STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JOHN HARRY MICHAELS AND MARTIN ) COUNTY LIQUORS, INC., )

)

Petitioners, )

)

vs. ) CASE No. 88-3977RX

) DEPARTMENT OF BUSINESS REGULATION, ) DIVISION OF ALCOHOLIC BEVERAGES ) AND TOBACCO, )

)

Respondent. )

)

FINAL ORDER

This matter came on for hearing in Tallahassee, Florida, before Robert T. Benton, Hearing Officer of the Division of Administrative Hearings, on September 16, 1988. The Division of Administrative Hearings received the transcript of proceedings on September 26, 1988, and the parties filed proposed final orders on October 3, 1988. The attached appendix addresses proposed findings of fact.

Petitioners appeared through a qualified representative. Respondent appeared through counsel.

For Petitioners: Ocie C. Allen, Jr.

Qualified Representative Post Office Box 10616 Tallahassee, Florida 32302

For Respondent: Katherine A. Emrich

Assistant General Counsel 725 South Bronough Street

Tallahassee, Florida 32399-1007

These rule challenge proceedings are ancillary to substantial interest proceedings that arose can respondent's denial of an application the corporate petitioner filed for a quota liquor license in Martin County, Florida.

By motion to dismiss, which was taken under advisement at hearing, respondent Department of Business Regulation, Division of Alcoholic Beverages and Tobacco (DABT) contends that petitioners lack standing to bring this challenge. This order treats issues the motion to dismiss and other motions not already decided raise.

STATEMENT OF THE ISSUES

Whether Rule 7A-2.017(6), Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority? Whether Section 301 or Section 302 or both sections of DABT's policy manual for field offices amount to rules never validly promulgated? Whether DABT forms DBR 700L and DBR 710L, or

either of them, is an invalid rule for DABT's failure to file forms with the Secretary of State? Whether petitioners or either of them has standing to raise any of the foregoing questions?

FINDINGS OF FACT

1. On January 17, 1984, DABT received John Harry Michaels' preliminary application for a new quota alcoholic beverage license in Martin County. Joint Exhibit No. 1.

   
   

2. By letter dated September 18, 1984, DABT advised Mr. Michaels that he was "one of the preliminary applicants selected in the drawing for an available liquor license in Martin County"; that he "must file a full and complete application within 45 days of the date of this letter pursuant to Rule 7A-2.17, Florida Administrative Rule"; and that "[f]ailure to file your complete application within such 45 day period will be deemed as a waiver of your right to file for the new quota license." Joint Exhibit No. 2.

   
   

3. On the 45th day, November 2, 1984, DABT received a letter from Sandra Elizabeth Allen, an attorney representing "John Michaels of Martin County Liquors, Inc." which reported that Mr. Michaels was out of the country and "request[ed] a forty-five day extension for Mr. Michaels to obtain a zoned location." Joint Exhibit No. 3.

   
   

4. Along with the letter, DABT received forms DBR 700L and DBR 710L, as revised in July 1984, which named Martin County Liquors, Inc. as the applicant, and designated a $10,000 commercial loan from Florida Home Equity as the source of all the corporation's capital, but failed to specify a location for the store. On November 7, 1984, DABT personnel reviewed the submissions received five days earlier, and noted on a transmittal form, DBR 709L, "applicant failed to submit financial documentation; applicant filed incomplete application - no location listed." Joint Exhibit No. 4.

   
   

5. Form DBR 700L requires that "documentation to support the financial arrangements must be submitted with this application," and asks several questions concerning the premises in which an applicant proposes to locate. Under the heading "RIGHT OF OCCUPANCY," the form asks for details concerning leases and inquires whether the applicant has "a legal right of occupancy to the premises."

   
   

6. By letter dated February 5, 1985, DABT advised petitioners' counsel, Ms. Allen, that "John H. Michaels, has been granted a 45 day extension to submit his application ... up to and including March 22, 1985." Joint Exhibit No. 6.

   
   

7. On March 22, 1985, DABT received a second letter from Ms. Allen requesting a second 45 day extension. Joint Exhibit No. 7. By letter dated April 3, 1985, DABT's L.B. Schoenfeld indicated that DABT would not be "granting any further extensions ... [and] that in the very near future a letter of denial for Mr. Michaels application will be forthcoming." Joint Exhibit No. 10.

   
   

8. DABT received, nevertheless, on April 23, 1985, an amended application, again naming Martin County Liquors, Inc. as the applicant, which gave "11230 Fed. Hwy (Hobe Sound)" as the address proposed for the store, and included both a sketch of the premises and a county zoning administrator's signature attesting that the location complied with zoning requirements for the sale of alcoholic beverages. Joint Exhibit No. 11.

