Lawsuits, Lawsuits, Lawsuits: Protect Your Business

Compliance Nugget Wednesdays: 2019 and moving compliance forward, www.compliancenuggets.com

As we start our third year in the compliance of the #Cannabis and #Hemp industry we wanted to start providing value to the thousands of pioneers who have decided to get in on one of the most exciting industries around.

We start with a link to a video presentation done by The Tasa Group, Inc who was offering a CE (Continuing Education) on "Litigation Against the Marijuana Industry". The link to the recorded webinar is, https://www.youtube.com/watch?v=GgXk7RYdCkc&t=714s, and if you are an operator in the industry it is important to understand how opponents are looking at targeting your business.

Use this as a training exercise for your entire team to see how a group that is targeting cannabis organizations and coming after them from legal standpoint. What you need to do is really listen to what they are saying, these are people who are against the industry and compare it to big tobacco and how to go after the operators. It is clear that the presenters are focusing on one sided research, it may be hard to listen to because it is so one sided, but it is important to listen to the entire presentation.

At 12:29 seconds into the 1:05 minute presentation the presenter shows an advertisement that he claims is "advertising marijuana back to school specials", when in fact the ad is done by Mile High Pipe and Tobacco which is not even a licensed cannabis industry entity. They are a vape and pipe shop that does not sell cannabis, and if you look at the add there is no reference to cannabis in it. So in any research or education setting it is important to understand what is being presented and if it is factual.

Product Liability

This is a picture of two of the slides in the presentation. Product liability refers to a manufacturer or seller being held liable for placing a defective product into the hands of a consumer. Responsibility for a product defect that causes injury lies with all sellers of the product who are in the distribution chain. In general terms, the law requires that a product meet the ordinary expectations of the consumer.

When a product has an unexpected defect or danger, the product cannot be said to meet the ordinary expectations of the consumer. This is an area that is covered in this presentation, you have to understand what the labeling laws are in your state when it comes to cannabis or hemp products.

In the presentation it mentions the labeling requirements by the FDA, here is a link to the Dietary Supplement Labeling Guide, https://www.fda.gov/Food/GuidanceRegulation/GuidanceDocumentsRegulatoryInformation/DietarySupplements/ucm2006823.htm, this is a great place to research about labeling requirements. You should also review the state specific labeling requirements set by different agencies, but specifically see if there are labeling requirements by the Agency that regulates cannabis or hemp in the state. Here are links to some examples: PA-1161.28 Labels and Safety Inserts, CA-Packaging and Labeling FAQ, and MD-10.62.29.02 Label for Distribution to a Qualifying Patient

In an earlier post I gave you the link to the FDA warning letters with some CBD companies and it is really important to read through these and see why they received the warning letters. There are always lessons learned from the lawsuits and other violations that happen to others.

The webinar goes on to talk about other ways to sue a Marijuana business, here are some basic definitions of these terms,:

• Breach of Contract-A contract case usually comes before a judge because one or both parties claim that the contract was breached. A breach of contract is a failure, without legal excuse, to perform any promise that forms all or part of the contract. This includes failure to perform in a manner that meets the standards of the industry or the requirements of any express warranty or implied warranty, including the implied warranty of merchant ability.
• Strict Liability-In tort law, strict liability is the imposition of liability on a party without a finding of fault (such as negligence or tortuous intent). The claimant need only prove that the tort occurred and that the defendant was responsible. The law imputes strict liability to situations it considers to be inherently dangerous.
• Statutory or regulatory liability- is a legal term indicating the liability of a party who may be held responsible for any action or omission due to a related law that is not open to interpretation.
• Unjust enrichment-Unjust enrichment occurs when Party A confers a benefit upon Party B without Party A receiving the proper restitution required by law. This typically occurs in a contractual agreement when Party A fulfills his/her part of the agreement and Party B does not fulfill his/her part of the agreement.
• Nuisance-a person, thing, or circumstance causing inconvenience or annoyance.
• Res Lpsa Loguitor-(rayz ip-sah loh-quit-her) n. Latin for "the thing speaks for itself," a doctrine of law that one is presumed to be negligent if he/she/it had exclusive control of whatever caused the injury even though there is no specific evidence of an act of negligence, and without negligence the accident would not have happened.
• Punitive damage-Punitive damages are awarded in addition to actual damages in certain circumstances. Punitive damages are considered punishment and are typically awarded at the court's discretion when the defendant's behavior is found to be especially harmful. Punitive damages are normally not awarded in the context of a breach of contract claim.

