14-006129RX South Florida Racing Association, Llc, A Florida Limited Liability Company vs. Department Of Business And Professional Regulation, Division Of Pari-Mutuel Wagering Status: Closed DOAH Final Order on Wednesday, March 25, 2015.

Summary: Petitioner established that existing rule 61D-4.002 is an invalid exercise of delegated legislative authority.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SOUTH FLORIDA RACING

ASSOCIATION, LLC, A FLORIDA

LIMITED LIABILITY COMPANY,

Petitioner,

vs. Case No. 14 - 6129RX

DEPARTMENT OF BUSINESS AND

PROFESSIONAL REGULATION,

DIVISION OF PARI - MUTUEL

WAGERING,

Respondent.

_______________________________/

FINAL ORDER

Pursuant to notice, a formal hearing was held in this case

before W. David Watkins, Administrative Law Judge of the Florida

Division of Administrative Hearings, on January 27, 2015, in

Tallahassee, Florida.

APPEARANCES

For Petitioner: Andrew T. Lavin, Es quire

Lavin Law Group, P.A.

1632 Northeast 12th Terrace

Fort Lauderdale, Florida 33305

For Respondent: Jason L. Maine, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street , Suite 40

Tallahassee, Florida 32399 - 2202

STATEMENT OF THE ISSUE

Whether Florida Administrative Code Rule 61D - 4.002

con stitutes an invalid exercise of delegated legislative

authority?

PRELIMINARY STATEMENT

This rule challenge proceeding was initiated on

November 12, 2014, when South Florida Racing Association, LLC

(Petitioner or SFRA ), filed a pleading captioned "Petition for

Formal Administrative Proceeding and for Administrative

Determination of Invalidity of Existing Rule 61D - 4.002, FAC"

(Petition) with the Department of Business and Professional

Regulation, Division of Pari - Mutuel Wagering (Respondent or

Department).

The Petition contested the agency action of the Department

in denying Petitioner's 2012 application for the issuance of a

summer jai alai permit , and also challenged the validity of

Florida Administrative Code Rule 61D - 4.002 (Rule) as an invalid

exercise of delegated legislative authority.

The Petition was referred to the Division of Administrative

Hearings, whereupon the agency action (denial of the jai alai

permit) was bifurcated from the rule challenge. 1/

Petitioner challenges the Rule as an invalid exercise of

del egated legislative authority, for each of the following

reasons:

• The Rule is invalid as applied to section 550.0745,

Florida Statutes 2/ ( Statute ) , because the Statute is

not identified in the Rule as rulemaking authority

for the Rule.

• The Rule is invalid a s applied to the Statute because

the Statute is not identified in the Rule as a law

implemented by the Rule.

• Application of the Rule to the Statute is an invalid

unad o pted Rule.

• The Rule is invalid in its entirety, or in part,

because it exceeds any specif ic authority granted by

any statu t e by:

- establishing criteria for the evaluation of

pari - mutuel permit applications which are not

expressly authorized by any of the authorizing

statutes;

- establ ishing financial criteria for th e

evaluation of pari - mutuel permit applications

which are not expressly authorized by any of the

authorizing statutes; and

- establishing criteria for the issuance of a

summer jai alai permit pursuant to the Statute

which are not expressly authorized by any of the

autho rizing statutes.

• The Rule is invalid in its entirety, or in part,

because it modifies or contravenes the terms of the

statutes it purports to implement, by creating

conditions to the issuance of a summer jai alai permit

that are not included in the statut es.

• The Rule is invalid in its entirety, or in part,

because it is vague, failing to include any objective,

discernable criteria, and improperly granting the

Division unbridled discretion with respect to its

consideration of an application for a pari - mutue l

permit, including in particular, a summer jai alai

permit pursuant to the Statute.

• The Rule is invalid in its entirety, or in part,

because it is arbitrary and capricious, failing to

fulfill the intention of the Rule, the Statute, or of

any of the statut es it is to implement.

On January 20, 2015, th e parties filed a Joint Prehearing

Stipulation, which included stipulated facts. To the extent

relevant, those stipulated facts are incorporated herein.

The final hearing was convened as scheduled on January 2 7,

2015, in Tallahassee, Florida. During the hearing the parties

presented their respective legal arguments. There were no

witnesses or evidence presented at the hearing.

The parties timely filed their proposed Final Orders on

February 25, 2015, both of which have been carefully considered

in the preparation of this Final Order.

FINDINGS OF FACT

1 . Petitioner is the owner and holder of a pari - mutuel

permit that authorizes it to conduct quarterhorse racing at

Hialeah Park, in Miami - Dade County. P etitioner is subject to

c hapter 550, Florida Statutes and the administrative rules

promulgated thereunder in Florida Administrative Code C hapter

61D.

2. The Florida Department of Business and Professional

Regulation, Division of Pari - Mutuel Wagering is th e state agency

charged with regulating pari - mutuel wagering, pursuant to

c hapter 550, Florida Statutes , and the administrative rules

promulgated thereunder in c hapter 61D .

