08-000496 Big Pig, Inc. vs. Department Of Business And Professional Regulation, Division Of Alcoholic Beverages And Tobacco Status: Closed Recommended Order on Thursday, July 3, 2008.

Summary: Respondent correctly rejected entries of corporate applicants as more than one application from 100 percent shareholder. A corporate applicant may challenge an adopted rule in a 120.57 proceeding.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LATINO GRANDE, INC., )

)

Petitioner, )

)

vs. ) Case No. 08-0495

)

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF ALCOHOLIC BEVERAGES )

AND TOBACCO, )

)

Respondent. )

)

BIG PIG, INC., )

)

Petitioner, )

)

vs. ) Case Nos. 08-0496

) 08-0497

DEPARTMENT OF BUSINESS AND ) 08-0498

PROFESSIONAL REGULATION, )

DIVISION OF ALCOHOLIC BEVERAGES )

AND TOBACCO, )

)

Respondent. )

)

RECOMMENDED ORDER

Administrative Law Judge (ALJ) Daniel Manry conducted the

final hearing of these cases for the Division of Administrative

Hearings (DOAH) on April 3, 2008, in Orlando, Florida.

APPEARANCES

For Petitioner: Jed Burman, Esquire

Infantino and Burman

Post Office Drawer 30

Winter Park, Florida 32790

For Respondent: Joshua B. Moye, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street, Suite 42

Tallahassee, Florida 32399-2202

STATEMENT OF THE ISSUE

The issue is whether Respondent should exclude four entries

in quota drawings for alcohol beverage licenses (license quota

drawings) pursuant to Subsection 561.19(2)(d), Florida Statutes

(2007), 1 and Florida Administrative Code Rules 61A-1.006(8) and

61A-5.0105(8). 2

PRELIMINARY STATEMENT

By letters dated November 1, 2007, Respondent proposes to

reject four applications for entries into license quota

drawings. The petitioners timely requested an administrative

hearing to challenge each of the four proposed rejections, and

Respondent referred the matter to DOAH to conduct the hearing.

DOAH consolidated the proceedings pursuant to the joint request

of the parties.

At the hearing, the petitioners and Respondent each

presented the testimony of one witness. The petitioners and

Respondent submitted, respectively, nine and six exhibits for

admission into evidence. Respondent submitted one impeachment

exhibit. The identity of the witnesses and exhibits and any

attendant rulings are reported in the one-volume Transcript of

the hearing filed with DOAH on April 28, 2008.

At the conclusion of the hearing, the ALJ granted the

parties' joint request to file their proposed recommended orders

(PROs) 30 days after the Transcript would be filed with DOAH.

The parties timely filed their respective PROs on May 27, 2008.

FINDINGS OF FACT

1. Respondent is the agency responsible for regulating

alcoholic beverage licenses (beverage licenses) in the state.

Each year, on or after October 1, 2000, Subsection 561.20(1)

authorizes Respondent to issue an additional beverage license

for each population increase of 7,500 persons in each county in

the state.

2. Applicants typically outnumber available beverage

licenses. A beverage license that becomes available by reason

of a population increase is a so-called "full liquor license."

A full liquor license entitles the licensee to sell alcoholic

beverages on the premises and as a package store. Full liquor

licenses are highly valued in the industry.

3. When applicants outnumber available beverage licenses,

Subsection 561.19(2) authorizes Respondent to advertise the

availability of a beverage license and to conduct a license

quota drawing. The statute requires the drawing to be public

and to be a "double random selection drawing." The statute

requires that the "double random selection drawing" shall:

[A]llow each applicant whose application is

complete and does not disclose on its face

any matter rendering the applicant

ineligible an equal opportunity of obtaining

an available license. After all

applications are filed with the director,

the director shall then determine by random

selection drawing the order in which each

applicant's name shall be matched with a

number selected by random drawing, and the

number shall determine the order in which

the applicant will be considered for a

license. . . .

§ 561.19(2)(a).

4. A license quota drawing determines only the order in

which Respondent will consider applications for a beverage

license. An applicant selected in the drawing does not

automatically receive a beverage license. The qualifications of

a selected applicant must be vetted in the same manner as any

other applicant before the selected applicant can obtain a

beverage license.

5. In 2007, Respondent scheduled a license quota drawing

for beverage licenses that became available by reason of

population increases in Lake, Orange, and Polk Counties. The

precise date of the drawing in each county is not clear in the

record.

6. On October 1, 2007, Mr. Sam C. Meiner, Esquire, filed

separate entries for the quota license drawings in Lake, Orange,

and Polk Counties. Respondent accepted Mr. Meiner's three

entries.

7. Petitioner, Latino Grande, Inc. (Latino), submitted an

entry for the drawing in Orange County. Petitioner, Big Pig,

Inc. (Big Pig), submitted separate applications for the drawings

in Orange, Polk, and Lake Counties.

8. By letter dated November 7, 2007, entitled "Notice of

Disapproval," Respondent rejected the entry from Latino. The

ground stated in the Notice of Disapproval is "[B]ecause you

have filed more than one application" for Orange County.

9. In three separate Notices of Disapproval, each of which

is dated November 7, 2007, Respondent rejected the entries from

Big Pig for the drawings in Lake, Orange, and Polk Counties.

