Green Analytics N., LLC v. Pa. Dep't of Health

298 A.3d 181

GREEN ANALYTICS NORTH, LLC d/b/a Steep Hill PA, Hanging Gardens, LLC, Pennsylvania Medical Solutions, LLC, Curaleaf PA, LLC, AES Compassionate Care, LLC, Standard Farms, LLC, and Parea BioSciences, LLC, Petitioners

v.PENNSYLVANIA DEPARTMENT OF HEALTH, Respondent

No. 104 M.D. 2023

Commonwealth Court of Pennsylvania.

Argued May 10, 2023

Decided June 29, 2023

Judith D. Cassel and Micah R. Bucy, Harrisburg, for Petitioners.

Kevin R. Bradford, Senior Deputy Attorney General, Philadelphia, for Respondent.

BEFORE: HONORABLE RENÉE COHN JUBELIRER, President Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE MICHAEL H. WOJCIK, Judge, HONORABLE CHRISTINE FIZZANO CANNON, Judge, HONORABLE ELLEN CEISLER, Judge, HONORABLE STACY WALLACE, Judge

OPINION BY JUDGE COVEY

Before this Court are the Pennsylvania Department of Health's (Department) Application for Summary Relief, and Green Analytics North, LLC d/b/a Steep Hill PA's (Green Analytics), Hanging Gardens, LLC's, Pennsylvania Medical Solutions, LLC's, Curaleaf PA, LLC's, AES Compassionate Care, LLC's, Standard Farms, LLC's, and Parea BioSciences, LLC's (collectively, Petitioners) Application for Partial Summary Relief (Cross-Applications). There are four issues before this Court: (1) whether Petitioners’ right to relief as to Count I of their Petition for Review (Declaratory Judgment - Lack of Statutory Authority) (Count I) is clear because the Department lacked the statutory authority to enact Section 1171a.29(c)(1)-(2) of the Department's Regulations, 28 Pa. Code § 1171a.29(c)(1)-(2) (Regulation), which mandates that growers/processors use a different medical marijuana laboratory (Lab) for the harvest stage and production stage of growing and processing medical marijuana (2-Lab Requirement); (2) whether Petitioners’ right to relief as to Count II of their Petition for Review (Declaratory Judgment - Improper Delegation of Authority) (Count II) is clear because the 2-Lab Requirement unconstitutionally delegates to private Labs the regulatory oversight of medical marijuana testing without any standards or protections; (3) whether Petitioners are entitled to a permanent injunction against the 2-Lab Requirement (Count V); and (4) whether Petitioners have shown that the 2-Lab Requirement amounts to a violation of the Contracts Clauses of the United States and Pennsylvania Constitutions¹ (Count III).²

Background

Pennsylvania's medical marijuana program began in 2016 pursuant to the Medical Marijuana Act (Act).³ Section 301(a)(3) of the Act states that the Department shall "[h]ave regulatory and enforcement authority over the growing, processing, sale and use of medical marijuana in this Commonwealth." 35 P.S. § 10231.301(a)(3). Section 103 of the Act defines a "[g]rower/processor" as "[a] person, including a natural person, corporation, partnership, association, trust or other entity, or any combination thereof, which holds a permit from the Department under this [A]ct to grow and process medical marijuana." 35 P.S. § 10231.103. The Department has issued permits to growers/processors. Petitioners Hanging Gardens, LLC, Pennsylvania Medical Solutions, LLC, Curaleaf PA, LLC, AES Compassionate Care, LLC, Standard Farms, LLC, and Parea BioSciences, LLC (collectively, Growers/Processors), have received such permits.

Former Section 704(a) of the Act required a grower/processor to contract with "an independent laboratory to test the medical marijuana produced by the grower/processor." Former 35 P.S. § 10231.704(a) (emphasis added). Green Analytics is a Department-approved Lab for medical marijuana testing and has been providing testing for both stages of growing and processing medical marijuana (harvest and processing) for several growers/processors, including some of the Growers/Processors. On June 30, 2021, the Act was amended by the Act of June 30, 2021, P.L. 210, No. 44 (Act 44). Act 44 revised Section 704(a) of the Act to mandate:

A grower/processor shall contract with one or more independent laboratories to test the medical marijuana produced by the grower/processor. The [D]epartment shall approve a laboratory under this subsection and require that the laboratory report testing results in a manner as the [D]epartment shall determine, including requiring a test at harvest and a test at final processing. ...

