After a year and a half of litigation, a New York federal judge has tossed a proposed securities class action suit against Curaleaf that alleged the company’s inaccurate labeling of its cannabidiol (CBD) products caused its share prices to drop.
Investors in the company filed the lawsuit in August 2019 after Curaleaf received a warning letter from the U.S. Food and Drug Administration (FDA) for selling CBD products with unsubstantiated health claims about the products treating cancer and Parkinson’s disease, among other health conditions. (Curaleaf responded by removing the health claims from its website and social media accounts.)
The day after the FDA administered its letter, Curaleaf’s stock price fell $0.54, or over 7 percent, and continued to fall in the following days.
The plaintiffs have argued that Curaleaf did not properly disclose the risks associated with selling CBD products.
However, in a Feb. 16 ruling, U.S. District Judge Brian Cogan said Curaleaf has been fully transparent about the legality of its business.
“Starting on its first day in existence, the Company publicly and repeatedly acknowledged the very information that plaintiffs contend it concealed: its cannabis-based products are not approved by the FDA and thus the FDA may regard their promotion as violating established law,” Cogan wrote in his opinion.
According to the opinion, the company’s listing statement (administered when the company made its IPO) disclosed that:
the company’s cannabis-based products “are not approved by the [FDA] as ‘drugs.’”
the FDA may regard their marketing “as the promotion of an unapproved drug in violation of the [FDCA].”
the “FDA has issued letters to a number of companies selling products that contain CBD . . . warning them that the marketing of their products violates the FDCA.”
an “FDA enforcement action against the [company]