STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HIALEAH, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 88-4581RP

) DEPARTMENT OF BUSINESS ) REGULATION, DIVISION OF ) PARI-MUTUEL WAGERING, )

)

Respondent. )

)

FINAL ORDER

Pursuant to written notice a formal hearing was held in this case before Larry J. Sartin, a duly designated Hearing Officer of the Division of Administrative Hearings, on October 7, 1988, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Joel F. Fass, Esquire

Colodny, Fass & Talenfeld, P.A. 11900 Biscayne Boulevard, Suite 620 North Miami, Florida 33181

For Respondent: W. Douglas Moody, Jr., Esquire

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007

INTRODUCTION

On August 15, 1988, the Respondent promulgated a proposed amendment to Rule 7E-6.007(3), Florida Administrative Code (hereinafter referred to as the "Proposed Amendment"). On September 16, 1988, the Petitioner, Hialeah, Inc., filed a Petition for Administrative Hearing to Challenge the Validity of the Proposed Amendment to Administrative Rule 7E-6.007, challenging the validity of the Proposed Amendment.

On September 29, 1988, the Respondent filed a Motion to Dismiss. In response to the Motion to Dismiss, the Petitioner filed a Motion to Amend Petition for Administrative Hearing to Challenge the Validity of the Proposed Amendment to Administrative Rule No. 7E-6.007. Following argument concerning these Motions at the formal hearing, the Motion to Amend was granted and the Motion to Dismiss was granted to the extent that paragraph 3.C. of the Amended Petition was intended as a separate ground for challenging the Proposed Amendment. The rulings on these Motions were memorialized by Orders issued October 13, 1988.

At the formal hearing the Respondent made an ore tenus motion to dismiss.

This motion was denied.

Official recognition of all pertinent rules of the Respondent and pertinent Attorney General Opinions was taken.

The Petitioner presented the testimony of John J. Brunetti, Jr., at the formal hearing. The Petitioner also offered two exhibits which were accepted into evidence. The Respondent presented the testimony of Anthony Fasulo. No exhibits were offered by the Respondent.

The parties stipulated to certain facts at the commencement of the formal hearing. Those stipulated facts have been included as findings of fact in this Final Order.

The parties initially agreed to file proposed final orders within twenty days following the filing of the transcript of the formal hearing. Pursuant to this agreement, the proposed final orders were to be filed on or before November 7, 1988. The parties subsequently agreed to file their proposed final orders on or before November 11, 1988. An Agreed Motion to Extend Time to File Recommended Orders was filed. That motion was granted by telephone. November 11, 1988, was a holiday and the Division of Administrative Hearings was closed. Therefore, the proposed final orders were to be filed on or before November 14, 1988. See Rule 22I-6.002, Florida Administrative Code. The parties have filed proposed orders, containing proposed findings of fact. The Petitioner has also filed Petitioner's Response to Respondent's Proposed Recommended [Final] Order which has been reviewed with the consent of the Respondent. A ruling on each proposed finding of fact included in the parties' proposed orders has been made either directly or indirectly in this Final Order or the proposed finding of fact has been accepted or rejected in the Appendix which is attached hereto.

ISSUE

Whether the Proposed Amendment of Rule 7E-6.007, Florida Administrative Code, is arbitrary and capricious and thus constitutes an invalid exercise of delegated authority?

FINDINGS OF FACT

1. The Petitioner, Hialeah, Inc., operates a race track (hereinafter referred to as the "Track") located in Dade County, Florida. The Petitioner is licensed by the Respondent.

   
   

2. In December, 1981, the Petitioner was granted permission by letter from Bob Smith, then Director of the Respondent, the Department of Business Regulation, Division of Pari-Mutuel Wagering, to operate Tel-A-Betting. Robert Rosenburg, Director of the Respondent after Mr. Smith, also approved Tel-A- Betting in a letter to the Petitioner.

   
   

3. The Petitioner has continuously operated Tel-A-Betting for more than six years.

   
   

4. The Petitioner instituted Tel-A-Betting in reliance on the Respondent's approval of Tel-A-Betting. If approval had not been granted to the Petitioner from the Respondent, the Petitioner would not have established Tel-A-Betting.

