Texas Department of State Health Services v. Crown Distributing LLC

• Decision Date: 24 June 2022
• Docket Number: 21-1045
• Parties: TEXAS DEPARTMENT OF STATE HEALTH SERVICES ; John Hellerstedt, in His Official Capacity as Commissioner of the Texas DSHS, Appellants, v. CROWN DISTRIBUTING LLC; America Juice Co., LLC; Custom Botanical Dispensary, LLC; 1937 Apothecary, LLC, Appellees
• Court: Texas Supreme Court

647 S.W.3d 648

TEXAS DEPARTMENT OF STATE HEALTH SERVICES ; John Hellerstedt, in His Official Capacity as Commissioner of the Texas DSHS, Appellants,

v.CROWN DISTRIBUTING LLC; America Juice Co., LLC; Custom Botanical Dispensary, LLC; 1937 Apothecary, LLC, Appellees

No. 21-1045

Supreme Court of Texas.

Argued March 22, 2022

OPINION DELIVERED: June 24, 2022

Chelsie Spencer, Dallas, Paul Stevenson, Shane A. Pennington, Matthew Zorn, Houston, Constance H. Pfeiffer, for Appellees Crown Distributing LLC, America Juice Co., LLC.

Judd E. Stone II, Kyle Highful, Bill Davis, Charles K. Eldred, Austin, Brent Webster, Houston, Atty. Gen. W. Kenneth Paxton Jr., Benjamin Walton, for Appellant Hellerstedt, John.

Victoria Clark, Wesley Hottot, for Amicus Curiae Institute for Justice.

Benjamin Walton, Kyle Highful, Christopher Galiardo, Charles K. Eldred, Austin, Brent Webster, Houston, Bill Davis, Austin, Judd E. Stone II, Atty. Gen. W. Kenneth Paxton Jr., for Appellant Texas Department of State Health Services.

Susan Lea Hays, for Appellees 1937 Apothecary, LLC, Custom Botanical Dispensary, LLC.

Justice Boyd delivered the opinion of the Court.

The Texas Constitution guarantees that "[n]o citizen of this State shall be deprived of life, liberty, property, privileges or immunities, or in any manner disfranchised, except by the due course of the law of the land." TEX. CONST. art. I, § 19. The plaintiffs in this case assert that this guarantee invalidates a new Texas law that prohibits the processing and manufacturing of smokable hemp products. The trial court agreed and permanently enjoined the defendants from enforcing the challenged law, and the defendants directly appealed to this Court.¹ Because we conclude that the due-course clause does not protect the interest the plaintiffs assert, we reverse the trial court's judgment.

I.Background

The federal Agriculture Improvement Act of 2018² —commonly referred to as the 2018 Farm Bill—classified "hemp" as an agricultural product and generally authorized each state to decide whether and how to regulate it within the state's borders. The bill delegated to the U.S. Department of Agriculture the responsibility for approving each state's hemp-regulation plan and for implementing a federal plan for any state that elects not to adopt its own. Although "marihuana" remains a Schedule 1 substance under the federal Controlled Substances Act, the 2018 Farm Bill excludes "hemp" and hemp products that are cultivated, produced, manufactured, and sold in compliance with federal regulations and the relevant state's federally approved plan.³

The Texas Legislature adopted a hemp plan at its next legislative session in 2019. Through House Bill 1325,⁴ the legislature enacted chapters 121 and 122 of the Texas Agriculture Code, generally permitting and regulating the cultivation and handling of hemp within the state. TEX. AGRIC. CODE §§ 121.001 – 122.404. The bill also added chapter 443 to the Texas Health and Safety Code, generally permitting and regulating the manufacture and sale of consumable hemp products within the state. TEX. HEALTH & SAFETY CODE §§ 443.001 –.207. Chapter 443 expressly authorizes the executive commissioner of the Texas Health and Human Services Commission to "adopt rules and procedures necessary to administer and enforce this chapter," consistent with the state plan. Id. § 443.051.⁵

The Texas hemp plan generally permits Texans to cultivate, handle, transport, export, process, manufacture, distribute, sell, and purchase hemp and hemp-containing products within the state.⁶ But as an exception to this otherwise broad authorization, the plan expressly prohibits the "processing" or "manufacturing" of hemp-containing products "for smoking."⁷ Specifically, chapter 122 prohibits any state agency from authorizing "a person to manufacture a product containing hemp for smoking." TEX. AGRIC. CODE § 122.301(b). And chapter 443 requires the commissioner's rules to reflect the "principle" that "the processing or manufacturing of a consumable hemp product for smoking is prohibited." TEX. HEALTH & SAFETY CODE § 443.204(4). Based on this mandate, the commissioner adopted rule 300.104, which prohibits the "manufacture" and "processing" of "consumable hemp products for smoking." 25 TEX. ADMIN. CODE § 300.104.⁸

The plaintiffs in this case (collectively, the Hemp Companies) are Texas-based entities that manufacture, process, distribute, and sell hemp products—including smokable hemp products—in Texas.⁹ They filed this suit against the Texas Department of State Health Services and its commissioner (collectively, the Department), seeking a declaration that section 443.204(4) and rule 300.104 violate the Texas Constitution's due-course clause and an injunction prohibiting their enforcement.¹⁰

After initially granting a temporary injunction against the rule's enforcement,¹¹ the trial court rendered a final judgment declaring that section 443.204(4) violates the Texas Constitution and that rule 300.104 is invalid in its entirety and enjoining the Department from enforcing the statute or the rule. We accepted the Department's direct appeal.

