08-000498 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.


View Dockets  
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.

1STATE OF FLORIDA

4DIVISION OF ADMINISTRATIVE HEARINGS

8LATINO GRANDE, INC., )

12)

13Petitioner, )

15)

16vs. ) Case No. 08-0495

21)

22DEPARTMENT OF BUSINESS AND )

27PROFESSIONAL REGULATION, )

30DIVISION OF ALCOHOLIC BEVERAGES )

35AND TOBACCO, )

38)

39Respondent. )

41)

42BIG PIG, INC., )

46)

47Petitioner, )

49)

50vs. ) Case Nos. 08-0496

55) 08-0497

57DEPARTMENT OF BUSINESS AND ) 08-0498

63PROFESSIONAL REGULATION, )

66DIVISION OF ALCOHOLIC BEVERAGES )

71AND TOBACCO, )

74)

75Respondent. )

77)

78RECOMMENDED ORDER

80Administrative Law Judge (ALJ) Daniel Manry conducted the

88final hearing of these cases for the Division of Administrative

98Hearings (DOAH) on April 3, 2008, in Orlando, Florida.

107APPEARANCES

108For Petitioner: Jed Burman, Esquire

113Infantino and Burman

116Post Office Drawer 30

120Winter Park, Florida 32790

124For Respondent: Joshua B. Moye, Esquire

130Department of Business and

134Professional Regulation

1361940 North Monroe Street, Suite 42

142Tallahassee, Florida 32399-2202

145STATEMENT OF THE ISSUE

149The issue is whether Respondent should exclude four entries

158in quota drawings for alcohol beverage licenses (license quota

167drawings) pursuant to Subsection 561.19(2)(d), Florida Statutes

174(2007), 1 and Florida Administrative Code Rules 61A-1.006(8) and

18361A-5.0105(8). 2

185PRELIMINARY STATEMENT

187By letters dated November 1, 2007, Respondent proposes to

196reject four applications for entries into license quota

204drawings. The petitioners timely requested an administrative

211hearing to challenge each of the four proposed rejections, and

221Respondent referred the matter to DOAH to conduct the hearing.

231DOAH consolidated the proceedings pursuant to the joint request

240of the parties.

243At the hearing, the petitioners and Respondent each

251presented the testimony of one witness. The petitioners and

260Respondent submitted, respectively, nine and six exhibits for

268admission into evidence. Respondent submitted one impeachment

275exhibit. The identity of the witnesses and exhibits and any

285attendant rulings are reported in the one-volume Transcript of

294the hearing filed with DOAH on April 28, 2008.

303At the conclusion of the hearing, the ALJ granted the

313parties' joint request to file their proposed recommended orders

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

333The parties timely filed their respective PROs on May 27, 2008.

344FINDINGS OF FACT

3471. Respondent is the agency responsible for regulating

355alcoholic beverage licenses (beverage licenses) in the state.

363Each year, on or after October 1, 2000, Subsection 561.20(1)

373authorizes Respondent to issue an additional beverage license

381for each population increase of 7,500 persons in each county in

393the state.

3952. Applicants typically outnumber available beverage

401licenses. A beverage license that becomes available by reason

410of a population increase is a so-called "full liquor license."

420A full liquor license entitles the licensee to sell alcoholic

430beverages on the premises and as a package store. Full liquor

441licenses are highly valued in the industry.

4483. When applicants outnumber available beverage licenses,

455Subsection 561.19(2) authorizes Respondent to advertise the

462availability of a beverage license and to conduct a license

472quota drawing. The statute requires the drawing to be public

482and to be a "double random selection drawing." The statute

492requires that the "double random selection drawing" shall:

500[A]llow each applicant whose application is

506complete and does not disclose on its face

514any matter rendering the applicant

519ineligible an equal opportunity of obtaining

525an available license. After all

530applications are filed with the director,

536the director shall then determine by random

543selection drawing the order in which each

550applicant's name shall be matched with a

557number selected by random drawing, and the

564number shall determine the order in which

571the applicant will be considered for a

578license. . . .

582§ 561.19(2)(a).

5844. A license quota drawing determines only the order in

594which Respondent will consider applications for a beverage

602license. An applicant selected in the drawing does not

611automatically receive a beverage license. The qualifications of

619a selected applicant must be vetted in the same manner as any

631other applicant before the selected applicant can obtain a

640beverage license.

6425. In 2007, Respondent scheduled a license quota drawing

651for beverage licenses that became available by reason of

660population increases in Lake, Orange, and Polk Counties. The

669precise date of the drawing in each county is not clear in the

682record.

6836. On October 1, 2007, Mr. Sam C. Meiner, Esquire, filed

694separate entries for the quota license drawings in Lake, Orange,

704and Polk Counties. Respondent accepted Mr. Meiner's three

712entries.

7137. Petitioner, Latino Grande, Inc. (Latino), submitted an

721entry for the drawing in Orange County. Petitioner, Big Pig,

731Inc. (Big Pig), submitted separate applications for the drawings

740in Orange, Polk, and Lake Counties.

7468. By letter dated November 7, 2007, entitled "Notice of

756Disapproval," Respondent rejected the entry from Latino. The

764ground stated in the Notice of Disapproval is "[B]ecause you

774have filed more than one application" for Orange County.

7839. In three separate Notices of Disapproval, each of which

793is dated November 7, 2007, Respondent rejected the entries from

803Big Pig for the drawings in Lake, Orange, and Polk Counties.

814The ground stated in each Notice of Disapproval is "[B]ecause

824you have filed more than one application" in each county.

83410. Latino and Big Pig each filed a petition for an

845administrative hearing, pursuant to Subsection 120.57(1), to

852challenge each of the four Notices of Disapproval. Latino's

861request for hearing became DOAH Case No. 08-0495. Big Pig's

871request for hearing in the drawings for Orange, Polk, and Lake

882Counties became DOAH Case Nos. 08-0496, 08-0497, and 08-0498,

891respectively. Pursuant to the parties' joint request, DOAH

899consolidated the four cases into DOAH Case No. 08-0495.

