The Issue The issue is whether Respondent violated the Code of Ethics for Public Officers and Employees.
Findings Of Fact The Parties Mayor Hammond served as mayor of Century, Florida, from 2004 to 2008. All allegations are derived from this period. Mayor Hammond did not have a vote on the Town Council, but was the chief executive officer of the town. Before becoming mayor, Mayor Hammond was a member of the Town Council. During the time she was a member of the Town Council, Bennie Barnes was mayor. He served from 2000 until 2004. Pursuant to Section 112.320, Florida Statutes, the Commission serves as the guardian of the standards of conduct for the officers and employees of the state, and officers and employees of counties, cities, or other political subdivisions of the state. Eddie Hammond's Utility Accounts As chief executive of Century, Mayor Hammond had supervisory authority over all town employees, including the Town Clerk, and general supervisory authority of all departments and agencies of the town. The town operates its own utilities, including water, sewage, natural gas, and garbage collection. Accordingly, Mayor Hammond exercised authority over these activities. Mayor Hammond had experience in determining the amount of utility bills, preparing bills, collecting them, and causing services to be terminated. She did this for the Town of Century for ten years and for Gulf Power Company for 18 years. During all times pertinent, Dorothy Sims was the Town Clerk. Ms. Sims was Mayor Hammond's first cousin. The supervisor of utility operations was Mayor Hammond's son, Eddie Hammond. He had worked for the Town of Century for 26 years and had been Superintendent of the Gas Department for about 20 years. His immediate supervisor was Town Clerk Sims. Utility bills in Century are payable by the tenth of the month, and a five dollar late charge is added on the fifteenth, if the bill has not been paid. If a bill is not paid by the twentieth day of the month, service is discontinued. Eddie Hammond is often the person who shuts off the gas, should a citizen fail to remit by the twentieth day. Because Century is a small town and town officials know most of its citizens and are aware of the needs of businesses, from time to time service is not discontinued even though payment is not made by the twentieth of the month. For instance, if a person is ill or has some other problem meriting an excuse, and is incapable of paying, Town Clerk Sims might forgive disconnection, at least for a time. In fact, numerous citizens on the utility "cut-off" list had their accounts marked with an "H" or the word "Hold." This meant that despite nonpayment, their utilities would not be disconnected. Beneficiaries of this policy included Saved Ministries, Winn-Dixie, and Leola Robinson, for example. In fact, Ms. Robinson was permitted a "hold" even though she owed $2,111.78. The "hold" was based on delays in a "land review" involving the placement of a mobile home. Another "hold" resulted because of the time it took to settle an estate. Another "hold" was placed because the citizen was ill. On the delinquent list of October 21, 2005, 23 people were given a "hold" notation instead of experiencing a cut-off of services. Eddie Hammond and Robert Tims did not pay their utility bills for years, yet their accounts were marked with a "hold." Eddie Hammond amassed a bill of $1,802.49 by October 2005 and Robert Tims grew his to $4,859.46 by October 2005, yet neither had their utility services terminated. Nevertheless, Eddie Hammond did not hesitate to pull the plug on citizens in a less fortunate posture. Eddie Hammond and Robert Tims were long-time employees of Century. During the period 1969 to 2001, Ray Lawson was Town Clerk, and during his incumbency he permitted some town employees to pay their utilities through payroll deductions. Eddie Hammond and Robert Tims were beneficiaries of this plan. Rather than have their utility bills deducted from their pay in an amount that reflected their actual bills, Town Clerk Lawson deducted a set amount each week. In the case of Eddie Hammond, $20.00 was deducted each week. Eddie Hammond was never presented with a utility bill during this period. Robert Tims had $35.00 deducted each week. The sum deducted was often insufficient to cover the cost of Eddie Hammond's utility bill and by the time Town Clerk Lawson departed the position, Eddie Hammond owed several hundred dollars. The mayor of Century from 2000-2004 was Bennie Barnes. In 2001, Town Clerk Lawson was replaced by Town Clerk Sims. Although it was easy to determine how much money Eddie Hammond and Robert Tims owed on their utility bills, Ms. Sims was unable to determine how much money had been withheld from their pay. When Town Clerk Sims became the incumbent, she found the financial records of the town to be a "big mess," and they remained that way for several years. The "mess" was created when Town Clerk Lawson left because he had bad feelings toward Mayor Barnes and the City Council and manifested these feelings by locking his computer and scrambling the town's financial records. Town Clerk Sims could not determine how much, if any, payroll had been applied to the utility bills of the two, and Hammond and Tims did not know either. They were the only two employees of Century in this position. Eddie Hammond was aware that some of the money deducted was paid as child support. The last payment made to his utility bill was July 9, 2001. By October 4, 2001, deductions from his paycheck had been discontinued. Mr. Tims' deduction continued. By 2004, following Mayor Hammond's inauguration as mayor, Town Clerk Sims continued to have over-all responsibility as supervisor of utility services and continued carrying Tims and Eddie Hammond in the "hold" category. The office procedure with regard to utility payments was that each month a printed list of delinquents was prepared by Assistant Clerk Kristina Wood. She gave the list directly to Town Clerk Sims who determined if a delinquent was to be awarded a "hold." Mayor Hammond did not get involved in the decision to terminate or not terminate anyone's utility services. Mayor Hammond paid some of Eddie Hammond's bills, other than his utility bills, because Mayor Hammond and Eddie Hammond did not want his former wives to get involved in his financial affairs. Mayor Hammond never saw Eddie Hammond's utility bill and assumed that, because he worked for the city, he paid it at his job. She was aware that he had money taken from his paycheck because she had seen some of his pay stubs. Eventually Mayor Hammond learned that Tims and Eddie Hammond were on the cut-off list and made inquiry to Town Clerk Sims. Mayor Hammond was informed about the payroll deductions by Town Clerk Sims, who told her that the money to pay the charges was present, but that she could not determine how much money was available. As events unfolded, records were discovered indicating the amounts withheld from Tims and Eddie Hammond, but this occurred after Mayor Hammond paid Eddie Hammond's bill. In early 2006, some citizens took notice of the unseemly situation where Eddie Hammond, the person who routinely cut off peoples' natural gas for failure to timely pay their utility bills, was himself avoiding his utility payment. His failure to pay was about to provide grist for the local journalist's mill. Mayor Hammond soon learned that the local media were about to publicize the situation. That moment was when Mayor Hammond concluded that paying her son's utility bill was ". . . the right thing to do." Accordingly, she wrote a personal check for the amount of the bill, including late charges. This amount was $1,984.30. On March 21, 2006, she took the check to the clerk's office and met with Assistant Clerk Wood. Eddie Hammond was present. Assistant Clerk Wood had a discussion with Mayor Hammond regarding the late charges. She had removed the late charges when Tims paid off his utility bill some time before March 2006 and she informed Mayor Hammond of this. Mayor Hammond told Assistant Clerk