3 . Petitioner applied for the issuance of a summer jai

alai permit pursuant to the Statute. Pursuant to the Statute,

in a county in which there are five or more pari - mutuel

permitholders, if one permitholder in the county has the lowest

total pool for two co nsecutive years, the permitholder can

convert its permit to a summer jai alai permit. Further, if the

qualifying permitholder elects not to convert its permit, a new

summer jai alai permit is made available in that county.

4 . There are more than five pa ri - mutuel permits issued in

Miami - Dade County. Petitioner had the lowest pool among all

permitholders in Miami - Dade County for fiscal years 2010/2011

and 2011/2012. Therefore, pursuant to the Statute, Petitioner

had the right to convert its permit to a s ummer jai alai permit.

Petitioner declined to do so, and instead applied for the

issuance of the summer jai alai permit made available pursuant

to the Statute as a result of its election not to convert. The

Department maintained that no permit was availa ble to be issued.

However, t he First District Court of Appea l 3/ and Third District

Court of Appeal 4/ have both ruled that a summer jai alai permit

is available to be issued for 2012 (Permit).

5 . Thereafter, the Division denied Petitioner's

applicatio n for the Permit, applying the Rule and determining

that issuance of the Permit to Petitioner would not preserve and

protect the pari - mutuel revenues of the State, and that

Petitioner does not reflect a prospective permitholder that

would enjoy potential p rofitability from the issuance of the

Permit.

6 . On November 11, 2014 , Petitioner filed a Petition for

Formal Administrative Hearing giving rise to the instant

proceeding. In the Petition, Petitioner also contended that

even if the r ule is valid, the De partment e rred in its

application of the Rule to deny the Permit . 5/

7 . In 1996, the Department undertook the rule promulgation

process as outlined in c hapter 120 to adopt r ule 61D - 4.002 for

"Evaluating a Permit Application for a Pari - Mutuel Facility."

The Rule identifies sections 550.0251(4), 550.054(8)(b), and

550.1815(5), Florida Statutes, as rulemaking authority. The

Rule identifies sections 550.0251, 550.054, 550.0951, 550.155,

and 550.1815, Fl orid a Stat utes , as the specific law to be

implemented.

8 . Pa rt (1)(a) of the Rule provides that the Department

shall consider whether the applicant is potentially profitable.

9 . Part (1) (b) of the Rule requires the Department to

consider whether the applicant would preserve and protect the

pari - mutuel reven ues of the state.

10 . Parts (1)(c) and (d) of the Rule require the

Department to consider the holdings, transactions, and

investments of the applicant and whether there exists any

judgment or current litigation against the applicant.

11 . At hearing, coun sel for the Department advised that

the Department has previously applied the Rule to the Statute on

at least two occasions, when West Flagler Associates applied for

summer ja i alai permits pursuant to the Statute .

CONCLUSIONS OF LAW

I. Jurisdiction, Standing, and Burden of Proof

12 . The Division of Administrative Hearings has

jurisdiction over the parties and the subject matter of this

proceeding. § 120.56, Fla. Stat.

13 . As stipulated by the parties, Petitioner has standin g

pursuant to section 120.56(1) to participate in this proceeding

as a person substantially affected by the Rule .

14 . Petitioner seeks a Final Order determining that the

Department's existing rule 61D - 4.002 constitutes an invalid

exercise of delegated legislative authority in violation of

section 120.52(8), Florida Statutes. Section s (1) and (3) of

section 120.56 provide in pertinent part, as follows:

120.56 C h allenges to rules. Î

(1) GENERAL PROCEDURES FOR CHALLENGING THE

VALIDITY OF A RULE OR A PROPOSED RULE.

(a) 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.

* * *

(e) H earings held under this section shall

be de novo in nature. The standard of proof

shall be the preponderance of the

evidence . . . .

* * *

( 3) CHALLENGING EXISTING RULES; SPECIAL

PROVISIONS. Î

(a) . . . T he petitioner has a burden of

proving by a preponderance of the evidence

that the existing rule is an invalid

exercise of delegated legislative authority

as to the objections raised.

(b) The administrative law judge may

declare all or part of a rule invalid .

15 . In a challenge to an existing rule, unlike a challenge

to a proposed rule, the burden of proof never shifts to the

agency. See Bd . of Clinical Lab . Personnel v. Fla . Ass'n of

Blood Banks , 721 So. 2d 317 (Fla. 1st DCA 1998).

II. Rulemaking Standards

16 . Rulemaking is a legislative function, and as such, it

is within the exclusive authority of the Legislature under the

separation of powers provision of the Florida Constitution. See

S.W. Fla. Water Mgmt. Dist. v. Save the Manatee Club, Inc. , 773

So. 2d 594, 598 - 99 (Fla. 1st DCA 2000). An administrative rule

is valid only if adopted under a proper delegation of

legislative authority. See I d. ; Chiles v. Children A, B, C, D,

E, and F , 589 So. 2d 260 (Fla. 1991); Askew v. Cross Keys

Waterways , 372 So. 2d 9 13 (Fla. 1978).

