11-001075RX Interblock Usa, Llc vs. Department Of Business And Professional Regulation, Division Of Pari-Mutuel Wagering Status: Closed DOAH Final Order on Thursday, April 7, 2011.

Summary: Adoption of word, "internal," to require an internal random number generator in each slot machine, as required by rule 61D-14.041(1), is invalid exercise of delegated legislative authority due to lack of authority and contravention of law implemented.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

INTERBLOCK USA, LLC, )

)

Petitioner, )

)

and )

)

S H UFFLE MASTER, INC., )

)

Intervenor, )

)

vs. ) Case No. 11 - 1075RX

)

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REG ULATION, )

DIVISION OF PARI - MUTUEL )

WAGERING, )

)

Respondent. )

________________________________)

SUMMARY FINAL ORDER

Pursuant to section 120.57(1)(h), Florida Statutes,

Petitioner and Intervenor have established that, based on the

pleadings and affidavits, no genuine issue as to any material

fact exists , and they are entitled as a matter of law to the

entry of this Summary Final Order .

APPEARANCES

For Petitioner: John M. Lockwood, Esq uire

Matthew J. Feil, Esq uire

Gunster, Yoakley & Stewart, P.A.

215 South Monroe Street, Suite 601

Tallahassee, Florida 32301

For Intervenor: Marc W. Dunbar, Esq uire

Joshua D. Aubuchon, Esq uire

Pennington, Moore, Wilkinson,

Bell & Dunbar, P.A.

215 South Monroe Street, Second Floor

Tallahassee, Florida 32301

For Respondent: Charles T. ("Chip") Collette

Assistant General Counsel

Joseph M. Helton, Jr.

Chief Attorney

Division of Pari - Mutuel Wagering

1940 North Monroe Street, Suite 40

Tallahassee, Florida 32399

STATEMENT OF THE ISSUE

The issue is whether the word, "internal," in Florida

Administrative Code Rule 61 D - 14.041(1) is an invalid exercise of

delegated legislative authority because Respondent exceeded its

grant of rulemaki ng authority or because this word enlarges,

modifies, or contravenes the law implemented, in violation of

sections 120.56(3) and 120.52(8)(b) and (c). In sum, Petitioner

and Intervenor challenge r ule 61 D - 14.041(1) only to the extent

that this rule require s that each slot machine contain an

i nternal random number generator .

PRELIMINARY STATEMENT

By Petition Challenging Validity of Rule 61D - 14.041,

Florida Administrative Code, Petitioner sought a final order

determining the invalidity of the cited rule. The Petition

focuses mainly on the requirement that slot machines co ntain

random number generators and cites the statutory definition of a

slot machine, at secti on 551.102(8), which includes a device

governed by chance or by skill, or by both. The Petitio n

alleges that Respondent lacked the authority to adopt the

challenged rule, under section 120.52(8)(b); that the challenged

rule enlarges, modifies, or contravenes the law implemented,

under section 120.52(8)(c); that the challenged rule is vague ,

fails t o establish adequate standards for agency decisions, or

vests unbridled discretion in Respondent, under section

120.52(8)(d); and that the challenged rule is arbitrary or

capricious, under section 120.52(8)(e).

In its Answer filed March 2, 2011 , Respond ent denied, among

other things, the allegations that Petitioner's slot machines

meet the applicable legal definition of slot machines and

asserted that the issue of whether the challenged rule is an

invalid exercise of delegated legislative authority is a

question of law and ultimate fact. Respondent affirmatively

claimed that Petitioner lacked standing because it does not have

a slot machine licensed for use in Florida, and the only gaming

device that Petitioner has discussed with Respondent is a

roulette machine that cannot qualify for licensure in Florida as

a slot machine.

On March 3, 2011, the Administrative Law Judge to whom the

case was originally assigned conducted a prehearing conference

and, on the next day, set the final hearing for April 1, 2 011.

On March 7, 2011, Petitioner filed a Motion for Summary

Final Order (SFO Motion) . The SFO Motion claims that Petitioner

has standing to challenge the rule because Petitioner is a

licensed slot machine manufacturer required to comply with

Respondent 's rules. In the SFO Motion, Petitioner argues only

two grounds for invalidity of the rule: that Respondent lacks

the authority to adopt the rule and that the rule enlarges,

modifies, or contravenes the law implemented. Although the SFO

Motion mentions the internal random number generator, it

continues to seek an order invalidating the entire rule , not

merely the word, "internal," as it appears in the rule .

