21-002431RU Leafly Holdings, Inc. vs. Florida Department Of Health Status: Appeal.

Summary: Petitioner proved that the agency's statement in letter to all MMTCs, that contracting with a third-party for online ordering of medical marijuana violated the statute, is an unadopted rule.

S TATE OF F LORIDA

D IVISION OF A DMINISTRATIVE H EARINGS

L EAFLY H OLDINGS , I NC . ,

Petitioner ,

vs. Case No. 21 - 2431RU

F LORIDA D EPARTMENT OF H EALTH ,

Respondent .

/

F INAL O RDER

A duly - noticed final hearing was conducted in this case on September 14,

2021, via Zoom teleconference, before Administrative Law Judge Suzanne

Van Wyk of the Division of Administrative Hearings.

A PPEARANCES

For Petitioner: Seann M. Frazier, Esquire

Kris ten Bond Dobson, Esquire

Parker, Hudson, Ranier & Dobbs, LLP

215 South Monroe Street, Suite 750

Tallahassee, Florida 32301

For Respondent: Louise Wilhite - St . Laurent, General Counsel

Katelyn Rose Boswell, Esquire

Departm ent of Health

4052 Bald Cypress Way, Bin A - 02

Tallahassee, Florida 32399

S TATEMENT OF T HE I SSUE S

Whether Respondent, Department of Health (ÑDepartmentÒ), has made an

agency statement which constitutes an agency rule, as defined in section

1 20.52(16), Florida Statutes, 1 but has not been adopted as a rule in violation

1 Except as otherwise p rovided, all citations to the Florida Statutes are to the 2021 version.

of section 120.54(1)(a); and whether Petitioner, Leafly Holdings, Inc.

(ÑLeaflyÒ), has standing to challenge that statement, pursuant to section

120.56(4).

P RELIMINARY S TATEMENT

On August 6, 2021, Petitioner filed a Petition Challenging Agency

Statements as Unpromulgated Rules (ÑPetitionÒ). Petitioner seeks the

determination that a statement of the Department constitutes an

unpromulgated and invalid rule.

On August 12, 2021, Pet itioner filed a Motion to Amend its Petition,

which was granted , and the Amended Petition was deemed filed as of

August 13, 2021.

The Department filed a Motion to Dismiss, or in the Alternative, Motion

for Final Summary Order and a Motion for Protective O rder on August 16,

2021 (ÑMotionsÒ). The undersigned conducted a hearing on the Motions on

August 25, 2021, and entered an O rder denying the Motions on August 26,

2021.

The Final Hearing in this case was originally scheduled for September 2,

2021, but wa s subsequently rescheduled to September 9, 2021, upon a Joint

Motion of the parties to allow for completion of discovery, which was granted

on August 30, 2021.

The Final Hearing commenced as rescheduled on September 9, 2021, via

Zoom teleconference. Join t Exhibits 1 through 35 were admitted into

evidence. Petitioner presented the testimony of Ross Moulton and Chris

Ferguson , and PetitionerÔs Exhibits 1 through 5 were admitted into evidence.

Respondent also presented the testimony of Chris Ferguson, and

Re spondentÔs Exhibits 1 through 6 were admitted into evidence.

F INDINGS OF F ACT

The Parties

1 . Leafly is a foreign corporation authorized to do business in Florida.

Leafly provides websites, including Leafly.com and success.leafly.com, and

related mobile o r software applications that contain information generally

related to cannabis, including user reviews and ratings, dispensary and

retailer directories, medical provider directories, and news and editorial

coverage.

2 . The Department is the state agency ch arged with regulating medical

marijuana in the State of Florida. The Department administers the

provisions of section 381.986, Florida Statutes, and has a constitutional duty

to ensure the availability and safe use of medical marijuana pursuant to

Article X, Section 29 of the Florida Constitution.

Medical Marijuana Regulation in Florida

3 . In 2014, the Florida Legislature legalized the cultivation, processing,

and dispensing of low - THC cannabis for certain qualified patients. See

§ 381.986, Fla. Stat. (201 4); and ch. 2014 - 157, Laws of Fla. Section 381.986

was titled ÑCompassionate Use of Low - THC Cannabis.Ò

4 . In 2016, the citizens of Florida approved an amendment to the Florida

Constitution to legalize the medical use of marijuana for patients with

debili tating medical conditions. Art. X, § 29, Fla. Const.

5 . Following the approval of the constitutional amendment, the 2017

Florida Legislature substantially amended section 381.986, and retitled the

section as ÑMedical Use of Marijuana.Ò £ 381.986(8)(a), Fla . Stat. (2017).

6 . The scope of s ection 381.986 is broad and governs the entire legislative

scheme for the legal use of medical marijuana in Florida. Among other

things, the statute codifies the medical conditions that can qualify a patient

to use medical marijuana, sets forth the requirements for qualified

physicians, establishes the medical marijuana use registry, provides for the

imposition of penalties for violations of the law, empowers the Department to

regulate unlicensed activity, and sets forth th e requirements for medical

marijuana treatment centers (ÑMMTCsÒ). See § 381.986(2), (3), (5), (8),

and (12), Fla. Stat.

