MARC SLIS and 906 VAPOR, Plaintiffs-Appellees, v STATE OF MICHIGAN and DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendants-Appellants. A CLEAN CIGARETTE CORPORATION, Plaintiff-Appellee, v GOVERNOR, STATE OF MICHIGAN, and DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendants-Appellants.
Nos. 351211; 351212
STATE OF MICHIGAN COURT OF APPEALS
May 21, 2020
332 Mich. App. 312
FOR PUBLICATION. LC Nos. 19-000152-MZ; 19-000154-MZ. Court of Claims.
If this opinion indicates that it is “FOR PUBLICATION,” it is subject to revision until final publication in the Michigan Appeals Reports.
Before: MARKEY, P.J., and JANSEN and BOONSTRA, JJ.
In these consolidated appeals, defendants appeal by leave granted the opinion and order of the Court of Claims granting plaintiffs’ motions for a preliminary injunction. The ruling enjoined enforcement of emergency rules promulgated by defendant Department of Health and Human Services (DHHS) pursuant to
I. CONSTITUTIONAL AND STATUTORY FRAMEWORK
“The public health and general welfare of the people of the state are hereby declared to be matters of primary public concern,” and “[t]he
The [DHHS] shall continually and diligently endeavor to prevent disease, prolong life, and promote the public health through organized programs, including prevention and control of environmental health hazards; prevention and control of diseases; prevention and control of health problems of particularly vulnerable population groups; development of health care facilities and agencies and health services delivery systems; and regulation of health care facilities and agencies and health services delivery systems to the extent provided by law.
The DHHS may “[e]xercise authority and promulgate rules to safeguard properly the public health[.]”
The promulgation of administrative rules is governed by Chapter 3 of the Administrative Procedures Act of 1969 (APA),
If an agency finds that preservation of the public health, safety, or welfare requires promulgation of an emergency rule without following the notice and
participation procedures required by [
II. PROMULGATION OF EMERGENCY RULES
We initially note that pursuant to 2019 PA 18, effective September 2, 2019, the Legislature amended the youth tobacco act (YTA),
Under Rule 1(1)(c) of the emergency rules, a “flavored nicotine vapor product” is defined as “any vapor product that contains nicotine and imparts a characterizing flavor.”3 And a “characterizing flavor” is defined as “a taste or aroma, other than the taste or aroma of tobacco, imparted either prior to or during consumption of a tobacco product, vapor product, or alternative nicotine product, or any byproduct produced thereof.” Rule 1(1)(a).4
Rule 2 of the emergency rules is the most pertinent provision for purposes of the two lawsuits, and it provides as follows:
(1) Beginning 14 days after these rules are filed with the secretary of state, a retailer or reseller shall not:
(a) Sell, offer for sale, give, transport, or otherwise distribute, nor possess with intent to sell, give, or otherwise distribute a flavored nicotine vapor product.
(b) Use imagery explicitly or implicitly representing a characterizing flavor to sell, offer for sale, give, or otherwise distribute a vapor product.
(2) Beginning 14 days after these rules are filed with the secretary of state, a person shall not transport flavored nicotine vapor products intended for delivery to any retailer or reseller in violation of these rules.
Rule 3 addresses “fraudulent or misleading terms or statements to sell, offer for sale, give, or otherwise distribute vapor products.” Rule 3(1). Rule 4 provides that “[b]eginning 14 days after these rules are filed with the secretary of state, the restrictions on advertising set forth at
part, is found to be invalid by a court of competent jurisdiction, such decision will not affect the validity of the remaining portion of these rules.”6
The documented intensification оf the vaping crisis only confirms what DHHS determined when it, with my concurrence, originally issued the Emergency Rules: to protect the public health and welfare from the emergent and worsening crisis of youth vaping, the Emergency Rules must go into effect immediately. The Emergency Rules’ prohibition on flavored vapor products will significantly limit the appeal of vaping to youth, curbing the increase in new youth users.
III. THE LITIGATION
Plaintiff Marc Slis owns and operates plaintiff 906 Vapor, LLC, which is a retail store located in Houghton that sells a variety of vapor products, some of which contain nicotine with non-tobacco flavors. We collectively refer to these two plaintiffs as “Slis.” On September 25, 2019, Slis filed an extensive complaint against the state and the DHHS in the Houghton Circuit Court seeking declaratory relief. In that original action, Slis first contended that the emergency rules were ultra vires. Slis also maintained that the emergency rules were invalid because: (1) there was no emergency justifying a departure from the procedural safeguards required by the APA; (2) assuming the circumstances warranted a somewhat urgent response, the DHHS could not skip all of the APA‘s procedural safeguards; and (3) assuming a true emergency, the threat only affected a small subgroup of the general public, which was insufficient as a matter of law to trigger the authority to promulgate emergency rules. Finally, Slis alleged that the emergency rules were substantively invalid because they were inconsistent with the legislative intent of the enabling statute and because they were arbitrary and capricious.