On March 11, 2011, Intervenor filed a Petition to

Intervene. The Petition to Intervene alleges that Intervenor is

a slot machine manufacturer and is substantially affected

because it must comply with Florida Administrative Code Rule

61D - 14.041. The Petition to Intervene states that Petitioner

and Respondent did not object to intervention. Possibl y, this

is because it is impossible to learn from the Petition to

Intervene whether Intervenor supported or opposed the challenged

rule. On March 11, 2011, the undersigned Administrative Law

Judge granted the Petition to Intervene and , with some doubt ,

al igned Intervenor with Petitioner .

On March 14, 2011, Respondent filed a memorandum in

opposition to Petitioner's SFO Motion and an Amended Answer,

which denied Petitioner's allegations that it is a slot machine

manufacturer. The memorandum notes that a SFO is inappropriate

due to the existence of material disputed facts -- "most

critically being the fact that the Division denies that any of

Interblock's gaming machines could ever be legally authorized in

Florida."

On March 18, 2011, the Administrative Law Judge conducted a

telephone conference with the parties. During the telephone

conference, Intervenor confirmed that it was challenging the

rule, Petitioner and Intervenor stated that the rule challenge

is only to the word "internal" in Florida Adminis tr ative Code

Rule 61D - 14.041(1), and Petitioner and Intervenor restricted

their grounds for invalidity to the two stated in the SFO

Motion: lack of authority and enlargement, modification, or

contravention of the law implemented. At the urging of the

Adm inistrative Law Judge, Petitioner and Intervenor filed, later

the same day, a Joint Case Stipulation, which confirmed most of

the concessions that they made during the unreported telephone

conference.

For its part, during the March 18 telephone conference ,

Respondent briefly argued that the grounds cited for the

invalidity of the rule required supporting evidence, but the

Administrative Law Judge rejected this argument during the

conference, at least as to certain grounds. During the

telephone conference, Respondent argued mainly that Petitioner

lacked standing. Respondent stated that it had agreed to

Intervenor's intervention only if it took the case as it found

it -- including the standing of Petitioner -- even though Respondent

conceded that Intervenor man ufactured devices that either

qualified as slot machines in Florida or were closer to

qualifying than Petitioner's devices. The Administrative Law

Judge did not rule at the conclusion of the telephone

conference, but promised to issue a timely order, give n that the

evidentiary hearing was set for two weeks later.

At this time, due to the amendment of the answer, the

pleadings did not establish that Petitioner manufactured what

might generally be called slot machines -- without regard to

whether these device s qualified for licensure in Florida as slot

machines. Also, Respondent's characterization of Intervenor's

devices, as described in the preceding paragraph, seemed

insufficiently definitive to provide a factual basis for summary

relief as to the threshold issue of standing, as the parties

describe it, or jurisdiction, as the Administrative Law Judge

describes it, as discussed below.

However, no material factual dispute exists as to the

questions of law involving wheth er the cited statutes authorize

Respon dent to adopt the word, "internal," in Florida

Administrative Code Rule 61 D - 14.041(1), or whether the adoption

of the word, "in ternal," in the rule enlarges, modifies or

contravenes the cited statutes. The Administrative Law Judge

thus entered , on March 2 2, 2011, an Order on Petitioner's Motion

for Summary Final Order. A partial summary final order, this

Order d etermined that Respondent lacks the statutory authority

to adopt the word, "internal" in r ule 61 D - 14. 041(1), and the

word enlarges, modifies, or c ontravenes the law implemented.

The result of this summary final order would be to inval idate

the requirement in r ule 61 D - 14.041(1) for internal random number

generators in slot machines, provided Petitioner or Intervenor

proves that it is substantially a ffected by the rule, either by

affidavit or at an evidentiary hearing. ( The March 22 Order is

substantially restated below in this Summary Final Order. )

On March 30, 2011, Respondent filed a Notice Regarding

April 1, 2011 Hearing. In the Notice, Respond ent asserts that

the evidentiary hearing on standing would serve no purpose

because the March 22 Order described above also relieved

Petitioner of the necessity of responding to Respondent's

pending discovery requests, which were predicated on a theory of

standing/jurisdiction that the Administrative Law Judge did not

share with Respondent.

