By Zane Gilmer
Twenty nine states and the District of Columbia now have laws that permit some form of legal marijuana (either medical, recreational, or both). As the marijuana industry continues to expand, so too do the legal issues facing the industry. One of these emerging legal issues is the threat of products liability exposure for marijuana manufacturers and distributors.
Plaintiffs’ lawyers have already begun testing products liability cases against the industry. For instance, in October 2015 a medical marijuana consumer filed a putative class action lawsuit against Colorado marijuana company LivWell (Flores v. LivWell, Case No. 2015CV33528). The lawsuit alleged that LivWell treated its marijuana with a dangerous fungicide, Eagle 20, which emitted a poisonous cyanide gas when it was burned. The Court dismissed the lawsuit because it found that the plaintiff did not suffer any harm and, despite the fact that it was treated with a problematic fungicide, the marijuana still performed as intended (the plaintiffs admitted smoking the marijuana without harm). Although the plaintiff in that case was unsuccessful, the case is still significant because it marks the first class action products liability lawsuit filed in the United States.
In early 2016 another marijuana products liability case was filed by the guardians of three children against a dispensary and manufacturer (Kirk v. Nutritional Elements, Case No. 2016CV31310). According to the lawsuit, the children’s father purchased and consumed marijuana edibles and then murdered the children’s mother. The lawsuit alleges that the dispensary and manufacturer failed to warn of the side effects of consuming marijuana, including delirium and paranoia. The lawsuit is currently pending.
OTHER POSSIBLE CLAIMS
Below is an overview of some of the common claims the marijuana industry must be aware of.
Failure to Warn
Failure to warn claims are based on the premise that the manufacturer and/or distributor failed to warn consumers about certain dangers associated with using or consuming the product. Common dangers that plaintiffs may argue should have been disclosed, but were not, include health risks, addictive nature of products, limitations on ability to operate motor vehicles, and proper dosage. Because the marijuana industry is still relatively new and formal studies regarding short and long term risks are limited, it can be difficult to know what manufacturers and distributors should actually be warning consumers about (i.e., the scope of their duty to warn). Nevertheless, industry participants should consider disclosing known risks to avoid failure to warn claims.
Negligence claims are often similar to failure to warn claims in that they may be premised on the argument that the manufacturer and/or distributor had a duty to act reasonably, which includes a duty to warn consumers about certain health risks, and failure to make such warnings constitutes negligence.
Fraud-related claims would likely arise as a result of allegations that a manufacturer and/or distributor intentionally concealed or lied about certain things concerning their products. For instance, in the Flores case, the plaintiffs argued that the defendants’ marketing materials falsely claimed that their products were of a higher/better quality than others, but, according to the plaintiffs, that was untrue given that the products had been subjected to the Eagle 20 fungicide. Industry participants must monitor their marketing and advertisements to ensure that they are not making false claims.
Design defect claims are based on the argument that a product is designed in a way that is not suitable or safe for its intended purpose. Many marijuana manufacturers alter marijuana in various ways (e.g., developing hybrid strains and creating edibles). These activities could provide the basis for a design defect claim based on a consumer claiming that the alteration or design led to additional health risks (e.g., caused greater risk of cancer), made the product more dangerous in some way, or even made it more addictive. As such, industry participants should consider these risks in connection with testing and marketing their products.
Breach of Contract
By purchasing a product, the consumer enters into a contract with the distributor and/or manufacturer. Consumers have used breach of contract claims in other products contexts to argue that distributors and/or manufacturers breached their contracts with the consumer when the product did not perform as expected or was more dangerous than they believed it would be.
Breach of Warranty
Breach of warranty claims generally arise when a consumer argues that a manufacturer and/or distributor made a certain representation about their product that turned out not to be true. This can take a number of forms, but one of the most likely forms it could take in the marijuana context is with regard to claims about the effectiveness of medical marijuana to cure, prevent, or control certain medical ailments. If a manufacturer or distributor makes a claim that its medical marijuana can or does have some medical benefit and it turns out that the representation is untrue, then the consumer may have a breach of warranty claim. Industry participants, therefore, must take care in making unsubstantiated representations about their products and should consider including a disclaimer of all implied and express warranties.
Tobacco plaintiffs have previously brought claims against tobacco companies based on the premise that tobacco companies improperly directed marketing and advertisements at youth in an effort to get young people to begin using tobacco and, thus, become addicted at an early age. Although youth marketing of marijuana is illegal in most jurisdictions that have legalized marijuana, a plaintiff could attempt to rely on a youth marketing claim if advertisements or marketing efforts are directed at youth. Thus, industry participants must ensure that their marketing and advertisements are not directed at youth.
Unfair or Deceptive Trade Practices
Many states have some form of unfair or deceptive trade practices laws that generally prohibit companies from using fraudulent or deceptive practices. In the past, some state attorney generals relied on those laws to bring claims against the tobacco industry. Those claims were largely based on allegations that the tobacco industry concealed or misrepresented the addictive nature and health risks of tobacco use. Given the general parallels between the tobacco and marijuana industries from a product stand point, the marijuana industry must be aware of these claims.
Bottom Line: Although the marijuana industry is still very much evolving, marijuana manufacturers and distributors must understand that given the nature of their products they face serious products liability risks. However, those risks can be minimized by taking proactive steps in the testing, marketing, and distribution of their products. Industry participants should work with an experienced products liability attorney (such as those at Stinson Leonard Street LLP) to evaluate their individual risks and work to implement processes to minimize them.
Zane Gilmer is a member of the firm's Business Litigation division. He is located in the Denver office For more information, please contact Zane or your usual Stinson Leonard Street contact.
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