11-001495 Ft. Myers Real Estate Holdings, Llc vs. Department Of Business And Professional Regulation, Division Of Pari-Mutuel Wagering Status: Closed Recommended Order on Tuesday, August 6, 2013.

Summary: The Department did not take improper actions when processing Petitioner's application for a quarter hourse racing permit. The 2010 version of section 550.334 applies to Petitioner.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FT. MYERS REAL ESTATE HOLDINGS,

LLC ,

Petitioner ,

vs. Case No. 11 - 1495

DEPARTMENT OF BUSINESS AND

PROFESSIONAL REGULATION,

DIVISION OF PARI - MUTUEL

WAGERING ,

Respondent .

/

RECOMMENDED ORDER

Pursuant to notice to all parties, the second portion of the

final hearing in this bifurcated matter was conducted on June 17,

2013, in Tallahassee, Florida, before Administrative Law Judge R.

Bruce McKibben of th e Division of Administrative Hearings.

APPEARANCES

For Petitioner: Brian Newman, Esquire

Pennington, Moore, Wilkinson,

Bell & Dunbar, P.A.

215 South Monroe Street, 2 n d Floor

Tallahassee, Florida 32301

For Respondent: Wil liam E. Williams, Esquire

Amy W. Schrader, Esquire

Gray Robinson, P.A.

301 South Bronough Street, Suite 600

Tallahassee, Florida 32302

STATEMENT OF THE ISSUE

This final hearing in this matter was previously bifurcated

with sev eral of the issues being heard in the first portion of

the final hearing that was conducted on June 24 - 25, 2011. A

Recommended Order was entered as to that portion of the hearing

on August 22, 2011. A Final Order was entered on November 11,

2011, holding that Respondent, Department of Business and

Professional Regulation, Division of Pari - Mutuel Wagering (the

ÐDivisionÑ), did not engage in undue or unreasonable delay in

processing the application of Petitioner, Ft. Myers Real Estate

Holding, LLC (ÐFt. Mye rsÑ); did not repeatedly deny Ft. MyersÓ

application for a quarter horse permit; and, did not deny Ft.

MyersÓ petition for formal administrative hearing for the purpose

of ensuring application of a new law that prohibited new quarter

horse racing permits b ecause of a geographical limitation. The

Final Order was appealed to the Third District Court of Appeal,

but the appeal was dismissed by the Court as not yet ripe for

appeal pending resolution of the remaining issue.

The issue in the present portion of t his case is whether the

Division operated in bad faith vis - à - vis its processing and

denial of Ft. MyersÓ quarter horse racing permit application.

PRELIMINARY STATEMENT

Ft. Myers filed an application seeking a quarter horse

racing permit from the Division. The Division determined the

application failed to meet the statutory criteria for approval

set forth in section 550.334(1), Florida Statutes (2008). The

Division issued a notice denying Ft. Myers' application on

January 13, 2009. Ft. Myers filed a petit ion seeking an

administrative hearing contesting the denial of its application.

The Division determined that the petition was non - compliant with

Florida Administrative Code Rule 28 - 106.210(2), and it was

dismissed with leave to amend. An amended petition was filed.

The Division dismissed Ft. Myers' amended petition with prejudice

based upon lack of standing. Ft. Myers successfully appealed the

Division's denial of the amended petition. The petition was then

remanded to the Division of Administrative He arings to conduct a

formal proceeding under section 120.57(1), Florida Statutes

(2010).

The parties then sought an initial determination from the

undersigned as to whether current law or the law in effect at the

time of Ft. Myers' initial application for a permit would apply

to this case. The proceeding was bifurcated to allow for a

determination of that issue, based in large part on application

of the exceptions from Lavernia v. Department of Professional

Regulation , 616 So. 2d 53 (Fla. 1st DCA 1993), as set forth in

Medsport Laboratory, Inc. v. Department of Agriculture & Consumer

Services , Case No. 97 - 2508 (DOAH Dec. 17, 1997; DACS Jan. 21,

1998). The singular issue of bad faith addressed in Lavernia and

Medsport was not included in the first portion of the bifurcated

final hearing, but was reserved for the present portion of the

final hearing.

In the initial phase of the bifurcated hearing, Ft. MyersÓ

E xhibits 1 through 44 and the DivisionÓs E xhibits 1 through 11

were admitted into evidence. Ft. Myer s presented the testimony

of David Romanik, David Roberts, Charles Collette, Joseph Helton,

and Jim Barnes. The Division also called Helton and Barnes in

its case - in - chief.

In the present phase of the bifurcated final hearing, Ft.

Myers called two addit ional witnesses: John Lockwood, a gaming

law attorney; and Jim Barnes, an investigator involved in the

processing of Ft. MyersÓ application. No additional exhibits

were offered into evidence by Ft. Myers. The Division did not

call any witnesses, but off ered E xhibits 1 and 2 which were

admitted into evidence without objection. Exhibit 1 is the

transcript of the initial phase of the bifurcated hearing from

June 29 - 30, 2011; E xhibit 2 is the Final Order entered by the

Division on November 10, 2011 (includi ng the Recommended Order,

PetitionerÓs exceptions to the Recommended Order, RespondentÓs

response to PetitionerÓs exceptions, and the transcript of a

motion hearing held on April 25, 2011).

A transcript of the second phase of the final hearing was

ordere d by the parties. The transcript was filed at the Division

of Administrative Hearings on July 8, 2013. By rule, the parties

were allowed 10 days, i.e., up until July 18, 2013, to submit

proposed recommended orders, but due to an issue regarding

receipt o f the transcript by one party, the parties requested and

were granted an extension until July 23, 2013, to file their

proposed recommended orders. Each party timely submitted a

P roposed R ecommended O rder and each was duly considered in the

preparation of this Recommended Order.

FINDINGS OF FACT

Based upon the evidence presented at both portions of the

bifurcated final hearing, considered in toto , the following

findings of fact are established.

