If you have been in a store in California or even shopped online recently, you have probably seen them – they seem to be everywhere! Those warning signs and warning labels telling you that the product you are about to buy “can expose you to chemicals that are known to the State of California to cause cancer and/or birth defects.” There are 600+ chemicals on California’s Proposition 65 (Prop 65) list and products that include over a small amount of those chemicals must be properly labelled with a warning. Due to the way the law is written, “bounty hunting lawyers” send out their agents to stores to hunt for products that do not comply with Prop 65. These lawyers make tens of millions of dollars a year suing businesses.
It’s a new year, but 2021 may not be so “happy” for cannabidiol (CBD) product manufacturers. CBD manufacturers will now have to comply with California’s Prop 65. In a nutshell, health warning labels are now required for all cannabis products sold in California, including hemp-derived CBD products as well as non-combustible products, such as edibles, topicals and vapor (vape) products. Furthermore, if a dispensary or other establishment allows on-site smoking, an exposure/environmental warning might also be required in a conspicuous area that an average consumer can see.
California’s Prop 65 label mandate (which has been around for decades) now requires businesses that may expose delta-9-tetrahydrocannabinol (THC) to consumers to make a crucial decision—either to put a warning label on their CBD product or not (and then hope that they are not sued). The warning labels are designed to alert consumers to the possible health impact of marijuana smoke and THC. This law will likely create a wave of product-liability lawsuits specifically targeting marijuana and hemp companies.
As of January 3, 2021, the grace period to comply with Proposition 65 warning requirements for THC came to a close and the cannabis police (i.e., class action lawyers since the mandate will likely not be enforced by state regulators) are on the hunt and ready to enforce the rules. This week, California’s Office of Environmental Health Hazard Assessment (OEHHA) finalized the listing of THC as a reproductive toxin. With little guidance from OEHHA, and no “safe harbor” exposure level at this point, each business has the burden to determine if their product has a detectable level of THC that will pose a significant risk of reproductive harm. This is a highly technical and expensive assessment.
While the 2018 Farm Act exempts CBD products with 0.3% or less THC from the Federal Controlled Substances Act, this exemption does not directly apply to Proposition 65. While California may establish a “safe harbor” exposure level for THC in the future, until that happens, CBD products with any detectable level of THC should carry a Proposition 65 warning label for THC.
If a business elects to put a label on their products (which every CBD manufacturer should seriously consider doing), then that business will have to post a proper warning. The labels can be a standard (long-form) or short-form warning. The short-form warning can read, “WARNING: Cancer and Reproductive Harm – www.p65warnings.ca.gov.” If a product fails to have the required warning, then the notice should be placed somewhere obvious where consumers can see it, such as on the store shelf where the product is displayed for shoppers. For example, other than placing the warning label on the product itself, a business can put it on their website, or on a store shelf, among other options.
Plaintiff’s lawyers will now begin shopping for marijuana and hemp products with the specific goal to locate products that fail to comply with Proposition 65. Typically, these lawyers will file (via a letter) a notice of violation and push for an out-of-court settlement. If you receive a notice of violation, contact your lawyer ASAP. In the end, this will turn on a cost-benefit analysis for a business in which it will need to determine if it will spend significant money on lawyers’ fees to fight and defend the claims or spend such to settle. Historically, in our practice, most Prop. 65 claims settle out of court, however, still at a cost to the client. Aside from the private lawsuit and while rarely enforced, California state law allows for fines to be levied against companies whose products violate Prop. 65 which can run up to $2,500 per product per day.
Cannabis and hemp businesses, especially consumer-facing companies of products that can be smoked or ingested, must be incredibly diligent in their compliance with Prop. 65. These businesses should take steps now to assess whether their products require Proposition 65 warnings to ensure that they are in compliance.
Leech Tishman offers a flat-fee Prop 65 compliance review and plan.
Christopher Gonzalez is a Partner at Leech Tishman, Co-Chair of the Cannabis Group and Co-Chair of the Data Privacy & Cybersecurity Group. He is also a member of the firm’s Corporate, Employment & Labor, Intellectual Property, Litigation, International and Immigration Practice Groups. Chris is based in the Pasadena, CA office and can be reached at 818.550.8300 or firstname.lastname@example.org.
Steven M. Taber is a Partner at Leech Tishman and is based in the firm’s Pasadena office. He is a member of the Environmental, Corporate and Litigation Practice Groups. Steve can be reached at 626.796.4000 or via email at email@example.com.
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