90811. Latino and Big Pig are closely held Florida

917corporations. Mr. Meiner is the sole shareholder, director, and

926officer of each corporation. 3

93112. Subsection 561.19(2)(d) prohibits Respondent from

937considering "more than one application from any one person,

946firm, or corporation" 4 in a drawing for one county. Chapter 561

958does not define "more than one application from the same person,

969firm, or corporation" and does not define the term "person."

97913. Some insight into the meaning of the term "person" can

990be gleaned from Florida Administrative Code Rule 61A-1.006(8).

998The term "person" shall not mean a

1005corporation that owns part or all of the

1013stock of an applicant corporation or

1019licensed corporation; however, it does

1024include officers, directors, and

1028shareholders of each shareholder

1032corporation.

103314. The definition of a "person" in Rule 61A-1.006(8) does

1043not reach the facts in this case. This case does not involve a

1056shareholder corporation. Latino is not a shareholder of Big

1065Pig, and Big Pig is not a shareholder of Latino. Nor does this

1078case involve an officer, director, or shareholder in a

1087shareholder corporation. Mr. Meiner is not an officer,

1095director, or shareholder of a corporation that is a shareholder

1105of either Latino or Big Pig. 5

111215. Latino, Big Pig, and Mr. Meiner are each a person

1123within the meaning of Subsection 1.01(3). Latino and Big Pig

1133are corporations, and Mr. Meiner is an individual.

114116. Latino, Big Pig, and Mr. Meiner comprise a "group or

1152combination" that is a "person" defined in Subsection 1.01(3).

1161Mr. Meiner owns all of the stock of each corporation, and the

1173three persons form a "group" or "combination" that is

1182statutorily defined as a "person" in Subsection 1.01(3).

119017. Respondent is statutorily prohibited from accepting

1197more than one application from any one person. Respondent

1206correctly accepted the application of Mr. Meiner and correctly

1215rejected the applications of the other members of the "group" or

"1226combination" defined as one "person" in Subsection 1.01(3).

123418. Apart from Subsection 1.01(3), Respondent correctly

1241applied Florida Administrative Code Rule 61A-5.0105(8) to reject

1249the applications from Latino and Big Pig. Florida

1257Administrative Code Rule 61A-5.0105(8) provides:

1262For the purposes of this section, "more than

1270one applicant" shall mean that an applicant

1277may have a direct or indirect interest in

1285only one application in each county or city

1293for which a license is available, but may

1301file separate entry forms for licenses in

1308different counties or cities for an

1314opportunity to obtain an available

1319license. [6]

132119. Neither Florida Administrative Code Rule 61A-5.0105

1328nor Chapter 561 defines the phrase "direct or indirect

1337interest." Neither party explicated any reasons in the record

1346that require agency expertise to define a "direct or indirect

1356interest." The issue of whether Mr. Meiner's 100 percent stock

1366ownership of Latino and Big Pig is a "direct or indirect

1377interest" in the corporate applications is an issue of fact to

1388be determined by the fact-finder. The fact-finder finds that

1397complete ownership and control of an applicant corporation is a

1407direct or indirect interest within the meaning of Respondent's

1416adopted rule.

141820. Mr. Meiner has a "direct or indirect interest" in the

1429application submitted by Latino for the license quota drawing in

1439Orange County. Mr. Meiner owns all of the stock of the

1450applicant corporation. Respondent correctly rejected the

1456application of Latino, in which Mr. Meiner has a direct or

1467indirect interest, as more than one application from Mr. Meiner.

147721. Mr. Meiner has a "direct or indirect interest" in the

1488applications submitted by Big Pig for the license quota drawings

1498in Lake, Polk, and Orange Counties. Mr. Meiner owns all of the

1510stock of the applicant corporation. Respondent correctly

1517rejected the applications of Big Pig, in which Mr. Meiner has a

1529direct or indirect interest, as more than one application from

1539Mr. Meiner.

154122. Latino and Big Pig assert two final arguments, each of

1552which involves mixed issues of fact and law. During the

1562hearing, counsel for Latino and Big Pig referred to the two

1573arguments as rule challenges, but counsel did not file a

1583separate rule-challenge petition pursuant to Subsection 120.56

1590(a 120.56 proceeding), and Respondent has not objected to the

1600consideration of the rule challenges in this proceeding, which

1609is conducted pursuant to Subsection 120.57(1) (a 120.57

1617proceeding). 7 The complete arguments concerning the two rule

1626challenges appear in pages 10 through 12 of the PRO filed by

1638Latino and Big Pig. The first argument, in substance,

1647challenges as an unadopted rule an agency statement in a printed

1658provision on the back of each entry form from Latino and Big

1670Pig. The substance of the second argument challenges an adopted

1680rule in Florida Administrative Code Rule 61A-5.0105(8). The

1688factual aspects of the two arguments are addressed in the

1698remaining findings.

170023. The alleged unadopted rule is stated in a provision

1710common to each entry form submitted by Latino and Big Pig. In

1722relevant part, the provision states:

1727The name of each individual entrant,

1733corporate officer, directly interested

1737person, etc. is required to be entered in

1745Part B [labeled "List All Interested

1751Persons"]. A person "interested" in the

1758license or licensed business includes, but

1764is not limited to, a person who agrees to do

1774any of the following: enter into any

1781financial arrangement through joint funds,

1786investing funds, cosigning or guaranteeing a

1792note or lease, or any action that creates

1800funds for a transaction or the ability of

1808the business to operate [hereinafter,

"1813financial interest"]. This may include

1819Spouse, Officer(s), Director(s),

1822Stockholder(s), Chief Executive, Limited and

1827General Partners(s), Corporation(s), or any

1832other entity connected with the business

1838. . . .

184224. It is undisputed that neither Mr. Meiner, Latino nor

1852Big Pig has any financial interest in the other except

1862Mr. Meiner's 100 percent stock ownership of each corporation. 8

1872However, a "financial interest" is not the factual ground

1881alleged in the Notices of Denial issued to Latino and Big Pig.

1893Rather, the Notices of Denial state that the ground for denial

1904is "[B]ecause you have filed more than one (1) application for

1915the above referenced county." The pertinent provision common to

1924the back of each entry form is not a stated ground for rejecting

1937the entries of Latino and Big Pig, the challenge to that

1948provision is not material to this proceeding, and the challenge

1958is deemed to be moot because it does not affect the substantial

1970interests of Latino and Big Pig in this proceeding.