Wood to take the late charges off Eddie Hammond's bill since they were removed from Tims' bill. She believed her son should get the same consideration. Assistant Clerk Wood did as directed by pulling up Eddie Hammond's account on the computer and deducting $245.00. Mayor Hammond further asserted that the town continued to owe Eddie Hammond money from the deductions taken from his pay. She wrote a new check for $1,739.30 and gave it to Assistant Clerk Wood, and thereafter the account displayed a zero balance. The greater weight of the evidence demonstrates that Mayor Hammond believed that the town owed Eddie Hammond some amount of money, and at the time the transaction took place it is clear that Century's accounts were in disarray to the extent it was difficult to determine what, if anything, the town owed Eddie Hammond. Her determination that her son should not pay late fees because a similarly situated employee did not pay late fees was not unreasonable. In any event, the "policy" of allowing Eddie Hammond to avoid paying his utility bills was in place prior to Mayor Hammond's election and continued without her intervention until the Spring of 2006. She did not intervene in the case of Robert Tims or others who were not keeping up with their utility bills either. Even though she had 28 years of utility billing experience, she was remarkably incurious with regard to the situation in the Town of Century. This is not, however, the same as wrong-doing. The Little League Concession Stand Century Little League is controlled by a board of directors. The president, from 2001 until the beginning of the 2006 baseball season, was Dabney Longhorne. In that capacity, Mr. Longhorne supervised the registration of participants, the scheduling of games, and oversaw the operation of the ballpark where the games were played. Since 2001, Showalter Park, a facility owned and maintained by the Town of Century, has been the main ballpark at which little league games were played. The facility has a concession stand. Century Little League operated the concession stand from 2001 through the beginning of the 2006 season. Mr. Longhorne met with Mayor Hammond in January 2004 and again in January 2005 to discuss generally the relationship between the town and the little league operation. To the extent the concession stand was discussed during these meetings, the tenor was that it was expected that the little league operation would run it and use the profits generated from it. Mr. Longhorne's wife ran the concession stand, and once Mr. Longhorne mentioned to Mayor Hammond that she was getting weary of running it. He never said the little league was contemplating turning the stand over to the Town of Century or otherwise abandoning the operation of the stand. The profit generated by the concession stand was important to the financial well-being of Century Little League. The money was used to pay umpires, among other expenses. For a number of years prior to the 2006 season, Eddie Hammond moonlighted as chief umpire of the Century Little League. He was paid $35.00 to $45.00 for each game and was paid from $2.00 to $4.50 as a booking fee for each umpire he arranged for the little league games. One of the umpires Eddie Hammond employed was his father, Ray Hammond. In January 2006 while planning for the up-coming season, Mr. Langhorne and Eddie Hammond had a discussion. During that discussion Eddie Hammond suggested he could make more money umpiring elsewhere. He advised he could make more money umpiring in Brewton, Alabama, for example. At the Century Little League Board meeting on Saturday, January 21, 2006, Eddie Hammond's comments were relayed to the board. The board thereafter voted to hire someone else as chief umpire. When Eddie Hammond learned of this he became angry. These events were discussed in the Hammond household. On Tuesday, January 24, 2006, Eddie Hammond called Mr. Langhorne on his cellphone and expressed his anger and, moreover, suggested that retaliation was in the offing. Later that day, Ray Hammond, Eddie Hammond's father, called Mr. Langhorne and left a message asking that his call be returned. Mr. Langhorne did not immediately call Ray Hammond because he determined, correctly, that he might be upset and that in the interval of a couple of days, calm might prevail. When he did call Ray Hammond on Thursday of the same week, Mr. Hammond informed him that the action was a "slap in the face" and that, "Century Little League will be getting a letter from the town stating what will be expected of them." On February 6, 2006, Mayor Hammond, during the Century Town Council meeting, recommended that the town take over the concession stand at Showalter Park. She stated that she had already found someone to operate it and that the profits from it would help pay for the light bill at the park. She also made this recommendation because she was angry at Dabney Langhorne. She did not, however, reveal this to the Century Town Council. Century Little League had received no prior notice of this recommendation and no one from the little league was present at the council meeting. No one spoke against the recommendation. The recommendation was put into the form of a motion by Councilperson McMurray, and everyone on the council voted in favor. Mayor Hammond stated at the hearing that the reason for her action was that she believed Century Little League did not want to operate the stand. Subsequently, Mayor Hammond wrote a letter to Mr. Langhorne dated February 8, 2006. It informed Mr. Langhorne that the Town of Century was taking over the operation of the concession stand. The letter stated that, "We feel this will defray some of the cost of running the parks." The letter also discussed maintenance matters and addressed the cost of lighting for night practices. It also fulfilled Ray Hammond's pledge that Langhorne would be "getting a letter." Clearly the community considered Mayor Hammond's actions to be motivated by revenge. During the 2006 little league season, they boycotted the concession stand. As a result, the concession stand was operated at a loss. In light of all the facts and circumstances revealed by the evidence in this case, including the inconsistent statements made by Mayor Hammond with regard to her reasons for taking the concession stand from the Century Little League, it is concluded that her actions were motivated solely by a desire to avenge the failure of Century Little League to re-employ her son.
Recommendation Based upon the Findings of Fact and Conclusions of Law, RECOMMENDED that the Florida Commission on Ethics dismiss the allegation that Evelyn Hammond used her position to allow her son, Edward Hammond, to receive utilities without paying for them; and that the Florida Commission on Ethics enter a final order and public report finding that Respondent, Evelyn Hammond, violated Subsection 112.313(6), Florida Statutes, by using her position to retaliate against the Century Little League and its president, Dabney Longhorne, and issuing a public censure and reprimand. DONE AND ENTERED this 6th day of November, 2008, in Tallahassee, Leon County, Florida. S HARRY L. HOOPER 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 6th day of November, 2008. COPIES FURNISHED: Mark Herron, Esquire Messer, Caparello & Self, P.A. 2618 Centennial Place Post Office Box 15579 Tallahassee, Florida 32317 James H. Peterson, III, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Kaye Starling, Agency Clerk Florida Commission on Ethics Post Office Drawer 15709 Tallahassee, Florida 32317-5709 James J. Dean, Esquire Messer, Caparello & Self, P.A. 2618 Centennial Place Post Office Box 1876 Tallahassee, Florida 32308 Philip C. Claypool Executive Director and General Counsel Florida Commission on Ethics Post Office Drawer 15709 Tallahassee, Florida 32317-5709
The Issue The issue for resolution in this case is whether Proposed Rules 8E- 4.003(3), (4), (9), (10) & (11) and Proposed Rule 8E-4.005 constitute invalid exercises of delegated legislative authority as asserted by Petitioner.
