Johnson v. Jackley

#28379-a-SLZ
2018 S.D. 37

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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JONI JOHNSON, SOUTH DAKOTA
BIOTECHNOLOGY ASSOCIATION, and
PHARMACEUTICAL RESEARCH AND
MANUFACTURERS OF AMERICA, Applicants and Appellants,

v.

MARTY J. JACKLEY, in his
Official Capacity as South Dakota
Attorney General, Respondent and Appellee.

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APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
HUGHES COUNTY, SOUTH DAKOTA

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THE HONORABLE MARK BARNETT
Judge

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JON HANSEN
LISA M. PROSTROLLO
MATTHEW S. MCCAULLEY
Redstone Law Firm LLP Attorneys for applicants and
Sioux Falls, South Dakota appellants.

MARTY J. JACKLEY
Attorney General

STEVEN R. BLAIR
Assistant Attorney General Attorneys for respondent and
Pierre, South Dakota appellee.

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CONSIDERED ON BRIEFS ON
MARCH 19, 2018
OPINION FILED 05/09/18
#28379

ZINTER, Justice

[¶1.] Joni Johnson, the South Dakota Biotechnology Association, and the

Pharmaceutical Research and Manufacturers of America (collectively, “Appellants”)

requested a writ of certiorari to challenge an Attorney General’s ballot explanation

of a proposed initiated measure. The proposed measure would limit the price state

agencies may pay for prescription drugs. Appellants alleged the Attorney General’s

explanation did not comply with the requirements of SDCL 12-13-25.1. The circuit

court denied the writ, and Appellants appeal. We affirm.

Facts and Procedural History

[¶2.] In South Dakota, a proposed initiated measure’s full text does not

appear on the ballot. Instead, the Attorney General prepares, and the Secretary of

State includes, a statement that contains a “title,” an “explanation,” and a

description of “legal consequences.” SDCL 12-13-25.1. Under the statute:

1. The title must be “a concise statement of the subject of the
proposed initiative”;
2. The explanation must be “an objective, clear, and simple
summary to educate the voters of the purpose and effect of the
proposed initiative or initiated [measure]”; and
3. The legal consequences must be “a description of the legal
consequences of the proposed initiative . . . , including the likely
exposure of the state to liability if the proposed initiative. . . is
adopted.”

See id. Additionally, the explanation may not exceed two hundred words. Id.

[¶3.] The proposed measure in this case, according to its title, is an act to

“establish a prescription drug pricing law enabling a State Agency to pay the same

or lower prices for prescription drugs as the prices paid by the United States

Department of Veterans Affairs.” The first three sections prohibit state agencies

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from entering into agreements with drug manufacturers for the purchase of

prescription drugs unless the net cost is equal to or less than that paid by the

United States Department of Veterans Affairs. Section 4 requires the promulgation

of implementing regulations, and section 5 purports to provide legal standing to the

proponents if the proposal is approved and challenged in post-election court

proceedings.1

1. The complete text of sections 1 through 5 is as follows:
Section 1. Notwithstanding any other provision of law, a State
Agency may not enter into any agreement with the
manufacturer of any drug for the purchase of a prescribed drug
or agree to pay, directly or indirectly, for a prescribed drug,
unless the net cost of the drug, inclusive of cash discounts, free
goods, volume discounts, rebates, and all other discounts or
credits, as determined by the purchasing department, agency, or
entity is the same as or less than the lowest price paid for the
same drug by the United States Department of Veterans Affairs.
Section 2. The price ceiling described in section 1 of this Act
applies to all programs in which the State or any of its agencies
is the ultimate payer for the drug, even if it does not purchase
the drug directly.
Section 3. In addition to any agreement for any cash discounts,
free goods, volume discounts, rebates, and any other discounts
or credits already in place for these programs, the State and its
agencies shall enter into additional agreements with drug
manufacturers for further price reduction so the net cost of the
drug, as determined by the purchasing department, agency, or
entity, is the same as or less than the lowest price paid for the
same drug by the United States Department of Veterans Affairs.
Section 4. The Bureau of Administration shall adopt rules,
pursuant to chapter 1-26 to obtain information about
prescription drug prices, credits, discounts, rebates, and other
price advantages for the purpose of determining the lowest price
at which a prescription drug is being offered to the United
States Department of Veterans Affairs and to establish the
lowest price at which prescription drugs may be purchased by
any State Agency. Any State agency may seek waivers of
federal law, rule or regulation necessary to implement this Act.
(continued . . .)
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[¶4.] On August 22, 2017, the Attorney General submitted the following

statement for the proposed measure:

Title:
An initiated measure establishing a cap on the price a State
agency may pay for a prescription drug.
Explanation:
This measure limits the amount that a State agency may pay for
a prescription drug. Under the measure, a State agency may
not directly or indirectly pay more for a prescription drug than
the U.S. Department of Veterans Affairs pays for that same
drug.
The measure requires the State Bureau of Administration to
enact rules establishing prescription drug prices payable by
State agencies.

[¶5.] Appellants objected to the explanation and filed an application for a

writ of certiorari to challenge it. Appellants argued that although the explanation

summarized the measure’s “purpose,” it did not summarize the “effect” or “legal

consequences” of sections 1-4. They also argued it did not summarize any “purpose,

effect, or legal consequence” of section 5.

[¶6.] The circuit court denied the writ. The court noted there was no

dispute the explanation summarized the proposed measure’s purpose—to limit “the

price to be paid by state agencies for prescription drugs[.]” The court concluded that

the explanation also expressed the “effect” and “legal consequences” of sections 1-4

________________________
(. . . continued)
Section 5. If any provision of this Act is challenged in court, the
committee of individuals responsible for circulating the petition
to qualify this Act for the ballot are deemed to have a direct and
personal stake in defending this Act from constitutional or other
challenges. If the Act is challenged, committee members shall
be deemed to have legal standing to assert the member’s direct
and personal stake by defending the Act’s validity.

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because the purpose, effect, and legal consequences were the same in this case.

Although the explanation did not summarize section 5, the court ruled an

explanation was unnecessary because section 5 was a collateral provision that could

not be simply summarized in the word limit allowed under SDCL 12-13-25.1.

Relying on this Court’s precedents citing Gormley v. Lan, 438 A.2d 519 (N.J. 1981),

the court expressed the view that Gormley deference precluded court intervention

unless the Attorney General’s acts were manifestly corrupt, arbitrary, or

misleading. Appellants appeal each of these rulings.

Decision

[¶7.] Certiorari is “granted only in very limited circumstances.” State ex rel.

Johnson v. Pub. Utils. Comm’n of S.D., 381 N.W.2d 226, 230 (S.D. 1986). “[T]he

review . . . cannot be extended further than to determine whether the inferior court,

tribunal, board, or officer . . . has regularly pursued the authority of such court,

tribunal, board, or officer.” SDCL 21-31-8. In making that determination, we “do

not review whether the [officer’s] decision is right or wrong.” Adolph v. Grant Cty.

Bd. of Adj’t, 2017 S.D. 5, ¶ 7, 891 N.W.2d 377, 381. Rather, when an officer has

jurisdiction, his acts will be sustained unless he did “some act forbidden by law or

neglected to do some act required by law.” Peters v. Spearfish ETJ Planning

Comm’n, 1997 S.D. 105, ¶ 6, 567 N.W.2d 880, 883.

[¶8.] Thus, in ballot explanation cases, we must determine whether the

Attorney General’s explanation satisfies the legal requirements of SDCL 12-13-25.1:

the explanation must include the proposed measure’s purpose, effect, and legal

consequences. See Ageton v. Jackley, 2016 S.D. 29, ¶ 14, 878 N.W.2d 90, 94. In

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making that determination, we “cannot be concerned with what the Attorney

General should have said or could have said or might have said or what is implied

or suggested by what he did say. Rather we must focus on the language chosen.”