1. Ft. Myers is a Florida limited liability company establi shed for

the purpose of obtaining a permit to own and operate a quarter horse racing

facility in the State of Florida. It is further the intent of Ft. Myers to

operate as a pari - mutuel wagering facility in any fashion allowed by law.

2. The Division is t he state agency responsible for

reviewing and approving applications for pari - mutuel wagering

permits, including quarter horse racing facility permits.

3. I n January 2009, Ft. Myers filed an application (the

"Application") seeking a permit to build and op erate a quarter

horse racing facility in Lee County, Florida. The Application

was properly filed with the Division.

4. On February, 13, 2009, the Division issued a deficiency

letter setting forth several deficiencies or omissions in the

Application.

5. Ft. Myers submitted a response to the deficiency letter

on February 18, 2009. In the response, Ft. Myers addressed each

of the deficiencies.

6. So far as can be determined from the evidence provided,

the Application was deemed complete by the Division s ometime

after February 18, 2009. However, Ft. Myers thereafter contacted

the Division and asked that further action on the Application be

delayed. The basis for that request was that there were some

"hostile bills" against quarter horse racing pending be fore the

Legislature and there were pending issues concerning proposed

gaming compacts with the Seminole Tribe of Florida.

7. Ft. Myers acknowledges that it requested delays in the

review of the Application based upon business reasons.

8. I n conjunction with amendments relating to the Indian

Gaming Compact, on May 8, 2009, the Legislature enacted Chapter

2009 - 170, Laws of Florida (commonly referred to as SB 788), which

authorized slot machine gaming for pari - mutuel permit holders

located in Miami - Dade Co unty. Chapter 2009 - 170 was filed with

the Secretary of State and approved by the Governor on June 15,

2009, and states, in pertinent part:

Section 14. Section 550.334,

Florida Statutes is amended to

read:

550.334 Quarter horse racing;

substitutions

(2) All other provisions of this

chapter, including s. 550.054,

apply to, govern, and control such

racing, and the same must be

conducted in compliance therewith.

* * *

Section 19. Subsections (4) and

(7) of section 551.102, Florida

Statutes, are ame nded to read:

551.102 Definitions. Ï As used in

this chapter, the term:

(4) "Eligible facility" means any

licensed pari - mutuel facility

located in Miami - Dade County or

Broward County . . .; any licensed

pari - mutuel facility located within

a county as def ined in s. 125.011,

provided such facility has

conducted live racing for 2

consecutive calendar years

immediately preceding its

application for a slot machine

license, pays the required license

fee, and meets the other

requirements of this chapter ; . . .

* * *

Section 26. Sections 1 through 3

of this act and this section shall

take effect upon becoming law.

Sections 4 through 25 shall take

effect only if the Governor and an

authorized representative of the

Seminole Tribe of Florida execute

an Indian Gaming Compact pursuant

to the Indian Gaming Regulatory Act

of 1988 and requirements of this

act, only if the compact is

ratified by the Legislature, and

only if the compact is approved or

deemed approved, and not voided

pursuant to the terms of this act,

by the Department of the Interior,

and such sections take effect on

the date that the approved compact

is published in the Federal

Register.

9. Section 14 of the legislation essentially applied a

provision to quarter horse racing facilities that already applied

to other pari - mutuel facilities, i.e., no new facility could be

approved for a site within 100 miles of an existing pari - mutuel

facility. There is no site in Florida that would be more than

100 miles from an already existing pari - mutuel facility.

10. The effective date of this legislation, as evidenced in

section 26, was conditioned on the execution and approval of the

gaming compacts between the State of Florida and the Seminole

Tribe of Florida.

11. The compacts were subsequently executed by the Governo r

and the Seminole Tribe of Florida on August 28, 2009, and

August 31, 2009 ; however, they were not ratified by the

Legislature, and, thus, they were specifically rendered void as

was the remainder of Chapter 2009 - 170. (It was not until c hapter

2010 - 29 wa s enacted and became law, effective July 1, 2010, that

the third compact entered into by the Governor and the Seminole

Tribe of Florida on April 7, 2010, went into effect. Thus, the

statutory amendment allowing slot machines at quarter horse and

other par i - mutuel facilities went into effect at the same time as

the provision subjecting quarter horse racing permits to the 100 -

mile distance requirement as set forth in section 550.334.)

Background Information (The Players)

12. Hartman and Tyner, d/b/a Mardi Gras C asino ("Hartman

and Tyner"), Calder Casino and Race Course ("Calder"), and the

Flagler Magic City Casino ("Flagler") are part of a coalition of

South Florida pari - mutuel permitholders (collectively referred to

as the "South Florida permitholders") that opp osed the expansion

of quarter horse racing into Miami - Dade County.

13. Jim Greer, then chairman of the Republican Party of

Florida, was a contract lobbyist for Hartman and Tyner. In

May 2008, Greer entered into a two - year contract with Hartman and

Tyner that paid him $7,500 per month as a lobbyist.

14. Charles "Chuck" Drago was the secretary of the

Department of Business and Professional Regulation (the

"Department"). Drago was a close friend of Greer. Drago had

been the chief of police of Oveido where Mr. Greer had lived and

served on the City Commission. Greer and Drago had been

fundraisers for Governor Crist.

15. Scott Ross was hired by the Department as a deputy

secretary in April 2009, just months after Ft. MyersÓ initial

application was filed. Ross was hired with assistance from

Delmar Johnson, Ross' college friend, who held the position of

executive director of the Republican Party of Florida. Johnson

worked for Greer. Ross' responsibility included oversight of the

Division.

16. David "Dave" Roberts was the dir ector of the Division

for approximately eight years. Roberts was division director

when a number of quarter horse permit applications were filed

with the Division after the 2007 changes in the card room law,

which allowed quarter horse racing facilities t o have card games.

