And So It Begins: The Wave of CBD-Related Consumer Actions Has Arrived
It was only a matter of time. As we anticipated last summer, the plaintiffs’ bar recently filed a slew of false advertising suits against manufacturers of products infused or made with cannabidiol, a/k/a CBD. This development was a fait accompli, given the combination of a booming CBD market, a murky federal regulatory landscape, and a patchwork of state regulatory efforts at varying degrees of development. This confluence of factors has paved the way for at least ten consumer lawsuits in the last six months against producers of CBD products. We expect more suits to follow in the near future as copycat suits are filed, CBD products become increasingly mainstream, and more deep-pocketed players enter the CBD market.
The recently filed consumer complaints have challenged the marketing and advertising of a wide variety of CBD products, including oils, gummies, capsules, topical creams, syrups, and other types of products. The claims brought in these class actions have generally proceeded on one of two theories:
- The defendant’s product labels and/or website misrepresent the amount of CBD (less than promised) or THC (more than promised) actually contained in those products. For instance, a plaintiff may allege that, based on preliminary laboratory testing, a CBD oil contains less CBD per milliliter than the label indicates.
- The marketing claims that the defendant makes about its CBD products (e.g., regarding health benefits) cause the products to violate the federal Food Drug and Cosmetic Act (“FDCA”) and, by extension, state law. Typically relying on FDA warning letters sent to companies (often other than the defendant) for their advertising of CBD products, plaintiffs allege that the FDA has not recognized CBD products as “safe and effective” for treating particular diseases or health conditions, and that products making such claims are therefore unapproved “new drugs” under the FDCA framework. Plaintiffs then attempt to bootstrap those alleged federal regulatory violations into claims under state consumer protection laws, given that certain states’ statutes purport to confer private rights of action to enjoin or seek damages for labeling that violate the FDCA and its implementing regulations.
Although claims like these have sometimes proven successful in other arenas (such as food labeling), plaintiffs challenging the marketing of CBD products face serious challenges. CBD manufacturers have a number of defenses they can raise, some at the earliest stages of litigation.
- Preemption: State-law claims are impliedly preempted when they conflict with a federal law like the FDCA. Such a conflict exists, not only where state and federal law differ substantively, but also when state law purports to allow private enforcement of a federal statute, like the FDCA, “that Congress intended . . . to be enforced exclusively by the Federal Government.” Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 352 (2001). When a plaintiff’s state-law claim asserting deceptive business practices is based on a putative violation of the FDCA or related regulations, the plaintiff is effectively seeking to enforce the FDCA itself, a federal statute that the FDA alone is charged with implementing. In particular, to the extent plaintiffs argue that companies market their CBD products as “drugs” or “dietary supplements” without receiving the FDA’s approval to do so, they improperly usurp the FDA’s sole authority to investigate and seek remediation of such regulatory violations. In an analogous recent case involving cosmetics—where the plaintiffs alleged certain cosmetics were marketed as “drugs” without FDA approval—one court found preemption on this exact basis. Borchenko v. L’Oreal, 389 F. Supp. 3d 769, 773-74 (C.D. Cal. 2019) (consumer protection claims based on state law provisions that “rely on and essentially mirror parallel provisions of the FDCA,” and which “rel[y] heavily on FDA warning letters and informal guidance to argue that Defendant’s products make ‘drug claims’ and, therefore, must receive federal premarket approval,” were “impliedly preempted by federal law”). Other courts have rejected private claims on similar grounds. See, e.g., PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1113 (2d Cir. 1997) (plaintiffs’ claim that defendant’s dietary supplements were actually “new drugs” sold “without proper FDA approval” was an “impermissible” attempt “to privately enforce alleged violations of the FDCA”).
- Primary jurisdiction: Primary jurisdiction is the prudential doctrine that allows courts to decide that a novel or complex issue should be decided by a regulatory agency with relevant technical skill or expertise, rather than through the judicial process. At the pleadings stage, CBD defendants can invoke primary jurisdiction as a basis for dismissing or staying the action insofar as the FDA is actively developing regulations and labeling guidance for CBD products. Indeed, the FDA has issued numerous statements in recent months, signaling that its rulemaking process is well underway. Moreover, as with preemption, the fact that plaintiffs’ claims rely on the FDA’s determination of whether a product qualifies as a “drug” is grounds for applying primary jurisdiction. Indeed, one court has already stayed a CBD-related consumer class action upon recognizing the FDA’s primary jurisdiction in this arena. See Snyder v. Green Roads of Florida LLC, 2020 WL 42239 (S.D. Fla. Jan. 3, 2020) (staying CBD consumer class action until the FDA completes its rulemaking on the marketing of ingestible CBD products after finding the current regulatory framework inadequate to resolve plaintiffs’ claims).