Id. ¶ 25, 878 N.W.2d at 96. Ultimately, explanations cannot be set aside merely

because they could be better. They need only be adequate. Id.; SDCL 12-13-9.2.

[¶9.] Before reviewing the adequacy of this explanation, we first consider

Appellants’ argument regarding the deference that must be given to the Attorney

General’s choice of language. Appellants contend the circuit court erroneously

applied Gormley’s standard. See Gormley, 438 A.2d at 525 (“[W]here . . . authority

confers discretion upon [administrative] agents, their actions will ordinarily not be

overturned by the courts unless they are manifestly corrupt, arbitrary or

misleading.”). Appellants contend the Gormley standard is overly deferential and

ignores the statutory requirements in SDCL 12-13-25.1. We disagree.

[¶10.] Although ballot explanations must satisfy the threshold requirements

of SDCL 12-13-25.1, we have repeatedly emphasized that the Attorney General

must be given “discretion as to how to author” them. S.D. State Fed’n of Labor

AFL-CIO v. Jackley, 2010 S.D. 62, ¶ 9, 786 N.W.2d 372, 376 (construing parallel

statute); Ageton, 2016 S.D. 29, ¶ 23, 878 N.W.2d at 96. That is because the

Attorney General’s duty is administrative in nature, and “[u]nder the separation-of-

powers doctrine, a court may not ‘exercise or participate in the exercise of functions

which are essentially legislative or administrative.’” State, Dep’t of Game, Fish &

Parks v. Troy Twp., 2017 S.D. 50, ¶ 14, 900 N.W.2d 840, 846 (quoting Fed. Radio

Comm’n v. Gen. Elec. Co., 281 U.S. 464, 469, 50 S. Ct. 389, 390, 74 L. Ed. 969

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(1930)). Thus, as stated shortly after ballot explanations first became required, the

Attorney General must have “significant discretion” in performing the statutory

duty of drafting ballot explanations. Hoogestraat v. Barnett, 1998 S.D. 104, ¶ 21,

583 N.W.2d 421, 425 (Gilbertson, J., concurring) (pointing out that Gormley

“properly” recognized the discretion must be significant).

[¶11.] Discretion in this sense permits the exercise of judgment in choosing

between competing considerations.

The term discretion itself involves the idea of choice, of an
exercise of the will, of a determination made between competing
considerations. In order to have an “abuse” in reaching such
determination, the result must be so palpably and grossly
violative of fact and logic that it evidences not the exercise of
will but perversity of will, not the exercise of judgment but
defiance thereof, not the exercise of reason but rather of passion
or bias.

Montana-Dakota Utils. Co. v. Parkshill Farms, LLC, 2017 S.D. 88, ¶ 19, 905 N.W.2d

334, 341 (quoting Basin Elec. Power Coop. v. Payne, 298 N.W.2d 385, 388

(S.D. 1980)). The Gormley standard fits comfortably within this understanding.

Moreover, we have repeatedly referenced Gormley in emphasizing the highly

discretionary nature of the Attorney General’s duty. See Ageton, 2016 S.D. 29, ¶ 25,

878 N.W.2d at 96; AFL-CIO, 2010 S.D. 62, ¶ 7, 786 N.W.2d at 375; Schulte v. Long,

2004 S.D. 102, ¶¶ 11, 26, 687 N.W.2d 495, 498, 501-02 (majority opinion, and

Zinter, J., concurring); Hoogestraat, 1998 S.D. 104, ¶ 21, 583 N.W.2d at 425

(Gilbertson, J., concurring). Therefore, in determining whether this explanation

satisfied SDCL 12-13-25.1’s requirements, the circuit court did not err in utilizing a

standard of review that considered whether the Attorney General’s actions were

“manifestly corrupt, arbitrary or misleading.” See Gormley, 438 A.2d at 525.