17 . The Legislature defines the standard for determining

whether a rule is supported by legislative authority, South West

Fl orida Water M ana g e m ent Dist rict , supra a t 598, and has done so

in sect ion 120.52(8), which provides in relevant part, as

follows:

"Invalid exercise of delegated legislative

authority" means action that goes beyond the

powers, functions, and duties delegated 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, citation to which is

required by s. 120.54(3)(a)l.;

(c) T he rule enlarges, modifies, or

contra venes the specific provisions of law

implemented, citation to which is required

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

(d) The rule is vague, fails to establish

adequate standards for agency decisions, or

vests unbridled discretion in the agency;

(e) The rule is arbitr ary or capricious. A

rule is arbitrary if it is not supported by

logic or the necessary facts; a rule is

capricious if it is adopted without thought

or reason or is irrational . . . .

18 . Pursuant to section 120.54(3)(a)(l) , a rule must make:

. . . a reference to the grant of rulemaking

authority pursuant to which the rule is

adopted; and a reference to the section or

subsection of the Florida Statutes or the

Laws of Florida being implemented or

interpreted.

19 . Further, pursuant to sect ion 120.53 6(1) :

A grant of rulemaking 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 agency's

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.

20 . Chapter 120 was amended during 1996, and again during

1999, to make the s tandard for agency rulemaking more

restrictive. State Bd. of Trust ees of the Int . Improv . Tr . Fd . ,

794 So. 2d at 699. Under the 1996 and 1999 amendments to the

APA, it was made clear that agencies have rulemaking authority

only where the Legislat ure has enacted a specific statute, and

authorized the agency to implement it, and then only if the rule

implements or interprets specific powers or duties, as opposed

to improvising in an area that can be said to fall only

generally within some class of powe rs or duties the L egislature

has conferred on the agency. Id . at 700; see also Lamar Outdoor

Adver . Lakeland v. Fla . Dep't of Transp . , 17 So. 3d 799, 801 - 02

(Fla. 1st DCA 2009). An agency only has rulemaking authority

when statutory language "explicitly" authorizes or requires an

agency to adopt, develop, establish, or otherwise create any

statement coming within the definition of the term "rule ."

§ 120. 52(17), Fla. Stat.; see F la . Elections Comm Ó n v. Blair , 52

So. 3d 9, 12 (Fla. 1 st DCA 2010) (words "explicit" and

"specific" are interchangeable; agency must have explicit or

specific statutory authority to adopt a rule).

21 . Either the enabling statute authorizes a particular

rule or it does not. S.W. Fla. Water Mgmt. Dist. v. Save the

Manatee Club, Inc. , supra at 599. The statutory provisions

governing rulemaking must be interpreted in light of the

Legislature's stated i ntent to clarif y significant restrictions

on agencies' exercise of rulemaking authority. State Bd . of

Tr ustees of the Int . Improv . Tr . Fd . , supra at 700. If

reasonable doubt exists as to the lawful existence of a

particular power that is being exercised, the further exercise of

the power should be arrested. Id . at 701.

22 . A rule is an agency statement of general a p plicability

that implements, interprets, or prescribes law or policy.

§ 120.52(16), Fla. Stat. When an agency makes such a statement

without adopting a rule, the action constitutes an invalid

unadopted ru le in violation of 120.54(l)(a) . Fla . Quarter Horse

Track Ass'n, Inc. v. State of Fla . , Dep Ó t of Bus . and Prof .

Reg . , Div . of Pari - Mutuel Wagering , 133 So. 3d 1118, 1119 (Fla.

1st DCA 2014). An unpromulgated agency rule is an invalid

exercise of delegated legislative authority, and unenforceable.

Dep Ó t of Rev . v. Vanjara Ente r . , Inc. , 675 So. 2d 252, 255 (Fla.

5th DCA 1996).

III. The Statute

550.0745 Conversion of pari - mutuel permit to summer jai

alai permit. Ï

(1) The owner or operator of a pari - mutuel

permit who is authorized by the division to

conduct pari - mutuel pools on exhibition

sports in any county having five or more

such pari - mutuel permits and whose mutuel

play from the operation of such pari - mutuel

pools for the 2 consecutive years next prior

to filing an application under this section

has had the smallest play or total pool

within the county may apply to the division

to convert its permit to a permit to conduct

a summer jai alai fronton in such county

dur ing the summer season commencing on May 1

and ending on November 30 of each year on

such dates as may be selected by such

permittee for the same number of days and

performances as are allowed and granted to

winter jai alai frontons within such county.

If a permittee who is eligible under this

section to convert a permit declines to

convert, a new permit is hereby made

available in that permitteeÓs county to

conduct summer jai alai games as provided by

this section, notwithstanding mileage and

permit rat ification requirements. If a

permittee converts a quarter horse permit

pursuant to this section, nothing in this

section prohibits the permittee from

obtaining another quarter horse permit.

