Class Actions Come for Cannabis

The cannabis industry in the United States is relatively new. But a series of class actions filed within the last month alleging deceptive labelling of cannabidiol (“CBD”) products demonstrate that some of the legal issues the industry faces are not.

The first case, Gaddis v. Just Brands USA, Inc., S.D. Fla. No.  0:19-cv-62067 (Aug. 16, 2019), alleges that the labelling and packaging of JUSTCBD-branded CBD products overstates the amount of CBD in the products, and that some of the products contained no CBD whatsoever. The complaint also alleged that the company’s website misrepresented the amount of CBD in various products, including gummies, tinctures, vaping cartridges, and food products. The plaintiff is seeking to certify a nationwide class of consumers asserting claims for breach of warranty, fraud, and unjust enrichment, and a statewide class asserting a claim under a New York consumer protection statute. 

Another potential class action against a CBD manufacturer was filed in the Southern District of Florida last week. Potter v. Potnetwork Holdings, Inc., S.D. Fla. No. 1:19-cv-24017 (Sept. 27, 2019) involves allegations that the labelling and packaging of defendants’ CBD products, including “CBD Oil,” “CBD Edibles,” “CBD Capsules,” “CBD Drinks,” “CBD Vape Oil,” as well as “Bath & Body” and “Cosmetics,” misrepresents the amount of CBD in those products. Comparing the CBD industry to the “Wild West,” the plaintiff accuses the defendants of “cheating every consumer who buys the Products” containing less than the represented amount of CBD. The plaintiff seeks to certify a nationwide class of consumers alleging an unjust enrichment claim, and a statewide class asserting a claim under a Florida consumer protection statute.

The same week, yet another class action was filed against a CBD manufacturer in the District of Massachusetts. Ahumada v. Global Widget LLC, D. Mass. No. 1:19-cv-12005 (Sept. 24, 2019), alleges that the defendants’  “Hemp Bomb” products, which include “CBD Gummies,” “CBD E-Liquid,” “CBD Oil,” “CBD Capsules,” “CBD Pain Freeze,” “CBD Lollipops,” “CBD Syrup,” “CBD Vape Products,” “Pet CBD Products,” and “CBD Shot,” also contain less CBD than represented in the products advertising and labelling. The plaintiff seeks to certify a nationwide class of consumers alleging breach of warranty claims, and a statewide class alleging a Massachusetts common law warranty claim. 

Consumer class actions are only one peril facing manufacturers of CBD products. Deceptive marketing claims by competitors are also possible under the federal Lanham Act and analogous state statues. So, it is vitally important that manufacturers of CBD products make sure, and be able to document, that the information on their labels and websites is consistent with what is in their products.