The ground stated in each Notice of Disapproval is "[B]ecause

you have filed more than one application" in each county.

10. Latino and Big Pig each filed a petition for an

administrative hearing, pursuant to Subsection 120.57(1), to

challenge each of the four Notices of Disapproval. Latino's

request for hearing became DOAH Case No. 08-0495. Big Pig's

request for hearing in the drawings for Orange, Polk, and Lake

Counties became DOAH Case Nos. 08-0496, 08-0497, and 08-0498,

respectively. Pursuant to the parties' joint request, DOAH

consolidated the four cases into DOAH Case No. 08-0495.

11. Latino and Big Pig are closely held Florida

corporations. Mr. Meiner is the sole shareholder, director, and

officer of each corporation. 3

12. Subsection 561.19(2)(d) prohibits Respondent from

considering "more than one application from any one person,

firm, or corporation" 4 in a drawing for one county. Chapter 561

does not define "more than one application from the same person,

firm, or corporation" and does not define the term "person."

13. Some insight into the meaning of the term "person" can

be gleaned from Florida Administrative Code Rule 61A-1.006(8).

The term "person" shall not mean a

corporation that owns part or all of the

stock of an applicant corporation or

licensed corporation; however, it does

include officers, directors, and

shareholders of each shareholder

corporation.

14. The definition of a "person" in Rule 61A-1.006(8) does

not reach the facts in this case. This case does not involve a

shareholder corporation. Latino is not a shareholder of Big

Pig, and Big Pig is not a shareholder of Latino. Nor does this

case involve an officer, director, or shareholder in a

shareholder corporation. Mr. Meiner is not an officer,

director, or shareholder of a corporation that is a shareholder

of either Latino or Big Pig. 5

15. Latino, Big Pig, and Mr. Meiner are each a person

within the meaning of Subsection 1.01(3). Latino and Big Pig

are corporations, and Mr. Meiner is an individual.

16. Latino, Big Pig, and Mr. Meiner comprise a "group or

combination" that is a "person" defined in Subsection 1.01(3).

Mr. Meiner owns all of the stock of each corporation, and the

three persons form a "group" or "combination" that is

statutorily defined as a "person" in Subsection 1.01(3).

17. Respondent is statutorily prohibited from accepting

more than one application from any one person. Respondent

correctly accepted the application of Mr. Meiner and correctly

rejected the applications of the other members of the "group" or

"combination" defined as one "person" in Subsection 1.01(3).

18. Apart from Subsection 1.01(3), Respondent correctly

applied Florida Administrative Code Rule 61A-5.0105(8) to reject

the applications from Latino and Big Pig. Florida

Administrative Code Rule 61A-5.0105(8) provides:

For the purposes of this section, "more than

one applicant" shall mean that an applicant

may have a direct or indirect interest in

only one application in each county or city

for which a license is available, but may

file separate entry forms for licenses in

different counties or cities for an

opportunity to obtain an available

license. [6]

19. Neither Florida Administrative Code Rule 61A-5.0105

nor Chapter 561 defines the phrase "direct or indirect

interest." Neither party explicated any reasons in the record

that require agency expertise to define a "direct or indirect

interest." The issue of whether Mr. Meiner's 100 percent stock

ownership of Latino and Big Pig is a "direct or indirect

interest" in the corporate applications is an issue of fact to

be determined by the fact-finder. The fact-finder finds that

complete ownership and control of an applicant corporation is a

direct or indirect interest within the meaning of Respondent's

adopted rule.

20. Mr. Meiner has a "direct or indirect interest" in the

application submitted by Latino for the license quota drawing in

Orange County. Mr. Meiner owns all of the stock of the

applicant corporation. Respondent correctly rejected the

application of Latino, in which Mr. Meiner has a direct or

indirect interest, as more than one application from Mr. Meiner.

21. Mr. Meiner has a "direct or indirect interest" in the

applications submitted by Big Pig for the license quota drawings

in Lake, Polk, and Orange Counties. Mr. Meiner owns all of the

stock of the applicant corporation. Respondent correctly

rejected the applications of Big Pig, in which Mr. Meiner has a

direct or indirect interest, as more than one application from

Mr. Meiner.

22. Latino and Big Pig assert two final arguments, each of

which involves mixed issues of fact and law. During the

hearing, counsel for Latino and Big Pig referred to the two

arguments as rule challenges, but counsel did not file a

separate rule-challenge petition pursuant to Subsection 120.56

(a 120.56 proceeding), and Respondent has not objected to the

consideration of the rule challenges in this proceeding, which

is conducted pursuant to Subsection 120.57(1) (a 120.57

proceeding). 7 The complete arguments concerning the two rule

challenges appear in pages 10 through 12 of the PRO filed by

Latino and Big Pig. The first argument, in substance,

challenges as an unadopted rule an agency statement in a printed

provision on the back of each entry form from Latino and Big

Pig. The substance of the second argument challenges an adopted

rule in Florida Administrative Code Rule 61A-5.0105(8). The

factual aspects of the two arguments are addressed in the

remaining findings.