Roberts caused the Division to develop guidelines to govern the

review of the quarter horse applications. After Roberts was

forced to resign, the Division modified the guidelines to require

applicants to show that zoning was in place f or racing before the

permit was issued.

17. Milton "Milt" Champion was named director of the

Division, effective January 4, 2010. He signed the denial of

Ft. Myers' quarter horse permits on January 12, 2010, after he

had been on the job for only eight days.

18. J oseph Helton is an attorney employed by the Division

and has served as chief legal counsel to the Division since 2002.

Helton has worked as an attorney for the Division for a combined

13 to 14 years. Helton was designated by the Division as its

agency re presentative in this proceeding.

19. Earnest James "Jim" Barnes is employed by the Division

as an Investigative Specialist II. Barnes' duties with the

Division include the evaluation of applications for quarter horse

permits. Barnes was involved in the proce ssing of all quarter

horse permit applications.

20. John Lockwood is an attorney who represents gaming

clients in this State. Some of his clients own pari - mutuel

facilities in the Miami - Dade County area.

The Roberts Regime

21. While he was director of the Divisio n, Roberts made all

of the decisions on whether to grant or deny a pari - mutuel

permit. Neither the secretary nor the deputy secretary made any

decisions on quarter horse applications during Roberts' tenure as

director of the Division.

22. According to Roberts , the Division developed guidelines

in 2007 to aid in the review of all quarter horse applications

after the first of several new applications for quarter horse

permits were filed. Roberts explained that the Division had no

rules implementing the statutor y criteria in 2007 because there

had not been any quarter horse applications filed with the

Division for a long time.

23. The guidelines for review of quarter horse applications

developed under Roberts did not require the applicant to

demonstrate that the prop erty was zoned for a racetrack before

the permit was issued. The Division interpreted the statutory

"location is available for use" criterion to mean that racetrack

zoning was "possible to obtain." Roberts noted that another

pari - mutuel statute, section 550.055(2), specifically required

the applicant for permit relocation to demonstrate that the

location is zoned for racing before the Division issued a permit.

In contrast, section 550.334 does not specifically require the

applicant to demonstrate that ra cetrack zoning is in place.

24. During Roberts' directorship, the Division would accept

a letter from a land use attorney familiar with zoning in the

area where the racetrack would be located describing the process

by which proper zoning could be obtained as a dequate evidence

that zoning was obtainable. Consistent with this guideline,

deficiency letters issued by the Division under Roberts requested

applicants to provide an opinion from an attorney and from a

local government official stating that proper zonin g for the

proposed location was "obtainable."

25. The guidelines for review of quarter horse applications

developed under Roberts did not require the applicant to own the

land at the time the permit was issued. Rather, the applicant

was required to give rea sonable assurances that the property was

under the control of the applicant by written agreement. The

applicant typically satisfied this guideline by submitting a

lease or contract for purchase along with the application. Some

contracts might include a c ontingency or condition precedent.

For example, the real estate contract in the Gretna Racing, LLC,

application listed a number of contingencies that must be met.

26. Roberts received numerous complaints from existing

pari - mutuel permitholders (including, in particular,

representatives of Hartman and Tyner) about the manner in which

the Division was granting quarter horse permits. Ross also made

it known to Roberts that he was not in favor of granting quarter

horse permits. Roberts, however, believed that he was required

to do what the letter of the statute dictated.

27. According to Hartman and Tyner's attorney,

John Lockwood, the "special interests" wanted Roberts terminated,

because they were concerned with the quarter horse application

review process. Lockwo od had heard complaints from his clients

that Roberts gave out quarter horse permits "like candy."

28. Lockwood made his client's concerns about Roberts'

interpretation of the quarter horse statute known to Ross.

Later, Jim Greer, then a contract lobbyist for Hartman and Tyner,

called Ross and asked him to fire Roberts.

29. Ross met with Roberts and gave him the option of

termination or resignation on July 16, 2009, within one week

after Greer asked him to terminate Roberts. Roberts was not

given a reason for his termination. During the time this was

going on, Ft. MyersÓ amended application (dated July 27, 2009)

was filed with the Division.

The Ross Regime

30. Joe Dillmore became the interim director of the

Division after Roberts was forced to resign. However, acco rding

to Dillmore, Ross was the person in charge of all quarter horse

permit applications after Roberts left. Ross told Dillmore that

he wanted to be informed on decisions at every level of the

quarter horse application process. Ross made it known to

Dil lmore that he believed the 100 - mile restriction placed on

other pari - mutuel permitholders should also be applied to quarter

horse permit applications, even though the quarter horse statute

did not impose a location restriction at that time. Ross opposed

q uarter horse racing because of the Governor's opposition to

gambling in general.

31. According to Barnes, Ross wanted to be kept apprised of

his actions on pending quarter horse permits, including

deficiency letters, and any recommendation for approval or

deni al. Previously, Barnes had never been required to report his

daily activities to a deputy secretary.

32. On August 11, 2009, approximately three weeks after

Roberts was forced to resign, there was a meeting held at the

Calder Race Track in Miami between exi sting pari - mutuel

permitholders and key agency personnel. The attendees of this

meeting included representatives of Hartman and Tyner, Calder,

and Flagler, the three loudest voices in opposition to the

expansion of quarter horse gaming into Miami - Dade Cou nty. The

agency was represented at the Calder meeting by Secretary Drago,

Deputy Secretary Ross, and attorney Helton.

33. One topic of the Calder meeting was the competitive

impact of new quarter horse permits on existing permitholders.

In particular, the S outh Florida permitholders made it very clear

at this meeting that they opposed the issuance of any quarter

horse permits in Miami - Dade County.

34. The existing pari - mutuel permitholders at the Calder

meeting argued that the Division should require quarter hor se

applicants to demonstrate that the proposed location for the

permit was zoned for a racetrack before the permit was issued.