Additionally, Slis filed a motion for preliminary injunction and an emergency ex parte motion for a temporary restraining order (TRO) that would prohibit defendants from enforcing the emergency rules pending a hearing on the motion for preliminary injunction. Slis claimed that his business would suffer an immediate and irreparable injury if the court did not enjoin enforcement of the emergency rules because the business would have to close its doors, terminate its employees, and destroy over 80% of its inventory. The circuit court denied the ex parte motion for a TRO on the basis of a technical defect, and shortly thereafter the case was transferred to the Court of Claims. On September 30, 2019, in the
Plaintiff, A Clean Cigarette Corporation (ACC), is a Michigan-based retailer of flavored vapor products. ACC operated 20 locations throughout the state, employed 53 people, and sold about 2500 flavored vapor cartridges a month that contained zero nicotine. On October 1, 2019, ACC filed a complaint against the state, the Governor, and the DHHS. On the same date, ACC filed a motion for TRO and order to show cause why a preliminary injunction should not issue. ACC alleged that it would suffer irreparable injury if the emergency rules were enforced because it would result in the closure of almost all of ACC‘s 20 locations. On October 2, 2019, the Court of Claims denied the motion for a TRO and ordered the consolidation of the two lawsuits. On October 4, 2019, ACC moved for a preliminary injunction, asserting:
These emergency rules give no consideration or mention the impact the ban will have on adult vaping users who have elected to use flavored vapor in order to transition away from smoking cigarettes. Since vaping is already illegal for minors, all that this ban will accomplish is to take the flavored vaping options away from adults. Accordingly, ACC requests injunctive relief to avoid the irreparable harm this ban will cause to its business, employees, businesses like it and the tens of-thousands of Michigan adults that elect to use flavored vapor products in lieu of combustible tobacco products.
On October 4, 2019, ACC also filed an amended complaint against defendants, alleging four causes of action. ACC alleged an unjustified interference with interstate commerce, federal statutory preemption under
With respect to Slis‘s action, on October 1, 2019, the Court of Claims, having rejected issuance of a TRO, heard testimony on the issue whether Slis would suffer irreparable harm if a preliminary injunction did not issue. Slis testified that he purchased 906 Vapor after being a customer of the business for about 1-1/2 years. He had first tried e-cigarettes as a method to stop smoking regular cigarettes and was successful. He was only successful, however, after he tried flavored e-cigarettes. Slis asserted that he had between 200 and 500 customers at any given time. He maintained a number of business documents, including sales records, inventory data, sales receipts, invoices, and tax records. Slis testified that approximately 95% of his customers
used flavored vapor products. He contended that 906 Vapor would have to close its doors and file for bankruptcy if the emergency rules went into effect. Slis also asserted that if the flavored nicotine vapor products were taken off the shelves for six months, the nicotine would oxidize and change the color of the product.
The Court of Claims denied Slis‘s motion for a preliminary injunction, concluding that he had “not met the burden of demonstrating an irreparable harm for which there is no adequate remedy at law.” Consistent with its order in the ACC suit, the Court of Claims consolidated Slis‘s suit with ACC‘s action. It denied Slis‘s motion for preliminary injunction without prejudice, stating that “all parties will have the opportunity for additional briefing, testimony, and argument” at a later hearing. In other words, the Court of Claims, given the consolidation, was prepared
The Court of Claims held the preliminary-injunction hearing on October 8 and 9, 2019. Slis testified that 906 Vapor closed its doors on October 1, 2019, because of the inability to sell flavored vapor products. Slis explained that his average customer was a middle-aged, semi-professional person. Slis claimed that he always verified the ages of all customers by examining their identification and using an age-checker cellular phone application. Slis maintained that his business was dedicated to helping people stop smoking. He further contended that 80% to 90% of his clients who wanted to quit smoking were ultimately successful. When asked if his customers could travel the five-plus miles to Wisconsin or use the Internet to purchase the banned products, Slis testified that they had already begun doing so. Slis opined that if the emergency rules remained in effect for six months, all of his product could possibly expire in the interim. He was certain that expiration of his product would occur if the emergency rules were extended for an additional six months, which extension has now come to fruition. Slis also testified that he carried between $15,000 and $20,000 in business debt and $60,000 in personal debt and that 906 Vapor was his sole source of income. According to Slis, if the emergency rules remained in effect, he would have to declare bankruptcy.
Cary Lee testified that he started ACC in 2010 and that it presently had 19 retail stores in Michigan with 53 employees. He maintained that one of his stores had closed because of the emergency rules. Lee indicated that ACC sold flavored vapor products. He started the company after using e-cigarettes to quit smoking in 2010, and he wished to help others overcome their addictions. Lee claimed that it is a real fight to quit smoking and that it is easier to quit when the e-cigarette tastes better. His wife, Ramona Lee, testified that five more ACC stores would close on October 15, 2019, and then probably another five stores would follow if the emergency rules were not overturned. She observed that approximately 50% of ACC‘s inventory was illegal under the emergency rules.
Ramona Lee further indicated that ACC had 740,000 cartridges, which were worth approximately $3 million, that could not be sold under the emergency rules. She testified that before September 2, 2019, ACC sold $13,000 to $14,000 of product a day, excluding online sales, but since October 2, 2019, sales had diminished to approximately $9,000 a day. She also explained that 75% of online sales came from customers outside of Michigan, but flavored vapor
products had been removed from ACC‘s website in response to the emergency rules. Dawn Every, an ACC employee, testified that only 2.3% of the company‘s clients were between the ages of 18 and 25. David Haight, the Vice-President of ACC‘s operations, indicated that the amount of product that could not be sold was worth between $2.2 million and $2.5 million. Another ACC employee, Deleasha Trice, testified that using e-cigarettes had improved her health.