The Spotted Owl and Cannabis. If you are a cultivator of cannabis or hemp, then you have the lawsuits regarding environmental issues. The moderator talks about how the Spotted Owl is being killed by the marijuana industry, "You recall the spotted owl in California, that the environmentalist were so concerned about the spotted owls being killed by the lumber industry there that they impinged on the lumber industry. Well guess who is dying now, the spotted owls, and they are dying because of marijuana contamination...." Again know what is being said and how they are looking to target the industry so that you are prepared.

Server Liability this is something that dispensaries and other must understand, this is a factor in the alcohol industry. Most of us have probably been to a bar or restaurant at some point and had to deal with that one person who has clearly had a few too many. Maybe they’re talking loudly or incoherently, or maybe they’re just having trouble keeping their eyes open and their head up. For fellow patrons of the bar, this person can be annoying or obnoxious, but for servers at the bar, this person can be a huge liability. They are looking at the same thing if wellness advocates or "bud" tenders (I don't like using this term, but using if for reference purposes) sell cannabis or even oils and edibles. If the person gets in an accident or kills someone the company may be liable for that.

Across the country, servers have a large level of responsibility put on them when it comes to serving those who are intoxicated. In many cases, a server can be held liable and can face punishment from the law if it is deemed that they served a person who was already intoxicated. Some states have even stricter laws when it comes to serving alcohol, so things can get tricky for those working behind the bar. To further complicate matters, bartenders may be held accountable for a DWI or DUI accident that is caused by someone that they served under the “Dram Shop Laws” enforced by numerous states.

Dram shop laws-Although it is not federally mandated, many individual states have adopted “Dram shop Laws.” Dram shop laws, in short, are laws that hold a person or establishment responsible if they sell alcohol to an individual that is intoxicated. These laws apply not only to the bartender or liquor sales clerk, but to waitresses and other staff as well. This may start being applied towards the cannabis industry.

Do you protect your workers? In the cannabis and hemp industry you want to make sure you are providing a safe environment and are following protocols all ready in place regarding worker safety. This is a slide from a presentation I did with attorney Eric Daigle of Daigle Law Group called, "Marijuana Madness: What every Chief should know." and we talked about providing PPE (Personal Protective Equipment), you can watch the entire presentation we did at https://vimeo.com/253443628/8b89057f27. How can you apply these principles to your teams.

If you made it this far, thank you. I hope you also take the time to listen to the entire presentation that was done. So how do you protect yourself from these things and mitigate the risk? There are a lot of things you could do from a compliance perspective, but the first step is DOCUMENT, DOCUMENT, DOCUMENT.

• Document your SOP's and Policies and have your employers sign off on them.
• Document your training and have your employees sign off on them.
• Document your preventive maintenance plans and create a schedule.
• Document all of your MSDS (Material Data Safety Sheets) and ensure your employees understand what they mean.
• Document your life safety checks: signing off on fire extinguisher checks, checking first aid kits, checking eyewash stations, and more.

The next is READ, READ, READ. Go through your states cannabis or hemp regulations and read them, they provide a map for you to base your compliance program on, they are not complicated. Here is an example, this is a link to the Maryland Medical Marijuana Regulations, if you have a cannabis business in Maryland, have you read through them?

Our hope is to educate and provide value in an area that gets complicated and overwhelming, COMPLIANCE. There is so much to it, but if you break it down it can be tackled. We are proud to support cannabis and hemp businesses in over 18 states and internationally. Through the use of technology, PowerDMS, and managed compliance services we are able to tackle many of the challenges and supplement the compliance programs of our clients. Even if you have your own team for compliance, you should look at how technology can help you through the compliance maze.

I am creating a new hastag #KUWIA if you think you know what it means comment on the post. The first to get will get a complimentary 2 hour review of your compliance program. Have a great year.

#ILoveCompliance #ILoveHempCompliance #ABetterMouseTrap #KUWIA #MJComplianceGuy #PowerDMS #DaigleLawGroup #FDA