This interpretation had been advanced in legal challenges filed

by existing permitholders (including Hartman and Tyner) before

t he Calder meeting. However, these legal challenges failed to

achieve the desired result before the Calder meeting.

35. It was on August 12, 2009, the day after the Calder

meeting, that Ft. Myers filed its amended application ("Amended

Application") changing t he proposed location of its facility to

Miami - Dade County. Lockwood found out about the Amended

Application within days and called Barnes to express his client's

extreme displeasure with Ft. MyersÓ intent to operate in the

Miami area. Barnes sent an emai l to Helton on August 19, 2009,

relaying the call from Lockwood stating "don't know what that

means in the long run."

36. There was a meeting held in Tallahassee within days of

this email between attorneys for the South Florida permitholders

(including Lockwoo d) and attorneys for the Division (including

Helton), so the permitholders could express their concerns with

the quarter horse review process with Division counsel in person.

37. Attorney Lockwood made it a point to follow the

progress of applicants for quarte r horse racing permits on behalf

of his clients. Such applicants could often be direct

competitors of his clients and, in the case of Ft. Myers, could

have an adverse impact on his clientsÓ businesses if approved.

38. When Ft. Myers later made a decision to r elocate its

proposed quarter horse racing facility from Lee County to Dade

County, Lockwood began to intensely study Ft. MyersÓ proposal.

He asked for and received a copy of Ft. MyersÓ application from

the Division. He carefully studied the application c ontent and

sought possible flaws therein. (This would necessarily have

occurred after the aforementioned meetings at Calder Race Track

and at the DivisionÓs office in Tallahassee.)

39. Lockwood had been in attendance at the Calder Race

Track meeting. The pri vate attendees at the meeting complained

to the Division employees that the process for approving quarter

horse racing permits was too lax, i.e., that it was too easy

under the current policies to obtain a permit. It was suggested

to the Division that mor e stringent requirements be put into

place. One suggestion was that rather than accept a letter from

the applicantÓs attorney that their proposed site could be

properly zoned for quarter horse racing, the Division should

require zoning to be in place at t he time of the application.

40. Lockwood also personally, through emails, phone calls

or visits, contacted Division employees to lobby for stricter

standards for quarter horse racing applications. When Ft. Myers

first changed its location to Dade County, Lock wood contacted

Jim Barnes to express his adamant opposition to such a change.

Lockwood then visited Division attorney Helton and others in

Tallahassee to express his concerns. He called Deputy Secretary

Ross as well. In short, Lockwood talked to everyon e he thought

might prevent Ft. MyersÓ application from being approved. Such

actions were consistent with LockwoodÓs normal lobbying efforts

for his clients on numerous other projects; they were not taken

against Ft. Myers individually, but against all com petitors of

his clients.

The Amended Application

41. In consideration of SB 788 and due to business

negotiations with another permit holder in Lee County, Ft. Myers

amended its application. The Amended Application was dated

July 27, 2009, and filed with the D ivision on August 12, 2009

(six months after filing its original application and one day

after the Calder meeting), Ft. Myers made the following changes

to its initial proposal:

Ʊ Changes were supposedly made to the

ownership interest of the project (although

no evidence of such changes were ever

presented at final hearing);

Ʊ A revised business plan, revised financial

projections for year one of operations, and a

revised inter nal organizational chart were

included;

Ʊ The proposed site plan was amended to

reflect the move to Florida City; and

Ʊ A new construction time line was

submitted.

42. Meanwhile, several other entities had submitted

applications seeking to construct and operate quarter horse

racing facilities in different venues around the state. Quarter

horse permits were ultimately issued to ELH Jefferson, LLC ("ELH

Jefferson"); Gretna Racing, LLC; Debary Real Estate Holdings, LLC

("Debary"); and South Marion Real Esta te Holdings, LLC, between

November 2008 and May 2009. Those approvals were, in part, based

on written assurances from land use attorneys that zoning and

other land use approvals (necessary elements for permit approval)

could be obtained after permit issua nce.

43. After the Calder meeting, the Division had decided to

require more from applicants to meet the statutory criteria for

issuance of a permit under section 550.334, Florida Statutes.

They noted that although nine quarter horse permits were issued

from S eptember 2008 until February 2010, no quarter horse racing

permit holder without an existing facility at the time of permit

issuance had actually utilized a permit to conduct quarter horse

racing. One project, Debary, failed to obtain necessary land use

a pproval after permit issuance, notwithstanding land use attorney

opinions that it was obtainable. Debary was the only one of 18

quarter horse permit applications submitted between 2007 and 2010

not to obtain zoning approval.

44. The Division continued to con sider whether it needed

more evidence that the land was Ðavailable for useÑ than simple

opinions from land use attorneys. The Division's stated basis

for its re - appraisal of this issue began when it reviewed the

Miami - Dade Airport's application for a quar ter horse permit,

which wrongly asserted that the entire airport property was

available for use as a quarter horse facility. Ultimately there

were no zoning issues associated with the Miami - Dade Airport

application, however.

45. Ft. Myers filed the Amended Ap plication just as the

Division was changing its interpretation of what the statute

required regarding zoning. In response to the Amended

Application, the Division sent Ft. Myers a deficiency letter

dated September 11, 2009. That letter set out the follow ing

pertinent deficiency items:

Deficiency #1 That the location(s) where the

permit will be used be "available for use."

That because previous quarter horse

applications have provided opinion letters

from land use experts, and those sites have

later prov en not be to usable [sic] for the

quarter horse facility, more specific

information was required, i.e., The

qualifications of the applicant's zoning

attorney; A written statement of the

attorney's grounds forming his opinion; and A

copy of any application for rezoning filed

with the City of Florida City, including an

update from the City on the status of the

application.

Deficiency #2 That the location(s) where the

permit will be used be "available for use."

