Right to Know Law; Disclosure of Financial and Security Information Contained within Medical Marijuana Organizations’ Applications

Mission Pennsylvania, LLC v. McKelvey , 212 A.3d 119 (Pa. Cmwlth. 2019), allocatur granted Jan. 28, 2020, appeal dockets 3-5 MAP 2020

In these consolidated Right to Know law (RTKL) appeals, the Supreme Court will consider whether redacted security and financial information contained in applications for medical marijuana grower/processor and dispensary permits, which prospective applicants submitted to the Pennsylvania Department of Health (DOH) pursuant to the Medical Marijuana Act, is subject to disclosure. Supreme Court also granted allocatur to address whether Commonwealth Court failed to provide a standard for dealing with iterative redactions and whether it failed to provide a standard for dealing with similarly situated applicants who achieved varying degrees of success on the same record.

These consolidated appeals arise from Wallace McKelvey, a reporter for The Patriot-News and PennLive.com (Requester)’s RTKL request to DOH seeking disclosure of applications for medical marijuana grower/processor and dispensary permits that were submitted to DOH by prospective applicants. DOH granted the request in part by providing redacted versions of some of the requested applications online and denied the request in part as to information that applicants redacted from their submissions.[1] For those applications posted online, DOH explained that it maintained applicants redactions and “added Department redactions if necessary.” Slip op at 4.

Requester appealed DOH’s partial denial to the Pennsylvania Office of Open Records (OOR) as to six applications from winning permittees – both grower/processor and dispensary applications from Cresco Yeltrah, LLC (Cresco), the grower/processor application from Terrapin Investment Fund 1, LLC (Terrapin), and dispensary applications from Mission Pennsylvania, LLC; SMPD Manufacturing, LLC and SMPB Retail, LLC (Harvest), and KW Ventures Holdings, LLC. On appeal, Requester argued that DOH lacked a legal basis for its redactions, emphasizing the disparity of redaction among applicants; that the Applications were public records as a matter of law under the Act; and that legislative intent and public interest supported disclosure of the redacted information.

Before OOR, DOH, Terrapin, and Cresco submitted evidence asserting the redacted information was protected, inter alia, under the RTKL’s trade secret and security exceptions, including an affidavit from Terrapin advising that five narrative sections of Terrapin’s application contained confidential financial information, and describing Terrapin’s efforts to maintain confidentiality of “any and all financial information.” Slip op. at 28.  

DOH and applicants further argued that while Section 302(b) of the Medical Marijuana Act (relating to public disclosure) provides that applications “are public records and shall be subject to the [RTKL],” 35 P.S. §10231.302(b), DOH’s Temporary Regulation protects information regarding the security and physical features of applicants’ facilities described in the applications in providing that: “the following information is considered confidential, is not subject to the [RTKL], and will not otherwise be released … unless pursuant to court order … information regarding the physical features of, and security measures installed in, a facility,” 28 Pa. Code §1141.22(b)(9). As to DOH’s redaction, DOH offered the affidavit of the Director of the Medical Marijuana Program attesting that DOH only redacted information marked as confidential proprietary by Permittees if not otherwise redacted; personal and financial information; and information related to building and infrastructure security, which included entire parts of the Applications.

On appeal, OOR rejected Terrapin’s evidence as to the confidentiality of its financial information as insufficient. OOR further found DOH’s evidence lacked sufficient detail about security issues and thus upheld redaction of only “plans, specifications, including architectural drawings” as clearly exempt under the temporary regulation. OOR concluded by directing DOH to disclose six applications for medical marijuana permits subject to redaction of certain personal information, facility security information, and trade secrets and confidential proprietary information. DOH and the five successful permittees challenged OOR’s final determination in Commonwealth Court.

Commonwealth Court rejected DOH’s premise that its voluntary reliance on applicants’ redactions was in line with Commonwealth Court’s prior decisions regarding third-party rights and that these decisions “do not compel an agency to defer to a third party’s exemptions without regard to their validity or consistent application.” Slip op. at 14.  Commonwealth Court further reasoned that “[b]ecause Permittees’ level of redaction varied widely, DOH’s denial of access among the Applications was inconsistent,” id., and concluded that “[Permittees’] redactions of their applications are unsubstantiated, except to the extent the evidence applies to all Permittees.” Slip op. at 16 n. 10. Commonwealth Court further concluded that Terrapin’s affidavit did not describe their content sufficiently so as to permit total redaction of the sections identified as containing financial information, reasoning that the affidavit “is flawed in that it assumes all financial information is confidential rather than alleging facts to establish its confidentiality.” Slip op. at 28. Commonwealth Court reversed OOR’s decision in part by allowing the Department to redact additional facility security information, reasoning:

Based on the surrounding unredacted content of the Applications, DOH’s description of its redactions suffices to trigger this exception. However, DOH provided no evidence as to the “reasonable likelihood of endangering safety” as Section 708(b)(3) of the RTKL requires. 65 P.S. §67.708(b)(3).

Regardless, as to reasonable likelihood, the record as a whole contains sufficient evidence regarding the dangers unique to the medical marijuana industry. We discern no reason for limiting proof of industry-wide risks to Terrapin alone.

The Wenzl Affidavit [submitted by Terrapin] establishes that disclosure of specified security information has a reasonable likelihood of endangering physical security of facilities engaged in the “legal cannabis industry.” Wenzl Affidavit, ¶8. Moreover, the application form itself recognizes the threat of diversion. See Sections 15 of the DS application and 16B of the GP application (diversion prevention). Permittees completed the same application form seeking information about security measures.

Based on the risks inherent in this cash-based industry, disclosure of security measures and locations of surveillance systems presents a credible threat to physical security of facilities that amounts to more than mere speculation. Carey [v. Dep’t of Corr., 61 A.3d 367 (Pa. Cmwlth. 2013)]. Because the record as a whole contains sufficient evidence satisfying the reasonable likelihood prong, we uphold DOH’s minimal redactions under Section 708(b)(3) of the RTKL from the applications of Harvest, Mission and KW Ventures.

Slip op. at 22-23. Commonwealth Court affirmed OOR’s decision in all other material respects.

The Supreme Court granted allocatur as to the following issues presented by Terrapin, Harvest, and DOH:

Terrapin (3 MAP 2020):

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.

Harvest (4 MAP 2020):

Should this Court grant allocatur in this case of first impression concerning a matter of substantial public importance because the opinion below treated similarly situated applicants on the same record with varying degrees of success and, alternatively, did not exercise its discretion to remand for further fact finding?

DOH (5 MAP 2020):

Should this Court grant allocatur in this case of first impression and of substantial public importance and reverse the Commonwealth Court’s opinion below because the opinion fails to protect building security in the valuable medical marijuana industry, does not create a workable standard for dealing with iterative redactions in the absence of statutory guidance, and fails to provide a standard for dealing with similarly situated applicants who achieved varying degrees of success on the same record?

[1] In the application instructions, DOH advised all applicants to submit redacted and unredacted copies of their applications with the understanding that redacted copies would be posted on its public website. Although the instructions state all submissions would be subject to disclosure under the RTKL, they also quote the Temporary Regulation which extended protection to “information regarding physical features of and security measures installed in a facility, information in the electronic tracking system” and other information subject to protection by the RTKL or as proprietary under another law. Slip op. at 3.

For more information, contact Kevin McKeon or Dennis Whitaker.