Alerts

AD-ttorneys@law – January 31, 2020

Alerts / January 30, 2020

In This Issue:

Cannabis Company Sued for Being Stingy With the Stash

Bhang Corp. oversold THC and CBD levels, says new class action

Holy Smokes!

Last summer we marveled over the mainstreaming of cannabis-derived products. The fact that Curaleaf, an online retailer of personal care products derived from cannabidiol (CBD), was locked in a branding and labeling dispute with the Food and Drug Administration (FDA) was a sign of the times: The cannabis industry had arrived, with its own quotidian regulatory concerns that might preoccupy any run-of-the-mill peddler of dietary supplements.

More confirmation has arrived, however. A new lawsuit against Nevada’s Bhang Corporation – a manufacturer of a wide variety of CBD-related products – drives the point home.

One of Bhang’s product lines comprises cannabis-infused chocolate bars that sound quite delicious (“rich dark chocolate studded with crunchy honey toffee and sprinkled with smoked sea salt”). The company also adds a contemporary artisanal flair: “The Dark Chocolate Bar was crafted by a master chocolatier with 25+ years of experience making gourmet dark chocolate for discriminating retail outlets…”

Totally mainstream.

But here’s the kicker: While Bhang got a warning letter from the FDA for making verboten advertising claims, the current suit is a class action that alleges that Bhang doesn’t contain enough tetrahydrocannabinol (THC) or CBD in its products.

If, like many of us, you grew up in an age of illegal, stigmatized pot, this dispute is just a little bit mind-blowing.

The Takeaway

The suit, filed by Charles Ballard in the Central District of California in the waning days of 2019, alleges that Bhang peddled its chocolates based on “false statements, representations, and warranties.” “Defendants’ claims and representations regarding the Bhang Products’ supposed THC and/or CBD content are false and are likely to deceive the reasonable consumer,” the complaint reads, “in that the Bhang Products contain substantially less than the amount of THC and/or CBD represented by Defendants.”

Ballard and his proposed class seek redress for unfair, fraudulent business acts and false advertising under the California Business & Professions Code, along with breach of express and implied warranty, fraud, and negligent misrepresentation.

Neurocore Pokes the Bear Again

Brain-improvement company racks up two FTC referrals within months

Letters From TINA

When last we left Neurocore, the “neurofeedback” company that purports to measure various aspects of brain performance through headband monitors and other services, it had found itself on the business end of a Truth In Advertising Inc. (TINA) missive to the Federal Trade Commission (FTC).

TINA recommended the FTC open an investigation into Neurocore and “take appropriate enforcement action” against it for alleged “deceptive marketing” that drew in consumers who sought assistance with several mental health issues.

But, as we noted, this wasn’t Neurocore’s first brush with the FTC.

Stormy Past

Back in August 2017, the National Advertising Division (NAD) came down on the company like a ton of bricks, recommending that it “discontinue challenged advertising claims … related to Attention Deficit/Hyperactivity Disorder (ADHD), autism, migraines, memory issues, sleep disorders and stress.”

Neurocore appealed the decision to the National Advertising Review Board (NARB), which affirmed NAD’s ruling in June 2018. Neurocore agreed to cooperate with the final NARB ruling.

The Takeaway

But Neurocore seems hell-bent on getting into a tussle with the FTC. While there are no reports of action taken in response to the TINA letter, NARB has taken the company to task for failing to conform to its 2018 ruling.

At issue are claims that NARB alleges were made by Neurocore in the intervening months, including that 84% of their customers experienced a “noticeable reduction of depressive symptoms,” and that 67% “no longer met symptomatic thresholds for Depression.” NARB found that these new claims fell within the scope of its earlier ruling, and that Neurocore “had not demonstrated a good faith effort to comply with the panel decision.”

And now NARB is referring the case to the FTC, which has, to put it mildly, not taken kindly to other members of the brain-improvement therapy marketplace. Do we need to fit the commissioners with mind-scanning headbands to see where this is going?

Sunshine State Rolls Out New Hemp Extract Rules

Florida Agricultural Commish delivers on campaign promise

Morass

Do you produce food or dairy products in Florida? Well, heads up: There’s a new regulatory regime in place covering extracts from everybody’s favorite plant, hemp – which means regulations covering everybody’s favorite hemp extract, CBD.

We’ve spent the past year documenting the various tussles over CBD and the sometimes-outlandish claims being made about it. And work has been good – state regulations in the United States define a hodgepodge of various levels of legality, and the federal government has been notoriously slow to act. There’s always plenty to write about!

Is There Viral Video of That?

But Florida Agriculture Commissioner Nikki Fried’s office is taking some work off our plate. The Sunshine State, which is the butt of endless Floridians-are-completely-insane jokes and urban legends, adopted a surprisingly – ahem – sober and straightforward rule set governing the use of hemp. New rules that took effect on Jan. 1 cover hemp’s inclusion in food, dairy and animal feed products; seed and cultivation rules will follow. Note, however, that at the federal level, the FDA still has not approved the use of CBD in foods or dietary supplements.

