The Wall Street Journal editorial board shed some light the other day on yet another disturbing issue. The article discusses how cannabis shops are growing throughout California since voters legalized recreational cannabis use last year.
While many pro-legalization advocates fear US Attorney General Jeff Sessions’ threats on killing the nascent cannabis industry, the bigger problem could actually be lawyers. Plaintiff firms have filed around 800 complaints hitting cannabis businesses who have supposedly violated the Safe Drinking Water and Toxic Enforcement Act (Prop. 65), which was established in 1986 requiring businesses to warn consumers if their goods contain one of over 900 hazardous or carcinogenic chemicals.
Truth be told, you can’t even tell if a strain you’re smoking may be carcinogenic. There’s no way to tell without proper testing if manufacturers don’t come clean about it. Lawyers are abusing this problem, and they’re hounding cannabusinesses like a moth to flame. The cannabis industry in California alone is expected to grow $5 billion more thanks to legalization efforts, and they want a piece of the pot pie. Plaintiffs left and right are raiding neighborhood pot shops and even co-ops; and the WSJ article mentions that one plaintiff alone has filed over 600 Prop. 65 violation notices.
An article written by Ann Grimaldi details how Michael Murphy, the plaintiff, identifies himself as the manager of Clean Cannabis Initiative, LLC and claims that some medical cannabis edibles and smokable items contain myclobutanil, malathion, and carbaryl, which are pesticides. The writer notes how myclobutanil has been on the Prop. 65 list of toxins since 1999, and carbaryl was added in 2010 but what’s strange is that malathion was added on May 20, 2016; although the warning date is effective on May 20, 2017, following the date after the notices.
Considering that businesses will be required to pay $2,500 for each day they violate the law and that private attorneys can sue businesses if they don’t act on the notices within 60 days, many businesses end up settling the case by paying a few thousand dollars just to avoid going to court. The lawyers are clearly onto the green rush.
The actions required by court can take a serious toll especially for small business owners. They have a choice to act on the violations by recalling the products sold, reformulating all their products to ensure that they eliminate the ability to smoke it, take measures to comply with Prop. 65, or pay a civil penalty based on factors listed in the California Health and Safety Code Section 25249.7(b).
How Pot Companies Can Protect Themselves
As a cannabis retailer, there’s no way that you can assume you won’t be held liable for finding toxic contaminants, pesticides, and carcinogens in the products you’re selling. There are things you can do to keep yourself protected, but it will take some time:
- Establish your business in such a way that you are protected from personal liability by doing some research on corporate separateness.
- Investigate the manufacturers and suppliers that you work with as well as the products you sell
- Use the right warning labels and packaging on all products that you sell. You can talk to a lawyer to discuss what options you have with labeling and packaging to avoid being targeted by greedy, hungry plaintiffs.
- Ensure that you have contracts with manufacturers in place that clearly indicate the manufacturer’s safety requirements, their liability for defects and similar problems, and an agreement with the manufacturer to fund your defense costs should you be sued over problems related to the manufacturer’s product, and that the manufacturer should have insurance in place.
- Get your cannabis business insured.
These days there is a growing number of lawyers who cater to cannabis businesses. Keep your business protected by having these strategies in place.
- What would you do?