In an important decision for cannabis companies facing class action litigation over the alleged misbranding of products containing CBD, a Southern District of Florida court recently held that because the FDA is exercising regulatory authority over the labeling of CBD products, litigation must be halted until the FDA completes its rulemaking. Thus, the court stayed the case of Snyder v. Green Roads of Florida, Case No. 0:19-cv-62342-UU (S.D. Fla.) pursuant to the primary jurisdiction doctrine.
Plaintiffs brought a class action complaint against Green Roads, a Deerfield Beach, Florida-based business, in September 2019, asserting that the CBD content listed on the product label and packaging of a 250 mg CBD Oil bottle did not match Green Roads’ laboratory certificates of analysis of the CBD content. The plaintiffs claimed that they relied on Green Roads’ labels when purchasing the products and were overcharged because each product contained less CBD than indicated.
As we’ve chronicled here and here, in addition to Green Roads, approximately ten (10) other CBD companies were hit with similar deceptive labeling class action lawsuits in late 2019. Thus, Judge Ursula Ungaro’s opinion, and her analysis of the primary jurisdiction doctrine as a means of staying litigation pending federal rulemaking, could prove instructive to other defendants.
In its motion to dismiss, Green Roads contended that district courts have inherent discretionary power to stay cases and the Snyder case represented a textbook example of an appropriate instance. Green Roads argued that the primary jurisdiction doctrine should apply where a case implicates a federal agency’s expertise with a regulated product, and that the doctrine enables a court to take advantage of an agency’s special expertise while promoting uniformity. Here, because the State of Florida and the FDA are poised to act on CBD regulations, Green Roads asserted that the agency’s forthcoming guidance should be dispositive.
Although the court denied Green Roads’ motion to dismiss plaintiffs’ claims outright in its decision dated January 3, 2020, the case now will be paused pending federal rulemaking. The court reasoned that any analysis of the facts associated with the case would “benefit greatly” from waiting until federal regulations of CBD products were enacted, noting that there is a need for “consistent guidance” relating to labeling standards for CBD products.
Moreover, the court found that federal level rulemaking efforts are active and ongoing – although the court recognized that “regulatory delays” could develop. In sum, the court concluded that current FDA regulations are insufficient to clearly delineate whether CBD ingestibles are food supplements, nutrients or additives and what labeling standards are applicable to each classification.
“ . . . [T]he rulemaking processes at the federal level is active,” the judge said. “Given that this case is in the nature of public interest litigation, the delay occasioned by a stay under the current circumstances, would not prejudice plaintiffs to any significant degree.”
It remains to be seen whether other CBD-company defendants will seek to employ the primary jurisdiction doctrine in attempting to stay their federal cases, or whether courts in other jurisdictions will follow Judge Ungaro’s opinion. Three federal cases alleging that various CBD companies overstated the quantity of the CBD in their products have been filed in the Southern District of Florida (in addition to the Green Roads case) and Judge Ungaro’s opinion would carry weight in those cases. However, other similar class actions have been filed in Massachusetts, California federal courts, the Eastern District of New York and in California state courts. Most likely, it is too early to predict how courts in those jurisdictions will rule on motions to dismiss – and whether the primary jurisdiction doctrine will be invoked – despite the promising ruling from Judge Ungaro’s court.