The next day, Petitioner filed Petitioner's Response to

Respondent's Notice Regarding April 1, 2011, Hearing. Disputing

Respondent's arguments, Petitioner nonetheles s shared

Respondent's conclusion that the evidentiary hearing would serve

no purpose, as Petitioner contended that the undisputed facts

already in the record established that Petitioner was

substantially affected by the rule.

On March 31, 2011, the partie s and the Administrative Law

Judge participated in another telephone conference. Among other

things, the Administrative Law Judge advi sed the parties that he

believed the threshold issue is jurisdictional, so the parties'

agreements are not bindi ng on, sa y, an appellate court. The

Administrative Law Judge also stated that he did not necessarily

disagree with the standing/jurisdictional arguments of

Petitioner and Intervenor, but the Administrative Law Judge

preferred to obtain affidavits or hearing testim ony concerning

the status of Petitioner and Intervenor in terms of the

manufacture, sale, or distribution of what might broadly be

called slot machines in order to make available to an appellate

court all of the relevant facts on which jurisdiction may be

based . Posed with this choice, a ll three parties opted for

affidavits, so the Administrative Law Judge canceled the April 1

evidentiary hearing, gave Petitioner and Intervenor until

April 4, 2011, to file their affidavits, and gave Respondent

until April 6, 2011, to file any opposing affidavits or motions.

On April 1, 2011, Petitioner and Inter venor each filed an

affidavit . On April 6, 2011, Respondent filed an affidavit of

Milton F. Champion, III, Respondent's Director of the Division

of Pari - Mutuel Wag ering.

UNDISPUTED FACT S

1. Petitioner is a Nevada limited liability corporation

authorized to do business in Florida . Petitioner manufacture s

and distributes gaming devices and is licensed to do so

domestically and internationally. On August 6, 2010, R espondent

issued Petitioner a license as a slot machine manufacturer,

pursuant to chapter 551, Florida Statutes. However, no gaming

device manufactured by Petitioner has ever been licensed as a

Florida slot machine or located in a Florida - licensed slot

ma chine facility.

2. Pursuant to Florida law, Petitioner has submitted one

of its gaming devices to Gaming Laboratories International

(GLI), a licensed, independent testing laboratory, for

evaluation for certification as a slot machine for distribution

int o Florida. By letter dated March 9, 2011, GLI advised

Petitioner that an impediment to certification of its gaming

device in Florida is the absence of an internal random number

generator. The absence of an internal random number generator

may not be the sole impediment to certification, which is a

precondition for the sale and use of a slot machine in Florida.

Multiple licensed slot machine facilities in Broward and Miami -

Dade counties have expressed interest in purchasing Petitioner's

gaming devices , if they are certified as slot machines .

3. Intervenor manufactures and distributes slot machines .

Intervenor is also licensed as a slot machine manufacture r,

pursuant to chapter 551 . As such, Intervenor's products are

regulated by the rule requiring a n internal random number

generator in each slot machine. Additionally, Intervenor's slot

machines have been certified and lawfully located in licensed

slot machine facilities in Florida.

4. GLI has advised Intervenor that an impediment to the

certificat ion of Intervenor's slot machine known as Table

Master®, for sale and use in Florida, is the requirement of an

internal random number generator. Intervenor thus is deprived

of revenues from the effect of the rule requiring internal

random number generator s.

5 . With the challenged word underlined, Florida

Administrative Code Rule 61D - 14.041 provides:

(1) Each slot machine shall use an internal

random number generator (RNG). The RNG

shall:

(a) Be statistically independent from

any other device;

(b) Conform to the random distribution

values specified in the slot machineÓs PAR

sheet;

(c) Pass statistical tests such as the

chi - squared test or random distribution

analysis test;

(d) Cycle continuously in the background

between games and dur ing game play;

(e) Randomly determine the first seed

number;

(f) Use a method of re - scaling that

permits all numbers within the lower range

to be equally probable if a function of a

slot machine requires a random number to be

generated with a small er range than that

provided by the slot machineÓs RNG; and

(g) Re - scale values using a method such

as discarding that random number and

selecting the next in sequence if a

particular random number selected is outside

the range of equal distribution of re -

scaling values.

