Our analysis and breakdown of the MCR Labs suit in the context of the current Mass cannabis landscape
By Chris Faraone with input from TJM staff and contributors
On Jan. 30, the Framingham-based MCR Labs filed a lawsuit in Suffolk County Superior Court against eight other Massachusetts Independent Testing Labs (ITLs) for alleged “violations” of the state’s cannabis law, “intentional interference with advantageous business relations,” and “unjust enrichment.” Due to the significant implications of the complaint and potential industrywide repercussions—including beyond the Bay State—we’re already covering the case extensively.
After speaking with a number of experts and people whose companies will at least be indirectly affected by the MCR suit, we compiled this initial analysis of the 50-page filing. None of us are scientists, CEOs of licensed weed purveyors, or attorneys, but we know a lot of them, and in addition to assisting us with this review, some will also be contributing additional assessments as the situation evolves.
There are basically two groups of defendants
Though some of the ITLs named in the suit straddle both categories, the part of the complaint outlining specific allegations against the defendants basically parses them into two camps: those who allegedly misreported “Total THC Potency numbers,” and those who allegedly misreported “results involving unlawful (or unlawful levels of) contaminants.”
This lawsuit didn’t come out of nowhere
As we noted in a post titled “15 Articles That Help Explain The Massachusetts Lab Lawsuit,” there was a lot of leadup to the complaint filed last week. That includes past presentations and comments about testing by the plaintiff as well as some of the defendants, as well as attempts by the CCC to course correct, and media coverage of moldy weed in Massachusetts even making national headlines.
There’s a lot of context to consider
While the Cannabis Control Commission has been on a somewhat positive streak these past few months, this lawsuit nevertheless comes amidst or at least on the heels of much drama, including criticism from state lawmakers and the Mass inspector general. Some of those critiques specifically included condemnations around lab testing, while in 2023, State Auditor Diana DiZoglio released a report indicating that problems in this realm go way back: “During the audit period [Jan. 1, 2019 through Dec. 31, 2020], [DiZoglio] identified $10,192,986 worth of product that contained some amount of material that was last tested for contaminants more than a year before it was sold to consumers.”
MCR isn’t suing every other lab
As noted, there are eight defendants in the suit. TJM asked those labs for comment via email at 6pm EST on Monday, Feb. 3. We will name and send further detailed questions to those companies if and when they come up in later coverage, but regarding the grand scheme of things:
- From what we were able to determine from a survey of the 15 ITLs that have been given the green light by the CCC to commence operations in Massachusetts, there are currently 11 in operation.
- Of the eight defendants, seven appear to still be operating. The Salem-based CDX Analytics, which is named in the suit, closed last year.
- Of the seven licensed ITLs that are not named as defendants in the lawsuit, four appear to still be operating.
- Two of those four operational ITLs that are not defendants are acknowledged in the lawsuit, but in a positive light, with their results juxtaposed with those of companies which are allegedly “willing to engage in these unlawful and unscrupulous practices.”
The existential nature of it all
At the center of the complaint: whether “Defendants’ unfair and unlawful competition has had the expected and intended result of diverting existing and prospective clients away from [MCR Labs], who refused to join in the fraudulent scheme to corrupt quality and compliance testing in the Massachusetts cannabis market.”
Whatever comes of these legal proceedings, there will likely be endless deliberation over whether certain decisions and testing evaluations by defendant labs demonstrably caused MCR Labs to lose business. But what’s already certain is that three other ITLs have closed, with owners pointing to problems which are paramount in this suit.
Not all fates will be the same
Whatever comes of this lawsuit, the end result will probably be different for all parties involved—whether because some defendants are small businesses, bootstrapped by independent scientists keen on the plant, while others are outposts of national giants, or because that’s just how things like this tend to unfold.
Some ITLs could get dropped from the complaint, while others could be forced to shutter from the fallout. One attorney we spoke with said that a major mistake that defendants make in this kind of multilateral suit is to assume they are all in the same boat, only for fingers to start pointing in every direction when depositions start. Also, as noted above, they aren’t all accused of the same misrepresentations, etc.
