16-004128RU Florida Quarter Horse Racing Association, Inc. vs. Department Of Business And Professional Regulation, Division Of Pari-Mutuel Wagering Status: Closed Settled and/or Dismissed prior to entry of RO/FO on Thursday, March 22, 2018.

Summary: Agency's disregard of statutory application deadline and/or submission requirements was an unadopted rule.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA QUARTER HORSE RACING

ASSOCIATION, INC.,

Petitioner,

vs. Case No. 16 - 4128RU

DEPARTMENT OF BUSINESS AND

PROFESSIONAL REGULATION,

DIVISION OF PARI - MUTUEL

WAGERING,

Respondent.

________________________ _______/

FINAL ORDER

Pursuant to notice, Lawrence P. Stevenson, Administrative

Law Judge of the Division of Administrative Hearings, conducted

a formal hearing in the above - styled case on October 25 and 26,

2016, in Tallahassee , Florida.

APPEARANCES

For Petitioner: J. Stephen Menton, Esquire

Tana D. Storey, Esquire

Gabriel F.V. Warren, Esquire

Rutledge Ecenia, P.A.

119 South Monroe Street, Suite 202

Tallahassee, Florida 32301

For Respondent: William D. Hall, Esquire

Caitlin R. Mawn, Esquire

Department of Business and

Professional Regulation

2601 Blair Stone Road

Tallahassee, Florida 32399 - 2202

STATEMENT OF THE ISSUE

Whether Respondent, Department of Business and Professional

Regulation, Division of Pari - Mutuel Wagering (ÐDivisionÑ),

relied on an unadopted rule when it issued a 2016 - 2017 annual

o perating license and cardroom license to the South Florida

Racing Association, LLC, d/b/a Hialeah Park (ÐHialeahÑ) , and

continued to authorize slot machine operations at Hialeah beyond

June 30, 2016.

PRELIMINARY STATEMENT

On July 22, 2016, Petitioner, F lorida Quarter Horse Racing

Association, Inc. (ÐFQHRAÑ) , filed at the Division of

Administrative Hearings a ÐPetition Challenging Agency Statement

Defined as an Unadopted RuleÑ (the ÐPetitionÑ) alleging that the

DivisionÓs acceptance of an agreement betwee n Hialeah and the

South Florida Quarter Horse Association, Inc. (ÐSFQHAÑ) , as a

basis for issuing Hialeah's annual operating license approving a

total of 36 performances for the 2016 - 2017 racing season,

issuing Hialeah's cardroom operating license for the 2016 - 2017

racing season, and continuing to authorize HialeahÓs slot

machine operations, constituted an unadopted rule in violation

of section 120.54(1)(a), Florida Statutes.

The case was scheduled for hearing on August 22, 2016, in

Tallahassee. One conti nuance was granted on PetitionerÓs

unopposed motion and the case was rescheduled for October 25

and 26, 2016, on which dates it was convened and completed.

At the hearing, Petition er offered the testimony of

Dr. Steven Fisch, a veterinarian and former pr esident of the

FQHRA, as a fact witness and expert on quarter horse racing;

William White, president of the Florida HorsemenÓs Benevolent

and Protective Association , Inc. ; and F.E. ÐButchÑ Wise, a

member of the executive committee of the American Quarter H orse

Association and a member of the board of directors of the FQHRA.

The Department presented no witnesses.

Joint Exhibits 1 through 28 were admitted into evidence,

including the depositions of Division employees Jonathan Zachem

and Jamie Pouncey , and of SFQHA board member Samual Ard and

former SFQHA board member Wesley Cox. PetitionerÓs Exhibits 1

through 5 and 7 were admitted into evidence, over RespondentÓs

relevance objection s . RespondentÓs Exhibits 1 through 4 were

admitted into evidence, over Peti tionerÓs relevance objection s .

A two - volume Transcript of the hearing was filed at the

Division of Administrative Hearings on November 14, 2016. Both

parties timely filed their P roposed F inal O rders. Both parties'

proposals have been given careful consid eration in the

preparation of this Final Order.

Unless otherwise indicated, all statutory references in

this Final Order are to the 2016 version of the Florida Statutes

and all references to r ules are to the current version of the

Florida Administrative C ode.

FINDING S OF FACT

Based on the oral and documentary evidence adduced at the

final hearing and the entire record in this proceeding,

including the partiesÓ Joint Prehearing Stipulation, the

following F indings of F act are made:

1. The FQHRA is a Florida not - for - profit corporation

located in Tallahassee. It comprises members in good standing

of its parent organization, the American Quarter Horse

Association. The FQHRA describes its mission as promot ing the

owning, breeding , and racing of Florida - bred qu arter horses.

The FQHRA represents 602 breeders, owners , and trainers of

quarter horses, many of whom have participated in the annual

quarter horse meet at Hialeah Park. During the

2015 - 2016 racing season, 535 members of the FQHRA participated

at Hialea h Park in a full schedule of live racing.

2. The FQHRA is named specifically in statutes related to

quarter horse racing in Florida. It is the statutory ÐdefaultÑ

horsemenÓs association for purposes of setting the schedule of

racing at quarter horse race tracks and representing quarter

horse owners in negotiating purse agreements with quarter horse

permitholders pursuant to sections 550.002(11), 551.104(10)(a)2.

and 849.086(13)(d), Florida Statutes.

3. Hialeah is the holder of a horse racing permit that

a uthorizes it to conduct quarter horse racing at its facility,

Hialeah Park, in Miami - Dade County, Florida.

4. The Division is the state agency responsible for

implementing and enforcing FloridaÓs pari - mutuel laws, including

the licensing and regulation of all pari - mutuel activities

conducted in the state. The DivisionÓs regulatory duties

include the adoption of Ðreasonable rules for the control,

supervision, and direction of all applicants, permittees, and

licensees and for the holding, conducting, and op erating of all

racetracks, race meets, an d races held in this state.Ñ

§ 550.0251(3), Fla. Stat.

5. Gambling is generally prohibited under Florida law.

See chapter 849, Florida Statutes, establishing criminal

penalties for many forms of gambling. 1/ However, certain types

of pari - mutuel activities, including wagering on horse racing,

have been authorized.

6. In recent years, the Legislature has expanded the

gambling activities that may occur at the facilities of licensed

pari - mutuel permitholders b y authorizing the operation of slot

machines and cardrooms at pari - mutuel facilities. These

operations are conditioned upon licensing requirements that

include having a Ðbinding written agreementÑ with the FQHRA or

Ðthe association representing a majority of the horse owners and

trainers at the applicantÓs eligible facilityÑ as to the payment

of purses on live quarter horse racing conducted at the

facility. §§ 551.104(10)(a)2. and 849.086(13)(d)3., Fla. Stat.

7. These conditions are commonly referenced a s ÐcouplingÑ

the expanded gambling operations with the promotion of horse

racing in the state. The Legislature has enacted specific

conditions to be met by applicants for slot machine and cardroom

licenses to ensure that coupling occurs. Section 551.104, the

slot machine licensing statute, sets forth conditions specific

to thoroughbred racing and similar conditions specific to

quarter horse racing. For purposes of this proceeding, the

quarter horse provision at sub section (10)(a)2. is relevant:

No slot m achine license or renewal thereof

shall be issued to an applicant holding a

permit under chapter 550 to conduct pari -

mutuel wagering meets of quarter horse

racing unless the applicant has on file with

the division a binding written agreement

between the ap plicant and the Florida

Quarter Horse Racing Association or the

association representing a majority of the

horse owners and trainers at the applicantÓs

eligible facility, governing the payment of

purses on live quarter horse races conducted

at the licensee Ós pari - mutuel facility. The

agreement governing purses may direct the

payment of such purses from revenues

generated by any wagering or gaming the

applicant is authorized to conduct under

Florida law. All purses shall be subject to

the terms of chapter 550.