Findings Of Fact Findings based on written stipulations. On September 11, 1992, Petitioner submitted an application for certification as a "facility for a new professional sports franchise." Petitioner's application contains the information required by Section 288.1162(4)(a)-(g), Florida Statutes, but does not demonstrate that eligible costs for which funding is being sought pursuant to Section 212.20, Florida Statutes, are for costs incurred after the award of the new professional sports franchise or after the start of certification, as required in Proposed Rule 8E- 4.003(3). Due to the effect of the proposed rule on Petitioner, Petitioner is a "substantially affected person" as that term is used in Section 120.54(4)(a), Florida Statutes. Findings based on evidence at hearing. On October 30, 1992, the Department of Commerce published Proposed Rule 8E-4 in the Florida Administrative Weekly. Portions of that proposed rule are the subject of this rule challenge proceeding. The full text of the proposed rule (with the challenged portions underscored) is as follows: 8E-4.001 Purpose. This rule contains the procedure for applying for certification pursuant to s. 288.03, Florida Statutes. 8E-4.002 Application Procedures. An application for certification under s. 288.03, Florida Statutes, as a "Facility For A New Professional Sports Franchise" or a "New Spring Training Franchise Facility" shall be submitted to the Secretary of Commerce and shall comply with and conform to the following requirements: An original and 5 copies shall be submitted. Applicants shall be a "unit of local government" as defined in s. 218.369, Florida Statutes, or a private sector group that has contracted to construct or operate a professional sports franchise facility on land owned by a unit of local government. The application must be signed by an official senior executive of the applicant. Items or forms requiring certification shall be notarized according to Florida Law providing for penalties for falsification. 8E-4.003 Application Contents. An application for certification as a Facility for New Professional Sports Franchises shall include the following: Documentation that the franchise team meets the following requirements: The franchise is not based in Florida prior to July 1, 1990. The applicant has a signed agreement with a new professional sports franchise for the use of the facility for at least 5 years or more. The new professional sports franchise agreement has been approved by one of the following leagues: National League (baseball) American League (baseball) National Basketball Association National Football League National Hockey League An independent analysis or study which demonstrates that the use and operation of the professional sports franchise facility will generate revenues on transactions at the facility of $2 million or more annually by taxes imposed under Part I of Chapter 212, Florida Statutes. Documentation of the actual cost or cost estimate for new construction, reconstruction, or renovation of the facility. Such documentation of cost shall be for construction, reconstruction, or renovation of the facility incurred or to be incurred after the award of the new professional sport franchise or after the start of certification. Eligible costs also include those incurred after July 1, 1990 and prior to the granting of a franchise where the costs were a necessary part of the competitive process for the awarded franchise. The applicant shall provide a commencement date upon which new construction, reconstruction, or renovation began or will begin. Projections demonstrating that the new franchise will attract a paid attendance of more than 300,000 annually. All data sources and methodologies of the projections must be included. Documentation that the municipality in which the facility is located, or the county if the facility is in an unincorporated area, has certified by resolution after a public hearing that the application serves a public purpose. Documentation that a unit of local government as defined in s. 218.369, Florida Statutes, is responsible for the construction, management, or operation of the professional sports franchise facility, or holds title to the property on which the professional sports franchise facility is located. Documentation that the applicant has demonstrated that it has provided, is capable of providing, or has a financial or other commitments to provide more than one-half of the costs incurred or related to the improvement and development of the facility. Statement certifying that applicant will comply with s. 288.1167, Florida Statutes, relating to requirements for minority participation. Documentation of the applicant's organization structure and principals. Applicants that are private sector groups shall file a public entity crime affidavit as required by s. 287.133(3)(a), Florida Statutes. 8E-4.004 Application Contents. An application for certification as a New Spring Training Franchise shall include the following: Documentation that the baseball team franchise meets the following requirements: The franchise is not based in Florida prior to July 1, 1990. The applicant has a signed agreement with a new professional sports franchise for the use of the facility for a term of at least 15 years. The agreement is approved by either the National League or the American League of professional baseball. Projections which demonstrate that the new professional baseball spring training facility will attract a paid attendance of at least 50,000 annually. Documentation of the actual cost or cost estimate for new construction, reconstruction, or renovation of the facility. Such documentation of cost shall be for construction, reconstruction, or renovation of the facility incurred or to be incurred after the grant of certification. Eligible costs also include those incurred after July 1, 1990 and prior to the granting of a franchise where the costs were a necessary part of the competitive process for the awarded franchise. The applicant shall provide a commencement date upon which new construction, reconstruction, or renovation began or will begin. Documentation that a unit of local government as defined in s. 218.369, Florida Statutes, is responsible for the construction, management, or operation of the professional sports franchise facility, or holds title to the property on which the professional sports franchise facility is located. Documentation that the applicant has demonstrated that it has provided, is capable of providing, or has financial or other commitments to provide more than one-half of the costs incurred or related to the improvement and development of the facility. Documentation that the New Spring Training Franchise Facility is located in a county that is levying a tourist development tax pursuant to s. 125.0104(3)(b),(c),(d) and (l), Florida Statutes, at the rate of 4 percent by March 1, 1992, and 87.5 percent of the proceeds from such tax are dedicated for the construction of a spring training complex. A site map and certification that the facility is located within 20 miles of an interstate or other limited access highway system. Statement certifying that applicant will comply with s. 288.1167, Florida Statutes, relating to requirement for minority participation. Documentation of the applicant's organization structure and principals. Applicants that are private sector groups shall file a public entity crime affidavit as required by s. 287.133(3)(a), Florida Statutes. 