5. Tel-A-Betting is a procedure for placing wagers on races at the Petitioner's Track. Persons utilizing this system (hereinafter referred to as "Account Holders"), open an account with the Petitioner by making a deposit of

   $100.00 or more with the Petitioner and paying a $25.00 fee. The funds deposited with the Petitioner are received and accounted for in accounts maintained at the Track. Once an account is opened, a plastic card which contains, among other information, an account number and an "800," toll-free, telephone number is issued to the Account Holder. Wagers may then be placed with the Petitioner by the Account Holder calling the "800" number and placing a wager with a telephone operator/pari-mutuel clerk located at the Track. The Account Holder identifies himself or herself by giving the operator the account number and a code name designated by the Account Holder when the account is opened. The account number is programmed into a computer to determine whether the Account Holder has sufficient funds in the account to make the wager. If the funds in the account are sufficient to cover the wager, the wager is entered into the computer. If the Account Holder wins the wager, the payoff is entered into his or her account.

   
   

6. Calls to place wagers through the Tel-A-Betting program can be made from anywhere in Florida and the person making the call and wager need not be physically present at the Track to make the wager.

   
   

7. Wagers taken through Tel-A-Betting are only made on races at the Track.

   
   

8. Tel-A-Betting allows the Petitioner to receive wagered funds as part of its pari-mutuel pool from persons located anywhere in the State of Florida.

   
   

9. When a wager is made through Tel-A-Betting, the operator/pari-mutuel clerk cannot establish the age or identity

   of the person placing the wager.

   
   

10. The Petitioner is the only race track permit holder in the State of Florida which employs Tel-A-Betting.

    
    

11. The Proposed Amendment of Rule 7E-6.007, Florida Administrative Code, if valid, will prohibit the Petitioner from continuing the use of Tel-A-Betting.

    
    

12. The Respondent has not received any complaints about the use of Tel-A- Betting by minors or any other abuses.

    
    

13. No evidence was presented that minors have made, or attempted to make, wagers through the use of Tel-A-Betting.

    
    

14. The Respondent has not received any objections to Tel-A-Betting or complaints about unfair competition from other racetrack permit holders.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of this proceeding. Section 120.57(1), Florida Statutes (1987).

    
    

16. Rule 7E-6.007(3), Florida Administrative Code, currently provides the following:

    
    

    (3) No pari-mutuel tickets shall be sold except through regular ticket

    windows properly designated as such. All ticket sales shall be for cash. This rule does not prohibit: (1) messenger betting; (2) betting utilizing prepaid tickets; (3) computerized account betting, whereby a bettor places a sum of money on deposit with the track and then bets against such account, such bets being recorded by computer as debits against his account; no betting will be permitted after such account is exhausted. These types of betting must be specifically approved by the Division.

    
    

17. The Proposed Amendment to Rule 7E-6.007(3), Florida Administrative Code, adds the following sentence to the end of Rule 7E-6.007(3):

    
    

    However, no form of wagering authorized above shall be permitted unless the individual who is actually making such bet is physically present within the enclosure of the pari-mutuel wagering permittee in whose pari-mutuel wagering pool such wager is being deposited, unless such wager is being made in a facility licensed pursuant to Section 550.355, Florida Statutes.

    
    

18. The Petitioner has challenged the Proposed Amendment to rule 7E- E.007(3), Florida Administrative Code, on constitutional grounds and as an invalid exercise of delegated legislative authority. Based upon an off the record discussion between the parties and without prejudice to the Petitioner to pursue its constitutional issues on appeal, the constitutional issues raised by the Petitioner have not been addressed by the parties in their proposed final orders or in this Order.

    
    

19. What constitutes an "invalid exercise of delegated authority" is governed by Section 120.52(8), Florida Statutes, which defines those terms, in pertinent part, as follows:

    
    

    ... 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 or more of the following apply:

    * * *

    (e) The rule is arbitrary and capricious.

    
    

20. In determining the validity of the Proposed Amendment, must remembered that an agency such as the Respondent has no inherent power to promulgate rules; it derives that power from a statutory base. Grove Isle, Ltd. v. Department of Environmental Regulation, 454 So.2d 571 (Fla. 1st DCA 1984). Where an agency has been granted authority to adopt rules, the agency cannot enlarge, modify or contravene its statutory authority. Department of Business Regulation, Division

    of Alcoholic Beverages and Tobacco v. Salvation Limited, Inc., 452 So.2d 237 (Fla. 1st DCA 1984). If, however, a rule is reasonably related to the purpose of the enabling legislation and is not arbitrary and capricious, the rule must be sustained. Florida Waterworks Association v. Florida Public Service Commission, 473 So.2d 237 (Fla. 1st DCA 1985).