- No reliance/materiality: To meet the reliance and/or materiality elements of their claims, some plaintiffs have alleged that they would not have bought the CBD products had they known the products had not been approved as a “new drug” by the FDA, or did not qualify as a dietary supplement under FDA regulations. This assertion strains credulity: how much do consumers really care or reasonably expect that, for example, CBD gummies are FDA approved? And even assuming they do care, apart from Epidiolex®, a prescription anti-seizure medication, there is no CBD product that FDA has permitted to be marketed as a drug or dietary supplement; thus, by making this argument, plaintiffs effectively contend they would not have bought any CBD products at all. It is difficult to fathom that FDA’s view on this obscure and technical regulatory question would deter consumers from buying CBD products altogether. And, if any of these claims survive the pleadings stage, it is reasonable to expect that survey evidence could demonstrate that consumers do not consider whether CBD products are FDA-approved (since, indeed, none are FDA-approved) when deciding to buy them. After all, many consumers willingly purchase a closely related product—marijuana—with full knowledge that federal law treats it as an unlawful controlled substance.
- No cognizable injury: Relatedly, plaintiffs’ allegations that they would not have bought the products had they known the “truth” that they were not “drugs” or “dietary supplements” within the meaning of FDA rules suggests that they seek damages in the amount of the full purchase price—i.e., consumers would have paid no money had they known FDA had not approved the product as a drug, and the product was worthless without such approval. But courts have repeatedly rejected this “full refund” theory of injury. By buying, e.g., a CBD drink, plaintiffs still would have received any CBD-related health benefits from consuming the drink, in addition to the basic thirst-quenching benefit of the beverage. Plaintiffs would need to isolate the “price premium,” if any, associated with a mistaken belief of FDA approval. But identifying the relevant “price premium” will be difficult, if not impossible, because there are no comparable FDA-approved CBD products. As noted above, Epidiolex, a prescription anti-seizure medication, is the only FDA-approved CBD drug product, and it is categorically different than gummies, oils, and the like at issue in these actions.
Regarding plaintiffs’ slack fill-like claims (where a defendant is alleged to have understated the amount of CBD in their CBD products), at least one company has argued that plaintiffs have not suffered a cognizable injury because CBD is a naturally occurring nutrient subject to the FDA’s “80% Safe Harbor” rule. In other words, even if there are discrepancies between the actual CBD content in their products and their marketing claims, plaintiffs have not been injured because any such discrepancies fall within the 20% tolerance allotted for naturally occurring nutrients, like CBD.
- No standing to pursue injunctive relief: In most federal jurisdictions, a consumer cannot plead a threat of imminent injury—and thus, cannot satisfy Article III standing for seeking injunctive relief—when challenging allegedly misleading labeling, as he cannot be “fooled twice” by a misleading claim about which he now knows the truth. Thus, if a consumer claims he has learned that CBD consumables are not approved by the FDA to be marketed as “drugs,” he cannot credibly allege that he faces the risk of making the same mistake the next time he considers buying them—particularly when the plaintiff’s own complaint alleges the FDA has declined to approve any such products for those purposes. Even in the Ninth Circuit—where a previously misled plaintiff can pursue injunctive relief if he alleges he would be interested in rebuying the product if the labeling representations were truthful but has no way of knowing whether they are true or not—a plaintiff would struggle to plausibly assert such allegations as to CBD products.
- No standing to challenge unpurchased products: Even assuming a claim could be stated as to products plaintiffs personally purchased, defendants can argue that standing is lacking to pursue claims as to other CBD products the plaintiffs did not purchase. Many courts apply a “substantial similarity” test to determine whether standing exists as to claims for unpurchased products. But given the variety among the different types of CBD products and the advertising claims manufacturers may make about each (e.g., relaxes your dog, helps you sleep, reduces anxiety, relieves pain), the products frequently are too different in material ways to permit a non-purchaser to pursue mislabeling claims as to them all. For example, the Snyder court (although it did not apply the “substantial similarity” test) held that the plaintiffs did not have standing to bring claims premised on the marketing of CBD products that they had not purchased because they had suffered no injury-in-fact with respect to those products. Snyder, No. 0:19-CV-62342-UU, 2020 WL 42239, at *3.
Thus, while the emergence of these lawsuits is an unwelcome development for manufacturers of CBD products, there are numerous points of attack to swat down or substantially narrow plaintiffs’ claims. If history is any guide, the FDA’s efforts to finalize regulations for CBD products will not be an overnight process. In the meantime, companies will need to ensure they are prepared to defend these types of challenges to the marketing and sale of their CBD products.