The Issue The issues for disposition in this case are whether proposed rules 61D-11.001(17) and 61D-11.002(5), Florida Administrative Code, which consist of the repeal of said rules, constitute an invalid exercise of delegated legislative authority as defined in section 120.52(8), Florida Statutes; and whether the Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering’s (Respondent), failure to prepare a statement of estimated regulatory costs constituted a material failure to follow the applicable rulemaking procedures or requirements set forth in chapter 120.
Findings Of Fact Respondent is the state agency charged with regulating pari-mutuel wagering pursuant to chapter 550, Florida Statutes, and cardrooms pursuant to section 849.086, Florida Statutes. Each Petitioner currently holds a permit and license under chapter 550 to conduct pari-mutuel wagering and a license under section 849.086 to conduct cardroom operations. Petitioners offer designated player games at their respective cardrooms. The rules proposed for repeal, rules 61D-11.001(17) and 61D-11.002(5), relate to the play of designated player games. Rule 61D-11.001(17) provides that “‘[d]esignated player’ means the player identified by the button as the player in the dealer position.” Rule 61D-11.002(5) provides that: Card games that utilize a designated player that covers other players’ potential wagers shall be governed by the cardroom operator’s house rules. The house rules shall: Establish uniform requirements to be a designated player; Ensure that the dealer button rotates around the table in a clockwise fashion on a hand to hand basis to provide each player desiring to be the designated player an equal opportunity to participate as the designated player; and Not require the designated player to cover all potential wagers. Both rules were adopted on July 21, 2014. Both rules list sections 550.0251(12), and 849.086(4) and (11) as rulemaking authority, and section 849.086 as the law implemented. Designated Player Games A designated player game is a subset of traditional poker games in which a designated player plays his or her hand against each other player at the table, instead of all players competing against each other. The term “designated player game” is used synonymously with “player banked games.”3/ However, a designated player is not a cardroom operator. In traditional “pool” poker games, each player bets into a central pool, with the winning hand(s) among all of the players collecting from the pool of bets, minus the cardroom rake. In designated player games, each player at the table makes an individual bet, and compares their hand against the designated player’s hand. If the player’s hand is better than the designated player’s hand, then the designated player pays the player from the designated player’s stack of chips. If the designated player’s hand is better than the player’s hand, then the designated player collects the player’s wager. At an eight- seat table, it is as though there are seven separate “player versus designated player” games. Designated player games were first played at the Ebro (Washington County Kennel Club) cardroom in 2011. The game, known as “double hand poker,” was demonstrated to Respondent, and subsequently approved for play. Though the internal control that describes the rules of game play was not offered in evidence, a preponderance of the evidence demonstrates that the game used a designated player. After Respondent’s approval of Ebro’s double hand poker, Respondent entered an order rescinding its approval due to concerns that the use of a designated player resulted in the establishment of a banking game. That decision was challenged, and subsequently withdrawn, with the result being that “Ebro may immediately resume play of Double Hand Poker as approved by the division.” In 2012, the Palm Beach Kennel Club cardroom began offering “tree card poker” with a designated player. Although tree card poker had been approved by Respondent, the designated player element had not. Thus, since the game was not being played in accordance with the approved internal control, it was unauthorized. Respondent investigated the playing of tree card poker at Palm Beach Kennel Club. A video demonstration was provided that showed two hands of tree card poker being played with a designated player. The video depicted a single designated player playing his hand against each other player at the table, and paying or collecting wagers based on each individual hand. After having reviewed the demonstration video, Respondent ultimately determined that the use of a designated player did not violate the prohibition against banking games as defined. The Adoption of the Designated Player Rules As requests for approval of internal controls for games using designated players became more common, Respondent determined that it should adopt a rule to establish the parameters under which designated player games would be authorized. On December 16, 2013, after having taken public comment at a series of rulemaking workshops, Respondent published proposed rule 61D-11.002(5) which provided as follows: 61D-11.002 Cardroom Games. * * * Card games that utilize a designated player that covers other players’ wagers shall: Allow for only one designated player during any single hand; Not require the designated player to cover all wagers that could be made by the other players in the game; Not allow other players to cover wagers to achieve winnings that the designated player could have won had he or she covered the same wagers; Not allow or require a player to buy in for a different amount than any other player in the game in order to participate as the designated player; and Rotate a button or other object to designate which player is the designated player. The button or other object shall rotate clockwise around the table to give each player the opportunity to participate as the designated player. On February 14, 2014, a challenge to the proposed rule was filed that objected to restrictions on the manner in which designated player games could be conducted. The rule challenge hearing was continued, and the case placed in abeyance pending negotiations between the parties. On March 14, 2014, Respondent filed a Notice of Change to the proposed rule 61D-11.002, which added the following provisions to proposed rule 61D-11.002: The designated player shall: Cover the table minimum for each participating player; and Pay each player an amount above the table minimum equal to their pro rata share of the pot in the event the designated player cannot cover all wagers. A public hearing on the changes to the proposed rule was held on May 8, 2014. As to the designated player provisions of the proposed rule, Respondent received the following comment: [I]f we could modify this . . . taking the existing paragraph 5 and come up with three new criteria, one being uniform requirements for a designated player included within the house rules; allowing for the dealer button to rotate on a hand-by-hand basis for qualified designated players; also, not requiring the designated player to cover all potential wagers, but nonetheless allowing the house rules to set a designated minimum buy-in amount or just a chip count. I think if we had those particular parameters, we would allow the preservation of this game to continue in its current fashion . . . . And . . . we’re going to avoid [] any argument that the department has somehow created a banked card game, because the biggest thing here is that we’re not requiring that the designated player meet all the theoretical payouts of the game. On May 19, 2014, written comments were submitted on behalf of several pari-mutuel facilities. Those comments included proposed language that is identical to the rule that was ultimately adopted, and included the following: Multiple jurisdictions have determined a key element to banked card games is the house requiring all wagers be covered. We propose this language to distinguish between lawful games and impermissible banked games. On June 9, 2014, Respondent filed a Notice of Change that adopted the industry’s proposed language, and changed proposed rule 61D-11.002 to its present form. On June 13, 2014, the challenge to proposed rule 61D-11.002(5) was voluntarily dismissed, and the case was closed. On July 21, 2014, rule 61D-11.002(5) became effective. There can be little doubt that Respondent understood that it was, by its adoption of rule 61D-11.002(5), recognizing player banked games in which a designated player plays his or her hand against each other player at the table. The rule is substantial evidence that, as of the date of adoption, Respondent had determined that designated player games did not violate the prohibition against “banking games” as that term is defined in section 849.086. Internal Controls Over the course of several years, beginning generally in 2011 and extending well into 2015, Respondent was presented with internal controls from cardrooms around the state for playing designated player games. Internal controls are required before a particular game may be offered, and describe the rules of the game and the wagering requirements. The internal controls submitted by the Jacksonville Kennel Club; the Daytona Beach Kennel Club; the West Flagler Associates/Magic City Poker Room; and the Naples/Ft. Myers Greyhound Track Cardroom, described games in which designated players played their hand against those of the other players at the table, and paid and collected wagers from the designated player’s chip stack based on the rank of the designated player’s hand against the individual players. The games described did not involve pooled wagers, and clearly described player banked games. Respondent approved the internal controls for each of the four facilities. The process of approving internal controls occasionally included the submission of video demonstrations of the games described in the internal controls for which approval was being sought. Approval of internal controls was never done without the review and assent of Respondent’s legal department or the division director. With regard to the rules of the designated player games that underwent review and approval by Respondent, “all of them are about the same, few differences.” From 2011 through mid-2015, Respondent approved internal controls for playing one-card poker, two-card poker, three-card poker, Florida Hold ‘Em, and Pai Gow poker using designated players at numerous cardroom facilities. A preponderance of the evidence establishes that Respondent was aware of the fact that, for at least several facilities, “eligible” designated players were required to meet minimum financial criteria, which ranged from a minimum of $20,000 in chips, up to $100,000 in chips. In the case of the Daytona Beach Kennel Club cardroom, internal controls called for a designated player to submit an application, agree to a background check, and submit a deposit of $100,000. Respondent approved those internal controls. DBPR Training In August 2015, Mr. Taylor was invited by the Bestbet cardroom in Jacksonville4/ to participate in a training session it was offering for its employees. Mr. Taylor is an investigator for Respondent, and visited the pari-mutuel facilities at least once per week. Mr. Taylor was invited by the facility to get an overview of how the cardroom games that had been approved by Respondent, including designated player games, were played. The games that were the subject of the training were substantially similar to those depicted in the April 2012 training video, and those he had observed during his weekly