197925. Latino and Big Pig challenge an adopted rule in

1989Florida Administrative Code Rule 61A-5.0105(8) (the challenged

1996rule). The substance of the challenge may be fairly summarized

2006as alleging that legislative changes in 2000 deprive the

2015challenged rule of any statutory authority and that the

2024challenged rule conflicts with the terms of the current statute.

203426. Latino and Big Pig begin their collective argument

2043with former Subsection 561.01(14), Florida Statutes (1981).

2050That statute defined the terms "licensee," "applicant" or

"2058person" to mean:

2061[A]n individual, corporation, firm,

2065partnership . . . or any such entity having

2074a financial interest , directly or

2079indirectly, in another such entity.

2084(Emphasis supplied)

208627. Latino and Big Pig acknowledge that the decision in

2096Peterson v. Department of Business Regulation , 451 So. 2d 983

2106(Fla. 1st DCA 1984), supports Respondent's proposed rejection of

2115the applications of Latino and Big Pig. In relevant part, the

2126court construed Subsections 561.19(2) and 561.01(14), Florida

2133Statutes (1981), by reading the two statutes together and

2142holding that it was improper to include in a drawing pool

2153separate applications of persons who, directly or indirectly,

2161are financially interested in other applications. Peterson , 451

2169So. 2d at 985.

217328. Latino and Big Pig argue that legislative authority

2182for the challenged rule has been repealed. The adopted rule was

2193last amended in 1998, and Subsection 561.01(14), Florida

2201Statutes (2000), deleted any definition of the terms "applicant"

2210or "person," deleted any reference to a "financial interest,"

2219and deleted any reference to a "direct or indirect interest."

2229The statute now reads:

"2233Licensee" means a legal or business entity,

2240person, or persons that hold a license

2247issued by the division and meet the

2254qualifications set forth in s. 561.15.

226029. Petitioner's rule challenge is rejected for two

2268factual reasons. First, the legislative changes in 2000 do not

2278affect either the law implemented in the challenged rule or the

2289specific authority for the challenged rule. Second, the facts

2298at issue in Peterson are different from those at issue in this

2310proceeding.

231130. The challenged rule implements Section 561.19 pursuant

2319to the specific authority in Section 561.11. Although the

2328decision in Peterson relied on Subsection 561.01(14), Florida

2336Statutes (1981), to guide the court's interpretation of

2344Subsection 561.19(2), the changes in Subsection 561.01(14),

2351Florida Statutes (2000), affected neither the law implemented in

2360the challenged rule nor the specific authority for the rule.

237031. Deletion of the definition of a "person" from

2379Subsection 561.01(14) leaves only the general definition of a

"2388person" in Subsection 1.01(3). Reliance in the challenged rule

2397on a "direct or indirect interest" in an application is

2407consistent with the statutory definition in Subsection 1.01(3)

2415of a "person" to include a "group" or "combination."

242432. The decision in Peterson did not resolve the issue of

2435whether a 100 percent shareholder and his wholly-owned

2443corporation are the same person within the meaning of Subsection

2453561.19(2)(d). Rather, Peterson dealt with the factual issue of

2462whether certain individuals, each of whom was clearly a person,

2472had a financial interest in the applications of other

2481individuals.

2482CONCLUSIONS OF LAW

248533. DOAH has jurisdiction over the parties and the subject

2495jurisdiction of DOAH to resolve the rule challenges in this

2505proceeding is discussed later in this Recommended Order.

251334. The burden of proof varies with the matter at issue in

2525this proceeding. Latino and Big Pig have the initial burden of

2536proving by a preponderance of the evidence that their separate

2546applications were accurate and complete when submitted and were

2555submitted in a timely manner. See M.H. and A.H. v. Department

2566of Children and Family Services , 977 So. 2d 755, 759 (Fla. 2d

2578DCA 2008)(applicant for license has initial burden of

2586demonstrating fitness to be licensed)( citing Osborne Stern & Co.

2596v. Department of Banking and Finance , 647 So. 2d 245, 248 (Fla.

26081st DCA 1994)( Osborne Stern I ), approved in part and quashed in

2621part by 670 So. 2d 932 (Fla. 1996) ( Osborne Stern II ).

263435. Latino and Big Pig satisfied their burden of proof

2644concerning their entries into the relevant drawings. It is

2653undisputed that the relevant applications were accurate and

2661complete when submitted and were submitted in a timely manner.

267136. Respondent has the burden of proving the specific

2680facts alleged in the Notices of Denial as the grounds for

2691rejecting the entries of Latino and Big Pig. Respondent must

2701show by a preponderance of the evidence that the applications

2711from Latino and Big Pig constitute more than one application

2721from the same person, firm, or corporation.

272837. Respondent asserts the affirmative of factual

2735allegations that the applications from Latino and Big Pig

2744represent more than one application from the same person and

2754that Mr. Meiner has a direct or indirect interest in Latino and

2766Big Pig. The party asserting the affirmative of the issue

2776generally bears the burden of proof. Florida Department of

2785Transportation v. J.W.C. Company, Inc. , 396 So. 2d 778 (Fla. 1st

2796DCA 1981); Balino v. Department of Heath and Rehabilitation

2805Services , 348 So. 2d 349 (Fla. 1st DCA 1977). Cf. M.H. ,

2816977 So. 2d at 760-761 (applicant does not have the burden of

2828disproving a charge of specific misconduct)( citing Osborne Stern

2837II , 670 So. 2d at 934; Mayes v. Department of Children & Family

2850Services , 801 So. 2d 980 (Fla. 1st DCA 2001). 9

286038. Respondent satisfied its burden of proof. For reasons

2869stated in the Findings of Fact and not repeated here, Respondent

2880showed by a preponderance of the evidence that Mr. Meiner has a

2892direct or indirect interest in Latino and Big Pig, within in the

2904meaning of Florida Administrative Code Rule 61A-5.0105(8), and

2912that the applications from Latino and Big Pig constitute more

2922than one application from Mr. Meiner. Respondent correctly

2930rejected the applications from Latino and Big Pig as

2939applications prohibited by Subsection 561.19(2)(d).