8. Section 849.086(13)(d)3. contains a virtually identical

condition for a quarter horse racing permitholder seeking to

operate a cardroom at its facility:

No cardroom license or renewal thereof shall

be issued to an applicant holding a permit

unde r chapter 550 to conduct pari - mutuel

wagering meets of quarter horse racing

unless the applicant has on file with the

division a binding written agreement between

the applicant and the Florida Quarter Horse

Racing Association or the association

representin g a majority of the horse owners

and trainers at the applicantÓs eligible

facility, governing the payment of purses on

live quarter horse races conducted at the

licenseeÓs pari - mutuel facility. The

agreement governing purses may direct the

payment of such purses from revenues

generated by any wagering or gaming the

applicant is authorized to conduct under

Florida law. All purses shall be subject to

the terms of chapter 550.

9. Once a track obtains its initial permit from the

Division to conduct a partic ular type of pari - mutuel wagering,

it must thereafter apply annually to the Division and obtain a

license to conduct pari - mutuel operations. The license

authorizes the track to conduct pari - mutuel wagering

performances under its permit on the specific dat es identified

on the license.

10. A permitholder must file its application between

December 15 and January 4 , for a license to conduct performances

during the next state fiscal year, i.e., July 1 through June 30.

The permitholder is entitled to amend i ts application through

February 28. § 550.01215(1), Fla. Stat.

11. The Division is also responsible for issuing licenses

for cardroom gaming at a licensed pari - mutuel permitholder's

facility. "A cardroom license may only be issued to a licensed

pari - mut uel permitholder and an authorized cardroom may only be

operated at the same facility at which the permitholder is

authorized under its valid pari - mutuel wagering permit to

conduct pari - mutuel wagering activities." § 849.086(5)(a), Fla.

Stat. After initi al issuance, a cardroom operator must apply

annually for renewal of its cardroom license, which must be

submitted in conjunction with the annual application for the

pari - mutuel license. § 849.086(5)(b), Fla. Stat.

12. To maintain its eligibility to opera te cardrooms, the

licensee must:

[ h ] ave requested, as part of its pari - mutuel

annual license application, to conduct at

least 90 percent of the total number of live

performances conducted by such permitholder

during either the state fiscal year in which

it s initial cardroom license was issued or

the state fiscal year immediately prior

thereto if the permitholder ran at least a

full schedule of live racing or games in the

prior year.

§ 849.086(5)(b), Fla. Stat.

13. The Division is also responsible for aut horizing slot

machine operations through the issuance of annual licenses

pursuant to sections 551.104 and 551.105. As with cardrooms,

slot machines may only be operated at a permitholder's eligible

facility identified in a valid pari - mutuel wagering permi t.

§ 551.104(3), Fla. Stat. As a condition of licensure, the slot

machine licensee must conduct "no fewer [sic] than a full

schedule of live racing or games as defined in s. 550.002(11)."

§ 551.104(4)(c), Fla. Stat.

14. Section 550.002(11) sets forth t he definition of Ðfull

schedule of live racing or games.Ñ As to quarter horse

permitholders, the definition provides, in relevant part:

ÐFull schedule of live racing or gamesÑ

means . . . for a quarter horse permitholder

at its facility unless an alternat ive

schedule of at least 20 live regular

wagering performances is agreed upon by the

permitholder and either the Florida Quarter

Horse Racing Association or the horsemenÓs

association representing the majority of the

quarter horse owners and trainers at th e

facility and filed with the division along

with its annual date application . . . for

every fiscal year after the 2012 - 2013 fiscal

year, the conduct of at least 40 live

regular wagering performances.

15. Hialeah began quarter horse racing in 2009, part nering

with the FQHRA to obtain initial approval from the Division to

operate slot machines at the Hialeah Park facility. The FQHRA

provided the horses and trainers needed by Hialeah to conduct

two quarter horse race meets, one at the end of 2009 and one at

the beginning of 2010. These race meets were timed to meet the

definition of Ðeligible facilityÑ set forth in section

551.102(4), which provides in relevant part that a licensed

pari - mutuel facility may apply for a slot machine license

Ðprovided such f acility has conducted live racing for 2

consecutive calendar years immediately preceding its

application.Ñ

16. Hialeah and FQHRA entered into exclusive horsemen's

agreements, 2/ hereinafter referred to collectively as the ÐFQHRA

Agreement,Ñ to govern th e payment of purses on live quarter

horse races conducted at Hialeah's pari - mutuel facility for the

2009 - 2010 racing season through the 2015 - 2016 racing season.

The FQHRA Agreement was valid through June 30, 2016. The last

quarter horse race at Hialeah f or the 2015 - 2016 season was

February 29, 2016.

17. As noted above, section 550.01215(1) requires a pari -

mutuel permitholder to file its license renewal application

between December 15 and January 4 for the next state fiscal

year, and permits the applicant to amend its application through

February 28. Section 550.01215(2) requires the Division to

issue the license no later than March 15.

18. Cardroom licenses must also be renewed annually, in

conjunction with the applicantÓs annual application for its

p ari - mutuel license. § 849.086(5)(b), Fla. Stat.

19. Slot machine licenses are valid for one year and must

be renewed annually. £ 551.105(1), Fla. Stat. HialeahÓs most

recent slot machine license was issued on December 11, 2015.

20. In September 2015 , it was apparent that Hialeah might

be looking for options other than entering into a horsemenÓs

agreement with the FQHRA for the 2016 - 2017 season. On or about

September 15, 2015, Hialeah's legal counsel, Andrew Lavin, met

with Jonathan Zachem, then the director of the Division, and

Jason Maine, legal counsel for the Division, to discuss several

issues , including the upcoming application process. In a

follow - up letter to Mr. Maine and Mr. Zachem, Mr. Lavin wrote:

During our meeting you confirmed that the

Division has on file SFRA's purse agreement

with the Florida Quarter Horse Racing

Association, which expires on June 30, 2016

(the "SFRA/FQHRA Agreement"). You also

confirmed that the SFRA/F Q HRA Agreement

serves as the requisite agreement for SFRA's

ap plications for its upcoming slots license

and cardroom license. SFRA shall file its

application accordingly.

You further explained that it is the

Division's position that by the expiration

date of the SFRA/F Q HRA Agreement, SFRA is

required to have a n ew agreement on file

with the Division that is effective as of

July 1, 2016, and that meets the

requirements of § 551.104(10)(a)(2), Fla.

Stat., and § 849.086(13)(d)(3), Fla. Stat.

21. Mr. Zachem confirmed that the meeting occurred and did

not dispute the substance of Mr. LavinÓs letter.

22. Representatives of the FQHRA met independently with

the Division's leadership, including Jonathan Zachem and Jason

Maine, in mid - September 2015, to discuss FQHRA's concerns with

respect to Hialeah's license appli cations and the negotiations

with Hialeah for a new horsemen's agreement for the 2016 - 2017

fiscal year. FQHRA came away from this meeting with the

understanding that the Division would rely on the FQHRA

Agreement to allow Hialeah to continue slot machine operations

until the agreement expired on June 30, 2016, and that a new

horsemenÓs agreement would have to be in place for Hialeah to

renew its cardroom license.

