96-003860RP West Flagler Associates, Ltd., D/B/A Flagler Greyhound Track; Hartman Tyner, Inc., D/B/A Hollywood Greyhound Track; St. Petersburg Kennel Club, D/B/A Derby Lane; And Daytona Beach Kennel Club, Inc., D/B/A Daytona Beach Kennel Club vs. Department Of Business And Professional Regulation, Division Of Pari-Mutuel Wagering Status: Closed DOAH Final Order on Monday, September 29, 1997.

Summary: Petitioners rules for implementation of cardroom regulation exceed Agency's statutory authority, with minor exceptions.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

WEST FLAGLER ASSOCIATES, LTD., )

d/b/a FLAGLER GREYHOUND TRACK, )

HARTMAN TYNER, INC. d/b/a HOLLYWOOD )

GREYHOUND TRACK, ST. PETERSBURG )

KENNEL CLUB d/b/a DERBY LANE )

and DAYTONA BEACH KENNEL CLUB, INC. )

d/b/a DAYTONA BEACH KENNEL CLUB, )

)

Petitioners, )

)

vs. ) CASE NO. 96-3860RP

)

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF PARI-MUTUEL WAGERING, )

)

Respondent. )

_______________________________________)

PPI, INC., d/b/a POMPANO PARK, )

)

Petitioner, )

)

vs. ) CASE NO. 96-4093RP

)

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 on September 18,

1996, in Tallahassee, Florida, before the Division of Administrative Hearings,

by its designated Administrative Law Judge, Don W. Davis.

APPEARANCES

For Petitioners: Gary R. Rutledge, Esquire

Harold F. X. Purnell, Esquire

Rutledge, Ecenia, Underwood,

Purnell and Hoffman, P.A.

Post Office Box 551

Tallahassee, Florida 32302-0551

Allan B. Koslow, Esquire

Becker and Polikoff, P.A.

311 Stirling Road

Fort Lauderdale, Florida 33312

For Respondent: Alexander Twedt, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

James J. Rimes, III, Esquire

Lee Ann Gustafson, Esquire

Office of the Attorney General

Ervin Building, Suite 308-A

2020 Capital Circle, Southeast

Tallahassee, Florida 32399-1050

STATEMENT OF ISSUE

Whether proposed rules 61D-11.001(6), (7), (10), (12), (14) and (17); 61D-

11.005(9), (10) and (11); 61D-11.007(1), (2) and (8); 61D-11.008(2), (5), and

(7); 61D-11.009(2); 61D-11.012(5); 61D-11.017(4); and BPR Forms 16-002, 16-004,

16-005, and 16-007 constitute invalid delegations of legislative authority.

PRELIMINARY STATEMENT

This matter began when Petitioners challenged, pursuant to Section 120.54,

Florida Statutes, the validity of certain proposed rules noticed by the Division

of Pari-mutuel Wagering (Respondent) on August 9, 1996 in Volume 22, Number 32,

Florida Administrative Weekly. The rules proposed by Respondent resulted from

legislative enactment of Chapter 96-364, Laws of Florida, authorizing the

operation of commercial cardrooms by pari-mutuel permitholders.

On August 20, 1996, Petitioners West Flagler Associates, Ltd., d/b/a

Flagler Greyhound Track; Hartman Tyner, Inc., d/b/a Hollywood Greyhound Track;

St. Petersburg Kennel Club, Inc., d/b/a Derby Lane; and Daytona Beach Kennel

Club, Inc., d/b/a Daytona Beach Kennel Club filed a Petition For Administrative

Determination Of The Invalidity Of Proposed Rules in Division of Administrative

Hearings Case No. 96-3860RP.

On August 29, 1996, Petitioner PPI, Inc., d/b/a Pompano Park Racing, filed

a Petition For Administrative Determination Of The Invalidity Of Proposed Rules

in Division of Administrative Hearings Case No. 96-4093RP.

Both cases were consolidated and scheduled for final hearing on September

18, 1996.

At the final hearing, Petitioners presented the testimony of three

witnesses and 21 exhibits of which 19 were admitted into evidence. Respondent

presented testimony of one witness and requested official recognition of tapes

and transcripts of the Florida House of Representatives; namely, the April 15,

1996 meeting of the Committee on Finance and Taxation, Subcommittee on Sales Tax

regarding House Bill 1141, tape and transcript of the full committee meeting of

the Committee on Regulated Industries on March 13, 1996, and staff analysis of

House Bill 337. Respondent's request for official recognition of these

documents is granted.

A transcript of the final hearing was filed with the Division of

Administrative Hearings on September 23, 1996. Proposed final orders submitted

by the parties have been reviewed and utilized in the preparation of this final

order.

FINDINGS OF FACT

1. The 1996 session of the legislature enacted Chapter 96-364, Laws of

Florida, 1996, which created, effective January 1, 1997, Section 849.086,

Florida Statutes. Section 849.086, Florida Statutes, authorizes pari-mutuel

permitholders which meet certain conditions to operate cardrooms on those days

when live racing is conducted at their respective pari-mutuel facilities.