294439. The remaining conclusions address arguments by Latino

2952and Big Pig that, in substance, challenge an alleged unadopted

2962rule and an adopted rule in Florida Administrative Code Rule

297261A-5.0105(8). The issue of whether DOAH has jurisdiction to

2981resolve the disputes requires a separate legal analysis for each

2991argument.

299240. DOAH has jurisdiction in a 120.57 proceeding to

3001resolve the dispute pertaining to an alleged unadopted rule.

3010Agency action that determines the substantial interests of

3018Latino and Big Pig and that is based on an unadopted rule is

3031subject to de novo review in this proceeding. § 120.57(1)(e).

3041Assuming arguendo that the challenged provision on the back of

3051the entry forms submitted by Latino and Big Pig is an unadopted

3063rule, the proposed agency action that affects the substantial

3072interests of Latino and Big Pig is not based on the challenged

3084provision, and the challenged provision is not subject to de

3094novo review in this proceeding. 10

310041. The remaining jurisdictional issue is whether DOAH has

3109jurisdiction to resolve the challenges of Latino and Big Pig to

3120an adopted rule. The ALJ concludes that DOAH does have

3130jurisdiction to resolve this aspect of the dispute between the

3140parties.

314142. The legal analysis of the remaining jurisdictional

3149issue begins with Subsection 120.56(1)(e). In relevant part,

3157the statute provides that, "Failure to proceed under this

3166section shall not constitute failure to exhaust administrative

3174remedies." The quoted statutory language means that the power

3183of direct review in Article V, Subsection 4(b)(2), Florida

3192Constitution (2007), 11 allows a reviewing court to consider a

3202challenge to an adopted rule for the first time on appeal even

3214though the rule was not challenged in the lower tribunal.

3224[I]t is open to a reviewing court to

3232adjudicate an administrative rule at odds

3238with the statute it purports to implement,

3245even when there has been no administrative

3252rule challenge proceeding below. See State

3258ex rel. Dep't of Gen. Servs. v. Willis , 344

3267So. 2d 580, 592 (Fla. 1st DCA 1977)

3275("[P]rovisions [now codified at section

3281120.56(1)(e)] are addressed . . . to

3288district courts of appeal, which might

3294otherwise rebuff rule challenges by

3299petitions to 120.57 proceedings because

3304petitioner did not 'exhaust' the rule

3310challenge remedies of 120.54

3314and .56"). . . .

3320Clemons v. State Risk Management Trust Fund , 870 So. 2d 881, 884

3332(Fla. 1st DCA 2004)(Benton, J., concurring).

333843. The decision in Willis does not limit the meaning of

3349the relevant statutory language now codified in Subsection

3357120.56(1)(e) to the power of direct review. The court also

3367interpreted the statutory language to avoid any appearance of

3376requiring a duplicative 120.56 proceeding if a substantially

3384affected party presents his or her rule challenge with other

3394grievances in a 120.57 proceeding.

3399The legislative purpose is simply to avoid

3406any appearance of requiring a substantially

3412affected party to initiate duplicative

3417120.54 or .56 proceedings if his rule

3424challenge is regularly presented with other

3430grievances under 120.57. . . .

3436State ex rel. Department of General Services v. Willis ,

3445344 So. 2d 580, 591-592 (Fla. 1st DCA 1977).

345444. A rule challenge that is regularly presented with

3463other grievances under 120.57 in the lower tribunal would not

3473require a reviewing court to consider the rule challenge for the

3484first time on appeal pursuant to the power of direct review.

3495The rule challenge would have been presented initially with

3504other grievances in a 120.57 proceeding.

351045. Rather than interpreting the absence of a 120.56

3519proceeding to mean issue preclusion in a 120.57 proceeding, the

3529decision in Willis construed the relevant statutory language now

3538codified in Subsection 120.56(1)(e) as enhancing the remedies

3546available to a substantially affected party. The court

3554interpreted legislative policy as allowing a substantially

3561affected party to challenge a rule in a 120.56 proceeding, a

3572120.57 proceeding, both proceedings, or for the first time on

3582appeal pursuant to the power of direct review. The court

3592specifically acknowledged that the purpose of a 120.57

3600proceeding is not limited to an adjudicatory proceeding but is

3610legislatively intended to be mechanism for challenging agency

3618policy, which may be stated as an adopted rule, an unadopted

3629rule, or nonrule policy.

3633There is yet a question whether traditional

3640judicial deference to administrative

3644remedies is lessened by certain language in

3651subsections 120.54 and 120.56. Those

3656sections authorize proceedings for the

3661invalidation of agency rules, be they

3667regularly adopted or merely proposed, which

3673invalidly exercise delegated legislative

3677authority. [Citations omitted] Subsections

3681120.54 . . . and [120].56 . . . provide that

"3692failure to proceed under [those sections]

3698shall not constitute failure to exhaust

3704administrative remedies." If the quoted

3709provisions are to be construed as qualifying

3716the exclusivity of the entire [Chapter 120,

3723Administrative Procedure] Act or its most

3729fundamental remedies, they surprisingly tend

3734to dissolve the judiciary's self imposed

3740restriction on intervention by extraordinary

3745writ even as the Act makes such intervention

3753less necessary and desirable.

3757The double entry of those provisions in the

3765rulemaking and rule-challenge sections and

3770their conspicuous omission elsewhere make

3775clear that the Act intends no general

3782cession of concurrent jurisdiction to the

3788courts. There is no comparable language in

3795120.57, the core section which both provides

3802the mechanism for rule challenges and is the

3810Act's wider point of entry for those with

3818more varied or general complaints concerning

3824agency action: those against whom the agency

3831has instituted adjudicatory proceedings,

3835those whose impending injury is not wholly

3842and precisely traceable to a rule invalidly

3849exercising delegated legislative authority,

3853those whose substantial interests are

3858threatened by several agency causes or

3864simply by agency action which is proceeding

3871arbitrarily, imperiously, or obliviously.

