Time and again I have warned cannabis industry participants that federal prohibition means nothing when it comes to liability created by defective products. Colorado is a prime example of the threat and the power of cannabis product recalls. And though for years now we’ve seen various cannabis businesses in Colorado pull their products from the shelves for illegal pesticides and/or manufacturing under unsanitary conditions, we have yet to see an official product recall for cannabis in the State of California. And why would we? The state hasn’t had any legitimate, enforceable, or uniform regulations to corral cannabis operators into worrying about consumer safety (other than self-imposed best practices). Though it’s pretty clear recalls should already be happening in California based on some of the available product in the state’s medical market, they haven’t yet, but they will.
With the passage of the Medicinal and Adult Use Cannabis Regulation and Safety Act (“MAUCRSA” aka SB 94), medical and adult use cannabis in California will soon be under one regulatory regime. Outside of MAUCRSA’s mandatory quality testing and packaging and labeling thresholds, what will California’s ultimate quality assurance and consumer protection operational standards look like? MAUCRSA regulations will fill in the baseline blanks and that will happen this fall, according to the state.
I’ve practiced law in enough regulated cannabis states to know that quality assurance, testing, and protecting the public through total product perfection isn’t going to be easy or cheap and it’s going to be mandatory if you want to keep your cannabis license. Still, even with your best quality assurance game face, you may not (more like never) escape the toe catch that is products liability. And with California being such a litigious state, as the Wall Street Journal editorial board recently pointed out, it’s only a matter of time before even more plaintiffs start suing cannabis operators alleging defective, dangerous, or mislabeled products and Prop. 65 violations.
If you’re not familiar with product liability, the most important thing you need to know is that the cannabis industry is not immune from it just because cannabis remains federally illegal. And now that you know that, I suggest you read at least some of the following to better grasp how product liability laws can impact or even derail your cannabis business:
- Cannabis Law Myths, Part I–Retailers Are Not Liable for Bad Product
- Cannabis Edibles: Fear, Regulation, Data and Maureen Dowd
- The Dangerously Delicious World of Medibles. Because Edibles Can Make Your Customers Sick
- Inaccurate Marijuana Testing Will Lead to Lawsuits
- Marijuana Edibles: What Makes a Warning Adequate?
- California Proposition 65 and Marijuana: Know Your Obligations
- Marijuana Product Recalls: You Can’t Touch This
- The Pot Safety Lawsuits Have Landed: Marijuana Businesses Need to Start Preparing Now
- Cannabis Products and Dosing: Educate, Educate, Educate and Label, Label, Label
- Marijuana Retailers: Be Mindful of Products Liability
Just the mere fact that my firm’s cannabis attorneys have written so many blog posts and articles on cannabis safety and cannabis product liability ought to tell you how truly important this issue will be in California once things truly get rolling here.
What then should you as a California cannabis business owner do to protect yourself from product related lawsuits and government actions? Again, the MAUCRSA regulations will no doubt create a baseline of what operators need to do if their products are defective, but you’ll need to go above and beyond that to ensure you’re ready to take on a recall situation or to defend yourself in the event of a product liability lawsuit.
Oftentimes, one of the best ways to mitigate against product liability claims is by instituting a product recall. In most industries, recall standards are dictated by either federal or state law or both. But since cannabis is federally illegal, neither the Food and Drug Administration (FDA) nor any other federal agency has rules or guidelines on how to undertake a cannabis recall.
However, since the federal government “tolerates’ only the cannabis regimes of states with robust marijuana regulations, it is not surprising that most states with commercial marijuana laws require their licensed marijuana businesses have a recall plan in place as a condition for receiving state licensing — and California will probably be no different. But few states have much in the way of specifics on what should go into a cannabis business’s recall plan. When our cannabis attorneys draft marijuana licensing applications for our clients, we are careful to make sure the recall steps we map out in the licensing application recall plan can actually be fairly easily accomplished. A gold-plated grandstanding recall plan may sound great when you are working to secure your cannabis license, but if you can’t execute on or afford that plan, you are only creating trouble for your cannabis business down the road.
In crafting a realistic cannabis product recall plan, you should, at minimum, consider or do the following:
1. Create an overall recall strategy.
2. As part of your recall plan, create definitions and standards for classes of recall and the depth and scope of any given recall. If your state or local laws do not provide basic recall standards for cannabis businesses, check out the FDA’s website under Guidance for Industry: Product Recalls, Including Removals and Corrections.
3. Appoint a recall committee within your company, to be led by experienced personnel capable of evaluating and investigating product complaints to determine if a recall is warranted. This also entails your developing a product complaint form that will be utilized by customers. It is better to learn about product problems early.
4. Develop a complaint receipt and evaluation method to ensure your product complaint processing and investigations are logical, efficient, and comprehensive. There are few things worse than receiving product safety complaints and then ignoring them until the situation is out of control.
5. Truly ponder what your product complaint investigation will entail. What facts should your recall committee be gathering when seeking to determine if a product complaint is valid or if a recall is warranted? What should your recall look like, as based on the facts and circumstances and the threat your product may pose to consumers and vendors?
6. Create a distribution list so your product recall committee can quickly and easily identify all affected products and product lots for disposition and potential destruction. The distribution list should — at minimum — include the names of all affected consumers and vendors, their contact information, and the dates on which the products were sold to them or consumed by them, and it should also include any side effects, injuries, or illnesses resulting from product use. Time is of the essence here. My law firm had a regional food client that inadvertently failed to issue a recall notice to one of many supermarket chains to which it sold its food. This supermarket chain was so angry about having been kept out of the loop that it refused ever to purchase our client’s product again. Then other supermarket chains learned of our client’s failure to notify this one supermarket company and they too ceased all of their purchasing. Needless to say, our client company no longer exists. Don’t let this sort of thing happen to you.
7. Institute a method of stock recovery so all tainted product in inventory is effectively quarantined from sale and distribution.
8. Generate your recall notice and be very careful with your wording in how you alert vendors and consumers to the recall. You want to effectively communicate that a product has been affected and how to deal with that, but you also want to minimize whatever liability your product problems may create for the company. On a case by case basis, consideration should also be given to drafting a press release to help the company’s PR. For this you absolutely need attorney help.
9. Make sure to as quickly as possible (preferably in advance) alert your outside advisors (your lawyers, your insurance broker, etc.) regarding your recall.
10. Set out in your recall plan your options for product disposition. Will you destroy a product? Cleanse and then repurpose it? Lay out your options in your plan now so you are not scrambling to try to figure out your possible options later, when you have no time to do so.
11. Record everything you do. Document every effort you make and record all your communications with consumers and vendors. If there is a legal action later, you will want to be able to show the court that you took all reasonable steps to ensure consumer safety.
In addition to formulating a solid and reliable recall plan, you also might want to consider conducting a mock recall to ensure your recall systems will work when the real deal occurs. Compliance audits can also be a big help in shoring up loose ends on a recall.
Cannabis product recalls are only going to increase in California as robust regulations under MAUCRSA hit all cannabis operators, so get your cannabis product recall plan in place now.