Cannabis Class Action Lawsuits Rise in 2019

The NERA Economic Consulting (www.nera.com) recently published a report that noted a trend in cannabis class action lawsuits being filed for 2019. The report wrote, “Between July and December 2019, six cases were filed on behalf of investors in the cannabis industry alleging either (1) failure to disclose weak demand for the product or the expected decline in revenue and profits or (2) misrepresentations related to quality of the product, the status of inventory, or markup on biological assets.”

These are the companies in which cases were filed in the 2nd Circuit Court:

India Globalization Capital, Inc.     Filed on: 02 Nov 18 Pending
CannTrust Holdings Inc.                 Filed on: 10 Jul 19 Pending
Sundial Growers Inc.                         Filed on: 25 Sep 19 Pending
HEXO Corp.                                       Filed on: 26 Nov 19 Pending
Trulieve Cannabis Corp.                  Filed on: 30 Dec 19 Pending

In the 3rd Circuit Court were:

Canopy Growth Corporation          Filed on: 20 Nov 19 Pending
Aurora Cannabis Inc.                       Filed on: 21 Nov 19 Pending

In addition to the suite that NERA mentioned, Charlotte’s Web Holdings Inc. and Infinite Product Co. are both dealing with proposed consumer class suits in California. These cases are alleging the companies improperly marketed products made from CBD. The suits were sparked by Warning Letters published by the FDA in November. They allege that products made by both Charlotte’s Web and Infinite did not abide by the FDA regulations and, as such, violate California law.

The cases are Dasilva v. Infinite Product Co., C.D. Cal., No. 2:19-cv-10148, complaint 11/27/19; McCarthy v. Charlotte’s Web Holdings, Inc., N.D. Cal., No. 5:19-cv-07836, complaint 11/30/19.

Charlottes Web had labeled their products as dietary supplements, which seems to be what the FDA took issue with. The FDA has written, “Based on available evidence, FDA has concluded that THC and CBD products are excluded from the dietary supplement definition under section 201(ff)(3)(B) of the FD&C Act [21 U.S.C. § 321(ff)(3)(B)]. Under that provision, if a substance (such as THC or CBD) is an active ingredient in a drug product that has been approved under section 505 of the FD&C Act [21 U.S.C. § 355], or has been authorized for investigation as a new drug for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public, then products containing that substance are excluded from the definition of a dietary supplement.”

The Infinite Products situation is a little different. That company included marketing statements like “CBD can alleviate some symptoms of autism, that cannabinoids have been found to inhibit the growth of cancer cells, and that, because of opiods’ addictiveness and painful withdrawal symptoms, people have moved to using CBD.”

According to NERA, in all class action cases, the median settlement value was $12.4 million, the highest since 2012, indicating that more cases are settling for higher values than in previous years. “The Aggregate NERA-defined Investor Losses for filed cases decreased from 2018’s record high of $929 billion to $519 billion, largely due to a decline in cases with Investor Losses of $5 billion or more. However, aggregate Investor Losses for cases with losses of $5 billion or less was $173 billion, the highest this decade.”

 

 

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


Leave a Reply

Your email address will not be published. Required fields are marked *

You may also like


About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


READ MORE



Recent Tweets

@GreenMarketRpt – 9 hours

RT : While there are plenty of discussions surrounding the opportunities with , it is critically important to also…

@GreenMarketRpt – 9 hours

RT : Great chat w/ 📈 🗞 re: 1/2M sq ft expansion, our compa…

@GreenMarketRpt – 9 hours

Green Growth Sells Off CBD Biz As The Board Says It Has Limited Alternatives $GGB $GGBXF

Back to Top

You have Successfully Subscribed!