7 . A qualified physician must, following patient examination , certify the

patientÔs qualification to receive medical marijuana. That ce rtification must

include the patientÔs qualifying condition, the daily dosage of medical

marijuana approved, the amount and forms of marijuana authorized for the

patient, and any type of marijuana delivery devices needed by the patient for

the medical use of marijuana. See § 381.986(4)(a), Fla. Stat. That information

is entered into the medical marijuana use registry. Id . Prior to dispensing

medical marijuana to a qualified patient, an MMTC must verify that the

qualified patient has an active and valid mari juana use registry identification

card, that the amount and type of marijuana dispensed matches the

physician certification in the medical marijuana use registry for that patient,

and that the physician certification has not already been filled. See

§ 381. 986(8)(e)16.d., Fla. Stat.

8 . An MMTC is an entity licensed by the Department and authorized to

cultivate, process, transport, and dispense marijuana for medical use. Art. X,

§ 2 9, Fla. Const. This structure requiring the MMTC to control the process

from s eed - to - sale is known as Ñvertical integration.Ò Under the statute,

MMTCs are prohibited from Ñcontract[ing] for services directly related to the

cultivation, processing, and dispensing of marijuana or marijuana delivery

devices[.]Ò £ 381.986(8)(e), Fla. St at.

9 . Applicants for MMTC certification must have applied on a form

supplied by the Department, which is adopted by Florida Administrative

Code Rule 64 - 4.002. See § 381.986(8)(b), Fla. Stat. The statute requires the

applicant to document the following o n the prescribed form :

1. That, for the 5 consecutive years before

submitting the application, the applicant has been

registered to do business in the state.

2. Possession of a valid certificate of registration

issued by the Department of Agriculture and

Consumer Services pursuant to s. 581.131.

3. The technical and technological ability to

cultivate and produce marijuana, including, but not

limited to, low - THC cannabis.

4. The ability to secure the premises, resources, and

personnel necessary to operate as a medical

marijuana treatment center.

5. The ability to maintain accountability of all raw

materials, finished products, and any byproducts to

prevent diversion or unlawful access to or

possession of these substances.

6. An infrastructure reasonably located to dispense

marijuana to registered qualified patients

statewide or regionally as determined by the

department.

7. The financial ability to maintain operations for

the duration of the 2 - year approval cycle, including

the provision of certified fin ancial statements to the

department.

* * *

8. That all owners, officers, board members, and

managers have passed a background screening

pursuant to subsection (9).

9. The employment of a medical director to

supervise the activities of the medical mariju ana

treatment center.

10. A diversity plan that promotes and ensures the

involvement of minority persons and minority

business enterprises, as defined in s. 288.703, or

veteran business enterprises, as defined in

s. 295.187, in ownership, management, and

employment. An applicant for licensure renewal

must show the effectiveness of the diversity plan by

including the following with his or her application

for renewal:

a. Representation of minority persons and veterans

in the medical marijuana treatment cent erÔs

workforce;

b. Efforts to recruit minority persons and veterans

for employment; and

c. A record of contracts for services with minority

business enterprises and veteran business

enterprises.

§ 381.986(8)(b), Fla. Stat. The licensing process is compr ehensive and the

regulation is tightly controlled to ensure the vertical integration of the

MMTC function, from seed - to - sale. As of the date of the final hearing, the

Department had issued 22 MMTC licenses.

10 . An MMTC must, at all times, maintain complian ce with the criteria

demonstrated and representations made in its initial application. See

§ 381.986(8)(d), Fla. Stat. Any deviation from the representations made in its

application must be reviewed by the Department through a variance request.

Id . The Dep artment considers each variance request based on the specific

facts and circumstances of the request, and may not grant a variance unless

the MMTC demonstrates that the proposed alternative to representations

made in its initial application fulfills the sa me or similar purpose and the

Department determines the variance will not be a lower standard tha n the

specific representation made in the application. Id .

11 . An MMTC may not engage in internet advertising and marketing

except as approved by the Departme nt. See § 381.986(8)(h)2., Fla. Stat. All

advertisements must be approved by the Department. Id . Approval of an

advertisement includes approval of the specific products to be advertised

(e.g., edibles, cartridges, or flower). If an MMTC wishes to change th e form of

its advertisements, the advertising platforms, or advertise additional

products, the MMTC must apply for a variance from the Office of Medical

Marijuana Use (ÑOMMUÒ).

LeaflyÔs Online Services

12 . Leafly provides advertising services to marijuana retailers,

manufacturers, producers, and distributors to advertise their products on

LeaflyÔs website. Through this service, MMTCs can post a menu on LeaflyÔs

website advertising their products to patients, which includes product name,

price, and THC conte nt, as well as the location and hours of operation of the

MMTC dispensing facility where the product is available.

13 . Advertisements on LeaflyÔs website include specific product and

dispensary location information to connect consumers with marijuana

disp ensaries and products near them. Rather than visiting each individual

dispensaryÔs website, a patient located in Tallahassee, Florida, for example,

can visit LeaflyÔs website and search for specific marijuana products and

product types available at several dispensing facilities in and around

Tallahassee.

14 . LeaflyÔs Chief Operating Officer, Ross Moulton, testified that this form

of advertising is intended to directly connect the consumer to the

dispensaries where a desired product is available, so that a sale may occur,

and marijuana may be dispensed.

15 . Through LeaflyÔs online ordering service, patients can view a

marijuana product or products available at a particular dispensing facility

and place reservations for those products. Once the order is requ ested, Leafly

transmits the order to the dispensing facility, which is responsible for

accepting and fulfilling the order. If the dispensary elects to fulfill the order,

and when the order is ready, the dispensary notifies Leafly, which, in turn,

notifies the patient. When the patient arrives at the selected dispensary, the

dispensary collects payment from , and dispenses the marijuana product to ,

the patient. This ordering system does not relieve the MMTC of its duty to

verify, through the medical marijuana use registry, whether the types and

dosage of medical marijuana ordered matches those approved for the patient

and whether the physician certification has already been filled.