23. The alleged unadopted rule is stated in a provision

common to each entry form submitted by Latino and Big Pig. In

relevant part, the provision states:

The name of each individual entrant,

corporate officer, directly interested

person, etc. is required to be entered in

Part B [labeled "List All Interested

Persons"]. A person "interested" in the

license or licensed business includes, but

is not limited to, a person who agrees to do

any of the following: enter into any

financial arrangement through joint funds,

investing funds, cosigning or guaranteeing a

note or lease, or any action that creates

funds for a transaction or the ability of

the business to operate [hereinafter,

"financial interest"]. This may include

Spouse, Officer(s), Director(s),

Stockholder(s), Chief Executive, Limited and

General Partners(s), Corporation(s), or any

other entity connected with the business

. . . .

24. It is undisputed that neither Mr. Meiner, Latino nor

Big Pig has any financial interest in the other except

Mr. Meiner's 100 percent stock ownership of each corporation. 8

However, a "financial interest" is not the factual ground

alleged in the Notices of Denial issued to Latino and Big Pig.

Rather, the Notices of Denial state that the ground for denial

is "[B]ecause you have filed more than one (1) application for

the above referenced county." The pertinent provision common to

the back of each entry form is not a stated ground for rejecting

the entries of Latino and Big Pig, the challenge to that

provision is not material to this proceeding, and the challenge

is deemed to be moot because it does not affect the substantial

interests of Latino and Big Pig in this proceeding.

25. Latino and Big Pig challenge an adopted rule in

Florida Administrative Code Rule 61A-5.0105(8) (the challenged

rule). The substance of the challenge may be fairly summarized

as alleging that legislative changes in 2000 deprive the

challenged rule of any statutory authority and that the

challenged rule conflicts with the terms of the current statute.

26. Latino and Big Pig begin their collective argument

with former Subsection 561.01(14), Florida Statutes (1981).

That statute defined the terms "licensee," "applicant" or

"person" to mean:

[A]n individual, corporation, firm,

partnership . . . or any such entity having

a financial interest , directly or

indirectly, in another such entity.

(Emphasis supplied)

27. Latino and Big Pig acknowledge that the decision in

Peterson v. Department of Business Regulation , 451 So. 2d 983

(Fla. 1st DCA 1984), supports Respondent's proposed rejection of

the applications of Latino and Big Pig. In relevant part, the

court construed Subsections 561.19(2) and 561.01(14), Florida

Statutes (1981), by reading the two statutes together and

holding that it was improper to include in a drawing pool

separate applications of persons who, directly or indirectly,

are financially interested in other applications. Peterson , 451

So. 2d at 985.

28. Latino and Big Pig argue that legislative authority

for the challenged rule has been repealed. The adopted rule was

last amended in 1998, and Subsection 561.01(14), Florida

Statutes (2000), deleted any definition of the terms "applicant"

or "person," deleted any reference to a "financial interest,"

and deleted any reference to a "direct or indirect interest."

The statute now reads:

"Licensee" means a legal or business entity,

person, or persons that hold a license

issued by the division and meet the

qualifications set forth in s. 561.15.

29. Petitioner's rule challenge is rejected for two

factual reasons. First, the legislative changes in 2000 do not

affect either the law implemented in the challenged rule or the

specific authority for the challenged rule. Second, the facts

at issue in Peterson are different from those at issue in this

proceeding.

30. The challenged rule implements Section 561.19 pursuant

to the specific authority in Section 561.11. Although the

decision in Peterson relied on Subsection 561.01(14), Florida

Statutes (1981), to guide the court's interpretation of

Subsection 561.19(2), the changes in Subsection 561.01(14),

Florida Statutes (2000), affected neither the law implemented in

the challenged rule nor the specific authority for the rule.

31. Deletion of the definition of a "person" from

Subsection 561.01(14) leaves only the general definition of a

"person" in Subsection 1.01(3). Reliance in the challenged rule

on a "direct or indirect interest" in an application is

consistent with the statutory definition in Subsection 1.01(3)

of a "person" to include a "group" or "combination."

32. The decision in Peterson did not resolve the issue of

whether a 100 percent shareholder and his wholly-owned

corporation are the same person within the meaning of Subsection

561.19(2)(d). Rather, Peterson dealt with the factual issue of

whether certain individuals, each of whom was clearly a person,

had a financial interest in the applications of other

individuals.

CONCLUSIONS OF LAW

33. DOAH has jurisdiction over the parties and the subject

jurisdiction of DOAH to resolve the rule challenges in this

proceeding is discussed later in this Recommended Order.

34. The burden of proof varies with the matter at issue in

this proceeding. Latino and Big Pig have the initial burden of

proving by a preponderance of the evidence that their separate

applications were accurate and complete when submitted and were

submitted in a timely manner. See M.H. and A.H. v. Department

of Children and Family Services , 977 So. 2d 755, 759 (Fla. 2d

DCA 2008)(applicant for license has initial burden of

demonstrating fitness to be licensed)( citing Osborne Stern & Co.

v. Department of Banking and Finance , 647 So. 2d 245, 248 (Fla.

1st DCA 1994)( Osborne Stern I ), approved in part and quashed in

part by 670 So. 2d 932 (Fla. 1996) ( Osborne Stern II ).

