Will litigation delay Pennsylvania’s medical marijuana launch?

Op-Ed by Judith D. Cassel and Micah Bucy of Cannabis Law PA

Two lawsuits filed last week by unsuccessful Grower/Processor applicants, including one lawsuit filed by an applicant that failed to timely submit its application, and a separate decision from the Pennsylvania Office of Open Records threaten to halt the rollout of the Pennsylvania medical marijuana program and in the process jeopardize the hope of thousands of Pennsylvania patients.

Pennsylvania’s legislature patiently and methodically waited and reviewed the medical marijuana rollout in 25 other states before it overwhelmingly passed the Medical Marijuana Act (Act).

Pennsylvania watched and absorbed other states’ mistakes and successes in implementing their respective medical marijuana programs and tried to replicate the successes and avoid the pitfalls when it enacted the Act.  To accomplish this, Pennsylvania’s legislature meticulously analyzed the scientific research that supported the effectiveness of medical marijuana as a treatment option and listened to the thousands of Pennsylvanians, including young children with epilepsy and other debilitating afflictions, whose pain and suffering would be eased and perhaps eliminated through the use of medical marijuana.

In April 2016, Pennsylvania finally passed the Act, with bi-partisan support, which legalized the use of medical marijuana to treat 17 serious medical conditions as well as patients facing terminal illnesses. The legislature also included in the Act the ability of the state’s universities and medical schools to perform research into the medicinal benefits of medical marijuana. The rollout, implementation, and enforcement of the Act was delegated to the Pennsylvania Department of Health (PA DOH), who subsequently promulgated specific regulations concerning the application process, including a regulation addressing the procedure for appealing a denial of an application.

Applications for Grower/Processors and Dispensaries were required to be filed by March 20, 2017 and the results of the Grower/Processors’ permits were announced June 20, 2017. Since the PA DOH’s announcement of Phase I Grower/Processor permittees, the permit holders have been tirelessly working to meet the 6-month deadline imposed by PA DOH to become operational while unsuccessful applicants have sought reconsideration of their application pursuant to the PA DOH’s proscribed appeals procedure. Some other non-successful applicants pursued a different path from the appeal path and requested a “debriefing” from PA DOH in order to improve their applications for the next phase of permits.  PA DOH made a decision to delay debriefing for any applicant that filed an appeal.

Despite PA DOH’s appeals procedure, Pennsylvania’s medical marijuana program has come under serious attack from unsuccessful Grower/Processor applicants.  One such affront to the medical marijuana program came when Keystone ReLeaf LLC (ReLeaf), a Grower/Processor applicant who failed to win a permit in PA DOH’s first round, filed a lawsuit alleging that the PA DOH abused its discretion and acted arbitrarily, capriciously, and unreasonably “by subjecting all medical marijuana permit applicants to a secretive, inequitable and unconstitutional Permitting Process” and is seeking to stop PA DOH from issuing any additional permits and rescinding the permits already issued until a more transparent process is implemented and all applications re-scored.

In other words,  like a petulant child, ReLeaf’s lawsuit translates to “if I cannot have a permit, no one can.”

ReLeaf already tried and lost its bid to force PA DOH to disclose how it scored ReLeaf’s application and has filed a Notice of Appeal with PA DOH appealing its application rejection. However in the current suit, ReLeaf seeks far more than disclosure of its evaluative process. ReLeaf’s most recent lawsuit has not gone unanswered. As the author and sponsor of the Act, PA State Senator Daylin Leach published a heart-wrenching letter imploring ReLeaf not to seek the remedy of staying the entire medical marijuana program.  Senator Leach stated in part in his letter,

“If the entire program is delayed, people will be forced to needlessly endure excruciating pain, agony, and in some cases, death.  As your client is surely aware, among the patients medical marijuana will help are small children with life-threatening seizure disorders, cancer patients who are too sick to continue their life-saving chemotherapy treatments, and veterans who, after serving our nation in combat now suffer from Post-Traumatic Stress Disorder, are committing suicide at an alarming and historically unprecedented rate.”

Senator Leach goes on to point out the well-documented 25% reduction in opioid use in states that have legalized medical marijuana.

As Senator Leach also points out, ReLeaf should be free to file a complaint for financial damages, if it feels it has suffered loss due to being unjustly evaluated in its application.  But ReLeaf was not unjustly evaluated in its Grower/Processor application—in fact, it was not evaluated at all.  Within ReLeaf’s Notice of Appeal filed with PA DOH and the Office of Open Record’s (OOR) Decision on ReLeaf’s failed attempt to force PA DOH to disclose its evaluation process is the fact that ReLeaf submitted its complete application two days late.