Such permittee shall pay the same taxes as

are fixed and require d to be paid from the

pari - mutuel pools of winter jai alai

permittees and is bound by all of the rules

and provisions of this chapter which apply

to the operation of winter jai alai

frontons. Such permittee shall only be

permitted to operate a jai alai fr onton

after its application has been submitted to

the division and its license has been issued

pursuant to the application. The license is

renewable from year to year as provided by

law.

(2) Such permittee is entitled to the

issuance of a license for the operation of a

jai alai fronton during the summer season as

fixed in this section. A permittee granted

a license under this section may not conduct

pari - mutuel pools during the summer season

except at a jai alai fronton as provided in

this section. Such license authorizes the

permittee to operate at any jai alai

permitteeÓs plant it may lease or build

within such county.

(3) Such license for the operation of a jai

alai fronton shall never be permitted to be

operated during the jai alai winter season;

and neither the jai alai winter licensee or

the jai alai summer licensee shall be

permitted to operate on the same days or in

competition with each other. This section

does not prevent the summer jai alai

permittee from leasing the facilities of the

winte r jai alai permittee for the operation

of the summer meet.

(4) The provisions of this chapter which

prohibit the location and operation of jai

alai frontons within a specified distance

from the location of another jai alai

fronton or other permittee and which

prohibit the division from granting any

permit at a location within a certain

designated area do not apply to the

provisions of this section and do not

prevent the issuance of a license under this

section.

H istory. Ï s. 14, ch. 92 - 348.

23 . Pursuant to the Statute , an eligible existing pari -

mutuel permitholder can convert its permit to a summer jai alai

permit. However, if an eligible permitee declines to convert, a

new summer jai alai permit is available in that county.

24 . The S tatute does not include any express authorization

for the Department to promulgate rules to implement the Statute.

IV. The Rule

25. The challenged r ule provides as follows:

61D - 4.002 Evaluating a Permit Application

for a Pari - Mutuel Facility.

An applicant for a Florida Pari - Mutuel

Facility permit shall submit a Form DBPR

PMW - 3010, Permit Application;

https://www.flrules.org/gateway/reference.as

p?NO=Ref - 01552 , a Form DBPR PMW - 3030,

Personal History Record;

https://www.flrules.org/gateway/reference.as

p?NO=Ref - 01553 , and a Form DBPR PMW - 3195,

Request for Release of Information and

Authorization to Release Information;

https://www.flrul es.org/gateway/reference.as

p?NO=Ref - 01555 , all of which are effective

9 - 12 - 12 and adopted herein by reference.

The forms can be obtained at

www.myfloridalicense.com/dbpr/pmw or by

contacting the Div ision of Pari - Mutuel

Wagering at 1940 North Monroe Street,

Tallahassee, Florida 32399 - 1037 .

(1) In evaluating a permit application, the

division shall take into consideration the

following:

(a) The potential profitability and

financial soundness of the prospective

permitholder;

(b) The ability to preserve and protect the

pari - mutuel revenues of the state and to

ensure the integrity of the wagering pool;

(c) The holdings, transactions, and

investments of the applicant connected to

previous business ventures;

(d) The existence of any judgment or

current litigation, whether civil, criminal,

or administrative, involving the applicant.

(2) After initial approval of the permit

and the source of financing, the terms and

parties of any subsequent fina ncing shall be

disclosed by the applicant or the

permitholder, to the division within 30

days.

(3) A pari - mutuel wagering permitholder who

transfers an ownership or equity interest in

its permit to another licensed pari - mutuel

wagering permitholder or w ho transfers a

permit to an entity exclusively composed of

ownership interests that have been approved

under the provisions of Sections 550.054 and

550.1815, F.S., must file with the division

Form DBPR PMW - 3040, Permit Transfer

Application From One Existin g Permitholder

to Another Existing Permitholder, effective

9 - 12 - 12, adopted herein by reference,

https://www.flrules.org/gateway/reference.as

p?NO=Ref - 01554 , which can be obtained at

www.myfloridalice nse.com/dbpr/pmw or by

contacting the Division of Pari - Mutuel

Wagering at 1940 North Monroe Street,

Tallahassee, Florida 32399 - 1037 .

Rulemaking Authority 550.0251(3),

550.054(8)(b), 550.1815(5) FS. Law

Implemented 550.0251, 550.054, 550.0951,

550.155, 550.1815 FS. History Î New 10 - 20 - 96,

Amended 12 - 15 - 97, 3 - 4 - 07, 9 - 12 - 12.

26 . The Rule identifies the following statutes as th e

rulemaking authority for the Rule :

a. § 550.025(3).

b. § 550.054(8)(b).

c. § 550.1815(5) .

27 . Further , the Rule identifies the statutes implemented

by the Rule as follows:

a. § 550.025 1 .

b. § 550.054 .

c. § 550. 0951 .

d. § 550.155 .

e. § 550.1815 .

V. Absence of Citation to the Statute in the Rule

28 . The parties stipulated that the Statute is not a

statute identified in the Rule as authority for the Rule .

