Charlotte's Web, second firm hit with class action suits over CBD's uncertain regulatory status

By Hank Schultz

- Last updated on GMT

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Related tags Cbd regulations hemp extracts

Hemp-derived CBD brands Charlotte’s Web and Infinite Product Co. have both been hit with proposed class action lawsuits filed in California that allege they misled consumers by marketing their products as dietary supplements when FDA has specifically said this is illegal.

The suits* - which were filed days after the FDA sent a flurry of warning letters​ to CBD brands “illegally selling products containing cannabidiol” ​- both allege that by running afoul of federal regulations, the companies are violating California law.

Suits:  FDA’s stance makes products illegal in California

Both proposed class actions were filed in the Central District of California. In the suit naming Charlotte’s Web Holdings, plaintiff Michele McCarthy claimed she bought a bottle of CBD oil in olive flavor for $254.77 from the company’s website.  She alleges the product was marketed as a dietary supplement.

But McCarthy’s suit claims that FDA has stated that CBD may not be marketed as a dietary ingredient for use in dietary supplements.

Charlotte’s Web, which is based in Boulder, CO, says it believes it is complying with the law as it sees it. “The Company believes that its products are accurately labeled and that the claims are without merit. The Company intends to vigorously defend itself against any such suits,”​ the company said in a statement issued today.  Infinite Products, which is based in Lakewood, CO, declined to comment.

The current unsettled regulatory climate would seem to raise the vulnerability of companies operating in the sector to these kinds of lawsuits.  On FDA’s website, in a Q&A document​ accessed today on cannabis products, the agency responds to the question “Can THC or CBD products be sold as dietary supplements?”​ with this answer:

“No. Based on available evidence, FDA has concluded that THC and CBD products are excluded from the dietary supplement definition.”

FDA bases this conclusion on its determination that CBD was first investigated as a drug before being put on the market as a dietary supplement.

Pressure to come to a resolution

Nevertheless,  the agency has been under pressure from members of Congress​, state governments and other stakeholders​ to come up with a regulatory solution to apply to the sector.  Despite FDA’s current official stance on CBD products, hundreds if not thousands of such products are for sale online at thousands of locations across the country.

Stakeholders such as Sen. Mitch McConnell, R-KY (whose state has a rapidly developing hemp cultivation sector), have pushed FDA to quickly issue a formal enforcement discretion policy​ if nothing else.  This would serve to clarify the legal position of CBD companies during the period in which a final regulatory solution is worked out.

FDA convened a meeting on May 31 in Washington, DC to solicit input on the matter.  Dozens of speakers and hundreds of pages of submitted documentation later, the agency has yet to reach a conclusion.  This is despite the fact that the agency committed earlier this year to issue some sort of statement about the outcome of the meeting by early fall.  The agency did update some of its information about CBD last week​, including calling the ingredient’s GRAS status into question. But that action appears to fall short of what CBD activists are calling for in terms of regulatory clarity.

The recent class actions also come in the wake of 15 warning letters issued to CBD companies just before Thanksgiving​.  As has been the case in the past, FDA cited companies that have allegedly been marketing hemp/CBD products with impermissible disease treatment claims. In those same letters, the agency also mentions the fact CBD does not meet the definition of a legal dietary ingredient.  As far as can be determined, FDA has yet to cite a CBD company based solely on the clouded regulatory status of the ingredient.

Isolate or extract?

It is not clear how the firms named in the latest lawsuits might defend themselves against this line of attack.

However, one line of defense might be to propose a difference between CBD (isolate) and hemp extract, which contains CBD and many other bioactives (although the FDA has notably gone after companies in both categories in its recent warning letters). 

In a motion to dismiss a recent lawsuit​ alleging discrepancies between the amount of CBD listed on pack and the amount actually contained in bottles of Diamond CBD oil, for example, attorneys representing the brand argued that the ‘full spectrum hemp extract’ in the Diamond CBD products is not the same as the isolated CBD used in some drugs.

The two drugs containing CBD to date - Epidiolex and Sativex -  are each highly concentrated solutions of CBD (and in the case of Sativex an equal amount of THC) made from an isolate and dedicated toward treatment of unique medical conditions, whereas Defendant’s CBD Product is offered only at radically lower concentrations and is not for the treatment or prevention of any disease.​​

“Thus,"​ argue the attorneys, "the CBD ingredient is a different article than the ingredient investigated and approved as a drug; therefore, the CBD ingredient used by Defendants is not excluded from being legally used as a dietary ingredient in a dietary supplement.”

*The cases are Dasilva v. Infinite Product Co., C.D. Cal., No. 2:19-cv-10148, filed 11/27/19; McCarthy v. Charlotte’s Web Holdings, Inc., N.D. Cal., No. 5:19-cv-07836, filed 11/30/19.

Further reading:

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