23. Hialeah received a renewal of its slot machine license

on December 11, 2015. In issuing this license, the Division

relied on the FQHRA Agreement that would expire on June 30,

2016.

24. Hialeah electronically submitted its application for

its 2016 - 2017 racing license and cardroom gaming license on

December 23, 2015. On February 26, 2016, Hi aleah electronically

submitted an amended application for its annual racing license.

At the time of HialeahÓs applications for its 2016 - 2017 racing

and cardroom licenses, the FQHRA Agreement was the only purse

agreement in the DivisionÓs files for Hialeah .

25. In its December 2015 filings, Hialeah requested a full

schedule of live racing and renewal of its cardroom gaming

l icense for the 2016 - 2017 race year. A "full schedule of live

racing" for the 2016 - 2017 quarter horse meet at Hialeah Park

would be 40 live regular wagering performances, absent an

alternative schedule agreed to by Hialeah and either the FQHRA

or the horsemen's association representing the majority of the

owners and trainers at Hialeah.

26. Jamie Pouncey is the Division employee respo nsible for

reviewing license applications for completeness. Ms. Pouncey

has no authority to approve or reject license applications.

Only the Division director has approval authority.

27. Ms. Pouncey testified that having a valid horsemenÓs

agreement on file is a requirement for purposes of processing

the cardroom application and for issuing the operating license.

28. In reviewing HialeahÓs racing license application,

Ms. Pouncey utilized a Division checklist that enumerated the

necessary forms and other requirements. One of the items on

that checklist stated: Ða copy of the binding written

agreements between the facility and respective associations

(horsemenÓs agreement) as required by section 849.086(13)(d)(3),

Florida Statutes (Quarter Horse Only).Ñ Ms. Pouncey marked the

checklist to indicate that Hialeah met this requirement. In so

doing, Ms. Pouncey relied on the FQHRA Agreement, which remained

valid until June 30, 2016.

29. On February 25, 2016, Dr. Steven Fisch, a former

president and current board member of the FQHRA, sent an email

to Ms. Pouncey inquiring whether Hialeah had applied for its

2016 - 2017 quarter horse racing license and whether it had

submitted a horsemen's agreement. Ms. Pouncey responded that

"there is one on file valid throu gh 06/30/2016 , " and later

confirmed to Dr. Fisch that the FQHRA Agreement was the only one

on file for Hialeah at that time.

30. On February 26, 2016, Hialeah electronically

transmitted its amended racing license application to the

Division. The amended application requested to run a reduced

schedule of 36 performances ins tead of the full schedule of

40 requested in the December 2015 filing. At the time the

amended application was filed, the only horsemenÓs agreement on

file at the Division for Hialeah r emained the FQHRA Agreement,

which included no deviation from the 40 - performance schedule.

31. On March 8, 2016, Ms. Pouncey indicated on the

Division's checklist that Hialeah's amended application for a

racing license and its application for a cardroom g aming license

were complete, with all the necessary documentation in place.

She forwarded Hialeah's renewal applications to Mr. Zachem,

along with draft licenses for his signature.

32. Ms. Pouncey testified that in her application review ,

she does not lo ok at the issue of whether the applicant is

requesting less than a full schedule of live racing dates. She

had no specific recollection of whether Hialeah requested less

than a full schedule. She m ade no assessment of whether

36 dates constitutes less th an a full schedule. Ms. Pouncey

testified that she would Ðconsult managementÑ if the issue arose

during her application review, but stated that she did not do so

regarding HialeahÓs application.

33. On March 15, 2016, Hialeah electronically submitted t o

the Division a horsemenÓs agreement between Hialeah and the

SFQHA (the ÐSFQHA AgreementÑ). It represented that the SFQHA

would be the horsemenÓs association representing the majority of

the horsemen at Hialeah Park effective July 1, 2016. Also on

March 15, 2016, the SFQHAÓs articles of incorporation were filed

with the Secretary of State.

34. Regarding who would represent the majority of the

horsemen at Hialeah, the preamble of the SFQHA Agreement states:

WHEREAS, because only horses owned by

members o f SFQHA will be eligible to

participate in races during the race meet,

the SFQHA is the horsemen's association that

represents all of the horse owners and

trainers at SFRA's facility who will

participate in the live quarter horse events

that will be conduc ted by Hialeah at Hialeah

Park during the race meet to which this

Agreement is applicable.

35. The substance of the SFQHA Agreement elaborates as

follows:

13. For and in consideration of the purse

payments that Hialeah has agreed to make as

provided in paragraph 4 above, Hialeah

agrees that it will accept entries during

the Race Meet only from owners and/or

trainers: (a) that appear on the membership

roll of the SFQHA as a member in good

standing; and (b) that have on file with

Hialeah a photocopy of an executed original

ÐPledge CardÑ in the form attached as

Exhibit A whereby said owner and/or trainer

has appointed the SFQHA to represent said

owner and/or trainer for the purposes stated

in § 550.002(11); § 551.104(10);

§ 849.086(13); and the IHA [Interst ate

Horseracing Act of 1978]. The SFQHA shall

maintain up to date membership information

that it will provide to Hialeah in order for

Hialeah to comply with the requirements of

this paragraph. Furthermore, Hialeah and

the SFQHA agree that all entries sha ll be

horses from qualifying breeds that have

either been bred in the State of Florida or

have been permanently based in the State of

Florida during the calendar year preceding

the day on which the horse is entered to

race at Hialeah Park. No exceptions w ill be

granted to the requirements of this

paragraph.

36. Regarding whether Hialeah would be required to run a

full schedule of 40 performances during the racing season, the

SFQHA Agreement states:

3. The parties agree that Hialeah has the

managerial pr erogative to determine the

dates and the number of operating

performances for which Hialeah shall seek

authorization when filing an application for

an operating license.

* * *

12. The SFQHA hereby authorizes Hialeah to

file this Agreement with the Divis ion

evidencing compliance by Hialeah with the

provisions of Chapters 550, 551 and 849 that

require the filing of this Agreement with

the Division of Pari - Mutuel Wagering as a

condition precedent to annual operating,

cardroom and/or slot machine licensure.

Specifically with regard to the number of

performances that Hialeah shall operate, the

SFQHA hereby provides the consent required

by § 550.002(11) to authorize Hialeah to

operate 36 performances during the Race

Meet. The authorizations, approvals and

con sents set forth in this Agreement shall

remain in ful l force and effect through

June 30, 2017.

37. On March 15, 2016, the Division issued to Hialeah a

permit to conduct quarter horse racing at Hialeah Park for the

fiscal year 2016 - 2017. The license, sig ned by Mr. Zachem as

director of the Division, authorized 36 regular performances, as

requested by HialeahÓs amended application.

38. The FQHRA contends that the Division's issuance of

licenses to Hialeah is based on a new, unpromulgated policy that

allow s pari - mutuel permitholders to unilaterally control racing

dates and purse decisions without the involvement of an

independent horsemen's association. The FQHRA also alleges that

the Division is operating pursuant to a new, unpromulgated

policy of allowin g amendments to license applications after

February 28 of a given year. The FQHRA urges the conclusion

that the Division's issuance of licenses to Hialeah represents a

new policy and/or interpretation of the statutory requirements

that have not been promu lgated as required by c hapter 120,

Florida Statutes. The FQHRA alleges that the Division's actions

and new interpretations effectively authorize "decoupling" by

allowing pari - mutuel permitholders to unilaterally control

racing dates and purse agreements.

