When cannabis companies think about compliance, they are usually talking about the state requirements for their cannabis operations. Companies must ensure that IDs are being checked, security measures are being adhered to, product is being tracked, among other requirements. However, cannabis companies often overlook other compliance requirements, especially those that are not cannabis specific. A lawsuit filed on Friday, May 15 demonstrates one very important compliance issue that deals with how companies advertise.
The Telephone Consumer Protection Act (TCPA) is designed to protect against harassing telemarketing. Many TCPA cases against players in the cannabis industry have been percolating around the country. For example, in Williams v. Eaze Sols., Inc., Case No. 3:18-cv-02598-JD, 2019 U.S. Dist. LEXIS 182942 (N.D. Cal. Oct. 21, 2019) the marijuana delivery service Eaze got hit with a TCPA class action complaint. Eaze responded by compelling the Plaintiff to arbitration per the parties’ contract, and the court agreed, and did not allow that case to proceed as a class action. That case remains ongoing.
The lawsuit Jackson v. Euphoria Wellness LLC, has just been filed in federal court in San Francisco. In the complaint, Jacqueline Jackson alleges that the defendant violated the TCPA by sending her promotional text messages for marijuana deals. Ms. Jackson claims that she never gave Euphoria her number, never consented to receiving these messages, and never had a prior business relationship with the company. The complaint goes on to state that there are likely dozens if not hundreds of people that are similarly receiving these unsolicited text messages. The law frowns upon this kind of unsolicited consumer contact, and allows a recovery of $500 per unauthorized text, which can add up very quickly.
What its likely happening is that a consumer will shop at one particular dispensary and enter their information into a tablet. That information is then shared with other entities, and added to a “potential customer list”. Next, without consent, a cannabis company or marketing agency sends out a mass text to all of the numbers on their list, despite not having permission to do so.
Euphoria must now respond to the complaint, and begin what is likely to become a lengthy and costly legal process. They might choose to fight the case in court, or perhaps try to settle the matter quickly. Regardless of the path forward, Euphoria will have an additional problem on its plate, one that takes time and energy away from other business needs.
It is important to note that Euphoria is certainly not the only company that has made such a mistake. This kind of oversight is unfortunately very common in the industry. There are marketing strategies that companies employ to gather customer data and increase their advertising reach. However, companies are often unaware of the TCPA and its limitations on advertising. In sum, dispensaries and affiliates must be extremely careful with customer information, and proceed with telemarketing that’s in compliance with the landscape of the many consumer protection statutes.
This kind of issue highlights why cannabis companies must have competent counsel who are reviewing all of their business practices. Even if it’s not product related, there can be liabilities that arise if appropriate protections are not implemented. As Benjamin Franklin said, “An ounce of prevention is worth a pound of cure.” Cannabis compliance is extremely important. Companies should be spending many up front ounces, to ensure they aren’t hit with pounds of legal problems later.
Many thanks to Jason M. Ingber who co-authored this blog. Jason and Shuki attended UCLA Law School together, where they developed the critical thinking skills that are on display in this post. Jason is a litigation associate at Squire Patton Boggs, LLP, where his practice focuses on consumer class action defense, breach of contract, and consumer protection statutes. He can be reached at firstname.lastname@example.org.
Disclaimer: This article has been prepared and published for informational and educational purposes only and is not offered or intended, nor should it be construed, to be legal advice.