Amelia Howard testified that she was a Ph.D. candidate at the University of Waterloo in the Department of Sociology and Legal Studies. Her dissertation was on the historical technology of e-cigarettes, the integration of these products into the marketplace, and the “moral panic” over vaping.
Dr. Joneigh Khaldun testified that she was the Chief Medical Executive and the Chief Deputy Director for Health at the DHHS. She discussed her other experiences with health crises, including those involving the measles, hepatitis A outbreaks, and the opioid epidemic. Dr. Khaldun emphasized that it was important to respond quickly once a health problem is identified. She stated that vaping use by the young impacted general public health. Dr. Khaldun had examined national and state data about the number of youths using vaping products and opined that the high numbers amounted to a public health emergency. According to Dr. Khaldun, at one high school more than a third of the students used vaping products. She testified that there was evidence that many youths used flavors to initiate their vaping experiences.
Dr. Khaldun discussed the recent amendment of the YTA, which we alluded to earlier, that banned the sale of vaping products to individuals under the age of 18. Despite the legislative action, she still believed that the emergency rules were necessary because she had no reason to conclude that the statutory amendment would have any impact. Dr. Khaldun noted that the FDA had banned the sale of vaping products to minors in 2016. She reviewed a chart that tracked the percentage of high school students who used vaping products from November 2013 through March 2019. It showed that high school use continued to rise significantly even after the 2016 ban.
Dr. Khaldun additionally testified that e-cigarettes were not approved by the FDA as a smoking cessation prоduct. She had not seen definitive evidence that e-cigarettes were effective in stopping the use of tobacco products overall. She further noted that another study showed that
tobacco-flavored products were one of the most popular flavors among adult e-cigarette users. When asked whether there would be any harm if the emergency rules were halted, Dr. Khaldun replied that there would indeed be harm because each new day without the ban would allow for the opportunity for a minor to gain access to flavored vapor products.
Dr. Khaldun testified that “the epidemic in the emergency is about youth being addicted to nicotine.” She agreed that traditional combustible cigarettes were more harmful to the health of adults and children.
Following the hearing, the Court of Claims issued an extensive written opinion and order that enjoined and restrained enforcement of the emergency rules. The Court of Claims made the following 16 specific findings of fact.
1. 906 Vapor is no longer a “going concern.” Its inventory remains at its retail operation.
2. The business owner, Slis, has considerable business and personal debt such that resumption of business after expirаtion of the Emergency Order[9] is unlikely.
3. Customers of 906 Vapor have begun purchasing product from out-of-state vendors.
4. [ACC] has shuttered one retail center and is in the process of closing four others.
5. [ACC] had a considerable [I]nternet operation that, like its retail stores, relied on sale of flavored nicotine product.
6. [ACC‘s] [I]nternet operation has ceased advertising flavored nicotine product.
7. The “A Clean Cigarette” logo and name is posted on its retail operations, uniforms, e-cigarette cartridges and batteries.
8. [The terms] Clean and Cigarette cannot be used together per Rule number 3(2), of the Emergency Order.
9. The shelf life of vaping product whether for open or closed container systems is ten months or less.
10. [ACC] has contractually committed to receive additional product bearing its logo.
11. Neither Plaintiff sold products to minors.
12. E-cigarette users who were patrons of the plaintiffs overwhelmingly use flavored nicotine product.
13. [ACC] has over two million dollars of unusable product.
14. In reaching the conclusion that an emergent danger was posed by e-cigarette use among persons under th[e] age of 18 in Michigan, the [DHHS] cited numerous studies . . . .
15. The [DHHS] considered the passage of Public Act 18 when it recommended the emergency rules.
16. The [DHHS] had a basis for its determination that Public Act 18 would not be a significant deterrent to youth e-cigarette use. That basis was derived from the historic data on e-cigarette use in other states which adopted similar legislation to Public Act 18 prior to Michigan.
The Court of Claims next reviewed the factors to be considered in determining whether to issue a preliminary injunction. It found that plaintiffs would suffer irreparable harm if the emergency rules were not enjoined. With respect to whether plaintiffs were likely to succeed on the merits, the Court of Claims noted that plaintiffs had argued that the DHHS had no rulemaking authority on the subject-matter. But it found that it did not need to reach that particular issue because it
The Court of Claims discussed the difference between an “emergent” problem such as teen vaping and a true emergency that “required” the DHHS to suspend the normal rulemaking process under the APA. It opined that the DHHS was required to do more than simply identify a problem; the DHHS was also required to articulate proper justification to take a shortcut in promulgating rules. The Court of Claims ruled that plaintiffs had the better argument with respect to whether the circumstances mandated the promulgation of the emergency rules pursuant to
eight months to take any action. During this time, according to the Court of Claims, the normal APA procedures could have been employed and run their course. The Court of Claims found that the old informational materials, coupled with the DHHS‘s failure to act promptly, undermined the declaration of an emergency. It rejected the DHHS‘s explanation for the delay that Dr. Khaldun had only recently been appointed as Chief Medical Executive, because DHHS could still have done something earlier. The Court of Claims ruled that the DHHS could not “create an emergency by way of its own failure to act,” finding plaintiffs’ citation to federal authority for this proposition persuasive.