    
    

21. The burden of proving that the Respondent has exceeded its authority in promulgating the Proposed Amendment is on the Petitioner in this case, as recognized by the court in Humana, Inc. v. Department of Health and Rehabilitative Services, 469 So.2d 889, 890 (Fla. 1st DCA 1985):

    
    

    One who attacks the validity of a rule on the grounds of arbitrariness and capriciousness carries the burden of demonstrating by a preponderance of the evidence that the rule is not supported by fact or logic, was adopted without thought or reason or is otherwise not based upon competent, substantial evidence.

    
    

    See also, General Telephone Co. of Florida v. Florida Public Service Commission,

    446 So.2d 1063 (Fla. 1984); and Agrico Chemical Co. v. Department of Environmental Regulation, 365 So.2d 759 (Fla. 1st DCA 1978).

    
    

22. In compliance with Section 120.54(a), Florida Statutes, the Respondent has indicated that the specific authority relied upon by the Respondent in adopting the Proposed Amendment is Section 550.16(1), Florida Statutes. Section 550.16(1), Florida Statutes, provides, in pertinent part, the following:

    
    

    1. The sale of tickets or other evidences showing an interest in or a contribution to a pari-mutuel pool is permitted within the enclosure of any horse racetrack and dog racetrack licensed and conducted under this law, but not elsewhere in this state except as is provided in chapter 551... [Emphasis Added].

       
       

23. The Respondent has taken the position that the manner in which Tel-A- Betting is operated allows the sale of pari-mutuel tickets outside of the enclosure of the Petitioner's racetrack in violation of Section 550.16(1), Florida Statutes. The Proposed Amendment has therefore been promulgated to stop the Petitioner's continued operation of Tel-A-Betting. In support of this position, the Respondent has argued that the Legislature, in adopting Section 550.16(1), Florida Statutes, intended that all of the incidents of the sale of a pari-mutuel ticket must take place within the enclosure of a racetrack. Thus, the Respondent has argued that both the offer to sell and the acceptance of the offer accompanied by consideration, the incidents of a sale, must occur within the enclosure of the racetrack. Since not all of the incidents of the sale of a pari-mutuel ticket through Tel-A-Betting occur within the enclosure of a racetrack, the Respondent argues that Tel-A-Betting violates Section 550.16(1), Florida Statutes.

    
    

24. The Petitioner on the other hand has argued that the sale of a pari- mutuel ticket through Tel-A-Betting does take place within the enclosure of the

    Track. Relying upon general principles governing the place at which a contract is deemed to be entered into pursuant to contract case law, the Petitioner has argued that the sale of a pari-mutuel ticket under Section 550.16(1), Florida Statutes, should be deemed to occur where the wager is "accepted." Pursuant to this theory, the Petitioner has argued that the acceptance of a wager occurs within the enclosure of the Track because the funds wagered are remitted, maintained and accounted for at the Track and, more importantly, the wager is received and accepted by a telephone operator located at the Track.

    
    

25. In determining the Legislature's intent in requiring chat sales of pari-mutuel tickets occur within the enclosure of a racetrack, Section 550.16(1), Florida Statutes, must be interpreted in pari materia with all of Chapter 550, Florida Statutes, and other laws governing the operation of pari- mutuel betting in Florida. State v. Gale Distributors, Inc., 349 So.2d 150 (Fla. 1977). Consistent with this principle of statutory construction, the Respondent has cited a number of statutory provisions contained in Florida Statutes, which support a conclusion that the Legislature intended that all of the incidents of the sale of a pari-mutuel ticket take place within the enclosure of a racetrack. For example, Section 849.04, Florida Statutes, prohibits accepting wagers from minors and Section 550.02(9), Florida Statutes, provides for the exclusion of certain individuals from pari-mutuel facilities. Despite the evidence presented by the Petitioner and the Petitioner's arguments to the contrary, the evidence in this case supports a conclusion that these provisions may be circumvented if the sale of a pari-mutuel ticket is allowed to take place in part or wholly outside the enclosure of a racetrack. Unless all of the incidents of the sale occur at the racetrack it will be difficult to detect violations of these provisions.

    
    

26. Additionally, Section 550.361(1), Florida Statutes, provides that bookmaking, as defined in Section 849.25, Florida Statutes, is a felony of the third degree when conducted on the grounds or property of a pari-mutuel permitholder. Section 550.361(4), Florida Statutes, requires that employees of a permitholder witnessing or otherwise having knowledge of bookmaking must notify the permitholder and the permitholder must in turn notify appropriate authorities. If a sale of a pari-mutuel ticket through Tel-A-Betting is deemed to occur on the premises of a racetrack it will be difficult, if not impossible, for employees of a racetrack to carry out their responsibility of aiding in the detection of bookmaking on the racetrack.

