A lawsuit filed in the Court of Queens’ Bench in Alberta is making some pretty heavy allegations and naming a number of big Canadian cannabis companies for false advertising as parties to the proceedings.
Lead plaintiff on the matter, Lisa Marie Langeuin, says that she was sold misleading products with false advertising after purchasing cannabis packed and distributed by Tilray Canada at a retail store called Canna Cabana in Calgary. Langeuin says that she selected the product based on the potency as displayed on the product packaging. However, after taking the recommended dosage on several occasions, she says that she felt nothing. Undeterred, Langeuin took the product to her doctor to get to the bottom of it. After examining the packaging, Langeuin says that her doctor became concerned.
He told her that the manner in which the cannabis was sold in this case – in a plastic bottle with a plastic lining – could cause the plastic to leech into the product itself. This, according to the doctor, could cause liver or pancreas damage as well as degrade the product’s potency level over time. But Langeuin says that she and her doctor did not stop their research there.
Concerned about false advertising and potential adverse health effects, they purchased a number of cannabis products and sent them to third party testing companies to determine their true contents. They say they that the results were alarming, with many products containing a higher than labeled THC potency or a lower than labeled CBD level.
The lawsuit alleges that product potency is “drastically different” than advertised and “could have” caused harm to the plaintiff and other members of the public. It seeks a whopping $500-million judgement along with punitive damages of $5 million from each of the named defendants.
Parties named to the suit include Tilray, Cronos and Aurora Cannabis, as well as a number of other cannabis industry players and subsidiaries. Community safety and consumer empowerment are some of the key issues at play here, with lawyers for the plaintiff arguing that legal cannabis products must be properly marketed and safely delivered to consumers. The potential for harm, they say, is serious if proper standards are not met.
But this isn’t the first time that Canadian cannabis companies have landed in legal hot water. In February, nine U.S. law firms launched class-action lawsuits against Canopy Growth, Aurora Cannabis and Hexo Corp alleging that the companies had released misleading inventory information and overstated their sales potential.
While these sorts of class action lawsuits are rather typical for a new and emerging industry, the cannabis sector has taken harder than expected hits over the two years. With a 75 percent drop in cannabis stocks, many investors are looking for more secure alternatives, sending ripples of doubt through the industry. Lay-offs, cutbacks and corporate restructuring are some of the more troubling symptoms of an industry struggling to stay on its feet. And this most recent lawsuit will only cast more shadows over Canadian cannabis.
If what Langeuin says is true, the chance of the court ruling that false or misleading advertising has taken place is not insubstantial. The legal test for false or misleading advertising is relatively straight-forward. It ultimately comes down to whether a representation was made to the public to promote a product that was misleading in nature and material to the transaction. In determining whether a representation is “material”, the court will consider whether an average consumer would be influenced in their decision to purchase the product in question or not based on the
information represented.
In the past, courts have found that things like product pricing and other key aspects – like projected performance or components – to be material representations. It is therefore not unlikely that the courts will find potency to be a material in terms of cannabis sales and advertising.
Moreover, it is important to note that in cases like these, the plaintiff only needs to prove their case on the civil burden of proof. This is on a balance of probabilities and is much lower than the criminal standard of proof beyond a reasonable doubt.
But even if Canadian cannabis companies’ role in false advertising is proven, the quantum of damages may be adjusted by the court. Generally speaking, Canadian courts have been more conservative than their American counterparts when it comes to accessing big cash awards.
So, just because this particular lawsuit is seeking a half-billion-dollar pay-day, that fact alone doesn’t mean it will happen. Only time will tell what damages – if any at all – is appropriate.
At this point, none of the products in question have been recalled by Health Canada.