIS 57166 (S.D. Fla. Mar. 30, 2020); Colette v. CV Scis., Inc., 2020 U.S. Dist. LEXIS 93553 (C.D. Cal. May 22, 2020); Glass v. Global Widget, LLC, 2020 U.S. Dist. LEXIS 104400 (E.D. Cal. June 15, 2020); Pfister v. Charlotte’s Web Holdings, Inc., No. 20 cv 418, Dkt. No. 43 (N.D. Ill. Aug. 11, 2020); Ahumada v. Global Widget LLC, No. 19 cv 12005, Dkt. No. 34 (D. Mass. Aug. 11, 2020).

[5] Clark v. Time Warner Cable, 523 F.3d 1110, 1114 (9th Cir. 2008).

[6] GCB Communs., Inc. v. U.S. South Communs., Inc., 650 F.3d 1257, 1263-64 (9th Cir. 2011) (internal quotation marks omitted).

[7] Id. at 1264 (internal quotation marks omitted).

[8] Snyder, 2020 U.S. Dist. LEXIS 1145, at *19.

[9] Id. at *20.

[10] Id. at *22.

[11] Pfister v. Charlotte’s Web Holdings Inc. US ND ILL.

[12] McCarthy v.Elixinol, LLC, 5:19-CV-07948, Dkt. 34 (N.D. Cal. Mar. 13, 2020).

[13] Id.

[14] Ahumuda v. Global Widget, LLC (Mass.)

[15] Kenneth Glass v. Global Widget.

[16] Ahumada v. Global Widget, No. 1:18-cv-12005-ADB; (Aug. 11, 2020) (Mass.) 2020 U.S. Dist. LEXIS 177510, 2020 WL 5669032

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