39. The FHQRA presented extensive testimony regarding the

LegislatureÓs intent when it established the requirement of a

horsemenÓs agreement between a permitholder and a horsemenÓs

association as a condition of licensure to operate slot machines

or cardro oms, and the need for armÓs length negotiations in

establishing those agreements. Dr. Fisch was involved in the

effort in the late 1990s and early 2000s to found the FQHRA and

re - establish quarter horse racing in Florida. He testified that

an independent horsemen's association , genuinely representing

the interests of the horsemen in negotiations with the

permitholder , is necessary to promote the stability of the

industry. The purse payments from the track must be sufficient

to entice the horsemen, who in cur substantial expenses, to

provide horses for the races. A single race meet can result in

the horsemen collectively investing millions of dollars.

40. Dr. Fisch stated that fewer horsemen will race and

enter into the horse racing industry if horsemen are excluded

from purse negotiations and the number of races is arbitrarily

reduced. Racing and its purse payments drive the horse breeding

industry, which is important to the economy of the state.

Dr. Fisch testified that if the horsemen's association is not

independent from the track, then the track can dictate the purse

payments and racing dates without input from the horsemen, a

situation contrary to the intent and purpose of coupling

expanded gaming opportunities with the continued healthy

operation of horse racing.

41. Dr. Fisch testified that the FQHRA offers membership

to any owner or trainer racing at Hialeah Park. The FQHRA

issues membership cards stating that the member has chosen FQHRA

to represent him in track negotiations and legislative

e ndeavors. Membership can be obtained online, and is renewed

automatically every year. Dr. Fisch stated that people may opt

out of membership in the FQHRA and still race at the facility.

42. The FQHRA contends that the SFQHA is a sham

organization estab lished and controlled by Hialeah as a means to

effectively skirt the coupling requirement of the relevant

statutes. At the hearing, it was established that the SFQHA had

no members as of March 14, 2016, the date on which the SFQHA

Agreement was submitted to the Division, or as of March 15,

2016, the date the racing and cardroom licenses were issued. In

deposition testimony, Wesley Cox, a founding board member of the

SFQHA (since resigned), testified that the SFQHA had no signed

pledge cards from members a s of September 20, 2016.

43. The FQHRA asserts that, as of the dates of the SFQHA

Agreement and HialeahÓs license issuance, it was the only

horsemenÓs association representing a majority of the owners and

trainers at Hialeah, by virtue of the ongoing FQ HRA Agreement.

Therefore, the FQHRA was the only entity authorized to enter a

valid horsemenÓs agreement with Hialeah.

44. The FQHRA points out that the Division was presented

with plentiful reason s to inquire whether the SFQHA was a

ÐcaptiveÑ associatio n created by Hialeah. Even though both

Hialeah and the FQHRA had made several inquiries to the Division

regarding the license renewal requirements and the recognized

horsemen's association for Hialeah, the Division made no effort

to establish whether the SFQHA actually represented a majority

of the owners and trainers at Hialeah at the time the SFQ H A

Agreement was submitted on March 15, 2016.

45. The DivisionÓs position is that the date of HialeahÓs

license issuance was the correct time to ascerta in which

horsemenÓs association represented a majority of the owners and

trainers at Hialeah Park, because no racing was occurring at

that time. There were no owners or trainers at Hialeah Park as

of March 15, 2016. When asked whether the Division checke d for

SFQHA membership cards upon rec eiving the SFQHA Agreement,

Mr. Zachem stated that Ðit wouldnÓt have been possible yetÑ

because Hialeah had not Ðhad performances since [the filing of

the SF Q HA Agreement] for us to be able to.Ñ

46. The Division reads the language of sections

551.104(10)(a)2 and 849.086(13)(d)3 . in literal terms: a

Ðbinding written agreement between the applicant and the [FQHRA]

or the association representing a majority of the horse owners

and trainers at the applicantÓs eligible faci lityÑ must be Ðon

file with the divisionÑ at the time the license is issued. At

all times pertinent to this proceeding, there was a binding

written agreement on file with the Division: the FQHRA

Agreement that expired on June 30, 2016, and the SFQHA Agre ement

that commenced on July 1, 2016. The DivisionÓs position is that

the agreement in effect at the time the license is issued need

not be the same agreement that will be in effect at the time the

race meet is underway.

47. Nothing in the statutes gai nsays the DivisionÓs

position. The Division has not here acted according to an

unadopted rule but pursuant to the language found on the face of

the statute. No new policy has been announced, no

interpretation was necessary. The only novel aspect of this

licensing determination is that Hialeah has changed horsemenÓs

associations, an event clearly contemplated by sections

551.104(10)(a)2 . and 849.086(13)(d)3.

48. The FQHRAÓs position is that Hialeah should be

required to run its 2016 - 2017 race meet using the horsemenÓs

association with which it had an agreement on file with the

Division at the time of the application. In other words,

Hialeah has no alternative but to enter a new horsemenÓs

agreement with the FQHRA, using the slot machine statuteÓs

arbitra tion process if necessary. See § 551.104(10)(c) , Fla.

Stat . Acceptance of the FQHRAÓs position would make it

difficult , if not impossible , for a quarter horse permitholder

to ever dislodge an incumbent horsemenÓs association. The

statutesÓ provision of alternatives -- Ðthe Florida Quarter Horse

Racing Association or the association representing a majority of

the horse owners and trainers at the applicantÓs eligible

facilityÑ -- militates against the FQHRAÓs position. 3/

49. The Division concedes that FQHRAÓ s points regarding

legislative intent and the need for an independent horsemenÓs

association may be valid as matters of policy. However, the

Division argues that the statutes give it no authority to

determine which is a ÐlegitimateÑ and which is a ÐshamÑ or

ÐpuppetÑ horsemenÓs association. The term ÐhorsemenÓs

associationÑ is undefined in statute. The DivisionÓs position

is that if it has on file a facially valid and binding

horsemenÓs agreement, the Division lacks any statutory ground

not to issue the l icense.

50. Both Dr. Fisch and William White, the president of the

Florida HorsemenÓs Benevolent and Protective Association, Inc.

(ÐFHBPAÑ)(a thoroughbred horsemenÓs association recognized in

the slot machine statute, see § 551.104(10)(a), Fla. Stat.),

re peatedly referred to the need for ÐlegitimateÑ horsemenÓs

associations in the pari - mutuel industry. Mr. White defined a

ÐlegitimateÑ horsemenÓs association as one that Ðcan prove itÓs

the majority.Ñ This statement led to the following colloquy

with coun sel for the Division, illustrating the difficulty of

proving who is ÐlegitimateÑ:

Q. Okay. What about a situation like

Dr. Fisch described, where not every member

has cards?

A. If you get proved as the majority, you

wouldn't have to have everyone have the

card.

Q. How is that?

A. Well, if you have 1,000 members and you

have 600 cards, you're the majority.

Q. Okay. But how do I know -- if you only

have 600 cards, how do I know you've got

1,000 members?

A. Well, in our particular case, our

member ship is anyone who has an owners or

trainers license.

Q. Sure.

A. So if I have cards that are more than

half of that number, then I've proven to you

that we're the majority.

Q. You understand we're not talking about

your organization, though, right?

A. Yes.

Q. So talking about the quarter horse

association, who, all members we've heard,

do not have cards, how are we to know how

many members they have?

A. Well, how much time did you put into it

to find out the answer to that question?

