STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLANIGAN'S ENTERPRISES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 80-1409RX

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

BUSINESS REGULATION, )

)

Respondent, )

and )

) ART'S RESTAURANT AND LOUNGE, )

)

Intervenor. )

)

FINAL ORDER

The Petitioner, Flanigan's Enterprises, Inc., filed a petition Pursuant to Section 120.56, Florida Statutes, challenging the validity of a rule promulgated by the Respondent, Division of Alcoholic Beverages and Tobacco of the Department of Business Regulation. The rule at issue is an amendment to the Respondent's Rule 7A-3.16, Florida Administrative Code. Subsequent to the filing of the Petition, the Respondent filed a Motion to Dismiss, and the Director of the Division of Administrative Hearings entered an order granting the Motion without prejudice to the filing of an amended petition. An amended petition was filed, and the Respondent filed another Motion to Dismiss. The Motion was denied, and the matter was assigned to the undersigned Hearing Officer for the Scheduling of a final hearing. The final hearing was conducted on September 12, 1980, in accordance with a Notice dated August 22, 1980. Art's Restaurant and Lounge filed a Motion to Intervene which was granted.

Evidentiary presentations, including testimony of witnesses and introduction of documentary evidence, were made at the final hearing. The Petitioner contends that the Respondent's amendment to its Rule 7A-3.16 constitutes an invalid exercise of delegated legislative authority because it is contrary to the Legislature's intention as expressed in enabling legislation, and because it was not supported by an adequate economic impact statement. The Respondent and the Intervenor contend that the amendment to the rule constitutes a valid exercise of delegated legislative authority. The Intervenor contends further that the portion of the rule deleted through the amendment was itself an invalid exercise of delegated legislative authority.

The parties have submitted proposed findings of fact and conclusions of law. To the extent that the proposed findings of fact and conclusions of law are not adopted in this Order, they have been specifically rejected as being either irrelevant to the issues, or as not having been supported by the evidence.

FINDINGS OF FACT

1. The Respondent is responsible for administering Florida laws respecting the sale of alcoholic beverages. Sales of alcoholic beverages are regulated in Florida through a licensing system. "Liquor" licenses authorize licensees to sell alcoholic beverages without regard to alcoholic content. Various categories of liquor licenses are issued by the Respondent. The two categories most pertinent to this proceeding are "quota" licenses and "restaurant" licenses. Quota licenses are available on the basis of one license per 2,500 in population for each county which permits such licenses (Some counties have different quotas established by Special Acts of the Legislature.). The term "quota" is derived from the fact that the issuing formula is based upon the decennial Federal census, and thus only a finite number of licenses are available. Section 561.20(1), Florida Statutes. Restaurant licenses are an exception to the quota scheme and are not limited in number. They are available to "any restaurant having 2,500 square feet of service area and equipped to serve 150 persons full-course meals at one time, and deriving at least 51 percent of its gross revenue from the sale of food and nonalcoholic beverages." Section 561.20(2)(a)3, Florida Statutes. There are approximately 3,000 outstanding quota licenses, and 2,000 outstanding restaurant licenses.

   
   

2. Depending upon the specific terms of the license, quota license holders are authorized to sell liquor for off premises consumption. These are called "package" sales. Prior to the adoption of the amendment to Rule 7A-3.16, restaurant licenses issued after January 1, 1958, did not authorize package sales. Prior to the adoption of the amendment, the rule Provided:

   
   

   No licensee holding a special restaurant license issued after January 1, 1958, may sell alcoholic beverages for off premises consumption other than as may be Provided by special act.

   
   

   The prefix "SRX" shall be made a part of the license numbers of all special restaurant licenses issued after January 1, 1958, distinguishing them in identity from other licenses.

   
   

   The amendment which is the subject of this proceeding deleted the underlined portion of the rule. The effect of the amendment is to permit holders of restaurant licenses to make package sales so long as other criteria pertaining to the licenses are met.

   
   

3. The Petitioner is a publicly owned Florida corporation which does business in Florida and five other states. Petitioner is engaged in the business of selling alcoholic beverages for on and off premises consumption. The majority of its business activities are in Florida, and Florida package sales represent more than half of the Petitioner's total business volume nationwide. The Petitioner holds forty-tow quota licenses issued by the Respondent. Quota licenses are transferable; and since they are limited in number, their market value frequently far exceeds the fees imposed by the Respondent. The market value of quota licenses held by the Petitioner in Dade and Broward Counties, Florida, is nearly two million dollars.