Balancing the harms to the parties, the Court of Claims noted that defendants had not argued that they would suffer any harm if the preliminary injunction were issued. With respect to whether the injunction would harm the public, the Court of Claims found that each side had presented a compelling argument. On one hand, were an injunction issued, youth could gain access to flavored nicotine vapor products, and there was evidence which suggested that there were risks to youth who used vaping products. On the other hand, plaintiffs had presented evidence to show that there was a real risk of harm to smokers who had used flavored vaping products as a substitute for more harmful combustible tobacco products and that they could go back to those products if flavored vaping products were banned. The Court of Claims ultimately found that the balancing factor did not weigh heavily for either side. It then ruled that the various factors, taken together, supported the issuance of the preliminary injunction.
Defendants applied for leave to appeal to this Court on October 25, 2019. They subsequently filed a bypass application for leave in the Michigan Supreme Court that was rejected. Slis v Michigan, 505 Mich 943 (2019) (“the Court is not persuaded that the question presented should be reviewed by this Court before consideration by the Court of Appeals“). This Court granted leave to appeal limited to the issues raised in the applications, expedited the appeals, consolidated the two cases, and denied defendants’ motion for a stay. Slis v Michigan, unpublished order of the Court of Appeals, entered December 9, 2019 (Docket No. 251211); A Clean Cigarette Corp v Governor, unpublished order of thе Court of Appeals, entered December 9, 2019 (Docket No. 251212).
A. STANDARDS OF REVIEW
We review for an abuse of discretion a trial court‘s ruling on a request for a preliminary injunction. Mich AFSCME Council 25 v Woodhaven-Brownstown Sch Dist, 293 Mich App 143, 146; 809 NW2d 444 (2011). A trial court abuses its discretion when its decision falls outside the range of reasonable and principled outcomes. Id. The factual findings that a trial court makes in the process of deciding whether to grant a preliminary injunction are reviewed for clear error. Id. Associated issues involving statutory interpretation are reviewed de novo by this Court as questions of law. Id. We also review de novo the interpretation of a rule or regulation adopted by an agency pursuant to statutory authority. United Parcel Serv, Inc v Bureau of Safety & Regulation, 277 Mich App 192, 202; 745 NW2d 125 (2007). And similarly, this Court reviews de novo constitutional issues. Harvey v Michigan, 469 Mich 1, 6; 664 NW2d 767 (2003).
B. PRINCIPLES OF STATUTORY INTERPRETATION
This Court‘s role in construing statutory language is to discern and ascertain the intent of the Legislature, which may reasonably be inferred from the words in the statute. Mich Ass‘n of Home Builders v City of Troy, 504 Mich 204, 212; 934 NW2d 713 (2019). We must focus our analysis on the express language of the statute because it offers the most reliable evidence of legislative intent. Id. When statutory language is clear and unambiguous, we must apply the statute as written. Id. A court is not permitted to read anything into an unambiguous statute that is not within the manifest intent of the Legislature. Id. Furthermore, this Court may not rewrite the plain statutory language nor substitute its own policy decisions for those decisions already made by the Legislature. Id. at 212-213.
“Judicial construction of a statute is only permitted when statutory language is ambiguous.” Noll v Ritzer, 317 Mich App 506, 511; 895 NW2d 192 (2016). A statute is ambiguous when an irreconcilable conflict exists between statutory provisions or when a statute is equally susceptible to more than one meaning. People v Hall, 499 Mich 446, 454; 884 NW2d 561 (2016). “When faced with two alternative reasonable interpretations of a word in a statute, we should give effect to the interpretаtion that more faithfully advances the legislative purpose behind the statute.” People v Adair, 452 Mich 473, 479-480; 550 NW2d 585 (1996).
C. LAW GOVERNING PRELIMINARY INJUNCTIONS IN GENERAL
A preliminary injunction is generally considered a form of equitable relief that has the objective of maintaining the status quo pending a final hearing concerning the parties’ rights. Mich AFSCME Council 25, 293 Mich App at 146. Four factors must be taken into consideration by a court when determining if it should grant the extraordinary remedy of a preliminary injunction to an applicant: (1) whether the applicant has demonstrated that irreparable harm will occur without the issuance of an injunction; (2) whether the applicant is likely to prevail on the merits; (3) whether the harm to the applicant absent an injunction outweighs the harm an injunction would cause to the adverse party; and (4) whether the public interest will be harmed if a preliminary injunction is issued. Pontiac Fire Fighters Union Local 376 v Pontiac, 482 Mich 1, 6 n 6; 753 NW2d 595 (2008); Mich Coalition of State Employee Unions v Civil Serv Comm, 465 Mich 212, 225 n 11; 634 NW2d 692 (2001); Thermatool Corp v Borzym, 227 Mich App 366, 376; 575 NW2d 334 (1998). “[A] preliminary injunction should not issue where an adequate legal remedy is available.” Pontiac Fire Fighters, 482 Mich at 9. “The mere apprehension of future injury or damage cannot be the basis for injunctive relief.” Id. The party requesting “injunctive relief has the burden of establishing that a preliminary injunction should be issued . . . .”