35. Latino and Big Pig satisfied their burden of proof

concerning their entries into the relevant drawings. It is

undisputed that the relevant applications were accurate and

complete when submitted and were submitted in a timely manner.

36. Respondent has the burden of proving the specific

facts alleged in the Notices of Denial as the grounds for

rejecting the entries of Latino and Big Pig. Respondent must

show by a preponderance of the evidence that the applications

from Latino and Big Pig constitute more than one application

from the same person, firm, or corporation.

37. Respondent asserts the affirmative of factual

allegations that the applications from Latino and Big Pig

represent more than one application from the same person and

that Mr. Meiner has a direct or indirect interest in Latino and

Big Pig. The party asserting the affirmative of the issue

generally bears the burden of proof. Florida Department of

Transportation v. J.W.C. Company, Inc. , 396 So. 2d 778 (Fla. 1st

DCA 1981); Balino v. Department of Heath and Rehabilitation

Services , 348 So. 2d 349 (Fla. 1st DCA 1977). Cf. M.H. ,

977 So. 2d at 760-761 (applicant does not have the burden of

disproving a charge of specific misconduct)( citing Osborne Stern

II , 670 So. 2d at 934; Mayes v. Department of Children & Family

Services , 801 So. 2d 980 (Fla. 1st DCA 2001). 9

38. Respondent satisfied its burden of proof. For reasons

stated in the Findings of Fact and not repeated here, Respondent

showed by a preponderance of the evidence that Mr. Meiner has a

direct or indirect interest in Latino and Big Pig, within in the

meaning of Florida Administrative Code Rule 61A-5.0105(8), and

that the applications from Latino and Big Pig constitute more

than one application from Mr. Meiner. Respondent correctly

rejected the applications from Latino and Big Pig as

applications prohibited by Subsection 561.19(2)(d).

39. The remaining conclusions address arguments by Latino

and Big Pig that, in substance, challenge an alleged unadopted

rule and an adopted rule in Florida Administrative Code Rule

61A-5.0105(8). The issue of whether DOAH has jurisdiction to

resolve the disputes requires a separate legal analysis for each

argument.

40. DOAH has jurisdiction in a 120.57 proceeding to

resolve the dispute pertaining to an alleged unadopted rule.

Agency action that determines the substantial interests of

Latino and Big Pig and that is based on an unadopted rule is

subject to de novo review in this proceeding. § 120.57(1)(e).

Assuming arguendo that the challenged provision on the back of

the entry forms submitted by Latino and Big Pig is an unadopted

rule, the proposed agency action that affects the substantial

interests of Latino and Big Pig is not based on the challenged

provision, and the challenged provision is not subject to de

novo review in this proceeding. 10

41. The remaining jurisdictional issue is whether DOAH has

jurisdiction to resolve the challenges of Latino and Big Pig to

an adopted rule. The ALJ concludes that DOAH does have

jurisdiction to resolve this aspect of the dispute between the

parties.

42. The legal analysis of the remaining jurisdictional

issue begins with Subsection 120.56(1)(e). In relevant part,

the statute provides that, "Failure to proceed under this

section shall not constitute failure to exhaust administrative

remedies." The quoted statutory language means that the power

of direct review in Article V, Subsection 4(b)(2), Florida

Constitution (2007), 11 allows a reviewing court to consider a

challenge to an adopted rule for the first time on appeal even

though the rule was not challenged in the lower tribunal.

[I]t is open to a reviewing court to

adjudicate an administrative rule at odds

with the statute it purports to implement,

even when there has been no administrative

rule challenge proceeding below. See State

ex rel. Dep't of Gen. Servs. v. Willis , 344

So. 2d 580, 592 (Fla. 1st DCA 1977)

("[P]rovisions [now codified at section

120.56(1)(e)] are addressed . . . to

district courts of appeal, which might

otherwise rebuff rule challenges by

petitions to 120.57 proceedings because

petitioner did not 'exhaust' the rule

challenge remedies of 120.54

and .56"). . . .

Clemons v. State Risk Management Trust Fund , 870 So. 2d 881, 884

(Fla. 1st DCA 2004)(Benton, J., concurring).

43. The decision in Willis does not limit the meaning of

the relevant statutory language now codified in Subsection

120.56(1)(e) to the power of direct review. The court also

interpreted the statutory language to avoid any appearance of

requiring a duplicative 120.56 proceeding if a substantially

affected party presents his or her rule challenge with other

grievances in a 120.57 proceeding.

The legislative purpose is simply to avoid

any appearance of requiring a substantially

affected party to initiate duplicative

120.54 or .56 proceedings if his rule

challenge is regularly presented with other

grievances under 120.57. . . .

State ex rel. Department of General Services v. Willis ,

344 So. 2d 580, 591-592 (Fla. 1st DCA 1977).

44. A rule challenge that is regularly presented with

other grievances under 120.57 in the lower tribunal would not

require a reviewing court to consider the rule challenge for the

first time on appeal pursuant to the power of direct review.

The rule challenge would have been presented initially with

other grievances in a 120.57 proceeding.