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[¶12.] We next turn to Appellants’ underlying argument that the explanation

fails to conform to the requirements of SDCL 12-13-25.1. Appellants first contend

that although the explanation adequately summarizes the purpose of sections 1-4, it

does not summarize the effect of those sections. In ballot explanation cases,

purpose is that “which one sets before him to obtain or accomplish,” and effect is

that “which is produced by an agent or . . . result[.]” AFL-CIO, 2010 S.D. 62, ¶ 16,

786 N.W.2d at 377. Appellants contend this explanation fails to explain the effect of

the proposed measure because purpose and effect “must be something different,”

and although this explanation addresses purpose, it fails to mention the sections’

effect.

[¶13.] Appellants’ contention fails to recognize that the purpose and effect of

a proposed law can be the same. We acknowledge that in some cases, a proposed

measure’s purpose and effect may be different. For example, in Ageton, the alleged

purpose of that measure was to end short-term lending in the state, and the

measure’s effect was to simply cap interest rates at 36%. 2016 S.D. 29, ¶ 7,

878 N.W.2d at 92. But here, as the circuit court observed, the purpose and effect of

sections 1-4 are the same. Both that which the proponents seek to obtain and the

result of the proposal is what the explanation indicates—a limitation on the amount

state agencies may pay for prescription drugs to that paid by the United States

Department of Veterans Affairs. We acknowledge that Appellants have suggested

additional potential effects of the proposed measure. But the Attorney General is

not required to “include every practical or possible effect of each initiated measure,”

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id. ¶ 25, 878 N.W.2d at 96, and Appellants have failed to demonstrate that their

suggested effects are anything more than possibilities.2

[¶14.] Appellants next contend the explanation fails to address the legal

consequences of sections 1-4. We have previously stated that in describing the legal

consequences of a proposed measure, the Attorney General is acting as legal counsel

for the State. Therefore, it is up to the Attorney General’s “professional discretion”

and “professional legal judgment” as an attorney to assess and describe the “likely”

legal consequences of a particular measure. AFL-CIO, 2010 S.D. 62, ¶ 25,

786 N.W.2d at 379. Here, Appellants’ challenge is based only on “possible litigation

scenarios” arising from many of the same speculative effects outlined in footnote 2.

Additionally, Appellants have not identified any facts or law suggesting those

possible legal claims are sufficiently meritorious to likely be asserted. Appellants

have not established that the Attorney General abused his discretion.

2. Appellants’ suggested effects are facially speculative. Appellants contend the
measure could:
(1) raise the price of prescription drugs for those with private
insurance if prescription drug suppliers raise prices to recoup
losses, (2) lead to drug shortages for vulnerable populations such
as the elderly, low-income children, and low-income parents that
rely on Medicaid for coverage if prices are set so low that drug
companies will not sell drugs to the state Medicaid program, (3)
lead to shortages of prescription drugs for state employees
reliant on the State of South Dakota’s self-funded health
insurance plan if the state is unable to negotiate a low enough
price from drug companies, or (4) incentivize individual
pharmaceutical companies to stop giving steep rebates and
discounts to the Department of Veterans Affairs in order to
charge higher prices to state agencies.
(Emphasis added.)

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[¶15.] Appellants finally contend the explanation fails to provide any

explanation of section 5, which purports to grant standing to the proponents if the

measure passes and is subsequently challenged in court. However, we agree with

the circuit court that an explanation was not required. Ballot explanations may not

exceed two hundred words, and the Attorney General is not required to include

every possible or even practical effect of each initiated measure. Ageton, 2016 S.D.

29, ¶ 25, 878 N.W.2d at 96. Here, section 5 is a contingent, legal-standing provision

that is wholly collateral to the proposed measure’s purpose and effect of limiting

drug prices. Additionally, legal standing is a litigation issue that affects the

personal interests of the proponents rather than the electorate as a whole.

[¶16.] “[F]ocus[ing] on the language chosen” by the Attorney General, see id.,

we cannot say that he failed to carry out his statutory duty to provide a ballot

explanation meeting the requirements of SDCL 12-13-25.1. We affirm.

[¶17.] GILBERTSON, Chief Justice, and SEVERSON, KERN, and JENSEN,

Justices, concur.

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