The new state regulations are a consequence of a 2018 law passed by Congress that removed hemp (cannabis with negligible levels of THC, the chemical that makes marijuana fun) from the controlled substances list and handed regulation authority to the states.

The upshot? Fried, who was elected commissioner on a pro-cannabis platform, launched a new “horizontally integrated” regulatory regime intended “to allow any interested parties to participate in any aspects of the process.”

The Takeaway

The rules contain the usual packaging and label provisions and define the levels of CBD that can be included in a product (no more than 0.3%).

But the most important provision is a blanket denial of medical performance claims: “The label and advertisement [of products containing hemp] shall not contain claims indicating the product is intended for diagnosis, cure, mitigation, treatment, or prevention of disease, rendering it a drug as defined in 21 U.S.C. 321(g)(1).”

So, there you have it. Clear and straightforward. Want your Florida-sold product to be classified as a drug under federal law? Go ahead and claim it cures … well, anything at all.

Quincy Still Dodging Bullets in Prevagen Claim Clashes

Mistrial lets the company off the hook for alleged unsupported brain-improvement claims

Send Help!

The jury’s note gives the impression of a hastily scribbled plea for rescue, stuffed, perhaps, in a bottle and sent to sea, or tied snugly to the leg of a trained raven cast from a prison tower. “The jury is deadlocked,” it reads. “We cannot agree on the issues. How do you suggest we proceed. Further progress seems unlikely.”

Ok, perhaps we’re being a bit dramatic.

But in addition to the poor jurors, who sound, at the very least, “over it,” should we not scrounge up some sympathy for the folks at Quincy Bioscience?

Understand: We’re not endorsing their positions in the recent deadlocked trial that ended with the note above. We simply imagine that they must have been at their wits’ end before it was all over.

Tightrope

The dispute, which went to trial on Jan. 7 and locked up permanently a week later, was, after all, a bit of a bear.

Launched in California’s Northern District in 2015 by concerned consumer Phillip Racies, the initial complaint opened a class action that accused Quincy of misleading statements related to its brain health supplement Prevagen. According to Racies, Quincy claimed that its products were “clinically tested” to “improve memory” and “support healthy brain function, sharper mind, and clearer thinking,” and to improve memory within 90 days.

Racies held that those claims were hogwash.

The court certified Racies’ class in 2017, which was promptly appealed by Quincy before the Ninth Circuit, which shot down the company’s attempt to overturn in 2018. The class action went back to the district court, and finally reached trial early this year – a trial that left the jury begging for the sweet release of a mistrial.

The Takeaway

Quincy must have let loose a sigh of relief, especially given its previous record in Prevagen-related disputes.

Halfway through the Racies class action, the FTC launched its own suit against the company, taking issue with the rather abstruse mathematics that underlay its Prevagen improved-memory claims.

In that case, the Southern District of New York granted Quincy’s motion to dismiss, which was appealed to the Second Circuit, which reversed the District Court’s decision to dismiss the case.

For now, at least, the ultimate disposition of Prevagen’s claims is still unresolved. But it would be hard to argue that Quincy doesn’t find itself in a better position than it did only a few short months ago.

Supremes Agree to Take Up TCPA Case

The Nine will review decision striking down debt collector exemption

Banned in D.C.?

For the layperson, the Telephone Consumer Protection Act (TCPA) can seem full of surprises.

The TCPA, as everyone knows, exists to protect consumers from the ever-worsening onslaught of automatic phone calls. Less well-known, however, is the fact that it excepts certain auto-dialers from its own provisions. A 2015 amendment to the TCPA allows auto-dialed calls from debt collectors seeking repayment on behalf of the federal government.

This exception did not sit well with organizations that were subject to the full might of the TCPA. The American Association of Political Consultants (can you imagine their board meetings?) and several co-plaintiffs sued the Federal Communications Commission (FCC) in the Eastern District of North Carolina in 2016, arguing that the exception violated the First Amendment’s free speech clause because the statute gave preferential treatment to certain types of automated calls based on their content. They asked for the entire auto-dialer ban to be overturned, which would have effectively ended the TCPA.

The Takeaway

The Eastern District granted the FCC summary judgment in 2018, and the plaintiffs appealed to the Fourth Circuit Court of Appeals, which ruled that the exception (i) undermined the privacy aims of the Act, (ii) constituted a content-based restriction in violation of the First Amendment and (iii) did not survive strict scrutiny analysis. But the Fourth Circuit nonetheless held that the TCPA shouldn’t be thrown out wholesale. Rather than strike down the entire Act as unconstitutional, as the plaintiffs urged, the circuit court opted to sever the exception from the statute (i.e., delete it).

And so, here’s the big news: The plaintiffs petitioned for a writ of certiorari from the U.S. Supreme Court, which was granted. This means that the TCPA will be subject to a searching review by the highest court in the land.

The questions presented:

“Whether the government-debt exception to the TCPA’s automated-call restriction violates the First Amendment, and whether the proper remedy for any constitutional violation is to sever the exception from the remainder of the statute.”

It’s the second question that carries the most weight for the future of the Act. We’ll see what happens, but in any case, we’ll have plenty to talk about.

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