(2) A slot machine shall use communication

protocols to protect the RNG and random

selection process from influence by

associated equipment.

(3) Each possible permutation or

combination of game elements that produces a

winning or l osing game outcome shall be

available for random selection at the

initiation of each play.

(4) The laboratory shall include a copy of

each of the certifications required under

this rule as part of the formal approval

documentation certifying the machine and/or

game for play in Florida to the division.

(5) Any misstatements, omissions or errors

in the required certification provided by

either the laboratory or the manufacturer

and/or distributor is a violation of rules

governing slot machine gaming.

6 . Rule 61D - 14.041 cites sections 551.103(1 ) and 551.122

as the rulemaking authority, and section 551.103(1)(c), (e), (g)

as the law implemented.

CONCLUSIONS OF LAW

7 . The Division of Administrative Hearings has

jurisdiction. §§ 120.56(1)(c), 120.569 , and 120.57(1), Fla.

Stat . Section 120.56(1)(a) provides:

Any person substantially affected by a rule

or a proposed rule may seek an

administrative determination of the

invalidity of the rule on the ground that

the rule is an invalid exercise of delegated

legislative authority.

8. Jurisdiction depends on a claim that a rule or proposed

rule is an invalid exercise of delegated legislative authority

by a person substantially affected by the challenged rule or

proposed rule. The threshold issue in this ca se is whether

Petitioner or Intervenor is substantially affected by the

presence of the word, "internal" in r ule 61D - 14.041(1).

9 . Substantial - interest jurisdiction under sect ion

120.569(1) does not require that the party prevail on the

merits. Peace R iver/Manasota Reg'l Water Suppl y Auth. v. IMC

Phosphates Co. , 18 So. 3d 1079, 1082 - 85 (Fla. 2d DCA 2009); Palm

Beach Cnty. Envt l . Coal . v. Dep' t of Env t l . Prot . , 14 So. 3d

1076 (2009). The teachings of these cases is that a person's

substantial interests are determined by an age ncy, under section

120.569(1) if its substantial i nterests "could be affected," 18

So. 3d at 1084, or "could reasonably be affected," 14 So. 3d at

1078, by the proposed agency action. The cases agree that the

standing require ment of a substantial interest is a "forward -

looking concept [that] cannot 'disappear' based on the ultimate

outcome of the proceeding." 18 So. 3d at 1083; 14 So. 3d at

1078.

10 . S ubstantially affected jurisdiction, under section

120.569(1) , likewise does not require that a party prevail on

the merits -- or, here, present to Respondent a certification -

ready slot machine, but for the requirement of an internal

random number generator . It is sufficient, under the case law,

that Petitioner and Intervenor, as sl ot machine manufacturers

and distributors, could be substantially affected or could

reasonab ly be substantially affected by a rule requiring that

each slot machine contain an internal random number generator.

11 . The proper jurisdictional inquiry is whet her the

impact of the rule's requirement of an internal random number

generator is different in kind upon Petitioner or Intervenor

than on all of Florida's citizens. NAACP v. Fla. Bd. o f

Regents , 863 So. 2d 294, 299 (Fla. 2003). Substantial affect

does n ot require "immediate and actual harm." 863 So. 2d at

300. In NAACP , it was not necessary for any rule challenger to

show that he or she had been rejected for admission to a state

university due to the adoption of rules eliminating certain

affirmative ac tion policies of state universities; prospective

candidates for admission were also substantially affected. Id.