16 . Leafly does not transfer the marijuana product to the patient. Leafly

does not accept any payment for the purchase of marijuana, and never

accepts payment for marijuana from any patient. However, Mr. Moulton

testified directly that Ñ[t]he purpose [of the online ordering platform] is for

products to be dispensed by the retailer to that customer.Ò 2

17 . MMTCs pay Leafly for these services on a subscription basis. LeaflyÔs

online ordering service is included in the basic advertising subscription

service. Placement of an order on LeaflyÔs website requires the patient or

caregiver to pr ovide basic information, including name, contact information,

and the patientÔs medical marijuana card number. All information that a

patient provides to Leafly to place an order is encrypted. Leafly never sells

patient information for commercial purposes. MMTCs do not provide patient

information to Leafly.

Alleged Unpromulgated Rule

18 . The Department has approved MMTCsÔ requests to advertise various

medical marijuana products on LeaflyÔs website through the variance process.

Curaleaf Florida, LLC (ÑCurale afÒ), a licensed MMTC regulated by the

Department, has approval to advertise certain of its products on LeaflyÔs

website.

19 . On December 15, 2020, Curaleaf requested approval from the

Department to allow qualified patients and caregivers to place orders f or

medical marijuana through LeaflyÔs website. On January 11, 2021, the

Department issued a written denial of CuraleafÔs variance request, noting as

follows:

2 T.63:20 - 21.

Section 381.986(8)(e), Florida Statutes, provides

that a [MMTC] may not contract for services

dir ectly related to the cultivation, processing, and

dispensing of marijuana or marijuana delivery

devices. Contracting through Leafly.com to allow

qualified patients and caregivers to place orders for

the dispensation of marijuana and low - THC

cannabis is a v iolation of section 381.986(8)(e),

Florida Statutes.

20 . Following the denial of its request to contract with Leafly for online

ordering, Curaleaf notified the Department that other licensed MMTCs were

using LeaflyÔs online ordering services. Curaleaf com plained that the

Department was engaging in disparate treatment of Curaleaf by allowing

other MMTCs to use third - party online ordering platforms.

21 . In response to this complaint, Chris Ferguson, OMMU Director,

requested his legal staff to draft a letter using the language from CuraleafÔs

variance denial letter to be sent to all MMTCs ÑASAP.Ò

22 . On February 1, 2021, the Department issued the following letter to all

MMTCs:

RE: Online Ordering Hosted by Third - Party

Websites

To All Medical Marijuana Treatm ent Centers,

The [Department] [OMMU] has received inquiries

and complaints regarding qualified patients and

caregivers placing orders for the dispensation of

marijuana and low - THC cannabis through

Leafly.com.

Section 381.986(8)(e), Florida Statutes, prov ides

that a [MMTC] may not contract for services

directly related to the cultivation, processing, and

dispensing of marijuana or marijuana delivery

devices. Contracting with Leafly.com, or any other

third - party website, for services directly related to

dis pensing is a violation of this provision.

An MMTC licensed by the [Department] is the only

entity permitted to dispense marijuana or

marijuana delivery devices or perform services

directly related thereto. An MMTC that contract s

for services directly rela ted to dispensation may be

subject to penalties in accordance with Rule 64 -

4.210(9)(eee), Florida Administrative Code.

23 . This letter contains the agency statement that Leafly alleges is an

unpromulgated rule: contracting with a third - party for online or dering of

medical marijuana products violates section 381.986(8)(e) because it

constitutes a service directly - related to dispensation of medical marijuana.

Fallout from February 1, 2021 letter

24 . In July 2021, the OMMU concluded an audit of MMTCs to dete rmine

whether any of them were using a third - party platform allowing qualified

patients to place orders for medical marijuana. Of the 22 licensed MMTCs,

the OMMU found eight to be utilizing third - party platforms, only one of

which was utilizing LeaflyÔs pl atform. The Department sent each of those

MMTCs a Notice of Violation with formal hearing rights.

25 . The MMTC that was in violation with respect to LeaflyÔs services did

not dispute the violation, paid the $5,000 fine required by the OMMU, and

submitted a Corrective Action Plan ( Ñ CAP Ò ) that was approved by the

OMMU. In its CAP, the MMTC noted that they had deactivated all online

ordering capabilities using LeaflyÔs platform and removed Leafly from its own

website. Further, the MMTC represented that it doe s not contract with

Leafly for advertising its retail locations and products. Two MMTCs disputed

the Notice of Violation and requested a formal hearing. As of the date of the

final hearing, those two cases remained pending.

26 . Mr. Moulton testified that, prior to the letter, Leafly contracted with

277 MMTC retail locations in Florida. He alleged that, following issuance of

the February 1, 2021 letter, Ñsome of those contracts canceled their

subscriptions with Leafly. All have stopped doing online ordering with

Leafly.Ò 3 Mr. Moulton quantified the loss to Leafly from those canceled

contracts as at least $300,000.

27 . On cross - examination, Mr. Moulton could not give the number of

contracts which had been canceled, could not name a single MMTC which

had cancel ed its contract with Leafly, and admitted that the $300,000 loss

figure was Ñprovided È from counsel and from our sales team.Ò 4 Apparently ,

Mr. Moulton had no personal knowledge of the contracts canceled or the

amount of loss to the company.

