United States: Judicial Decisions Reflect Need For CBD Regulations And Legal Counsel

Consumer class actions regarding CBD marketing are on the rise. In recent months, a number of federal judges have placed lawsuits concerning the marketing of CBD-infused products on hold because the U.S. Food & Drug Administration (FDA)—tasked with regulating those products under the 2018 Farm Bill—still has not issued regulations governing how they can be marketed.

Besides updating its website with content reflecting its current approach to CBD products, the only pertinent FDA action since the Farm Bill passed has been the issuance of warning letters to CBD product manufacturers, distributors and retailers regarding their advertising. While warning letters provide insight into the FDA's views about how CBD products should not be marketed, they are not law and they may not help courts handling the increasing number of CBD claims determine whether the sale of a particular CBD product violates the law. The invocation of the "primary jurisdiction" doctrine by federal court judges, and the attendant deferral of decisions in CBD cases pending the issuance of FDA regulations, underscores the need for sound legal advice in connection with marketing CBD products.

Federal Lawsuits Stayed Given Lack of FDA Regulation of CBD

In late May, the presiding judge in Colette v. CV Sciences, Inc.—a putative class action pending in the U.S. District Court for the Central District of California, which asserts consumer fraud claims relating to the marketing and sale of CBD-infused products, such as CBD sprays, CBD oil drops, CBD gummies and CBD capsules and softgels—ordered a stay of the case given the absence of CBD regulations by FDA. In response to a motion to dismiss filed by the defendant in the case, the court, in an opinion dated May 22, reviewed the contours of the primary jurisdiction doctrine, under which courts defer judicial proceedings "pending the resolution of an issue within the special competence of an administrative agency." In the CV Sciences case, that "issue" is the regulation of CBD, and that "administrative agency" is FDA.

As a result, the case has been stayed "until the FDA completes its rulemaking regarding the marketing, including labeling, of CBD ingestible products."

The judge in CV Sciences was not the first federal court judge to stay a CBD-related lawsuit pending FDA action. In fact, in the opinion, Judge Phillips commended a similar analysis and conclusion reached by the federal judge overseeing Snyder v. Green Roads of Florida in the U.S. District Court for the Southern District of Florida. In that case, the court undertook a review of the primary jurisdiction doctrine, ultimately deciding to stay the case "until the FDA completes its rulemaking regarding the marketing, including labeling, of hemp-derived ingestible products."

FDA Continues to Issue Warning Letters

While some courts await FDA regulations on CBD, FDA has continued to send warning letters to companies making and marketing CBD products. Some of those letters have sought to crack down on the sale of CBD products purporting to treat or prevent COVID-19, such as one issued in May to a business based in Puerto Rico.

But most of FDA's recent CBD-focused warning letters have raised noncoronavirus concerns; that is, most letters have continued to inform recipients that they are violating the Food, Drug, and Cosmetic Act (FDCA), because, according to FDA, CBD products cannot be, among other things, marketed as dietary supplements or promoted with health claims. As recently as June 2, FDA issued a warning letter to a business in Boulder, Colorado, flagging CBD products marketed as providing "relief of cold & flu symptoms" and purporting to address "acute anxiety." In April, FDA announced that it had sent warning letters to two businesses (one in Washington and one in New Hampshire) accused of marketing CBD products as alternatives for opioid products.

As FDA continues to focus—and warn—CBD businesses for allegedly violating federal law, the agency still has yet to complete the CBD rulemaking process. Such rules would create clarity in the market by providing a comprehensive, consistent federal regulatory framework for CBD products, something that has been lacking despite the persistent wave of warning letters. As the judge in the CV Sciences case was sure to point out, "regulatory letters"—like FDA warning letters—"do not constitute final agency action[.]"

Despite not taking "final agency action," FDA has taken steps to enforce its warning letters, and in so doing, the agency has made clear that failure to respond promptly and appropriately to warning letters can have serious consequences. Case in point: on May 26, a judge from the U.S. District Court for the Southern District of New York issued a permanent injunction against two individuals doing business as Sundial Herbal Products—a company that marketed, with health claims, various product including hemp seed oil—barring them from engaging in a range of business activities (including those that were the subject of the case) until they demonstrate full compliance with the FDCA and obtain written permission to resume business from FDA. The case, United States v. Hakim, which was brought two years ago by the Department of Justice on behalf of FDA, can be traced to multiple warning letters that FDA sent the business—and the recipients' subsequent failure to comply with FDA's requests.

Takeaway

The deference by some federal courts to FDA's primary jurisdiction over CBD-related products, against the backdrop of FDA's continued practice of issuing warning letters despite not issuing relevant regulations, further complicates the already confusing federal-state regulatory structure concerning the treatment of CBD products. Individuals and businesses at all levels of the CBD supply chain should obtain sound legal advice—ideally before receipt of a warning letter—about pertinent state and federal regulations, as well as about a growing body of judicial precedent applicable to the marketing of CBD-infused products.

For More Information

If you have questions about this Alert, please contact Seth A. Goldberg, Justin M. L. Stern, any of the attorneys in our Cannabis Industry Group or the attorney in the firm with whom you are regularly in contact.

Originally published by Duane Morris, on June 2020

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.