12 . Under the above - discussed authority, Petitioner and

Intervenor are substantially affected by the word, "internal,"

in Florida Administr ative Code Rule 61D - 14.041(1) . Each is a

manufacturer of devices that, with varying degrees of

reconfiguration, can satisfy Florida's requirements imposed upon

slot machines, as this term is defined, in part, by sect ion

551.102(8) . Petitioner and Interve nor are not manufacturers of

boats or furniture with an undefined interest in a rule

requiring an internal random number generator in each slot

machine . Petitioner and Interve nor manufacture gaming devices --

in Intervenor's case, as conceded by Respondent, these gaming

devices are slot machines. Petitioner and Intervenor are

Florida - licensed slot machine manufacturer s . W hen compared to a

typical citizen, each of these parties suffers a different kind

of harm from the rule requiring an internal random numb er

generator in each slot machine . The standard implied by

Respondent in its standing argument is nothing less than

immediate and actual harm, which the Florida Supreme Court has

rejected for rule challenges.

13 . Section 120.56 (3)(a) provides:

A subst antially affected person may seek an

administrative determination of the

invalidity of an existing rule at any time

during the existence of the rule. The

petitioner has a burden of proving by a

preponderance of the evidence that the

existing rule is an in valid exercise of

delegated legislative authority as to the

objections raised.

14 . Section 120.52(8) provides in relevant part:

ÐInvalid exercise of delegated legislative

authorityÑ means action that goes beyond the

powers, functions, and duties delegat ed by

the Legislature. A proposed or existing

rule is an invalid exercise of delegated

legislative authority if any one of the

following applies:

* * *

(b) The agency has exceeded its grant

of rulemaking authority, citati on to which

is required by s. 120.54(3)(a)1; [or]

(c) The rule enlarges, modifies, or

contravenes the specific provisions of law

implemented, citation to which is required

by s. 120.54(3)(a)1.

* * *

A grant of rulemakin g authority is necessary

but not sufficient to allow an agency to

adopt a rule; a specific law to be

implemented is also required. An agency may

adopt only rules that implement or interpret

the specific powers and duties granted by

the enabling statute. No agency shall have

authority to adopt a rule only because it is

reasonably related to the purpose of the

enabling legislation and is not arbitrary

and capricious or is within the agencyÓs

class of powers and duties, nor shall an

agency have the authority to implement

statutory provisions setting forth general

legislative intent or policy. Statutory

language granting rulemaking authority or

generally describing the powers and

functions of an agency shall be construed to

extend no further than implementing or

interpreting the specific powers and duties

conferred by the enabling statute.

15 . Added in 2008, s ection 120.52(17) provides:

"'Rulemaking authority' means statutory language that explicitly

authorizes or requires an agency to adopt, develop, esta blish,

or otherwise create any statement coming wit hin the definition

of the term ' rule. '" This definition does not add new

restrictions to agency rulemaking authority, but re - emphasizes

the existing restrictions cited immediately above. Fl a . Elec .

Comm ' n v. Blair , 52 So. 3d 9 (Fla. 1st DCA 2010).

16 . Section 555.103(1) provides:

The division shall adopt, pursuant to the

provisions of ss. 120.536(1) and 120.54, all

rules necessary to implement, administer,

and regulate slot machine gaming as

authorized in this chapter. Such rules must

include:

(a) Procedures for applying for a slot

machine license and renewal of a slot

machine license.

(b) Technical requirements and the

qualifications contained in this chapter

that are necessary to receive a slot ma chine

license or slot machine occupational

license.

(c) Procedures to scientifically test and

technically evaluate slot machines for

compliance with this chapter. The division

may contract with an independent testing

laboratory to conduct any necessary testing

under this section. The independent testing

laboratory must have a national reputation

which is demonstrably competent and

qualified to scientifically test and

evaluate slot machines for compliance with

this chapter and to otherwise perform the

fu nctions assigned to it in this chapter.

An independent testing laboratory shall not

be owned or controlled by a licensee. The

use of an independent testing laboratory for

any purpose related to the conduct of slot

machine gaming by a licensee under this

chapter shall be made from a list of one or

more laboratories approved by the division.

(d) Procedures relating to slot machine

revenues, including verifying and accounting

for such revenues, auditing, and collecting

taxes and fees consistent with this c hapter.

