The Beginning Of Cannabis Product Liability Class Proceedings In Canada And The U.S.

Author:Mr David McKnight and Chris Chu
Profession:Alexander Holburn Beaudin + Lang LLP
 
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As Canadian and U.S. legislation paves the way for more cannabis production and use over time, an increasing number of cannabis companies will be looking to grow and distribute their products. With market demand growing, cannabis producers, like any other product manufacturers, must pay attention to safety and production standards.

Flores v Livwell, Dist. Ct., Denver County, 2015-CV-33528 ("Flores") and Downton v Organigram Holdings Inc, 2019 NSSC 4 ("Downton") are class proceedings filed in Colorado and Nova Scotia respectively. Both actions are deemed the first cannabis product liability class proceedings in their countries. In common with both actions was the alleged use of a dangerous pesticide to treat cannabis plants, Myclobutanil.

The former was dismissed because only pure economic loss was alleged, while the latter went ahead to be certified as a class action due to the sufficiency of common physical and economic injuries pleaded. The two cases are discussed below.

Flores v Livwell, Dist. Ct., Denver County, 2015-CV-33528

In Colorado, the country's first cannabis class action, Flores, was brought to court on October 5, 2015. It was ultimately dismissed by the District Court of Colorado on February 11, 2016.

The plaintiffs attempted to bring a class action against Livwell Inc., a cannabis grower and dispenser. They alleged that Livwell had sold cannabis contaminated with Eagle 20, which contains a dangerous anti-fungal agent, Myclobutanil. Of note is the fact that the plaintiffs did not plead physical injury, but instead based their claim on pure economic loss. They argued that because the cannabis they bought from Livwell contained a dangerous pesticide, they had overpaid for the product.

Livwell filed to dismiss the case, arguing that the Plaintiffs lacked standing since they did not suffer an injury in fact. In Colorado, standing to sue is based on a two prong test - the plaintiffs must establish that they suffered an injury in fact, and that their injury was to a legally protected interest.

The Court decided that the plaintiffs did not suffer an injury in fact. The sole pleaded injury was overpayment for the contaminated cannabis product which they had consumed. The plaintiffs did not allege that the product did not perform as expected, or that they suffered any physical or emotional injury. The Court noted that in pure economic loss cases, injury in fact may be found where the defect reduced the original or resale value of the...

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