Q. I thin k you misunderstand. You need to

answer the question, not ask me questions.

A. I cannot answer it because I do not know

your effort that you put into it.

Q. I'm asking how could we.

A. Get on the phone and write some letters.

Send some investigators out there, do some

work.

Q. To people who don't have cards?

A. To get a pulse on what's going on out

there.

Q. Okay. And how would you suggest we get

said pulse?

A. It's -- I'll give you the answer you guys

usually give me.

Q. Okay.

A. It's not my job to tell you what to do.

51. The FQHRA insists that the Division has a duty to

investigate the organization and membership of a horsemenÓs

association prior to issuing a license based on an agreement

between the association and a permitholder , and that its failure

to do so in this instance constitutes a change in policy. This

insistence is based on the FQHRAÓs reading of In re: Petition

for Declaratory Statement of Florida HorsemenÓs Benevolent &

Protective Association, Inc. , Case No. DS 99 - 025 (Ma r . 22,

2000), issued by the Division in response to a request by the

FHBPA, which sought a declaratory statement on how the Division

Ðdetermines how a horsemenÓs group, such as Petitioner, is Òthe

horsemenÓs group representing a majority of thoroughbred ra ce

horse owners and trainers in this stateÓ within the meaning of

S ection 550.3551(6)(a), Florida Statutes.Ñ

52. The FQHRA asserts that the declaratory statement

Ðdeclared that a new horsemenÓs association seeking to represent

the majority of the horsemen at a facility to replace an

existing representative group must demonstrate support through

the presentation of membership cards evidencing that the new

group actually represents the majority of the horsemen.Ñ

However, it is clear from the language of the declaratory

statement that the Division was not declaring a general intent

or duty on its part to investigate a new horsemenÓs association

prior to issuance of a license, or stating a specific

requirement that membership cards be presented as proof.

Rath er, the Division was placing the onus on the permitholder to

ensure that the horsemenÓs group represents a majority of

licensees:

9. Recognizing that the state may impose

penalties against the permitholder for

violations of section 550.3551, Florida

Statu tes, the permitholder should make every

reasonable means [sic] to verify that the

horsemenÓs group represents the majority of

licensees. [4/] It is a reasonable summation

that to determine which (if more than one

horsemenÓs group representing thoroughbred

horserace owners and trainers exist) of the

horsemenÓs groups represent the majority of

the thoroughbred horserace owners and

trainers, one must examine the membership

roster of each association. Signed

enrollment cards should substantiate

membership rost ers. The permitholder should

also receive confirmation that the

membership roster is comprised of licensed

thoroughbred racehorse owners or trainers

maintaining a ÐcurrentÑ status in contrast

to an ÐexpiredÑ status. The membership

roster must then be com pared to the total

number of licensed thoroughbred racehorse

owners and trainers in the state on that

race day.

10. While section 550.2614(2), Florida

Statutes, may have provided a mandatory

verification process for the horsemenÓs

association to certify that it represented a

majority of the owners and trainers of

thoroughbred horses in the state, the Court

in Florida Horsemen Benevolent & Protective

Association v. Rudder , 738 So. 2d 449 (Fla.

1st DCA 1999) , ruled all of section

550.2614, Florida Statutes,

unconstitutional.

11. Nevertheless, said ruling does not

prohibit the permitholder from seeking

verification, independently from the

statute, from the horsemenÓs groups. Such

verification may be accomplished by several

means, one [of] which may include state

verification of the number of current

licensed thoroughbred racehorse owners and

trainers, supplemented by an affidavit by

the horsemenÓs association that it

represents a majority of those licensees. [5/]

12. The Division believes that the

methodol ogy outlined above is consistent

with the legislative intent that the

permitholder seek approval of the majority

represented for holding less than eight live

races on any race day.

53. The DivisionÓs actions in the instant case were not

inconsistent wi th the declaratory statement as to the nature of

the horsemenÓs association. In the instant case, Hialeah

submitted a horsemenÓs agreement that on its face appeared to be

valid and binding. The Division accepted HialeahÓs implicit

representation that it had used all reasonable means to verify

that the SFQHA represented (or would represent, at the time the

new agreement took effect) a majority of the quarter horse

owners and trainers at Hialeah Park. At the hearing, the

Division stated that HialeahÓs repr esentations could not be

verified until the race meet begins. If events prove that the

SFQHA does not represent a majority of the owners and trainers

at Hialeah Park, then Hialeah will be subject to the

disciplinary measures set forth in sections 551.014( 10)(b) and

849.086(14). In the declaratory statement and in the instant

case, the Division was consistent in claiming no duty or

authority to investigate or take action against the permitholder

prior to issuance of a license.

54. The FQHRA also contends that the DivisionÓs allowance

of amendments to HialeahÓs application after February 28

constituted an unadopted rule. The Division counters that the

filing of the SFQHA Agreement on March 14, 2016, was not an

amendment of HialeahÓs application. Consisten t with its

position that the statute requires only that an agreement must

be on file with the Division at the time an application is

filed, and with the fact that the application form completed by

the permitholder makes no reference to a horsemenÓs agreeme nt,

the Division states that the agreement itself is not a part of

the application. So far as this goes, the DivisionÓs view is

consistent with the statutes, none of which impose any deadline

on the filing of a new horsemenÓs agreement to take effect upon

the expiration of the horsemenÓs agreement already on file with

the Division.

55. However, the statutes in fact contemplate two

agreements between the permitholder and a horsemenÓs

association. First, there is the mandatory Ðbinding written

agreementÑ r egarding distribution of purses, for which the

statutes provide no filing deadline. Second, there is the

permissive agreement between the permitholder and the horsemenÓs

association regarding a reduction in the Ðfull schedule of live

racingÑ as defined by section 550.002(11). If the facility

intends to run the full schedule of 40 racing performances,

there is no need to file this agreement. 6/ However, this second

agreement does have a statutory deadline: it must be Ðfiled

with the division along with [t he permitholderÓs] annual date

application.Ñ This agreement is, in effect, part of the

application if the permitholder is seeking approval of a reduced

schedule for purposes of the cardroom and slot machine licensing

requirements.

56. The Division neg lected to account for this deadline in

concluding that Hialeah did not amend its application after

February 28. HialeahÓs initial race dates and cardroom license

application, filed December 23, 2015, requested a full schedule

of 40 performances. HialeahÓ s amended application, dated

February 26, 2016, requested 36 performances, fewer than the

statutory Ðfull scheduleÑ of 40. As of the application

amendment deadline of February 28, 2016, Hialeah had not filed

an agreement with any horsemenÓs association fo r an Ðalternative

scheduleÑ reducing the statutory number of performances.

Hialeah made such a filing only on March 15, 2016, when it

submitted the SFQHA Agreement, which purported to Ðauthorize

Hialeah to operate 36 performances during the Race MeetÑ and

generally consent to HialeahÓs Ðmanagerial prerogativeÑ in

determining the number of racing dates. The DivisionÓs approval

of HialeahÓs reduced operating schedule could only have been

premised upon the SFQHA Agreement, which was not filed Ðalong

with . . . the annual date application , Ñ even though in this

respect it was part of the application.

