DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,1/
vs.
Case No. 17-3727
Respondent.
On October 17, 2017, Robert E. Meale, Administrative Law Judge of the Division of Administrative Hearings (DOAH), conducted the final hearing in Tallahassee, Florida.
For Respondent: John M. Lockwood, Esquire
Thomas J. Morton, Esquire Devon Nunneley, Esquire The Lockwood Law Firm
The issue is whether Petitioner's Notice of Intent to Withdraw License should be granted or dismissed.
By Notice of Intent to Withdraw License filed June 1, 2017 (NOI), Petitioner informed Respondent of Petitioner's intent to withdraw a license that it had recently issued to Respondent.
The NOI states that Respondent holds Pari-Mutuel Permit (Permit). The Permit derives from Respondent's conversion, over
35 years ago, of a greyhound racing permit in Dade County to a summer jai-alai permit in Dade County.
The NOI alleges that, on December 26, 2016, Respondent applied for a 2017-18 operating license for the Permit. The application identifies the proposed location of the summer jai- alai performances as 301 East Dania Boulevard, Dania, Florida (Dania). On March 10, 2017, Petitioner issued the requested operating license.
The NOI alleges that Petitioner subsequently realized that it had issued the 2017-18 operating license in error because Respondent was not authorized to operate summer jai-alai performances outside of Dade County. Designating its error as a mistake of law, the NOI explains that the plain language of the conversion statute, chapter 80-88, Laws of Florida, 284, limits Respondent to jai-alai performances in Dade County. The NOI
does not refer to section 550.475, Florida Statutes. Consequently, the NOI announces Petitioner's intent to withdraw the 2017-18 operating license. Attached to the NOI is a Notice of Rights, warning Respondent that, if it fails to request a hearing within 21 days, it will have "waived [its] right to any hearing."
Respondent timely requested a formal hearing. In its Petition for Formal Administrative Hearing, which it filed with Petitioner, Respondent requested a hearing pursuant to sections 120.569, 120.57(1), and 120.57(1)(e).
At the hearing, Petitioner called one witness and offered into evidence no exhibits. Respondent called two witnesses and offered into evidence one exhibit: Respondent Exhibit 1. The parties jointly offered 21 exhibits: Joint Exhibits 1-21. All exhibits were admitted.
The court reporter filed the transcript on November 1, 2017. The parties filed proposed recommended orders on
December 8, 2017.
At all material times, Respondent has held The Permit, which authorizes Respondent to conduct summer jai-alai performances in Dade County. In 1980, Respondent converted a greyhound racing permit into the Permit, as authorized by a predecessor to section 550.0745, which is discussed in the
Conclusions of Law. Each year, as required by section 550.0115, Respondent has obtained an operating license under the Permit to conduct performances, which it has done at the same location named in the Permit.
On December 26, 2016, Respondent filed an application for an operating license for 2017-18. This application sought a license to conduct performances in Dania, which is in Broward County. The new location is less than 35 miles from the Dade County location mentioned in the preceding paragraph.
Petitioner's employee assigned to examine applications attached a large post-it note to the portion of the application advising of the change in operating location from Dade to Broward county. The note is still attached to the file, which was presented at the final hearing. The note is impossible to miss.
On March 10, 2017, Petitioner granted the operating license, which authorizes Respondent to conduct summer jai-alai performances in Dania for the 2017-18 season. In reliance on the 2017-18 operating license, Respondent has terminated its lease for the Dade County facility and entered into a lease for the Dania facility.
Following a complaint from the lessor of Respondent's Dade County location, the Division of Pari-Mutuel Wagering (Division) concluded that it had issued the operating license in
error, determined that an operating license for a converted permit must be limited to the county named in the converted permit, and issued the NOI on June 1, 2017. Directed to Respondent, the NOI does not allege that Respondent has violated any statute or rule. Instead, the NOI states only that Petitioner issued the operation license "in error as [Respondent] is not authorized to operate summer jai-alai performances via The Permit outside of Miami-Dade County." The NOI never mentions section 550.475.