That the Letter of Intent provided by

Ft. Myer s is insufficient and that

documentation reflecting its control over the

property is required, i.e., a purchase

agreement. The Division also asks for

information regarding Ft. Myers' relationship

with the registered owner of the site in

question.

Deficie ncy #4 That reasonable supporting

evidence be provided that "substantial

construction will be started within 1 year"

after issuance of the permit.

46. After a deficiency letter was sent to Ft. Myers by the

Division concerning the shortcomings of the amended application,

Ft. Myers responded with additional information. After the

Division had received the responses from Ft. Myers, but before a

final letter of denial had been issued, Lockwood met with Deputy

Secretary Ross. Ross informed Lockwood that Ðthe [Ft . Myers]

application was not capable of being approvedÑ or some language

to that effect. The reason Ross provided was there was no

current zoning for the site and the purchase contract had a

contingency in it that made ultimate purchase of the site less

t han certain. Lockwood, who had lobbied for the zoning

requirement and had pointed out to Division employees the

contingency in the contract, agreed with RossÓ stated bases for

intending to deny the application. Absent testimony from Ross,

it is impossibl e to ascertain his intention in making a statement

to Lockwood (and whether it was as Lockwood remembered or

something else). There is no mention of the meeting in RossÓ

deposition transcript which was entered into evidence in this

proceeding.

47. On November 11, 2009, Ft. Myers responded to the Dade

County deficiency letter. In its response, Ft. Myers provided

the Division the following information:

Ʊ Information about its land use attorney,

Jerry B. Proctor, from the law firm Bilzin

Sumberg.

Ʊ A letter dated September 18, 2009, from

Henry Iier, City Planner for the City of

Florida City. The letter indicates that the

City has zoning jurisdiction over the subject

property and that it allows applications for

zoning changes. Iier also states that the

timetable for rezoning appears reasonable.

Ʊ An Agreement for Purchase and Sale between

Ft. Myers and an entity called Florida City

70 Acres, LLC. The agreement includes a

contingency provision requiring

implementation of certain provision of SB 788

passed by the 2009 Legislature. Fulfillment

of those provisions was a condition precedent

to Ft. Myers' commitment to purchase the

property.

48. The Divis ion accepted Ft. MyersÓ response as submitted.

At the time of the response, David Romanik, a principal of and

legal counsel to Ft. Myers, contacted Barnes to make sure that,

as was customary, he would be notified if there were any

Ðapproval stoppersÑ (i.e ., missing information that would cause

the application to be denied). By email dated November 18, 2009,

Barnes told Romanik,

ÐThe Division received your response to our

Sept 11, 2009, deficiency letter regarding

the Ft. Myers Real Estate Holdings, LLC

q uarter horse permit application. I will

review the response and will contact you if I

have any further questions.Ñ

49. However, instead of contacting Romanik when approval

stoppers were found, Barnes was told by his superiors to simply

issue a letter denying the permit. The grounds for the denial

were:

1) The application fails to demonstrate that

the land is available for use; and

2) The application fails to provide

reasonable supporting evidence that

substantial construction of a quarter horse

facility w ould be commenced within one year

of the issuance of the permit, because the

applicant does not currently own the land and

the ÐAgreement of Purchase and SaleÑ included

in the application is contingent upon

implementation of certain provisions of HB

788.

50. Although there was no mention of it in the denial

letter, the Division found the contingency in the Purchase and

Sale Agreement to be a significant impediment to commencement of

construction within one year.

51. Sometime during the month of December 2009, p ersonnel

from the Division contacted another quarter horse permit

applicant, North Florida Racing, concerning its pending

application. The Division employee advised North Florida Racing

that there had been a change in "policy" at the Division

concerning o ne aspect of the application review. Specifically,

North Florida Racing was advised that its selected site would

have to be proven to be "land available for use" as a quarter

horse facility. They were told that the old standard of having a

local zoning l awyer's opinion letter would not suffice. Rather,

the applicant must show that an application for rezoning had

actually been filed. It is not clear from the evidence whether

North Florida Racing contacted the Division or whether the

Division initiated th at contact. Other than the statements in

the deficiency letter, Ft. Myers was not directly contacted by

anyone from the Division concerning this change in policy,

despite the promise Barnes made to Romanik to let him know if he

had any further questions.

52. Instead, on January 12, 2010, almost exactly one year

after the Application had been filed, the Division issued a

letter denying Ft. Myers' A mended A pplication for a quarter horse

racing permit in Miami - Dade County, Florida. The denial letter

contained a statement concerning the process for requesting an

administrative hearing on the matter.

53. It was the Division's normal practice to provide

applicants with deficiency letters so that applicants could be

fully aware of any shortcomings in their applications and be

given an opportunity to correct the deficiencies. 1/ It was not

uncommon for the Division to issue two or more deficiency letters

to an applicant, though there is no requirement or policy for

more than one such letter. In the present case, Ft. Myer s

received a deficiency letter relating to its Lee County site and

then received another one when the site was changed to Miami - Dade

County. After Ft. Myers responded to the deficiency letter for

the Amended Application, it reasonably expected the issuanc e of a

further deficiency letter if there were remaining deficiencies.

Although no additional letter was required, Ft. Myers believed

one would be issued if there were further deficiencies,

especially after BarnesÓ email to Romanik.

54. The Division did not i ssue a second deficiency letter

for the Amended Application. The Division's rationale was that

the first letter was clear and unambiguous and if Ft. Myers did

not respond appropriately, then the deficiencies must not be

correctable. No one from the Divis ion provided credible

explanation for why it did not follow the traditional process,

the one followed with other applicants at around the same time.

55. It is the position of Ft. Myers that the Division

imposed unauthorized requirements on Ft. Myers' applicati on so

that it could use the new law which was about to come into

effect, that the Division imposed non - rule policy on Ft. Myers to

delay processing of the application, and that the Division

unreasonably and improperly delayed Ft. Myers' application in

orde r to take advantage of the change in the law.

