Marijuana is one of America’s most lucrative cash-crops and has been around since the founding of America. It is woven throughout the tapestry of our history – our founding fathers even wrote the Declaration of Independence on hemp, which a form of marijuana. Until recently, marijuana was illegal for recreational use in California. In 1996, voters approved proposition 215, which legalized the use of medical marijuana. Voters legalized the recreational use of marijuana in 2016 with Proposition 64, which went into effect January 1, 2018. Not surprisingly, California's cannabis market is expected to exceed $5.1 billion market value in 2019.
While the legalization of marijuana has created a booming industry, it comes with some unintended consequences. A settlement from April of this year in the matter of Center for Advanced Public Awareness, Inc. (CAPA)v. Septem Coma, Inc. dba South Sacramento Care, venued in Sacramento, signals a new wave of potential Proposition 65 litigation. Relying on Prop 65 and the Safe Drinking Water and Toxic Enforcement Act of 1986, the plaintiff in CAPA contended that the defendant dispensary produced, processed, marketed, offered to sell, sold, and/or distributed for sale marijuana intended for smoking without first providing a clear and reasonable exposure warning as required by Prop. 65.
Prop. 65 generally requires warnings to consumers before exposing any person to a chemical “known to the State of California” to cause cancer or reproductive toxicity. The proposition also prohibits discharging those dangerous chemicals into the drinking water supply. As of June 2009, “marijuana smoke” is among the nearly 900 chemicals currently on the list.
The $48,000 settlement and consent judgment includes a requirement that the dispensary post Prop. 65 warnings and pay a civil penalty of $16,000 (75% of which is to be paid to the State Office of Environmental Health Hazard Assessment and 25% to be paid to the plaintiff). The defendant further agreed to pay $32,000 in attorneys’ fees and costs to the plaintiff for investigating, litigating, and negotiating a settlement.
While $48,000 is not a catastrophic loss given the potential for hefty civil judgments and penalties associated with Prop. 65 violations, the settlement is likely one of many in forthcoming lawsuits against dispensaries. According to data from the California Bureau of Cannabis Control, the State currently has 358 licensed recreational marijuana stores and the number is growing fast, as demand exceeds supply.
Even more alarming for dispensaries are the new Prop. 65 warning specifications which went into effect on August 30, 2018. As we reported last month and further discussed this month, warnings must now conform to specific provisions in order to be adequate. Historically, most lawsuits were filed for failure to provide Prop. 65 warnings. Since the new rules went into effect, we can expect more lawsuits based in inadequate warning labels, as companies grapple with multiple new labeling options.