Pot Shot: Watchdog Groups Use Prop 65 to Target Marijuana Dispensaries

Proposition 65 requires that businesses with 10 or more employees provide a clear and reasonable warning to California consumers before knowingly and intentionally exposing them to any chemical on a list of more than 900 chemicals known to cause cancer or reproductive toxicity.
Companies that violate Proposition 65 can be liable for civil penalties up to $2,500 per violation, injunctive relief, and reasonable attorneys’ fees incurred by the plaintiff’s counsel in pursuing the matter. Before filing a lawsuit alleging violation of Proposition 65, a plaintiff must issue a Notice of Violation to the allegedly non-compliant company. The NOV provides a 60-day window for the alleged violator to negotiate a resolution with the plaintiff.
 
Proposition 65 compliance is a critical issue for any companies manufacturing, selling, or distributing products in California that contain a chemical on the Proposition 65 list. In recent months, medical marijuana dispensaries have been the target of plaintiff consumer “watchdog” groups searching for a new set of products to pull into the Proposition 65 web of enforcement. In particular, over the last several months, there has been a significant uptick in NOVs aimed at marijuana dispensaries and manufactures and retailers of marijuana edible products. Specifically, there has been a wave of two types of NOVs in this area: (i) pesticides in marijuana edible products; and (ii) marijuana smoke.
 
Regarding the first category of recent enforcement, in May 2017 approximately 675 NOVs were issued to the state’s more than 1,000 marijuana dispensaries, including those in San Francisco, Oakland, San Jose, Los Angeles, Sacramento, and the Central Valley for allegedly exposing consumers to pesticides in marijuana edibles without providing a necessary warning under Proposition 65. Three pesticides have been the focus of these notices: (i) myclobutanil, listed under Proposition 65 in 1999; (ii) carbaryl, listed in 2010; and (iii) malathion, listed on May 20, 2016. Interestingly, the marijuana pesticide NOVs have been issued by a new citizen enforcer, Michael Murphy, identified as the manager of the Clean Cannabis Initiative LLC. 
 
Concerning the second category of recent enforcement, marijuana smoke was added to the Proposition 65 list in 2009. Ironically, no NOVs were issued for failing to warn regarding marijuana smoke until December 2014. Since that time, approximately 110 NOVs have been issued, primarily to marijuana dispensaries, for failing to warn of health hazards in marijuana smoke, with approximately 45 of those NOVs having been issued since July 2017.
 
The NOVs for marijuana edibles come at a critical time for dispensaries, as state agencies are in the process of developing regulations that would implement the California Medical Cannabis Regulation and Safety Act, passed into law in the fall of 2015. MCRSA created a comprehensive state licensing system for the commercial cultivation, manufacture, retail sale, transport, distribution, delivery, and testing of medical cannabis.
 
Just over a year later, on November 8, 2016, California’s voters approved Proposition 64, the Adult Use of Marijuana Act. The AUMA is an extensive initiative, which regulates and legalizes the adult recreational use of cannabis. With the AUMA, sales of marijuana edibles at dispensaries have substantially increased, with a reported $1 billion in overall marijuana sales in 2016 alone, and expected sales of approximately $5 billion in 2017. The legalization of adult recreational marijuana use also implicates compliance with Proposition 65, which requires a warning, either posted at the retail location, on shelving, or on the packaging of the product, as long as the warning is sufficiently conspicuous to be read and understood by the ordinary consumer.
 
The California Attorney General’s Office is currently looking closely at the NOVs for marijuana edibles to determine what type of warning should be required, including whether or not physicians who prescribe these products for medicinal reasons should be required to provide a Proposition 65 warning. While the AG assesses the issue, plaintiff’s counsel has agreed to put a temporary hold on filing Proposition 65 lawsuits arising out the subject NOVs. This temporary pause may provide dispensaries with an extended negotiation period to attempt to resolve the NOVs beyond the statutory 60-day period, and potentially avoid time-consuming and expensive litigation. 
 
Medical marijuana dispensaries represent the latest wave of Proposition 65 targets, and as such, need to be well-informed of their obligations under the applicable regulations. Arent Fox LLP has extensive experience counseling clients in Proposition 65 matters in a wide variety of industries, from notice of violation through all phases of litigation. We also provide Proposition 65 training seminars for clients with practical tips on effective compliance.
 
Arent Fox's Cannabis group will continue to monitor developments in this area. If you have any questions, please contact James Ravitz, Lynn Fiorentino, or the Arent Fox professional who usually handles your matters. 

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