56. Two other quarter horse permit applications were

pending at the same time the Application was under review at the

agency: Hamilton Downs II and North Florida Racing. Hamilton

Downs received its permit on Fe bruary 4, 2010; North Florida

Racing received its permit on March 26, 2010.

57. Counsel for North Florida Racing remembers being told

by Mr. Helton at the Division about changes to the Division's

interpretation concerning the need for zoning approval. Divis ion

counsel sent an email which says in part: "The powers that be

seem to be shifting their interpretation of the statutes and

rules to require that zoning for the track must be in place

before a QH permit can be issued." Thereafter, North Florida

Racing changed locations to a location zoned for quarter horse

racing, and its permit was ultimately issued. It is unclear from

the record whether Helton actually made the quoted statement,

and, if so, in what context it was made. Helton could not

remember the statement, but does not deny that it could have been

made.

58. As to the Hamilton Downs II location, neither of the

two deficiency letters issued in that filing stated that the

property had to be zoned for quarter horse racing. On

November 4, 2009, Hamilton Downs provided the Division with a

letter from the Town Council of Jennings stating it would support

a zoning change at the proposed site to allow for quarter horse

racing and that the zoning could be accomplished within six

months. Thereafter, on Decembe r 14, 2009, Hamilton Downs

submitted a letter from Hamilton County, Florida, stating the

proposed site is, in fact, presently zoned for quarter horse

racing. There is no credible evidence as to what precipitated

Hamilton DownsÓ sending the Division that l etter.

The Petitions Requesting Administrative Hearings

59. After receiving the denial letter from the Division,

Ft. Myers prepared a Petition for Formal Administrative Hearing

which it filed on January 29, 2010. On February 16, 2010, the

Division rejected t he Petition on the basis that it failed to

identify disputed issues of material fact. Ft. Myers was given

leave to amend its Petition within 21 days, i.e., on or before

March 8, 2010.

60. Ft. Myers filed its Amended Petition for Formal

Administrative Hearing exactly 21 days later, i.e., on March 8,

2010. The A mended Petition was also rejected by the Division,

this time on the basis that Ft. Myers (the denied applicant) did

not have standing to challenge the denial of its own application.

The final order of dismissal is dated March 23, 2010. The

DivisionÓs rationale for the denial -- developed by its attorney,

Chip Collette - - was that inasmuch as the SB 788 provisions could

not come into effect and those provisions were a condition

precedent to Ft. Myers' p urchase agreement for property,

Ft. Myers could not move forward on their Amended Application

and, thus, did not have standing in an administrative challenge.

Mr. Collette, a long - time expert in administrative law, did not

provide a credible explanation f or this obviously flawed

position. At about the time he created this strained position on

standing, Collette advised Lockwood that the A mended P etition

filed by Ft. Myers was not likely to get an administrative

hearing.

61. The rejection of Ft. Myers' Amended Petition was

appealed to the First District Court of Appeal. In an opinion

dated February 7, 2011, that court -- in strong language --

reversed the Division's dismissal of the Amended Petition. The

Court remanded the case to the Division with directions to refer

the case to the Division of Administrative Hearings. AttorneysÓ

fees were also awarded to Ft. Myers.

62. Meanwhile, the Division was already discussing the

impact of the legislation that was about to become law. At a

meeting on March 23, 2010, Divi sion employees were discussing the

impending dismissal of Ft. MyersÓ amended Petition for Formal

Administrative Hearing. At that meeting, it was suggested that

even if Ft. Myers were to appeal, the impending law would be in

effect, thereby mooting Ft. Mye rsÓ application.

63. The new law became effective July 1, 2010. The new law

contained the 100 - mile geographical restriction mentioned above.

There is not any location in Florida that would qualify for a new

pari - mutuel facility under that limitation.

64. There a re several reasons the application(s) filed by

Ft. Myers were not processed more quickly: Ft. Myers asked that

no further action be taken at one point. Ft. Myers amended its

application, necessitating additional review by the Division.

The petitions for formal administrative hearing were rejected.

The first petition had been filed 17 days after notice of denial,

the second one 21 days after dismissal. If the original Petition

filed by Ft. Myers on January 29, 2010, had been accepted by the

Division, it is possible a final order could have been entered

sometime between June 17 and July 26, 2010, had the case

proceeded at a normal pace. Thus, it is possible the final order

could have been entered prior to the new 100 - mile limitation

taking effect on July 1, 2010.

65. By denying the amended Petition and further delaying

any ultimate decision on Ft. MyersÓ application, the Division was

fairly certain that the application could never be approved.

CONCLUSIONS OF LAW

66. The Division of Administrative Hearings has

jur isdiction over the parties to and the subject matter of this

proceeding pursuant to s ections 120.569 and 120.57(1), Florida

Statutes (2012).

67. Ft. Myers, as the party asserting the affirmative of

the issue in this proceeding, has the burden of proof. See

Ba lino v. DepÓt of HRS , 348 So. 2d 349, 350 (Fla. 1 st DCA 1977)

( citing DepÓt of Agric. & Consumer Servs. v. Strickland , 262 So.

2d 893 (Fla. 1 st DCA 1972) ) .

68. At the time Ft. Myers' application for a quarter horse

racing permit was filed, the pertinent portio n of s ection

550.334, Florida Statutes (2008), stated as follows:

(4) Section 550.054 is inapplicable to

quarter horse racing as p ermitted under this

section. All other provisions of this

chapter apply to, govern, and control such

racing, and the same must be conducted in

compliance therewith.

69. While Ft. Myers' application was pending at the

Division, s ection 550.334 was amended to read:

(2) All other provisions of this chapter,

including s. 550.054, apply to, govern, and

control such racing, and the same must be

conducted in compliance therewith.