(e) Procedures for regulating, managing,

and auditing the operation, financial data,

and program information relating to slot

machine gaming that allow the division and

the Department of Law Enforcement to audit

the operation, financial data, and program

information of a slot machine licensee, as

required by the division or the Department

of Law Enforcement, and provide the division

and the Department of Law Enforcement with

the ability to monitor, at any time on a

real - time basis, wagering patter ns, payouts,

tax collection, and compliance with any

rules adopted by the division for the

regulation and control of slot machines

operated under this chapter. Such

continuous and complete access, at any time

on a real - time basis, shall include the

abilit y of either the division or the

Department of Law Enforcement to suspend

play immediately on particular slot machines

if monitoring of the facilities - based

computer system indicates possible tampering

or manipulation of those slot machines or

the ability t o suspend play immediately of

the entire operation if the tampering or

manipulation is of the computer system

itself. The division shall notify the

Department of Law Enforcement or the

Department of Law Enforcement shall notify

the division, as appropriate , whenever there

is a suspension of play under this

paragraph. The division and the Department

of Law Enforcement shall exchange such

information necessary for and cooperate in

the investigation of the circumstances

requiring suspension of play under this

paragraph.

(f) Procedures for requiring each licensee

at his or her own cost and expense to supply

the division with a bond having the penal

sum of $2 million payable to the Governor

and his or her successors in office for each

year of the licenseeÓs slot machine

o perations. Any bond shall be issued by a

surety or sureties approved by the division

and the Chief Financial Officer, conditioned

to faithfully make the payments to the Chief

Financial Officer in his or her capacity as

treasurer of the division. The lice nsee

shall be required to keep its books and

records and make reports as provided in this

chapter and to conduct its slot machine

operations in conformity with this chapter

and all other provisions of law. Such bond

shall be separate and distinct from the bond

required in s. 550.125.

(g) Procedures for requiring licensees to

maintain specified records and submit any

data, information, record, or report,

including financial and income records,

required by this chapter or determined by

the division to be ne cessary to the proper

implementation and enforcement of this

chapter.

(h) A requirement that the payout

percentage of a slot machine be no less than

85 percent.

(i) Minimum standards for security of the

facilities, including floor plans, security

camer as, and other security equipment.

(j) Procedures for requiring slot machine

licensees to implement and establish drug -

testing programs for all slot machine

occupational licensees.

17 . Se ction 551.122 provides: " The division may adopt

rules pursuant t o ss. 120.536(1) and 120.54 to administer the

provisions of this chapter."

18 . As source s of rulemaking authority, section 551.122

and the first sentence of section 551.103(1) fall within the

scope of the final sentence of the flush - left lan guage of

sect ion 120.52(8) as general description s of the powers an d

functions of Respondent. These statut ory provisions are

therefore of no particular value in determining Respondent's

specific rulemaking authority.

19 . However, the remainder of s ection 551.103 ( 1) confers

specific powers and duties upon Respondent with respect to

rulemaking. The question is whether any of these provisions

explicitly authorize s Respondent to require an i nternal random

number generator . Most of the provisions obviously do not

aut horize such a requirement, but four subsections warrant

discussion.

20 . Section 555.103 ( 1)(b) authorizes Respondent to adopt

rules concerning "[ t]echnical requirements and . . .

qualifications," but of licensee s , not of devices.

21 . Applicable to dev ices, s ection 555. 103 (1)(c)

authorizes Respondent to adopt rules concerning "[p]rocedures to

scientifically test and technically evaluate slot machines," but

only to determine compliance with chapter 551. This statute

authorizes rulemaking of procedures, which are not components of

slot machines. Even ignoring the distinction between procedures

and random number generators, this statute does not authorize

rulemaking of substantive requirements to be imposed upon slot

machines, unless these substantive req uirements are found

elsewhere within chapter 551. Section 551.103 (8) defines "slot

machines," although more inclusively than exclusively, and

section 555.121 adds important restrictions on slot machines.

However, neither of these provisions, nor any prov ision in

chapter 551 , requires that each slot machine contain an internal

random number generator.

22 . Also applicable to devices, section 555.1 03 (1)(e)

authorizes Respondent to adopt rules concerning:

[p]rocedures for regulating, managing, and

audit ing the operation, financial data, and

program information relating to slot machine

gaming that allow the division and the

Department of Law Enforcement to audit the

operation, financial data, and program

information of a slot machine licensee, as

required by the division or the Department

of Law Enforcement, and provide the division

and the Department of Law Enforcement with

the ability to monitor, at any time on a

real - time basis, wagering patterns, payouts,

tax collection, and compliance with any

rules a dopted by the division for the

regulation and control of slot machines

operated under this chapter.