45. Rather than interpreting the absence of a 120.56

proceeding to mean issue preclusion in a 120.57 proceeding, the

decision in Willis construed the relevant statutory language now

codified in Subsection 120.56(1)(e) as enhancing the remedies

available to a substantially affected party. The court

interpreted legislative policy as allowing a substantially

affected party to challenge a rule in a 120.56 proceeding, a

120.57 proceeding, both proceedings, or for the first time on

appeal pursuant to the power of direct review. The court

specifically acknowledged that the purpose of a 120.57

proceeding is not limited to an adjudicatory proceeding but is

legislatively intended to be mechanism for challenging agency

policy, which may be stated as an adopted rule, an unadopted

rule, or nonrule policy.

There is yet a question whether traditional

judicial deference to administrative

remedies is lessened by certain language in

subsections 120.54 and 120.56. Those

sections authorize proceedings for the

invalidation of agency rules, be they

regularly adopted or merely proposed, which

invalidly exercise delegated legislative

authority. [Citations omitted] Subsections

120.54 . . . and [120].56 . . . provide that

"failure to proceed under [those sections]

shall not constitute failure to exhaust

administrative remedies." If the quoted

provisions are to be construed as qualifying

the exclusivity of the entire [Chapter 120,

Administrative Procedure] Act or its most

fundamental remedies, they surprisingly tend

to dissolve the judiciary's self imposed

restriction on intervention by extraordinary

writ even as the Act makes such intervention

less necessary and desirable.

The double entry of those provisions in the

rulemaking and rule-challenge sections and

their conspicuous omission elsewhere make

clear that the Act intends no general

cession of concurrent jurisdiction to the

courts. There is no comparable language in

120.57, the core section which both provides

the mechanism for rule challenges and is the

Act's wider point of entry for those with

more varied or general complaints concerning

agency action: those against whom the agency

has instituted adjudicatory proceedings,

those whose impending injury is not wholly

and precisely traceable to a rule invalidly

exercising delegated legislative authority,

those whose substantial interests are

threatened by several agency causes or

simply by agency action which is proceeding

arbitrarily, imperiously, or obliviously.

We are accustomed to think that the

principal use of hearings is to develop

records for "adjudicatory" or "quasi-

judicial" decisions. [Citations omitted]

That was the limited role of administrative

hearings in years past, when the "universe

of administrative law was hierarchical, with

the judiciary at its apex." [Footnote

omitted] Current understanding of the

administrative process . . . recognizes that

a hearing independently serves the public

interest by providing a forum to expose,

inform and challenge agency policy and

discretion. Section 120.57 is central to

the Act's purpose. . . .

An understanding of 120.57's centrality

makes clear that the [statutory language]--

"Failure to proceed under [120.56] shall not

exhaust administrative remedies"--enhances

remedies available under the Act rather than

encourage circuit court intrusion into the

administrative process. The quoted

provisions are addressed not to circuit

courts but to district courts of appeal,

which might otherwise rebuff rule challenges

by petitions to review 120.57 proceedings

because petitioner did not "exhaust" the

rule challenge remedies of 120.54 and .56.

[Citations omitted] The legislative purpose

is simply to avoid any appearance of

requiring a substantially affected party to

initiate duplicative 120.54 or .56

proceedings if his rule challenge is

regularly presented with other grievances

under 120.57, resulting in final agency

action and a petition for judicial review. [12]

(Emphasis supplied)

Willis , 344 So. 2d at 591-592.

46. The foregoing interpretation of the decision in Willis

is consistent with several legislatively intended purposes for

the APA. 13 In relevant part, the APA creates a point of entry for

a person to challenge proposed agency action that affects his or

her substantial interests. The APA also creates a mechanism for

intra-branch dispute resolution within the executive branch of

government. 14 Finally, the APA creates a mechanism to check

dispute-resolution in the executive branch that goes beyond the

powers, functions, and duties legislatively delegated in the

terms of the statute implemented. 15

47. Dispute-resolution that goes beyond the statute

implemented exercises legislative power within the executive

branch in a manner that is repugnant to the separation of powers

act. Art. II, § 3, Fla. Const. The separation of powers act

encompasses two prohibitions. No branch of government may

encroach upon the powers of another, and no branch may delegate

its power to another. Chiles v. Children A, B, C, D, E, and F ,

589 So. 2d 260, 264-266 (Fla. 1991).

48. Mandatory enforcement of an adopted rule that goes

beyond the statute implemented (an illicit adopted rule) in a

120.57 proceeding, for the sole reason that a substantially

affected party did not file a duplicative 120.56 proceeding,

would deny the executive branch an opportunity to formulate a

dispute-resolution without exercising legislative power and

without the need for an inter-branch judicial review. Mandatory

enforcement of an illicit adopted rule would require executive

exercise of legislative power in a statutory mechanism

legislatively intended to check executive exercise of

legislative power. It is axiomatic that a statutory mechanism

for dispute-resolution within the executive estate is powerless

to circumvent the separation of powers act.

49. Rulemaking requirements are not intended as a

substitute for, or modification of, the separation of powers act

in a dispute-resolution within the executive estate. Statutory

rulemaking is authorized in furtherance of, not in opposition to

legislative policy. Willette v. Airproducts and Bassett and

Department of Labor and Employment Security, Division of

Workers' Compensation , 700 So. 2d 397, 399 (Fla. 1st DCA 1997).