   
   

4. The Petitioner's business is a very competitive one. When the petitioner is considering whether to invest in a new location, numerous factors

   are considered. These include demographics, traffic patterns, population, zoning, and the number and location of competitors. The number and location of competitors is the single most important factor. Since package sales constitute a majority of the Petitioner's business volume, the proximity of competitors who offer package sales is paramount. Because under the Respondent's rules restaurant licensees have been prohibited from making package sales, the location of restaurant licensees has not been of concern to the petitioner in determining where to locate. The Petitioner may have made different judgments about numerous of its locations if nearby restaurants were able to make package sales in competition with the Petitioner. No specific evidence was introduced from which it could be determined which if any of the Petitioner's locations would not have been opened, or which will suffer a competitive disadvantage as a result of the amendment to Rule 7A-3.16. Indeed, implementation of the amendment to the rule has been stayed by the courts, and no determination can be made as to which restaurant licensees might avail themselves of the opportunity of making package sales, and to what extent.

   
   

5. The market value of the Petitioner's quota licenses and competition for the Petitioner's business outlets are affected by licensing considerations apart from whether restaurant licensees will be permitted to make package sales. As a result of the 1980 Federal census, numerous new quota licenses will be available in Dade and Broward Counties. These additional licenses, when issued, could have a substantial impact upon the value of the Petitioner's licenses, and the competitive advantages of the Petitioner's business locations.

   
   

6. The Intervenor is the holder of a restaurant license issued by the Respondent. The amendment to Rule 7A-3.16 would permit the Intervenor to make package sales of alcoholic beverages.

   
   

7. The economic impact statement adopted by the Respondent in support of its amendment to Rule 7A-3.16 provides in pertinent part as fellows:

   
   

   This rule will likely stimulate competition in the market place by permitting more outlets for off premises sale of alcoholic beverages. There would be no appreciable impact upon the state's revenue, but should there be any impact it is estimated that more liquor would be sold rather than less. Competition upon existing package stores would be in proportion to the proximity and competitive power of special restaurants permitted to sell by the package.

   
   

   In developing this statement, various officials within the Respondent met on several occasions to discuss the potential economic impact of the amendment to the rule, and representatives of the regulated industry were consulted.

   Hearings were conducted by the Respondent before the amendment was adopted. Representatives of the industry, including a representative of the Petitioner, appeared at hearings and stated their positions with respect to the amendment. The economic impact statement accurately portrays the potential economic impact of the amendment. It does not appear that the effect of competition upon existing package stores can be estimated with any precision. Indeed, the Petitioner did not present evidence and could not present evidence with respect to the precise impact that the amendment would have upon any of its locations.

   CONCLUSIONS OF LAW

   
   

8. The Division of Administrative Hearings has jurisdiction ever the subject matter and the parties to this proceeding. Section 120.56, Florida Statutes. The amendment to the Respondent's Rule 7A-3.16 will have a substantial impact upon the Petitioner. The value of quota licenses presently held by the Petitioner will likely be reduced as a result of the amendment, and it is possible that some of the Petitioner's outlets will face increased competition as a result of it. The amendment substantially impacts the Intervenor because it permits the Intervener to make package sales which it was previously not able to make.

   
   

9. An understanding of the legislative history providing for issuance of liquor licenses to restaurants is instructive. Florida's regulation of the beverage industry began in 1935 with the enactment of Chapter 16,774, Laws of Florida (1935). A licensing system was therein adopted. In 1947 the concept of limiting purveyors of alcoholic beverages was embodied in Chapter 23,746, Laws of Florida (1947). The system of licensing by quota based upon population was established. An exception to the quota system was established for restaurants which met certain standards. The Act provided:

   
   

   No such limitation of number of licenses as herein provided shall be applicable to hotels of not less than 50 guestrooms or to restaurants having accommodations for services of 200 or more patrons at tables and occupying more than 4,000 square feet of space. . .

   
   

   Some additional conditions were imposed upon restaurant licensees under Chapter 57-773, Laws of Florida (1957). The Act provided:

   
   

   No such limitation of the number of licenses as herein provided [the quota system] shall prohibit the issuance of a special license

   to any. . .bona fide restaurant containing all necessary equipment and supplies for and serving full-course meals regularly and having accommodations at all times for service of two hundred (200) or more patrons at tables and occupying more than four thousand (4,000) square feet of space provided, however, that any restaurant granted special license hereunder shall be prohibited from selling alcoholic beverages in packages for consumption for off the premises, and from operating as a package store. . .and providing that no intoxicating beverages shall be sold under such license after the hours of serving food has ceased. . .

   
   

   Chapter 57-773 became effective on January 1, 1958, and did not apply to any businesses which had been licensed prior thereto. Chapter 57-1991, Laws of Florida (1957).