inspections. The designated player games for which training was provided had been approved by Respondent. In September 2015, training in designated player games was provided at Respondent’s Tallahassee offices to several of its employees. Mr. Taylor perceived the training “as an overview to give us an idea of what we are going to see.” Neither Mr. Taylor nor any other participant in the training offered any suggestion that the training was being provided in anticipation of a shift in Respondent’s practice of approving the internal controls for designated player games. Current Rulemaking On September 23, 2014, Respondent published a Notice of Development of Rulemaking. The notice cited 15 of the 30 subsections of chapter 61D-11 as being the subject areas affected by the notice, and provided that “[t]he purpose and effect of the proposed rulemaking will be to address issues discovered in the implementation and practical application of cardroom rules adopted on July 21, 2014.” There is nothing in the notice to suggest that Respondent had modified its position on designated player games, and its continued approval of institutional controls approving such games is strong evidence that it had not. On August 4, 2015, Respondent published a Notice of Meeting/Workshop Hearing for a rule workshop to be held on August 18, 2015. The Notice listed each rule in chapter 61D-11 as the “general subject matter to be considered,” including those related to games of dominos. Respondent asserted that it had “posted a version of amended cardroom rules that included the [repeal of rule 61D-11.005] on its website,” though such was not published, nor did Respondent provide a record citation in support of its assertion. On October 29, 2015, Respondent published its proposed amendments to chapter 61D-11. Rule 61D-11.001(17), which defines the term “designated player” as “the player identified by the button as the player in the dealer position,” was proposed for repeal. Rule 61D-11.002(5), as set forth above, which had established the standards for designated player games, was proposed for repeal. Rule 61D-11.005 was proposed for amendment to add subsection (9), which provided that “[p]layer banked games, established by the house, are prohibited.” On December 2, 2015, the Division held a public hearing on the proposed amendments. During the public hearing, Mr. Zachem made it clear that the intent of the proposed amendments was to change the Division’s long-standing and consistently applied construction of section 849.086 as allowing designated player games to one of prohibiting designated player games, and in that regard stated that: The rules pertaining to designated player games are now going to be correlated with the statute that is the prohibition against designated player games. The statute does not allow designated player games. There has to be a specific authorization for a type of game in statute, and there is none in 849.086 pertaining to designated player games . . . . When some of these definitions in other areas were created, I don’t think that the concept of what these games could even become was fathomed by the division. Given the process by which internal controls for designated player games were approved by Respondent, including written descriptions and video demonstrations of play, the suggestion that Respondent could not “fathom” the effect of its rules and decisions is not accepted. On December 11, 2015, Petitioners individually filed petitions challenging the validity of the proposed rules. The cases were consolidated and ultimately placed into abeyance pending efforts to resolve the issues in dispute. Agency Action Concurrent with Rulemaking After the December 2015 public hearing, and prior to the adoption of any amendments to chapter 61D-11, Respondent filed a series of administrative complaints against cardrooms offering designated player games. Those administrative complaints were very broadly worded, and reflected Respondent’s newly-developed position that designated player games constituted “a banking game or a game not specifically authorized by Section 849.086, Florida Statutes.” In that regard, Mr. Zachem testified that a cardroom could have been operating in full compliance with its Respondent-approved internal controls and still have been the subject of an administrative complaint.5/ The position of Respondent was made clear by Mr. Zachem’s statement that if a cardroom has an approved designated player game “where a banker is using their table, their dealer, their facility they [the cardroom] are establishing a bank.”6/ Thus, there can be little doubt that Respondent now construes section 849.086 to mean that player banked games constitute prohibited “banking games” because, by allowing the player banked game in its facility, the cardroom “establishes” a bank against which participants play. After the December public hearing, Ms. Helms was instructed that she was to no longer approve internal controls if they included provisions regarding designated players. That blanket instruction came with no conditions. Since that instruction, the internal controls for at least one facility have been disapproved, despite their being “about the same” as internal controls that had been previously approved for other facilities. Ms. Helms testified that after the December 2015 rule hearing, “things kind of turned around” with regard to Respondent’s position on designated player games. She then rethought her selection of words, stating instead that “things changed.” Given the totality of the evidence in this case, Ms. Helms’ statement that the position of Respondent towards designated player games “turned around” is the more accurate descriptor. Notice of Change On January 15, 2016, the Division published a Notice of Change/Withdrawal of proposed rules. Through the issuance of this notice, the Division withdrew proposed rule 61D-11.005(9). The proposed repeal of rules 61D-11.001(17) and 61D-11.002(5) remained unchanged. Since that notice of change, the preponderance of the evidence demonstrates that Respondent has stopped approving internal controls that propose the offering of designated player games, and has continued to take action against facilities that offer designated player games. Respondent’s statements and actions, including those made in the course of this proceeding, demonstrate that Respondent intends the repeal of rules 61D-11.001(17) and 61D-11.002(5), to effectuate the prohibition of designated player games despite the withdrawal of proposed rule 61D-11.005(9). Lower Cost Regulatory Alternative When it proposed the subject amendments to rule 61D-11 on October 29, 2014, Respondent had not prepared a statement of estimated regulatory costs. Rather, the notice of proposed rule provided that: The agency has determined that this rule will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the agency. The agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: the economic review conducted by the agency. Any person who wishes to provide information regarding the statement of estimated regulatory costs, or to provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice. On November 19, 2015, in conjunction with the rulemaking process described above, a number of licensed cardroom operators, including some of the Petitioners, timely submitted a good faith proposal for a lower cost regulatory alternative (“LCRA”) to the proposed amendments to chapter 61D-11 that would have the effect of prohibiting designated player games, citing not only the creation of rule 61D-11.005(9), but the repeal of rule 61D-11.002(5). A preponderance of the evidence demonstrates that the LCRA indicated that the rule was likely to directly or indirectly increase regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. The LCRA, as described in the letter of transmittal, also concluded that regulatory costs could be reduced by not adopting the proposed rule amendments, thus maintaining Respondent’s previous long-standing interpretation of section 849.086, and thereby accomplishing the statutory objectives. Respondent employed no statisticians or economists, and there was no evidence to suggest that any such persons were retained to review the LCRA. Though Mr. Zachem did not “claim to be an expert in statistics,” he felt qualified to conclude that the LCRA was “a bit of a challenging representation.” Thus, Respondent simply concluded, with no explanation or support, that “the numbers that we received were unreliable.” Respondent did not prepare a statement of estimated regulatory costs or otherwise respond to the LCRA. Respondent argues that its abandonment of proposed rule 61D-11.005(9), which was the more explicit expression of its intent to prohibit designated player games, made the LCRA inapplicable to the rule as it was proposed for amendment after the January 15, 2016, notice of change. That argument is undercut by the fact that Respondent did not amend its statement of estimated regulatory costs as a result of the change in the proposed rule. Moreover, the evidence is overwhelming that Respondent, by its decision to disapprove internal controls that included designated player games, and its enforcement actions taken against cardrooms offering designated player games, specifically intended the amendments repealing the designated player standards to have the effect of prohibiting designated player games. Thus, despite the elimination of the specific prohibition on designated player games, there was no substantive effect of the change. Therefore, the LCRA remained an accurate expression of Petitioners’ estimated regulatory costs of the proposed rule. Ultimate Findings Respondent has taken the position that the repeal of rule 61D-11.005(9) was undertaken “[f]or clarity with the industry.” That position is simply untenable. Rather, Respondent has taken an activity that it previously found to be legal and authorized and, by repealing the rule and simply being silent on its effect, determined that activity to be prohibited. By so doing, Respondent has left it to “the industry” to decipher the meaning and effect of a statute that is, quite obviously, ambiguous and in need of the interpretive guidance that has been and should be provided by rule. The evidence is conclusive that, by its repeal of rule 61D-11.002(5), Respondent simply changed its mind as to whether playing with a designated player constituted the establishment of a prohibited banking game.7/ It previously determined that such games were lawful under the terms of section 849.086; it has now determined they are not. Though there is substantial evidence to suggest that the reason for the change was related to the renegotiation of the Seminole Compact, the reason is not important. What is important is that Respondent has taken divergent views of the statute in a manner that has substantially affected the interests of Petitioners. For Respondent to suggest that its repeal of the rules is a clarification, a simplification, or a reflection of the unambiguous terms of the statute, and that Petitioners should just tailor their actions to the statute without any interpretive guidance from Respondent, works contrary to the role of government to provide meaningful and understandable standards for the regulation of business in Florida. Respondent cannot, with little more than a wave and well-wishes, expect regulated businesses to expose themselves to liability through their actions under a statute that is open to more than one interpretation, when the agency itself has found it problematic to decipher the statute under which it exercises its regulatory authority.