8E-4.005 Application Processing. The Department of Commerce shall certify applications only after these rules have been published in the Florida Administrative Weekly and all requested public hearings have been held. Subsequent to this, the Department shall have two weeks following receipt of an application to notify an applicant of any deficiencies in an application. The Department will allow 30 days from the date of notification for the applicant to correct any such deficiencies. Upon determining that an applicant is or is not certifiable, the Secretary of Commerce will notify the applicant by means of an official letter of his status. If certifiable, the Secretary will notify the Executive Director of the Department of Revenue of such certification by means of an official letter. If the Department of Commerce determines that the applicant satisfies all the conditions of Section 288.1162, F.S., and this rule, certification shall be issued by the Department of Commerce no sooner than, either the date of commencement as provided by the applicant in 8E-4.003(5) or 8E-4.004(5) or 120 days following receipt of application under this rule whichever is the longer. No certification shall be issued until the Department of Commerce has verified that actual construction, reconstruction, or renovation has commenced. The Department of Revenue will begin distributing funds 60 days following certification, but no such distribution may be made prior to July 1, 1992, pursuant to s. 288.03, Florida Statutes. If and when the above-quoted proposed rule becomes an effective rule, the Department of Commerce intends to apply the provisions of the subject proposed rule in the course of determining whether to grant or deny the Petitioner's application for certification as a "facility for a new professional sports franchise." The Department of Commerce intends for the language in Proposed Rule 8E-4.003(3) and (4) to limit funding under the applicable statute to new facility construction costs or to costs of renovation of an existing facility. The Department intends to disallow the use of grant funds for existing stadium construction costs, even if such costs were expended to facilitate the future recruitment of a "new professional sports franchise." The new requirements for certification contained in Proposed Rule 8E-4.003 are considered by the Department to be substantive in nature. The purpose of the funding program created pursuant to Sections 288.1162 and 212.20, Florida Statutes (1991), is to encourage the recruitment of professional sports franchises to Florida. During the 1992 session of the Florida Legislature, amendments were proposed to Section 288.1162, Florida Statutes (1991), which would have had the effect of limiting funding under the program to a reimbursement of costs of new construction. In Senate Bill 216-H, the Legislature proposed authorizing the Department to require that information be submitted regarding cost estimates verified by the Department for the new construction, reconstruction or renovation of the facility. This estimate shall include the costs of debt service on, or the costs to fund debt service reserve funds, costs for arbitrage rebate obligations, and other costs payable with respect to, bonds issued for the new construction, reconstruction or renovation of the facility. (e.s) The amendments proposed in Senate Bill 216-H would have eliminated as an approved use of the funds payment of costs of refinancing construction bonds and would have limited the use of funds only to newly incurred costs. In addition, the proposed bill provided that upon certification of an applicant, the Department shall also certify to the Department of Revenue the amount to be paid monthly to the applicant. In the case of a professional sports franchise facility, such amount shall be the lesser of $166,667 per month for a 30 year period, or the costs of the project verified by the Department pursuant to paragraph (4)(g) [which is the language cited directly above] and amortized over a 30 year period. The statutory limitation proposed by Senate Bill 216-H is consistent with, if not identical to, the limitation intended by the Department of Commerce through the promulgation of Proposed Rule 8E-4. Senate Bill 216-H failed to be enacted into law.
The Issue The issue in the case is whether the Petitioner qualifies as a “charitable institution” as defined at Section 212.08(7) (o)2.b., Florida Statutes, and is therefore entitled to a consumer certificate of taxation exemption.
Findings Of Fact The Junior League of Tampa, Inc., (League) is a non- profit corporation exempt from federal income tax under Section 501(c)3 of the Internal Revenue Code. The Articles of Incorporation for the League provide that the League is intended to foster member’s interests in local social, economic, educational, cultural, and civic conditions, and to make efficient use of members as volunteers. According to testimony offered at hearing, the purposes of the Junior League of Tampa are to offer social assistance to persons in the community, provide volunteers to various local organizations, and to offer volunteer training to League members. The League provides member education regarding issues of local concern by offering bus tours through area communities, attendance at government meetings (school board, county commission, etc.) and training sessions focusing on the operation and activities of the League. Members of the League pay dues which are used to support the administrative costs of the organization. Members of the League are expected to provide volunteer services to community organizations through the League. No services are provided directly to individuals. In addition to dues the League raises funds through local fund raising activities, including production of a cookbook and a thrift sale. Fund raising revenue is used to support community projects. According to the financial statements for the fiscal year ending May 31, 1995, the League’s total operational expenses (excluding depreciation) were about $400,000. Expenses were allocated between “program services” and “support services.” Total support services costs were approximately $269,000, including $94,576 for fund raising costs. Other costs allocated to support services included $103,827 in “administrative costs,” $11,089 in “association dues,” $20,493 in “membership expense” and almost $39,000 for the League’s membership publication, “The Sandspur.” None of the support services expenditures were directly related to the community or volunteer efforts of the League. Total program services costs were $131,655, including $21,642 for “program research and evaluation,” $25,876 for “association dues,” and $84,137 for “community projects.” “Program research and evaluation” costs include the expenses of the community advisory board which assists the League in determining local needs and evaluating projects. Additional program research costs include expenses related to development and evaluation of League projects, expenses related to sending Tampa League members to meetings of the national League, other membership expenses, expenses of a public relations campaign, expenses related to preparation of a member brochure describing volunteer opportunities, and “ad hoc training.” None of the expenses allocated to “program research and evaluation” are directly provided to recipient organizations through monetary donation or by provision of volunteers. Expenses identified as “program services/association dues” include $25,876 paid to the American Association of Junior Leagues. The national organization offers information related to the anticipated success of specific league projects. None of the expenses allocated to “association dues” are directly provided to recipient organizations through monetary donation or provision of volunteers. The “community projects” total expenditure of $84,137 represents actual funds donated by the League to recipient organizations. In addition to actual donations, members of the League provide hours of free volunteer service to local IRC 501(c)(3) organizations. During fiscal year 1985, League members provided 11,823 hours of volunteer service to local organizations and to the League’s own community projects. The League asserts that many League members providing volunteer services are professionals and that such services should be valued at approximately $10.00 per hour. The evidence fails to establish that the volunteer services provided require professional education or certification or that the volunteer services should be valued at any more than the minimum wage, $5.00 during the time period relevant to this proceeding. The League lists 22 local activities and organizations for which volunteer services were provided. The parties have stipulated that 12 of the 22 (Bereavement Camp, Kids Rights Fund, Child Life Program, Immunization, Ronald McDonald House, Parenting Power, Emergency Shelter, Georgia Flood Relief, Judeo Christian Health, Bay Area Legal Services, WestCoast Golden Services, and McDonald Training) are accepted as “charitable activities.” The Department asserts that the ten remaining activities and organizations do not meet the relevant definition of acceptable charitable services and can not be included in the League’s total charitable effort for purposes of tax exemption. The ten activities include Puppet Troupe, Children’s Museum, McKay Bay Learning Lab, Funbook, Tampa Tickets, Tampa Area Playground, Tampa Museum of Art, Tampa Bay Youth Orchestra, Musicale and Federated Club and H. B. Plant Museum. The “Puppet Troupe” consists of the preparation and performance of a puppet show for residents of nursing homes and for hospitalized children. The evidence fails to establish that the League's participation in Puppet Troupe is an acceptable charitable service for purposes of the tax determination. The Tampa Children’s Museum is an admission-charging, public museum, open to all, designed to provide learning opportunities for children and parents. The evidence fails to establish that the League's