At one time, Petitioner construed section 550.475, which is discussed below, to allow a holder of a county-specific permit to relocate performances to a facility located within
35 miles from the facility, but in another county, and a circuit court has sustained this construction. In the past, Petitioner issued operating licenses to holders of converted or created permits that authorized performances at the licensed location or a facility leased pursuant to section 550.475. It is unclear, though, when Petitioner changed its position. Division directors changed between the issuance of the 2017-18 operating license and the NOI, and it is unlikely that the former director missed the proposed out-of-county relocation described in the application for the 2017-18 operation license. However, these two facts do not preclude a mistake of law, as Petitioner contends, so that the NOI is not necessarily a statement that
represents a change in longstanding policy. The NOI states that the operating license is based on a mistake of law, but Petitioner's proposed recommended order states that the operating license is a mistake of law--the same conclusion that the Administrative Law Judge reaches in the Conclusions of Law.
CONCLUSIONS OF LAW
DOAH has jurisdiction of the subject matter.
§§ 120.569 and 120.57(1), Fla. Stat. (2016). The effect of the NOI was to revoke the operating license that Petitioner issued on March 10, 2017. Thus, the NOI determines the substantial interests of Respondent; Petitioner bears the burden of proof, see Osborne Stern v. Dep't of Bank. & Finance, 670 So. 2d 932
(Fla. 1996); and the standard of proof is clear and convincing evidence due to the penal nature of the proceeding.
§ 120.57(1)(j), Fla. Stat.; Osborne Stern, supra.
As Petitioner argues, the NOI is not a proposed revocation of the operating license because the NOI does not allege wrongdoing by Respondent and does not meet the requirements imposed on an administrative complaint. However, the NOI operates like an administrative compliant because it notifies Respondent of Petitioner's intent to invalidate Respondent's license. The clear point of entry contained in the NOI suggests that the only impediment to the invalidation of
Respondent's license would be Respondent's request for a hearing.
Petitioner seems to claim a special right to invalidate the license, as though it had never been issued. There are at least two problems with this argument. First, Petitioner's unilateral invalidation of the license at this time would circumvent the statute that provides for the issuance of a default license if an agency fails to act promptly on an application. As noted above, Petitioner issued the operating license shortly before the expiration of the 90 days authorized by section 120.60(1) for the agency to act on an application and issued the NOI long after the 90 days had expired. If Petitioner were able unilaterally to invalidate a license on these facts, after the 90 days had run, Petitioner would be allowed effectively to declare a time-out on the 90-day clock that runs under section 120.60(1) and, thus, defeat the purpose of this statute.
More importantly, a purported "withdrawal" of an already-issued permit or license has previously been held to be a nullity, unless the invalidation of the license is authorized by statute or rule. See Bd. of Trs. v. Barrett, 533 So. 2d
1202, 1205 (Fla. 3d DCA 1988). A purported withdrawal of an already-issued permit or license is a revocation, which must be based on grounds "clearly within the ambit of [the agency's]
statutory authority" and must provide the holder of the permit or license with an opportunity for a hearing. Id. at 1206. If an agency errs in issuing a permit or license for a reason that does not constitute a ground for revocation, the agency may not withdraw or revoke its prior action, or else there would be no finality to agency action. Id. at 1207 (citing Tri-State Sys. Inc. v. Dep't of Transp., 500 So. 2d 182, 183 (Fla. 1st DCA
1986)) (agency's error in determining nature of surrounding area before granting sign permit is no basis for revoking the already-issued permit). Finality of agency action in this case justified Respondent to make substantial business plans based on the 2017-18 operating license that Petitioner issued.
Petitioner lacks statutory grounds for withdrawing or revoking the 2017-18 operating license. Section 550.0745(1) addresses permits, except for one provision that is irrelevant to the present case. Section 550.0745(1) generally authorizes an eligible holder of a pari-mutuel permit to convert to a summer jai-alai permit within the same county. A permittee is eligible to convert if, for the two years immediately preceding the conversion, the permittee has generated the smallest play or total pool among at least five pari-mutuel permittees in the same county. If an eligible permittee declines to convert, a new permit for summer jai-alai games is created in the eligible permittee's county.