9. On April 25, 1985, DABT received a COP of a lease executed by a Mr. Jack Biederwolf on behalf of the lessors and by Ocie Allen as attorney-in-fact for John Harry Michaels for "space located at ... Hobe Sound ... [to] commence upon issuance to lessee ... of .... an alcoholic beverage license ... and upon vacation of the present tenant ... [provided, however] that, beginning from the date of issuance of liquor license to the Lessee, this Lease Agreement may be cancelled and rendered null and void upon a twenty-four (24) hour written notice by either party." Joint Exhibit No. 12.

   
   

10. The April submissions notwithstanding, DABT sent a formal letter of denial, as promised. Addressed to Martin County Liquors, Inc., and dated May 31, 1985, the letter cited Section 561.18, Florida Statutes, as authority for disapproving the application, and stated:

    
    

    Application incomplete in that applicant has failed to file a right of occupancy for a specific location within the extended time period as granted by the Agency. Also, applicant has failed to provide complete verification of his financial interest.

    
    

    In response, John Harry Michaels (by Ocie Clyde Allen) requested an administrative hearing, a request which DABT eventually transmitted to the Division of Administrative Hearings.

    
    

11. Proceedings in the substantial interest case at the Division of Administrative Hearings, Martin County Liquors vs. Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, No. 88-1185, eventuated in a recommended order (Donnelly, H.O.) which DABT adopted "in toto" [by final order entered October 4, 1988. The recommended order concluded that

    
    

    When the Petitioner did not provide a business location to the Respondent, the right to file for a quota license was waived under Rule 7A-2.17(6) .....

    Respondent has acted according to law in its denial of the license for failure to file a right of occupancy for a specific location within the expended time period.

    Recommended Order entered September 22, 1988, at pages 7 and 9.

    
    

    Both the recommended order and DABT's denial letter cited the corporate petitioner's failure "to file a right of occupancy for a specific location within the extended time period." The denial letter, but not the recommended order, cited a failure "to provide complete verification of his financial interest," as an additional basis for denial. Neither DABT nor Hearing Officer Donnelly made explicit reference to the forms, DBR 700L or DBR 710L, or to Sections 301 or 302 of the policy manual.

    The Challenged Provisions

    
    

12. Rule 7A-2.017(6), Florida Administrative Code, formerly numbered 7A- 2.17(6), provides:

    
    

    All applicants in the drawing whose number corresponds with the available number of quota liquor licenses shall file a full and complete application for an alcoholic beverage license, following their selection in the drawing. Such applications are available from the District Field Office having jurisdiction over such county and must be filed within 45 days of the date of their selection. Failure to file an application within such 45-day period shall be deemed a waiver of the applicant's right to file for a quota liquor license. The Division shall then notify the next person in order of priority from the random drawing by certified mail of their entitlement to apply for a quota license in accordance with the procedures for notifying the originally selected parties. The Division shall follow such procedure until all available licenses have been applied for and awarded.

    Petitioner's Exhibit No. 2.

    
    

    The only provisions of Section 301 of DABT's "standardized policy and procedure" which petitioners assail are the following:

    
    

    1. Background Information

       
       

       1. The Division of Alcoholic Beverages and Tobacco will inform applicants for licenses of requirements for licensure in writing pursuant to this policy and procedure.

       
       

    2. General Information

       
       

       3. Once the field office has determined what requirements are necessary and has completed the DBR761L by checking the appropriate blocks, the original DRB761L is given to the applicant along with the appropriate application forms and a copy of the Instructions for Completing Application for Alcoholic Beverage License.

       
       

       Petitioners challenge Section 302 which was revised February 2, 1987, as it existed until that date and after August 15, 1984, as follows:

       SUBJECT: DEFINITION OF COMPLETED APPLICATION

       SECTION: 302

       PAGES: 3

       CLASS: New Policy and Procedure PURPOSE: This section establishes a standardized policy and procedure to be followed by all field offices in connection with the definition of a completed application. Any deviation from this policy and procedure must be with the approval of the Bureau of Licensing and Records.

       EFFECTIVE DATE: August 15, 1984

       1. Background Information:

          1. The Division of Alcoholic Beverages and Tobacco will only accept for filing applications which are complete.

          2. The Division of Alcoholic Beverages and Tobacco does not accept applications for filing on "piece at a time basis."

       2. General Information:

          1. A completed application is defined as follows:

             1. The DBR 700L must be complete

                and requirements furnished in accordance with the list of license application requirements (DBR 761L) given to the applicant. Also, any agreements or financial documentation which are required as attachments as a result of the completion of Section III of the DBR 700L application for alcoholic beverage license must also be furnished.

