The country’s first products liability class action has hit the marijuana industry with the filing of various tort, strict liability and contract claims against LivWell, Inc. in Colorado state court last month.  The complaint purports to define two classes—a medical class and a recreational class.  LivWell operates eleven retail marijuana dispensaries and one of the world’s largest grow facilities in Colorado.

According to the plaintiffs’ allegations, LivWell intentionally used and applied Eagle 20 to its cannabis plants, a fungicide that allegedly releases hydrogen cyanide when ignited. Representative consumers complain they were uninformed of the application of the fungicide, and the dangers and health related consequences associated with the inhalation of its combustible by-product, hydrogen cyanide.

The complaint points out that the dangers of Eagle 20 are known and documented.  Indeed, the product is not approved for use in tobacco products.  Unlike the marijuana industry, however, the tobacco industry is not a new frontier–it is highly regulated.  The complaint alleges that because of the ban of the product’s use in the growth of tobacco products, its use by marijuana growers was improper, its failure to warn of the inherent associated risks negligent and its representation of the product as “medical” grade misleading. Where the legislation governing the marijuana industry does not correspondingly ban the use of Eagle 20, it will be interesting to see how the Colorado Court handles these questions, and whether it leaves them to be resolved by legislative action.

Given the unique undeveloped nature of the industry, the claims and relief sought are somewhat creative.  First, plaintiffs claim that the products labeled “medical” breached warranties. By labeling some of its marijuana product as “medical,” according to plaintiffs, LivWell represented that the product was of a higher grade and quality, when in fact, it was highly dangerous to users. Interestingly however, the consumers do not claim they were harmed by the use of the product, but instead that had they had knowledge of the application of the fungicide, they would have paid less for it.  The plaintiffs demand that putative class members be awarded the difference between the amount they actually paid for the cannabis at issue and the amount they assert they would have paid had the fungicide been disclosed.  It is questionable whether this economic theory will withstand a motion to dismiss where the underlying allegation is that the product poses an unreasonable risk of physical harm, and by their allegations, there is (in this case) no physical harm.

It is important to note that hydrogen cyanide (HCN) is present in a variety of plant matter, including bitter almonds, apple seeds, and peach pits.  HCN can be toxic, but only in the presence of sufficient exposure or dose – an issue that the complaint does not address.  The complaint is also silent concerning the nature of the potential health effects of the fungi that were controlled or eliminated through the fungicidal precautions that plaintiffs allege were taken by LivWell.

Second, plaintiffs claim for relief includes a cy pres award to “an appropriate designee that is dedicated to consumer marijuana advocacy.”  Cy pres awards are not uncommon in class actions, but it is likely a first that plaintiffs are seeking the award to benefit a marijuana advocacy group.

A final thought, and one not directly addressed in the complaint but that should be considered by producers and manufacturers, is that product liability class actions often resolve and settlement awards typically include either financial compensation or “vouchers”/“coupons” for class members. This is a popular and well-accepted practice in class action settlements. However, how a voucher, coupon, or other form of compensation for marijuana products will be handled given the uncertain legislative landscape is a legitimate, presently unanswered question.

As the legal cannabis market grows, so will the number of product liability lawsuits against the industry, including cases based upon a failure to warn of real or imagined risks, such as those alleged in the LivWell complaint.