Section 550.0745(2) addresses licenses for permits that have been converted or created under section 550.0745(1). Section 550.0745(2) provides that the holder of a converted or created permit is entitled to a license to operate summer jai- alai, but only at a jai-alai fronton. Section 550.0745(2) adds that the license "authorizes the permittee to operate at any jai-alai permittee's plant it may lease or build within such county."
As Petitioner contends, section 550.0745(1) and (2) is county-specific. Although section 550.0745(1) and (2) is not entirely clear on the point, this section has been held not to permit the holder of a converted or created permit to relocate its performances from its original licensed location following conversion or creation to another location within the same county--unless the permit holder complies with section 550.054, which requires, among other things, a local ratification election. Summer Jai-Alai Partners v. Dep't of Bus. & Prof'l
Reg., 125 So. 3d 304, 308 (Fla. 3d DCA 2013) (court sustained Petitioner's construction of section 550.0745(2) to prevent the holder of a converted summer jai-alai permit "to continuously relocate its permit" within the county in which the permit was converted).
However, applicable to almost all pari-mutuel permits, including jai-alai permits, section 550.475 authorizes a holder
of any pari-mutuel permit to lease its facility to "any other holder of the same class valid pari-mutuel permit . . . when located within a 35 mile radius of each other." (Section
550.475 is unmentioned in Summer Jai-Alai Partners, presumably because the new location to which the permittee sought to relocate did not host performances under the same class of pari- mutuel permit.) As Respondent contends, nothing in section
550.475 suggests that it is inapplicable to summer jai-alai permits converted or created under section 550.0745. The reference to "jai-alai games" in section 550.475 is similar to the references to "jai-alai games" in other statutes, such as section 550.70, which clearly applies various restrictions, such as the availability of a chief judge and a limit on the consecutive performance days for players, to all jai-alai games, including summer jai-alai games.
In the present case, Petitioner has applied section 550.0745(1) and (2) without regard to section 550.475, at least regarding the relocation of performances under a converted or created permit to a different county. (It is unknown whether Petitioner construes section 550.475 to authorize the relocation of performances under a converted or created permit within the original county, but this recommended order will not assume such a construction, even though the NOI's failure even to mention section 550.475 is consistent with an interpretation that this
statute does not even apply to a converted or created permit.) Petitioner's determination relies on an unenacted exception to section 550.475: as applied to converted or created permits, section 550.475 authorizes relocation up to 35 miles, but not outside of the original county.
The doctrine of in pari materia requires that these statutes be harmonized by giving meaning to both of them, see,
e.g., Dep't of State v. Martin, 916 So. 2d 763, 768 (Fla. 2005),
and does not allow the provisions of one statute to be disregarded. See e.g., Sch. Bd. v. Dep't of Educ., 317 So. 2d
68, 74 (Fla. 1975). A reasonable construction of sections 550.0745 and 550.475 would trim each statute, rather than fully preserve section 550.0745 and carve a large exception out of section 550.475. Without regard to county limits, a lessor could enter into a qualifying lease of a facility with the holder of a converted or created permit, as long as the leased facility were not more than 35 miles from the original licensed facility (or current licensed facility within the original county, if the permittee has already used section 550.475 for an intra-county relocation), but, to give effect to the county- specific provisions of section 550.0745, the lessee could not effect a second relocation under section 550.475 to another leased, out-of-county facility that is more than 35 miles from the original licensed facility (or the most recently licensed
facility within the original county, if the permittee had already used section 550.475 for an intra-county relocation).