             2. Completed (DBR 710L) personal questionnaire(s) for all applicants and persons connected directly with the business.

             3. A set of fingerprints on regular United States Department of Justice forms for each applicant person(s) connected directly with the business or anyone designated by the Division of Alcoholic Beverages and Tobacco.

          * * *

          1. The following information may be required during the application background investigation:

             1. Additional documentation of financial interest.

             2. Criminal history information.

             3. Right of occupancy documentation.

             4. Additional documentation of

          qualifications.

       3. Application Requirements

          1. Any application which is

             submitted in accordance with this policy and procedure must be accepted for filing by the field office. This includes situations where the applicant in good faith attempts to file the application and a review shows a need for additional financial documentation. If no financial documentation is included and is necessary based on the application, it should not be accepted and the applicant instructed accordingly.

          2. Acceptance of the application will make the applicant eligible for a temporary license if authorized by law based on the type of application filed.

       
       

       Form DBR 761L was not offered in evidence. Forms DBR 700L and DB 710L (1984 revisions) are in evidence. Neither they nor their predecessor versions were ever filed with the Secretary of State.

       
       

       CONCLUSIONS OF LAW

       
       

13. The Division of Administrative Hearings has jurisdiction of petitions like the present one challenging provisions of an existing administrative rule as an invalid exercise of delegated legislative authority. Section 120.56, Florida Statutes (1987). Petitioners' allegations that written policies and forms never promulgated as rules amount to illicit rules likewise fall within the Division's jurisdiction. State Department of Administration, Division of Personnel vs. Harvey, 356 So.2d 323 (Fla. 1st DCA 1977).

    
    

    Standing

    
    

14. DABT raises the preliminary question whether petitioners have "demonstrate[d] standing by showing that a rule has a real and immediate effect upon [their] case, as well as by proving injury-in-fact." Professional Firefighters of Florida, Inc. vs. Department of Health and Rehabilitative Services, State of Florida, 396 So.2d 1194, 1196 (Fla. 1st DCA 1981).

    
    

15. Martin County Liquors, Inc. d/b/a Martin County Liquors filed both the initial application, Joint Exhibit No. 3, and the amended application. Joint Exhibit No. 11. John Harry Michaels did not participate individually as a party in the Section 120.57 proceeding, Martin County Liquors, Inc. d/b/a Martin County Liquors, No. 88-1185 (DOAH, Sept. 22, 1958)("motion to allow Mr. Michaels to be joined ... denied" R.O., P. 2), and made no showing in the present case of any possibility of injury-in-fact, except as a stockholder, director or officer of the corporation. Accordingly, he failed to establish standing individually apart from the corporation.

    
    

16. DABT contends that the corporate applicant, too, lacks standing to challenge Rule 7A-2.017(6), Florida Administrative Code since DABT waived the

    45-day deadline for filing applications. Although the deadline was extended, it was not ignored. Ultimately the application was denied because the applicant failed "to file a right of occupancy for a specific location within the extended

    time period." In these circumstances, the company has standing to challenge Rule 7A-2.017(6), Florida Administrative Code, insofar as it authorizes DABT to set a filing deadline for completed applications.

    
    

17. Petitioners failed to show that Section 301 of DABT's standardized policy or Form DBR 710L had any bearing on the disposition of the applications. But Section 302 of DABT's standardized policy is one of several bases on which the DABT might have concluded that the only application filed timely was incomplete. Similarly, the statement in DBR 700L that "documentation to support the financial must be submitted with this application" and the questions pertaining to a right of occupancy might have been a basis for DABT's proposal to deny the application. See Joint Exhibit No. 4. Since criteria or requirements found in Section 302 of DABT's standardized policy and in DBR 700L were invoked by DABT in proposing to deny the application, the applicant has standing to challenge the pertinent provisions.

    
    

18. Although by now DABT has entered a final order denying the application, time for an appeal remains. Under the decisions in Greynolds Park Manor, Inc. vs. Department of Health and Rehabilitative Services, 491 So.2d 1157 (Fla. 1st DCA 1986) and Phillip Moultrie vs. Florida Department of Corrections,

    496 So.2d 191 (Fla. 1st DCA 1986), entry of the final order did not deprive the corporate applicant of standing. Cf. Capeletti Bros., Inc. vs. Department of Transportation, 499 So.2d 855 (Fla. 1st DCA 1986)(reh. den. 1987). See State ex rel. Department of General Services vs. Willis, 344 So.2d 580, 592 (Fla. 1st DCA 1977). Of course, to the extent the rule, the policies oil the forms are redundant of statutory requirements, their invalidation cannot alter the results of any substantial interest proceeding.