Findings Of Fact The 1996 session of the legislature enacted Chapter 96-364, Laws of Florida, 1996, which created, effective January 1, 1997, Section 849.086, Florida Statutes. Section 849.086, Florida Statutes, authorizes pari-mutuel permitholders which meet certain conditions to operate cardrooms on those days when live racing is conducted at their respective pari-mutuel facilities. Section 849.086(1), Florida Statutes, sets forth the legislative intent with regard to cardroom facilities and reads as follows: Legislative Intent.--It is the intent of the Legislature to provide additional entertain- ment choices for the residents of and visitors to the state, promote tourism in the state, and provide additional state revenues through the authorization of the playing of certain games in the state at facilities known as cardrooms which are to be located at licensed pari-mutuel facilities. To ensure the public confidence in the integrity of authorized cardroom operations, this act is designed to strictly regulate the facilities, persons, and procedures related to cardroom operations. Furthermore, the Legislature finds that authorized games as herein defined are considered to be pari- mutuel style games and not casino gaming because the participants play against each other instead of against the house. Respondent is the agency granted regulatory authority with regard to cardroom operation pursuant to a grant of rulemaking power set forth in Section 849.086(4)(a)-(f), Florida Statutes as created by Section 20 of Chapter 96-364, Laws of Florida, 1996. Section 849.086(4)(a)-(f), Florida Statutes, reads as follows: Authority of Division. - The Division of Pari-mutuel Wagering of the Department of Business and Professional Regulation shall administer this section and regulate the operation of cardrooms under this section and the rules adopted pursuant thereto, and is hereby authorized to: Adopt rules, including, but not limited to: the issuance of cardroom and employee licenses for cardroom operations; the operation of a cardroom; recordkeeping and reporting requirements; and the collection of all fees and taxes imposed by this section. Conduct investigations and monitor the operation of cardrooms and the playing of authorized games therein. Review the books, accounts, and records of any current or former cardroom operator. Suspend or revoke any license or permit, after hearing, for any violation of the provisions of this section or the administrative rules adopted pursuant thereto. Take testimony, issue summons and subpoenas for any witness, and issue subpoenas duces tecum in connection with any matter within its jurisdiction. Monitor and ensure the proper collec- tion of taxes and fees imposed by this section. Permitholder internal controls are mandated to ensure no compromise of state funds. To that end, a roaming division auditor will monitor and verify the cash flow and accounting of cardroom revenue for any given operating day. Respondent is also provided additional rulemaking authority with regard to cardrooms through Section 21 of Chapter 96-364, Laws of Florida, 1996, which amended and added subsections (12) and (13) to Section 550.0251, Florida Statutes. Those subsections read as follows: The division shall have full authority and power to make, adopt, amend, or repeal rules relating to cardroom operations, to enforce and to carry out the provisions of s. 849.086, and to regulate the authorized cardroom activities in the state. The division is authorized to adopt emergency rules prior to January 1, 1997, to implement the provisions of s. 849.086. * * * The division shall have the authority to suspend a permitholder's permit or license, if such permitholder is operating a cardroom facility and such permitholder's cardroom license has been suspended or revoked pursuant to s. 849.086. The Term "Pot" Proposed rule 61D-11.001(l2) provides: 'Pot' means the total amount wagered in a hand or round of cards which shall not exceed $10.00 in chips or tokens. Respondent asserts that statutory authority for this rule is Section 849.085(2)(a) and Section 849.086(8)(b), Florida Statutes, which read respectively as follows: 'Penny-ante game' means a game or series of games of poker, pinochie, bridge, rummy, canasta, hearts, dominoes, or mah-jongg in which the winnings of any player in a single round, hand or game do not exceed $10 in value. * * * The winnings of any player in a single round hand or game may not exceed $10 in value. The fee charged by the cardroom for participation in the game shall not be included in the calculation of the limita- tion on the pot size provided in this paragraph. The cardroom act does not set forth a definition of the term "pot", nor does Section 849.085(2)(a), Florida Statutes, contain a pot limit. The statutory language is unambiguous: The "winnings of any player in a single round, hand, or game may not exceed $10 in value." The limitation on winnings is further referenced in the language of Section 849.086(8)(b), Florida Statutes, excluding "the calculation of the limitation on the pot size" from the $10 winnings limitation by any player. Respondent acknowledges that its construction of Section 849.086(8)(b), and Section 849.085(2)(a), Florida Statutes, requires that the term "any player" be construed to mean "all players", contrary to the clear statutory wording. This same agency construction, applied to Section 849.086(8)(b), Florida Statutes, renders meaningless the term "the calculation of" the limitation on pot size which term exists because pot size will vary, i.e. when multiple winner card games are played. The impropriety of Respondent's definition of the term pot to include an improper limit of $10 in terms of amounts wagered is demonstrated by the game of Hi-Lo Seven Card Stud, a form of poker set forth in Hoyle's Modern Encyclopedia Of Cardgames in which there are two separate and distinct winners, the high winner and the low winner. These two separate and distinct winners each may win $10 or less, though the total pot size limit calculated in accordance with the rules of such game may equal but not exceed $20. Respondent's proposed rule 61D-11.002(2), which is unchallenged, authorizes cardgames to be played in a manner set out in Hoyle's Modern Encyclopedia of Cardgames. Cardroom operators are also authorized by the cardroom act to charge a "rake" which is defined as a set fee or percentage of the pot assessed by the cardroom operator for providing the services of the dealer, table, or location for playing the authorized game. Section 849.086(2)(k), Florida Statutes. Where the cardroom operator charges a rake as a percentage of the pot, the amount wagered in a game such as Seven Card Stud may exceed $10, as demonstrated by Petitioners' Exhibit 1 in which such a game was conducted with the cardroom operator charging a rake as a percentage of the pot. The amount wagered inclusive of the rake may exceed $10, but the pot available for the winner at the end of the game after deduction of the rake is $10. As established by testimony of Petitioners' expert at the final hearing and Petitioner's exhibit 1, dealers are trained to specifically control the pot size through such practices as the placement of bets by players in front of their cards. Bets are moved into the pot only by the dealers. The stacking of chips in easily observable and countable $l stacks and in rows of 5 assists the dealer who stops bets where, if all remaining players bet, the $10 per player winnings limit would be exceeded. This precludes a situation from arising in which chips not accounted for as rake or as winnings within the $10 "winnings of any player" limitation are in the pot at anytime during the game. Section 849.086(8)(a), Florida Statutes, provides that the calculation of the limitation on pot size is dependent on the "winnings of any player in a single round, hand or game" not exceeding $10. Respondent's definition of the term "pot" in proposed rule 61D- 11.001(12) as an absolute maximum amount of $l0 based on wagers, rather than a limitation on the winnings of card games with multiple winners, or winnings of any player in a single round, hand, or game, exclusive of the percentage rake that may be charged, is found to be without statutory authority and is arbitrary and capricious. The Terms "Game", "Hand", and "Round" Proposed rule 61D-11.001(6) provides: 'Game' means a card game which results in a winner who achieves a desired result required to win a pot not to exceed $10.00 in chips or tokens. Proposed rule 61D-11.001(7) provides: 'Hand' means a single game of cards, one deal of cards to each player based on the rules of the game, resulting in a winner of a pot not to exceed $10.00 in chips or tokens. Proposed rule 61D-11.001(14) provides: 'Round' means a cycle of bets made by the players following the deal of the cards and resulting in a player winning the pot which shall not exceed $10 in chips or tokens. Respondent includes the same $10 pot limitation in the challenged definition of the term "game" found in proposed rule 61D-11.001(6);"hand" found in proposed rule 61D-11.001(7); and "round" found in proposed rule 61D- 11.001(14). Upon the same findings noted above relative to the definition of "pot", such rules are found to be in excess of Respondent's statutory authority and are arbitrary and capricious. Additionally, Section 849.086(8)(a), Florida Statutes, has defined authorized games to mean those games "authorized by s. 849.085(2)(a)". In turn, Section 849.085(2)(a), Florida Statutes, includes non-card games within the definition of authorized games, i.e. dominoes and mah-jongg. Consequently, Respondent's limitation of the term "game" to only cardgames is found to be in excess of the statutory authorization and is arbitrary and capricious. The term "round" means the cycle of bets in a single game and there may be several cycles of bets in a single game, a fact conceded by Respondent. This was demonstrated by Petitioners' Exhibit 1 in the playing of Seven Card Stud - one winner. While the winner of such game received $10, the winnings were based on several cycles of bets conducted over the course of the single game. Respondent has artificially restricted the term "round" to a cycle of bets following the deal of the cards with such single cycle resulting in a player