participation in Tampa Children's Museum is an acceptable charitable service for purposes of the tax determination. The McKay Bay Learning Lab offers educational programs to children of elementary school ages. The programs are targeted to special needs children, but are open to all. The evidence fails to establish that the League's participation in the McKay Bay Learning Lab is an acceptable charitable service for purposes of the tax determination. “Funbook” is a coloring book focused on Tampa history and distributed to hospitalized children. The evidence fails to establish that the League's participation in Funbook is an acceptable charitable service for purposes of the tax determination. “Tampa Tickets” is a grant of funds to the Tampa Performing Arts Center and is intended to subsidize the cost of admission to cultural events at the Center. The evidence fails to establish that the League's participation in Tampa Tickets is an acceptable charitable service for purposes of the tax determination. The Tampa Area Playground is a public playground which was constructed with funds and volunteer labor contributed by many local organizations including the League. The evidence fails to establish that the League's participation in the Tampa Area Playground is an acceptable charitable service for purposes of the tax determination. The Tampa Museum of Art is a public admission-charging museum for which the League funded a curriculum guide for use in local schools. The evidence fails to establish that the League's participation in the Tampa Museum of Art is an acceptable charitable service for purposes of the tax determination. The Tampa Bay Youth Orchestra received funds from the League directed towards purchasing musical instruments for children who could not afford them. The evidence fails to establish that the League's participation in the Tampa Bay Youth Orchestra is an acceptable charitable service for purposes of the tax determination. The Musicale and Federated Clubs is a performing arts organization. The League provided a grant of funds to cover the costs of termite treatment for the Club facility. The evidence fails to establish that the League's participation in the Musicale and Federated Clubs is an acceptable charitable service for purposes of the tax determination. The H. B. Plant Museum is a public admission-charging museum. The League contributed funds to purchase two computers used in the museum’s membership solicitation program. The evidence fails to establish that the League's participation in the H. B. Plant Museum is an acceptable charitable service for purposes of the tax determination. The evidence establishes that the McKay Bay Learning Lab, the Children’s Museum, the Tampa Museum of Art, and the H. B. Plant Museum are educational institutions, rather than charitable institutions. Expenditures of funds or volunteer time contributed to educational organizations which do not otherwise meet the requirements for qualification as charitable institutions are properly disallowed from the calculation of the League’s charitable effort. The evidence is insufficient to establish that expenditures related to the Puppet Troupe and Funbook projects, the Tampa Tickets program, the Tampa Area Playground, the Tampa bay Youth Orchestra, or the Musicale and Federated Clubs meet applicable requirements for qualification as a charitable expenditures by the League. Such expenditures are properly disallowed from the calculation of the League’s charitable effort. Based on examination of the total acceptable charitable effort of the League, both donations of volunteer time and actual funds, the evidence fails to establish that the sole or primary purpose of the League is to provide such services.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Revenue enter a Final Order denying the Petitioner’s application for renewal of a Consumer Certificate of Exemption. RECOMMENDED this 8th day of January, 1997, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32301-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 8th day of January, 1997. COPIES FURNISHED: Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Jeremy P. Ross, Esquire Bush, Ross, Gardner, Warren and Rudy, P.A. 220 South Franklin Street Tampa, Florida 33602 Ruth Ann Smith, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
The Issue Whether or not the Petitioner, Conduces Club, Inc., is entitled to the issuance of a Series 11-C alcoholic beverage license.
Findings Of Fact The Petitioner, Conduces Club, Inc., a nonprofit corporation incorporated in the State of Florida, has applied to the Respondent, State of Florida, Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, for the issuance of a series 11-C alcoholic beverage license. This license is described in Rule 7A-1.13, Florida Administrative Code, as a club license to sell to members and nonresident guests only. The terms and conditions for the issuance of such a license are as set forth in Subsection 561.20(7)(a), Florida Statutes, and Subsection 565.02(4), Florida Statutes. The Director of the Division of Alcoholic Beverages and Tobacco has denied the application of the Petitioner premised upon the assertion that the Petitioner has failed to meet the requirements set out in the aforementioned sections of the Florida Statutes. The Petitioner has disagreed with that interpretation and a Section 120.57, Florida Statutes, hearing was scheduled and held on April 10, 1979. The crucial language to be considered in determining whether or not the Petitioner should be extended the privilege of operating under a Series 11-C alcoholic beverage license is found in the Subsection 561.20(7)(a), Florida Statutes, which reads as follows: "(7)(a) There shall be no limitation as to the number of licenses issued pursuant to 565.02(4). However, any licenses issued under this section shall be limited to: Subordinate lodges or clubs of national fraternal or benevolent associations; Golf clubs and tennis clubs municipally or privately owned or leased; Nonprofit corporations or clubs devoted to promoting community, municipal, or county development or any phase of community, muni- cipal, or county development; Clubs fostering and promoting the general welfare and prosperity of members of showmen and amusement enterprises; Clubs assisting, promoting, and de- veloping subordinate lodges or clubs of national fraternal or benevolent associa- tions; and Clubs promoting, developing, and main- taining cultural relations of people of the same nationality." (Although the introductory phrase in the above-quoted Subsection makes reference to Subsection 565.02(4), Florida Statutes, as being involved in the process of issuing a license, Subsection 565.02(4), Florida Statutes, true function is the establishment of the requirement that chartered or unincorporated clubs pay an annual state license tax of $400.00, and it is this Subsection 561.20(7)(a), -- Florida Statutes, which establishes those categories of candidates who may receive a Series 11-C alcoholic beverage license.) Of the possible categories for licensure, the one which appears to be the focal point of the controversy is that provision found in Subsection 561.20(7)(a)3., Florida Statutes. In support of its request, the Petitioner presented certain witnesses and items of evidence. Among those items was the testimony of Mrs. E. R. Atwater, Social worker Supervisor with the United States Department of Housing and Urban Development, Housing Management Division, assigned to the Blodgett Community in Jacksonville, Florida. The Blodgett Community is a housing development of some 53 acres which contains 628 housing units with a breakdown of that population containing 301 senior citizens and 1,069 juveniles, with cost of the heads of the households being female. Those persons living in the Blodgett development are described as having a poor economic circumstance. Mrs. Atwater indicated that the Conduces Club, Inc., had on occasion sponsored girls softball teams and boys basketball teams for those young persons living in the Blodgett Community and she had expressed her appreciation in the form of correspondence of January 17, 1979, which is the Petitioner's Exhibit No. 1 admitted into evidence. In addition, Mrs. Atwater indicated that the Conduces Club, Inc., had provided transportation for a trip for the residents of the Blodgett Community to Six Gun Territory located near Ocala, Florida. Arrangements were made for three busses; two of the busses which transported residents on July 16, 1977, and the third bus transported them on August 11, 1977. The trips involved both young people and adults as participants. The letters requesting the assistance of the Conduces Club, Inc., and the confirmation of that request may be found as Petitioner's Exhibits