23 . This statute also authorizes rulemaking of procedures ,

not components of slot machines . Even ignoring the distinction

between procedures and rando m number generators, this statute

does not authorize the adoption of a rule requiring an i nternal

random number generator . The authorized procedures fall into

two categories. The first set of procedures is to allow

Respondent to audit the operation and p rogram information of a

slot machine licensee, not a slot machine. This authority thus

does not involve the devices themselves.

24 . The second set of procedures is to provide Respondent

with the ability to monitor, in real time, wagering patterns,

pay outs, tax collection, and compliance with the rules. This

authority involves the devices themselves, but provides no

authority for differentiating between internal and external

random number generators. There does not appear to be a

relationship between the requirement of an internal random

number generator and procedures to monitor, in real time,

wage ring patterns , payouts, tax collection, and compliance with

the rules.

25 . Section 555.103 (1)(g) authorizes Respondent to adopt

rules concerning "[p]roced ures for requiring licensees to

maintain specified records and submit any data, information,

record, or report, including financial and income records,

required by this chapter or determined by the division to be

necessary . . .." This statute pertains al so to procedures and

financial records; as such, it provides no authority for

differentiating between internal and external random number

generators. Even ignoring the distinction between procedures

and random number generators, this authority involves th e

maintaining and submitting of financial records, not slot

machines.

26 . During the March 18 telephone conference, Respondent

cited PPI, Inc. v. Departme nt of Business and Professional

Regulation , 698 So. 2d 306 (Fla. 3d DCA 1996). Among the

holdings i n this opinion is a rever s al of an Administrative Law

Judge, who had invalidated a rule . The rule required pari -

mutuel wagering permit holders that operated cardrooms to

install electronic surveillance devices. Noting, under then -

current law, that "[w]he re an agency is granted rule - making

authority, it is granted wide discretion in exercising that

authority," the court cited statutory authority empowering

Respondent to adopt rules for the operation of cardrooms, to

monitor the operation of cardrooms, and to insure the

implementation of internal controls and the collection of fees

and taxes. Much has changed in the law of rulemaking since

1996. See, e.g. , Sw . Fla. Water Mgmt. Dist. v. Save the Manatee

Club, Inc. , 773 So. 2d 594 (Fla. 1st DCA 2000). Regar dless of

these changes, a statute authorizing an agency to adopt rules

for the operation of cardrooms, for the monitoring of the

operations of cardrooms, and for the assurance of the

implementation of internal controls and the collection of fees

and taxes provides firmer administrative footing for a rule

requiring security cameras than the above - quoted statutes

provide for a rule requiring an internal random number generator

in every slot machine .

27. During the March 18 telephone conference, Respondent

a rgued that internal random number generators were important in

assuring the security of slot machines. Thus, Respondent

reasoned, it would be necessary to receive evidence, even on the

two claims -- lack of rulemaking authority and lack of law

implemented -- addressed in this Order. Perhaps the evid ence

would have showed that the requirement of a n internal random

number generator provides the assurance of a secure slot - machine

gaming experience. Perhaps the evidence would have showed that

the location of the random number generator does not affect the

security of the slot - machine gaming experience. But the

existence of either situation has no bearing on the absence of

statutory authority to adopt the rule or the fact that the rule

enlarges, modifies, or cont ravenes the law implemented.

28 . A more relevant case is St. Petersburg Kennel Club v.

Department of Business and Professional Regulation , 719 So. 2d

1210 (Fla. 2d DCA 1998) (per curiam). In this case, the court

considered the statute authorizing pa ri - mutuel wagering permit

holders to operate cardrooms and whether Respondent had the

authority to adopt a rule defining the game of poker. Reviewing

a list of statutes that authorized Respondent to adopt rules for

the issuance of cardroom licenses, the o peration of a cardroom,

recordkeeping and reporting requirements, and the collection of

all fees and taxes, the court concluded that Respondent lacked

the specific authority to adopt rules defining poker, even

though the substantive statute cross - reference d another statute

that included poker among a list of approved games. There was

some relationship between a statute authorizing Respondent to

adopt rules licensing cardrooms and governing their operation

and a rule defining poker, as contrasted to the pre sent case

where there is no relationship between the cited statutes and

the challenged rule, but the St. Petersburg Kennel Club court

held that the relationship was insufficient to support the

definitional rule.