winning a pot of $10 or less. Respondent's rule definition in proposed rule 61D-11.001(14) limits statutorily authorized activity, exceeds the Respondent's statutory authority and is arbitrary and capricious. The Term "Jackpot" Proposed rule 61D-11.001(10)(b) defines the term "jackpot" to mean: Any amount wagered in a round, hand, or game in excess of $10 in value paid out to a player or players once a desired result is achieved; Any amount wagered in a round, hand, or game in excess of $10 in value which is accumulated and paid out to a player or players once a desired result is achieved; or Any prize or cash award in excess of $10 in value paid out to a player or players once a desired result is achieved. A "jackpot" in the context of cardrooms occurs when the house deducts from each hand played a certain amount which is accumulated over many hands and is placed in a separate jackpot fund and paid out when there is a defined occurrence such as a player achieving a royal flush. The definition of jackpot in 61D-11.001(10)(a) is in substance and effect the same definition as the term "pot" found in proposed rule 61D- 11.001(12). This definition would preclude the playing of the authorized game Hi-Lo Seven Card Stud in which the winnings of two separate and distinct players are $10 but in excess of $10 in the aggregate. Proposed rule 61D-11.001(10)(a) is found, on the basis of the same findings set forth relative to Respondent's definition of "pot" in proposed rule 61D-11.001(12), to exceed Respondent's statutory authority and to be arbitrary and capricious. The definition of jackpot set forth in proposed rule 61D-11.001(10)(b) would preclude the playing of the authorized game of Hi-Lo Seven Card Stud where the amount wagered is accumulated over several betting cycles prior to the winners being declared with the amount awarded to each winning player being $10 or less but with the aggregate amount awarded to all players exceeding $10 in value. Upon the same findings set forth relative to the Division's definition of the term "pot", proposed rule 61D-11.001(10)(b) is found to exceed Respondent's statutory authority and is arbitrary and capricious. Likewise, the definition of jackpot set forth in proposed rule 61D- 11.001(10)(c) is reasonably susceptible to an interpretation that would preclude the playing of the authorized game of Hi-Lo Seven Card Stud in which there are two separate and distinct winners of $10 or less but with winnings of more than $10 in the aggregate. Again, upon the same findings set forth relative to Respondent's definition of the term "pot", proposed rule 61D-11.001(10)(c) is in excess of statutory authority and is arbitrary and capricious. The Term "Tournament" Proposed rule 61D-11.001(l7) provides: 'Tournament' means any competition involving more than one round, hand, or game where the winner of the competition or the runners-up receive any prize or cash award in excess of $10 in value. The cardroom statute, Section 849.086(2)(a), Florida Statutes, defines "authorized games" as those games authorized by Section 849.085(2)(a), Florida Statutes. In turn, Section 849.085(2)(a), Florida Statutes, provides: 'Penny-ante game' means a game or series of games of poker in which the winnings of any player in a single round, hand or game do not exceed $10 in value. Section 849.085(2)(a), Florida Statutes, does not require that the winnings of the player be paid at the conclusion of each single round, hand, or game nor does it require that the player have "won" such single round, hand or game. Further, Section 849.085(2)(a), Florida Statutes, imposes no limit on pot size. The statute does, however, only authorize those winnings which do not exceed $10 in value. Petitioners' expert testified at final hearing to the circumstance of a group of players that pay an entry fee, receive tournament chips, play a specific number of hands of cards and at the end of the designated number of hands the winner or winners who hold the most chips will receive funds which total an amount in excess of $10 but do not exceed $10 per hand played throughout the tournament. The proposed rule and Section 849.085(2)(a), Florida Statutes, clearly permit only $10 payments to game winners. Under the scenario to which Petitioner's expert testified, payments are made at the conclusion of the tournament, in amounts which exceed that authorized by the cardroom statute. Consequently, it is found that such results provide no basis to determine that Respondent's proposed rule 61D-11.001(17), defining the term tournament, is invalid. Prohibitions Proposed rule 61D-11.005(9) provides: Tournaments and jackpots are prohibited. Proposed rule 61D-11.005(9) is found to be in excess of Respondent's statutory authority and arbitrary and capricious only in regard to the prohibition of jackpots. This finding is made on the basis of those findings noted above relating to invalidity of the definition of "Jackpot" in proposed rule 61D-11.001(10). Proposed rule 61D-11.005(10) provides: An accumulation of $10 values based upon the actual number or an average number of rounds, hands, or games played during a competition where the winner of the competition and the runners up receive the accumulated amount, a portion thereof, or the prize representing the accumulated amount or a portion thereof is prohibited. On the basis of findings noted above relative to proposed rule 61D- 11.001(17), which defines the term "tournament", proposed rule 61D-11.005(10), is not in excess of Respondent's statutory authority and is not arbitrary and capricious. Proposed rule 61D-11.005(11) provides: No amount wagered by a player, ante, or participation fee collected by the house shall be accumulated into a pool for purposes of paying out the accumulated amount once a desired result is achieved by a patron or patrons. On the basis of findings previously set forth relating to proposed rule 61D-11.001(10), the definition of "jackpot" and in particular subsection (10)(b), the prohibition of proposed rule 61D-11.005(11) that no amount wagered may be accumulated even within a single hand or game, is in excess of Respondent's statutory authority and is arbitrary and capricious. Ordinance Requirement Proposed rule 61D-11.007 provides in pertinent part: A licensed pari-mutuel permitholder desiring to operate a cardroom must submit to the Division proof that the county commission of the county which the permit- holder intends to operate the cardroom has passed an ordinance approving cardroom operations. The proof of the passage of a county ordinance shall consist of a copy of the certified ordinance as filed with the Secretary of State. The effective date of the ordinance shall be upon filing with the Secretary of State or later if so prescribed. If a cardroom ordinance is repealed or amended, the effective date of the repeal or amendment shall be upon filing with the Secretary of State or later if so prescribed. If the cardroom ordinance is repealed, cardroom operation shall be ceased upon the effective date of repeal. * * * (8) An applicant for an annual cardroom license shall complete a cardroom license application, BPR Form 16-002 . . . BPR Form 16-002 is entitled Permitholder Application for Annual License to Operate a Cardroom. Question 10 of this form provides, "If this is your initial cardroom operator license application, enclose a copy of the certified ordinance as filed with the Secretary of State." Respondent contends that its authority to promulgate this rule is derived from the provisions of Section 849.086(16), Florida Statutes, which provides: County Commission Approval -- The Division of Pari-Mutuel Wagering shall not issue any license under this section except upon proof in such form as the Division may prescribe that a majority of the county commissioners in the county where the applicant for such license desires to conduct cardroom gaming has voted to approve such activity within the county. Respondent acknowledges that Section 849.086(16), Florida Statutes, does not expressly require the adoption of an ordinance by a county commission. Respondent's position is that the phrase "except upon proof in such form as the Division may prescribe" provides the unlimited power or authority to require the local government approval to be in a form Respondent may desire, here the adoption of an ordinance. This is as opposed to the statutory language which requires the applicant to report the means of local approval in a manner (form) acceptable to Respondent. In the analogous statutes governing municipalities, the factual distinction between a resolution and an ordinance is set forth in Section 166.041(1)(a) and (b), Florida Statutes: 'Ordinance' means an official legislative action of a governing body, which action is a regulation of a general and permanent nature and enforceable as a local law. * * * 'Resolution' means an expression of a governing body concerning matters of administration, an expression of a temporary character, or a provision for the disposition of a particular item of the administrative business of the governing body. Section 849.086(16), Florida Statutes, requires only that a majority of the county commissioners in the county where the applicant proposes to conduct cardroom activity vote to approve that activity within the county. Neither Section 849.086(16), Florida Statutes, nor any other provision of the cardroom act authorize a county commission to exercise any regulatory jurisdiction or control enforceable as a local law over the operation of cardrooms. This authority instead is vested in Respondent. Consequently, as a matter of law, Respondent's authority to designate the form which approval may take is not a grant of authority to dictate the means of passage of substantive legislation by a county commission and the proposed rule's attempt to do so through the requirement of ordinance passage exceeds Respondent's authority. Section 125.01(1)(t), Florida Statutes, provides: The legislative and governing body of a county shall have the power to carry on county government. To the extent not inconsistent with general or special law, this power includes, but is not restricted to, the power to: * * * (t) Adopt ordinances and resolutions necessary for the exercise of its powers and prescribe fines and penalties for the violation of