Nos. 2 and 3, admitted into evidence consecutively. The president of the Conduces Club, Inc., Mr. Cornell Tarver, testified in support of the petition. He indicated that the club had been originally formed as the Pacesetter Club but its name was changed in September, 1976, because of a conflict concerning the utilization of the name, which had been preempted by another club. The club was chartered as a nonprofit corporation by the State of Florida on September 22, 1976, under the name, "Conduces Club, Inc." A copy of the Articles of Incorporation may be found as Respondent's Exhibit No. 1 admitted into evidence. Mr. Tarver indicated that the purpose of the club was to help the youth and senior citizens and principally the kids of the Blodgett Community, to include organizing softball and baseball and providing uniforms. He also testified that a certain banquet was hold for these young persons and the parents of those children were invited to attend, and enough food was prepared to food cost of the individuals who reside in the Blodgett Community. He produced certain plaques and trophies awarded to the club. The plague was given by the mothers of the children in the sports programs and the trophy was presented by an unaffiliated club that the Conduces Club had helped to organize. The witness, Tarver, indicated that the club was financed by functions such as dances, fish fries, food sales in their club house, dues of the members and fines. The club itself has twenty-seven members. Other projects the club has participated in, were the contribution of money to local churches and the donation of an organ to one of those churches. On December 16, 1977, the club contributed $500.00 to the National Association for the Advancement of Colored People. The club house is open every day and there are certain activities through the week, to include club meetings and entertainment for the benefit of club members. The members run the club without compensation and the club does not maintain any regular employees. The official statement of the club's purposes may be found in the Respondent's Exhibit No. 2 admitted into evidence. This is a composite exhibit which contains part of the application for the license and a copy of the Bylaws. The objectives of the corporation may be found in Article II of the Bylaws and the activities of the corporation may be found in Article VIII of the Bylaws. Article II states: "The objectives of this organization shall be as follows: To unite fraternally all persons who the membership may from time to time take into the club. To promote brotherhood, sportsmanship, friendship and charity for the membership and their families. To strive at all times to promote and protect the welfare of every member. To promote a spirit of cooperation between its members and the public. To honor outstanding individuals in the City of Jacksonville for their achievement. To do anything necessary, including, but not limited to, the ownership of property, real and personal, for the accomplishment of the foregoing objectives, or those which may be recognized as proper and legal objectives of this club, all of which shall be consistent with the laws, the public interest and the interest of its mergers. To sue or to be sued as a natural person. To bear a seal to be placed on all of the club's official correspondence." Article VIII states: "COMMITTEES Section 1. The following standing committees and such other committees as the directors may, from time to time deem necessary, shall be appointed by the president of the association. Social Committee Athletic Committee Scholarship Committee The duties of the standing committee shall include the following, which shall not, however, prelude other activities by such committees. Section 2. The social committee shall be composed of six members. It shall be the duty of this canted to supervise the use of club room and to plan such club meetings of a purely social nature as it may deem necessary. These may include parties, picnics, and other such social or athletic events sponsored by the organization. Section 3. The athletic committee shall be composed of three members. It shall be the duty of this committee to supervise and manage all athletic activities for the association, including but not limited to management of various athletic teams sponsored by the club. Section 4. The scholarships committee shall be composed of six members. It shall be the duty of this committee to screen applicants for scholarships and deserving students in Duval County, Florida, and to make recommendations to the general membership of its findings of worthwhile recipients of scholarships, or awards." It can be seen that the Petitioner's members have a commendable concern for the community in which the club has its principal base of operation and this concern has been expressed through the activities of the club members which have been described in the course of this Recommended Order; however, it appears from an examination of the testimony in this hearing and the official statement, that is, the Bylaws of this corporation, that the principal purpose of the club is as stated by the Article II B. of the Bylaws, which language states, "To promote brotherhood, sportsmanship, friendship and charity for the membership and their families," and this attitude carries over to foster good relations between those members and the members of the general public. Therefore, the Petitioner is not perceived as being a club which meets the criterion, "devoted to promoting community, municipal or county development or any phase of community, municipal or county development." See Subsection 561.20(7)(a)3., Florida Statutes. This conclusion is reached in examining the definition of the word "devoted," as found in Webster's New World Dictionary of the American Language, College Edition. That definition states that to be devoted one must be, "1. vowed; dedicated; consecrated. 2. very loyal; faithful." and although the community concern of the Petitioner is very high, it does not reach the level of devotion. Consequently, the Director of the Division of Alcoholic Beverages and Tobacco was correct in denying the application for a Series 11-C alcoholic beverage license.
Recommendation It is recommended that the Director of the Division of Alcoholic Beverages and Tobacco deny the Petitioner, Conduces Club, Inc.'s request for a Series 11-C alcoholic beverage license. DONE AND ENTERED this 30th day of April, 1979, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings Room 101, Collins Building MAILING ADDRESS 530 Carlton Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Jennings H. Best, Esquire 3410 North Myrtle Avenue Jacksonville, Florida 32209 Francis Bayley, Esquire Staff Attorney Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301 J. M. Ogonowski Richard P. Daniel Building, Room 514 111 East Coast Line Drive Jacksonville, Florida 32202
Findings Of Fact Based upon the evidence adduced at hearing, the stipulations of the parties, matters officially recognized and the record as a whole, the following Findings of Fact are made: Petitioner is a Florida corporation that was at all times material to the instant case (but is no longer) in the coin-operated machine business. It owned various amusement and game machines that were placed at different locations pursuant to agreements with the location operators. Most of these agreements were not reduced to writing. In those instances where there was a written agreement, a "Location Lease Agreement" form was used, with insertions made where appropriate in the spaces provided. The form indicated, among other things, that Petitioner was "in the business of leasing, renting, servicing, maintaining and repairing of coin-operated machines" and that the agreement was "for the placement, servicing and maintaining of certain coin-operated machines" in the location specified in the agreement. In the coin-operated machine trade, the custom (hereinafter referred to as the "industry custom") was for the parties to an oral or written agreement for the placement of an amusement or game machine on the property of another to treat such an agreement as involving the location operator's rental of the machine owner's tangible personal property rather than the machine owner's rental of the location operator's real property. Petitioner and the location operators with whom it contracted followed this custom of the trade in their dealings with one another. They construed their agreements as involving the rental of Petitioner's tangible personal property by the location operators and acted accordingly. Petitioner collected from the location operators the sales tax due on such rentals and remitted the monies collected to Respondent. 