Accord One Beacon Insurance v. Agency for Health Care

Administration , 958 So. 2d 1127, 1129 (Fla. 1st DCA 2007);

Zimmerman v. Florida Windstorm Underwriting Association , 873 So.

2d 411, 415 (Fla. 1st DCA 2004); Broward Children's Center, Inc.

v. Hall , 859 So. 2d 623, 627 (Fla. 1st DCA 2003); Department of

Children and Family Services v. L.G. , 801 So. 2d 1047, 1053

(Fla. 1st DCA 2001).

50. The concurring opinion in Clemons observed, in

relevant part, that an ALJ "presiding in [a 120.57 proceeding]

will deem controlling [an adopted rule] never challenged [in a

120.56 proceeding]." Clemons , 870 So. 2d at 884 (Benton, J.,

concurring)(Emphasis supplied). Similarly, the decision in

Willette held, in relevant part, that "a presumptively valid

adopted rule must give way in judicial proceedings to any

contradictory statute that applies." Willette , 700 So. 2d at

399 (Emphasis supplied).

51. The emphasized language in Clemons and Willette is not

inconsistent with the ALJ's interpretation of the decision in

Willis , 344 So. 2d at 591-592 (construing legislative intent as

avoiding any requirement for filing a duplicative 120.56

proceeding if the rule challenge of a substantially affected

party is presented in a 120.57 proceeding). First, neither the

concurring opinion in Clemons nor the decision in Willette

considered the application of the separation of powers act to a

rule challenge in a 120.57 proceeding. Second, the term "will,"

as it is used in Clemons , is not synonymous with "must." The

term "will" also means likelihood, willingness, intention,

probability, expectation, and customary or habitual action.

American Heritage Dictionary of the English Language , at 1968

(Houghton Mifflin Company 4th ed. 2000). Mandatory enforcement

of an illicit adopted rule in a 120.57 proceeding, in the

absence of judicial review, would require executive exercise of

legislative power in a statutory mechanism that is legislatively

intended to check executive exercise of legislative power. Such

an interpretation is best left to the courts in an inter-branch

judicial review.

52. Rulemaking requirements are legislatively intended to

create transparency by closing the gap between what an agency

and a member of the staff knows about the agency's law and

policy and what a regulated party can know. McDonald v.

Department of Banking and Finance , 346 So. 2d 569, 580 (Fla. 1st

DCA 1977). A principal goal of the APA is the abolition of

"unwritten rules" by which agency employees can act with

unrestrained discretion to adopt, change, and enforce

legislative policy. Straughn v. O'Riordan , 338 So. 2d 832, 834

n.3 (Fla. 1976). 16

53. Having recognized the jurisdiction of DOAH to resolve

the dispute based on an argument challenging an adopted rule,

the Recommended Order turns to the burden of proof. By analogy

to Subsection 120.56(4)(b), the ALJ concludes that the burden of

proof is on Latino and Big Pig to prove that the challenged rule

in Florida Administrative Code Rule 61A-5.0105(8) goes beyond

the statute implemented.

54. Latino and Big Pig rely on Subsection 561.01(14),

Florida Statutes (2000), which deleted the definition of the

term "person" as well as any reference to a financial interest

and any reference to a direct or indirect interest. Latino and

Big Pig argue that references in the challenged rule to a

"direct or indirect interest" lack statutory authority after the

legislative changes in 2000. However, the adopted rule does not

implement Subsection 561.01, and that statute is not specific

authority for the rule. The legislative changes in 2000 may

have eliminated statutory language on which courts previously

relied to interpret Subsection 561.19(2), but the statute

implemented in the adopted rule is unaffected by the legislative

changes.

55. Prior to 2000, the specific definition of a "person"

in Subsection 561.01(14) controlled the general definition in

Subsection 1.01(3). See , e.g. , Zorc v. City of Vero Beach ,

722 So. 2d 891, 899 (Fla. 4th DCA 1998)(specific statute

covering a particular subject controls a statute covering the

same subject in more general terms). Beginning in 2000, and in

this proceeding, Chapter 561 contains no specific definition

of the term "person." The more general definition in

Subsection 1.01(3) is now the controlling definition.

56. In construing the definition of a "person" in

Subsection 1.01(3), the singular includes the plural, and vice

versa , whenever the context permits. § 1.01(1); PNR, Inc. v.

Beacon Property Management, Inc. , 842 So. 2d 773, 775 (Fla.

2003); Canida v. Canida , 751 So. 2d 647, 649 (Fla. 3d DCA 1999).

The 100 percent ownership interest of two corporate applicants

by one individual applicant is a factual context that permits

Respondent's definition of Latino, Big Pig, and Mr. Meiner to be

the same "person," "group" or "combination" within the meaning

of Subsection 1.01. The 100 percent ownership of two corporate

applicants by the same individual applicant is also a "direct or

indirect interest" within the meaning of the challenged rule.

