Marijuana

Breaking Bud: Marijuana And Product Recalls

Just because marijuana remains illegal doesn’t mean that consumer protection and preparedness don’t apply to marijuana businesses.

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Earlier this year, a Colorado cannabis company instituted a successful statewide recall of one of its marijuana-infused products and another Colorado cannabis company had a similar recall last summer. Whether you’re a marijuana producer, manufacturer, or a retailer, now is the time to establish a reliable and effective recall procedure.

My firm has blogged before about products liability and the cannabis industry, and we all know it’s just a matter of time before a plaintiff successfully sues a marijuana company for injuries caused by a defective marijuana product.

There are a number of things cannabis companies can do to help protect themselves against product liability claims. One of the best ways to prevent such lawsuits is to do a product recall as soon as you learn that one of your products is or may be “bad.”

Product recalls help companies protect their customers and, in doing so, help reduce the company’s litigation costs. Just as is done by so many product manufacturers, distributers, and retailers outside the cannabis industry, marijuana businesses should prepare now for any possible recalls, all with an eye towards deciding what should be recalled and how. Though the Food and Drug Administration has its own procedures for product recalls, the marijuana industry has little more than its own best practices and self-made standards to use as its guidelines.

The questions posed below are intended to help cannabis business owners and their legal counsel think about recall procedures now in order to be ready if and when an unsafe cannabis product makes it into the marketplace.

  • Do your state’s laws require you to do a recall?

The first thing you should determine is whether your state’s marijuana laws or regulations mandate any particular recall procedures for certain events like customer complaints or negative quality assurance testing. Some states, like Maryland and New York, have such procedures and some states, like Washington and Nevada, do not. Regardless of the state laws on recalls, the makers and sellers of defective products can still be liable.

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  • Should you issue a recall even if it is not required by state law?

Even if your state laws do not mandate a recall, you still need to decide whether to institute a recall anyway in an effort to reduce the extent of your liability or even just for public relation purposes. This will depend on a number of factors, including whether the defect affects the safety of your customers, the risk of physical harm to your customers, the involvement of regulatory agencies, and the cost of the recall. Remember, the longer a defective product remains in the marketplace, the greater the risk of it doing harm and triggering product liability lawsuits. There is also a greater likelihood that regulatory agencies will pursue you civilly or even criminally if you don’t get the product off the shelves.

  • What will the recall cost you?

There are going to be significant costs involved with a product recall, some of which are not strictly monetary. Your obvious first line priority is consumer protection — your customers. Instituting a recall to get products back from them is going to be expensive and most general liability insurance policies do not cover product recalls or their associated costs. Do you know what your policy says on this? Does your insurance policy expressly relieve your insurer of providing you coverage if you are engaging in an illegal activity? Be sure to read your insurance policy and discuss it and the prospect of a product recall with your insurer.

  • What about your vendors? 

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Your vendors may also be affected by your recall and they may even be the cause of it. You should be sure to address both products liability and recall issues in your vendor contracts and in your sales contracts. Who between the two of you will be responsible for any resulting harm? Who gets to decide whether or not to initiate a recall? Get all of this clearly set out in writing now, before you have a problem later.

  • What about your reputation? 

Your reputation will suffer at least somewhat for being associated with a product problem or recall. But when doing a cost benefit analysis, a little hurt pride is usually going to be better than increased consumer complaints, a lawsuit, and/or state or federal agency scrutiny and punishment for unleashing a dangerous product into the marketplace. So, be sure to calculate how your company will handle its customer and industry public relations post-recall.

Just because marijuana remains illegal doesn’t mean that consumer protection and preparedness don’t apply to marijuana businesses. Quite the contrary, because of a lack of overall federal regulation and product standards, marijuana products are particularly ripe for scrutiny. Consequently, cannabis businesses shouldn’t wait until they have a recall crisis to establish recall procedures.

Hilary Bricken is an attorney at Harris Moure, PLLC in Seattle and she chairs the firm’s Canna Law Group. Her practice consists of representing marijuana businesses of all sizes in multiple states on matters relating to licensing, corporate formation and contracts, commercial litigation, and intellectual property. Named one of the 100 most influential people in the cannabis industry in 2014, Hilary is also lead editor of the Canna Law Blog. You can reach her by email at hilary@harrismoure.com.

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