1/ It engaged in this practice for approximately a decade without challenge by Respondent. In late 1990 and early 1991, Respondent conducted a routine audit (Audit No. 90-19801486) of Petitioner's records. The audit covered the period from January 1, 1988, to September 30, 1990 (referred to herein as the "audit period"). The Department's auditors are, for the most part, college-trained accountants. While they receive Department-sponsored training in the general procedures and standards they are expected to adhere to in conducting their audits, they are not provided with training and information regarding the trade customs and practices that are unique to particular industries or businesses they audit. The Department auditors who conducted the audit of Petitioner's records reviewed, among other things, those agreements between Petitioner and location operators that were reduced to writing. Based upon their reading of these agreements, the auditors erroneously, yet not unreasonably given the imprecise contractual language used, believed that the agreements into which Petitioner had entered were actually for the rental of the location operators' real property, not the rental of Petitioner's machines. They therefore concluded that, in light of then existing provisions of Rule 12A-1.044, Florida Administrative Code (hereinafter referred to as the "Rule"), Petitioner, as opposed to the location operators, should have paid sales tax and that Petitioner's purchase of machines and parts should not have been treated as tax exempt. In March of 1991, the Department sent Petitioner a Notice of Intent to Make Sales and Use Tax Audit Changes for the audit period based upon the auditors' findings. The Notice advised Petitioner of its right to meet with the Department and discuss these findings made by the auditors. Petitioner requested such a meeting. The meeting was held on May 7, 1991, in Tallahassee. Petitioner's attorney, Marie A. Mattox, Esquire, represented Petitioner at the meeting. Mattox was accompanied by Robert Matthews, one of Petitioner's officers. The Department was represented by the head of the its Bureau of Hearings and Appeals and several other employees. Mattox and the Department representatives discussed the contents of the written agreements the auditors had reviewed. During the discussion, Mattox reminded the Department representatives of the "industry custom." 2/ In addition, she brought to their attention that the agreements under review involved amusement and game, not vending, machines. The meeting lasted only approximately ten minutes. Mattox and Matthews left the meeting with the impression, based upon the comments made by the Department representatives, that the matter would be resolved in Petitioner's favor. To their surprise, on May 23, 1991, the Department issued a Notice of Proposed Assessment in which it announced its intention, based upon Audit No. 90-19801486, to issue an assessment against Petitioner in the amount of $238,780.06 for taxes owed (plus penalty and interest) for Petitioner's alleged use, during the audit period, of real property in connection with its coin- operated machine business. The Notice of Proposed Assessment contained a statement advising Petitioner of its right to protest the Department's proposed action. Mattox, on behalf of Petitioner, responded to the Notice of Proposed Assessment by sending a letter, dated July 22, 1991, to the Department's General Counsel. In her letter, Mattox advised the General Counsel that Petitioner was contesting the proposed assessment and made the following argument in support of Petitioner's position that the Department had made "an error:" This tax has been assessed apparently because of a misunderstanding on the part of the auditors as to the arrangements under which Lauren, Inc. conducts business. As I am sure you are aware, under Rule 12A-1.004, Florida Administrative Code, there are various arrange- ments and agreements through which amusement and game machine owners conduct business. The first arrangement is where the machine owner rents the real property upon which the machine is located from the location owner. Under this arrangement, the machine owner pays a "lease fee" to the location owner, which fee is subject to sales and use tax. Under this arrangement, the location owner collects tax upon the lease fee and remits said tax to the state. The second arrangement through which amusement and machine owners conduct business is where the machine is rented by the location owner. Under this scenario, the machine owner acts as tax collector for the State and submits sales and use tax paid on the "rental fee" paid to the machine owner by the location owner. On March 25, 1991, Carmen R. Cordoba, C.P.N., Audit Group Supervisor with the Department of Revenue, wrote to Mr. Matthews indicating that the Department was construing the arrangement under which Mr. Matthews operated to be a lease of real property as opposed to the rental of personal property. Specifically, the Department stated the following: "we found them to be agreements to lease space to place the vending machines." To the contrary, Mr. Matthews' agreements are not for the rental of real property. Instead, he rents his personal property (the amusement and game machines) to the various locations. Under this scenario, Mr. Matthews is responsible for collecting sales and use tax on the rental fee paid to him and transmitting the sales and use tax thereon to the Department of Revenue. Apparently, the Department of Revenue has assessed an additional use tax on the payments made to the location owners where the Department has construed that Lauren, Inc. "rents space" for the machines. An additional tax has been assessed on the purchase of the machines, purchases of parts, etc... because the Department found that he was not renting these machines. This is simply in error. The Department has specified that Lauren, Inc. must refund all taxes collected from the location owners where Lauren, Inc., purportedly "rents space." At that point, Lauren, Inc. can apply for a refund on the taxes paid by Lauren, Inc. on the rental of the personal property. It is my opinion that this is a simple misunderstanding by the Department of Revenue staff as not under- standing the arrangements made by Lauren, Inc. in conducting its business with various location owners. On July 25, 1991, Mattox sent a copy of this letter to the Disposition Section of the Department's Bureau of Hearings and Appeals. By letter dated September 6, 1991, the Administrator of the Sales Tax Appeals Section of the Department's Bureau of Hearings and Appeals gave notice that Mattox's July 22, 1991, letter, had "been accepted for review as a qualifying protest." On November 13, 1991, a Notice of Decision was issued denying the protest. The nature of the protest was described in the Notice of Decision as follows: Lauren, Inc. is protesting the assessment of use taxation for the rental of real property involving the following situations: Taxation of purchases of vending machines, repairs and purchasers [sic] of parts; and Tax erroneously collected to be reimbursed to customers/landlords and taxpayer to request a refund from D.O.R. The following were set forth in the Notice of Decision as the "facts" pertinent to the protest: This is a first time audit of the taxpayer. The taxpayer is a full service vending machine business. The taxpayer has furnished representative con- tracts between his business and the location owners where his machines are placed. The specifics of the contracts are discussed below. According to the agreement, the taxpayer "installs, operates, services, and maintains coin operated machines on the proprietor's premises." The taxpayer has collected tax from location owners on their share of the proceeds, which he refers to as "rentals of the machine" to the location owners. The contract provides for the location owner to provide a space for the vending machines. It makes no reference whatsoever to a lease of the machine to the location owner. The taxpayer collects the money from the machines, and when applicable, also provides and owns the merchandise. The Notice of Decision contained the following discussion and analysis of the "law and [Petitioner's] argument:" You argue in the letter of protest that the Lauren, Inc. lease agreements are for the rental of personal property (the vending machines) to various locations. You state that "Mr. Matthews is responsible for collecting sales and use tax on the rental fee paid to him and transmitting the sales and use tax thereon to the Department of Revenue." You also state "an additional tax has been assessed on the purchase of the machine, purchases of parts, etc.... because the Department found that he was not renting these machines. This is simply in error." A