Hemp, a type of cannabis with less than .3% THC, became legal in 2019 with the passage of the 2018 Farm Bill, which treats hemp as an agricultural commodity and removed it from the definition of “marijuana” under the Controlled Substances Act (CSA). This ushered in a new industry and a new era of federally (re)legalized cannabis. In just a few years, hemp is being grown all over the country, both for industrial purposes, such as textiles, and for therapeutic cannabinoids, such as CBD.
CBD was a two-billion-dollar industry by the close of 2020. Extracts derived from hemp plants are infused into a variety of products, both ingestible and topical, to produce therapeutic effects. Many people are true believers in the healing properties of CBD. Businesses have been aggressively pursuing market share by peddling their own versions of CBD products for humans and pets across all types of marketing platforms, despite recent enforcement actions by the Food and Drug Administration (FDA), which retains regulatory authority over CBD. As with any new industry, it is caveat emptor right now; some products are indeed effective and high quality and others sit beside the register at your local gas station.
CBD is one of many active chemical compounds in the cannabis plant, and it has found exponential popularity in oils, gummies, capsules, topical creams, and drinks. These products have been floating around in the stream of commerce virtually unregulated. Thus, on the same day President Trump signed the 2018 Farm Bill, the FDA issued a statement that it retained authority to regulate CBD products. The FDA also asserts that CBD is a drug because the FDA approved Epidiolex, a marijuana-derived CBD drug for epilepsy. The FDA also stated that CBD may not be marketed as a dietary supplement. Finally, the FDA stated that CBD may not be infused into foods or beverages placed in interstate commerce. On this last point, each state’s health department has a different position on this—some allowing CBD-infused foods, but until the FDA clarifies its stance, the interstate prohibition on infused foods causes problems with federally oriented services such as banking and insurance. And the FDA is taking enforcement action against companies it targets for violating these precepts, sometimes bringing in the Federal Trade Commission (FTC) to file a lawsuit for advertising violations.
Hemp, a type of cannabis with less than .3% THC, became legal in 2019 with the passage of the 2018 Farm Bill, which treats hemp as an agricultural commodity and removed it from the definition ofThe entire CBD industry, including state governing bodies, are in a state of suspension waiting on the FDA to issue its regulations for CBD products. The FDA has conducted public hearings and taken extensive public comment on how CBD should be regulated, and it is reportedly in the midst of evaluating how to properly and uniformly market CBD products. The only way a consumer can verify a particular bottle of hemp CBD is to check its website or QR code for a certificate of analysis (COA) that reflects its test results that trace the product and its manufacturer. These documents are not necessarily fully reliable and, for that reason, the 2018 Farm Bill made falsification of COAs a felony.
In the absence of regulation, the FDA has issued some public guidance material for consumers. To date, all an attorney has to go on to advise clients for guidance are the FDA drug labeling guidelines and the series of warning letters issued by the FDA and FTC against CBD companies making impermissible claims about their products and other marketing and labeling foibles.
Plaintiffs’ attorneys have seized on the vulnerabilities of this nascent industry and there is already a crop of lawsuits based on mislabeling, misrepresentation, and related claims. But, because the FDA has not determined yet how CBD will be regulated and has not yet issued its guidelines for labeling, content, and marketing of CBD products, one court after another has begun to either abate or dismiss these CBD mislabeling cases until the FDA releases its CBD rules, often invoking the primary jurisdiction doctrine. The consumer lawsuits make nearly identical claims: (1) the CBD products are illegal drugs, foods, or dietary supplements that violate the FDA guidelines; (2) the CBD products make impermissible health claims; and/or (3) the CBD products are mislabeled in terms of their curative properties, CBD content or dosage information, and that the products would not have been purchased if it had been known the products were unregulated.
As a result, CBD companies have raised similar defenses, resulting lately in courts ruling similarly on these issues. For example, in January 2020, the Southern District of Florida in the Snyder case stayed a CBD class action relating to the marketing and sale of CBD products until the FDA sets forth a legal path for the manufacture, sale, and marketing of the products. The court concluded a judgment was premature because “FDA regulations currently provide little guidance with respect to whether CBD ingestibles, in all their variations, are food, supplements, nutrients or additives and what labeling standards are applicable to each iteration,” and thus, deemed the existing regulatory framework inadequate to resolve these issues. What follows is a brief survey of these cases over the past year.