2. Section 849.086(1), Florida Statutes, sets forth the legislative intent

with regard to cardroom facilities and reads as follows:

Legislative Intent.--It is the intent of the

Legislature to provide additional entertain-

ment choices for the residents of and

visitors to the state, promote tourism in

the state, and provide additional state

revenues through the authorization of the

playing of certain games in the state at

facilities known as cardrooms which are to

be located at licensed pari-mutuel facilities.

To ensure the public confidence in the

integrity of authorized cardroom operations,

this act is designed to strictly regulate the

facilities, persons, and procedures related

to cardroom operations. Furthermore, the

Legislature finds that authorized games as

herein defined are considered to be pari-

mutuel style games and not casino gaming

because the participants play against each

other instead of against the house.

3. Respondent is the agency granted regulatory authority with regard to

cardroom operation pursuant to a grant of rulemaking power set forth in Section

849.086(4)(a)-(f), Florida Statutes as created by Section 20 of Chapter 96-364,

Laws of Florida, 1996. Section 849.086(4)(a)-(f), Florida Statutes, reads as

follows:

Authority of Division. - The Division of

Pari-mutuel Wagering of the Department of

Business and Professional Regulation shall

administer this section and regulate the

operation of cardrooms under this section

and the rules adopted pursuant thereto, and

is hereby authorized to:

(a) Adopt rules, including, but not

limited to: the issuance of cardroom and

employee licenses for cardroom operations;

the operation of a cardroom; recordkeeping

and reporting requirements; and the

collection of all fees and taxes imposed by

this section.

(b) Conduct investigations and monitor

the operation of cardrooms and the playing

of authorized games therein.

(c) Review the books, accounts, and

records of any current or former cardroom

operator.

(d) Suspend or revoke any license or

permit, after hearing, for any violation

of the provisions of this section or the

administrative rules adopted pursuant

thereto.

(e) Take testimony, issue summons and

subpoenas for any witness, and issue

subpoenas duces tecum in connection with

any matter within its jurisdiction.

(f) Monitor and ensure the proper collec-

tion of taxes and fees imposed by this

section. Permitholder internal controls are

mandated to ensure no compromise of state

funds. To that end, a roaming division

auditor will monitor and verify the cash

flow and accounting of cardroom revenue for

any given operating day.

4. Respondent is also provided additional rulemaking authority with regard

to cardrooms through Section 21 of Chapter 96-364, Laws of Florida, 1996, which

amended and added subsections (12) and (13) to Section 550.0251, Florida

Statutes. Those subsections read as follows:

(12) The division shall have full authority

and power to make, adopt, amend, or repeal

rules relating to cardroom operations, to

enforce and to carry out the provisions of

s. 849.086, and to regulate the authorized

cardroom activities in the state. The

division is authorized to adopt emergency

rules prior to January 1, 1997, to implement

the provisions of s. 849.086.

* * *

(13) The division shall have the authority

to suspend a permitholder's permit or license,

if such permitholder is operating a cardroom

facility and such permitholder's cardroom

license has been suspended or revoked

pursuant to s. 849.086.

The Term "Pot"

5. Proposed rule 61D-11.001(l2) provides:

'Pot' means the total amount wagered in a

hand or round of cards which shall not

exceed $10.00 in chips or tokens.

6. Respondent asserts that statutory authority for this rule is Section

849.085(2)(a) and Section 849.086(8)(b), Florida Statutes, which read

respectively as follows:

'Penny-ante game' means a game or series

of games of poker, pinochie, bridge, rummy,

canasta, hearts, dominoes, or mah-jongg in

which the winnings of any player in a single

round, hand or game do not exceed $10 in

value.

* * *

The winnings of any player in a single round

hand or game may not exceed $10 in value.

The fee charged by the cardroom for

participation in the game shall not be

included in the calculation of the limita-

tion on the pot size provided in this

paragraph.

7. The cardroom act does not set forth a definition of the term "pot", nor

does Section 849.085(2)(a), Florida Statutes, contain a pot limit.

8. The statutory language is unambiguous: The "winnings of any player in a

single round, hand, or game may not exceed $10 in value." The limitation on

winnings is further referenced in the language of Section 849.086(8)(b), Florida

Statutes, excluding "the calculation of the limitation on the pot size" from the

$10 winnings limitation by any player.

9. Respondent acknowledges that its construction of Section 849.086(8)(b),

and Section 849.085(2)(a), Florida Statutes, requires that the term "any player"

be construed to mean "all players", contrary to the clear statutory wording.

This same agency construction, applied to Section 849.086(8)(b), Florida

Statutes, renders meaningless the term "the calculation of" the limitation on

pot size which term exists because pot size will vary, i.e. when multiple winner

card games are played.

10. The impropriety of Respondent's definition of the term pot to include

an improper limit of $10 in terms of amounts wagered is demonstrated by the game

of Hi-Lo Seven Card Stud, a form of poker set forth in Hoyle's Modern

Encyclopedia Of Cardgames in which there are two separate and distinct winners,

the high winner and the low winner. These two separate and distinct winners

each may win $10 or less, though the total pot size limit calculated in

accordance with the rules of such game may equal but not exceed $20.

Respondent's proposed rule 61D-11.002(2), which is unchallenged, authorizes

cardgames to be played in a manner set out in Hoyle's Modern Encyclopedia of

Cardgames.