D. REVIEW OF AN AGENCY‘S ACTION TO PROMULGATE EMERGENCY RULES UNDER MCL 24.248
The Court of Claims effectively concluded that there was no true emergency as necessary to permit the DHHS and Governor to proceed under
addressing the issue. In examining whether there was an emergency justifying a suspension of normal rulemaking procedures, the Court of Claims applied de novo review, treating the issue as one of statutory construction of
The issue of whether the preservation of the public health, safety, or welfare requires promulgation of an emergency rule without having to comply with the normal notice and participation procedures involves, for the most part, a factual inquiry. And it is in regard to this factual inquiry that we search for any applicable standards in judging the factual findings ultimately made by the DHHS in association with the Governor. This theoretically includes the possibility that the standard is that factual findings are not subject to any judicial review. To the extent that statutory construction of
1. THE APA
Chapter 6 of the APA,
Unless an exclusive procedure or remedy is provided by a statute governing the agency, the validity or applicability of a rule, including the failure of an agency to accurately assess the impact of the rule on businesses, including small businesses, in its regulatory impact statement, may be determined in an action for declaratory judgment if the court finds that the rule or its threatened application interferes with or impairs, or imminently threatens to interfere with or impair, the legal rights or privileges of the plaintiff. . . . This section shall not be construed to prohibit the determination of the validity or applicability of the rule in any other action or proceeding in which its invalidity or inapplicability is asserted.
We agree with plaintiffs that
Furthermore, there is no exclusive procedure or remedy provided in a different statute governing the DHHS with respect to challenging the validity of a rule promulgated by the DHHS. We have scoured the Public Health Code, including Part 22,
rule—provides “an exclusive procedure or remedy,” as that phrase is used in
Moreover,
2. THE MICHIGAN CONSTITUTION
All final decisions, findings, rulings and orders of any administrative officer or agency existing under the constitution or by law, which are judicial or quasi-judicial and affect private rights or licenses, shall be subject to direct review by the courts as provided by law. This review shall include, as a minimum, the determination whether such final decisions,
findings, rulings and orders are authorized by law; and, in cases in which a hearing is required, whether the same are supported by competent, material and substantial evidence on the whole record. . . . .
The promulgation of an agency rule does not constitute a decision by the agency that is judicial or quasi-judicial in nature; therefore,
Defendants raise a constitutional separation of powers argument with no citation of supporting precedent that is pertinent and binding. “The powers of government are divided into three branches: legislative, executive and judicial. No person exercising powers of one branch shall exercise powers properly belonging to another branch except as expressly provided in this constitution.”
This case implicates the powers, and the boundaries of the powers, of all three branches: the Legislature, the judiciary, and administrative agencies, which are part of the executive branch. . . . .
The people of the state of Michigan have divided the powers of their government into three branches: legislative, executive and judicial. Furthermore, no person exercising the powers of one branch shall exercise powers properly belonging to another branch except as expressly provided in this constitution.
The legislative power of the State of Michigan is vested in a senate and a house of representatives. Simply put, legislative power is the power to make laws. In aсcordance with the constitution‘s separation of powers, this Court cannot revise, amend, deconstruct, or ignore the Legislature‘s product and still be true to our responsibilities that give our branch only the judicial power. While administrative agencies have what have been described as “quasi-legislative” powers, such as rulemaking authority, these agencies cannot exercise legislative power by creating law or changing the laws enacted by the Legislature. [Quotation marks, citations, and alterations omitted.]
The Legislature gave authority to the DHHS to promulgate rules as reflected in sections 2226 and 2233 of the Public Health Code, and the Legislature provided the DHHS and other agencies the authority to promulgate emergency rules to preserve the public health, safety, or welfare, with the concurrence of the Governor,
agency, is part of the executive branch,
3. CASELAW
The parties direct much of their attention to this Court‘s opinion in Mich State AFL-CIO, 230 Mich App 1, which is binding precedent. See
On appeal, this Court affirmed the trial court‘s ruling, albeit for different reasons. Id. at 25. The Court first indicated:
Rules adopted by an agency in accordance with the APA are legislative rules that have the force and effect of law. In this case, the secretary adopted the emergency rules pursuant to § 48 of the APA. We conclude that the emergency rules are legislative rules that, if valid, have the forсe and effect of law. [Id. at 14-15 (citation omitted).]
The Court then addressed whether the emergency rules were substantively valid, which, as we noted earlier, implicated a three-part test that considers: “(1) whether the rule is within the subject matter of the enabling statute; (2) whether it complies with the legislative intent underlying the enabling statute; and (3) whether it is arbitrary or capricious.” Id. at 15 (quotation marks and citations omitted).16
Accordingly, for purpose only of our preliminary injunction analysis, we conclude that the trial court apparently misjudged the strength of the union‘s demonstration that it is likely to prevail on the merits of its claim for declaratory relief that the secretary‘s emergency rules are substantively invalid. However, we emphasize that if and when this matter comes to trial, the actual determination of this claim is for the trial court in the first instance. [Id. at 17.]
The Court next addressed whether the trial court erred by finding that no emergency existed. Id. The Court cited and reviewed Mich Petroleum Ass‘n v State Fire Safety Bd, 124 Mich. App. 187; 333 NW2d 506 (1983), in which this Court affirmed a lower court decision that rejected an argument that no emergency existed for purposes of emergency rules promulgated under
This Court moved on with its analysis and, quoting in part the language in
An emergency rule is justified if three conditions are satisfied: (1) the agency “finds that preservation of the public health, safety, or welfare requires promulgation of an emergency rule without follоwing the notice and participation
procedures required by section 41 and 42;” (2) the agency “states in the rule the agency‘s reasons for that finding“; and (3) “the governor concurs in the finding of emergency.” [Mich State AFL-CIO, 230 Mich App at 21.]