ordinances in accordance with law. The adoption of a resolution approving cardrooms by a county commission is not, as a matter of law, inconsistent with the provisions of Section 849.086(16), Florida Statutes. Dade County adopted a resolution, by unanimous vote of all the county commissioners, approving the conduct of cardrooms and all activities authorized by Section 849.086, Florida Statutes, within the County. A certified copy of this resolution was received in evidence at the final hearing. Respondent's representative acknowledged that there is no better proof of the adoption of such a resolution then a certified copy of the resolution. There is, as a matter of law, no element of proof of the approval required by Section 849.086(16), Florida Statutes, that is not reflected in the Dade County resolution approving cardrooms. Proposed rule 61D-11.007(1), (2) and that portion of (8) and of BPR Form 16-002 which seek to impose the ordinance requirement are in excess of Respondent's statutory authority and are arbitrary and capricious. Cardroom Business Occupational License Proposed rule 61D-11.008(2) provides: A corporation, general or limited partnership, sole proprietorship, business trust, joint venture, or unincorporated association, or other business entity may not be issued or hold a cardroom business occupational license in this state if any one of the persons or entities specified in paragraph (a) has been determined by the Division not to be of good moral character, to have filed a false report to any govern- ment agency, pari-mutuel wagering or gaming commission or authority, or has been convicted of any offense specified in paragraph (b). 1. The cardroom business occupational license; An employee of the licensee; The sole proprietor operating under the license; A corporate officer or director of the licensee; A general partner of the licensee; A trustee of the licensee; A member of an unincorporated association of the licensee; A joint venturer of the licensee; The owner of more than 5 percent of any equity interest in the licensee, whether as a common shareholder, general or limited partner, voting trustee, or trust beneficiary; or An owner of any interest in the licensee, including any immediate family member of the owner, or holder of any debt, mortgage, contract, or concession from the licensee, who by virtue thereof is able to control the business of the licensee. 1. A felony or misdemeanor involving forgery, larceny, extortion, or conspiracy to defraud, in this state or any other state or under the laws of the United States. 2. A felony or misdemeanor set forth in s. 550.105, Florida Statutes. Proposed rule 61D-11.008(2) is, as Respondent's Director has acknowledged, an almost verbatim copy of Section 550.1815(1), Florida Statutes, which authorizes Respondent to determine whether applicants for a pari-mutuel wagering permit are of good moral character. Pursuant to Section 849.0866(5), Florida Statutes, only the holder of such a pari-mutuel wagering permit may be licensed to operate a cardroom. It is found, as a mixed question of law and fact, that Respondent is authorized to seek good moral character information as part of the application process. Specifically, Section 849.086(6)(f), Florida Statutes, incorporates the provisions of Section 550.105(9), Florida Statutes, as follows: (f) The division shall promulgate rules regarding cardroom occupational licenses. The provisions specified in s. 550.105(3),(4),(5),(6),(7) and (9) relating to licensure shall beapplicable to cardroom occupational licenses. Section 550.105(9), Florida Statutes, provides that Respondent may seek ". . . any information [Respondent] determines is necessary to establish the identity of the applicant or to establish that the applicant is of good moral character." Proposed rule 61D-11.008(2) is not in excess of Respondent's statutory authority, does not vest unbridled discretion in Respondent and is not arbitrary and capricious. Similarly, it is found as a matter of law and fact that proposed rule 61D-11.008(5) which requires an FDLE fingerprint processing and criminal records check fee "for each person or entity as specified in paragraph (2)(a)" of the rule is supported by Section 849.086(6)(f), Florida Statutes, which incorporates the provisions of Section 550.105(9), Florida Statutes, and is not in excess of the Division's statutory authority, does not vest unbridled discretion in Respondent and is not arbitrary and capricious. Proposed rule 61D-11.008(7) requires that: An applicant for an annual cardroom business occupational license shall complete a card- room business occupational license application, BPR Form 16-004, and submit the $250.00 fee for an annual cardroom business occupational license. Proposed rule 61D-11.008(7) is supported by provisions of Section 849.086(4), and (6), Florida Statutes, which incorporates the provisions of Section 550.105(9), Florida Statutes, and is not in excess of the Division's statutory authority, does not vest unbridled discretion in Respondent and is not arbitrary and capricious. Cardroom Employee Occupational License Proposed rule 61D-11.009(2) provides: All applicants for a . . . cardroom employee occupational license, shall complete a card- room employee occupational application BPR Form 16-005. . . BPR Form 16-005 consists of two forms, the Cardroom Employee Occupational License Application and the Request for Release of Information and Authorization to Release information forms. BPR Form 16-005, the Cardroom Employee Occupational License Application in question 14 requires that the applicant provide a complete listing of all addresses where the applicant has resided during the last five years under penalty that the application may be denied or the license revoked based upon any misstatements or omissions in the application. As previously noted, Section 550.105(9), Florida Statutes, adopted by Section 849.086(6)(f), Florida Statutes, authorizes Respondent to require an applicant to provide Respondent with any information deemed necessary by Respondent "to establish the identity of the applicant or to establish that the applicant is of good moral character." Despite Petitioners' concerns that cardroom employee occupational license applicants are expected to be highly transient and that such individuals should not be required to execute the proposed rule's release of information form, proposed rule 61D-11.009(2) and the subject BPR Form 16-005 is supported by Respondent's authority in Section 550.105(9), Florida Statutes, as adopted by Section 849.086(6)(f), Florida Statutes, and is not in excess of statutory authority or arbitrary and capricious. Electronic Surveillance Proposed rule 61D-11.012(5) provides: Cardroom operators shall install electronic surveillance equipment to record all gaming activity. The surveillance equipment must provide a cover ratio of one camera per four tables and to record all activity in the cardroom bank and cage and count area. Surveillance cameras and monitors shall be able to record and observe in color or black and white. Cameras must have the capability to zoom in on specific card table(s) and record card table activity. Tapes shall be labeled in chrono- logical order by date and time. Tapes of surveillance records shall be maintained for a period of no less than 14 days. Tapes shall be kept for a longer period of time if requested by the Division or any law enforcement agency. As established by testimony of Terry Fortino, Petitioners' expert in poker cardroom management and operations, many cardrooms, similar to the low stakes games operations contemplated by the cardroom act, do not have cameras on the tables for the reasons that the poker players, dealers and floor managers police the game and the house's money is not at risk. Respondent has made no cost benefit analysis regarding electronic surveillance requirements of the proposed rule. Respondent's representative at the final hearing has never viewed or had demonstrated a surveillance tape that complies with the one camera per four table ratio. Under such an arrangement, people's backs will always be to the camera and at best there will only be limited coverage lacking in detail. While the cameras must have the capabilities to zoom in on a specific card table, the proposed rule is silent as to how such zoom capability would be activated. The pan and tilt feature that enables the camera to zoom in on a table is manually operated. Unless somebody is physically present to monitor a video screen and to operate the pan and tilt controls, the zoom feature is effectively meaningless. The proposed rule's requirement of surveillance by one camera for every four tables is stated to be for the the purpose of obtaining evidence should Respondent desire to take licensing action against a dealer or cardroom operator. Notably, no electronic surveillance has ever been required in the pari-mutuel industry yet Respondent has routinely taken licensing action absent video tapes. Pursuant to Section 849.086(4)(e), Florida Statutes, Respondent is empowered to take testimony, issue subpoenas and subpoenas duces tecum in connection with any matter within its jurisdiction. Section 849.086(4)(f), Florida Statutes, specifically authorizes Respondent to: Monitor and ensure the proper collection of taxes and fees imposed by this section. Permitholder internal controls are mandated to ensure no compromise of state funds. To that end, a roaming division auditor will monitor and verify the cash flow and accounting of cardroom revenue for any given operating day. Section 849.086, Florida Statutes, contains no requirement that electronic surveillance, or any other form of ongoing monitoring of the activities of cardroom players, be provided by a cardroom operator. Daniel Riley, Petitioners' expert in electronic surveillance equipment in the gaming industry, while noting that less expensive fixed camera electronic surveillance of the bank, count area and cages in cardrooms could prove beneficial, projected the cost of providing only the electronic surveillance equipment required by Respondent's proposed rule at $15,320 for four tables and $27,820 for 20 tables. Steven Hlas, Petitioner's expert in pari-mutuel facility management and operation, testified that the cost of providing the proposed rule's required surveillance equipment together with the necessary construction costs, electrical and cable installations and personnel approximated $3,200 per cardroom table seating eight players and that Petitioner Derby Lane's expected cost with 25 cardroom tables was approximately $80,000. The provisions of proposed rule 61D-11.012(5) exceed Respondent's statutory authority, are arbitrary and capricious and impose regulatory costs on the regulated entities which can be reduced or eliminated by the adoption of less costly alternatives that substantially accomplish the statutory objectives, i.e. Respondent's implementation of its statutorily prescribed auditing function by "a roaming division auditor" to "monitor and verify the cash flow" of cardroom revenue. Admissions and Player Count Proposed rule 61D-11.017(4) reads as follows: Each cardroom operator shall file with the Division admission information on BPR form 16-007. Any cardroom operator that wishes to charge admission fees shall notify the Division in writing at least 2 working days prior to the effective date of such change via facsimile. Proposed rule 61D-11.018(2) reads as follows: Every licensed cardroom operator shall file BPR Forms . . . 