57. For purposes of the cardroom and slot machine license

statutes, it is immaterial when the purse agreement has been

filed so long as there is a valid agreement on file at the time

the license is issued. Mr. Zachem accurately stated that the

D ivision has no way of knowing whether the SFQHA is the majority

horsemenÓs association at Hialeah Park until the 2016 - 2017 race

meet commences. The Division accepted the S FQHA Agreement on

the premise that the SFQHA would represent, at the time of the

race meet, a majority of the quarter horse owners and trainers

at Hialeah Park, and that Hialeah would be subject to discipline

against its license should that not come to pas s. As to the

purse agreement, the DivisionÓs actions did not constitute an

unadopted rule but a straightforward application of statutory

language.

58. However, the timing of the filing of the alternative

schedule agreement is decisive. The deadline for filing the

racing dates application was February 28, 2016. As of that

date, the Division did know which horsemenÓs association

represented a majority of the owners and trainers at Hialeah

Park because the 2015 - 2016 racing meet did not conclude until

the f ollowing day, February 29, 2016. As of the filing

deadline, the FQHRA was indisputably the majority horsemenÓs

association. As of the filing deadline, the SFQHA did not

exist, even on paper. As of the filing deadline, no alternative

schedule agreement h ad been filed with the Division. 7/

59. Therefore, the DivisionÓs action in approving

HialeahÓs operating dates and cardroom licenses constituted

either a waiver of the statutory deadline of February 28 for the

filing of application amendments, or a waiv er of the statutory

requirement that a permitholder file an alternative schedule

agreement in order to receive a license to run fewer than

40 live regular wagering performances. Such a waiver would

perforce be generally applicable to any similarly situate d

applicant. The DivisionÓs action in this respect constitutes an

unadopted rule.

CONCLUSIONS OF LAW

60. The Division of Administrative Hearings has

jurisdiction over the parties and the subject matter of this

proceeding pursuant to sections 120.56(4), 1 20.569, and

120.57(1), Florida Statutes.

61. The Division is an ÐagencyÑ within the meaning of

section 120.52(1). The DivisionÓs statutory powers include

rulemaking pursuant to sections 550.0251(3) and 550.3511(10).

62. Section 120.52(16) defines a Ðru leÑ as:

[E] ach agency statement of general

applicability that implements, interprets,

or prescribes law or policy or describes the

procedure or practice requirements of any

agency and includes any form which imposes

any requirement or solicits any informa tion

not specifically required by statute or by

an existing rule.

63. An "unadopted rule" is defined as an agency statement

that meets the definition of the term rule, but that has not

been adopted pursuant to the re quirements of section 120.54.

§ 120.5 2(20), Fla. Stat.

64. Section 120.54(1) provides:

(1)(a) Rulemaking is not a matter of agency

discretion. Each agency statement defined

as a rule by s. 120.52 shall be adopted by

the rulemaking procedure provided by this

section as soon as feasible and practicable.

65. The Ðflush leftÑ language of section 120.52(8),

defining Ðinvalid exercise of legislative authority,Ñ provides:

A grant of rulemaking authority is necessary

but not sufficient to allow an agency to

adopt a rule; a specific law to be

impl emented 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 th e

enabling legislation and is not arbitrary

and capricious or is within the agencyÓs

class of powers and duties, nor shall an

agency have the authority to implement

statutory provisions setting forth general

legislative intent or policy. Statutory

languag e 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.

66. Section 120.56(4) provides a remedy for persons who

are substantially affected by an unadopted rule:

(a) Any person substantially affected by an

agency statement that is an unadopted rule

may seek an administrative determination

that the statement violates s. 120.54(1)(a).

The petition shall include the text of the

statement or a description of the statemen t

and shall state facts sufficient to show

that the statement constitutes an unadopted

rule.

* * *

(e) If an administrative law judge enters a

final order that all or part of an unadopted

rule violates s. 120.54(1)(a), the agency

must immediately discon tinue all reliance

upon the unadopted rule or any substantially

similar statement as a basis for agency

action.

67. The FQHRA has standing for purposes of challenging an

unadopted rule pursuant to section 120.56(4), in that a

substantial number of its me mbers would be substantially

affected by the DivisionÓs regulatory actions. NAACP, Inc. v.

Fla. Bd. of Regents , 863 So. 2d 294 (Fla. 2003); Rozenzweig v.

DepÓt of Transp. , 979 So. 2d 1050, 1053 - 54 (Fla. 1st DCA 2008).

The FQHRA, which is named specifical ly in the statutes at issue

in this proceeding, would itself be substantially affected by

the DivisionÓs decisions regarding horsemenÓs agreements

generally and the DivisionÓs specific decision to approve

HialeahÓs license under the conditions described in the above

Findings of Fact.

68. An administrative agency is required to promulgate

rules as to "those statements which are intended by their own

effect to create rights or to require compliance, or otherwise

to have the direct and consistent effect of law." Coventry

First, LLC v. Off. of Ins. Reg. , 38 So. 3d 200, 203 (Fla. 1st

DCA 2010), quoting Ag. for Health Care Admin. v. Custom

Mobility , 995 So. 2d 984, 986 (Fla. 1st DCA 2008).

69. An agency statement need not be reduced to writing in

order to me et the definition of a rule, and an agency cannot

avoid the rulemaking requirement by refraining from

memorializing the agency statement in written terms. Dep't of

High. Saf. & Motor Veh. v. Schluter 705 So. 2d 81, 84 (Fla. 1st

DCA 1997).

70. The focus in determining whether an agency statement

is a rule within the meaning of section 120.52(16) is on the

effect of the statement rather than the agencyÓs

characterization of it. Dep't of Rev. v. Vanjaria Enter., Inc. ,

675 So. 2d 252, 255 (Fla. 5th DCA 199 6); Balsam v. Dep't of HRS ,

452 So. 2d 976, 977 (Fla. 1st DCA 1984); Amos v. Dep't of HRS ,

444 So. 2d 43, 46 - 47 (Fla. 1st DCA 1983); State Dep't of Admin.

v. Harvey , 356 So. 2d 323, 325 (Fla. 1st DCA 1977).

71. An agency's interpretation of a statute is a rule if

it gives the statute a meaning not readily apparent from a

literal reading, or if it purports to create rights, require

compliance, or otherwise has the direct and consistent effect of

law. Beverly Enterprises - Florida, Inc. v. Dep't of HRS , 573 So.

2d 19, 22 - 23 (Fla. 1st DCA 1990), quoting St. Francis Hosp.,

Inc. v. Dep't of HRS , 553 So. 2d 1351, 1354 (Fla. 1st DCA 1989).

72. Florida administrative law does not allow an agency to

establish new policy by stealth, through the issuance of

licenses. A policy having the force and effect of law must be

formally adopted through the rulemaking process. Fla . Quarter

Horse Trac k AssÓn v. DepÓt of Bus. & ProfÓl Reg. , 133 So. 3d

1118, 1119 - 20 (Fla 1st DCA 2014). However,

an agency interpretation of a stat ute which

simply reiterates the legislatureÓs

statutory mandate and does not place upon

the statute an interpretation that is not

readily apparent from its literal reading,

nor in and of itself purport to create

certain rights, or require compliance, or to

otherwise have the direct and consistent

effect of the law, is not an unpromulgated

rule, and actions based upon such an

interpretation are permissible without

requiring an agency to go through

rulemaking.

State Bd. of Admin. v. Huberty , 46 So. 3d 1144, 1147 (Fla. 1st

DCA 2014), quoting St. Francis Hosp., Inc. v. DepÓt of HRS , 553

So. 2d 1351, 1354 (Fla. 1st DCA 1989).