After examining the definition of “public welfare” in Black‘s Law Dictionary (6th ed), this Court ruled:
[I]n order to bypass the general rule-making procedural protections contained in the APA, the secretary in this case was required to find that the preservation of the political interests of the public at large, or of a whole community, as distinguished from the advantage of an
individual or limited class required promulgation of an emergency rule. [Mich State AFL-CIO, 230 Mich App at 22 (quotation marks omitted).]
The Court then reviewed the Secretary of State‘s finding of an emergency, determining that the basis for the finding was the original “injunction that enjoined the enforcement of the secretary‘s declaratory ruling.” Id. at 23. But the panel noted that the injunction had only enjoined the Secretary of State from enforcing the declaratory ruling against the labor union and its affiliated organizations. Id. The Court pointed out that the declaratory ruling could still be enforced by the Secretary of State against all other entities subject to the MCFA. Id. The Court failed “to perceive how preservation of the political interests of the whole community is threatened where the secretary is generally free to attempt to enforce its interpretation of . . . the MCFA except against the limited class of the political committees of the union and its affiliated organizations.” Id. at 24. Accordingly, the Court concluded that the emergency finding by the Secretary of State related only to the advantage of a limited class. Id. The panel then ruled:
A rule is invalid and may be stricken by a court if the agency failed to follow proper procedure. Generally, this principle applies where the agency fails to promulgate a rule in accordance with the APA‘s notice-and-participation procedures. However, we see no reason why this principle should not apply to emergency rules should the agency fail to follow the procedures and standards enunciated in § 48 of the APA, particularly where these procedures and standards take the place of the general rule-making procedural protections contained in the APA. It thus appears that the secretary‘s emergency rules are procedurally invalid because the secretary‘s finding did not meet the statutory threshold imposed by the Legislature. We note that we have treated this issue as an issue of statutory construction, which is a question of law that we review de novo. However, we would arrive at the same conclusion even if the “substantial basis” and “abuse of discretion” tests enunciated in Michigan Petroleum are the appropriate tests. [Id. at 24-25 (citations omitted).]
Therefore, this Court held that the trial court had not erred by determining that the labor union was likely to prevail on the merits of its claim that the emergency rules were procedurally invalid. Id. at 25. The Court ended its opinion with the following summarization:
[W]e conclude that the trial court apparently misjudged the strength of the union‘s demonstration that it is likely to prevail on the merits of its claim for
declaratory relief that the secretary‘s emergency rules are substantively invalid. However, we conclude that the trial court did not err in determining that the union is likely to prevail on the merits of its claim for declaratory relief that the emergency rules are procedurally invalid. No persuasive arguments have been made that the trial court erred in its consideration of the other preliminary injunction factors, and we will not, therefore, second-guess the trial court in this regard. The grant of a preliminary injunction with respect to the emergency rules preserved the status quo pending a final hearing and did not grant any of the parties final relief before a hearing on the merits. Accordingly, we conclude that on the facts of this particular case the trial court did not abuse its discretion in preliminarily enjoining the enforcement of the emergency rules. [Id. (citation omitted).]
4. RESOLUTION – GIVING DEFERENCE TO THE DHHS AND GOVERNOR
Initially, we do agree with defendants that a finding by a court that promulgation of emergency rules was not necessary to preserve the health, safety, or welfare of the public is not a finding that the emergency rules are procedurally invalid. Defendants fully complied with the procedures for promulgating the emergency rules under
Next, we conclude that agency fact-finding under
construction of
As discussed earlier,
This deferential standard, while not expressly set forth in either
not subject to the substantial evidence test, we cannot extend the due deference standard to those statutes on the basis of caselaw construing
Nevertheless, the principle of giving due deference to an agency with regard to fact-finding because of its expertise has become well established in our civil jurisprudence. We note this Court‘s discussion in Mich Basic Prop Ins Ass‘n v Office of Fin & Ins Regulation, 288 Mich App 552, 560-561; 808 NW2d 456 (2010), regarding the nature of administrative agencies:
Administrative agencies are created by the Legislature as repositories of special competence and expertise uniquely equipped to examine the facts and develop public policy within a particular field. Administrative agencies possess specialized and expert knowledge to address issues of a regulatory nature. Use of an agency‘s expertise is necessary in regulatory matters in which
judges and juries have little familiarity. The relationship between the courts and administrative agencies is one of restraint, and courts must exercise caution when called upon to interfere with the jurisdiction of an administrative agency. Judicial restraint tends to permit the fullest utilization of the technical fact-finding expertise of the administrative agency and permits the fullest expression of the policy of the statute, while minimizing the burden on court resources. [Quotation marks, citations, and alterations omitted.]