    
    

    The Merits

    
    

19. Because Rule 7A-2.017(6), Florida Administrative Code, was invoked in denying its application for licensure, the corporate petitioner has standing to maintain the challenge, but "the validity of ... [a challenged] rule must be upheld if it is reasonably related to the purpose of the legislation interpreted and it is not arbitrary and capricious." Department of Professional Regulation vs. Durrani, 455 So.2d 515, 517 (Fla. 1st DCA 1984). Florida Beverage Corporation vs. Wynne, 306 So.2d 200 (Fla. 1st DCA 1975). See Section 120.52(8), Florida Statutes (1987).

    
    

20. As the "one who attacks the rule," Agrico Chemical Co. vs. State Department of Environmental Regulation 365 So.2d 759,763, (Fla. 1st DCA 1978) rev. den. 376 So.2d 74 (Fla. 1979), Martin County Liquors, Inc. has the burden to

    
    

    show that (1) the agency adopting the rule has exceeded its authority; (2) that the requirements of the rule are not appropriate to the ends specified in the legislative act; and (3) the requirements contained in the rule are not reasonably related to the purpose of the enabling legislation but are arbitrary or capricious. Department of Administration, Division of Retirement vs. Albanese, 455 So.2d 639, 641 (Fla.

    1st DCA 1984).

    The challenger's burden "is a stringent one indeed." Agrico Chemical Co. vs. State Department of Environmental Regulation, 365 So.2d 759, 763 (Fla. 1st DCA 1978) rev. den. 376 So.2d 74 (Fla. 1979).

    
    

21. Time limits are inherently arbitrary, but they need not be capricious or irrational, and were not shown here to be inappropriate "to the ends specified in the legislative act." 455 So.2d at 641. Section 561.19(4), Florida Statutes (1986), requires that respondent DABT grant quota licenses to qualified applicants within 180 days of the random drawing. By specifying that lottery winners file completed applications within 45 days, Rule 7A-2.017(6), Florida Administrative Code, assures that 135 days will be available for DABT to investigate any matters that applications may indicate require investigation. Petitioners failed to prove that a 45-day period was an unreasonably short one in which to complete an application. In fact, when the applicant requested an extension on grounds Mr. Michaels had been out of the country, and presumably unavailable to take the steps necessary to complete an application, only 45 days were requested.

    
    

22. As it happened, a much longer extension was granted, allowing the applicant a total of 191 days in which to file a completed application. Given this circumstance, petitioners' attack on Rule 7A-2.017(6), Florida Administrative Code, boils down to a challenge to DABT's authority to set any deadline whatsoever for filing completed quota license applications. Section 561.11(1), Florida Statutes (1987) clearly confers such authority on DABT.

    
    

    Policy and Form

    
    

23. The Administrative Procedure Act define the term rule "broadly ... to reach ... invisible policy-making." Straughn vs. O'Riordan, 338 So.2d 832, 834

    n.3 (Fla. 1976). Rules are defined to include any "agency statement of general applicability that implements, interprets or prescribes law or policy ..." Section 120.52(16), Florida Statutes (1987).

    
    

    Whether an agency statement is a rule turns on the effect of the statement, not on the agency's characterization of the statement by some appellation other than "rule." State Department of Administration, Division of Personnel vs. Harvey, 356 So.2d 323, 325

    (Fla. 1st DCA 1977)(reh. den. 1978).

    
    

    To the same effect, see Amos vs. Department of Health and Rehabilitative Services, 444 So.2d 43, 46 (Fla. 1st DCA 1983).

    
    

24. Insofar as Section 302 of DABT's standardized policy and procedure specifies when applications are sufficiently documented or otherwise adequate to be deemed complete, it constitutes more than an internal management memorandum which does "not affect either the private interests of any person or any plan or procedure important to the public." Section 120.52(16)(a), Florida Statutes (1987). Because pertinent provisions require that certain applications be rejected, they constitute an "agency statement of general applicability that implement ... law or policy ... [and has] application outside the agency issuing the memorandum." Section 120.52(16), Florida statutes (1987). Because the completeness provisions of Section 302 have the force and effect of a rule but were never promulgated as a rule, they are invalid as a rule.