29 . The Blair decision, supra , involves a definitional

rule, which the court held was valid. T he rule defines a

statutory term, "willful," in determining the existence of

campaign finance violations. Listing the statutes empowering

the agency to "in vestigate and determine" viola tions of the law,

the court reasoned that the agency had to "interpret and app ly"

the meaning of "willful" to discharge its clear statutory

duties. Similarly, the Blair court determined that the

definitional rule properly implemented the law because a statute

predicated l iability on a willful violation of the law.

30 . The Blair holding is based on the close relationship

between the object of agency regulation -- the definition of

"willful" -- and the clear statutory assignment of duties to the

agency to determine willful vio lations of campaign finance laws.

Without determining the meaning of "willful," the agency could

not discharge any of these duties. The relationship between the

object of agency regulation -- the definition of poker -- and the

clear statutory assignment of d uties to Respondent was more

attenuated in St. Petersburg Kennel Club . I n the present case,

there is no relationship between the object of agency

regulation -- internal random number generators -- and the statutory

assignment of duties listed above; Responden t can meaningfully

discharge each of these duties without requiring slot machine

manufacturers or distributors to include a random number

generator in each slot machine.

31 . For the reasons set forth above, Respondent lacks the

rulemaking authority to ad opt the requirement of an inter nal

random number generator in r ule 61D - 14.041(1).

32 . For the reasons set forth above, the requirement of an

internal random number generator in r ule 61D - 14.041(1) enlarges,

modifies, and contravenes section 551.103(1)( c), (e), and (g) ,

Florida Statutes .

33 . Section 120.56(3)(b) provides:

The administrative law judge may declare all

or part of a rule invalid. The rule or part

thereof declared invalid shall become void

when the time for filing an appeal expires.

The age ncy whose rule has been declared

invalid in whole or part shall give notice

of the decision in the Florida

Administrative Weekly in the first available

issue after the rule has become void.

ORDER

Based on the foregoing,

It is

ORDERED that the word, "i nternal," in Florida

Administrative Code Rule 61D - 14.041(1) is stricken as an invalid

exercise of delegated legislative authority because of a lack of

rulemaking authority to adopt a rule imposing this requirement

and because the word, "internal" in this r ule enlarges,

modifies, and contravenes the law implemented.

DONE AND ORDERED this 7th day of April , 2011, in

Tallahassee, Leon County, Florida.

S

___________________________________

ROBERT E. MEALE

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 7th day of April , 2011.

COPIES FURNISHED:

John M. Lockwood, Esquire

Matthew J. Feil, Esquire

Gunster, Yoakley & Stewart, P.A.

215 South Monroe Street, Suite 618

Tallahassee, Florida 32301

Charles T. "Chip" Collette, Assistant General Counsel

Joseph M. Helton, Jr., Chief Attorney

Department of Business and

Professional Regulation

1940 North Monro e Street

Tallahassee, Florida 32399 - 2202

Marc W. Dunbar, Esquire

Joshua D. Aubuchon, Esquire

Pennington, Moore, Wilkinson,

Bell & Dunbar, P.A.

215 South Monroe Street, 2nd Floor

Post Office Box 10095

Tallahassee, Florida 32302 - 2095

Layne Smith , General Counsel

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

Ken Lawson, Secretary

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florid a 32399 - 2202

Milton Champion, Director

Division of Pari - Mutuel Wagering

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

NOTICE OF RIGHT OF JUDICIAL REVIEW

A party who is adversely af fected by this final order is

entitled to judicial review. Review proceedings are governed by

the Florida Rules of Appellate Procedure. Such proceedings are

commenced by filing one copy of a Notice of Appeal with the

agency clerk of the Division of Admin istrative Hearings and a

second copy, accompanied by filing fees prescribed by law, with

the District Court of Appeal, First District, or with the

District Court of Appeal in the appellate district where the

party resides. The Notice of Appeal must be fil ed within 30

days of rendition of the order to be reviewed.