Earlier this fall, we released a client alert regarding FTC warning letters issued to various companies warning that their advertising of CBD oils, tinctures, capsules, “gummies” and creams may violate FTC rules. Similarly, the FDA issued warning letters this year to a number of firms marketing CBD products, citing them for misbranded drug products, unsubstantiated advertising claims and the sale of unapproved drug products.
Clearly, companies operating in the CBD space must be well-advised regarding regulatory exposures when it comes to the marketing and labeling of their products. However, a new front has recently opened that represents additional legal and financial exposures for those that are not carefully labeling and marketing their products with an eye toward specificity and accuracy.
In recent months, several class action lawsuits have been filed against companies that produce and sell CBD products alleging that certain products do not contain as much CBD as their labels claim. The suits, filed under state consumer protection laws related to fraud and deceptive trade practices, show every indication of spreading to any number of jurisdictions as plaintiff’s attorneys uncover a new and potentially lucrative revenue stream.
Gaddis v. Just Brands USA, et al, and Potter v. PotNetwork Holdings, Inc. et al, a class action filed in the U.S. District Court for the Southern District of Florida, alleges that the defendant companies have overstated how much CBD some of their products contain, with some independent lab tests initiated by the plaintiff in the Gaddis case purporting to show that some products contained no CBD whatsoever. A similar complaint, filed in Massachusetts, makes comparable claims related to products produced by Global Widget LLC (which also does business as “Hemp Bombs”).
Just Brands USA is also named as the Defendant in a proposed class action in the U.S. District Court for the Northern District of Illinois. In this case, however, it isn’t the amount of CBD in the products that is serving as the basis for the claims, but the alleged presence of THC in products that have been labeled as containing “No THC.” The case, Darrow vs. Just Brands USA, Inc., et al, presents the rather compelling case of an Illinois truck driver who lost his job after testing positive for THC during a drug test. Darrow alleges that CBD gummies that he purchased from Just Brands, labeled as “No THC,” contained the THC that caused him to fail the test and lose his job.
The recent spike of class action suits regarding the accuracy of CBD product labeling, together with the increasing frequency of warnings coming out of the FDA and FTC, should serve as a caution to manufacturers and sellers of CBD-containing products. At this point, the importance of accurate labeling and advertising, with appropriate documentation to back up any claims related to the CBD content of their products, cannot be overstated.
This includes careful, state-by-state attention to label requirements. By way of example, the draft rules issued by the State of Florida, which will be effective in 2020, require on the label a QR scan which will allow the consumer to have access to the independent lab test to verify the ingredients and cannabinoids in the final product.
The FisherBroyles Pharmacy and Health Care Law team is pleased to keep you updated on events of interest to those in the healthcare and pharmaceutical industries. Questions regarding the subject matter of this alert may be directed to any of the following attorneys:
T HE N E X T G E N E R AT I O N LA W F I RM ®