CBD marketers can learn something from the food industry. And it has nothing to do with the regulatory morass around whether CBD can be legally added to foods. It’s about managing the risk of consumer false advertising litigation. Lawsuits filed in California and New York help illustrate what kinds of cases are already being brought and suggest that broader food and beverage litigation trends are likely to be instructive.
In Horn v. Medical Marijuana, Inc., plaintiffs, a truck driver and his wife, purchased and consumed a hemp-based cannabidiol (CBD) oil manufactured and distributed by defendants. Plaintiffs claimed that the CBD oil product caused the truck driver to fail a drug test administered by his employer, which in turn resulted in him losing his job. Plaintiffs attempted to recover from defendants on several claims, including false advertising and deceptive business practices. Plaintiffs relied on four sources of information from defendants: (1) an article in High Times magazine, (2) YouTube videos, (3) the seller’s website, and (4) a call to the seller’s 1-800 number. The last three sources stated that CBD did not contain THC, and the magazine article stated that the hemp used to extract CBD from contained less than 0.3% THC in accordance with federal definition of “hemp”.
Under New York law, the “false advertising” and “deceptive business practices” statutes are limited in their territorial reach, and to qualify as a prohibited act under the statutes, the consumer deception must occur in New York. Interestingly, despite the fact that plaintiffs viewed all of defendants’ sources of information while in New York and the CBD product was shipped to and consumed in New York, the court held that the statutes did not apply because the transaction was out-of-state. Defendants were not located in New York and no part of the online transaction took place in New York. The case is now on appeal.
In a similar California case, Thurston v. Koi CBD, LLC, plaintiff Thurston purchased CBD vape juices from defendant believing that the products could help treat or mitigate her knee pain. She also believed she would not fail her employer’s drug test because the products were labeled and promoted as having 0% THC and as being THC FREE. After using defendant’s products, Thurston was given a random drug test by her employer, which came back positive for cannabinoids, and she lost her job as a result. On April 8, 2019, Thurston filed a class action lawsuit against defendant claiming violations of the “Unlawful” and “Unfair” prongs of the California State Unfair Competition Law, the California Consumer Legal Remedies Laws, and the Pennsylvania Unfair Trade Practices and Consumer Protection Law. The case is currently pending in the Superior Court of the State of California for the County of Los Angeles.
The lesson for CBD marketers is this: Setting aside the employment issues in these cases, the plaintiffs’ bar is likely to scrutinize CBD labels with the same skeptical eye they have taken to the food and beverage industry in recent years. While we do not know whether the products at issue in these cases were accurately or falsely advertised, it’s fair to say that scrutiny on the advertising claims at issue were foreseeable based on what we’ve seen in the food and beverage space. Terms such as “free,” “0%,” health claims, “free from”-type claims, and processing claims such as “organic” have been frequent targets in consumer class litigation. As the CBD industry grows, marketers will want to understand and follow these trends to fully evaluate risk.