   
   

10. Apparently in anticipation that the 1960 Federal census would make available sufficient additional quota licenses to obviate the need for any continued exemption from the quota system for restaurants, the Legislature

    deleted the restaurant exception in 1961. Chapter 61-300, Laws of Florida (1961). Businesses which held restaurant licenses issued prior to the effective date of Chapter 61-300 were specifically not affected by the law. From 1961 through 1973, restaurant licenses were not available as an exception to the quota licensing scheme. Special restaurant licenses were available only through special act of the Legislature. A number of Special Acts were adopted by the Legislature authorizing such special licenses. Some of these specifically provided that no package sales would be authorized, others did not. The Respondent took the position that no package sales were allowed under any of these licenses granted by special act. In 1972 the Legislature reestablished the restaurant license exception to the quota system. Chapter 72-230, Laws of Florida (1972). The restaurant exception is now embodied in Sections 561.20(1), (2)(a)3, Florida Statutes (1979), and provides in pertinent part:

    
    

    No such limitation of the number of licenses as herein provided [the quota system] shall henceforth prohibit the issuance of a special license to:

    3. Any restaurant having 2,500 square feet of service area and equipped to serve 150 persons full-course meals at one time, and deriving at least 51 percent of its gross revenue from the sale of food and nonalcoholic beverages.

    
    

11. No agency has inherent rule-making authority. Section 120.54(14), Florida Statutes. The Respondent's rule-making authority with respect to the beverage laws is set out at Section 561.11(1) as fellows:

    
    

    The division [Respondent] shall have full power and authority to make, adept, amend or repeal such rules, regulations or administrative orders in pursuance of the purposes of the beverage laws, or reasonably necessary for, or calculated to facilitate the enforcement or administration of the provisions thereof as may be appropriate. . .

    
    

    While the Respondent has the authority to adept rules which implement license restrictions imposed by statute, it does not have authority to impose additional restrictions. In 4245 Corporation v. Division of Beverage, 371 So.2d 1032 (1 DCA Fla. 1978), the Court struck rules of the Respondent which established appropriate attire to be worn by entertainers at a licensee's premises. The Court stated: (at p. 1033)

    
    

    The rulemaking power which the legislature may validly delegate to administrative agencies must be and is limited by the statute conferring the power. Administrative agencies, when empowered to do so, may make and carry

    out powers definitely conferred on them but they are not permitted to do more. The legislature cannot clothe them with more, and neither may they assume to do more. While an administrative agency may regulate, it may not legislate unless so authorized by the Constitution. Its power to adopt rules and regulations is limited to the yardstick laid

    down by the legislature. Moreover, the rules and regulations enacted by administrative agencies must be reasonable.

    
    

    The portion of the Respondent's Rule 7A-3.16 which was deleted by the amendment which is the subject of this proceeding provided that restaurant licensees could not make package sales. This prohibition is not one authorized by statute. If the validity of the deleted portion of the rule were at issue in this proceeding, the conclusion would be that the provision constitutes an invalid exercise of delegated legislative authority. An issue similar to that was considered by a Hearing Officer of the Division of Administrative Hearings in Gainesville Golf and Country Club, Inc. v. Division of Alcoholic Beverages and Tobacco, DOAH Case No. 79-1851R (Final Order entered December 12, 1979). In that case, the validity of the Respondent's Rule 7A-3.15, Florida Administrative Code, was at issue. The rule provided in pertinent part:

    
    

    All restaurants holding a special restaurant license, in addition to the quota limitation imposed by Section 561.20(1), Florida Statutes, must discontinue the sale of alcoholic beverages whenever the service of full course meals is discontinued.

    
    

    The Hearing Officer concluded that this additional limitation upon restaurant licensees beyond these provided by statute constituted an invalid exercise of delegated legislative authority. Her order is now on appeal to the First District Court of Appeal. Since entry of the Order in Gainesville Golf and Country Club, the Respondent has sought legislation which would specifically authorize the additional limitations upon restaurant licenses that had been set out in Rule 7A-3.15 and in Rule 7A-3.16 before the instant amendment. Bills were introduced in the Legislature, but were not adopted. Deletion of the invalid provision of Rule 7A-3.16 is not only valid, it is a commendable effort to remove invalid provisions from the Respondent's rules.

    
    

12. The conclusion that the Legislature did not intend to prohibit restaurant licensees from making package sales so long as they are within the other limitations set out at Section 561.20(2)(a)3 is Supported by the fact that the Legislature has specifically prohibited package sales under other categories of licenses which are exceptions to the quota system. Under Section 565.02(6), state-chartered legal entities not for profit organized principally for the purposes of supporting or managing the affairs of a symphony orchestra are authorized to obtain licenses without regard to the quota, but such licensees are restricted to sale of beverages by the drink. Under Section 561.20(8), special licenses are available to entities within the confines of the Inter- American Cultural and Trade Center without regard to the quota, but sales by such licensees by the package for off premises consumption are prohibited.