28 . Some licen sed MMTCs continue to pay for and advertise approved

medical marijuana products on Leafly.com at the same minimum cost of the

base subscription package. Leafly also continues to provide locations and

addresses of all MMTCs, irrespective of whether the MMTC pays Leafly for a

separate medical marijuana product advertising service or whether the

OMMU has approved product advertising on Leafly.com.

C ONCLUSIONS OF L AW

29 . The Division of Administrative Hearings has jurisdiction over this rule

challenge and the parties hereto. § 120.56(1), Fla. Stat.

30 . The burden of proof is on Petitioner to establish by a preponderance of

the evidence that : (1) it has standing to challenge the alleged unpromulgated

rule; and (2) that the DepartmentÔs statement is an unadopted rule.

31 . If Petitioner proves that the statement is an unadopted rule, the

Department must demonstrate that rulemaking is not feasible or not

practicable. See § 120.56(4)(c), Fla. Stat.

3 T.47:5 - 9.

4 T.54:11 - 12.

Standing

32 . ÑAny person substantially affected by an agency stateme nt may seek

an administrative determination that the statement violates section

120.54(1)(a).Ò £ 120.56(4), Fla. Stat.

33 . The substantially affected language is not codified in chapter 120, but

is instead a judicially - created test for standing that examin es what

constitutes a legally - sufficient interest.

34 . To establish standing to challenge an administrative rule or policy

under the Ñsubstantially affectedÒ test, a party must show: (1) that the rule or

policy will result in a real and immediate injury i n fact, and (2) that the

alleged interest is within the zone of interest to be protected or regulated. See

Jacoby v. Fla. Bd. of Med. , 917 So. 2d 358, 360 (Fla. 1st DCA 2005). 5 The first

prong of the test addresses the degree of injury , while the second pr ong

addresses the nature of the injury . See Agrico v. DepÔt of Envtl. Reg ., 406 So.

2d 478, 482 (Fla. 1981).

35 . Although the two - pronged test articulated in Jacoby and Agrico is the

same, both the First and Fourth District Courts of Appeal have applied th is

standard differently depending on whether standing is being analyzed in a

rule challenge proceeding or in a licensing/permitting proceeding. In Florida

Medical Association., Inc. v. Department of Professional Regulation, 426 So.

2d 1112, 1114 - 15 (Fla. 1 st DCA 1983), the First District distinguished the

case before it Ð a rule challenge proceeding where the petitioners challenged

the validity of the proposed rule Ð from Agrico , a permitting proceeding that

did not involve a claim of illegality. The court conc luded that in the rule

challenge case, the hearing officer Ñerred in the interpretation and

application of the Ózone of interestÔ requirementÒ because there was a

5 The injury - in - fact prong and zone of interest prong were earlier articulated in Agrico

Chemical Co. v. Department of Environmental Regulation , 406 So. 2d 478 ( Fla. 1981) ,

applying in the context of challenges to agency action for proceedings that involve Ñdecisions

that determine substantial interestsÒ under sections 120.569 and 120.57.

contention of unlawful exercise of authority, unlike in Agrico , which only

involved oppositio n to a granting of a permit.

36 . The First District has expressly observed that Ñstanding in a licensing

proceeding may well have to be predicated on a somewhat different basis

than standing in a rule challenge proceedingÒ because Ñthere can be ... a

diff erence between the concept of Ósubstantially affectedÔ under section

120.56(1) and Ósubstantial interestsÔ under section 120.57(1).Ò

F la. SocÔy of Ophthalmology v. State of Fla. Bd. of Optometry, 532 So.

2d 1279, 1288 (Fla. 1st DCA 1988). The court furthe r explained in

Department of Professional Regulation, Board of Dentistry v. Florida Dental

Hygienist Association, Inc., 612 So. 2d 646, 651 (Fla. 1st DCA 1993), that this

distinction between the type of proceeding is significant because:

Prior decisions in licensing or permitting cases

have made it clear that a claim of standing by third

parties based solely upon economic interests is not

sufficient unless the permitting or licensing statute

itself contemplates consideration of such interests,

or unless sta nding is conferred by a rule, statute, or

based on constitutional grounds.

37. In contrast, for a challenge to a proposed or adopted agency rule, an

interest economic in nature can satisfy the injury in fact element of the

standing test. See Fla. Med. As sÔn., Inc., 426 So. 2d at 1115. However, to

satisfy the real and immediate injury in fact element, the injury must not be

based on pure speculation or conjecture. See, e.g., ProfÔl Firefighters of Fla.,

Inc. v. DepÔt of HRS , 396 So. 2d 1194, 1196 (Fla. 1st DCA 1981); Off. of Ins.

Reg. and Fin. Servs. CommÔn v. Secure Enter s. , LLC , 124 So. 3d 332 (Fla. 1st

DCA 2013). In Secure Enterprises , the First District distinguished between

the cases that held economic injury satisfied injury in fact from the present

c ase, where it concluded that the economic harm alleged did not meet injury

in fact:

It is reasonable to conclude as we did in those two

cases that allowing either a generic drug to enter

the pharmaceutical market or less - educated dental

hygienists to enter the field of hygienists in Florida

would result in economic harm to a brand - name

drug manufacturer or dental hygienists currently

working in the state. Unlike the situations in

Abbott Laboratories and Department of Professional

Regulation, Board of Dentis try , a manufacturer in

this case is claiming economic harm based upon the

absence of an insurance credit that Florida

homeowners have never been provided. Had this

been a situation where [Office of Insurance

Regulation] eliminated an existing insurance cre dit

for garage doors, AppelleeÔs injury in fact argument

would be much stronger.