11. Cardroom operators are also authorized by the cardroom act to charge a

"rake" which is defined as a set fee or percentage of the pot assessed by the

cardroom operator for providing the services of the dealer, table, or location

for playing the authorized game. Section 849.086(2)(k), Florida Statutes.

Where the cardroom operator charges a rake as a percentage of the pot, the

amount wagered in a game such as Seven Card Stud may exceed $10, as demonstrated

by Petitioners' Exhibit 1 in which such a game was conducted with the cardroom

operator charging a rake as a percentage of the pot. The amount wagered

inclusive of the rake may exceed $10, but the pot available for the winner at

the end of the game after deduction of the rake is $10.

12. As established by testimony of Petitioners' expert at the final

hearing and Petitioner's exhibit 1, dealers are trained to specifically control

the pot size through such practices as the placement of bets by players in front

of their cards. Bets are moved into the pot only by the dealers. The stacking

of chips in easily observable and countable $l stacks and in rows of 5 assists

the dealer who stops bets where, if all remaining players bet, the $10 per

player winnings limit would be exceeded. This precludes a situation from

arising in which chips not accounted for as rake or as winnings within the $10

"winnings of any player" limitation are in the pot at anytime during the game.

13. Section 849.086(8)(a), Florida Statutes, provides that the calculation

of the limitation on pot size is dependent on the "winnings of any player in a

single round, hand or game" not exceeding $10.

14. Respondent's definition of the term "pot" in proposed rule 61D-

11.001(12) as an absolute maximum amount of $l0 based on wagers, rather than a

limitation on the winnings of card games with multiple winners, or winnings of

any player in a single round, hand, or game, exclusive of the percentage rake

that may be charged, is found to be without statutory authority and is arbitrary

and capricious.

The Terms "Game", "Hand", and "Round"

15. Proposed rule 61D-11.001(6) provides:

'Game' means a card game which results in

a winner who achieves a desired result

required to win a pot not to exceed $10.00

in chips or tokens.

16. Proposed rule 61D-11.001(7) provides:

'Hand' means a single game of cards, one

deal of cards to each player based on the

rules of the game, resulting in a winner

of a pot not to exceed $10.00 in chips

or tokens.

17. Proposed rule 61D-11.001(14) provides:

'Round' means a cycle of bets made by the

players following the deal of the cards and

resulting in a player winning the pot which

shall not exceed $10 in chips or tokens.

18. Respondent includes the same $10 pot limitation in the challenged

definition of the term "game" found in proposed rule 61D-11.001(6);"hand" found

in proposed rule 61D-11.001(7); and "round" found in proposed rule 61D-

11.001(14). Upon the same findings noted above relative to the definition of

"pot", such rules are found to be in excess of Respondent's statutory authority

and are arbitrary and capricious.

19. Additionally, Section 849.086(8)(a), Florida Statutes, has defined

authorized games to mean those games "authorized by s. 849.085(2)(a)". In turn,

Section 849.085(2)(a), Florida Statutes, includes non-card games within the

definition of authorized games, i.e. dominoes and mah-jongg. Consequently,

Respondent's limitation of the term "game" to only cardgames is found to be in

excess of the statutory authorization and is arbitrary and capricious.

20. The term "round" means the cycle of bets in a single game and there

may be several cycles of bets in a single game, a fact conceded by Respondent.

This was demonstrated by Petitioners' Exhibit 1 in the playing of Seven Card

Stud - one winner. While the winner of such game received $10, the winnings

were based on several cycles of bets conducted over the course of the single

game. Respondent has artificially restricted the term "round" to a cycle of

bets following the deal of the cards with such single cycle resulting in a

player winning a pot of $10 or less. Respondent's rule definition in proposed

rule 61D-11.001(14) limits statutorily authorized activity, exceeds the

Respondent's statutory authority and is arbitrary and capricious.

The Term "Jackpot"

21. Proposed rule 61D-11.001(10)(b) defines the term "jackpot" to mean:

(a) Any amount wagered in a round, hand,

or game in excess of $10 in value paid out

to a player or players once a desired

result is achieved;

(b) Any amount wagered in a round, hand,

or game in excess of $10 in value which is

accumulated and paid out to a player or

players once a desired result is achieved; or

(c) Any prize or cash award in excess of

$10 in value paid out to a player or players

once a desired result is achieved.

22. A "jackpot" in the context of cardrooms occurs when the house deducts

from each hand played a certain amount which is accumulated over many hands and

is placed in a separate jackpot fund and paid out when there is a defined

occurrence such as a player achieving a royal flush.

23. The definition of jackpot in 61D-11.001(10)(a) is in substance and

effect the same definition as the term "pot" found in proposed rule 61D-

11.001(12). This definition would preclude the playing of the authorized game

Hi-Lo Seven Card Stud in which the winnings of two separate and distinct players

are $10 but in excess of $10 in the aggregate.

24. Proposed rule 61D-11.001(10)(a) is found, on the basis of the same

findings set forth relative to Respondent's definition of "pot" in proposed rule

61D-11.001(12), to exceed Respondent's statutory authority and to be arbitrary

and capricious.

