‘As Ubiquitous as Cigarettes and Advil’
Knowledge

‘As Ubiquitous as Cigarettes and Advil’

January 16, 2020

This article originally appeared in Goldberg Segalla’s Product Liability Playbook. Read the issue here.

As a consumer good, cannabis now subject to product-liability claims.

It was on a June morning in 2017 that Goldberg Segalla partner Adam R. Dolan came across an article on Medical Marijuana Inc.’s news website that changed his career.

The article, “Bipartisan Group of U.S. Senators Reintroduce the CARERS Act,” sparked an interest in cannabis law that led Adam to read voraciously and write prolifically on the subject.

Eventually, he stepped up to co-chair the innovative and interdisciplinary Cannabis and Hemp Law practice group with Los Angeles-based partner David Y. Choi.

“We already had more than half the country’s states enacting laws that allowed for the medical use of cannabis, and the federal government continued to say it had no accepted medical uses,” Adam says.

As the marijuana industry grows, Goldberg Segalla expects to see an ever-expanding range and number of clients and cases, including product-liability litigation.

While cannabis is still a Schedule I substance under the federal Controlled Substances Act— the same as heroin—33 states, Puerto Rico, and the District of Columbia have legalized marijuana or certain components of it for medical or commercial use.

Among the cannabis-related product-liability cases is a 2017 Colorado lawsuit in which an in- surer refused to cover a marijuana-candy company for selling a product that allegedly caused a 49-year-old man to become psychotic and murder his wife. The man pleaded not guilty by reason of insanity but then changed his plea and is now serving 30 years in state prison for his wife’s death. In what is believed to be the first wrongful-death claim against a recreational marijuana company, the man’s children sued the candy’s maker.

“Down the line, once cannabis is de-scheduled and can move freely across state lines and becomes as ubiquitous as cigarettes or Advil, you’ll likely see product-liability cases or mass torts actions similar to those we see currently, such as cigarette class-actions or asbestos cases,” Adam says. “The cannabis industry is like any other industry. Once it matures and becomes as accepted as other products, we will likely see all types of litigation arise. The main thing is making sure companies are aware of the pitfalls and are prepared for the future.”

Already an entire sub-industry is growing around the production, distribution, and sale of so-called edibles that mix components of cannabis with other ingredients. Such products may account for the majority of the cannabis market.

“There’s more and more interest in edibles, more and more people are looking to get into that,” Adam says.

‘STILL IN ITS INFANCY’

The emergence of cannabis as a product coincides with the transformation of its image.

“There’s still this idea linking cannabis use to a stoner-culture,” Adam says. “But I think a lot more people now are interested in cannabis for food products and not necessarily for a high. It’s an amazing plant that we’re only just beginning to fully understand. The industry is still in its infancy, but its growth and the passion which people involved in it bring is incredible. I look forward to working in this field for the rest of my career.”

Adam’s writing on cannabis law began with a June 20, 2017, post on the firm’s Life Science Matters blog—the one for which he was seeking story ideas when he ran across Medical Marijuana Inc.’s piece on the Compassionate Access, Research Expansion and Respect States (CARERS) Act, a bill that would end the prohibition of medical marijuana. Adam’s regular articles on Goldberg Segalla’s life-sciences blog became a trusted resource for industry professionals, lawyers, and journalists interested in covering the evolving area. Soon Adam was being quoted in the New York Law Journal and National Law Journal.

As co-chair of the Cannabis and Hemp Law practice group, Adam helps lead attorneys from across the firm’s footprint commanding a diverse range of skills—from transactions and commercial disputes to employment and intellectual property law. Crucially, the group includes a deep bench of litigators and legal counselors in Goldberg Segalla’s Los Angeles and Orange County offices, ready to service established companies and clients in the cannabis industry, as well as numerous attorneys in New York and other states, where businesses are grappling with the likelihood of imminent regulatory and statutory changes regarding cannabis and related products.

“I recognized that we were looking at a point in law that doesn’t come around very often—a brand-new area, completely open to interpretation and in need of great attorneys to help develop it. I believed we could play a part, that I could play a part,” Adam says.

Now clients from all parts of the burgeoning national cannabis industry rely on Goldberg Segalla for a geographic reach and bench depth rivaling other top-tier firms. But they don’t choose the firm for the numbers alone; they choose it because understanding each client’s business is the firm’s first priority. Goldberg Segalla tailors legal teams and cost-effective strategies to meet clients’ immediate needs as well as their long-term goals.

This tailored, cross-practice approach positions Goldberg Segalla to provide exceptional and comprehensive counsel for clients operating in the cannabis industry, handling and advising on virtually any legal need—whether securing funding for a new business venture, adapting to the industry’s ever-changing regulatory landscape, or defending diverse and complicated claims.

