THC’s recent listing under California’s Prop 65 is may have been speculated by industry stakeholders, however, it could further complicate the state’s controversial cannabis industry.
On January 3, 2020, the California Office of Environmental Health Hazard Assessment (OEHHA) released a revised list of chemicals classified under the Safe Drinking Water and Toxic Enforcement Act of 1986 (“Prop 65”). The revised list includes delta-9 tetrahydrocannabinol (“THC”).
Rumors that OEHHA would be placing THC on the Prop 65 list circulated in the industry for several months now, but those rumors became substantial in early December of 2019 after the Developmental and Reproductive Toxicant Identification Committee of OEHHA met to identify THC’s potential to cause developmental problems during pregnancy.
California businesses selling products containing THC must update product warning labels in accordance with Prop 65 to indicate the risk of birth defects or other reproductive consequences. Failure to do so will open up such companies to dangerous litigation and here is why: Prop 65 allows for public and/or private enforcement. Plaintiffs only need to allege a violation has occurred and do not need to allege or show harm, injury, or damage to people, property, or the environment. Failure to comply with any Prop 65 mandate results in penalties of up to $2,500 per day, per violation. If a public prosecutor also brings an unfair business practices claim, a Prop 65 defendant can be required to pay additional penalties of up to $2,500 per day, per violation.
More importantly, private persons or organizations may bring actions against alleged Prop 65 violators on behalf of the general public. Bringing a Prop 65 action is relatively easy and lucrative for plaintiffs and their counsel often referred to as “Bounty Hunters.” Private plaintiffs retain 25% of the negotiated penalty amounts (the balance goes to the state) and are entitled to reimbursement of attorneys’ fees and costs. In 2015 alone, attorneys’ fees and costs comprised 68% of the $26.2 million paid by defendant companies in Prop 65 settlements. To sum that all up: there is a thriving legal practice in which specialized law firms bring Prop 65 lawsuits and reap huge financial awards for doing so. We won’t get into the ethical considerations of putting such an economic incentive to the plaintiff’s bar, suffice it to say there are big sharks in the water and the cannabis industry has just started bleeding…
The scariest part of Prop 65 is that a company’s intent to sell products in California is not an element required for a successful Prop 65 lawsuit. There are hundreds of examples of cases in which plaintiff’s attorneys successfully sued companies that did not intend to sell products in California but said products ended up in the state anyway through no fault of such companies. Accordingly, it is our recommendation that any company selling products meant for human consumption (topical, ingestible, or otherwise) put a Prop 65 warning on their products. This includes products containing THC manufactured and sold in other states that legally should not be able to cross state lines. The downsides of not doing so could be catastrophic
For more on Prop 65, click here.
