Cannabis in-house counsel have growing concerns over litigation
Fifty-six percent of cannabis in-house counsel believe they will need to increase legal resources to keep up with the market, says report.
Fifty-six percent of general counsel and in-house counsel believe in the next couple years they will need to increase their legal resources to keep up with the cannabis market, according to a report published by ALM and Shook, Hardy & Bacon.
Many in-house counsel, according to the report, have growing concerns over cannabis-related litigation. Jean Smith Gonnell, general counsel at STWC Holdings Inc., said she is not surprised that more resources will be spent on litigation.
“It’s a very competitive market and it’s going to grow and it’s going to continue growing,” Gonnell said. “Litigation is definitely one of those things that is going to grow.”
According to the report, general counsel overwhelmingly believe they will need to tackle product labeling and products liability in the next two years. Ten percent of respondents indicated they spend resources for product labeling now; however, 32% of respondents believe they will need to dedicate more resources to product labeling in two years. Fifteen percent of respondents say they now dedicate time to products liability concerns, but in two years, 31% say they plan on dedicating more resources to products liability cases.
“At the moment there is not a lot of pending litigation in that space,” said Michael Barnett, a partner at Shook, Hardy & Bacon in Kansas City, Missouri.
Barnett said litigation concerns grow with the industry as it matures. He explained there are a lot of claims made about cannabis products that the Food and Drug Administration and regulators have taken stances on, and that is where the litigation will come from.
“Generally, plaintiffs’ lawyers take some guidance from those agencies and start to piggyback on top of them,” Barnett said. “As the industry matures, we expect to see more things moving from simple enforcement actions into the private litigation world.”
Katie Gates Calderon, a partner at Shook, Hardy & Bacon in Kansas City, said those types of risk analysis and concerns in the cannabis industry are similar to those in any other product industry.
“Our clients who are getting into this industry are concerned about the same types of things that they would be with any other product like what do their labels say, are they making claims, what can they do with marketing, what can’t they do?” Calderon said.
An area that remains a high priority for in-house counsel is the FDA and other regulators, according to the report. Fifty-eight percent of respondents said in the next two years they expect a majority of their legal needs will be surrounding the FDA and growing state regulation.
“In places like Colorado, for instance, there are more regulations pertaining to hemp,” Gonnell explained. “I think it’s going to expand. There are a lot of industry groups that want guidance so you’re seeing different portions of state governments putting forth their own stamp on different things.”
FDA regulatory guidance is one of the larger concerns, Calderon said.
“The CBD industry and all the various forms of how it is ingested kind of took before FDA had the chance to get its arms around everything,” Calderon said. CBD, or cannabidiol, is a compound found in cannabis.
The FDA has stated CBD in food products is prohibited, Calderon said, although there are stores that sell those products and the industry for those products continues to grow. There is also an issue of states that allow CBD-infused food, while acknowledging that the FDA says those products are prohibited.
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