3875We are accustomed to think that the

3882principal use of hearings is to develop

3889records for "adjudicatory" or "quasi-

3894judicial" decisions. [Citations omitted]

3898That was the limited role of administrative

3905hearings in years past, when the "universe

3912of administrative law was hierarchical, with

3918the judiciary at its apex." [Footnote

3924omitted] Current understanding of the

3929administrative process . . . recognizes that

3936a hearing independently serves the public

3942interest by providing a forum to expose,

3949inform and challenge agency policy and

3955discretion. Section 120.57 is central to

3961the Act's purpose. . . .

3967An understanding of 120.57's centrality

3972makes clear that the [statutory language]--

"3978Failure to proceed under [120.56] shall not

3985exhaust administrative remedies"--enhances

3989remedies available under the Act rather than

3996encourage circuit court intrusion into the

4002administrative process. The quoted

4006provisions are addressed not to circuit

4012courts but to district courts of appeal,

4019which might otherwise rebuff rule challenges

4025by petitions to review 120.57 proceedings

4031because petitioner did not "exhaust" the

4037rule challenge remedies of 120.54 and .56.

4044[Citations omitted] The legislative purpose

4049is simply to avoid any appearance of

4056requiring a substantially affected party to

4062initiate duplicative 120.54 or .56

4067proceedings if his rule challenge is

4073regularly presented with other grievances

4078under 120.57, resulting in final agency

4084action and a petition for judicial review. [12]

4092(Emphasis supplied)

4094Willis , 344 So. 2d at 591-592.

410046. The foregoing interpretation of the decision in Willis

4109is consistent with several legislatively intended purposes for

4117the APA. 13 In relevant part, the APA creates a point of entry for

4131a person to challenge proposed agency action that affects his or

4142her substantial interests. The APA also creates a mechanism for

4152intra-branch dispute resolution within the executive branch of

4160government. 14 Finally, the APA creates a mechanism to check

4170dispute-resolution in the executive branch that goes beyond the

4179powers, functions, and duties legislatively delegated in the

4187terms of the statute implemented. 15

419347. Dispute-resolution that goes beyond the statute

4200implemented exercises legislative power within the executive

4207branch in a manner that is repugnant to the separation of powers

4219act. Art. II, § 3, Fla. Const. The separation of powers act

4231encompasses two prohibitions. No branch of government may

4239encroach upon the powers of another, and no branch may delegate

4250its power to another. Chiles v. Children A, B, C, D, E, and F ,

4264589 So. 2d 260, 264-266 (Fla. 1991).

427148. Mandatory enforcement of an adopted rule that goes

4280beyond the statute implemented (an illicit adopted rule) in a

4290120.57 proceeding, for the sole reason that a substantially

4299affected party did not file a duplicative 120.56 proceeding,

4308would deny the executive branch an opportunity to formulate a

4318dispute-resolution without exercising legislative power and

4324without the need for an inter-branch judicial review. Mandatory

4333enforcement of an illicit adopted rule would require executive

4342exercise of legislative power in a statutory mechanism

4350legislatively intended to check executive exercise of

4357legislative power. It is axiomatic that a statutory mechanism

4366for dispute-resolution within the executive estate is powerless

4374to circumvent the separation of powers act.

438149. Rulemaking requirements are not intended as a

4389substitute for, or modification of, the separation of powers act

4399in a dispute-resolution within the executive estate. Statutory

4407rulemaking is authorized in furtherance of, not in opposition to

4417legislative policy. Willette v. Airproducts and Bassett and

4425Department of Labor and Employment Security, Division of

4433Workers' Compensation , 700 So. 2d 397, 399 (Fla. 1st DCA 1997).

4444Accord One Beacon Insurance v. Agency for Health Care

4453Administration , 958 So. 2d 1127, 1129 (Fla. 1st DCA 2007);

4463Zimmerman v. Florida Windstorm Underwriting Association , 873 So.

44712d 411, 415 (Fla. 1st DCA 2004); Broward Children's Center, Inc.

4482v. Hall , 859 So. 2d 623, 627 (Fla. 1st DCA 2003); Department of

4495Children and Family Services v. L.G. , 801 So. 2d 1047, 1053

4506(Fla. 1st DCA 2001).

451050. The concurring opinion in Clemons observed, in

4518relevant part, that an ALJ "presiding in [a 120.57 proceeding]

4528will deem controlling [an adopted rule] never challenged [in a

4538120.56 proceeding]." Clemons , 870 So. 2d at 884 (Benton, J.,

4548concurring)(Emphasis supplied). Similarly, the decision in

4554Willette held, in relevant part, that "a presumptively valid

4563adopted rule must give way in judicial proceedings to any

4573contradictory statute that applies." Willette , 700 So. 2d at

4582399 (Emphasis supplied).

458551. The emphasized language in Clemons and Willette is not

4595inconsistent with the ALJ's interpretation of the decision in

4604Willis , 344 So. 2d at 591-592 (construing legislative intent as

4614avoiding any requirement for filing a duplicative 120.56

4622proceeding if the rule challenge of a substantially affected

4631party is presented in a 120.57 proceeding). First, neither the

4641concurring opinion in Clemons nor the decision in Willette

4650considered the application of the separation of powers act to a

4661rule challenge in a 120.57 proceeding. Second, the term "will,"

4671as it is used in Clemons , is not synonymous with "must." The

4683term "will" also means likelihood, willingness, intention,

4690probability, expectation, and customary or habitual action.

4697American Heritage Dictionary of the English Language , at 1968

4706(Houghton Mifflin Company 4th ed. 2000). Mandatory enforcement

4714of an illicit adopted rule in a 120.57 proceeding, in the

4725absence of judicial review, would require executive exercise of

4734legislative power in a statutory mechanism that is legislatively

4743intended to check executive exercise of legislative power. Such

4752an interpretation is best left to the courts in an inter-branch

4763judicial review.

476552. Rulemaking requirements are legislatively intended to

4772create transparency by closing the gap between what an agency

4782and a member of the staff knows about the agency's law and

4794policy and what a regulated party can know. McDonald v.