This failure to submit an application on time was grounds for automatic rejection.  Pursuant to the PA DOH’s Medical Marijuana Organization Permit Application Instructions, “[a]n application that is received without U.S. Postal Form 3817, or with Form 3817 dated after March 20, 2017, will be rejected by the Department and returned to the applicant without further consideration, with all fees.”  PA DOH drew a bright red line which will likely be easy to defend.

A separate but related attack on PA DOH’s process also came this week via OOR when it ordered PA DOH to provide a timeline in which it will re-review all redactions made in each submitted application. Under the Right-to-Know Law (RTKL), any document in possession by a Commonwealth agency is considered public information available upon request unless it fits under one or more of a myriad of exemptions which include personal information, physical and cyber security concerns, and trade secret information.

On Monday September 11, 2017, OOR determined, in response to an appeal by the Reading Eagle, that PA DOH failed to make a “good faith effort” in determining which portions of the applications could legally be redacted under the RTKL.  Recognizing the challenge DOH faces under the tight RTKL deadlines because of the sheer volume of applications that are thousands of pages long, OOR gave PA DOH 7 days to submit a timeframe on how long it would take PA DOH to re-review all the applications’ redactions – an exercise which would include the review of over 300,000 pages.

In making its decision, OOR expressed concern that PA DOH, who “bears the burden of proving the applicability of any cited exemptions” to the presumption that all records in the Commonwealth’s possession are public, dodged its responsibility by allowing applicants to redact their own applications.

And while some applicants, in making their redactions, cited to the specific provisions of the RTKL that exempted the redacted information from being made public, the vast majority did not include such legal justification for its redaction.  Some applications had all but the company names redacted.  Of specific importance is the RTKL exemption that allows a “record that constitutes or reveals a trade secret or confidential proprietary information” to be redacted.

This is significant because Applicants put hundreds of hours and tens of thousands of dollars into developing their specific application information which doubles as their business plan and is replete with proprietary and confidential information. The significance of OOR’s decision is the possibility that following PA DOH’s review of all redactions, OOR will order most if not all of the applications to be un-redacted.  PA DOH has already indicated its unwillingness to fight challenges to redacted trade secret information instead placing the onus on applicants to defend their own trade secret redaction.

So, if PA DOH is left to fight this fight on its own, the result will be that proprietary and highly competitive business plan information will be disclosed not only to the public but to the competitors of the applicants.  This dynamic forces applicants to intervene in the proceedings in order to defend their trade secrets from being disclosed to their competitors.

There are several additional RTKL Appeals still pending that seek unredacted applications. The procedural effect of OOR’s September 11th decision is unclear, but the practical effect is that all RTKL appeals are left in limbo if PA DOH is ultimately required to re-review all redactions made in every application. But because there are so many RTKL Appeals pending and thus there are so many applicants who are in jeopardy of their applications being disclosed, it is easier to simply fight rather than negotiate through a mediation process with the rationale being, as one successful applicant put it, mediation is the equivalent of a “death by a thousand cuts.”

Despite these recent legal challenges to the PA DOH’s implementation of the Act, the Pennsylvania Legislature’s prudent analysis of all that came before it and galvanized by true advocates of the patients who need it as an alternative to harsh or ineffective drugs, Pennsylvania’s medical marijuana program is likely to withstand the legal challenges currently foisted upon it – and march on to its successful implementation slated for January 2018.

 

The Authors represent growers, processor, dispensaries, laboratories, physician groups, and CME organizations in Pennsylvania, Maryland, West Virginia, Ohio, and New Jersey.

About the Authors:

Judith D. Cassel of Cannabis Law PA provides legal guidance to cultivators, dispensaries, other related businesses, universities, health care organizations, and practitioners navigating the regulatory landscape of medical marijuana.

Utilizing her past experience as a corporate executive and small business owner, Ms. Cassel works extensively in commercial legal matters involving application drafting, entity formation, financing, contract negotiations, sales and leasing transactions, and litigation.  In her regulatory practice, Ms. Cassel has represented clients in applications, investigations, and litigation before federal and state courts and administrative agencies.

Micah Bucy of Cannabis Law PA provides legal guidance to cultivators, dispensaries, other related businesses, universities, health care organizations, and practitioners navigating the regulatory landscape of medical marijuana. Mr. Bucy works extensively in commercial legal matters involving application drafting, entity formation, financing, contract negotiations, sales and leasing transactions, and litigation.  In his regulatory practice, Mr. Bucy has represented clients in applications, investigations, and litigation before state courts and administrative agencies.

 

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