Wallace Mckelvey &Pennlive & Patriot-News v. Pennsylvania Department of Health, and Mission Pennsylvania, LLC

TODD JUSTICE.

ARGUED: September 15, 2020

Appeal from the Order of the Commonwealth Court at No. 186 CD 2018 dated June 4, 2019 reversing in part and affirming in part the decision of the Office of Open Records at No. AP 2017-1443 dated January 11, 2018.

BAER, C.J., SAYLOR, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

OPINION

TODD JUSTICE.

Id.

There are, however, statutory exemptions to the presumption of disclosure. Id. § 67.708. While the RTKL provides for numerous exemptions, three Section 708 exemptions are the focus of the matter sub judice: the facility security exemption, the trade secrets exemption, and the confidential proprietary information exemption.

(1) derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and

(2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Id. at § 67.102. Additionally, "Confidential proprietary information" is defined as:

Commercial or financial information received by an agency:

(1) which is privileged or confidential; and

(2) the disclosure of which would cause substantial harm to the competitive position of the person that submitted the information.

Id.

With respect to discerning and establishing exemptions, the RTKL provides that "[t]he burden of proving that a record of a Commonwealth agency or local agency is exempt from public access shall be on the Commonwealth agency or local agency receiving a request by a preponderance of the evidence." 65 P.S. § 67.708(a)(1). The RTKL does not allow an agency to delegate its disclosure duty or burden of proof to third parties. Furthermore, it is presumed that Commonwealth agencies will act in good faith in discharging their statutory duties under the RTKL. See Office of Governor v. Donahue, 98 A.3d 1223, 1239 (Pa. 2014).

Mindful of the presumption of disclosure of agency records, but that such records may include sensitive information submitted by private parties such as trade secrets and confidential proprietary information, Section 707(b) requires the governmental agency to notify third parties of a request for trade secrets or confidential proprietary information, and gives such parties the opportunity to provide input to, and be notified of, the agency's determination. 65 P.S. § 67.707(b). Moreover, decisional law allows third parties to raise and defend exemptions to protect information that they believe is exempt from disclosure. Commonwealth, Department of Education v. Bagwell, 131 A.3d 638 (Pa. Cmwlth. 2016); Office of the Governor v. Bari, 20 A.3d 634 (Pa. Cmwlth. 2011). Further, "agencies are not permitted to waive a third party's interest in protecting the records." Bagwell, 131 A.3d at 650.

With these foundations in hand, we turn to the issues upon which we granted allocatur.

B. Appeal of the Department - RTKL Exemption Standards

The first issue that we will consider, raised by the Department, is whether the Commonwealth Court failed to create a workable standard for dealing with repetitive redactions in the absence of statutory guidance. Initially, the Department stresses the difficulties that government agencies face when confronted with third-party trade secret and confidential proprietary information redactions under the RTKL. The Department points to a lack of guidelines to address these redactions, noting that, without regulations, resolution of the redaction process has been determined through fact-specific litigation. The Department offers that it has consistently taken the position that it is unable to unilaterally assess and determine the propriety of redaction of trade secret and confidential and proprietary information. According to the Department, only the owner of the trade secret can identify and assert the secrecy or confidentiality of records. Related thereto, the Department also argues that the Commonwealth Court's opinion places the Department "in the impossible position of having to affirmatively declare whether certain records constitute a trade secret or confidential proprietary information, despite the fact that [it is] not permitted to waive a third party's interest in protecting its records." Department of Health Brief at 13 (citation omitted).

(1) Any account, voucher or contract dealing with:

(i) the receipt or disbursement of funds by an agency; or

(ii) an agency's acquisition, use or disposal of services, supplies, materials, equipment or property.

(2) The salary or other payments or expenses paid to an officer or employee of an agency, including the name and title of the officer or employee.

(3) A financial audit report. The term does not include work papers underlying an audit.

65 P.S. §67.102 (emphasis added). In Eiseman, we explained the term "financial record" was not limited to an agency's records of its own transactions, but also included records "dealing with" the agency's monetary disbursements via its contractors performing delegated governmental functions. See Eiseman, 125 A.3d at 29 ("'financial records' encompass records 'dealing with' disbursements of public money and services acquisitions by agencies"); id. at 32 (records submitted to government agency for approval "which embody a delegation (albeit a downstream delegation) of a governmental function" are records "'dealing with' the agency's monetary disbursements and services acquisitions"). Here, Terrapin is a third-party permit applicant, not a contractor or subcontractor performing any delegated government function. In addition, as the majority relates, medical marijuana permit applicants are required by the terms of the Medical Marijuana Act to include in their applications, inter alia, the identity of and other information regarding their financial backers, a description of their business activities, activities in other jurisdictions, ability to obtain sufficient land and facilities for operation, and ability to maintain effective security. See Majority Opinion at 20-21 n.14 (setting forth medical marijuana permit application requirements pursuant to 35 P.S. §10231.602). At least facially, none of these requirements appear to deal with disbursements of public money, and Terrapin asserts no such agency transactions are contained in its financial information. See Terrapin's Brief at 17-20, 27-28 n.23-24, 32.