II.Due Course of Law

The Hemp Companies assert that the state's ban against the manufacturing and processing of smokable hemp products in Texas violates the Constitution's due-course clause because the ban has no rational connection to any possible governmental interest¹² and its real-world effect is so burdensome as to be oppressive in light of any governmental interest.¹³ They rely in particular on our decision in Patel v. Texas Department of Licensing and Regulation , 469 S.W.3d 69, 90 (Tex. 2015) (holding that state licensing requirements for commercial eyebrow threading were "so burdensome that they are oppressive").

Before we can address the Hemp Companies’ no-rational-basis and oppressiveness arguments, however, we must determine whether the Hemp Companies have alleged the deprivation of an interest the due-course clause protects. See Honors Acad., Inc. v. Tex. Educ. Agency , 555 S.W.3d 54, 61 (Tex. 2018) ("Before any substantive or procedural due-process rights attach, however, the citizen must have a liberty or property interest that is entitled to constitutional protection.").¹⁴ The Department argued in the trial court and continues to argue in this Court that the due-course clause does not protect the Hemp Companies’ interest in manufacturing or processing smokable hemp products. Under our "two-step inquiry," we address this argument first. Tex. S. Univ. v. Villarreal , 620 S.W.3d 899, 905 (Tex. 2021).¹⁵ Because we agree with the Department that the due-course clause does not protect the Hemp Companies’ asserted interest, we do not reach the inquiry's second step.¹⁶

A. Work-related interests

The Hemp Companies assert that the state's ban on the manufacturing and processing of smokable hemp products impermissibly infringes on their "liberty" and "property" rights to "work and earn a living." This Court and the U.S. Supreme Court have at times recognized that the due-course and due-process clauses can protect work-related economic interests, which have sometimes been characterized as the "right to earn a living," Smith v. Decker , 158 Tex. 416, 312 S.W.2d 632, 633 (Tex. 1958), or the right to engage in a "chosen profession," Greene v. McElroy , 360 U.S. 474, 492, 79 S.Ct. 1400, 3 L.Ed.2d 1377 (1959).

But protected work-related interests, although sometimes broadly stated, are not without limits. Neither "property rights nor contract rights are absolute," and "[c]ertain kinds of business may be prohibited" altogether. Nebbia v. New York , 291 U.S. 502, 523, 528, 54 S.Ct. 505, 78 L.Ed. 940 (1934) (footnotes omitted).¹⁷ The due-course clause is not so broad as to protect every form and method in which one may choose to work or earn a living, and some work-related interests do not enjoy constitutional protection at all. Many cases have thus described the constitutionally protected work-related interest more narrowly as a right to "engage in any of the common occupations of life," Meyer v. Nebraska , 262 U.S. 390, 399, 43 S.Ct. 625, 67 L.Ed. 1042 (1923) (emphasis added),¹⁸ or as a right to follow or pursue a "lawful calling, business, or profession," Dent v. West Virginia , 129 U.S. 114, 121, 9 S.Ct. 231, 32 L.Ed. 623 (1889) (emphasis added).¹⁹

To decide this case, we need not determine precisely what constitutes a "common occupation" or a "lawful calling." Nor must we decide how or whether Texas's due-course clause protects all such occupations or callings. It is enough to observe that the due-course clause, like its federal counterpart, has never been interpreted to protect a right to work in fields our society has long deemed "inherently vicious and harmful." Murphy v. California , 225 U.S. 623, 628, 630, 32 S.Ct. 697, 56 L.Ed. 1229 (1912) (stating that such occupations are "neither protected by the state nor the Federal Constitution"). Historically, for example, gambling and racetrack ownership were not "one of life's ‘common occupations,’ " and the desire to make a living by owning such an enterprise does not fall within the "liberty" or "property" interests the due-process and due-course clauses protect. Medina v. Rudman , 545 F.2d 244, 251 (1st Cir. 1976) (explaining that an "investment in such an enterprise, when permitted at all, is plainly open to the strictest kind of supervision"). Citizens are "bound to know" that such occupations can "lawfully be regulated out of existence." Murphy , 225 U.S. at 630, 32 S.Ct. 697 (rejecting constitutional challenge to an ordinance prohibiting "the keeping of billiard or pool tables for hire").

Similarly, some occupational interests exist only because the government has created them or made them available. For due-process and due-course purposes, such an interest is properly characterized as a form of "property" interest. Villarreal , 620 S.W.3d at 908.²⁰ But to be constitutionally protected, a property interest must be "vested...