57. The remedies available in a 120.56 proceeding and a

120.57 proceeding are distinct, and, as previously discussed,

the election of those remedies is legislatively left to a

substantially affected party. The statutory purpose for filing

a 120.56 proceeding is to "seek an administrative determination

of the invalidity of a rule." § 120.56(1). In contrast, the

purpose of initiating a 120.57 proceeding is to challenge

proposed agency action. If the proposed agency action were

based on an illicit adopted rule, the recommended order of the

presiding ALJ would not need to "invalidate" the adopted rule

because that is not the purpose of a 120.57 proceeding. The

recommended order would merely conform any ambiguity in the

adopted rule to the statute implemented to preserve the validity

of the rule, thereby avoiding the need to invalidate the rule.

Even a literal conflict between an adopted rule and a statute

can be conformed to the statute as though a court were

construing the statutory term "and" to mean "or" in order to

preserve the constitutional validity of the statute. 17

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is

RECOMMENDED that Respondent enter a final order excluding

the entries of Latino and Big Pig and finding the adopted rule

to be a valid exercise of delegated legislative authority.

DONE AND ENTERED this 3rd day of July, 2008, in

Tallahassee, Leon County, Florida.

S

DANIEL MANRY

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 3rd day of July, 2008.

ENDNOTES

1/ References to subsections, sections, and chapters are to

Florida Statutes (2007).

2/ References to rules are to rules promulgated in the Florida

Administrative Code in effect in 2007, unless otherwise stated.

3/ Mr. Meiner incorporated Latino on December 21, 2006, and he

incorporated Big Pig on December 22, 1994.

4/ Subsection 561.19(2)(d), in its entirety, provides:

The director shall not include more than one

application from any one person, firm, or

corporation in the random selection process,

nor may she or he consider more than one

application for any one person, firm, or

corporation when there are fewer

applications than available licenses.

Counsel for the parties stipulated during a post-hearing

telephone conference with the undersigned that the statute is

properly construed to prohibit more than one application from

any one person, firm, or corporation when, as in this case, the

number of applications exceeds the number of available licenses.

The random selection process referred to in the statute is used

only when applications exceed available licenses.

5/ Stock attribution rules in the federal tax law would make

Latino and Big Pig constructive owners of each other because

Mr. Meiner owns 50 percent or more of each corporation. In

If 50 percent or more . . . of the stock in

a corporation is owned, directly or

indirectly, by . . . any person, such

corporation shall be considered as owning

the stock owned by . . . such person.

Neither party cited any legal authority for applying the stock

attribution rules for constructive ownership under federal tax

law in this proceeding. The undersigned expressly avoids the

use of stock attribution rules to determine whether Latino, Big

Pig, and Mr. Meiner are one person. If stock attribution rules

were used to find that Latino and Big Pig were shareholder

corporations of each other, neither would be a person under

Florida Administrative Code Rule 61A-1.006(8). It is unclear

whether a finding that Latino and Big Pig are not persons would

preclude either corporation from filing an application for entry

into a license quota drawing. Neither Chapter 561 nor Florida

Administrative Code Rule 61A-1.006 defines the terms "person"

and "applicant." Both the statute and the rule tend to use the

terms "applicant" and "person" synonymously but without

explanation. An inference that the two terms are synonyms may

support a finding that the stock attribution rules would

preclude Latino and Big Pig from being defined as a person and

would preclude both from submitting an application for entry

into a license quota drawing.

6/ The undersigned interprets the reference in Florida

Administrative Code Rule 61A-5.0105(8) to "this section" to be a

reference to "Section" 561.09(2)(d). The reference in the rule

to "this section" is followed by a reference to "more than one

applicant." The latter reference does not appear elsewhere in

the rule. Although Subsection 561.09(2) uses the phrase "more

than one application," rather than the reference in the rule to

"more than one applicant," the reference in the rule is the

agency's attempt to explain relevant statutory phrases.

7/ Latino and Big Pig may not have filed a separate 120.56

proceeding because Subsection 561.19(4), which is the specific

statutory authority for challenging a proposed exclusion of

entries from a license quota drawing, limits administrative

remedies to those authorized in Subsections 120.569 and

120.57(1). Counsel for the parties may have construed

Subsection 561.19(4) to preclude a challenge in a separate

120.56 proceeding. If that were the case, such an

interpretation would have been consistent with the general rule

of statutory construction that a specific statute covering a

particular subject controls a statute covering the same subject

in more general terms. Zorc v. City of Vero Beach , 722 So. 2d

891, 899 (Fla. 4th DCA 1998). In addition, the factual issues

inherent in the two rule challenges suggest that such a

statutory construction by the parties would have been consistent

with Subsection 120.569(1)(providing, in relevant part, that

Subsection 120.57(1) applies whenever a proceeding involves a

disputed issue of material fact). However, the ALJ expressly

refrains from a determination of whether Subsection 561.19(4)

should be construed literally to preclude a separate 120.56

proceeding.

8/ The principal business purpose of Latino is the development

of a chain of Latin food restaurants. Latino is not, and has

never been, engaged in the active conduct of a trade or

business. The sole assets of Latino are limited to assets

identified in the record as restaurant equipment.

The principal business purpose of Big Pig is to earn revenue as

a license holder for a restaurant named Bubbalou's Bodacious

Bar-B-Que in Central Florida and as a management company for

various other restaurants in central Florida. Big Pig has been,

and is, engaged in the conduct of a trade or business and

maintains its principal place of business at 1302 Orange Avenue,

Winter Park, Florida 32789. Big Pig generates funds through one

or more licensing agreements with other restaurants.