Id. at 338 - 39.

38 . The courtÔs conclusion followed from its reasoning that the injury was

based on conjecture because the administrative law judge inferred that the

absence of such a discount would likely cause economic injury, the

manufacturer had no protected economic right impaired by the rules at issue,

and neither the statute nor the rules at issue regulate, either directly or

indirectly, the manufacturerÔs industry. Id . The First District recently

reiterated the rule that speculation and conjecture of an economic harm are

insufficient to satisfy the real or immediate injury - in - fact prong . In Calder

Race Course, Inc. v. SCR, Inc. , 2021 WL 3672206 (Fla. 1st DCA Aug. 19,

2 021), SCR challenged the Division of Pari - Mutuel WageringÔs F inal O rder

approving CalderÔs slot machine gaming license as an unadopted rule. On

appeal, the court found that ÑSCFs speculation that the removal of the

Grandstand and reconfiguration of the slo t machine gaming area may cause

it to have some indeterminate degree of financial injury is not enough to

support a finding of standing under the first prong of the two - part test.Ò

Calder Race Course at *2.

39 . The instant case is distinguishable from both Secure Enterprises and

Calder Race Course . In the instant case, the economic injury that Petitioner

is alleging is real and immediate as opposed to purely speculative or

conjecture. Leafly had 277 contracts with MMTC retail locations in Florida

prior to t he OMMUÔs statement in its February 1, 2021 letter. After the letter

was issued, some of LeaflyÔs clients canceled their contracts, and Leafly no

longer provides online ordering services in Florida. LeaflyÔs injury is real and

immediate, even though the lo ss from canceled contracts was not quantified

at the final hearing. The Ñproper inquiry is on the likelihood of injury, not

that it be certain.Ò SCF, Inc. v. Fla. Thoroughbred BreederÔs AssÔn, Inc ., 227

So. 3d 770, 776 (Fla. 1st DCA 2017). Unlike Secure En terprises , where the

economic injury was based on the administrative law judgeÔs inference of

economic injury based on words such as Ñprobably,Ò Ñlikelihood,Ò Ñlikely

cause,Ò Petitioner here has sustained cancelation of real contracts. While

Mr. MoultonÔs testimony was insufficient to establish the amount of economic

harm Leafly incurred, it was sufficient to establish that an economic injury

occurred in the form of canceled contracts.

40 . The zone of interest prong of the substantially affected test is met

where a party asserts that a statute, or a rule implementing such statute,

encroaches upon an interest protected by a statute or the constitution. Ward

v. Bd. of Trs . , 651 So. 2d 1236, 1238 (citing Fla. Med. Assn., Inc., 426 So. 2d

at 1117). The zone of i nterest prong can be met where an agencyÔs proposed

rule Ñhas the collateral effect of regulating [the challenging entityÔs]

industry.Ò ABC Fine Wine & Spirits v. DepÔt of Bus. & ProfÔl Reg., 323 So. 3d

794 (Fla. 1st DCA 2021) (citing Televisual CommcÔns, Inc. v. DepÔt of Labor &

EmpÔt Sec./Div. of WorkersÔ Comp. , 667 So. 2d 372, 374 (Fla. 1st DCA 1995)).

In Televisual, a publisher of educational materials useful to healthcare

practitioners challenged the agencyÔs proposed rules relating to the

certificatio n of health care providers and training courses for physician

certification. Televisual, 667 So. 2d at 373. The First District reversed the

hearing officerÔs determination that the publisher lacked standing because

the hearing officer erred Ñin concluding that the proposed rule does not

purport to subject [the publisher], or those similarly situated, to regulation or

control.Ò Id. at 374. The court explained that although the hearing officer

correctly noted the publisher was not a healthcare provider affect ed by the

enabling statute, the hearing officer failed to recognize that the publisher

was indeed affected by the proposed rule because it had the collateral effect of

regulating the industry that provides the medium for education of health care

providers. Id.

41 . In the instant case, the Department does not directly regulate Leafly

because Leafly is not an MMTC, a qualified physician, or a patient or

caregiver, subject to the provisions of section 381.896. However, the

DepartmentÔs February 1, 2021 letter concluded that, Ñcontracting with

Leafly.com, or any other third - party website, for services directly related to

dispensing is a violation of this provision,Ò specifically identifying LeaflyÔs

services as violative of the operative statute. Even though th e letter was

addressed to all licensed MMTCs in the state of Florida, the letter ha d the

collateral effect of regulating the activities Petitioner can engage in as a

third - party operator of an online website and application - based resource for

cannabis info rmation.

42 . Petitioner established by a preponderance of the evidence that it has

standing to bring the instant rule challenge, pursuant to section 120.56(1)(a).

Petitioner has suffered an injury in fact due to the publication of the

February 1, 2021 let ter , and that injury is within the zone of interest the

statute is designed to protect.

Is the Statement a Rule ?

43 . Section 120.52(16) defines a rule as follows:

ÑRuleÒ means each agency statement of general

applicability that implements, interprets, or

prescribes law or policy or describes the procedure

or practice requirements of an agency and includes

any form which imposes any requirement or solicits

any information not specifically required by statute

or by an existing rule. The term also includes th e

amendment or repeal of a rule.