Further, there is no dispute that the Rule does not include the

Statute among the laws implemented by the Rule .

29 . An agency engaged in rulemak ing must identify both the

statutory authority for the rulemaking and a statute or act to

be implemented by the rulemaking. State Dep Ót of Child . and

Fam . Servs . v. I.B. , 891 So. 2d 1168, 1171 (Fla. 1st DCA 2005).

After adoption of a rule, an agency may not rely on statutory

provisions not cited in the rule as statutory authority. Id . ,

and cases cited therein.

30 . Petitioner asserts that the failure of the Ru1e to

identify the Statute as either the enabling auth ority for the

Rule , or as a law to be implemented by the Rule renders the Rule

invalid when applied to the Statute. Moreover, according to

Petitioner, regardless of whether the R u1e is invalid with

respect to its application to the statutes identified in the

Rule as the basis for its rulemaking authority, the Rule is

in valid as applied to the Statute because the Statute is not

identified as a basis for establishment of the Rule . Also,

regardless of whether the Rule is valid with respect to any of

the statutes identified in the Rule as the laws to be

implemented, it is in valid as applied to the Statute because the

Statute is not identified as a law to be implemented.

31 . While Pet itionerÓs argument regarding the alleged

fatal omission may or may not have merit, it is unnecessary to

reach that determination here . 6/ This is becaus e Petitioner's

premise is built upon a faulty interpretation of section

550.0745 that the Statute is exempted from the general permit

application requirements, conditions, and qualifications set out

in section 550.054 and the rules of the Department.

32 . When construing a statute, one looks first to the

statute's plain meaning . Moonlit Waters Apts . , Inc. v. Cauley ,

666 So. 2d 898, 900 (Fla. 1996). Furthermore, "[w]hen the

language of the statute is clear and unambiguous and conveys a

clear and definite meaning, there is no occasion for resorting

to the rules of statutory interpretation and construc tion; the

statute must be given its plain and obvious meaning." Holly v.

Auld , 450 So. 2d 217, 21 9 (Fla. 1984) ( citing A.R. Douglass,

Inc. v. McRainey , 137 So. 157, 159 (1931) ) .

33 . A careful reading of the Statute reveals only

exemptions for mileage an d permit ratification requirements, not

from the application submittal and approval requirement s set

forth in section 550.054. Indeed, the Statute expressly

references the application process:

The owner or operator of a pari - mutuel

permit who is authorized by the division to

conduct pari - mutuel pools on exhibition

sports in any county having five or more

such pari - mutuel permits and whose mutuel

play from the operation of such pari - mutuel

pools for the 2 consecutive years next prior

to filing an application under this section

has had the smallest play or total pool

within the county may apply to the division

to convert its permit . . .

and

Such permittee shall only be permitted to

operate a j ai alai fronton after its

application has been submitted to the

division and its license has been issued

pursuant to the application. The license is

renewable from year to year as provided by

law.

§ 550.0745, Fla. Stat. (emphasis add ed)

34 . In this instance, the clear meaning of section

550.0745 is that if a permit is created and made available to be

applied for, applicants must adhere to the requirements,

conditions, and qualifications set forth in c hapter 550,

specifically section 550.05 4, and the rules of the Department ,

including r ule 61D - 4.002, with the specific exceptions of the

mileage and permit ratification requirements.

35 . Notwithstanding the clear and unambiguous meaning of

the Statute , the Department's interpretation of section

550.0745, a statute it is charged with administering, is

entitled to great deference. Verizon Fla., Inc. v. Jacobs , 810

So. 2d 906, 908 (Fla. 2002); Bellsouth Telecomms., Inc. v.

Johnson , 708 So. 2d 594, 596 (F la. 1998). The deference to an

agency interpretation of a statute it is charged with enforcing

applies even if other interpretations or alternative s exist.

Atlantic Shores Resort v. 507 S. St. Corp. , 937 So. 2d 1239,

1245 (Fla. 3d DCA 2006); Miles v. F la. A & M Univ. , 813 So. 2d

242, 245 (Fla. 1 st DCA 2002 ) ; Int . Improv . Tr . Fd . v. Levy , 656

So. 2d 1359, 1364 (Fla. 1st DCA 1995). Accordingly, the

undersigned concludes that the Rule is not rendered invalid for

failure to include the Statute among the statutes being

implemented, or as rulemaking authority for the Rule .

VI. An Invalid Unadopted Rule ?

36 . Petitioner asserts that the DepartmentÓs policy of

applying section 550.054 to all applications for summer jai alai

permits requested pursuant to the Statute is a statement of

general applicability having the force and effect of law, and

therefore constitutes a rule as defined by 120.52(16), Florida

Statutes. Inasmuch as the policy has not been adopted as a

rule, application of th e Rule to the Statute violates section

120.54(1)(a), as an unad o pted r ule , according to Petitioner .

37 . PetitionerÓs contention that the application of

section 550.054 to aspiring permittees for summer jai alai

permits pursuant to the Statute is an invalid unadopted rule, is

rejected. While it is true that the Department has determined

that entities wishing to avail themselves of the opportunities

afforded under the Statute must still file a n application

pursuant to section 550.054, that determination is consistent

with the clear and unambiguous language of section 550.054.

