More Law Suits against Public Firms which deal with Hemp: Report

According to a news report by Goodwin Procter, there was a surge in federal lawsuits. The cases were against businesses that deal with marijuana and hemp between 2018 and 2019. The report further states that most of these lawsuits have mainly been federal class-based. The trend rose twofold between 2018 and 2019. Notably, this condition manifests itself when a new industry, such as marijuana, enters the market.

According to Goodwin Procter, a law firm that is based in Boston, the federal courts in the United States recorded 13 cases related to marijuana and hemp in 2019. The number was more than double the six cases reported in 2018 at the federal level. Companies that deal with the production and sale of cannabidiol (CBD) and marijuana were some of the parties involved in the litigation.

The litigations most hit Canadian-based marijuana and CBD firms. From the report, Canadian firms that were sued in federal courts of law were listed in the stock market of the United States.

Several cases were raised against the companies which dealt with CBD and marijuana. The firms were accused of not adhering to the requirements of disclosure. Others were accused of tampering with financial statements deliberately. Yet still, some of the companies did not have proper internal controls, and also failed to record some special transactions due to poor financial guidance. Failure to adhere to these standards raised the number of litigations against them, which went up to the federal level.

The report by Goodwin also focuses on activist companies which are termed as short-sellers. According to the report, these companies were accused of malpractices, which contributed to the rise in lawsuits. It is also worth noting that some of these companies more than one lawsuit, which also contributed to the increased litigations.