How cannabis vape businesses can avoid legal liability

, How cannabis vape businesses can avoid legal liability

Cannabis vape manufacturers should be preparing for a long legal fight in the coming months.

The biggest news in the cannabis industry for 2019 has been the vaping health scare, which has seen hundreds of people fall ill across the country and more than two dozen die from pulmonary illnesses tied to vaping.

In late September, health officials reported that most of those sickened used cannabis vape products containing THC, and many of those in the first two states to report illnesses—Illinois and Wisconsin—said they used counterfeit marijuana products from the illicit market, not licensed MJ companies.

Despite the many unknowns, cannabis companies can take preventive measures now to gird against the lawsuits that will likely be filed in the coming months and lessen the potential for damage via litigation. In Washington state, a man filed suit in September against six cannabis vape companies for allegedly causing his lung illness. It’s believed to have been the first suit of its kind in the state. More are expected.

“There really haven’t been a lot of product-liability claims yet,” said Rachel Gillette, a Denver-based cannabis attorney with Greenspoon Marder. “I say ‘yet’ because they’re bound to be coming.”

Key actions business owners can take include:

  • Maintaining strict compliance with state regulations.
  • Closely monitoring their supply chain to check for contaminants or unapproved additives.
  • Adhering to Good Manufacturing Practice (GMP) to ensure products are made in accordance with the relevant standards.

“This is all about product liability,” said Ben Bodamer, a Columbus, Ohio-based cannabis attorney. “The core of product liability protections from a legal standpoint starts way before you have the possibility of these claims.”


Compliance is King

For Bodamer, the first consideration for a cannabis executive looking to sidestep any legal pitfalls is strict compliance with state regulations.

“In every single state that has medical cannabis or adult-use cannabis, there are regulations about how to conduct business,” Bodamer added, such as product testing and packaging requirements.

If the regulations in a certain state aren’t clear enough, then it’s up to the company to exceed those requirements, he added.

For example, if state regulators don’t require testing for certain additives or contaminants, but they can make people sick, a vape product company should still be screening for those potential liabilities.

Gillette re-emphasized that point. “Compliance is important, no matter what,” she said. “And it’s strict compliance, not substantial compliance.”

Given the scrutiny that will be on producers of vaping products, companies need to go beyond the rules and regulations when it comes to compliance.

For example, one potential cause of illness related to the vaping outbreak is that people are adding compounds to vape cartridges after purchase.

“There may not be a regulation that prohibits someone from manufacturing a customizable product,” Gillette said, but if a consumer can easily modify a vape product and ends up sick because of an additive, then perhaps the product needs to be made more secure.

“A manufacturer needs to be very thoughtful in light of what’s going on and potential liability claims,” she added.

Also, maintain clear records such as tracking product materials and ingredients as they move through the supply chain, standard operating procedures and thorough training, said Emily Leongini, a cannabis attorney based in Washington DC.

“You’re never going to be able to avoid all litigation risk,” she added. “But compliance will limit the amount of risk exposure a company has.”


Keep an Eye on Supply

If additives such as vitamin E acetate prove to be the culprit for the vaping-related illnesses, vape cartridge manufacturers need to be able to account for every step of the supply chain, from where the vaporizer was manufactured to when it was filled with cannabis oil and any other chemicals.

Cannabis vape companies should have a process in place to investigate their products, Leongini said, citing the importance of knowing “what’s in what you’re selling, the process of how it’s manufactured and what kind of testing is done.” Keeping careful batch records will help defend your company against potential lawsuits.

For example, if an executive wants to blame the ingredient supplier who provided the tainted ingredients, he or she will need meticulous records of who supplied all inputs throughout the supply chain.

“Have the contracts in place to assign the liability to them so you’re not the one left holding the bag,” Leongini said.

David Jaroslaw, a New York City attorney who specializes in product-liability defense, said in any product-liability action, the manufacturer will be considered an expert about the product’s risks.

The company should be able to demonstrate the chain of manufacture—from the source materials to the finished vaporizer—to ensure the product is as safe as possible, he added.

“Know who you’re buying from, know who you’re selling to,” Jaroslaw said. “Know, if you can, where it’s manufactured and what the standards are.”

Bodamer backs up that point. “The best way to understand the inputs to a given product is to have meaningful relationships with all the vendors involved,” he said.

Bodamer suggests that a cannabis vape cartridge manufacturer should know:

  • Where the plant came from that was used to make the cannabis oil.
  • Where the plant was extracted into oil.
  • Who supplied any additives.
  • Whether the additives are sanctioned and approved.
  • Whether the ingredients are compliant with Good Manufacturing Practice in other industries.
  • Whether there were ingredients that haven’t been approved for human ingestion.

“Being able to track the answers to every single one of these questions is among the best defenses that these companies will have to alleged product-liability claims,” he added.


Know your GMPs

Without federal legalization, U.S. cannabis companies aren’t held to the same standards as other industries. But that shouldn’t prevent a company from demanding its vendors are meeting certain standards, Bodamer said.

“If you have certifications from suppliers that are following GMP, that goes very far to protect companies against claims that they’ve been negligent or reckless in permitting faulty products into the marketplace,” he added. For example, certifications are available for food products by applying to a number of different global certification groups, including the Health Sciences Authority.

Bodamer added that he would like to see cannabis companies going beyond the bare minimum for good practices.

“You shouldn’t be meeting them,” he said. “You should be exceeding them.”

Leongini also suggested that a cannabis company in danger of falling on the wrong side of a product-liability claim find a good law firm with expertise in both litigation in response to class-action complaints as well as the regulatory subject matter expertise needed to defend against them.

“Retain counsel,” Leongini said. “Lawyer up.”