Curaleaf to face class action lawsuit over FDA's CBD letter
A couple of weeks ago, the FDA sent a letter to Curaleaf, one of the biggest makers of CBD products, asking them to stop making medical promises about the drug. The FDA alleged that Curaleaf was promising CBD would help with pain relief, ADHD, Parkinson’s, and other health problems, but said that the science hadn’t yet backed up those findings, giving the company fifteen days to shape up. Curaleaf has since lowered its tone a bit, focusing more on its own products and less on what they can supposedly do for users.
But it turns out that might not quite have been fast enough. The FDA hasn’t taken any further action, but a group of lawyers are jumping on the case, trying to file a class action lawsuit against the company. Bragar Eagel & Squire, PC is a New York law firm that’s setting up an action on behalf of Curaleaf’s investors, trying to hold the company accountable for the value lost by the FDA’s letter. The lawsuit suggests that Curaleaf knew its marketing was false and that the FDA would come after them, and that by leaving the marketing up, they took a risk that resulted in lost value for investors. Right now, the law firm is essentially just looking for investors to join the lawsuit — they have filed a complaint, but it seems like they’re just looking to build a case first, before taking further action.
If you’re an investor, you can try contacting them on the site linked above, but in our opinion, this seems pretty specious. The law firm cites the news as inspiring a $.50 drop in the stock price, but Curaleaf has dropped way more than that — the stock was up to $11.20 in April after the news that CVS would carry their products, and had dropped down to around $6.40 even before the FDA’s letter hit. This lawsuit doesn’t have the strongest ground, then, and even if it moves forward, the lawyers are likely just looking for a settlement anyway, which Curaleaf will probably easily pay if this suit gets any traction at all.
So we doubt the company is shaking in its boots (if anything, they’re probably just annoyed this has attracted the attention of the firm, which has a reputation for class action investor suits like this). Odds are good that even if the law firm can find investors to represent in the case, we’d bet that any impartial judge will determine that a) Curaleaf had no idea the FDA would have an issue with what it was doing, and b) that the stock hit isn’t worth a class action case anyway.