25. The definition of jackpot set forth in proposed rule 61D-11.001(10)(b)

would preclude the playing of the authorized game of Hi-Lo Seven Card Stud where

the amount wagered is accumulated over several betting cycles prior to the

winners being declared with the amount awarded to each winning player being $10

or less but with the aggregate amount awarded to all players exceeding $10 in

value.

26. Upon the same findings set forth relative to the Division's definition

of the term "pot", proposed rule 61D-11.001(10)(b) is found to exceed

Respondent's statutory authority and is arbitrary and capricious.

27. Likewise, the definition of jackpot set forth in proposed rule 61D-

11.001(10)(c) is reasonably susceptible to an interpretation that would preclude

the playing of the authorized game of Hi-Lo Seven Card Stud in which there are

two separate and distinct winners of $10 or less but with winnings of more than

$10 in the aggregate. Again, upon the same findings set forth relative to

Respondent's definition of the term "pot", proposed rule 61D-11.001(10)(c) is in

excess of statutory authority and is arbitrary and capricious.

The Term "Tournament"

28. Proposed rule 61D-11.001(l7) provides:

'Tournament' means any competition involving

more than one round, hand, or game where the

winner of the competition or the runners-up

receive any prize or cash award in excess of

$10 in value.

29. The cardroom statute, Section 849.086(2)(a), Florida Statutes, defines

"authorized games" as those games authorized by Section 849.085(2)(a), Florida

Statutes. In turn, Section 849.085(2)(a), Florida Statutes, provides:

'Penny-ante game' means a game or series of

games of poker in which the winnings of any

player in a single round, hand or game do

not exceed $10 in value.

30. Section 849.085(2)(a), Florida Statutes, does not require that the

winnings of the player be paid at the conclusion of each single round, hand, or

game nor does it require that the player have "won" such single round, hand or

game. Further, Section 849.085(2)(a), Florida Statutes, imposes no limit on pot

size. The statute does, however, only authorize those winnings which do not

exceed $10 in value.

31. Petitioners' expert testified at final hearing to the circumstance of

a group of players that pay an entry fee, receive tournament chips, play a

specific number of hands of cards and at the end of the designated number of

hands the winner or winners who hold the most chips will receive funds which

total an amount in excess of $10 but do not exceed $10 per hand played

throughout the tournament.

32. The proposed rule and Section 849.085(2)(a), Florida Statutes, clearly

permit only $10 payments to game winners. Under the scenario to which

Petitioner's expert testified, payments are made at the conclusion of the

tournament, in amounts which exceed that authorized by the cardroom statute.

Consequently, it is found that such results provide no basis to determine that

Respondent's proposed rule 61D-11.001(17), defining the term tournament, is

invalid.

Prohibitions

33. Proposed rule 61D-11.005(9) provides:

Tournaments and jackpots are prohibited.

34. Proposed rule 61D-11.005(9) is found to be in excess of Respondent's

statutory authority and arbitrary and capricious only in regard to the

prohibition of jackpots. This finding is made on the basis of those findings

noted above relating to invalidity of the definition of "Jackpot" in proposed

rule 61D-11.001(10).

35. Proposed rule 61D-11.005(10) provides:

An accumulation of $10 values based upon the actual number or an average

number of rounds, hands, or games played during a competition where the winner

of the competition and the runners up receive the accumulated amount, a portion

thereof, or the prize representing the accumulated amount or a portion thereof

is prohibited.

36. On the basis of findings noted above relative to proposed rule 61D-

11.001(17), which defines the term "tournament", proposed rule 61D-11.005(10),

is not in excess of Respondent's statutory authority and is not arbitrary and

capricious.

37. Proposed rule 61D-11.005(11) provides:

No amount wagered by a player, ante, or

participation fee collected by the house

shall be accumulated into a pool for

purposes of paying out the accumulated

amount once a desired result is achieved

by a patron or patrons.

38. On the basis of findings previously set forth relating to proposed

rule 61D-11.001(10), the definition of "jackpot" and in particular subsection

(10)(b), the prohibition of proposed rule 61D-11.005(11) that no amount wagered

may be accumulated even within a single hand or game, is in excess of

Respondent's statutory authority and is arbitrary and capricious.

Ordinance Requirement

39. Proposed rule 61D-11.007 provides in pertinent part:

(1) A licensed pari-mutuel permitholder

desiring to operate a cardroom must submit

to the Division proof that the county

commission of the county which the permit-

holder intends to operate the cardroom has

passed an ordinance approving cardroom

operations. The proof of the passage of a

county ordinance shall consist of a copy of

the certified ordinance as filed with the

Secretary of State. The effective date of

the ordinance shall be upon filing with the

Secretary of State or later if so prescribed.

(2) If a cardroom ordinance is repealed

or amended, the effective date of the repeal

or amendment shall be upon filing with the

Secretary of State or later if so prescribed.

If the cardroom ordinance is repealed,

cardroom operation shall be ceased upon the

effective date of repeal.

* * *

(8) An applicant for an annual cardroom

license shall complete a cardroom license

application, BPR Form 16-002 . . .

40. BPR Form 16-002 is entitled Permitholder Application for Annual

License to Operate a Cardroom. Question 10 of this form provides, "If this is

your initial cardroom operator license application, enclose a copy of the

certified ordinance as filed with the Secretary of State."

