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Court Partially Overturns Class-Action Lawsuit Against OrganiGram Holdings

By Eric Volkman - May 1, 2020 at 1:56PM

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The legal action against the cannabis company will continue, but its scope has been considerably reduced.

OrganiGram Holdings (OGI -3.51%) announced Thursday that a class-action lawsuit against it has been partially overturned. A ruling by the Nova Scotia Court of Appeal has the effect of "significantly reducing the scope of the claim against the Company," in OrganiGram's words.

In 2018, Dawn Rae Downton sued OrganiGram for supplying her with medical cannabis that allegedly contained unauthorized pesticides and made her ill. Early the next year, her action was widened into a class-action lawsuit involving other OrganiGram customers.

Gavel with marijuana leaf.

Image source: Getty Images.

According to OrganiGram, the appeals court ruled that the plaintiffs did not present any evidence that the cannabis in question had caused any harmful health effects. On that basis, the class members will not be able to seek damages related to such effects.

The lawsuit will continue, albeit only seeking compensation for the money that customers spent on the cannabis in question. The batches in question were purchased by patients in 2016. Subsequent to that, OrganiGram recalled the affected product, and the marijuana company says it has already reimbursed many of the customers who bought the allegedly tainted cannabis.

OrganiGram added that its insurance provider has appointed a lawyer to represent the company in the class-action suit. That insurer might cover at least some of the fees and damages OrganiGram could have to pay. 

"Organigram management does not anticipate that what remains of the class action (including the resolution thereof) will affect its business or operations in any material way," the company said in its press release updating the case.

On Thursday, OrganiGram's stock fell by nearly 3.1%, exceeding the decline of the wider equities market.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.

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