4804Department of Banking and Finance , 346 So. 2d 569, 580 (Fla. 1st

4816DCA 1977). A principal goal of the APA is the abolition of

"4828unwritten rules" by which agency employees can act with

4837unrestrained discretion to adopt, change, and enforce

4844legislative policy. Straughn v. O'Riordan , 338 So. 2d 832, 834

4854n.3 (Fla. 1976). 16

485853. Having recognized the jurisdiction of DOAH to resolve

4867the dispute based on an argument challenging an adopted rule,

4877the Recommended Order turns to the burden of proof. By analogy

4888to Subsection 120.56(4)(b), the ALJ concludes that the burden of

4898proof is on Latino and Big Pig to prove that the challenged rule

4911in Florida Administrative Code Rule 61A-5.0105(8) goes beyond

4919the statute implemented.

492254. Latino and Big Pig rely on Subsection 561.01(14),

4931Florida Statutes (2000), which deleted the definition of the

4940term "person" as well as any reference to a financial interest

4951and any reference to a direct or indirect interest. Latino and

4962Big Pig argue that references in the challenged rule to a

"4973direct or indirect interest" lack statutory authority after the

4982legislative changes in 2000. However, the adopted rule does not

4992implement Subsection 561.01, and that statute is not specific

5001authority for the rule. The legislative changes in 2000 may

5011have eliminated statutory language on which courts previously

5019relied to interpret Subsection 561.19(2), but the statute

5027implemented in the adopted rule is unaffected by the legislative

5037changes.

503855. Prior to 2000, the specific definition of a "person"

5048in Subsection 561.01(14) controlled the general definition in

5056Subsection 1.01(3). See , e.g. , Zorc v. City of Vero Beach ,

5066722 So. 2d 891, 899 (Fla. 4th DCA 1998)(specific statute

5076covering a particular subject controls a statute covering the

5085same subject in more general terms). Beginning in 2000, and in

5096this proceeding, Chapter 561 contains no specific definition

5104of the term "person." The more general definition in

5113Subsection 1.01(3) is now the controlling definition.

512056. In construing the definition of a "person" in

5129Subsection 1.01(3), the singular includes the plural, and vice

5138versa , whenever the context permits. § 1.01(1); PNR, Inc. v.

5148Beacon Property Management, Inc. , 842 So. 2d 773, 775 (Fla.

51582003); Canida v. Canida , 751 So. 2d 647, 649 (Fla. 3d DCA 1999).

5171The 100 percent ownership interest of two corporate applicants

5180by one individual applicant is a factual context that permits

5190Respondent's definition of Latino, Big Pig, and Mr. Meiner to be

5201the same "person," "group" or "combination" within the meaning

5210of Subsection 1.01. The 100 percent ownership of two corporate

5220applicants by the same individual applicant is also a "direct or

5231indirect interest" within the meaning of the challenged rule.

524057. The remedies available in a 120.56 proceeding and a

5250120.57 proceeding are distinct, and, as previously discussed,

5258the election of those remedies is legislatively left to a

5268substantially affected party. The statutory purpose for filing

5276a 120.56 proceeding is to "seek an administrative determination

5285of the invalidity of a rule." § 120.56(1). In contrast, the

5296purpose of initiating a 120.57 proceeding is to challenge

5305proposed agency action. If the proposed agency action were

5314based on an illicit adopted rule, the recommended order of the

5325presiding ALJ would not need to "invalidate" the adopted rule

5335because that is not the purpose of a 120.57 proceeding. The

5346recommended order would merely conform any ambiguity in the

5355adopted rule to the statute implemented to preserve the validity

5365of the rule, thereby avoiding the need to invalidate the rule.

5376Even a literal conflict between an adopted rule and a statute

5387can be conformed to the statute as though a court were

5398construing the statutory term "and" to mean "or" in order to

5409preserve the constitutional validity of the statute. 17

5417RECOMMENDATION

5418Based upon the foregoing Findings of Fact and Conclusions

5427of Law, it is

5431RECOMMENDED that Respondent enter a final order excluding

5439the entries of Latino and Big Pig and finding the adopted rule

5451to be a valid exercise of delegated legislative authority.

5460DONE AND ENTERED this 3rd day of July, 2008, in

5470Tallahassee, Leon County, Florida.

5474S

5475DANIEL MANRY

5477Administrative Law Judge

5480Division of Administrative Hearings

5484The DeSoto Building

54871230 Apalachee Parkway

5490Tallahassee, Florida 32399-3060

5493(850) 488-9675 SUNCOM 278-9675

5497Fax Filing (850) 921-6847

5501www.doah.state.fl.us

5502Filed with the Clerk of the

5508Division of Administrative Hearings

5512this 3rd day of July, 2008.

5518ENDNOTES

55191/ References to subsections, sections, and chapters are to

5528Florida Statutes (2007).

55312/ References to rules are to rules promulgated in the Florida

5542Administrative Code in effect in 2007, unless otherwise stated.

55513/ Mr. Meiner incorporated Latino on December 21, 2006, and he

5562incorporated Big Pig on December 22, 1994.

55694/ Subsection 561.19(2)(d), in its entirety, provides:

5576The director shall not include more than one

5584application from any one person, firm, or

5591corporation in the random selection process,

5597nor may she or he consider more than one

5606application for any one person, firm, or

5613corporation when there are fewer

5618applications than available licenses.

5622Counsel for the parties stipulated during a post-hearing

5630telephone conference with the undersigned that the statute is

5639properly construed to prohibit more than one application from

5648any one person, firm, or corporation when, as in this case, the

5660number of applications exceeds the number of available licenses.

5669The random selection process referred to in the statute is used

5680only when applications exceed available licenses.

56865/ Stock attribution rules in the federal tax law would make

5697Latino and Big Pig constructive owners of each other because

5707Mr. Meiner owns 50 percent or more of each corporation. In

5718If 50 percent or more . . . of the stock in

5730a corporation is owned, directly or

5736indirectly, by . . . any person, such

5744corporation shall be considered as owning

5750the stock owned by . . . such person.

5759Neither party cited any legal authority for applying the stock

5769attribution rules for constructive ownership under federal tax

5777law in this proceeding. The undersigned expressly avoids the

5786use of stock attribution rules to determine whether Latino, Big

5796Pig, and Mr. Meiner are one person. If stock attribution rules

5807were used to find that Latino and Big Pig were shareholder

5818corporations of each other, neither would be a person under

5828Florida Administrative Code Rule 61A-1.006(8). It is unclear

5836whether a finding that Latino and Big Pig are not persons would

5848preclude either corporation from filing an application for entry

5857into a license quota drawing. Neither Chapter 561 nor Florida

5867Administrative Code Rule 61A-1.006 defines the terms "person"

5875and "applicant." Both the statute and the rule tend to use the

5887terms "applicant" and "person" synonymously but without

5894explanation. An inference that the two terms are synonyms may

5904support a finding that the stock attribution rules would

5913preclude Latino and Big Pig from being defined as a person and

5925would preclude both from submitting an application for entry

5934into a license quota drawing.