Accordingly, in my view, Terrapin's claim the financial information contained in its permit application is not a "financial record" as defined by the RTKL has some merit. Yet, as the majority concludes, and I agree, absent integral fact-finding by the lower tribunals, we are constrained to remand the issue of whether the information could properly be redacted under RTKL subsection 708(b)(3) or (11). However, for the foregoing reasons, I view a determination of whether the financial information constitutes a "financial record" as an integral preliminary step to implementing the majority's directive "to review the information at issue - in camera if prudent - and to consider fully the reasons proffered by Terrapin to support its claimed exemptions from disclosure." Majority Opinion at 46.

(a) Application.--An application for a grower/processor or dispensary permit to grow, process or dispense medical marijuana shall be in a form and manner prescribed by the department and shall include:

(1) Verification of all principals, operators, financial backers or employees of a medical marijuana grower/processor or dispensary.

(2) A description of responsibilities as a principal, operator, financial backer or employee.

(3) Any release necessary to obtain information from governmental agencies, employers and other organizations.

(4) A criminal history record check. Medical marijuana organizations applying for a permit shall submit fingerprints of principals, financial backers, operators and employees to the Pennsylvania State Police for the purpose of obtaining criminal history record checks and the Pennsylvania State Police or its authorized agent shall submit the fingerprints to the Federal Bureau of Investigation for the purpose of verifying the identity of the principals, financial backers, operators and employees and obtaining a current record of any criminal arrests and convictions. Any criminal history record information relating to principals, financial backers, operators and employees obtained under this section by the department may be interpreted and used by the department only to determine the principal's, financial backer's, operator's and employee's character, fitness and suitability to serve as a principal, financial backer, operator and employee under this act. This paragraph shall not apply to an owner of securities in a publicly traded corporation if the department determines that the owner of the securities is not substantially involved in the activities of the medical marijuana organization.

(5) Details relating to a similar license, permit or other authorization obtained in another jurisdiction, including any suspensions, revocations or discipline in that jurisdiction.

(6) A description of the business activities in which it intends to engage as a medical marijuana organization.

(7) A statement that the applicant:

(i) Is of good moral character. For purposes of this subparagraph, an applicant shall include each financial backer, operator, employee and principal of the medical marijuana organization.

(ii) Possesses the ability to obtain in an expeditious manner the right to use sufficient land, buildings and other premises and equipment to properly carry on the activity described in the application and any proposed location for a facility.

(iii) Is able to maintain effective security and control to prevent diversion, abuse and other illegal conduct relating to medical marijuana.

(iv) Is able to comply with all applicable Commonwealth laws and regulations relating to the activities in which it intends to engage under this act.

(8) The name, residential address and title of each financial backer and principal of the applicant. Each individual, or lawful representative of a legal entity, shall submit an affidavit with the application setting forth:

(i) Any position of management or ownership during the preceding 10 years of a controlling interest in any other business, located inside or outside this Commonwealth, manufacturing or distributing controlled substances.

(ii) Whether the person or business has been convicted of a criminal offense graded higher than a summary offense or has had a permit relating to medical marijuana suspended or revoked in any administrative or judicial proceeding.

(9) Any other information the department may require.

35 P.S. § 10231.602. First, with respect to Terrapin's petition for allowance of appeal, our Court limited our grant of allocatur to a single question: "In considering whether financial information submitted in a medical marijuana application was 'confidential and proprietary,' whether the Commonwealth Court erred in disregarding substantial evidence of 'competitive harm' and of the significant security issues associated with disclosure of financial information in a unique cash-based business." Mission Pennsylvania, LLC v. McKelvey, 224 A.3d 1089, 1089-1090 (Pa. 2020) (order). Thus, the sole question on which we granted allocatur was largely one of the sufficiency of the evidence, and not the distinct issue of whether the financial information in question constituted "financial records" under the RTKL. Appellees did not raise the question of whether the financial information, included as part of Terrapin's application, constituted "financial records," and they have not claimed that Terrapin's financial information is comprised of "financial records," which would, in turn, limit the scope of Terrapin's claimed exemptions. Terrapin, for its part, as noted above in the context of the broader issue of the disclosure of public records, contends its financial information does not constitute "financial records" under the RTKL, and Appellees do not dispute Terrapin's asserted status of its financial information. Related thereto, there is no suggestion in the lower tribunal's determinations that Terrapin's financial information constitutes "financial records" which limit Terrapin's claimed exemptions. Thus, based upon our limited grant of allocatur, the argument of the parties, and the lower tribunals' decisions, the only relevant issue before our Court is whether Terrapin offered substantial evidence in support of its claimed exemptions. We have answered that singular question today and have remanded for further proceedings. Additionally, and contrary to the concurrence's assertion, we in no way are suggesting that Terrapin's financial information constitutes a "financial record." Concurring Opinion at 4-5. Rather, we are merely rejecting Terrapin's broader suggestion that, because its financial information is not a "financial record," such information is globally not subject to disclosure under the RTKL. As noted above, this information is part of Terrapin's application, which, by the plain terms of the Medical Marijuana Act, constitutes a public record that is subject to the RTKL. 35 P.S. § 10231.302(b)(1). Thus, while Justice Dougherty's analysis of the exemptions available regarding "financial records" is well taken, our statutory analysis is consistent with the issue on which we granted allocatur, the positions of the parties, and the treatment of this litigation by the lower tribunals.