Moreover, section 550.054, which is entitled ÐApplication for

Permit to Conduct Pari - Mutuel Wagering ,Ñ mandates that Ð [ t] he

Division shall require that each applicant subm it an ap plication

setting forth . . . . Ñ § 550.054(3), Fla. Stat. Thus, it is

self - evident from the face of the Statute itself that entities

wishing to conduct pari - mutuel wagering in Florida must file an

application pursuant to section 550.054. In requiring that an

applicant for a summer jai alai permit file an application , the

Department is simply applying the express l anguage of the

Statute , not an unadopted rule.

VII. Specific Powers and Duties Implemented

38 . P etitioner next argues that the Rule is invalid on its

face because it fails to implement or interpret specific powers

and duties.

39 . An agency may adopt rules only where the L egislature

has enacted a specific statute and authorized the agency to

implement it, and then only if the rule implements or interprets

specific powers or duties. Frandsden v. Dep Ót of Envtl . Prot . ,

829 So. 2d 267, 269 (Fla. 1st DCA 2002). The question is

whether the s tatute contains a specific grant of legislative

authority for the rule, not whether the grant of authority is

specific enough. Id .

40. A grant of rulemaking authority is necessary but not

sufficient to allow an agency to adopt a rule; a specific law to

be implemented is also required, and only ru1es that implement

or interpret the specific powers and duties granted by the

enabling statu te are valid. § 120.52(8), Fla. Stat.;

§ 120.536(1), Fla. Stat.; supra , 829 So. 2d at 269. The

authorizing statute must explicitly authorize or require the

agency to adopt the rule. Fla . Elections Comm Ó n v. Blair , 52

So. 3d 9, at 12.

41 . The Rule identifies sections 550.0251, 550.054,

550.0951, 550.15 5, and 550.1815 , as specific law it serves to

implement.

42 . Section 550.054(3) commands the Department to collect

financial information , operational information, liability

information, and Ðother information the Department requires . Ñ

Section 550.054(5) then imposes on the Department a duty to

evaluate and investigate the information contained in an

application to determine whether to issue a permit.

43 . The manifest intent of section 550.054 re quires the

Department to qualitatively evaluate applicants for a permit to

conduct pari - mutuel wagering. See State Bd. Of Optometry v.

Fla. Soc. of Opthalmology , 538 So. 2d 878, 888 (Fla. 1st DCA

1988) (the statute must be read with reference to its manifest

intent and spirit and interpreted according to the ordinary

sense in which the words of com mon usage were employed.) The

L egislature would not have required the Department to collect

the financial, operational and liability information if it did

not intend for the Department to rely upon it in the process of

qualitatively evaluating applicants.

44 . Discretionary authority is necessary for agencies

involved in the issuance of licenses and the deter mination of

fitness of applicants for licenses. See Astral Liquors, Inc. v.

Dep't of Bus . Reg. , 463 So. 2d 1130, 1132 (Fla. 1985) (citing

inter alia, Solimena v. State, Dept. of Bus. Reg. , 402 So. 2d

1240 (Fla. 3rd DCA 1981)). This discretionary authority is

particularly necessary where an agency regulates occupations

which are practiced by privilege rather than by right and which

are potentially injurious to the public welfare. Id .

45 . In this instance, the challenged Rule relates to

licensing and the fitness of the applicants to be licensed, and

serves to regulate a business operated as a privilege rather

than as a right, and which is potentially dangerous to the

public.

46 . The Rule specifically attempts to implement the

legislative mandate issued in the enabling statute, section

550.054, Florida Statutes. Furthermore, while the Rule is

impermissibly vague for the reasons set forth below, it does not

modify, contravene, or enlarge the enabling statue.

VIII. Vagueness

47 . Petitioner contends that even if one were to concede

that section 550.054 applies to an application for a summer jai

alai permit pursuant to the Statute, the Rule is vague , fails to

establish adequate standards for agency decisions, and vests

unbridled discretion in the agency . § 120.52(8)(d), Fla. Stat.

An admini strative rule is invalid under section 120.52(8)(d) if

it forbids or requires the performance of an act in terms that

are so vague that persons of common intelligence must guess at

its meaning, and may differ as to its application. State v.

Peter R. Brown Constr . , Inc. , 108 So. 3d 723, 728 (Fla. 1st DCA

2013). The Legislature may not delegate the power to enact the

law, to declare what a law shall be, or to exercise unrest ricted

discretion in applying a law. Fla . East Coast Indus . v. State ,

677 So. 2d 357, 360 (Fla. 1st DCA 1996). The Constitution

requires that agency rules include standards to guide regulated

persons or entities to comply with the rule , and to govern the

agency in applying it. Barrow v. Hollins , 12 5 So. 2d 749, 752

(Fla. 1960). An administrative rule which creates discretion

not articulated in the statute it implements must specify the

basis on which the discretion is to be exercised. Otherwise the

lack of standards for the exercise of discretion vested under

the rule renders it incapable of application in a manner

susceptible of review. Cortes v. State Bd. of Regents , 655

So. 2d 132, 138 (Fla. 1st DCA 1995).