The firm’s cannabis-industry capabilities span the full range of the cannabis supply chain, including directors and officers (D&O), dispensaries and retailers, distributors, growers, hydroponics suppliers, and investors.

‘IT SEEMED LIKE THE PERFECT TIME’

Adam has become an emerging authority and thought leader in the rapidly changing cannabis field, writing articles on liability and cannabis law and advising other attorneys on developing aspects of this relatively new and growing area of law. In June 2019, he co-chaired the high-profile Perrin conference, Emerging Legal Trends in the Cannabis Industry, which brought together industry leaders, innovators, and advocates as well as attorneys.

Among the topics conference speakers discussed were employment, insurance issues, industry innovation, and changes in the federal landscape wrought by passage of the 2018 Farm Bill. Besides giving opening remarks, Adam moderated a panel on “Employer/Employee Relationships and the Proliferation of Medical Cannabis Use.” Fellow Goldberg Segalla partner Joseph J. Welter moderated the panel, “Developing a State of the Art: Current Science in Cannabis Products.”

Adam and Joe’s participation in the Perrin conference showed how Goldberg Segalla’s Cannabis and Hemp Law practice group helps educate those affected by changes in the landscape of the industry. Adam shared that educating clients is a big part of what cannabis-practice attorneys at the firm do.

Among those affected by all the growth and change in the cannabis industry are insurance companies, growers, dispensary owners, and medical providers. Some of the issues they face are:

  • Crop insurance: Climate change and the increasingly heavy storms and tornados that it’s causing pose a challenge for outdoor growers. Indoor growers’ worries include mold and fungus.
  • Workers’ compensation insurance: As growers build their operations and hire more people, employee issues will arise just as they do in other industries. For example, a worker at an indoor growing facility might develop Legionnaire’s disease.
  • Errors and omissions (E&O) insurance: If your cannabis-related business performs any professional service for another party, such as processing, consulting, marketing, hosting, or developing, you’re at risk of being hit with a claim alleging financial losses suffered because of a failure in your services.

“A lot of these companies are raising a lot of money,” Adam says. “To the extent they don’t survive, you may want to be insured should an investor decide to sue.”

PRESCRIPTION, NO. RECOMMENDATION, YES.

Insurance coverage in the industry is complicated by the disconnect between federal and state laws that create an odd risk for major carriers. Many of the nation’s largest insurers aren’t offering cannabis-related policies yet for fear of being accused of money laundering. Since cannabis, as a controlled substance, is not allowed to be transported across state lines, national insurance carriers that accept payment from out-of-state producers fear they may run afoul of federal laws enacted to prevent cartels from laundering drug money through interstate commerce.

The fault line between state and federal laws poses a conundrum for medical providers, too. Doctors in every state are prohibited from prescribing cannabis because it is a Schedule I substance and as such has no accepted medical uses. But a 2002 Ninth Circuit ruling in a class-action suit by a group of California doctors affirmed the right of physicians to recommend medical marijuana—a decision that cited the First Amendment right of patients to hear accurate information from their doctors and California’s right to make its own laws without federal subversion. The ruling set a precedent protecting doctors, patients, and state medical marijuana programs in the nine states of the Ninth Circuit: Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

In New York State, where Adam is based, medical marijuana has been legal since 2014, and marijuana possession was decriminalized in 1977, but arrests for having small amounts continued for decades. There are 10 registered organizations in the state allowed to cultivate, manufacture, and dispense medical marijuana. Each is allowed to operate four dispensaries.

Though legalization advocates in the state— including many farmers who want to grow marijuana—are hopeful that New York will fully legalize it this year, Gov. Andrew Cuomo says that won’t happen because too many members of the state senate still oppose it.

Adam learned of Cuomo’s remarks right after settling in at his desk for another day of work on the morning of June 4. “I wasn’t surprised,” he says. “When it didn’t get put into the budget, many people, myself included, did not believe adult-use legislation would occur this year in New York.”

The news did, however, start Adam thinking about the cannabis landscape in the Northeast, where states such as Maine and Massachusetts have legalized the drug. He thought it was a missed opportunity for New York to create a sizable tax-revenue stream. Just from the clients he sees in his own practice, he knows that in New York the industry is ready to take off as soon as the state legalizes marijuana. Clients in other states are already profiting from legalization, he says.

Keeping up with what’s legal when marijuana laws continue changing state by state is a challenge, Adam says. “When I’m preparing to give a presentation, I can spend hours researching the laws, case rulings, and discrepancies across various jurisdictions to make sure my presentation is as well-rounded as possible.”

“I usually just try and read my automatic news updates on a daily basis,” Adam says. “As the practice grows, this may change.”


The Product Liability Playbook is collaborative effort of Goldberg Segalla’s Product Liability practice group examining the latest practices, emerging developments, and influential court decisions in product liability law. View our most recent issue.