Mr. Meiner is the only employee of Big Pig.

9/ The grounds for proposed rejection do not allege a specific

act of misconduct. By analogy, however, the grounds for

proposed rejection do allege specific facts. Respondent alleges

that the entries from Latino and Big Pig are more than one

application from Mr. Meiner and that Latino, Big Pig, and

Mr. Meiner have a direct or indirect interest in each other

within the meaning of Florida Administrative Code Rule 61A-

5.0105(8).

10/ If the undersigned were to reach the merits of the first

rule challenge, the burden of proof would be on Respondent.

Compare § 120.57(1)(e)2. (the agency must demonstrate an

unadopted rule is within delegated legislative authority) with

in the petition challenging an unadopted rule and limiting the

agency's burden to a showing that rulemaking is not feasible and

practicable).

11/ References to the Florida Constitution are to Florida

Constitution (2007), unless otherwise stated.

12/ If a substantially affected party's rule challenge involves

a disputed issue of material fact, he or she would be required

to assert the rule challenge in a 120.57 proceeding. See

applies whenever the proceeding involves a disputed issue of

material fact). A substantially affected party "may" also file

a 120.56 proceeding if the party elects to pursue the additional

remedies available in that statute. See § 120.56(1)(a)(any

substantially affected person "may" file a 120.56 proceeding to

determine the invalidity of a rule).

13/ Patricia Dore, Access to Florida to Florida Administrative

Proceedings , 13 FLA.ST.U.L.REV., 965, 967, 970, 1017 (winter

1986).

14/ In a 120.57 proceeding, for example, an independent

executive agency, DOAH, assigns an ALJ to conduct a hearing and

recommend final agency action in a dispute between a sister

executive agency and a substantially affected party. The sister

agency issues a final order that is final agency action. In a

120.56 proceeding, the ALJ issues a final order that is final

agency action. Both the final order in a 120.57 proceeding and

the final order in a 120.56 proceeding are subject to an inter-

branch review by the judicial branch of government. All agency

action, on appropriate challenge, matures into an agency order

impressed with the characteristics of Subsection 120.57(1).

McDonald v. Department of Banking and Finance , 346 So. 569, 577

(Fla. 1st DCA 1977).

15/ Subsection 120.52(8)(introductory paragraph).

16/ Rulemaking disposes of proof and debate of agency policy in

a 120.57 proceeding. McDonald , 346 So. 2d at 583. The

jurisdictional analysis in this Recommended Order is limited to

the argument of Latino and Big Pig that the challenged rule goes

beyond the statute that exists after the legislative changes in

2000. The analysis does not reach proof and debate of agency

policy on other grounds. Statutory rulemaking requirements are

powerless to displace the separation of powers act in a 120.57

proceeding.

17/ A recommended order invalidating an adopted rule would

present several perplexing issues under the remand provisions in

Subsection 120.68(7). Remand is mandatory when agency action

conflicts with a statute or constitutional provision and when

agency action conflicts with an adopted rule. Compare §§

120.68(7)(e)4. (remand if agency action conflicts with a

statutory or constitutional provision) and 120.68(7)(e)2.

(remand for agency action that conflicts with an adopted rule).

If an adopted rule were to conflict with a statute and the

presiding ALJ were unable to conform the rule to the statute,

the ALJ would be required to recommend agency action that

conforms to the statute implemented even though the recommended

agency action would deviate from the illicit adopted rule.

Similarly, the final order of the agency would necessarily

deviate from the illicit adopted rule and conform to the

statute. Differences in the statutory remedies available in a

120.56 proceeding and a 120.57 proceeding would also make a

recommended order invalidating an adopted rule problematic.

Unlike a final order invalidating an adopted rule in a 120.56

proceeding, a recommended order invalidating a rule in a 120.57

proceeding would not require the agency to publish a notice of

invalidity. The recommended order would be subject to

modification in the final order of the agency, would be limited

to the parties and facts of record, and would not preclude the

agency from relying on the rule in other cases, except to the

extent the doctrine of stare decisis may preclude reliance on

the rule in cases involving similar facts and law. See Gessler

v. Department of Business and Professional Regulation , 627 So.

2d 501, 504 (Fla. 4th DCA 1993)(agency is bound by

administrative stare decisis to follow its final orders in like

cases involving similar facts). A determination of invalidity

in a 120.56 proceeding is a final order which an agency does not

have statutory authority to modify, and the final order is

binding on the agency in other administrative hearings. The

final orders in a 120.56 proceeding and a 120.57 proceeding are

subject to inter-branch judicial review. However, the problems

associated with a recommended order invalidating an adopted rule

would be similar to those attendant to a recommended order

invalidating an unadopted rule pursuant to Subsection

120.57(1)(e).

COPIES FURNISHED :

Jed Berman, Esquire

Infantino and Berman

Post Office Drawer 30

Winter Park, Florida 32790

Joshua B. Moye, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street, Suite 42

Tallahassee, Florida 32399-2202

Ned Luczynski, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Cynthia Hill, Director

Division of Alcoholic Beverages

and Tobacco

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399-0792

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.