70. The reference to s ection 550.054, Florida Statutes,

specifically relates to subsectio n (2) of that statute which

states, "[ a]n application may not be considered, nor may a permit

be issued by the division or be voted upon in any county, to

conduct horseraces, harness horse races, or dograces at a

location within 100 miles of an existing pa ri - mutuel facility

. . . ." Under the amended version of s ection 550.334, Ft.

Myers' application could not be approved because there is not any

location within the State that would satisfy the 100 - mile

limitation.

71. Courts generally state that, absent ex plicit guidance

from the Legislature, remedial changes to licensing laws are

applied retroactively, but substantive changes are not. Florida

follows the general rule that a change in the licensure statute

that occurs during the pendency of an application for licensure

is operative as to the application, so that the law as changed,

rather than as it existed at the time the application was filed,

determines whether the license should be granted. Lavernia , 616

at 52 - 54 ( citing Bruner v. Board of Real Estate, Dep't of

Licenses and Permits , 399 So. 2d 4 (Fla. 5th DCA 1981) ) .

72. However, there are exceptions to the general rule. In

Medsport Laboratories, Inc., d/b/a Fitness USA v. DepÓt of Agric.

& Consumer Servs. , No. 97 - 2508 (DOAH Dec. 17, 1997 ; DACS Jan. 21,

1998), the exceptions to Lavernia are discussed. The exceptions

discussed therein that are relevant to this case are as follows:

Ʊ Unreasonable delays, i.e., when the

reviewing agency unreasonably delays acting

upon an application until the amended statu te

becomes effective. Attwood v. State , 53 So.

2d 101 (Fla. 1951).

Ʊ Applying improper statute, i.e., when the

reviewing agency seeks to apply the amended

statute during appeal when it had applied the

prior statute when making its initial

decision. Dep Ót of HRS v. Petty - Eifert , 443

So. 2d 266 (Fla. 1 st DCA 1983).

Ʊ Repeated denial, i.e., when the reviewing

agency repeatedly denies an application and

the law changes while the application is

pending. Goldstein v. Sweeny , 42 So. 2d 367

(Fla. 1949).

73. The application at issue was not repeatedly denied

pending a change in the law. The Division did not seek to apply

one version of the statute prior to appeal and another after.

74. Though there were apparent inconsistencies between the

way Ft. MyersÓ applicatio n was processed as compared to some

other applicants, it cannot be said that the Division

Ðunreasonably delayedÑ the review process. At worst, the action

taken on Ft. MyersÓ amended application, dismissing it on clearly

fallacious reasoning, does not pass the smell test. But it seems

the Division could have ÐdelayedÑ Ft. MyersÓ application by

asking for more information after the deficiency letter -- which

it did not do.

75. The issue, then, is whether there was bad faith on the

part of the Division concernin g its review and processing of Ft.

MyersÓ application.

76. ÐBad faithÑ is defined in BlackÓs Law Dictionary as:

The opposite of Ðgood faith,Ñ generally

implying or involving actual or constructive

fraud, or a design to mislead or deceive

another, or a negl ect or refusal to fulfill

some duty or some contractual obligation, not

prompted by an honest mistake as to oneÓs

rights or duties, but by some interested or

sinister motive. Term Ðbad faithÑ is not

simply bad judgment or negligence, but rather

it implies the conscious doing of a wrong

because of dishonest purpose or moral

obliquity; it is different from the negative

idea of negligence in that it contemplates a

state of mind affirmatively operating with

furtive design or ill will.

77. In Espirito Santo Bank v . Agronomics Fin ancial Corp. ,

591 So. 2d 1078 (Fla. 3 d DCA 1991), the Court addressed Ðbad

faithÑ in a commercial banking situation. There, the Court held,

Ð [ A ] finding of bad faith must be based upon the bank's

subjective state of mind, Sienfield v. Comm ercial Bank & Trust

Co. , 405 So. 2d 1039 (Fla. 3d DCA 1981), and is not equated with

lack of commercial reasonableness.Ñ In the instant action, the

DivisionÓs state of mind is not clear. Although some of its

actions vis - à - vis Ft. Myers are not consistent with how some

other applicants were treated, the Division did not appear to

specifically delay the processing of the application.

78. In Margate v. Amoco Oil Co. , 546 So. 2d 1091 (Fla. 4 th

DCA 1989), the City of Margate was found to have acted in bad

faith. In that case, the City intentionally and blatantly

delayed the processing of AmocoÓs application for a permit while

the City enacted new ordinances which would prohibit such a

permit. In the instant action, the Division had no power or

authority to enact SB 788. The Division did seem intent on

limiting some new quarter horse racing permits, but it seemed to

follow its general policies (though some of those policies

changed during the pendency of the application).

79. Bad faith was found by the Court in Dade County v.

Jason , 278 So. 2d 311 (Fla. 3 rd DCA 1973). In that case, a

county clerk intentionally withheld issuance of a permit for

thirty minutes so that a moratorium imposed by the county could

go into effect. The applicants had satisfied all requirement s

for the permit they were seeking but a clerk did not issue the

permit as he should have, waiting just long enough to make the

permit non - issuable under the new moratorium. In the present

case, even if it was the DivisionÓs intent not to approve new

perm its, there is no evidence Ft. Myers already satisfied all the

requirements for issuance of a quarter horse racing permit. By

failing to provide all the information requested in the second

deficiency letter, Ft. MyersÓ application could be deemed

deficient .

80. In each of the cases cited above, the governmental

entity was clearly (almost blatantly) delaying the application

process so it could create and apply a new legal requirement.

The present case is distinguishable because: 1) there is no clear

intent to delay the application process; and 2) the Division was

not in control of the new legal standard that was to be imposed.