16-009. . . with the Division by the fifth day of each calendar month for the preceding calendar month's cardroom activity. Taxes are collected with regard to cardroom wagering in two ways. Ten percent of the cardroom operation's monthly gross income, and fifteen percent (or 10 cents, whichever is greater) of the admission charge for entrance to the cardroom, if any. Section 849.086(13)(a) and (b), Florida Statutes. Respondent is required to monitor and ensure the proper collection of taxes and fees. Section 849.086(4)(f), Florida Statutes. Respondent is also called upon by the legislature to generate tax revenue projections for the Revenue Estimating Conference and to supply information to public officials, the industry and the general public regarding the pari-mutuel industry. Further, Respondent will be developing a statistical model to permit it to determine if the correct amount of taxes are being paid to the State, as well as developing essential tax revenue projections. Under the proposed rules, Respondent requires cardroom operators to report statistics regarding the number of persons admitted to the cardroom at each facility, and the number of persons participating in the cardroom games at each facility. Reporting of the number of persons admitted to the cardroom facility is required, regardless of whether a cardroom operator is charging separate admissions fees for the cardroom portion of the pari-mutuel facility, in order to verify and corroborate the cardroom operator's figures regarding the number of people actually gambling. Unlike pari-mutuel racing wagering which operates with a "Totalizator" tracking every individual wager, there is no method of recording individual wagers in the cardroom. Proposed rule 61D-11.017(4) and its requirement of a filing of BPR Form 16-007 is not in excess of Respondent's statutory authority, is not arbitrary and capricious and does not appear to impose excessive regulatory costs on the regulated entity. Proposed rule 61D-11.018(2) requires a cardroom operator to file BPR Form 16-009. This form in turn requires the cardroom operator to report not just the collection of fees or rakes but also the actual number of players to have played at each table during the period of time in which the fees or rakes were collected. Requirements of proposed rule 61D-11.018(2) and BPR Form 16-009 are not in excess of Respondent's statutory authority, are not arbitrary and capricious and do not appear to impose regulatory costs on the regulated entity which could be eliminated by less costly alternatives that substantially accomplish the statutory objective. Stipulated Facts Petitioners have standing to challenge the proposed rules at issue in this proceeding.
The Issue Whether Respondent violated Sections 849.01, 849.15, and 849.09(1)(k), Florida Statutes, and if so what penalty should be imposed pursuant to Section 561.29, Florida Statutes.
Findings Of Fact Respondent, Christina Market Corporation, d/b/a Christina Sandwich Shop, is located at 4085 East Eighth Avenue, Hialeah, Florida. At all times relevant to this proceeding, Respondent held a Series II, COP license, number 23-2039. Gladys Rodriguez is the president and 100 percent stockholder of Respondent. A Series II, COP license is a license issued by the Division of Alcoholic Beverages and Tobacco to sell beer and wine for consumption on the premises. On March 10, 1992, Leonard H. Delmonte, an investigator for the Miami office of the Division of Alcoholic Beverages and Tobacco conducted an inspection of Respondent's premises. Mr. Delmonte observed five coin-operated poker machines and issued a Notice, warning that the poker machines were in violation of Rule 7A-3.004, Florida Administrative Code. On March 24, 1992, Respondent's premises were again inspected. The poker machines had been removed. Phillip Bidart, a sergeant with the organized crime section of the Hialeah Police Department, investigates violations of Chapter 849, Florida Statutes, as part of his duties with the police department. During the last two years he has investigated approximately 45 to 47 premises for gambling violations. Based on these investigations and professional training, Sergeant Bidart has developed expertise in the identification of devices commonly used in gambling and the investigations of violations of Chapter 849. In September, 1992, Sergeant Bidart observed video game machines at Respondent's premises. Later in September or October, 1992, he went in the establishment and saw a Bosconian video game machine which displayed an El Dorado Super Seven game on the screen and saw patrons playing the machine. In December, 1992, Sergeant Bidart sent two detectives to Respondent's establishment. They observed remote control type video game machines. One of the detectives played one of the machines and lost. In January, 1993, the Hialeah police raided an establishment near Respondent and found gambling machines. Shortly thereafter, the police visited Respondent's business and the video games machines previously observed in the fall of 1992 were gone. In late January or early February 1993, Sergeant Bidart observed people playing the video game machines at the Respondent's establishment. He believed that they were gambling because they were adults and were playing after nine o'clock at night. On February 6, 1993, Sergeant Bidart and other Hialeah police officers raided Respondent's business. There were no patrons in the establishment at the time of the raid. The police found and seized three video game machines: a Bosconian, a Mario Brothers, and a Chop-Lifter. Each machine had a coin slot and a paper currency slot which was located on the side of the machine and not in the same area as the coin slot. It is a common characteristic of gambling devices to contain such currency slots. A video gambling machine usually has a meter on the machine which shows the number of credits accumulated by a player. The owners can reset the machine by hitting a button which zeroes out the credit. The El Dorado Super Seven game found on Respondent's premises had such a reset button. During the raid the police also found a remote control on a shelf behind the counter. When one of the top three buttons was pushed, the Bosconian game screen turned into an El Dorado screen and the Mario Brothers screen turned into a Winner's Circle screen. The Chop-Lifter machine was not working; however Ms. Rodriguez advised Sergeant Bidart that the Chop-Lifter screen could be changed to a Cherry Bonus screen by the use of the remote control. A remote control is a device that is commonly used in gambling establishments to change the screens on video machines in order to mask game screens that are used for gambling. When an El Dorado Super Seven game is being played, three columns each containing three items will form three rows, each row containing three items. If three of the same items come up, vertically, horizontally, or diagonally, the player gets credits. El Dorado Super Seven games also have a high-low game which can be played as a bonus. Sergeant Bidart tested the El Dorado game by putting $20 in the machine and playing up to 110 credits. No skill was involved in playing the game. Sergeant Bidart turned on the Winner's Circle game and tested it by putting money in the currency slot. The game is a horse race with eight horses which run across the screen, and the player is supposed to bet on a horse. Sergeant Bidart was not certain how a player was supposed to win so he did not play the game. Based on his experience and training, he concluded that the Winner's Circle is a game of chance commonly used in gambling establishments, and that the screen on the Winner's Circle game was consistent with other Winner's Circle games that he had observed. At the time of the raid, the Bosconian/El Dorado machine contained $1.50 and the Mario Brothers/Winners Circle contained $8.00. There was no money in the Chop-Lifter machine. Ms. Rodriguez told Sergeant Bidart that she had emptied the money from the machines just prior to the raid. During the raid, the police found a blue bank deposit bag containing $1,116.00 in Ms. Rodriguez's purse. Ms. Rodriguez told the police that she had collected the money from the video game machines and that approximately $100 represented the receipts from the music machine. At the time of the raid Ms. Rodriguez said that Tokyo Video owned the machines and collected the money from the machines each week. She gave 40 percent of the receipts to Tokyo Video and kept the remaining 60 percent. She admitted that she had had the machines for three months and that her average net receipt was $300 per week. The police also found yellow slips of paper in Ms. Rodriguez's purse. Ms. Rodriguez told Mr. Bidart that the slips were some of the slips that Tokyo Video gives to her to show how much money she makes on the machines. She gives the slips to her accountant who records the take from the machines as sales. She pays the appropriate tax and normally destroys the slips after reporting the amounts to her accountant. One of the slips is dated 9-29-92 and the other is dated 