25. DABT never promulgated DBR 700L as an official form because it never filed a copy with the Secretary of State, as required by Section 120.54(8), Florida Statutes (1987). In any event, the 1984 revision occurred after Rule 7A-2.019, Florida Administrative Code, took effect. The language DBR 700L that

    "documentation to support the financial arrangements must be submitted with this application" constitutes an "agency statement of general applicability that implements, interprets or prescribes law or policy." Section 120.52(16), Florid Statutes (1987).

    
    

26. DABT has statutory authority to require applications and to "cause the application to be fully investigated, both as to qualifications of the applicants ... and the premises and location..." Section 561.18, Florida Statutes (1987), but DABT pointed to no existing rule or statute that explicitly requires an applicant to furnish documentation to support the financial arrangements, or to demonstrate a "right of occupancy." See generally State, Department of Health and Rehabilitative Services vs. McTigue, 387 So.2d 454 (Fla. 1st DCA 1980)(rule requirement that license applicant furnish names and addresses so agency could verify that statutory criteria had been met stricken as ultra vires). This is not to say that such requirements could not be adopted by duly promulgated rules or forms.

    
    

27. Rules are defined to include "any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule." Section 120.52(16), Florida Statutes (1987). The financial documentation requirement in DBR 700L and the questions under the heading of right of occupancy, insofar as they constitute a requirement that an applicant demonstrate that it has such a right are invalid as unpromulgated rules.

It is, accordingly, ORDERED:

1. Petitioner John Harry Michaels is dismissed as a party.

   
   

2. Insofar as Section 302 of DABT's standardized policy and procedure defines which license applications are complete and which shall be refused for filing as incomplete, it is an invalid exercise of delegated legislative authority.

   
   

3. The requirements DBR 700L purports to impose, that "documentation to support the financial arrangements must be submitted with this application," and that an applicant must demonstrate a "right of occupancy," are invalid exercise of delegated legislative authority.

   
   

4. The petition for administrative determination of invalidity of an existing rule and to determine the invalidity of an unpromulgated policy and unfiled forms is otherwise denied.

DONE and ENTERED this 18th day of October, 1988, in Tallahassee, Florida.

ROBERT T. BENTON, II

Hearing Officer

Division of Administrative Hearings The Oakland Building

29000 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 18th day of October, 1988.

APPENDIX

Petitioners' proposed findings of fact Nos. 1, 2, 3, except for the first sentence, 4, 5, except for the clause beginning with because in the second sentence, 6, 7, 9, 10, 11, 12, 14, except for the second sentence, 15, 16, 17, and 18 have been adopted, in substance, insofar as material.

With respect to petitioners' proposed finding of fact No. 8, a final order has now been issued in the substantial interest case.

Petitioners' proposed finding of fact No. 13 has been adopted, in substance, except that the testimony suggested that DABT counted the 180 days from when the applicant was selected, whether by drawing or by default of another applicant originally selected.

With respect to petitioners' proposed finding of fact No. 19, failure to file within 45 days did not mean "that the applicant ... lost forever ... entitlement to a license."

With respect to the proposed findings of fact Nos. 20 and 21, the policies, forms and rule had only the impact on petitioners' applications described in the final order.

Respondents' proposed findings of fact Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10,

11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 22, 23, 24, 25, 27, the second sentence

of 28, 29, 30, and 31 have been adopted, in substance, insofar as material.

Respondents' proposed finding of fact No. 21 has been rejected because the policy and procedure memoranda were not "used for internal bureau purposes only."

With respect to respondents' proposed finding of fact No. 26, it is not clear that DABT modified the policy as opposed to making an exception as contemplated by the policy.

With respect to the first sentence of respondents' proposed finding of fact No. 28, the forms referred to were not the revised forms under challenge.

COPIES FURNISHED:

Ocie C. Allen, Jr. Qualified Representative

P.O. Box 10616 Tallahassee, FL 32302

Katherine A. Emrich Assistant General Counsel

Department of Business Regulation 725 S. Bronough Street Tallahassee, FL 32399-1007

Leonard Ivey, Director

Division of Alcoholic Beverages and Tobacco

Department of Business Regulation 725 S. Bronough Street Tallahassee, FL 32399-1000

Van B. Poole, Secretary Department of Business Regulation 725 S. Bronough Street Tallahassee, FL 32399-1000

NOTICE OF RIGHT TO JUDICIAL REVIEW A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68 FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A 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.

Docket for Case No: 88-003977RX

Orders for Case No: 88-003977RX