44 . Section 120.52(20) provides that an ÑÓ[u]nadopted ruleÔ means an

agency statement that meets the definition of the term Órule,Ô but that has not

been adopted pursuant to the requirements of s. 120.54.Ò

45 . Section 120. 54(1)(a) provides that Ñ[r]ulemaking is not a matter of

agency discretion. Each agency statement defined as a rule by s. 120.52 shall

be adopted by the rulemaking procedure provided by this section as soon as

feasible and practicable.Ò

46 . The requirement for agency rulemaking, codified in section 120.54(1),

prevents an administrative agency from relying on general policies that are

not tested in the rulemaking process, but it does not apply to every kind of

statement an agency may make. See McDonald v. De pÔt of Banking & Fin. ,

346 So. 2d 569, 581 (Fla. 1st DCA 1977) (stating that rulemaking

requirements were never intended to Ñencompass virtually any utterance by

an agencyÒ), superseded by statute on other grounds , § 120.54(1)(a), Fla. Stat.

(Supp. 1996), as recognized in DepÔt. of High. Saf. & Motor Veh. v. Schluter ,

705 So. 2d 81 (Fla. 1st DCA 1997). Rulemaking is required only for an agency

statement that is the equivalent of a rule.

47 . In the instant case, the Department argues that the letter constit utes

the agencyÔs application of the law to a particular set of facts, which is not

itself a rule. See Amerisure Mut. Ins. Co. v. Fla. DepÔt of Fin. Servs., Div. of

WorkersÔ Comp. , 156 So. 3d 520, 531 (Fla. 1st DCA 2015) (concluding that the

agency did not rely on an unadopted rule, but Ñsimply applied the governing

statute to the informationÒ reported by the relevant entity), superseded by

state constitutional amendment on other grounds , art. V, § 21, Fla. Const., as

recognized in Lee MemÔl Health Sys. Gul f Coast Med. Ctr. v. Ag. for Health

Care Admin. , 272 So. 3d 431, 437 (Fla. 1st DCA 2019); see also

§ 120.57(1)(e)1., Fla. Stat. (expressly authorizing Ñapplication of . . .

applicable provisions of law to the factsÒ).

48 . Where an agency statement analyze s existing law, as it applies to a

particular set of circumstances, the statement is not itself a rule and is not

subject to the rulemaking process. See Envtl. Trust v. State, DepÔt of Envtl.

Prot. , 714 So. 2d 493, 498 (Fla. 1st DCA 1998). To conclude othe rwise would

effectively require an agency to adopt a rule for every possible circumstance

that may arise. Instead, Ñan agency is free to simply apply a statute to facts

È without engaging in rulemaking.Ò Office of Ins. Reg. v. Guarantee Trust

Life Ins. Co. , Case No. 11 - 1150 at ¶ 75 (Fla. DOAH Mar. 16, 2012; Fla. OIR

June 28, 2012).

49 . The case at hand is distinguishable from Environmental Trust . There

the court construed an internal memorandum from the department

environmental manager to the environmental administrator, and a

subsequent email from the administrator to his staff, regarding application of

an existing rule on qualification for reimbursement of contractors for

underground petroleum cleanup projects. Envtl. Trust , 714 So. 2d at 496,

498 - 99. The re the court found that the internal documents were Ñnothing

more than an analysis of the existing rule as it applies to the circumstances

in which a general contractor is employed for the apparent purpose of

increasing the amount of the bill.Ò Id . at 499.

50 . The Department cited Agency for Health Care Administration v.

Custom Mobility, Inc. , 995 So. 2d 984 (Fla. 1st DCA 2008); and Department of

Financial Services v. Capital Collateral Regional Counsel - Middle Region , 969

So. 2d 527 (Fla. 1st DCA 2007), as more recent holdings of the First District

that agency statements that are not self - executing and do not by their own

effect create rights, require compliance, or otherwise have the direct and

consistent effect of law, are not rules.

51 . The statement in the DepartmentÔs February 1, 2021 letter is

completely distinguishable from those cases. The DepartmentÔs statement is

not analogous to a recommendation made in a memorandum following an

investigation into an office of state or regional government. See Cap ital

Collateral , 969 So. 2d at 531. Nor is the letter analogous to the statistical

formula used to calculate overpayments to Medicaid providers examined in

Custom Mobility . Neither of those statements created rights, required

compliance, or had the direct and consistent effect of law. In Capital

Collateral , the determination might have been used in a later administrative

complaint to seek reimbursement of funds spent on a lobbyist for a state

agency. In Custom Mobility , the court found that that methodology Ñdoes not

itself establish that the service provider owes money.Ò Custom Mobility , 995

So. 2d at 987. The applicable statute required compliance; the formula was

the tool used to determine the amount owed. Id . at 986.

52 . By contrast, the DepartmentÔs Feb ruary 1, 2021 letter applied

uniformly to all 22 licensed MMTCs; notified them that contracting with

Leafly, or any other third - party website for online ordering of marijuana and

low - THC cannabis, was a violation of section 381.986(8)(e); and informed

them that violating the statute may subject them to penalties outlined in rule

64 - 4.210(9)(eee) (i.e., fines ranging in amount from $2,500 to $ 5,000). The

statement is generally applicable to all MMTCs.