12-15-92. The other slip is undated. Based on Ms. Rodriguez's admission that the slips show her split with Tokyo Video on the machines, it is concluded that the names under the heading "Modelo Equipo," "Caballo", "Dorado" and "C. Bonus" refer to the Winner's Circle game, the El Dorado game, and the Chop-Lifter game. The slips show that credits were deducted from the amounts that were put in the machines to arrive at the net amounts that would be due Respondent and Tokyo Video. Tally sheets are used in gambling establishments to record payouts to the owners. In the video game gambling business a credit usually represents 25 cents. Tally sheets record the number of credits and games played on the machine. The net due the owners is calculated by dividing the total credits by four. The yellow slips of paper found in Ms. Rodriguez' purse at the time of the raid are tally sheets. Normally, owners of bars with gambling machines will keep records on the premises which show how much they have paid out to players on a particular day or show specific wins. The police also found three sales books. The books contain some pages with names and dates written at the top and had cash entries from 5 to 200. Most of the entries are for 200. Several entries are for an individual named Felix showing cash payments to him. One of the books shows a drawing resembling an El Dorado Super Seven screen when all 7's come up, with the exclusion of the two side scores from the center. The drawing shows three 7's horizontally across the top and across the bottom and three 7's vertically in the center. Above the drawing are the words, "Pago a Felix $2,812.50 Cash." Underneath the drawing is the notation "32 Bet" and underneath that is "11,250 Credit" with an arrow going from the 11,250 to the $2,812.50 above the drawing. The police also found a composition book which contains one page with dollar amounts in two columns titled "pago" and "calro maq." Ms. Rodriguez told Sergeant Bidart that she knew the machines were illegal but that since numerous bars in Hialeah and Opalocka had them she was going to have them too.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding Respondent guilty of violating Sections 849.01, 849.15, and 849.09(1)(k), Florida Statutes and revoking Respondent's alcoholic beverage license No. 23-02039, series 2-COP. DONE AND ENTERED this 29th day of November, 1993, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of November, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-2969 To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the Petitioner's proposed findings of fact: Petitioner's Proposed Findings of Fact. Paragraphs 1, 2, and 3 accepted in substance. Paragraph 4 accepted in substance with the exception of the last sentence. The evidence did not show that Sgt. Bidart testified as an expert witness in the six trials. Paragraphs 5 and 6 accepted in substance. Paragraph 7 accepted in substance with the exception of the third to last sentence. Sgt. Bidart stated that he was not exactly sure how a winner is determined in the Winner's Circle game and that is why he did not play the game. Paragraph 8 accepted in substance with the exception of the proposed finding that an El Dorado game would become a poker game. Sgt. Bidart testified that an El Dorado game would become a High-Low game as a bonus. Paragraph 9 accepted in substance with the exception of the title of the game as "Cherry Blossom." Sgt. testified that Ms. Rodriguez admitted the machine could display a Cherry Bonus game. Paragraphs 10, 11 and 12 accepted in substance. Paragraph 13 accepted in substance with the exception of the next to last sentence which is rejected to the extent that it infers that the method of calculation described Sgt. Bidart was admitted by Ms. Rodriguez. She admitted the slips were used to show how much money she received, but not how her 60 percent share was calculated. Paragraphs 14, 15 and 16 accepted in substance. COPIES FURNISHED: Miguel Oxamendi, Esquire Assistant General Counsel Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007 Emmanuel Perez 2121 Ponce de Leon Boulevard, Suite 240 Coral Gables, Florida 33134 Jack McRay Acting General Counsel Department of Business Regulation 1940 North Monroe Street Tallahassee, Florida 32399 John J. Harris Acting Director Department of Business Regulation 1940 North Monroe Street Tallahassee, Florida 32399
The Issue Whether Petitioner, the Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering, is authorized to charge and collect interest from Respondent, Florida Gaming Centers, Inc., on the unpaid value of the outsbook for the 1995-1996 meet from August 29, 1997, the date payment of the value of the outsbook was due, to September 8, 1998, the date payment was received by Petitioner.
Findings Of Fact At all times relevant hereto, the Respondent held a permit to conduct jai alai pari-mutuel wagering, under License No. 2909-D Amended, issued by the Department. Between July 1, 1995, and June 30, 1996, inclusive, Respondent held jai alai games for the purpose of conducting pari-mutuel wagering on those games. Respondent's meet for the relevant time period ended on June 30, 1996. One year and sixty days after the end of the State of Florida's (State) fiscal year of June 30, 1996, any "out" tickets that remained uncashed escheated to the State pursuant to Section 550.1645(2), Florida Statutes. Once these tickets or the value thereof escheated to the State, Respondent was required to pay the value of such tickets, as reflected on its outsbook, to the Department no later than August 29, 1997. Pursuant to the outsbook prepared by Respondent, the value of the outs for the 1995-1996 meet was $108,221.20. Nonetheless, Respondent failed to submit to the Department the value of the balance of the outsbook within the prescribed time frame and instead held these funds. On June 2, 1998, the Department served an Administrative Complaint on Respondent, alleging that Respondent had failed to timely submit the value of the outsbook to Petitioner. By letter dated September 4, 1998, Respondent submitted to the Department a check for $109,128.60 as payment for the unpaid value of Respondent's outsbook for the 1995-1996 meet. The Department received Respondent's payment on September 8, 1998. Of the total amount Respondent paid over to the Department, $108,221.20 was credited against the unpaid value of the outsbook for the 1995-1996 meet, resulting in full payment of the outstanding outsbook value. The remaining $907.40 paid by Respondent to Petitioner was an overpayment. Petitioner alleges that Respondent is responsible for interest accrued on the unpaid value of the outsbook for the period of time that amount remained unpaid. According to the Department, the interest owed by Respondent as a result of its failure to timely remit the value of the outsbook, "shall be determined at a rate per annum . . . equal to the State's average investment rate for the preceding month to the month for which interest is being calculated." The average interest rate earned on the investment of State funds as determined by the State Treasurer and/or Comptroller" for the time period of August 1997 through August 1998, was 6.73 percent. The Department determined that the interest "shall accrue on the unpaid aggregate principal amount due the State for the month(s) from the respective due date." Based on its calculations and after deducting Respondent's overpayment of $907.40, the Department asserts that Respondent owes the Department approximately $6,573.85 in accrued interest. Respondent disputes that the Department has authority to collect interest on the unpaid amount of the outsbook and alleges the powers of the Department under Section 550.0251, Florida Statutes, do not include such authority.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that (1) an administrative fine of $1,000.00 be imposed against the Respondent for the violation Section 550.1645, Florida Statutes; and, (2) Respondent shall receive a credit of $907.40 toward payment of the administrative fine. RECOMMENDED this 28th day of January, 1999, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1999. COPIES FURNISHED: Deborah R. Miller, Director Division of Pari-Mutuel Wagering Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 William P. Cagney, III, Esquire 3400 Financial Center 200 South Biscayne Boulevard Miami, Florida 33131 Eric H. Miller, Esquire Chief Assistant General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 William Woodyard Acting General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
Findings Of Fact Petitioner designs, manufactures, and sells the "Little Casino" video game machine. The machine is designed to enable a player, through the insertion of either one or two quarters, to play one of four games: poker, high-low, blackjack, or craps. The machine contains two switches which enable the owner to control the cost per game, whether 25 cents or 50 cents per game. Upon deposit of the appropriate amount of money, the player of the game receives 10,000 points to play the selected game. If the operator utilizes the entire 10,000 points in less than four hands or rolls, the game is over. If, however, the operator earns or wins 100,000 points by the conclusion of the fourth hand or roll, a free fifth hand or roll is allowed. If the operator earns 200,000 points by the conclusion of the fifth hand or roll, a free sixth hand or roll is allowed. The player of the game is allowed no more than six hands or rolls in the chosen game, regardless of the number of points scored. Depending upon the game option selected, cards or dice appear on the video screen. So far as can be determined from the record in this cause, the dealing of the cards or roll of the dice is entirely determined by the programming of the machine, and the player is wholly unable to control or influence the initial selection of cards or the roll of the dice. Little Casino does not allow free replays, does not accumulate free replays, and makes no permanent record of free replays. The game is not classified by the United States as requiring a federal gambling tax stamp under any applicable provisions of the Internal Revenue Code. The machine can be set to eliminate what Respondent considers to be the objectionable fifth and sixth hands.