48 . The undersigned is in agreement with Petitioner that

sections (a) thr ough (d) of section (1) of the Rule are

impermissibly vague, and do not include any standards that

explain how any one of the identified criteria are to be applied

in the evaluation of an application . Further, there is no

explanation of how the four criteria relate to one another, or

are to be weighted, in the context of the Department's

evaluation of an application for a permit. As a result, the

Department is improperly afforded unbridled discretio n,

untethered by any guidelines or objective standards with respect

to its review of permit applications. Pursuant to the Rule , the

D epartment can approve or deny a permit application in its

discretion, without any consistency in its decisions because of

the Ð play Ñ in the Rule's criteria . 7 /

49 . The first criterion is the Ð potential profitability

and financial soundness of the prospective permitholder . Ñ

Material questions fairly raised, but left unanswered are: What

constitutes Ð potential profitability Ñ ? How is potential

profitability projected? When must profitability be achieved -

the first year, the fifth? How is profitability calculated?

How profitable must the prospective permitholder be? At

hearing , counsel for the Department stated that project ing that

the applicant will earn $1.00 qualifies as being potentially

profitable. The Rule does not so state, highlighting the lack

of objective standards. What assurance does an applicant have

that the Department will apply the Ð $1.00 equals profitabili ty Ñ

interpretation of the Rule ? As the Rule is currently worded,

the Department has unbridled discretion in deciding what

constitutes Ð potential profitability . Ñ Similarly, on its face

one cannot discern what is meant by Ð financial soundness . Ñ Such

general criteria, without objective standards, afford the

Department unauthorized discretion in evaluating permit

applications. An applicant could not reasonabl y ascertain from

reviewing the Rule what is required by the Department, or the

likelihoo d of its application being approved. Moreover,

meaningful review of the Department's decision would not be

possible.

50 . The second criterion is Ð the ability to preserve and

protect the pari - mutuel revenues of the state and to ensure the

integrity of the wagering pool . Ñ Again, questions fairly

raised, but left unanswered are: What exactly does this mean?

How is it measured? Must the Department conclude that the new

permit will increase overall pari - mutuel revenues as a condition

to granting the permit ? Is it sufficient that the new permit

will not have an adverse im pact on pari - mutuel revenues? Does

it matter if the new permit will have an adverse impact on other

permitholders if the net effect is an overall increase in pari -

mutuel revenues? How muc h of an impact must the new permit have

before the application will be denied based on this criterion?

51. T he third criterion authorizes the Department to

consider Ð the holdings, transactions, and investments of the

applicant connected to previous busine ss ventures . Ñ Here, some

of the questions raised are: How far back in time may the

Department look? What is the significance of this criterion?

What type of information might the Department learn that would

warrant the denial of an application? How im portant is this

criterion in relation to the other thr ee criteria included in

the R ule? What if an applicant was involved in an unsuccessful

business venture years ago and, thereafter , had many successful

business ventures? None of these questions are answered by the

R ule. As a result, the Department is impermissibly granted

discretion to decide what the terms mean and how they are to be

applied in reviewing an application.

52 . The fourth criterion is Ð the existence of any judgment

or c urrent litigation, whether civil, criminal, or

administrative, involving the applicant . Ñ Unknown is the

significance of this criterion. Will the Division apply this

criterion and deny a permit application if the applicant has

judgments entered in its fav or? What if the applicant's

holdings are substantial yet it has had judgments entered

against it?

53. Based upon the extremely vague wording of the Rule , it

is unlikely that an applicant could reasonably surmise what

information it should include in its application to enhance the

chances of approval. Then, having been made to divine what

information might be meaningful to the Department, the applicant

is left to guess as to whether its ap plication will be approv ed ,

based on the vague criteria included in the Rule .

54. For the reasons stated above, t he Rule is

impermissibly vague, and therefor invalid.

IX. Arbitrary or Capricious ?

55 . Finall y, Petitioner asserts that the Rule is an

invalid exercise of delegated legislative authority because it

is arbitrary and caprici ous. Petitioner maintains the Rule

fails to fulfill the intention of the Rule , the Statute , or of

any of the statutes it is intended to implement.

A rule is a rbitrary if it is not supported

by logic or the necessary facts; a rule is

capricious if it is adopted without thought

or reason or is irrational.

§ 120.52(8)(e), Fla. Stat.

56 . The analysis for whether a rule is arbitrary and

capricious is (1) whether the rule is supported by logic or the

necessary facts; and (2) whether the rule was adopted without

2 7

thought or is irrational. See Las Mercedes Home Care Corp. v.

Ag. for Health Care Admin . , Case No. 10 - 0860RX (Fla. DOAH

July 23, 2010); affÒd , 67 So. 3d 1262 (Fla. 1st DCA 2011).