Courts like the Snyder case in the Southern District of Florida, faced with considering whether CBD products are mislabeled have reached similar temporary resolutions. These courts, including several in California, explained that although the FDA expressed its position about CBD products in warning letters, these letters do not amount to final agency action and that the FDA has yet to formally express its position on the regulation of these products. The Court in Collete also wrote that “the number of CBD class actions currently pending in the federal district courts makes clear the danger of inconsistent adjudications.” Accordingly, these courts have all issued stays, concluding they would need the FDA’s final rules before issuing orders in those cases.
Since January 2020, multiple federal district courts have stayed false advertising cases involving CBD products at the pleading stage on primary jurisdiction grounds. “The primary jurisdiction doctrine allows courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency.” It “is a prudential doctrine under which courts may, under appropriate circumstances, determine that the initial decision making responsibility should be performed by the relevant agency rather than the courts.” “It is useful . . . in instances where the federal courts do have jurisdiction over an issue, but decide that a claim requires resolution of an issue of first impression, or of a particularly complicated issue that Congress has committed to a regulatory agency.”
Regulating these new CBD products is a complicated issue indeed that will also implicate the Food Drug & Cosmetic Act. As these courts have explained, resolving the claims at issue in these cases requires “consistent guidance” from the FDA on whether “some or all CBD products are food additives, supplements, or nutrients that can be safely marketed to the public and, if nutrients, whether the labeling standards and requirements for CBD products will be different or the same as for other nutrients.” The FDA’s recent steps to study the CBD market and its public statements have been viewed as evidence the agency has “an active interest in regulating the manufacture and marketing of CBD products.” These courts have therefore elected to pause litigation challenging CBD-product advertising “until the FDA completes its rulemaking regarding the marketing, including labeling, of hemp-derived ingestible products.”
A class action was filed in the Northern District of Illinois against the world’s largest CBD company, Charlotte’s Web, alleging that the products were labeled as dietary supplements and did not contain the amount of CBD claimed on the label. The U.S. District Court Judge denied Charlotte’s Web’s Motion to Dismiss without prejudice, but granted a stay on the litigation invoking the primary jurisdiction doctrine on September 16, 2020, and requiring periodic status reports on the FDA’s definition of ”hemp extract,” at issue in this lawsuit as it pertains to dosing expectations. In a joint stipulation, the parties stated, “the court and the parties would benefit from the FDA’s expertise on the question of defining ‘hemp extract,’ such that a stay based on primary jurisdiction is warranted…”
Another fairly high-profile case is a class action in the Northern District of California against Colorado-based Elixinol, alleging that its CBD capsules, tinctures, and dog treats were “illegal” to sell. Elixinol’s attorneys argued that the FDA’s position on CBD products remains “in a state of flux” and therefore the products are not “illegal.” After a thorough briefing on a motion to dismiss, including attacks on the sufficiency of plaintiffs’ pleading by Elixinol, the plaintiffs dropped all claims after the court stayed all of the plaintiffs’ claims pending the FDA’s conclusion of its rulemaking process.
In Massachusetts, a federal judge stayed a class action determination over allegations that over 1,000 CBD edible products did not contain the potencies listed on the labels. The judge cited the other stayed cases and held the “FDA is in the best position to determine whether CBD is a legal product in the forms marketed by defendant, whether those products are required to contain certain dosages of CBD, and how those products should be manufactured, tested, and labeled to ensure compliance with FDA requirements.” A prior case brought by a different plaintiff against this same company alleging the same general claims was also stayed.
In Ahumada v Global Widget LLC d/b/a Hemp Bombs, filed in the District of Massachusetts, a class action complaint was asserted with claims for breach of express warranty, breach of contract/common law warranty, and Magnuson-Moss – breach of express warranty. The plaintiff alleges that “independent laboratory testing, commissioned by plaintiff’s attorney, confirms that the CBD products do not contain the amount of CBD as advertised.” This is becoming prevalent in laboratories: attorneys are sending products in for testing for the purposes of filing lawsuits. This court issued a stay of the litigation under the primary jurisdiction doctrine to await the regulations to be promulgated by the FDA.
Federal legalization of hemp has brought with it the ability to sue in court. Before the 2018 Farm Bill, hemp was still marijuana at the federal level. Lawsuits were frowned upon despite state legal regimes. But now, products are being tested solely to sue based on inaccurate results, and given the inconsistency in this fledgling industry, these first-mover lawsuits could yield substantial settlements if they do not put these new companies out of business altogether.