81. In Coral Springs Street Systems, Inc. v. City of

Sunrise , 371 F. 3d 1320 (11 th Cir. 2004), the court set forth

three elements which must be proven in order to establish bad

faith on the part of a governmental entity, to wit: 1) The

applicant was entitled to the permit for which it applied at the

time its application was complete; 2) The agency unreasonably

delayed action or denied the per mit to gain time to change the

applicable law; and 3) The agency subsequently conceived and

enacted a law to prevent issuance of the permit.

82. The Coral Springs decision does not directly apply to

this case because the Division cannot Ðchange the applicable

law.Ñ However, let us presume the holding in Coral Springs meant

to imply that a state agency could act in bad faith while waiting

for the Legislature to change applicable law. One element of the

decision is that the applicant must be entitled to a permi t at

the time its application was complete. The Ft. Myers application

did not provide assurance that the intended site was zoned for

quarter horse racing. It did not prove that substantial

construction could be commenced within one year of issuance.

Thu s, Ft. Myers was not -- at that time -- entitled to the

requested permit.

83. Ft. MyersÓ own actions in seeking delays in the

processing of its application militate against the suggestion

that the Division delayed the process in order to allow for a

Legislat ive enactment to become law. Ft. Myers asked that action

on its application be delayed at one point, and it changed the

proposed location of its facility from one coast of Florida to

the other, necessitating additional review by the Division.

Neither the Division nor Ft. Myers could predict when the

proposed changes would take effect -- or whether they would take

effect at all. Thus, no matter what the DivisionÓs rationale or

motivation concerning the handling of Ft. MyersÓ application, the

evidence does not show that there was a bad faith purpose based

on an intention to assure the new law would apply.

The Deficiency Notice

84. Because Ft. Myers raised the issue at final hearing and

in its Proposed Recommended Order, a discussion of the deficiency

letter is appropriate.

85. The Division issued only one deficiency letter to Ft.

Myers. That letter included -- in deficiency number two -- a

statement concerning the proposed site of the facility. The

letter said, Ð[D]ocumentation reflecting [Ft. MyersÓ] control

ove r the property is required, i.e., a purchase agreement.Ñ The

letter of intent concerning the property submitted by Ft. MyersÓ

in its Amended Application had been deemed insufficient by the

Division. Ft. Myers, in response, provided an Agreement for

Purch ase and Sale for the property. It, however, contained a

contingency requiring implementation of certain provisions in SB

788 passed by the 2009 Legislature.

86. The denial letter set forth two reasons relied upon by

the Division for denying Ft. MyersÓ applica tion: (1) That the

land wasnÓt available for use; and (2) That commencement of

construction could not occur within one year because the

[Ft. Myers] did not currently own the land. Mere ownership of

the land itself was not stated as a basis for denial; ra ther,

failure to own the land would prevent commencement of

construction within one year.

87. It is necessary for a state agency to specifically

identify Ðdeficiencies or omissions failure of which to correct

would result in denial of the application.Ñ See dissent by Judge

Nimmons in Doheny v. Grove Isle, Ltd. , 442 So. 2d 966, 975 (Fla.

1 st DCA 1983). See also section 120.60(1), Florida Statutes

(2009). In this case, the Division sufficiently identified the

deficiencies which needed to be addressed.

88. The Division could have (and in the past had) issued

another deficiency letter asking Ft. Myers to address the

contingency in its purchase agreement. Barnes could have called

Romanik and told him the purchase agreement/land ownership issue

was an approval sto pper. But there is no legal requirement that

the Division (or Barnes) do so. Failure to do so, though not the

best way to treat citizens of this State, is neither a violation

of the law nor an act of bad faith.

89. Ft. Myers contends the change in the Divisi onÓs

interpretation of statute concerning zoning requirements

constitutes an unadopted rule. Inasmuch as the recommendation in

this Recommended Order is that the current version of section

550.054(2), Florida Statutes, applies, it is not necessary to

cons ider that argument. However, even if the zoning element of

Ft. MyersÓ application were not considered, the failure to have a

non - contingent purchase agreement in place would be sufficient

basis for denying the application.

RECOMMENDATION

Based on the fo regoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final order be entered by the Department

of Business and Professional Regulation finding the absence of

any bad faith on the part of the Division, and declaring that the

2010 versio n of s ection 550.334, Florida Statutes, applies to the

application filed by Ft. Myers Real Estate Holdings, LLC, for a

quarter horse racing permit.

DONE AND ENTERED this 6th day of August , 2013 , in

Tallahassee, Leon County, Florida.

S

R. BRUCE MCKIBBEN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Fi led with the Clerk of the

Division of Administrative Hearings

this 6th day of August , 2013 .

ENDNOTE

1/ It was, in fact, required by law. § 120.60(1), Fla. Stat.

(2009)

COPIES FURNISHED:

William E. Williams, Esquire

Amy W. Schrader, Esquire

Gray Rob inson, P.A.

301 South Bronough Street , Suite 600

Tallahassee, Florida 32301

Brian Newman, Esquire

Pennington, Moore, Wilkinson,

Bell and Dunbar, P.A.

Post Office Box 10095

Tallahassee, Florida 32302 - 2095

David S. Romanik, Esquire

David S. Romanik, P.A.

Post Office Box 650

Oxford, Florida 34484 - 0650

Leon M. Biegalski, Director

Division of Pari - Mutuel Wagering

Department of Business and

Professional Regulation

Northwood Centre, Suite 60

1940 North Monroe Street

Tallahassee, Florida 32399 - 0792

J. Layne Smith, General Counsel

Department of Business and

Professional Regulation

Northwood Centre, Suite 60

1940 North Monroe Street

Tallahassee, Florida 32399 - 0792

Joseph M. Helton, Jr., Esquire

Department of Business and

Professional Regulation

Nor thwood Centre, Suite 60

1940 North Monroe Street

Tallahassee, Florida 32399 - 0792

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

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

to thi s Recommended Order should be filed with the agency that

will issue the Final Order in this case.