73. Sections 551.104(10)(a)2., and 849.086(13)(d)3. set

forth a condition al precedent to the issuance of slot machine

gaming and cardroom licenses to permitholders. Both statutes

require a quarter horse permitholder that wishes to apply for a

slot machine or cardroom license to have Ðon file with the

division a binding written agreement between the applicant and

the [FQHRA] or the associat ion representing a majority of the

horse owners and trainers at the applicant's eligible facility,

governing the payment of purses on live quarter horse races

conducted at the licensee's pari - mutuel facility.Ñ

74. Section 551.104(10)(b) requires the Divis ion to

suspend a slot machine license if the horsemenÓs agreement is

terminated or otherwise ceases to operate, or if the Division

determines that the licensee is materially failing to comply

with the terms of the horsemenÓs agreement. Section 849.086

doe s not contain similar language.

75. The FQHRA has alleged that the DivisionÓs issuance of

licenses to Hialeah is based on unadopted rules in two respects.

First, the DivisionÓs acceptance of the SFQHA as a horsemenÓs

association will have the effect of c eding control to

permitholders to control racing dates and purse decisions

without negotiating with a truly independent horsemenÓs

association. Ultimately, such unilateral control will

accomplish a ÐdecouplingÑ of slot machine and cardroom

operations from the promotion of horse racing and breeding in

the state of Florida, in contravention of the LegislatureÓs

intent when it expanded gambling operations in the state.

76. Second, the DivisionÓs grant of a license to Hialeah

announced a new, unpromulgated po licy of allowing amendments to

license applications after February 28 or, alternatively, a new,

unpromulgated policy of waiving the requirement that a

permitholder file an alternative schedule agreement in order to

receive a license to operate for fewer th an 40 live regular

wagering performances.

77. As to the FQHRAÓs first policy - oriented allegation, it

is concluded that the Division has not acted pursuant to an

unadopted rule. Sections 551.014(10)(a)2. and 849.086(13)(d)3.

employ identical phrasing: th e applicant must have Ðon file

with the division a binding written agreement between the

applicant and the [FQHRA] or the association representing a

majority of the horse owners and trainers at the applicantÓs

eligible facility, governing the payment of pu rses on live

quarter horse races conducted at the licenseeÓs pari - mutuel

facility.Ñ The statutes do not define ÐassociationÑ or

ÐhorsemenÓs associationÑ and contain no limiting language such

as Ð independent horsemenÓs association.Ñ

78. The Division did not dispute the FQHRAÓs arguments

regarding the policy ramifications of allowing the newly - formed

and dubiously independent SFQHA to enter into a purse agreement

with Hialeah. The Division did convincingly point out that the

statutes give it no authority to Ðpre - qualifyÑ a horsemenÓs

association for purposes of the purse agreements. The

DivisionÓs literal reading of sections 551.014(10)(a)2. and

849.086(13)(d)3. is persuasive. The ÐshamÑ identity or

ÐcaptiveÑ nature of the horsemenÓs association is not a ground

for denial of a license, provided the Division has on file a

binding purse agreement as of the date the license is issued.

The FQHRA Agreement satisfied the purse agreement requirement

for purposes of sections 551.014(10)(a)2. and 849.086(13)(d)3 .

In this respect, the Division acted according to the plain

language of the statutes and not pursuant to an unadopted rule.

79. As to the FQHRAÓs second, more technical allegation,

it is concluded that the Division has acted pursuant to an

unadopted rule. The fact that a binding written purse agreement

was on file did not satisfy the definitional requirement of

section 550.002(11) regarding an alternative schedule agreement.

HialeahÓs amended application, filed on February 26, 2016,

requested a lice nse for 36 live regular wagering performances.

In order to receive a license for fewer than 40 live regular

racing performances, Hialeah was required to file, Ðalong with

its annual date application,Ñ an agreement for an alternative

schedule between Hiale ah and Ðeither the [FQHRA] or the

horsemenÓs association representing the majority of the quarter

horse owners and trainers at the facility.Ñ

80. As of the February 28 deadline for submitting

amendments to HialeahÓs racing dates application, the SFQHA did

not exist. The only entity that conceivably could have entered

into an alternative schedule agr eement with Hialeah on

February 28, 2016, was the FQHRA.

81. The DivisionÓs approval of HialeahÓs reduced operating

schedule was based either on the SFQHA Agreement, which was not

filed until March 14, 2016, well after the statutory deadline

for submitting amendments to a racing dates application, or on

thin air. Therefore, the DivisionÓs action in approving

HialeahÓs operating dates and cardroom licenses constituted

either a waiver of the statutory deadline of February 28 for the

filing of application amendments, or a waiver of the statutory

requirement that a permitholder file an alternative schedule

agreement in order to receive a license to run fewer th an

40 live regular wagering performances. There is no other way to

rationalize the DivisionÓs action. 8/

82. The DivisionÓs action in waiving clear statutory

racing dates application requirements for Hialeah constitutes an

Ðagency statement of general app licability that implements,

interprets, or prescribes law or policy.Ñ Without question, a

deviation from clear statutory language gives the statute a

meaning not readily apparent from a literal reading. It is

certainly a statement purporting by its own e ffect to create

rights.

83. It could be objected that, as a creature of statute

itself, the Division obviously lacks the authority to waive the

clear requirements of sections 550.102(11) and/or 550.01215(1).

Such an objection would misconstrue the nature of this

proceeding. In Fl orid a Quarter Horse Racing Ass ociation v.

Dep ar t ment of Bus iness & Prof essional Reg ulation , DOAH Case

No. 11 - 5796RU (Final Order May 6, 2013), affÓd 133 So. 2d 1118

(Fla. 1st DCA 2014), Administrative Law Judge John Van Laningham

succinctly disposed of a similar objection as follows, in

endnote 16:

The Division argues that because (in the

Division's view) it has no authority to

promulgate a rule defining "horse race" and

its variants, the Division is legally

incapable of formulati ng an unadopted rule

expressing such a definition, which makes

the Divisio n immune from liability under

§ 120.56(4). This contention is rejected.

An agency's duty to adopt a particular

statement is wholly independent of the

agency's authority to make tha t statement a

formal rule. Thus, if an agency produces a

statement which is a rule by definition,

then the agency must adopt that statement as

a rule or risk the consequences of being

found in violation of § 120.54(1)(a). If

the agency lacks the authorit y to adopt such

statement as a rule, then the statement is

doubly unlawful, first as an unadopted rule

and second as an invalid exercise of

delegated legislative authority. In a

§ 120.56(4) proceeding, however, the central

issue is whether the challenged statement is

an unadopted rule; its substantive validity

is irrelevant for the moment, a matter to be

determined in a future rule challenge, after

the agency has initiated or completed

rulemaking. The Division's position, if

accepted, would allow an agenc y, with

impunity, to formulate and apply a statement

of general applicability having the effect

of law as to a subject for which the

legislature has not delegated such authority

to the agency; that would be a perversion of

§ 120.54(1)(a), not to mention th e

democratic process.

84. The Division presented no case - in - chief and made no

showing to overcome the presumption that rulemaking is feasible

and practicable as to the unadopted rule waiving the clear

requirements of sections 550. 102(11) and/or 550.01215 (1).

§ 120.56(4)(c), Fla. Stat. The FQHRA proved by a preponderance

of the evidence that the Division failed to adopt , as a rule ,

its generally applicable policy of waiving the statutory

February 28 deadline for submission of application amendments

and/o r its generally applicable policy of waiving the statutory

requirement that an alternative schedule agreement be filed

along with the quarter horse race dates application when the

applicant seeks a license for fewer than 40 live regular

wagering performanc es. In no other respect did the FQHRA prove

that the DivisionÓs issuance of licenses to Hialeah was based on

an unadopted rule.