    
    

27. The Petitioner has argued that in interpreting the Proposed Amendment the only justification for the Proposed Amendment which should be considered is the Respondent's statement in the notice of intent issued with the Proposed Amendment that the Respondent is concerned with the inability to verify the age of a Tel-A-Betting caller. Thus the Petitioner has argued that the provisions concerning bookmaking and other provisions of Florida Statutes relied upon by the Respondent at the formal hearing and in its proposed order should not be considered in this proceeding. In support of this argument, the Petitioner has cited Guerra v. Department of Labor and Employment, 427 So.2d 1098 (Fla. 3d DCA 1983). Guerra is, however, distinguishable from this case.

    
    

28. In this case the Respondent included the specific statutory authority implemented by the Respondent through the Proposed Amendment: Section 550.16(1), Florida Statutes. The other statutory provisions cited by the Respondent in this proceeding have been cited by the Respondent and relied upon in this Final Order, not as specific authority for the Proposed Amendment, but as part of the process of interpreting Section 550.16(1), Florida Statutes. There is no requirement that an agency, in adopting a rule, cite every statutory

    provision it may rely upon in interpreting the specific authority implemented by a proposed rule.

    
    

29. It may be true that the Respondent could have specifically discussed all of its reasons for concluding that all of the incidents of a sale of a pari- mutuel ticket must occur within the enclosure of a racetrack and not just its concern over the sale of tickets to minors. The Respondent's failure to do so, however, is not fatal.

    
    

30. Finally, the Petitioner has argued that the Respondent has failed to prove that minors or others have abused Tel-A-Betting. This argument is without merit. The Petitioner has the burden of proof in this case and has failed to meet its burden.

    
    

31. Based upon the foregoing, it is concluded that the Legislature, in adopting Section 550.16(1), Florida Statutes, intended that all of the incidents of the sale of a pari-mutuel ticket take place within the enclosure of a racetrack. It is also concluded that not all of the incidents of a sale of a pari-mutuel ticket through Tel-A-Betting within the racetrack. Therefore, the Proposed Amendment of Rule 7E-6.007(3), Florida Administrative Code, prohibiting Tel-A-Betting is within the Respondent's delegated legislative authority. The Petitioner has therefore failed to establish the invalidity of the Proposed Amendment.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the Petitioner has failed to prove that the Proposed Amendment

of Rule 7E-6.007(3), Florida Administrative Code, is an invalid exercise of

delegated legislative authority. The Petitioner's request that the Proposed Amendment be declared invalid is therefore denied.

DONE and ORDERED this 2nd day of December, 1988, in Tallahassee, Florida.

LARRY J. SARTIN

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 2nd day of December, 1988.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-4581RP

The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Final Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted.

The Petitioner's Proposed Findings of Fact

Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection

1 1.

1. Hereby accepted.

2. 2. The last sentence is a conclusion of law.

4 5.

5-6 4.

7 3.

8 11.

1. Not supported by the weight of the evidence.

2. Hereby accepted.

11 7.

12 Hereby accepted.

13 12.

1. 13. The last sentence is irrelevant.

2. Irrelevant.

16-21 Hereby accepted.

22 14.

The Respondent's Proposed Findings of Fact

Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection

1 1.

2 3.

3 11.

4 12.

5 2.

6 5-6.

7 1 and 8.

8 9.

1. Not supported by the weight of the evidence.

2. The first sentence is hereby accepted. The last sentence is not supported by the weight of the evidence.

3. Hereby accepted.

12 10.

COPIES FURNISHED:

Joel Fass, Esquire

Howard M. Talenfeld, Esquire 11900 Biscayne Boulevard

Suite 620

North Miami, Florida 33181

W. Douglas Moody, Jr. Assistant General Counsel

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1000

Liz Cloud, Chief

Bureau of Administrative Code Room 1802, The Capitol Tallahassee, Florida 32399-0250

Carroll Webb Executive Director

Administrative Procedures Committee

120 Holland Building Tallahassee, Florida 32399-1300

Billy Vessel, Director Pari-Mutuel Wagering

Rhode Building, Suite N-1026

401 Northwest Second Avenue Miami, Florida 33128-1705

Joseph A. Sole General Counsel

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1000

Van B. Poole, Secretary Department of Business Regulation The Johns Building

725 South Bronough Street Tallahassee, Florida 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 WITH 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: 88-004581RX

Orders for Case No: 88-004581RX