Wendel Rosen Business & Legal Updates

Proposition 65: High Risk for Cannabis Industry!

Highway sign as reference to California's laws regarding the use of marijuana.

[Special thanks for this guest blog from Wendel Rosen attorney Wendy Manley.]

 

Those on the forefront of the burgeoning cannabis industry are a bold lot, striking out into the frontier of new, shifting and unanticipated regulations. While these pioneers may have know-how in cultivating, developing and marketing new cannabis products, they likely never imagined the tangle of regulations they would need to manage. Perhaps chief amongst those is the Safe Drinking Water and Toxic Enforcement Act, more commonly known as Proposition 65, or “Prop 65.” Prop 65 is the law behind that sign you’ve seen for more than 30 years in California warning that some thing or place may contain chemicals known to the state to cause cancer or reproductive harm. Many cannabis products, as it turns out, are subject to Prop 65.

Prop 65 requires businesses to provide a warning to Californians of potential exposure to a chemical on the State’s Prop 65 list. Failing to do so leaves a business vulnerable to expensive enforcement action, most of which occurs at the hands of an aggressive citizen contingent (plaintiff’s attorneys) rather than by the state or an agency. While the responsibility for providing the warning rests primarily with the manufacturer, every party in the chain of commerce is potentially liable, including unsuspecting retailers.

Any cannabis business needs to consider whether any listed chemicals in their products could cause an exposure and trigger the warning requirement. Chemicals listed by the state number well over 900, and “marijuana smoke,” not surprisingly, is one of them. As with other consumable products (most notably food), there is a potential for exposure to listed pesticides and metals. A number of cannabis edibles have been stung for cadmium and lead, which appear to have originated in chocolate ingredients. In addition to cannabis products themselves, paraphernalia used for smoking cannabis should also be labeled for exposure to cannabis smoke and possibly other chemicals. More generally, various pthalates and metals such as lead and cadmium seem to be showing up in a vast array of products.

Prop 65 warnings must be “clear and reasonable,” a subjective standard if ever there was one. Fortunately, the regulations provide some specifics for both warning content and the method for transmitting the warning. A warning in conformance with the regulations is deemed “clear and reasonable.”

But – the warning regulations have recently changed, leaving some who previously complied now exposed to litigation. The warning must now state a product “can expose you to chemicals” rather than simply that it “contains chemicals.” It also must name at least one listed chemical for each endpoint (cancer or reproductive toxicity), which requires closer examination of the potential chemicals. The regulations now require a reference to the new Prop 65 webpage and sharply restrict additional information in the warning.

In addition to the specific wording, the regulations include parameters for the appearance of the warning, which vary depending on the product or circumstances. Food warnings, for example, need to be placed in a box, while non-food warnings require a yellow triangle symbol enclosing an exclamation point. Signs posted in designated smoking areas must be 8.5 x 11 inches and contain the warning in 22-point type within a box. And Internet warnings must be provided before purchase. As these examples illustrate, there are a lot of details, and the devil is definitely in those details.

While applying the regulations can be a tedious and nuanced process, those who have weathered the cost and turmoil of an enforcement action understand the risk of taking the matter lightly. The cost of resolving a citizen suit is significant under the best of circumstances. Even if a matter is settled without litigation, defendants must pay the attorneys’ fees of their accusers in addition to penalties, and so typically face paying tens of thousands of dollars without ever mounting a serious defense.

The new warning regulations took effect August 31, 2018. It is high time for everyone in and out of the cannabis industry to carefully review their compliance with Prop 65, and consider getting help with interpreting the regulations for their particular circumstances.

 

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