41. Respondent contends that its authority to promulgate this rule is

derived from the provisions of Section 849.086(16), Florida Statutes, which

provides:

County Commission Approval -- The Division

of Pari-Mutuel Wagering shall not issue any

license under this section except upon proof

in such form as the Division may prescribe

that a majority of the county commissioners

in the county where the applicant for such

license desires to conduct cardroom gaming

has voted to approve such activity within

the county.

42. Respondent acknowledges that Section 849.086(16), Florida Statutes,

does not expressly require the adoption of an ordinance by a county commission.

43. Respondent's position is that the phrase "except upon proof in such

form as the Division may prescribe" provides the unlimited power or authority to

require the local government approval to be in a form Respondent may desire,

here the adoption of an ordinance. This is as opposed to the statutory language

which requires the applicant to report the means of local approval in a manner

(form) acceptable to Respondent.

44. In the analogous statutes governing municipalities, the factual

distinction between a resolution and an ordinance is set forth in Section

166.041(1)(a) and (b), Florida Statutes:

(a) 'Ordinance' means an official

legislative action of a governing body,

which action is a regulation of a general

and permanent nature and enforceable as a

local law.

* * *

(b) 'Resolution' means an expression of

a governing body concerning matters of

administration, an expression of a temporary

character, or a provision for the disposition

of a particular item of the administrative

business of the governing body.

45. Section 849.086(16), Florida Statutes, requires only that a majority

of the county commissioners in the county where the applicant proposes to

conduct cardroom activity vote to approve that activity within the county.

Neither Section 849.086(16), Florida Statutes, nor any other provision of the

cardroom act authorize a county commission to exercise any regulatory

jurisdiction or control enforceable as a local law over the operation of

cardrooms. This authority instead is vested in Respondent. Consequently, as a

matter of law, Respondent's authority to designate the form which approval may

take is not a grant of authority to dictate the means of passage of substantive

legislation by a county commission and the proposed rule's attempt to do so

through the requirement of ordinance passage exceeds Respondent's authority.

46. Section 125.01(1)(t), Florida Statutes, provides:

(1) The legislative and governing body

of a county shall have the power to carry

on county government. To the extent not

inconsistent with general or special law,

this power includes, but is not restricted

to, the power to:

* * *

(t) Adopt ordinances and resolutions

necessary for the exercise of its powers

and prescribe fines and penalties for the

violation of ordinances in accordance with

law.

47. The adoption of a resolution approving cardrooms by a county

commission is not, as a matter of law, inconsistent with the provisions of

Section 849.086(16), Florida Statutes.

48. Dade County adopted a resolution, by unanimous vote of all the county

commissioners, approving the conduct of cardrooms and all activities authorized

by Section 849.086, Florida Statutes, within the County. A certified copy of

this resolution was received in evidence at the final hearing. Respondent's

representative acknowledged that there is no better proof of the adoption of

such a resolution then a certified copy of the resolution. There is, as a

matter of law, no element of proof of the approval required by Section

849.086(16), Florida Statutes, that is not reflected in the Dade County

resolution approving cardrooms.

49. Proposed rule 61D-11.007(1), (2) and that portion of (8) and of BPR

Form 16-002 which seek to impose the ordinance requirement are in excess of

Respondent's statutory authority and are arbitrary and capricious.

Cardroom Business Occupational License

50. Proposed rule 61D-11.008(2) provides:

(2) A corporation, general or limited

partnership, sole proprietorship, business

trust, joint venture, or unincorporated

association, or other business entity may

not be issued or hold a cardroom business

occupational license in this state if any

one of the persons or entities specified in

paragraph (a) has been determined by the

Division not to be of good moral character,

to have filed a false report to any govern-

ment agency, pari-mutuel wagering or gaming

commission or authority, or has been

convicted of any offense specified in

paragraph (b).

(a) 1. The cardroom business occupational

license;

2. An employee of the licensee;

3. The sole proprietor operating under

the license;

4. A corporate officer or director of

the licensee;

5. A general partner of the licensee;

6. A trustee of the licensee;

7. A member of an unincorporated

association of the licensee;

8. A joint venturer of the licensee;

9. The owner of more than 5 percent of

any equity interest in the licensee, whether

as a common shareholder, general or limited

partner, voting trustee, or trust

beneficiary; or

10. An owner of any interest in the

licensee, including any immediate family

member of the owner, or holder of any debt,

mortgage, contract, or concession from the

licensee, who by virtue thereof is able to

control the business of the licensee.

(b) 1. A felony or misdemeanor involving

forgery, larceny, extortion, or conspiracy

to defraud, in this state or any other state

or under the laws of the United States.

2. A felony or misdemeanor set forth in

s. 550.105, Florida Statutes.

51. Proposed rule 61D-11.008(2) is, as Respondent's Director has

acknowledged, an almost verbatim copy of Section 550.1815(1), Florida Statutes,

which authorizes Respondent to determine whether applicants for a pari-mutuel

wagering permit are of good moral character. Pursuant to Section 849.0866(5),

Florida Statutes, only the holder of such a pari-mutuel wagering permit may be

licensed to operate a cardroom.