An apparent lack of clear lab guidance is likely relevant
In the past, multiple stakeholders including some from MCR Labs have criticized the CCC for its lack of standardization around potency and contaminant testing, methodology, etc. This suit, however, seems to imply to some degree that current regulations do indeed provide adequate guidance to theoretically yield the same testing results from all licensed laboratories, if they’re honest, noting that “true THC potency and presence of contaminants are determinable with accuracy using validated testing methods.” We plan on covering this aspect of the situation further and expect (the lack of) clarity on protocols to play a major role in these proceedings moving forward.
“Lab shopping” and “round robins”
From the MCR lawsuit: “Defendants have sought to entice potential customers in a variety of ways. In some of the most blatant cases, many Defendants participated in ‘round robins,’ in which prospective customers sent representative samples to multiple labs. The lab with the highest potency and lowest fail rates (most favorable results) would generally win the customer’s business. Whether in a ‘round robin’ or through other means, the effect is the same. The customer selects the lab that gives them the highest—and most marketable and profitable—THC potency results and/or lowest fail rates.”
Last November, the CCC publicly recognized “lab shopping” as a problem, and subsequently introduced a new “One Sample, One CoA” policy. Many lab-side voices argued that it didn’t go far enough. MCR Labs VP of Marketing and Technology Yasha Kahn told TJM, “Sometimes [cultivators and manufacturers] send samples to multiple labs, but then they find out which gives better results, and then they keep on sending samples to that lab.”
MCR CEO Michael Kahn wrote in a follow-up email: “The practice of lab shopping is not achieved through sending a batch to multiple labs and picking the most favorable results, as described in the CCC’s presentation. … It is a laboratory selection process by the cultivator / manufacturer to work with the lab which will give the most favorable results. This is observed in the publicly available data.”
There’s also a connection to this week’s public health and safety advisory
Speaking of unlawful levels of contaminants, on Monday the CCC informed “consumers and patients about new health and safety concerns regarding marijuana products produced by two separate licensees that may have been sold recently by Marijuana Establishments and Medical Marijuana Treatment Centers.” Those products came from The Heirloom Collective and Holistic Industries, the latter of which is mentioned in the MCR Labs lawsuit, and not in a positive way.
We are working on a longer story for next week on these related cases—one in Suffolk Superior Court, the other one still under the commission’s purview. But in short, a stipulated agreement from last year included a mandate for Holistic Industries to “Engage a third-party Independent Testing Laboratory (ITL) acceptable to both the Commission and the Respondent, to perform all required microbial testing for Marijuana flower” for six months from the date of the order, along with a $200,000 fine.
The MCR suit notes: “In the Stipulated Agreement, Holistic Industries was required to use the CCC’s contracted laboratory, ATOZ Labs, for the Total Yeast and Mold screen for six months. … In this timeframe, ATOZ Labs failed 59.5% of Holistic Industries’ samples for Total Yeast and Mold. Holistic Industries continued to also test with Defendant Green Analytics, who failed only 4% of the received samples.”
In a statement, Holistic Industries General Counsel Kyle Crossley said, “Consumer safety and product quality are our top priorities – so much so that we only sell organic flower that is not irradiated, unlike many other operators in the Commonwealth. Although all recalled product previously passed the CCC-mandated testing before being sold and, as the CCC notice said, there have been zero reports of any consumer health issues, we are honoring the product recall.”
Crossley continued, “This product was fully compliant with all of the rules and regulations set forth by the CCC; however, the circumstances that led to this product recall shed light on the need for standardized testing methodologies and the negative impact the lab infighting, and the CCC’s choice to side with certain labs without making formal rule changes, has on operators, consumers and the entire cannabis program.”
You can read the full statement from Holistic Industries here.
And don’t forget about the consumer side of things
From the lawsuit: “This race-to-the-bottom willingness to manipulate testing also results in unknowing consumers overpaying for lower-potency cannabis riddled with dangerous contaminants. Given the rampant corruption of compliance testing, neither consumers nor dispensaries could be expected to know which products on the shelf may be unlawfully contaminated or have misleading potency claims.”
In other states, consumers have filed class action lawsuits against companies for much less—for example, one plaintiff sued Cookies for selling real but illicit THC labeled as legal hemp-derived products in Georgia. If MCR is validated by the courts, there could be room for patients and consumers to follow up with their own complaint, whether that’s against regulators, labs, cultivators, or all of the above.