By invoking section 120.57(1)(e), Respondent would remove the Administrative Law Judge's construction of sections 550.0745(1) and (2) and 550.475 from section 120.57(1)(l), which, as between the agency and the Administrative Law Judge, assigns to the agency the responsibility of construing the statutes within its substantive jurisdiction or expertise, such as sections 550.0745 and 550.475. Instead, Respondent contends that Petitioner's construction is or depends upon an unadopted or invalid rule, on which neither the Administrative Law Judge nor the agency may base agency action that determines Respondent's substantial interests--here, the revocation of the 2017-18 operating license. If so, section 120.57(1)(e)4. authorizes the agency to reject the Administrative Law Judge's determination about an unadopted rule, but only if the Administrative Law Judge's determination is "clearly erroneous" or "does not comport with the general requirements of law." Obviously, the overall effectiveness of this strategy depends on whether it also generates an appellate standard of review that is more favorable than the deferential clearly erroneous standard applicable in the typical adjudicatory case to statutes within the jurisdiction of the agency. See, e.g., Summer Jai-
Alai Partners, supra at 307.
Section 120.57(1)(e)1. prohibits an agency or Administrative Law Judge from basing agency action that determines the substantial interests of a party "on an unadopted rule or a rule that is an invalid exercise of delegated legislative authority." Regardless of whether a nonagency party raises the issue, in any proceeding to determine the substantial interests of a party, the agency and Administrative Law Judge are barred from basing agency action on an unadopted or invalid rule. If a nonagency party raises the issue as a defense, section 120.57(1)(e)2.a. applies the procedures of section 120.56(1)(b), and section 120.57(1)(e)2.c. applies section 120.56(4)(c) to a challenge alleging an unadopted rule.
Section 120.56(1)(b) provides that Respondent must show that it is substantially affected by the unadopted rule and state the grounds for determining that the rule is invalid. Section 120.56(4)(c) imposes upon Respondent the burden of proving these matters, and, upon such proof, section 120.56(4)(c) imposes upon Petitioner the burden of proving that rulemaking is not feasible or practicable.
Due to the imminent revocation of its 2017-18 operating license, Respondent has proved that it is substantially affected by the alleged change in agency position, as discussed in the Findings of Fact, that Respondent cites as the unadopted rule. Standing is determined on a forward-looking
basis that does not disappear based on the final outcome of the proceeding. See, e.g., Peace River/Manasota Reg'l Water Supply Auth. v. IMC Phosphates Co., 18 So. 3d 1079, 1083 (Fla. 2d DCA
2009). Respondent is also substantially affected by the NOI itself. It is uncontested that Petitioner has not adopted the alleged rule that is the subject of this proceeding.
The closer issue is whether Respondent has identified an unadopted statement that qualifies as a rule. A rule is an "agency statement of general applicability that implements, interprets, or prescribes law or policy." § 120.52(16). Section 120.57(1)(e)1. warns that an agency's application of rules and statutes to facts is not a rule. Accord Envtl. Trust
v. Dep't of Envtl. Prot. 714 493, 498 (Fla. 1st DCA 1998). If the facts are not in dispute, the agency's interpretation of the law drives its adjudication, but an agency's interpretation of a statute that is "readily apparent" from a literal reading of the statute is not a rule. St. Francis Hosp. v. Dep't of Health &
Rehab. Servs., 553 So. 2d 1351, 1354 (Fla. 1st DCA 1989) (dictum). Of course, Petitioner's implying a broad exception in section 550.475 for created or converted permits is not readily apparent from a literal reading of this statute.
A rule is an agency statement that requires compliance and has the direct and consistent effect of law. Dep't of
Admin. v. Harvey, 356 So. 2d 323, 325 (Fla. 1st DCA 1977)
(citing McDonald v. Dep't of Banking & Fin., 346 So. 2d 569, 581
(Fla. 1st DCA 1977)). If it "sets out categoric requirements as a prerequisite for obtaining certification," an agency statement may meet these criteria for being a rule, even though it is directed to a single regulated person. McCarthy v. Dep't of
Ins. & Treasurer, 479 So. 2d 135, 137 (Fla. 2d DCA 1985) (agency statement was a letter voiding a fire safety inspector certificate because the agency had erroneously allowed the person to sit for the certification examination).
