Delta Extraction v. Division of Cannabis Regulation: 5 important takeaways from the state’s first cannabis product recall

Delta Extraction v. Division of Cannabis Regulation: 5 important takeaways from the state’s first cannabis product recall

 

The legal dispute between Delta Extraction and Missouri’s Division of Cannabis Regulation (DCR) came to a head at the Administrative Hearing Commission (AHC) during the first week of March regarding Delta’s manufacturing license revocation and the state’s first recall of over 65,000 products.

While a decision from the AHC is still not expected for several weeks, the hearings exposed the industry and consumers to DCR’s regulatory practices, communication, and guiding principles, many of which should sound warning alarms. The outcome of this case carries significant implications for Missouri licensees and consumers.

Below, we summarize five key takeaways:

DCR knew that Delta was using THC–A, and that other licensees were as well

Heather Bilyeu, Delta’s assigned DCR compliance officer, was in frequent communication with Delta, visited the facility multiple times, and testified at the hearing and in her depositions that she was aware of the processes Delta was using long before July 30, 2023, when DCR’s final rule changes became effective. Heather reviewed SOPs that Delta provided for their manufacturing processes, and communicated internally within DCR with her colleagues in the department on several occasions about Delta’s THC-A conversion, seeking clarity amidst the ambiguity created by the department’s promulgation of new rules in February and July, 2023. [Exhibit: Exhibit 20, Exhibit 22]

Through discovery and trial testimony, DCR revealed that during the same time period, they were aware that other Missouri licensees were making and selling distillate using similar procedures incorporating THCA; however, Delta was the only manufacturer to have their license disciplined or revoked. [Exhibit: Exhibit 30]

Investigation was triggered by a debunked anonymous complaint

The initial investigation into Delta began with an anonymous complaint, which DCR quickly determined to be unfounded. The decision to continue the investigation, despite the discrediting of the complaint’s source and content, raises questions about the motivations and criteria used by DCR to pursue such inquiries. This situation highlights the vulnerability of all licensed operators to baseless accusations, and clearly reveals the significant impact of premature regulatory actions on Delta’s operations as well as the entire state marketplace. [Exhibit: Kirkweg deposition, pp.47-50; Kirkweg transcript, pp. 180-181]

Confusion and communication gaps within DCR on authority to regulate hemp-derived cannabinoids

Internal communications between DCR staff during the period of rule change underscore how the confusion and lack of coherent communication within DCR in the development and implementation of these rules contributed to Delta’s understanding of guidance received from DCR and its subsequent activities. The department appears to focus on the end product containing THC, while there was clearly misunderstanding and ambiguity among DCR staff members on the regulation of its precursor, THCA, and how that should be communicated to licensees and operators [Exhibit: Exhibit 30, Exhibit 21]

Limited technical knowledge and expertise

Deposition and hearing transcripts reveal wide gaps in the department’s understanding of critical aspects of cannabis chemistry and production processes. As a result, DCR developed ambiguous and confusing rules and regulations that do not fully account for the complexities of cannabis product manufacturing, and are frequently difficult for licensees to understand, interpret, and apply as evidenced by the promulgation of both “emergency rules” and “final rules” for the adult-use industry, as well as the multitude of industry “communications, guides, instructions, Guidance letters, and variances” published by DCR on their website. [Exhibit: Kirkweg transcript, p. 164-165]

Absence of safety testing in product recall

DCR’s invocation of a “credible and imminent threat to public safety” under their rules as rationale for Delta’s suspension and ultimate revocation was obviously a pretense. DCR revealed through discovery and trial testimony that they were aware other licensees were concurrently using the same or similar processes, but none were suspended or revoked, or had products recalled, for doing so.

Remarkably, DCR did not conduct a single safety test on any of the products in their recall. The lack of empirical testing to substantiate the recall raises concerns about the criteria and processes used to determine public health risks. It suggests that the recall may have been preemptively executed without concrete evidence of safety concerns, potentially undermining the rationale for such regulatory interventions and their impact on public perceptions of safety. [Exhibit: Kirkweg transcript, p. 224-226]