    Under Section 561.20(10), the Respondent is authorized to issue licenses without regard to the quota to any marketing association of horse breeders organized under the laws of the state. Such licensees are prohibited from making package sales for off premises consumption. Under Section 561.20(2)(c), the Respondent is authorized to issue special licenses without regard to the quota to bowling establishments. Such licensees are specifically prohibited from selling alcoholic beverages by the package for off premises consumption. The specific prohibition of package sales by various categories of special licensees clearly indicates that the Legislature intended no such restriction for special licensees when none is expressed.

13. Section 120.54(2)(a), Florida Statutes, provides that prior to the adoption, amendment or repeal of any rule, an agency must prepare a detailed economic impact statement. The statement prepared by the Respondent in support of its amendment to Rule 7A-3.16 complies with the statutory provision. While the Respondent did not specifically delineate the competitive effect that the amendment would have upon every quota license holder, the factors which would cause such an effect are set out in the statement. Furthermore, it is clear that the effect cannot be determined with any precision. The purpose of requiring economic impact statements is to assure that agencies will analyze economic factors during the course of rule making. Florida-Texas Freight, Inc.

v. Hawkins, 379 So.2d 944 (Fla. 1979). It is apparent that the Respondent considered the economic consequences of the amendment to Rule 7A-3.16. In School Board of Broward County v. Gramith, 375 So.2d 340 (1 DCA Fla. 1979); and Polk v. School Board of Polk County, 373 So.2d 960 (2 DCA Fla. 1979), it was held that specific defects in an economic impact statement will not render a rule invalid unless it is shown that the error impaired the fairness of the rule-making proceeding or the correctness of the action taken by the agency.

Even if the failure of the Respondent to specifically delineate the economic impact upon each licensee of its amendment to Rule 7A-3.16 were required, and it is concluded that it is not, the failure could net impair the fairness of the rule-making proceeding or the correctness of the action taken when the very purpose of the amendment to the rule is to delete language which would itself constitute an invalid exercise of delegated legislative authority.

FINAL ORDER

Based upon the foregoing findings of fact and conclusions of law, it is, hereby,

ORDERED:

The amendment to the Respondent's Rule 7A-3.16, Florida Administrative Code, constitutes a valid exercise of delegated legislative authority, and the petition for determination of invalidity of the rule is hereby dismissed.

DONE AND ORDERED this 10th day of October, 1980, in Tallahassee, Florida.

G. STEVEN PFEIFFER Assistant Director

Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

Filed with the clerk of the Division of Administrative Hearings this 10th day of October, 1980.

COPIES FURNISHED:

Theodore L. Tripp, Jr., Esquire 1492 South Miami Avenue

Miami, Florida 33130

Dennis E. LaRosa, Esquire Staff Attorney

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301

William C. Andrews, Esquire 1133 North West 23rd Avenue Gainesville, Florida 32601

Carroll Webb, Esquire Executive Director

Administrative Procedures Committee Room 120, Holland Building Tallahassee, Florida 32301

Ms. Liz Cloud, Chief Department of State

Bureau of Administrative Code Tallahassee, Florida 32301

================================================================= DISTRICT COURT ORDER

=================================================================

FLANIGAN'S ENTERPRISES, INC., IN THE DISTRICT COURT OF APPEAL

FIRST DISTRICT, STATE OF FLORIDA

Appellant,

CASE NOS. YY-237, WW-350

vs. WW-466

DOAH CASE NO. 80-001409RX

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

Appellee,

and

ART'S RESTAURANT AND LOUNGE, INC.,

Intervenor/Appellee.

/

ORDER

Following oral argument in this case, we entered an order directing the parties to file briefs on several questions, one of them being whether or not the 1981 amendment to 561.20(2)(a)(3), Florida Statutes, enacted by Chapter 81- 158, Laws of Florida, has rendered this appeal moot. After consideration of the briefs, we find the appeal to be moot.

Intervenor/Appellee, Art's Restaurant and Lounge, Inc., contends that we should rule upon the merits of the appeal because it feels that it may be subjected to disciplinary proceedings by appellee for sales of alcoholic beverages made by it prior to the effective date of the 1981 amendment to the statute. This, however, is entirely speculative. If the Division should take such action against intervenor, our ruling here is without prejudice to intervenor to itself initiate a new rule challenge pursuant to 120.56, Florida Statute (1979).

It is, therefore, ORDERED that this appeal is dismissed.

By Order of the Court dated this 15th day of October, A. D. 1981. Judge Guyte P. McCord, Jr., Judge Douglass B. Shivers and Judge James E. Joanos.

A True Copy ATTEST:

RAYMOND E. RHODES, CLERK

District Court of Appeal, First District Tallahassee, Florida

Docket for Case No: 80-001409RX

Orders for Case No: 80-001409RX