35 P.S. § 10231.704(a) (emphasis added).

Prior to Act 44's passage, in February 2021, the Department submitted Proposed Regulations to the Independent Regulatory Review Commission (IRRC), which included the 2-Lab Requirement, in order to create checks and balances in the testing process. The 2-Lab Requirement was located at Section 1171a.29(c)(1)-(2) of the Proposed Regulations.⁴

On June 9, 2021, Pennsylvania State Senator John M. DiSanto (Senator DiSanto), by way of a formal letter to the IRRC, expressed his opposition to the proposed 2-Lab Requirement. On or about September 19, 2022, after the new Section 704(a) of the Act had been enacted, the Department submitted to the IRRC its proposed Final Regulations. The IRRC discussed and approved the Department's Final Regulations, including the 2-Lab Requirement, at its October 20, 2022 public meeting. The Regulations had an effective date of Saturday, March 4, 2023.

Facts

On March 4, 2023, the Department's Regulations were published in the Pennsylvania Bulletin at 53 Pa. B. 1275 (March 4, 2023), including Section 1171a.29(c)(1)-(2) of the Department's Regulations, which imposes the 2-Lab Requirement, and stating therein that the new Regulations were effective immediately. On the morning of March 4, 2023, Petitioners filed a Petition for Review (Petition), an Application for Special Relief in the Nature of a Preliminary Injunction (Application for Special Relief), an Application for Special Relief in the Nature of an Ex Parte Preliminary Injunction, and a Brief in Support of Petitioners’ Application for Preliminary Injunction. Later that same day, this Court granted Petitioners’ Application for Special Relief in the Nature of an Ex Parte Preliminary Injunction and temporarily enjoined the Department from enforcing the 2-Lab Requirement.

On March 6, 2023, this Court held a telephone conference with the parties, during which the parties agreed that the Petitioners would withdraw their Application for Special Relief and the Department would not enforce the 2-Lab Requirement pending this Court's final order on Petitioners’ Petition. On March 7, 2023, the parties filed a stipulation in this Court memorializing their agreement that Petitioners would withdraw their Application for Special Relief, without prejudice, in consideration for the Department's agreement not to enforce the 2-Lab Requirement pending final order of this Court on all counts and that Petitioners and the Department would file cross-applications for summary relief in accordance with this Court's forthcoming scheduling order.

On March 20, 2023, the Department filed its Application for Summary Relief seeking judgment in its favor and against Petitioners, with prejudice. Also on March 20, 2023, Petitioners filed their Application for Partial Summary Relief seeking judgment for Petitioners as to Counts I, II, and V of their Petition and for this Court to order that: the Department's 2-Lab Requirement is unlawful because it exceeds the Department's authority under the Act and does not track the meaning of the statute; the Department's 2-Lab Requirement is unlawful because it violates the Act and article II, section 1 of the Pennsylvania Constitution insofar as it delegates the regulatory oversight of the Labs to private and competing third-party Labs; and the Department is permanently enjoined from applying or enforcing any aspect of the Department's 2-Lab Requirement.

Discussion

Initially,

[t]his Court may grant an application for summary relief if the moving party's right to judgment is clear and no material issues of fact are in dispute. See Pa.R.A.P. 1532(b) ; Eleven Eleven Pa., LLC v. State Bd. of Cosmetology , 169 A.3d 141, 145 (Pa. Cmwlth. 2017). In ruling on an application for summary relief, this Court must " ‘view the evidence of record in the light most favorable to the non-moving party and enter judgment only if there is no genuine issue as to any material facts and the right to judgment is clear as a matter of law.’ " Eleven Eleven , 169 A.3d at 145 (citation omitted).

Cao v. Pa. State Police , 280 A.3d 1107, 1109 (Pa. Cmwlth. 2022).

Petitioners first argue that they have a clear right to relief on Count I because the Department's 2-Lab Requirement exceeds the scope of the Department's statutory authority since neither Section 704 of the Act, nor any other Act provision authorizes the Department to mandate its 2-Lab Requirement. Petitioners contend that the Act unambiguously provides growers/processors the right to contract with one or more Labs for the two stages of required testing - at harvest and at final processing. Petitioners further assert that, even if Section 704(a) of the Act is found to be ambiguous (which Petitioners declare it is not), and a statutory construction analysis is required to ascertain the General Assembly's intent, the result remains the same: the Department's 2-Lab Requirement exceeds the scope of the Department's authority under the Act and does not track the language of Section 704 of the Act. In addition, Petitioners claim that the Department's interpretation of the Act yields an absurd result because the Act expressly states that growers/processors shall contract with one or more Labs, and the insistence of two Labs makes the one language superfluous.

The Department rejoins that Petitioners improperly focus on the first sentence of Section 704(a) of the Act, which requires growers/processors to contract with "one or more independent laboratories." 35 P.S. § 10231.704(a). The Department retorts that Petitioners put great emphasis on the fact that independent laboratory was singular in the...