52. It is found, as a mixed question of law and fact, that Respondent is

authorized to seek good moral character information as part of the application

process. Specifically, Section 849.086(6)(f), Florida Statutes, incorporates

the provisions of Section 550.105(9), Florida Statutes, as follows:

(f) The division shall promulgate rules

regarding cardroom occupational licenses.

The provisions specified in s.

550.105(3),(4),(5),(6),(7) and (9) relating

to licensure shall be applicable to cardroom

occupational licenses.

Section 550.105(9), Florida Statutes, provides that Respondent may seek ". . .

any information [Respondent] determines is necessary to establish the identity

of the applicant or to establish that the applicant is of good moral character."

53. Proposed rule 61D-11.008(2) is not in excess of Respondent's statutory

authority, does not vest unbridled discretion in Respondent and is not arbitrary

and capricious.

54. Similarly, it is found as a matter of law and fact that proposed rule

61D-11.008(5) which requires an FDLE fingerprint processing and criminal records

check fee "for each person or entity as specified in paragraph (2)(a)" of the

rule is supported by Section 849.086(6)(f), Florida Statutes, which incorporates

the provisions of Section 550.105(9), Florida Statutes, and is not in excess of

the Division's statutory authority, does not vest unbridled discretion in

Respondent and is not arbitrary and capricious.

55. Proposed rule 61D-11.008(7) requires that:

An applicant for an annual cardroom business

occupational license shall complete a card-

room business occupational license

application, BPR Form 16-004, and submit the

$250.00 fee for an annual cardroom business

occupational license.

56. Proposed rule 61D-11.008(7) is supported by provisions of Section

849.086(4), and (6), Florida Statutes, which incorporates the provisions of

Section 550.105(9), Florida Statutes, and is not in excess of the Division's

statutory authority, does not vest unbridled discretion in Respondent and is not

arbitrary and capricious.

Cardroom Employee Occupational License

57. Proposed rule 61D-11.009(2) provides:

All applicants for a . . . cardroom employee

occupational license, shall complete a card-

room employee occupational application BPR

Form 16-005. . .

58. BPR Form 16-005 consists of two forms, the Cardroom Employee

Occupational License Application and the Request for Release of Information and

Authorization to Release information forms.

59. BPR Form 16-005, the Cardroom Employee Occupational License

Application in question 14 requires that the applicant provide a complete

listing of all addresses where the applicant has resided during the last five

years under penalty that the application may be denied or the license revoked

based upon any misstatements or omissions in the application.

60. As previously noted, Section 550.105(9), Florida Statutes, adopted by

Section 849.086(6)(f), Florida Statutes, authorizes Respondent to require an

applicant to provide Respondent with any information deemed necessary by

Respondent "to establish the identity of the applicant or to establish that the

applicant is of good moral character."

61. Despite Petitioners' concerns that cardroom employee occupational

license applicants are expected to be highly transient and that such individuals

should not be required to execute the proposed rule's release of information

form, proposed rule 61D-11.009(2) and the subject BPR Form 16-005 is supported

by Respondent's authority in Section 550.105(9), Florida Statutes, as adopted by

Section 849.086(6)(f), Florida Statutes, and is not in excess of statutory

authority or arbitrary and capricious.

Electronic Surveillance

62. Proposed rule 61D-11.012(5) provides:

(5) Cardroom operators shall install

electronic surveillance equipment to record

all gaming activity. The surveillance

equipment must provide a cover ratio of one

camera per four tables and to record all

activity in the cardroom bank and cage and

count area. Surveillance cameras and

monitors shall be able to record and observe

in color or black and white.

(a) Cameras must have the capability to

zoom in on specific card table(s) and record

card table activity.

(b) Tapes shall be labeled in chrono-

logical order by date and time.

(c) Tapes of surveillance records shall be

maintained for a period of no less than 14

days. Tapes shall be kept for a longer

period of time if requested by the Division

or any law enforcement agency.

63. As established by testimony of Terry Fortino, Petitioners' expert in

poker cardroom management and operations, many cardrooms, similar to the low

stakes games operations contemplated by the cardroom act, do not have cameras on

the tables for the reasons that the poker players, dealers and floor managers

police the game and the house's money is not at risk.

64. Respondent has made no cost benefit analysis regarding electronic

surveillance requirements of the proposed rule. Respondent's representative at

the final hearing has never viewed or had demonstrated a surveillance tape that

complies with the one camera per four table ratio. Under such an arrangement,

people's backs will always be to the camera and at best there will only be

limited coverage lacking in detail.

65. While the cameras must have the capabilities to zoom in on a specific

card table, the proposed rule is silent as to how such zoom capability would be

activated. The pan and tilt feature that enables the camera to zoom in on a

table is manually operated. Unless somebody is physically present to monitor a

video screen and to operate the pan and tilt controls, the zoom feature is

effectively meaningless.

66. The proposed rule's requirement of surveillance by one camera for

every four tables is stated to be for the the purpose of obtaining evidence

should Respondent desire to take licensing action against a dealer or cardroom

operator. Notably, no electronic surveillance has ever been required in the

pari-mutuel industry yet Respondent has routinely taken licensing action absent

video tapes.