In Fla. Quarter Horse Track Ass'n v. Dep't of Bus. &
Prof'l Reg., 133 So. 3d 1118 (Fla. 1st DCA 2014) (per curiam), the court held that the agency's "policy" of treating barrel racing as a form of quarter horse racing for issuing permits and licenses was an unadopted rule. Citing the Administrative Law Judge's final order, the court agreed that Florida administrative law "does not allow the agency to establish such a policy stealthily by the issuance of . . . licenses." Id. at
1119. Undisclosed in the appellate opinion, the license at issue in the administrative proceeding was the first time a holder of a quarter horse racing permit had applied for a license for barrel racing. Fla. Quarter Horse Racing Ass'n v.
Dep't of Bus. & Prof'l Reg., DOAH Case No. 11-5796RU, https://www.doah.state.fl.us/ROs/2011/11005796.pdf, ¶¶ 24 et
seq.
In granting a license, the agency in Florida Quarter
Horse determined, as a matter of law that was not readily apparent from a literal reading of the statute, that barrel racing was included within quarter horse racing. Similarly, in "withdrawing" the 2017-18 operating license, Petitioner determined, as a matter of law, that section 550.475 does not apply to a converted or created permit, at least when the holder seeks a license to conduct performances outside of the original county. As in McCarthy and Florida Quarter Horse, the agency statement in this case was directed to a single person, but is a categoric declaration of law that governs all persons similarly situated.
The NOI is a rule that deprives holders of converted and created permits of the benefit of section 550.475--either entirely, as suggested by the omission of the statute from the statement, or partially in terms of any attempt to relocate performances to compliant locations that are outside of the original counties named in the permit. Respondent is entitled to the formal adoption of such a rule, so that it may be determined whether such a rule would be an invalid exercise of delegated legislative authority, as well as the de novo appellate standard of review that applies to the final orders determining legal issues in rule challenges. See, e.g., Dep't
of Health v. Bayfront Med. Ctr., Inc., 134 So. 3d 1017, 1018
(Fla. 1st DCA 2012).
In its proposed recommended order, Petitioner argued that rulemaking at this time is neither feasible nor practicable. Rulemaking is feasible unless Petitioner proves that it has not had sufficient time to acquire the knowledge and experience reasonably necessary for rulemaking or related matters remain pending, so that rulemaking cannot proceed at this time. § 120.54(1)(a)1. The construction of sections 550.0745(1) and (2) and 550.475 is not a new issue, nor is the need for an authoritative determination of how to harmonize these sections. Petitioner instead argues that it may not choose one of these statutes in a rule, although that is exactly what Petitioner through a confusing statement that Petitioner maintains is, not only no threat to Respondent's operating license, but also insulated from a rule challenge. Appellate review of a final order adjudicating a challenge of an adopted rule is the proper means of obtaining an authoritative construction of these statutes.
Rulemaking is practicable unless Petitioner proves that detail in the establishment of principles, criteria, or standards for agency decisions is not reasonable under the circumstances or that the issues are of such a narrow scope that more specific resolution of the matter is impossible outside of
case-by-case adjudication to determine the substantial interests of individual parties. Clearly, Petitioner's adoption of a broad exception to section 550.475 does not raise any
practicability concerns.
RECOMMENDED that Petitioner enter a final order dismissing the Notice of Intent to Withdraw License.
DONE AND ENTERED this 12th day of December, 2017, in Tallahassee, Leon County, Florida.
ROBERT E. MEALE
Filed with the Clerk of the Division of Administrative Hearings this 12th day of December, 2017.
1/ The agency has been redesignated as Petitioner because it has the burden of proof.
John M. Lockwood, Esquire Thomas J. Morton, Esquire Devon Nunneley, Esquire The Lockwood Law Firm
Louis Trombetta, Esquire Charles LaRay Dewrell, Esquire Department of Business and
Professional Regulation Capital Commerce Center 2601 Blair Stone Road Tallahassee, Florida 32399 (eServed)
15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
