Recent news on the class action front continues to demonstrate that cannabis is a common target for class action litigation — and one that can produce large settlements that make pursuit worthwhile for law firms.
Pennsylvania-based Zynerba Pharmaceuticals just acquiesced to a $4 million settlement on behalf of investors who had claimed the company failed to publicly disclose the poor results of a clinical trial for a CBD drug. According to the lawsuit, a Phase 2 trial for Zygel, a transdermal CBD gel being developed for treatment of neuropsychiatric disorders in children and adolescents, showed adverse effects — some serious — in more than 20 percent of the trial participants.
The investors claimed that Zynerba’s public statements were materially false and misleading at all relevant times. Zynerba failed to disclose that Zygel was proving unsafe and was not well-tolerated, and that as such there was a heightened risk that Zynerba would not be able to secure regulatory approval. When Zynerba finally did make the information public, the price for the company’s shares declined 20%.
The three law firms representing the investors — Pomerantz LLP, Rosen Law Firm, and Bronstein Gewirtz & Grossman LLC, are sharing one-third, or $1.3 million, of the settlement, plus litigation expenses. This leaves approximately $2.6 million to compensate the entire investor class — those who purchased Zynerba shares between March 11 and September 17, 2019 — for their losses.
Meanwhile, California-based dispensary City Compassionate Caregivers has been hit with a proposed class action suit claiming they engaged in “aggressive unsolicited marketing.” The company is accused of violating the Telephone Consumer Protection Act by sending text messages without prior opt-in consent, and continuing to do so after being requested to stop. With damages being sought of up to $1,500 per every violation, the sum in question upon discovery may well reach into the millions of dollars.
As did a similar suit earlier this year against Michigan dispensary chain Green Peak Industries, seeking $5 million in damages for unsolicited promotional texts. Cannabis companies are particularly susceptible to TCPA class action lawsuits due to their limited opportunities to advertise, and their young employees’ attraction to social media and general unfamiliarity with the TCPA and the national Do Not Call registry.