59396/ The undersigned interprets the reference in Florida

5947Administrative Code Rule 61A-5.0105(8) to "this section" to be a

5957reference to "Section" 561.09(2)(d). The reference in the rule

5966to "this section" is followed by a reference to "more than one

5978applicant." The latter reference does not appear elsewhere in

5987the rule. Although Subsection 561.09(2) uses the phrase "more

5996than one application," rather than the reference in the rule to

"6007more than one applicant," the reference in the rule is the

6018agency's attempt to explain relevant statutory phrases.

60257/ Latino and Big Pig may not have filed a separate 120.56

6037proceeding because Subsection 561.19(4), which is the specific

6045statutory authority for challenging a proposed exclusion of

6053entries from a license quota drawing, limits administrative

6061remedies to those authorized in Subsections 120.569 and

6069120.57(1). Counsel for the parties may have construed

6077Subsection 561.19(4) to preclude a challenge in a separate

6086120.56 proceeding. If that were the case, such an

6095interpretation would have been consistent with the general rule

6104of statutory construction that a specific statute covering a

6113particular subject controls a statute covering the same subject

6122in more general terms. Zorc v. City of Vero Beach , 722 So. 2d

6135891, 899 (Fla. 4th DCA 1998). In addition, the factual issues

6146inherent in the two rule challenges suggest that such a

6156statutory construction by the parties would have been consistent

6165with Subsection 120.569(1)(providing, in relevant part, that

6172Subsection 120.57(1) applies whenever a proceeding involves a

6180disputed issue of material fact). However, the ALJ expressly

6189refrains from a determination of whether Subsection 561.19(4)

6197should be construed literally to preclude a separate 120.56

6206proceeding.

62078/ The principal business purpose of Latino is the development

6217of a chain of Latin food restaurants. Latino is not, and has

6229never been, engaged in the active conduct of a trade or

6240business. The sole assets of Latino are limited to assets

6250identified in the record as restaurant equipment.

6257The principal business purpose of Big Pig is to earn revenue as

6269a license holder for a restaurant named Bubbalou's Bodacious

6278Bar-B-Que in Central Florida and as a management company for

6288various other restaurants in central Florida. Big Pig has been,

6298and is, engaged in the conduct of a trade or business and

6310maintains its principal place of business at 1302 Orange Avenue,

6320Winter Park, Florida 32789. Big Pig generates funds through one

6330or more licensing agreements with other restaurants.

6337Mr. Meiner is the only employee of Big Pig.

63469/ The grounds for proposed rejection do not allege a specific

6357act of misconduct. By analogy, however, the grounds for

6366proposed rejection do allege specific facts. Respondent alleges

6374that the entries from Latino and Big Pig are more than one

6386application from Mr. Meiner and that Latino, Big Pig, and

6396Mr. Meiner have a direct or indirect interest in each other

6407within the meaning of Florida Administrative Code Rule 61A-

64165.0105(8).

641710/ If the undersigned were to reach the merits of the first

6429rule challenge, the burden of proof would be on Respondent.

6439Compare § 120.57(1)(e)2. (the agency must demonstrate an

6447unadopted rule is within delegated legislative authority) with

6455in the petition challenging an unadopted rule and limiting the

6465agency's burden to a showing that rulemaking is not feasible and

6476practicable).

647711/ References to the Florida Constitution are to Florida

6486Constitution (2007), unless otherwise stated.

649112/ If a substantially affected party's rule challenge involves

6500a disputed issue of material fact, he or she would be required

6512to assert the rule challenge in a 120.57 proceeding. See

6522applies whenever the proceeding involves a disputed issue of

6531material fact). A substantially affected party "may" also file

6540a 120.56 proceeding if the party elects to pursue the additional

6551remedies available in that statute. See § 120.56(1)(a)(any

6559substantially affected person "may" file a 120.56 proceeding to

6568determine the invalidity of a rule).

657413/ Patricia Dore, Access to Florida to Florida Administrative

6583Proceedings , 13 FLA.ST.U.L.REV., 965, 967, 970, 1017 (winter

65911986).

659214/ In a 120.57 proceeding, for example, an independent

6601executive agency, DOAH, assigns an ALJ to conduct a hearing and

6612recommend final agency action in a dispute between a sister

6622executive agency and a substantially affected party. The sister

6631agency issues a final order that is final agency action. In a

6643120.56 proceeding, the ALJ issues a final order that is final

6654agency action. Both the final order in a 120.57 proceeding and

6665the final order in a 120.56 proceeding are subject to an inter-

6677branch review by the judicial branch of government. All agency

6687action, on appropriate challenge, matures into an agency order

6696impressed with the characteristics of Subsection 120.57(1).

6703McDonald v. Department of Banking and Finance , 346 So. 569, 577

6714(Fla. 1st DCA 1977).

671815/ Subsection 120.52(8)(introductory paragraph).

672216/ Rulemaking disposes of proof and debate of agency policy in

6733a 120.57 proceeding. McDonald , 346 So. 2d at 583. The

6743jurisdictional analysis in this Recommended Order is limited to

6752the argument of Latino and Big Pig that the challenged rule goes

6764beyond the statute that exists after the legislative changes in

67742000. The analysis does not reach proof and debate of agency

6785policy on other grounds. Statutory rulemaking requirements are

6793powerless to displace the separation of powers act in a 120.57

6804proceeding.

680517/ A recommended order invalidating an adopted rule would

6814present several perplexing issues under the remand provisions in

6823Subsection 120.68(7). Remand is mandatory when agency action

6831conflicts with a statute or constitutional provision and when

6840agency action conflicts with an adopted rule. Compare §§

6849120.68(7)(e)4. (remand if agency action conflicts with a

6857statutory or constitutional provision) and 120.68(7)(e)2.