ORDER

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is

ORDERED that the policy of the Division purs uant to which

an applicant for a license to conduct fewer than 40 live regular

quarter horse racing wagering performances for the next state

fiscal year may be granted such license, as well as subsidiary

slot machine and cardroom licenses, despite its fail ure to

submit a completed application within the statutory timeframe

and/or despite its failure to submit an alternative schedule

agreement with the Florida Quarter Horse Racing Association or

the horsemenÓs association representing the majority of the

qua rter horse owners and trainers at the facility, is an

unadopted rule that violates section 120.54(1)(a), Florida

Statutes.

Jurisdiction is retained to conduct further proceedings as

necessary to award attorney's fees and costs pursuant to section

120.595(4 ). It is therefore further ORDERED that Petitioner

shall have 30 days from the date of this Final Order within

which to file a motion for attorney's fees and costs, to which

motion (if filed) Petitioners shall attach appropriate

affidavits (e.g., attestin g to the reasonableness of the fees)

and essential documentation in support of the claim, such as

time sheets, bills, and receipts.

DONE AND ORDERED this 1st day of February , 2017 , in

Tallahassee, Leon County, Florida.

S

LAWRENCE P. STEVENSON

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

Divisi on of Administrative Hearings

this 1st day of February , 2017 .

ENDNOTE S

1/ Paragraphs 6 through 17 of Florida Quarter Horse Racing

Ass ociation v. Dep artment of Bus iness & Prof essional Reg ulation ,

DOAH Case No. 11 - 5796RU (Final Order May 6, 2013), affÓd 133 So.

2d 1118 (Fla. 1st DCA 2014), provide an excellent primer on

Florida pari - mutuel wagering in general , and quarter horse

racing in particular.

2/ HorsemenÓs agreements are often referred to as Ðpurse

agreements,Ñ though they may cover topics beyond the

distribution of purses. See Finding of Fact 55, infra ,

regarding the fact that there are two statutory requirements:

one for a purse agreement between the permitholder and a

horsemenÓs group in order to operate slot machines and

cardrooms, and one f or an agreement between the permitholder and

the horsemenÓs group agreeing to reduced racing dates, if the

permitholder intends to run less than a full schedule of live

performances. The statutes do not necessarily require that

these agreements be found i n a single document, though such has

been the practice up to now.

3/ The undersignedÓs emphasis on the statutory option provided a

quarter horse permitholder is partly rooted in the fact that the

slot machine statute gives no such choice to a thoroughbr ed

permitholder, whose only option is to execute a binding written

purse agreement with the F lorida HorsemenÓs Benevolent and

Protective Association, Inc . §§ 551.104(10)(a), Fla. Stat. The

cardroom statute does not require a thoroughbred permitholder to

file a purse agreement; rather, it requires a thoroughbred or

harness racing permitholder to distribute half of its monthly

cardroom proceeds to supplement purses and breedersÓ awards. £

849.086(13)(d)2., Fla. Stat.

4/ The referenced statute, section 55 0.3551, sets forth the

standards under which a licensed horse track, dog track, or jai

alai fronton may transmit broadcasts of its races or games to

locations outside of Florida. At the time of the declaratory

statement, subsection (6)(a) required a thoro ughbred

permitholder to conduct at least eight live races on a race day ,

unless it had written approval from the Florida Thoroughbred

BreedersÓ Association and the ÐhorsemenÓs group representing the

majority of thoroughbred racehorse owners and trainers in this

state.Ñ

The FHBPA did not receive its statutory designation as the

ÐdefaultÑ horsemenÓs group until later in 2000. See § 27,

ch. 2000 - 354, Laws of Florida, effective July 1, 2000. It

should be noted that the current language of section

550.3551( 6)(a) requires the written approval of the FHBPA

Ðunless it is determined by the department that another entity

represents a majority of the thoroughbred racehorse owners and

trainers in the state.Ñ The quote indicates that the

Legislature is well able, i n plain language, to require the

Division to determine the majority representation of a

horsemenÓs association, and underscores the fact that it chose

not to do so in the slot machine and cardroom statutes.

5/ Regardless of legal requirements, this means of verification

would be unavailable to Hialeah in the instant case as a

practical matter. As noted in endnote 3 above, the declaratory

statement was discussing an agreement between a facility and a

statewide horsemenÓs group. The DivisionÓs occupationa l license

filings would readily yield the number of owners and trainers in

the entire state. The Division has no readily discoverable file

of the number of current and licensed quarter horse owners and

trainers at Hialeah Park .

6/ The fact that the pa rties to the FQHRA Agreement and the

SFQHA Agreement have in practice chosen to roll the two

agreements into one ÐhorsemenÓs agreementÑ has no bearing on the

statutory scheme under discussion.

7/ It could be argued that even if the SFQHA Agreement had bee n

timely filed, it would not have satisfied the requirement of

section 550.002(11) , that the alternative schedule agreement

include either the FQHRA or the horsemenÓs association

representing the majority of the owners and trainers, because as

of February 28, 2016, only the FQHRA satisfied either of those

criteria.

8/ There is, of course, an argument that the DivisionÓs action

was simply a mistake. Ms. Pouncey was not trained to connect

the requested reduction in racing dates with the alternative

schedul e agreement requirement, and neither Mr. Zachem nor any

other Division employee caught the error before the license was

issued. However, the fact that the sole Division employee

charged with reviewing applications did not know the statutory

requirements f or a reduced racing dates license, coupled with

the DivisionÓs institutional insistence that the licenses were

issued in accordance with the law, support the conclusion that

this was a policy decision rather than a single employeeÓs

mistake.

COPIES FURN ISHED:

Jason L. Maine, General Counsel

Department of Business and

Professional Regulation

2601 Blair Stone Road

Tallahassee, Florida 32399 - 2202

(eServed)

J. Stephen Menton, Esquire

Tana D. Storey, Esquire

Gabriel F.V. Warren, Esquire

Rutledge Ecenia, P.A.

Suite 202

119 South Monroe Street

Tallahassee, Florida 32301

(eServed)

Caitlin R. Mawn, Esquire

Department of Business and

Professional Regulation

2601 Blair Stone Road

Tallahassee, Florida 32399 - 2202

(eServed)

William D. Hall, Esquire

Departmen t of Business and

Professional Regulation

2601 Blair Stone Road

Tallahassee, Florida 32399 - 2202

(eServed)

Jonathan Zachem, Director

Division of Pari - Mutuel Wagering

Department of Business and

Professional Regulation

2601 Blair Stone Road

Tallahasse e, Florida 32399 - 2202

(eServed)

Matilde Miller, Interim Secretary

Department of Business and

Professional Regulation

Capital Commerce Center

2601 Blair Stone Road

Tallahassee, Florida 32399 - 2202

(eServed)

Ken Plante, Coordinator

Joint Administrative Procedures Committee

Room 680, Pepper Building

111 West Madison Street

Tallahassee, Florida 32399 - 1400

(eServed)

Ernest Reddick, Chief

Alexandra Nan

Department of State

R. A. Gray Building

500 South Bronough Street

Tallahassee, Florida 32399 - 0250

(eSer ved)

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 Procedu re. Such proceedings are commenced by

filing the original notice of administrative appeal with the

agency clerk of the Division of Administrative Hearings within

30 days of rendition of the ord er 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 pro vided by law.