The Issue Whether the proposed repeal of Rule 61D-11.027, Florida Administrative Code, is an invalid exercise of delegated legislative authority because the repeal has the effect of creating or implementing a new rule or policy.
Findings Of Fact The Florida Legislature enacted Section 849.086, Florida Statutes, in 1996. The law authorized the establishment of “cardrooms” at licensed pari-mutuel facilities and dictated the parameters by which games may be conducted at such facilities. In essence, the cardrooms conduct games wherein the players compete against one another. The participants do not wager against “the house.” Instead, the house, that is, the pari-mutuel facility, conducts the games in a non-banking manner. This means the house does not have a financial interest in the outcome of the game(s). For purposes of this case, it is determined that the players who win share fractions of the “pot” created by the entry fees paid to participate in the game(s). The Petitioners in this cause are licensed facilities that have operated cardrooms. Each Petitioner holds a pari- mutuel wagering permit and a valid cardroom license. The Respondent is the state agency charged with the responsibility of administering Section 849.086, Florida Statutes (2005). Section 849.086, Florida Statutes, was amended in 2003 by Section 4, Chapter 2003-295, Laws of Florida. The 2003 amendment imposed a $2.00 bet limitation, with a maximum of three raises per round of betting. This change to the statute required the Respondent to revisit the rules governing cardrooms and, more specifically, the concept of poker “tournaments” being conducted at pari-mutuel facilities. To that end, and after extensive rule-making proceedings, the Respondent adopted rules that were incorporated in Florida Administrative Code Chapter 61D-11. The Respondent intended for the rules to address concerns regarding the $2.00 bet and raise limitations as well as how “re-buys” might affect or potentially allow a violation of such provisions. A “re-buy” describes when a card player is allowed to purchase more chips from the house during a game(s). Florida Administrative Code Rule 61D-11.027 was adopted on May 9, 2004. It was then challenged by pari-mutuel facilities who alleged the rule encompassed more than the statute authorized. Such challenge (DOAH Case No. 04-2950RX), was granted. The Final Order found that the rule (Florida Administrative Code Rule 61D-11.027(2)(a)) exceeded the Agency’s grant of rulemaking authority, modified the specific law implemented, and was arbitrary. Accordingly, the Final Order (DOAH Case No. 04-2950RX) determined that the rule violated Subsections 120.52(8)(b), (c), and (e), Florida Statutes. The Florida First District Court of Appeal affirmed the Final Order by a Per Curiam decision issued on October 28, 2005. Thereafter, the Respondent proceeded with the emergency repeal of the tournament rule in its entirety and issued an advisory letter to all cardroom license holders. The Respondent represented that it cannot reconcile the holding of the court with the explicit language of Section 849.086(8), Florida Statutes (2005). At the hearing, the Respondent represented that additional rulemaking will be necessary. The Respondent does not dispute that tournaments are permissible under the statute. Moreover, the parties agree that prior to the rule, repeal tournaments were conducted using tokens or chips that did not have value. Tournaments were played at licensed cardroom facilities during the period commencing in May 2004 through November 9, 2005. During that time (the period the rule was in effect) counties, cities, and the state received income from the monies remitted by the cardroom facilities. Additionally, the cardrooms employed persons to work the facilities to conduct the various games. After the repeal of the rule, revenues from the cardrooms decreased substantially. Similarly, the cardrooms did not need the number of employees as games were not being conducted. Tournaments at the St. Petersburg Kennel Club have not been conducted since January 17, 2006. From November 2005 through January 17, 2006, the tournaments at the St. Petersburg Kennel Club were conducted using chips or tokens that had “fractional value.” The “fraction” did not correspond to the entry fee charged for the tournament. It is not known whether or not re-buys during the tournaments were allowed. The Respondent issued a Memorandum to Pari-Mutuel General Managers at Cardroom Facilities and Cardroom Managers on January 12, 2006, that provided in part: In light of the recent ruling by the First District Court of Appeals, the Division’s administrative rules regarding tournaments have been repealed on an emergency basis, and are scheduled to be repealed permanently. The Division distributed a memorandum to all cardroom operators regarding Clarification of Cardroom Tournament Rules and Jackpots on November 9, 2005. The Division has also expressed on numerous occasions a serious concern of cardroom operators issuing chips in a fashion that does not represent an even value exchange for money in an attempt to circumvent the $2 bet and three raise limitation outlined in Chapter 849.086(8)(b), Florida Statutes. [Italics in original.] The November 9, 2005, Memorandum referred to in paragraph 14 above provided, in pertinent part: This memorandum is intended to clarify issues regarding the recent ruling by the First District Court of Appeals which affirmed an earlier ruling of the Division of Administrative Hearings (DOAH). The DOAH ruling found that various cardroom rules, which were challenged by Dania Jai Alai and Calder Race Course, are invalid. These rules addressed tournaments, jackpots, the Division’s approval of games, and gifts that enable play in an authorized game. As a result of the ruling, today the Division filed emergency rules to ensure that tournaments are played in compliance with the bet limitation of Section 849.086(8)(b), Florida Statutes. * * * The Final Order that was affirmed by the First District Court of Appeals invalidated the Division’s rules regarding entry fees, re-buys and single table tournaments. The judge held that tournament play is authorized by the cardroom statute. Therefore, cardrooms may set their own entry fees and allow re-buys in tournaments and hold single table tournaments. * * * Unauthorized activity, such as conducting wagering on tournaments that does not conform with the wagering restrictions found in Section 849.086(8)(b), Florida Statutes, or offering of jackpots or gifts that do not comply with the requirements that cardrooms be operated in strict conformity with the statute as required by Section 849.086(3), Florida Statutes, may result in disciplinary action. The memorandums identified above did not change or modify the Respondent’s position regarding whether tournaments are legal or permitted by the statute. To the contrary, the memorandums merely advised the cardroom facilities that they would be held to the statutory standard regarding wagering and that jackpots and gifts would be prohibited. Prior to the appeal of the rule, the Respondent routinely approved tournaments that were based upon the following scheme: A participant paid a $32 buy-in and paid the house $13 for the fee to conduct the tournament. Then the participant received a number of no-value chips that were used to play a multiple number of games of poker. At the end of the designated time, number of games, or whenever the designated end occurred (on the same day of play), winners were announced based upon the number of chips they held. Participants were “ranked” and awarded cash prizes from the pot of entry fees. The $32 entry fee was a mathematical calculation thought to assure that no participant would violate the statute’s bet and raise limitations. Whether or not the “all in” concept violated the statute was not considered as the chips were deemed to have no value in and of themselves. This “no value” chip was a fiction that the Respondent supported as, in theory, the $32 player buy-in comported with a mathematical calculation that was within the statutory guideline. The payouts were determined based upon the number of participants and were set by percentage with the first place person receiving the largest payout. Additionally, participants under the approved scheme were not allowed re-buys. That assured that all participants started with the same number of chips and had the same “betting” potential. Finally, winners were not paid or could not receive prizes outside the “pot” created by the entry fees. A nominal gift (such as a T-shirt) was not considered a violation. Prizes such as giant television sets or vacations were not acceptable. All winnings were to be paid from the buy-in fees and all buy-in fees were to be returned to the players in winnings.