53 . The statement does not merely reiterate the statute, but places a

construction on the statute that is not readily - apparent on its face. The

statute does not address third - party websites or online ordering. The statute

prohibits MMTCs from contracting with third parties for services directly -

related to dispen sing medical marijuana. The letter constitutes the

DepartmentÔs interpretation that online ordering is a service directly - related

to dispensation of medical marijuana; thus, the letter implements the statute

and prescribes policy. The letter has the direct and consistent effect of

prohibiting the practice of MMTCs contracting with third - party websites for

online ordering of medical marijuana. To further gain compliance with this

statement, five months after issuance of the letter, the Department

conducted a udits of all 22 MMTCs and issued notice s of violation to the eight

MMTCs still using third - party online ordering platforms.

54 . Petitioner has proven, by a preponderance of the evidence, that the

DepartmentÔs statement is a rule within the definition of s ection 120.52(16),

which has not been adopted as a rule, pursuant to section 120.54(1)(a). The

burden shifts to the Department to prove that rulemaking was either

infeasible or impracticable.

55 . Rulemaking is presumed feasible and practicable, but the pre sumption

may be rebutted by the agency. See § 120.54(1)(a), Fla. Stat. An agency may

demonstrate infeasibility by showing that : (1) it has not had sufficient time to

acquire knowledge and experience reasonably necessary for rulemaking ; or

(2) related matte rs are not sufficiently resolved. See § 120.54(1)(a)2.a. -

(1)(a)1.b., Fla. Stat. An agency may prove impracticability by establishing

that : (1) it is not reasonable under the circumstances to formulate precise or

detailed principles, criteria, or standards; or (2) the issue involved is so

narrow in scope that more specific resolution is impractical except through

adjudication of a partyÔs substantial interests based on individual

characteristics. See § 120.54(1)(a)2.a. - (1)(a)2.b., Fla. Stat.

56. The Departm ent argued in its Proposed Final Order that rulemaking

to define Ñdirectly related toÒ is unnecessary and not practicable. In

explanation, the Department stated that it Ñneed not institute rulemaking on

language that is clear from its ordinary meaning in t he statute and Ó[t]he

particular questions addressed are of such a narrow scope that more specific

resolution of the matter is impractical outside of an adjudication to determine

the substantial interests of a party based on individual circumstances.ÔÒ 6 Th e

Department presented no evidence that rulemaking was impractical. To the

contrary, Mr. Ferguson testified that the Department has determined that

certain services provided by third parties to MMTC s Ð placement of

Automated Teller Machines (ÑATMsÒ) in the l obby of MMTCs, point - of - sale

software, and internet service Ð are not directly - related to dispensation of

6 Leafly v. DepÔt of Health , Case No. 21 - 2431RU (DepÔt of Health Pro. Fin. Ord. at ¶ 44, citing

§ 120.54(1)(a)2.b. Fla. Stat. ).

medical marijuana. According to Mr. Ferguson, the Department has

formulated a ÑtestÒ it applies to make that determination: whether the

service brings p atients into the MMTC for the purpose of being dispensed

marijuana. Having apparently already formulated detailed criteria or a

standard to determine whether third - party services to MMTCs are, or are

not, directly - related to dispensation of medical marijua na, it is disingenuous

for the Department to claim that rulemaking is impracticable.

57 . The Department did not establish that rulemaking is either infeasible

or impracticable, pursuant to section 120.54(1)(a).

Validity of the Unadopted Rule

58 . Petitione r seeks a determination from the undersigned that the

agency statement in the February 1, 2021 letter is an invalid exercise of the

DepartmentÔs delegated legislative authority, pursuant to section

120.56(1)(a), in addition to a determination of whether th e statement

constitutes an unadopted rule. The day prior to the final hearing, after

reviewing the partiesÔ pre - hearing stipulation, the undersigned conducted a

pre - hearing conference with the parties to discuss whether the undersignedÔs

jurisdiction exten ds to consideration of whether the agency statement is an

invalid rule, rather than simply whether it constitutes a rule, as defined in

section 120.52(16). Rather than ruling on the issue at such a late date, the

undersigned requested the parties to addre ss the issue in their Proposed

Final Orders, which they have done.

59 . Section 120.56(4) specifically governs challenges to agency statements

defined as unadopted rules. The statute specifically authorizes the

administrative law judge to determine Ñwhethe r all or part of a statement

violates s. 120.54(1)(a),Ò and provides that the determination is a final order.

§ 120.56(4)(d), Fla. Stat. Should the administrative law judge find that the

agency statement is an unadopted rule, the statute requires the agenc y to

Ñimmediately discontinue all reliance upon the unadopted rule or any

substantially similar statement as a basis for agency action.Ò £ 120.56(4)(e),

Fla. Stat.

60 . Section 120.56 limits the scope of the administrative law judgeÔs

determination of valid ity to existing and proposed rules. See § 120.56(1)(a),

Fla. Stat. (ÑAny person substantially affected by a rule or proposed rule may

seek an administrative determination of the invalidity of the rule on the

ground that the rule is an invalid exercise of d elegated legislative

authority.Ò) . Even in section 120.56(4), which governs challenges to

unadopted rules, the reference to a determination of validity of rules is

directed to the Ñproposed rules addressing the challenged unadopted rule[.]Ò

§ 120.56(4)(f), Fla. Stat.

61 . Petitioner cited as precedent, St. Johns River Water Management

District v. Modern, Inc. , Case No. 97 - 4389 (Fla. DOAH June 15, 1999), in

which the administrative law judge determined both whether an agency

statement constituted a rule and whether the rule was invalid. However, that

case construed an earlier version of section 120.56(4), which provided as

follows:

Prior to entry of a final order that all or part of an

agency statement violates s. 120.54(1)(a), if an

agency publishes, pursuan t to s. 120.54(3)(a),

proposed rules which address the statement and

proceeds expeditiously and in good faith to adopt

rules which address the statement, the agency shall

be permitted to rely upon the statement or a

substantially similar statement as a bas is for

agency action if the statement meets the

requirements of s. 120.57(1)(e) .