67. Pursuant to Section 849.086(4)(e), Florida Statutes, Respondent is

empowered to take testimony, issue subpoenas and subpoenas duces tecum in

connection with any matter within its jurisdiction. Section 849.086(4)(f),

Florida Statutes, specifically authorizes Respondent to:

Monitor and ensure the proper collection

of taxes and fees imposed by this section.

Permitholder internal controls are mandated

to ensure no compromise of state funds. To

that end, a roaming division auditor will

monitor and verify the cash flow and

accounting of cardroom revenue for any

given operating day.

68. Section 849.086, Florida Statutes, contains no requirement that

electronic surveillance, or any other form of ongoing monitoring of the

activities of cardroom players, be provided by a cardroom operator.

69. Daniel Riley, Petitioners' expert in electronic surveillance equipment

in the gaming industry, while noting that less expensive fixed camera electronic

surveillance of the bank, count area and cages in cardrooms could prove

beneficial, projected the cost of providing only the electronic surveillance

equipment required by Respondent's proposed rule at $15,320 for four tables and

$27,820 for 20 tables.

70. Steven Hlas, Petitioner's expert in pari-mutuel facility management

and operation, testified that the cost of providing the proposed rule's required

surveillance equipment together with the necessary construction costs,

electrical and cable installations and personnel approximated $3,200 per

cardroom table seating eight players and that Petitioner Derby Lane's expected

cost with 25 cardroom tables was approximately $80,000.

71. The provisions of proposed rule 61D-11.012(5) exceed Respondent's

statutory authority, are arbitrary and capricious and impose regulatory costs on

the regulated entities which can be reduced or eliminated by the adoption of

less costly alternatives that substantially accomplish the statutory objectives,

i.e. Respondent's implementation of its statutorily prescribed auditing function

by "a roaming division auditor" to "monitor and verify the cash flow" of

cardroom revenue.

Admissions and Player Count

72. Proposed rule 61D-11.017(4) reads as follows:

Each cardroom operator shall file with the

Division admission information on BPR form

16-007. Any cardroom operator that wishes

to charge admission fees shall notify the

Division in writing at least 2 working days

prior to the effective date of such change

via facsimile.

73. Proposed rule 61D-11.018(2) reads as follows:

Every licensed cardroom operator shall file

BPR Forms . . . 16-009. . . with the Division

by the fifth day of each calendar month for

the preceding calendar month's cardroom

activity.

74. Taxes are collected with regard to cardroom wagering in two ways. Ten

percent of the cardroom operation's monthly gross income, and fifteen percent

(or 10 cents, whichever is greater) of the admission charge for entrance to the

cardroom, if any. Section 849.086(13)(a) and (b), Florida Statutes. Respondent

is required to monitor and ensure the proper collection of taxes and fees.

Section 849.086(4)(f), Florida Statutes.

75. Respondent is also called upon by the legislature to generate tax

revenue projections for the Revenue Estimating Conference and to supply

information to public officials, the industry and the general public regarding

the pari-mutuel industry. Further, Respondent will be developing a statistical

model to permit it to determine if the correct amount of taxes are being paid to

the State, as well as developing essential tax revenue projections.

76. Under the proposed rules, Respondent requires cardroom operators to

report statistics regarding the number of persons admitted to the cardroom at

each facility, and the number of persons participating in the cardroom games at

each facility.

77. Reporting of the number of persons admitted to the cardroom facility

is required, regardless of whether a cardroom operator is charging separate

admissions fees for the cardroom portion of the pari-mutuel facility, in order

to verify and corroborate the cardroom operator's figures regarding the number

of people actually gambling. Unlike pari-mutuel racing wagering which operates

with a "Totalizator" tracking every individual wager, there is no method of

recording individual wagers in the cardroom.

78. Proposed rule 61D-11.017(4) and its requirement of a filing of BPR

Form 16-007 is not in excess of Respondent's statutory authority, is not

arbitrary and capricious and does not appear to impose excessive regulatory

costs on the regulated entity.

79. Proposed rule 61D-11.018(2) requires a cardroom operator to file BPR

Form 16-009. This form in turn requires the cardroom operator to report not

just the collection of fees or rakes but also the actual number of players to

have played at each table during the period of time in which the fees or rakes

were collected.

80. Requirements of proposed rule 61D-11.018(2) and BPR Form 16-009 are

not in excess of Respondent's statutory authority, are not arbitrary and

capricious and do not appear to impose regulatory costs on the regulated entity

which could be eliminated by less costly alternatives that substantially

accomplish the statutory objective.

Stipulated Facts

81. Petitioners have standing to challenge the proposed rules at issue in

this proceeding.

CONCLUSIONS OF LAW

82. The Division of Administrative Hearings has jurisdiction over this

subject matter and the parties to this action pursuant to Section 120.57(1),

Florida Statutes.

83. Section 120.536(3), Florida Statutes, enacted by Section 9 of Chapter

96-159, Laws of Florida, provides all proposed rules filed with the Department

of State on or after October 1, 1996 must be based on rulemaking authority no

broader than permitted by such statute. This statute, in subsection (1), limits

the rulemaking authority of an agency as follows:

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, interpret,

or make specific the particular 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, 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 of an agency

shall be construed to extend no further than

the particular powers and duties conferred

by the same statute.

