We keep reading in Law360 and other publications about defense law firms that are ramping up cannabis practice groups. Our own firm is one of them. These developments sparked an interest. After all, won’t many of the principles we’ve worked with over the years for prescription and OTC medications apply to pot and its dressed-up cousins? Or is that just wacky? We’d like to be invited to join a CBD group, even as an adjunct member, but we won’t hold our breath. Anyway, plaintiffs are apparently doing something similar, as we start to see lawsuits alleging problems with cannabidiol (CBD) products. (We have written before about whether the learned intermediary rule should apply to cannabis lawsuits.) Such cannabis lawsuits often focus on whether the CBD product is as strong as advertised.
One example is Snyder v. Green Roads of Florida LLC, 2020 WL 42239 (S.D. Fla. Jan. 3, 2020), a class action against a manufacturer/distributor/seller of various CBD products including but not limited to CBD Oil, CBD Gummies, CBD capsules, CBD Terpenes, CBD Topicals, CBD Syrups, CBD Tea, and CBD Coffee. (There was just one defendant. Thus, surprisingly in this case, there was no joint defense.) There were multiple named plaintiffs. Though they purchased different items, each plaintiff claimed that the product labels misrepresented the amount of CBD that each product contained and that, as a result, each plaintiff was over-charged.
The defendant moved to dismiss the case to the extent that the plaintiffs lacked standing to sue over products they did not purchase, and to dismiss or stay the case because the FDA had primary jurisdiction to decide how CBD products should be labeled. The court mostly went the defendant’s way. The standing issue came first. Article III standing requires a plaintiff to have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision. The requirement of standing is meant to weed out phony controversies. Standing principles are fully applicable in the class action context. It is not a terribly high standard, but it isn’t so low as to permit plaintiffs to assert claims based on the marketing of products that they did not purchase.
So that’s a problem for the Snyder class action, as the complaint listed products that no named plaintiff bought. But what about future purchases? Who knows what the future holds, right, man? That stoner logic cannot help the plaintiffs because the allegations in the complaint made it clear that the plaintiffs “will not purchase more of Defendant’s products so long as the labelling does not meet their standards.” Accordingly, the Snyder court dismissed the complaint “to the extent Plaintiffs have failed to allege facts sufficient to demonstrate their standing to pursue class action claims based on products they did not purchase on the product labels in making his decision to purchase that the product labels misrepresented the amount of CBD that each product contained and that, as a result, each was over-charged for the products each purchased.” Far out – as in out of court.
Next is the issue of primary jurisdiction. CBD products are regulated at the federal and state level. The substance and scope of such regulation is in flux, but its existence is undeniable. Effective January 1, 2020, the state of Florida began regulating CBD products, including their labelling with respect to the number of milligrams of hemp extract contained in a product. As for the federal level, regulatory oversight of CBD ingestible products, including labelling, is currently the subject of rulemaking at the FDA. The FDA fairly recently conducted a public hearing and instituted an agency task force on CBD regulations. The Snyder court recognized that “[a]lthough the FDA rulemaking process in ongoing, the FDA is under considerable pressure from Congress and industry to expedite the publication of regulations and policy guidance regarding CBD products.”
Given that regulatory backdrop, did the plaintiffs’ beef with CBD strength labelling come within the embrace of primary jurisdiction? Four factors are baked into the primary jurisdiction doctrine: (1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry activity to a comprehensive regulatory scheme that (4) requires expertise or uniformity in administration. These four factors are not exclusive and courts “seem heavily influenced by a fifth factor in cases implicating FDA jurisdiction: whether the FDA has shown any interest in the issues presented by the litigants.”
All of those five factors militated in favor of primary jurisdiction in the Snyder case. First, the FDA is exercising regulatory authority over ingestible and other CBD products, even if there is “uncertainty with respect to whether the FDA will conclude that some or all CBD products are food additives, supplements or nutrients that can be safety 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.” Second, the FDA’s exercise of regulatory authority over CBD products is proper and within the FDA’s jurisdiction. Third, the Agriculture Improvement Act of 2018 explicitly recognized the FDA’s authority to regulate products containing cannabis-derived compounds. Fourth, the exercise of regulatory authority by the FDA over the labelling of ingestible CBD products requires “both expertise and uniformity in administration.” Among other issues with which the FDA is concerned are “whether CBD products pose safety risks, how the mode of delivery affects safety, whether there are dosage considerations related to safety, whether there is a need for manufacturing standards, and whether there are standardized definitions for the ingredients in, for example, hemp oil.” Fifth, the FDA “obviously has expressed an active interest in regulating the manufacture and marketing of CBD products.”
These five factors added up to primary jurisdiction in this case. The public interest in the litigation justifies a stay and “would not prejudice Plaintiffs to any significant degree.” At the same time, “[c]ourts would benefit greatly from the FDA’s regulatory framework.” Consequently, the Snyder court stayed the tort case “until the FDA completes its rulemaking regarding the marketing, including labelling, of hemp-derived ingestible products.” The court’s reasoning is blunt and right on.