MJBizMag February 2021 - 10

FiveQuestions | with Lara DeCaro
Getting Ahead of California's Prop 65
Noncompliance with new labeling rules can cost cannabis companies $200,000 or more
By John Schroyer
C
alifornia has a reputation for heavily
regulating businesses, and the
marijuana industry is no exception.
As of Jan. 1, a mandate requires all
marijuana products to be labeled with
warnings about the health dangers of both
marijuana smoke and THC.
The regulation was established by
Proposition 65, a 1986 state ballot
initiative that requires warning labels for
any product containing chemicals that
might cause cancer or birth defects.
Marijuana smoke and THC were added
as " reproductive toxins " in 2020, and the new label
requirement went into effect on New Year's Day.
The main problem for cannabis businesses is the
enforcement of Prop 65, which historically has led private
attorneys and citizens to look for violations and then file
suits against the companies that produced or sold the items
in question. Such actions can mean costly out-of-court
settlements or even more expensive litigation for businesses.
Lara DeCaro, an attorney who has represented California
cannabis businesses for more than a decade, is wellacquainted
with the liabilities associated with Prop 65.
Marijuana Business Magazine asked DeCaro what cannabis
companies can do to minimize their legal exposure.
How have you seen cannabis companies run afoul
of Prop 65 requirements in the past?
Many companies ignored the potential liability entirely.
Sometimes it was because they had a lot going on and that
seemed to be the least of their worries, but other times it
seemed that they simply weren't advised on the issue. This is
what caused that glut of Prop 65 notices from a certain set of
attorneys a few years ago-really starting in 2014 and again in
2017. But marijuana smoke had been (included on the state╩╝s
list of carcinogens) since 2009, so you could say that people
had plenty of lead time to comply before those came along.
There also was significant reluctance by cultivators and
manufacturers to include the warnings on their products
because cannabis is a product that has gained momentum
specifically because of its ability to help cancer patients
and others, and they are being told they must say it actually
causes cancer.
10 Marijuana Business Magazine | February 2021
Lara
DeCaro
As of 2018, the product warnings
need to be tailored to the harm allegedly
posed. They need to list at least one
chemical. Cannabis smoke has been
listed as a carcinogen since 2009 and for
developmental/reproductive toxicity as of
January 2020. Delta-9 THC was added to
the list of chemicals known to the state
to cause developmental/reproductive
toxicity as of January 2020. Thus, a proper
warning on flower would clearly and easily
cover both cancer and reproductive harm.
Edibles, topicals and other manufactured
cannabis products should include both warnings,
identifying a listed carcinogen other than smoke.
How easy or hard is it to comply with Prop 65?
There are a lot of possible scenarios that can give rise to
liability, so it is entirely possible to miss one if you don't
have good compliance advice or stop paying attention.
For example, under the current rules, the manufacturer is
primarily liable for a failure to warn but can push liability
onto the retailer through wording in ordinary purchase
orders. This is where paying attention to your contracts
becomes important-because most retailers will just sign
a vendor's (purchase order), boilerplate terms on the back
and all, without really knowing what those terms say or do.
How big of a hurdle is Prop 65 in the context of all
the regulations marijuana businesses deal with?
This is totally an annoyance-but one that can cost a
pretty penny.
In 2017 alone, one of these Prop 65 plaintiffs settled
five of these claims for $117,750-only $17,000 (or 16%)
of which was penalty. The remainder was for attorneys'
fees and costs. The following year, that same plaintiff
settled eight more claims for $233,500, only $28,500 (or
12%) of which was penalty.
Considering that the law permits up to $2,500 per day
per violation, the overall penalties can be high. But in most
settlements, the actual fines are very low.
On an operational level, the compliance is rather simple:
Products need to have the warnings on their labels, signs
should be posted and contracts need to be in place.

MJBizMag February 2021

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