§ 120.56(4)(e), Fla. Stat. (1997) (emphasis added ) . Section 120.57(1)(e) at that

time, required the agency to demonstrate that the unadopted rule on which it

was relying to d etermine the substantial interests of a party, did not enlarge,

modify, or contravene the specific provisions of law implemented.

§ 120.57(1)(e)1. a nd 2.b., Fla. Stat. (1997) (this provision was known as the

Ñprove - up provisionÒ). Thus, the administrative law judge had specific

authority to determine whether the unadopted rules were valid as defined in

section 120.57(1)(e), in order for the agency to continue relying upon those

statements during rulemaking to codify those statements as agency rules.

62 . Eve n if Modern did construe the current version of section 120.56, the

undersigned would not be required to follow the legal conclusions of the

fellow administrative law judge. 7

63 . Petitioner has proposed that the ruling be made because, if the

Department u ndertakes rulemaking, it would be best served by a

determination of whether this particular agency statement is valid or invalid.

Practically speaking, the Department may simply discontinue reliance on the

agency statement, rather than choosing to adopt th e statement as a rule. In

that case, a ruling on the validity of the statement as a rule would be

advisory in nature .

64 . The undersigned is sympathetic to PetitionerÔs argument that this

issue was preserved in its Petition, which plainly states that it wa s brought

pursuant to both sections 120.56(1) and 120.56(4); and the prayer for relief,

which seeks an order finding that the agency statement is an invalid exercise

of delegated legislative authority, as defined in section 120.56(8). However,

the undersig ned cannot conclude that she has jurisdiction to determine the

validity of the agency statement, pursuant to section 120.56(1), and declines

to do so. Furthermore, contrary to PetitionerÔs argument, the parties cannot

stipulate to the jurisdiction of the t ribunal. See Polk C n ty. v. Sofka , 702 So.

2d 1243, 1245 (Fla. 1997); Youth Crime Watch of Am. v. DepÔt of HRS , Case

No. 92 - 1145 (Fla. DOAH Apr. 23, 1992; Fla. HRS June 2, 1992).

7 Decisions of her fellow administrative law judges may be persuasive, but are not binding on

the undersigned.

O RDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it i s

O RDERED that :

1. T he Department shall immediately discontinue reliance on its policy ,

stated in paragraph 22, regarding online ordering of medical marijuana

through third - party websites ; and

2. The Department shall pay reasonable costs and reasonable att or neyÔs

fees to Petitioner as required under section 120.595(4)(a). Petitioner shall

have 45 days from the date of this Final Order to file a motion for attorneyÔs

fees and costs, to which motion (if filed) Petitioner shall attach: (1) proof that,

at least 30 days before the filing of the Petition, the Department received

notice that the statement may constitute an unadopted rule , see

§ 120.5 95(4)(b), Fla. Stat.; (2) the essential documentation supporting the

claim, such as time sheets, bills, and receipts; and (3) appropriate affidavits

(attesting, e.g., to the reasonableness of the fees and costs).

D ONE A ND O RDERED this 25th day of October , 2021 , in Tallahassee, Leon

County, Florida.

S

S UZANNE V AN W YK

Administrative Law Judge

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 25th day of October , 2021 .

C OPIES F URNISHED :

Seann M. Frazier, Esquire Louise Wilhite - St . Laurent , General

Parker, Hu dson, Rainer & Dobbs, LLP Counsel

Suite 750 Department of Health

215 South Monroe Street Bin C - 65

Tallahassee, Florida 32301 4052 Bald Cypress Way

Tallahassee, Florida 32399

Katelyn Rose Boswell, Esquire

Department of Health Kristen Bond Dobson, Esquire

Prosecution Services Unit Parker, Hudson, Rainer & Dobbs, LLP

Bin A - 02 Suite 750

4052 Bald Cypress Way 215 South Monroe Street

Tallahassee, Florida 32399 Tallahassee, Florida 32301

Wanda Range, Agency Clerk Joseph A. Ladapo, M.D. Ph.D.

Depa rtment of Health State Surgeon General

Bin A - 02 Department of Health

4052 Bald Cypress Way Bin A - 00

Tallahassee, Florida 32399 - 1703 4052 Bald Cypress Way

Tallahassee, Florida 32399 - 1701

Ken Plante, Coordinator

Joint Administrative Procedure Committee Anya Owens, Program Administrator

Room 680, Pepper Building Margaret Swain

111 West Madison Street Florida Administrative Code & Register

Tallahassee, Florida 32399 - 1400 Department of State

R. A. Gray Building

500 South Bronough S treet

Tallahassee, Florida 32399 - 0250

N OTICE O F R IGHT T O J UDICIAL R EVIEW

A party who is adversely affected by this Final Order is entitled to judicial

review pursuant to section 120.68, Florida Statutes. Review proceedings are

governed by the Florida Ru les of Appellate Procedure. Such proceedings are

commenced by filing the original notice of administrative appeal with the

agency clerk of the Division of Administrative Hearings within 30 days of

rendition of the order to be reviewed, and a copy of the no tice, accompanied

by any filing fees prescribed by law, with the clerk of the d istrict c ourt of

a ppeal in the appellate district where the agency maintains its headquarters

or where a party resides or as otherwise provided by law.