6863(remand for agency action that conflicts with an adopted rule).

6873If an adopted rule were to conflict with a statute and the

6885presiding ALJ were unable to conform the rule to the statute,

6896the ALJ would be required to recommend agency action that

6906conforms to the statute implemented even though the recommended

6915agency action would deviate from the illicit adopted rule.

6924Similarly, the final order of the agency would necessarily

6933deviate from the illicit adopted rule and conform to the

6943statute. Differences in the statutory remedies available in a

6952120.56 proceeding and a 120.57 proceeding would also make a

6962recommended order invalidating an adopted rule problematic.

6969Unlike a final order invalidating an adopted rule in a 120.56

6980proceeding, a recommended order invalidating a rule in a 120.57

6990proceeding would not require the agency to publish a notice of

7001invalidity. The recommended order would be subject to

7009modification in the final order of the agency, would be limited

7020to the parties and facts of record, and would not preclude the

7032agency from relying on the rule in other cases, except to the

7044extent the doctrine of stare decisis may preclude reliance on

7054the rule in cases involving similar facts and law. See Gessler

7065v. Department of Business and Professional Regulation , 627 So.

70742d 501, 504 (Fla. 4th DCA 1993)(agency is bound by

7084administrative stare decisis to follow its final orders in like

7094cases involving similar facts). A determination of invalidity

7102in a 120.56 proceeding is a final order which an agency does not

7115have statutory authority to modify, and the final order is

7125binding on the agency in other administrative hearings. The

7134final orders in a 120.56 proceeding and a 120.57 proceeding are

7145subject to inter-branch judicial review. However, the problems

7153associated with a recommended order invalidating an adopted rule

7162would be similar to those attendant to a recommended order

7172invalidating an unadopted rule pursuant to Subsection

7179120.57(1)(e).

7180COPIES FURNISHED :

7183Jed Berman, Esquire

7186Infantino and Berman

7189Post Office Drawer 30

7193Winter Park, Florida 32790

7197Joshua B. Moye, Esquire

7201Department of Business and

7205Professional Regulation

72071940 North Monroe Street, Suite 42

7213Tallahassee, Florida 32399-2202

7216Ned Luczynski, General Counsel

7220Department of Business and

7224Professional Regulation

7226Northwood Centre

72281940 North Monroe Street

7232Tallahassee, Florida 32399-0792

7235Cynthia Hill, Director

7238Division of Alcoholic Beverages

7242and Tobacco

7244Department of Business and

7248Professional Regulation

7250Northwood Centre

72521940 North Monroe Street

7256Tallahassee, Florida 32399-0792

7259NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

7265All parties have the right to submit written exceptions within

727515 days from the date of this Recommended Order. Any exceptions

7286to this Recommended Order should be filed with the agency that

7297will issue the Final Order in this case.

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Date
Proceedings
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Date: 09/02/2008
Proceedings: (Second) Final Order filed.
PDF:
Date: 09/02/2008
Proceedings: Final Order filed.
PDF:
Date: 08/27/2008
Proceedings: Agency Final Order
PDF:
Date: 08/27/2008
Proceedings: Agency Final Order
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Date: 08/27/2008
Proceedings: Agency Final Order
PDF:
Date: 08/20/2008
Proceedings: Order Setting Aside Final Order filed.
PDF:
Date: 08/05/2008
Proceedings: Final Order filed.
PDF:
Date: 07/24/2008
Proceedings: Response to Petitioners` Exceptions to Recommended Order filed.
PDF:
Date: 07/03/2008
Proceedings: Recommended Order
PDF:
Date: 07/03/2008
Proceedings: Recommended Order cover letter identifying the hearing record referred to the Agency.
PDF:
Date: 07/03/2008
Proceedings: Recommended Order (hearing held April 3, 2008). CASE CLOSED.
PDF:
Date: 05/27/2008
Proceedings: Respondent`s Proposed Recommended Order filed.
PDF:
Date: 05/27/2008
Proceedings: Petitioner`s Proposed Recommended Order filed.
Date: 04/28/2008
Proceedings: Transcript filed.
Date: 04/03/2008
Proceedings: CASE STATUS: Hearing Held.
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Date: 03/28/2008
Proceedings: Amended Notice of Hearing (hearing set for April 3, 2008; 9:30 a.m.; Orlando, FL; amended as to hearing room).
PDF:
Date: 03/24/2008
Proceedings: Joint Pretrial Statement filed.
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Date: 02/28/2008
Proceedings: Notice of Taking Deposition filed.
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Date: 02/19/2008
Proceedings: Petitioners` Response to First Requests for Admission filed.
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Date: 02/19/2008
Proceedings: Notice of Filing Answers to Interrogatories filed.
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Date: 02/13/2008
Proceedings: Order of Pre-hearing Instructions.
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Date: 02/13/2008
Proceedings: Notice of Hearing (hearing set for April 3, 2008; 9:30 a.m.; Orlando, FL).
PDF:
Date: 02/13/2008
Proceedings: Order of Consolidation (DOAH Case Nos. 08-0495, 08-0496, 08-0497 and 08-0498).
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Date: 02/06/2008
Proceedings: Notice of Transfer.
PDF:
Date: 02/04/2008
Proceedings: Notice of Service of Interrogatories filed.
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Date: 02/04/2008
Proceedings: Respondent`s First Request for Admissions to Petitioner filed.
PDF:
Date: 02/01/2008
Proceedings: Joint Response to Initial Order filed.
PDF:
Date: 01/28/2008
Proceedings: Initial Order.
PDF:
Date: 01/25/2008
Proceedings: DOAH Rule 28-106.201 Petition filed.
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Date: 01/25/2008
Proceedings: Notice of Disapproval filed.
PDF:
Date: 01/25/2008
Proceedings: Agency referral filed.

Case Information

Judge:
DANIEL MANRY
Date Filed:
01/25/2008
Date Assignment:
02/06/2008
Last Docket Entry:
09/02/2008
Location:
Orlando, Florida
District:
Middle
Agency:
ADOPTED IN TOTO
 

Counsels

Related DOAH Cases(s) (1):

Related Florida Statute(s) (11):

Related Florida Rule(s) (2):