We now invoke the separation of powers doctrine to incorporate a due deference stаndard with respect to agency fact-finding under
Accordingly, in the context of a declaratory judgment action, when a court reviews an agency‘s decision, concurred in by the Governor, that the preservation of the public health, safety, or welfare requires the promulgation of emergency rules absent notice and participation procedures,
E. DISCUSSION
1. LIKELIHOOD OF SUCCESS ON THE MERITS
We hold that even giving due deference to the DHHS and the Governor, we cannot conclude that the Court of Claims erred by finding that plaintiffs had demonstrated a likelihood of success on the merits at this stage of the proceedings with respect to their claim that the emergency rules were
Michigan undisputedly faces a youth vaping crisis, and each day that passes, this crisis is causing immediate and lasting harm to the public health of this state. E-cigarette use among high school and middle school students continues to skyrocket at alarming rates. And kid-friendly flavored vaping products targeted to hook children on nicotine continues to present a grave public health emergency in our state. Nicotine is highly addictive and negatively impacts the developing brain. Research shows that youth who use such products are significantly more likely to start smoking combustible cigarettes—notwithstanding the documented and well-known negative health consequences associated with the use of cigarettes. [Emphasis added.]
Again,
enforcement of emergency rules. The number of individuals whose health, safety, or welfare would be affected during the period of delay and the nature and seriousness of the impact on those individuals would be key factors to consider.
We think it would be helpful to provide a hypothetical, albeit a very simplistic, generalized one. If a delay in promulgating and enforcing a rule to satisfy APA notice and participation procedures would result in harm to 3% to 5% of the population, which would otherwise not have occurred without the delay, but the harm was fairly minor, it would be reasonable to conclude that the preservation of the public health, safety, or welfare would not require promulgation of an “emergency” rule without following procedural safeguards. If that hypothetical is tweaked so that the harm is elevated to likely death, it would be reasonable to conclude that the preservation of the public health, safety, or welfare would rеquire promulgation of an “emergency” rule without following procedural safeguards. If we return to minor harm being involved but with 90% of the population being affected, an “emergency” rule would likely be justified.21
In the instant cases, defendants presented evidence that would lend support for a determination that use of e-cigarettes or vapor products by minors is an ever-worsening and serious public health concern
Giving due deference to defendants’ factual finding that the preservation of the public health, safety, or welfare required the promulgation of emergency rules absent notice and participation procedures, we nonetheless cannot conclude that the finding is reasonable. The case did not present a choice between two reasonably differing views on whether an emergency existed. Defendants did not, in any form or fashion, tailor the evidence or their arguments to the period of delay that would have occurred if notice, hearing, and participation procedures had been undertaken. Defendants did not present evidence indicating, showing, suggesting, or giving an opinion on: the number of youths who could be expected to start vaping for the first time during the period of delay because flavored niсotine vapor products remained on shelves; the danger of those first-timers becoming addicted to nicotine based solely on the use of flavored nicotine vapor products during the period of delay; and whether youths already using flavored nicotine vapor products would have a decreased chance of a healthier or addiction-free outcome if there was a period of delay.22 Bluntly stated, defendants did not produce evidence that an emergency situation existed such that a period of delay would make any relevant difference in preserving the public‘s health, welfare, or safety. In sum, on the basis of the evidence presented
at this stage of the proceedings, we agree with the Court of Claims that plaintiffs are likely to succeed on the merits regarding their shared request that the emergency rules be declared invalid. Defendants will still have the opportunity to attempt to gather the necessary evidence when the merits of plaintiffs’ lawsuits are litigated.23
2. IRREPARABLE HARM
The Court of Claims found that plaintiffs had carried their burden of demonstrating irreparable harm. With respect to ACC, the Court of Claims determined that
Defendants argue that, in regard to ACC and lost goodwill, the Court of Claims erred on the issue of irreparable harm because ACC did not make a particularized showing that irreparable harm would in fact flow from rebranding itself to the extent necessary to comply with the emergency rules. Defendants contend that half of ACC‘s online sales occur out of state, which is beyond the reach of the emergency rules, and that the emergency rules would only temporarily bar ACC‘s misleading advertising practices as to the online sales in Michigan.
Defendants maintain, therefore, that ACC failed to show that it would have to rebrand itself entirely or that the extent of the required rebranding “would in fact cause loss so certain, pervasively destructive, and incalculable as to be irreparable.” With respect to Slis, defendants argue that he failed to show that loss of his business was in fact the necessary consequence of the emergency rules. Defendants contend that the emergency rules still left room for Slis to make sales, considering that Slis could sell flavored nicotine vapor products outside of Michigan, that he could still sell tobacco-flavored vapor products and flavored vapor products lacking nicotine in Michigan, and that the emergency rules were only temporary.
In Thermatool Corp, 227 Mich App at 377, this Court discussed the irreparable-harm factor, observing:
In order to establish irreparable injury, the moving party must demonstrate a noncompensable injury for which there is no legal measurement of damages or for which damages cannot be determined with a sufficient degree of certainty. The injury must be both certain and great, and it must be actual rather than theoretical. Economic injuries are not irreparable because they can be remedied by damages at law. A relative deterioration of competitive position does not in itself suffice to establish irreparable injury. [Citations omitted.]