57 . As explained in Agrico Chemical Co mpany v. Dep artmen t

of Env ironmen t a l Prot ection , 365 So. 2d 759 (Fla. 1st DCA 1979):

A capricious action is one which is taken

without thought or reason and irrationally.

An arbitrary decision is one not supported

by facts or logic, or despotic.

Administrative discretion must be reasoned

and based upon competent substantial

evidence. Id. at 763.

58 . While the undersigned has found that the Rule is

invalid due to its vagueness and its failure to establish

adequate standards for agency decisions, thereby vesting

unbridled discretion in the agency, it cannot be concluded that

the Rule is arbitrary and capricious. The Rule was adopted with

the intent of giving effect to the application content and

evaluation requirements set forth in s tatute, and therefore

cannot be said to be arbitrary. Similarly, the four criteria

set forth at secti on (1) of the Rule do not appear to be the

product of caprice, but instead simply lack the clarity,

specificity, and standards necessary to give meaningful guidance

to applicants and to ensure a fair and consistent evaluation of

applications submitted to t he Department.

ORDER

Based on the foregoing Findings of Fact and Conclusions of

Law, it is ORDERED that Florida Administrative Code Rule 61D -

4.002 constitutes an invalid exercise of delegated legislative

authority.

DONE AND ORDERED this 2 5 th day of March , 2015 , in

Tallahassee, Leon County, Florida.

S

W. DAVID WATKINS

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

Filed with the Clerk of the

Division of Administrative Hearings

this 2 5 th day of March, 2015 .

END NOTES

1/ The agency action challenge was assigned DOAH Case No. 15 -

0157 , and was placed in abeyance pending the issuance of the

Final Order in the instant case.

2/ Unless otherwise noted, all references are to the 2014

version of the Florida Statutes.

3/ West Flagler Associates, Ltd. v. Dep Ó t of Bus . & Prof . Reg. ,

Division of Pari - Mutuel Wagering , 139 So. 3d 419 (Fla. 1st DCA

2014) .

4/ Sou th Florida Racing Associates, LLC. v. DepÓ t of Bus . and

Prof . Reg . , Division of Pari - Mutuel Wagering , 143 So. 3d 1149

(Fla. 3rd DCA 2014).

5/ In the instant proceeding , the only matter that wi ll be

determined is SFRA's rule challenge. By agreement of counsel,

a ll other matters raised in the P etition have been bifurcated

from this proceeding, and wi ll be considered at a later hearing,

if necessary, in the context of Case No. 15 - 0157 .

6/ Some Florida courts have held that the failure to name the

statute a rule implements should ordinarily be deemed harmless

error, in the same way erroneous or incomplete economic impact

statements do not render administrative rules invalid unless the

deficienci es are material, and impair either the fairness of the

rulemaking proceedings or the correctness of the rule. See ,

e.g . , Humhosco, Inc. d/b/a Humana Hosp . Mandarin v. Dep Ó t of

Health and Rehab . Servs . , 476 So. 2d 258 (Fla. 1 st DCA 1985);

State Dep Ó t of Ins . v. Ins . Serv . Office , 434 So. 2d 908 (Fla.

1 st DCA 1983).

7/ The lack of articulated standards for qualitative evaluation

of applications would be particularly problematic in the

instance of multiple applicants comparatively and competitively

vying for a single permit franchise.

COPIES FURNISHED:

Andrew T. Lavin, Esquire

Lavin Law Group, P.A.

1632 Northeast 12th Terrace

Fort Lauderdale, Florida 33305

(eServed)

Marisa G. Button, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street , Suite 40

Tallahassee, Florida 32399 - 2202

(eServed)

Jason L. Maine, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street , Suite 40

Tallahassee, Florida 32399 - 2202

(eServed)

Ken Lawson, Secretary

Department of Business and

Professional Regulation

1940 North Monroe Street , Suite 40

Tallahassee, Florida 32399 - 2202

(eServed)

William Spicola, General Counsel

Department of Business and

Professional Regulation

1940 North Monroe Street , Suite 40

Tallahassee, Florida 32399 - 2202

(eServed)

Ernest Reddick, Chief

Alexandra Nam

Department of State

R. A. Gray Building

500 South Bronough Street

Tallahassee, Florida 32399 - 0250

(eServed)

Ken Plante, Coordinator

Joint Administrative Procedures Committ ee

Room 680, Pepper Building

111 West Madison Street

Tallahassee, Florida 32399 - 1400

(eServed)

Jonathan Zachem, Director

Division of Para - Mutuel Wagering

Department of Business and

Professional Regulation

1940 North Monroe Street

Tall ahassee, Florida 32399 - 2202

(eServed)

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by

filing the o riginal notice of administrative appeal with the

agency clerk of the Division of Administrative Hearings within

30 days of rendition of the order to be reviewed, and a copy of

the notice, accompanied by any filing fees prescribed by law,

with the clerk of the District Court of Appeal in the appellate

district where the agency maintains its headquarters or where a

party resides or as otherwise provided by law.