84. Section 120.536, Florida Statutes, is applicable to the instant matter

since the proposed agency rules will be filed with the Secretary of State after

October 1, 1996. Section 120.54(3)(e), Florida Statutes.

85. The definition of an invalid exercise of delegated legislative

authority is set forth in Section 120.52(8) which provides:

"Invalid exercise of delegated legislative

authority" means action which 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:

(a) The agency has materially failed to

follow the applicable rulemaking procedures

or requirements set forth in this chapter;

(b) The agency has exceeded its grant of

rulemaking authority, citation to which is

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

(c) The rule enlarges, modifies, or

contravenes the specific provisions of law

implemented, citation to which is required

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

(d) The rule is vague, fails to establish

adequate standards for agency decisions, or

vests unbridled discretion in the agency;

(e) The rule is arbitrary or capricious;

(f) The rule is not supported by competent

substantial evidence; or

(g) The rule imposes regulatory costs on

the regulated person, county, or city which

could be reduced by the adoption of less

costly alternatives that substantially

accomplish the statutory objectives.

86. Relative to proposed rule 61D-11.001(12), defining the term "pot" on

the basis of wagers rather than winnings, the proposed rule is found to be

without statutory authority and is arbitrary and capricious.

87. The same ten dollar wager limitation on the pot in the challenged

definition of "game" in proposed rule 61D-11.001(6); in the definition of "hand"

found in proposed rule 61D-11.001(7); and in the definition of "round" in

proposed rule 61D-11.001(14) is also found to be without statutory authority and

is arbitrary and capricious, resulting in invalidity of these proposed rules.

88. Proposed rule 61D-11.001(10)(a),(b), and (c), which seeks to restrict

the term "Jackpot" on the basic premise that a pot may not exceed ten dollars

and that wagers are restricted to that amount, is also found to be without

statutory authority and is arbitrary and capricious, resulting in invalidity of

these proposed rules.

89. Proposed rule 61D-11.005(9) is found to be partially in excess of

Respondent's authority, arbitrary and capricious, and invalid only with regard

to prohibition of jackpots.

90. Proposed rule 61D-11.005(11) that no amount wagered may be accumulated

within a hand or game is found to be in excess of Respondent's authority, and

arbitrary and capricious.

91. Proposed rule 61D-11.007(1), (2), that portion of (8), and BPR Form

16-002 which seeks to require an ordinance from a local government approving

authorized cardroom activity, as opposed to merely addressing the form of

approval, exceed Respondent's statutory authority and are considered arbitrary

and capricious.

92. Provisions of proposed rule 61D-11.012(5), requiring electronic

surveillance, are invalid since the provisions are arbitrary, capricious and

impose concomitant regulatory costs which can be reduced or eliminated by less

costly alternatives.

93. The proof presented at final hearing fails to establish invalidity of

the remainder of the challenged rules.

ORDER

Based upon the foregoing findings of fact and conclusions of law, proposed

rules 61D-11.001(6), 61D-11.001(7), 61D-11.001(10), 61D-11.001(12), and 61D-

11.001(14); 61D-11.005(9) only as to jackpots, and 61D-11.005(11); 61D-

11.007(1), 61D-11.007(2), the portion of 61D-11.007(8) and Question 10 of BPR

Form 16-002 which impose an ordinance requirement upon county government; and

61D-11.012(5) are hereby found to be invalid exercises of delegated legislative

authority.

DONE AND ORDERED this 24th day of October, 1996, in Tallahassee, Florida.

___________________________________

DON W. DAVIS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone] SUNCOM 278-9675

Fax Filing 921-6847

Filed with the Clerk of the

Division of Administrative Hearings

this 24th day of October, 1996.

COPIES FURNISHED:

Gary R. Rutledge, Esquire

Harold F. X. Purnell, Esquire

Rutledge, Ecenia, Underwood,

Purnell and Hoffman, P.A.

Post Office Box 551

Tallahassee, FL 32302-0551

Alexander Twedt, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, FL 32399-0792

John J. Rimes, III, Esquire

Lee Ann Gustafson, Esquire

Office of the Attorney General

Ervin Building, Suite 308-A

2020 Capital Circle, S.E.

Tallahassee, FL 32399-1050

Alan B. Koslow, Esquire

Becker and Polikoff, P. A.

311 Stirling Road

Ft. Lauderdale, FL 33312

Liz Cloud, Chief

Bureau of Administrative Code

The Elliott Building

Tallahassee, FL 32399-0250

Carroll Webb, Executive Director

Administrative Procedures Committee

Holland Building, Room 120

Tallahassee, FL 32399-1300

Royal H. Logan, Acting Director

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, FL 32399-0792

Lynda L. Goodgame, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, FL 32399-0792

NOTICE OF RIGHT TO APPEAL

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 one copy of the notice of appeal with the Agency Clerk of

the Division of Administrative Hearings and a second copy, accompanied by filing

fees prescribed by law, with the District Court of Appeal, First District, or

with the District Court of Appeal in the Appellate District where the party

resides. The notice of appeal must be filed within 30 days of rendition of the

order to be reviewed.