In Atwood Turnkey Drilling, Inc v Petroleo Brasileiro, SA, 875 F2d 1174, 1179 (CA 5, 1989), the Fifth Circuit of the United States Court of Appeals observed:
Petrobras directs our attention to cases holding that a preliminary injunction is an inappropriate remedy where the potential harm to the movant is strictly financial. This is true as a general rule but an exception exists where the potential economic loss is so great as to threaten the existence of the movant‘s business. [Citations omitted.25]
As an initial point and as argued by Slis, there is a question whether plaintiffs would have any claim for money damages against the state defendants in light of immunity principles. See Smith v Dep‘t of Pub Health, 428 Mich 540, 544; 410 NW2d 749 (1987). We do note that ACC alleged an unconstitutional takings claim against defendants and seeks $840,500 in just compensation for lost product. But this claim is for loss of product only and not loss of business. The Court of Claims did not speak to the matter, and we decline to resolve the issue because it is unnecessary for us to do so.
With respect to ACC, defendants’ arguments only address the goodwill and rebranding issue connected to ACC‘s having the word “clean” in its name. But the Court of Claims also
based its decision on the significant loss of sales, store closings, and the possible collapse of the business, all of which found fаctual support in the record. “When an appellant fails to dispute the basis of a lower court‘s ruling, we need not even consider granting the relief being sought by the appellant.” Denhof v Challa, 311 Mich App 499, 521; 876 NW2d 266 (2015). On this basis alone, we can affirm the finding of irreparable harm in regard to ACC.
Moreover, the Court of Claims was correct that “[t]he loss of customer goodwill often amounts to irreparable injury because the damages flowing from such losses are difficult to compute.” Basicomputer Corp v Scott, 973 F2d 507, 512 (CA 6, 1992). Whether “the loss of customer goodwill amounts to irreparable harm often depends on the significance of the loss to the plaintiff‘s overall economic well-being.” Apex Tool Group, LLC v Wessels, 119 F Supp 3d 599, 610 (ED Mich, 2015) (quotation marks and citation omitted).26 Defendants argue that there was an evidentiary failure in regard to goodwill because ACC did not show any particular harm due to the loss of goodwill or that rebranding would not have been successful. Defendants’ position, however, demands too much of ACC and is the very reason that loss of goodwill can constitute irreparable harm, i.e., the difficulty in measuring harm. David Haight of ACC testified that their products were branded with the ACC name, that the ACC name had been used for ten years, including online, and that ACC‘s customers knew and had become familiar with the ACC name.
With respect to both ACC and Slis, defendants’ contention that the harm is only temporary misses the mark given that the emergency rules have now been extended another six months and that the plaintiffs presented evidence indicating that the businesses were in financial distress and danger even under the initial six-month period that the
Slis further testified that he would have to close the doors to the business and file for bankruptcy if the emergency rules remained in force. This evidence sufficed to support the determination by the Court of Claims that Slis would suffer irreparable harm if a preliminary injunction did not issue.
In sum, the Court of Claims did not clearly err in concluding that both Slis and ACC would sustain irreparable harm if the emergency rules were not enjoined.
3. BALANCING THE HARMS
The Court of Claims concluded that the harm that would befall plaintiffs if no preliminary injunction were issued would outweigh the harm that would occur to defendants should a preliminary injunction be issued. The Court of Claims indicated that plaintiffs had demonstrated a risk of irreparable harm absent a preliminary injunction, which was greater than any risk of harm to defendants with an injunction in place, especially where defendants had not articulated that they would suffer any harm. The Court of Claims also stated that defendants would not suffer any harm if they were forced to comply with the APA‘s notice and participation procedures before implementing the rules regulating vapor products. The Court of Claims concluded that “the harm to dеfendants as state entities is neither compelling nor noteworthy.”
Defendants essentially argue that a preliminary injunction enjoining enforcement of the emergency rules harms them by preventing defendants from carrying out their constitutional and statutory duties to protect and preserve the health, safety, or welfare of the people of this state, which in turn results in harm to the people themselves and the state‘s financial health. The preliminary injunction does not undercut the overall ability of the DHHS to promulgate valid emergency rules that meet the requirements of
4. THE PUBLIC INTEREST
The Court of Claims concluded that the public-interest factor favored neither plaintiffs nor defendants, finding compelling
Defendants argue that the Court of Claims erred because the evidence was overwhelming regarding the health dangers of nicotine addiction and that youths were starting down the path to nicotine addiction through the use of flavored nicotine vapor products, while plaintiffs’ evidence that depriving adults of flavored nicotine vapor products would return many of them to smoking regular cigarettes was anecdotal and statistically unsupported.
Defendants are
V. CONCLUSION
We hold that the DHHS and the Governor are entitled to due deference with
We affirm. Having fully prevailed on appeal, plaintiffs may tax costs under
/s/ Jane E. Markey
/s/ Kathleen Jansen
/s/ Mark T. Boonstra
Notes
[N]ot all agencies’ actions are taken in a judicial or quasi-judicial capacity. To determine whether an administrative agency‘s determination is adjudicatory in nature, courts compare the agency‘s procedures to court procedures to determine whether they are similar. Quasi-judicial proceedings include procedural characteristics common to courts, such as a right to a hearing, a right to be represented by counsel, the right to submit exhibits, and the authority to subpoena witnesses and require parties to produce documents. [Citations omitted.]
[T]he purpose of compensatory damages, which is to make the plaintiff whole, indicates that exemplary damages may be construed as appropriate for injuries to a corporation that cannot be measured or estimated in monetary terms. Clearly, a loss of reputation as a skillful company is unquantifiable and recoverable as exemplary damages, as may be a loss of goodwill, or any damage to other types of company reputation amongst either employees or customers. [Citations omitted.]