The commercial litigation landscape for CBD, hemp and marijuana is constantly evolving as federal and state courts issue decisions that impact investors, commercial contracts, employment issues, intellectual property and insolvency. The CannaBizDisputes™ blog regularly tracks and reports on these developments.
Florida Federal Court Stays Class Action Pending FDA Issuance of CBD Regulations
In November 2019, the Food and Drug Administration (FDA) sent warning letters to 15 companies, asserting they were illegally selling products containing CBD and improperly making claims about CBD’s benefits in advertisements, websites and packaging. Since then, numerous class actions have been filed against CBD manufacturers on the basis of these claims. The CBD manufacturers have interposed a range of defenses, including defenses predicated on the need for deference to FDA rule making. On January 3, 2020, the U.S. District Court for the Southern District of Florida adopted one such argument, staying a class-action on the grounds that it was premature to adjudicate the matter while the federal rulemaking process for CBD-related products was ongoing.
Citing its “inherent authority to stay its own proceedings” under the primary jurisdiction doctrine, the Court in Snyder v. Green Roads of Florida LLCconcluded that the “rulemaking processes at the federal level is active,” that the “FDA regulations currently provide little guidance” with respect to the labeling standards for CBD-related products, and that “the Court would benefit greatly from the FDA’s regulatory framework.” Snyder v. Green Roads of Florida LLC, 2020 WL 42239, at *2, 7 (S.D. Fla. 2020). The Court rejected the Plaintiffs’ argument that the delay caused by the stay would impose undue prejudice given that “this case is in the nature of public interest litigation,” and noted that the “FDA is under considerable pressure from Congress and industry to expedite publications of regulations and policy guidance regarding CBD products.” Id.at *6-7.
The decision in Snyder may prove to be a harbinger of a new, unique obstacle faced by plaintiffs in CBD-related consumer and commercial litigation. Several CBD-distributor defendants in other cases have already cited the decision in Snyder in support of their own primary jurisdiction arguments to stay the proceedings against them. See Dasilva v. Infinite Product Co., Case No. 2:19-cv-12005 (C.D. Cal.); Potter v. Potnetwork Holdings, Inc. et al., Case No. 1:19-cv-24017 (S.D. Fla.); Amuhada v. Global Widget LLC, Case No. 1:19-cv-12005 (D. Mass.) While no other court has (to date) relied on Snyder to grant a similar stay, that may change in the near future, as more CBD defendants cite the decision in support of their attempts to stay the actions against them.
The fact that the FDA does not appear to be close to finalizing rules and regulations for CBD may strengthen these arguments. In early March 2020 the FDA advised Congress that it would be re-opening the public comment period to receive feedback concerning its regulation of CBD. That said, this signal of additional delay in the issuance of CBD regulations by the FDA could also have the opposite effect, as plaintiffs may oppose Snyder-based stays by citing the seemingly open-ended timeline for the completion of the FDA’s rulemaking process, and arguing that an indefinite stay will impose undue hardship.
Either way, it will be important for litigants on both sides of these CBD-related disputes to track the regulatory process, and monitor how it impacts decisions in cases like Snyder.
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03.13.2020 | PRACTICE AREAS: Litigation and Dispute Resolution | INDUSTRIES: Cannabis