tax is imposed on the privilege of engaging in the business of coin operated vending and amusement machines by Rule 12A-1.044(2)(A), F.A.C., which is written as follows: "(a) When coin-operated vending and amusement machines or devices dispensing tangible personal property are placed on location by the owner of the machines under a written agreement, the terms of the agreement will govern whether the agreement is a lease or license to use tangible personal property or whether it is a lease or license to use real property." Rule 12A-1.044(4), F.A.C., states..."the purchase of amusement machines or merchandise vending machines and devices is taxable, unless purchased for exclusive rental." The effect of the agreement is utterly clear. Lauren, Inc. provides the food and cigarette items to be sold. The sales revenues belong to Lauren, Inc. Sales tax is due the state from Lauren, Inc. on the entire amount of those sales revenues. A share of the sales revenues is paid to the location owner by Lauren, Inc. as consideration for what the location owner has provided, a license to use his realty by placing the vending machines on the premises. NO RENT WHATSOEVER FOR THE MACHINES IS PAYABLE BY THE LOCATION OWNER TO LAUREN, INC. UNDER THE AGREEMENT. Generally, whether an agreement is a lease or a license depends upon the intent of the parties as determined from the entire agreement. In determining the intent of the parties, the fact that the parties may use terms such as "lease," "lessor," "lessee," or "rent" will not be determinative of whether an agreement is a lease. In Napoleon v. Glass, supra, 224 So.2d 883 (3d Dist. Ct. App. 1968), the court, at 884-885 states: "Although the parking concession agreement was called a Concession Lease and provided for the payment of 'rent,' the document unquestionably created a licensor-licensee relationship rather than a landlord-tenant relationship." The "conclusion" that the Department reached by applying the foregoing principles of "law" to the pertinent "facts" in Petitioner's case was articulated as follows in the Notice of Decision: It is the Department's position that based upon the terms of the agreements provided by Lauren, Inc. that this is a license to use the location owner's real property rather than a lease of Lauren, Inc.'s tangible personal property to the location owners. Likewise, absent a re-rental of the vending machines, the sales tax is due from, Lauren, Inc. on its purchases of and repairs to its vending machines. Likewise, the taxes collected in error by the taxpayer from his customers should be reimbursed to the taxpayer's customers. The audit findings shall, therefore, remain as assessed. The Notice of Decision advised Petitioner of its right to file a Petition for Reconsideration. Such a Petition for Reconsideration was subsequently submitted on or about December 10, 1991, by Mattox on Petitioner's behalf. In the Petition for Reconsideration, Mattox made the following argument: The Notice of Decision is flawed in all respects. With respect to issue No. 1, which the Tax Conferee [the author of the Notice] has entitled "Vending Machines," even the situations set forth are incorrect. Lauren, Inc. does not contest nor is there any issue related to any finding regarding its vending machines. There is simply no issue regarding vending machines. There is also no issue regarding the taxation of purchases of vending machines, repairs, and/or purchases or parts. Lauren, Inc., purchases its machines and performs repairs for machines that are rented to various locations. Therefore, under Rule 12A-1.044, Florida Admini- strative Code, these purchases and repairs are exempt from taxation. The only issue in this case is the factual scenario with which Lauren, Inc. conducts business. Under Rule 12A-1.044, Florida Administrative Code, there are several instances in which the rental of tangible personal property are recognized. The Tax Conferee has apparently ignored the industry standards in this regard and has misinterpreted the manner and method in which Lauren, Inc., conducts business. As I originally stated in my July 22, 1991 correspondence to the Department protesting the assessment of Sales and Use Tax, Lauren, Inc. has agreements with various location owners to place amusement and game machines at any particular location and the location owner rents Lauren, Inc.'s personal property (amusement and game machines). Even under the Location Lease Agreements that Lauren, Inc. has with its customers, they specify that the company (Lauren, Inc.) is in "the business of leasing, renting, servicing, operating, maintaining and repairing... coin operated machines..." I am absolutely confounded as to why the Department has determined that Lauren, Inc., owes the above- stated tax and penalty. There has never been any question that Lauren, Inc. collected tax from the various locations and remitted this tax to the Department of Revenue. It appears that Lauren, Inc. is now to apply for a refund to the Department of Revenue, pay all sums already paid to the Depart- ment of Revenue to the various locations where its machines are located, for the various locations to remit this same amount back to the Department of Revenue. This simply does not make sense to me. With respect to the statement made in the Notice of Decision that the "effect of the agreement is utterly clear," Mattox continued: We are in complete agreement with the Tax Conferee in this regard, except for the fact that our conclusions are utterly inapposite. Lauren, Inc. does provide food and cigarette items to be sold out of the various machines, however, in this audit and protest, there is no issue regarding food and cigarette items or the tax paid thereon. The only issue is the [e]ffect of the agreement between Lauren, Inc. and the location owners. If the Tax Conferee had characterized this relationship correctly, a completely different result would have been reached. Lauren, Inc. does have vending machines as well as amusement and game machines. The Tax Conferee may have confused the vending arrangements with location owners with the amusement and game agreements. There is a recognized difference industry wide in the method and manner within which vending businesses and amusement and game business are conducted. There has been no such recognition by the Tax Conferee and we would sincerely appreciate the opportunity to present additional evidence, if necessary, to the Department of Revenue for its reconsideration of the issues raised herein. Sometime after it received the Petition for Reconsideration, the Department, through one of its employees, Vicki Allen, telephoned Mattox and asked her to provide the Department with any additional materials she wanted the Department to consider. Mattox responded to this request by letter dated February 19, 1992, in which she stated the following: You have requested that I provide additional information regarding Lauren, Inc. however, in lieu of providing this information through the mails, I would like the opportunity to sit down and explain in person our position regarding the sales and use tax assessments set forth in the recent assessment. Moreover, I am not certain as to whether any additional documentation or information exists or the nature of the documentation that will be helpful to you. Upon your receipt of this correspondence, please contact me to discuss this matter further. We are more than willing to provide additional information, but truly believe that the issues involved in this assessment could be resolved through a meeting between all parties concerned. Please advise accordingly. Allen never responded to Mattox's letter. On April 21, 1992, the Department issued a Notice of Reconsideration sustaining an assessment against Petitioner in the amount of $206,017.85 for taxes owed (plus penalty and interest). Allen was the author of the Notice of Reconsideration. The following were set forth in the Notice of Reconsideration as the "facts" upon which the sustained assessment was based: Lauren, Inc. is in the business of owning and operating coin-operated vending machines. The corporation entered into various agreements under which it received permission to install, place, operate, service and maintain its coin-operated vending machines on the premises of various location owners in return for an agreement to pay the location owners a percentage of the gross receipts from the machines. The corporation interpreted the agreements to be transactions involving the rental of tangible personal property and not for the license to use real property. Therefore the corporation collected and remitted tax on the gross receipts taken from the machines and from the location owners on the rental of the machines as provided under Rule 12A- 1.044(2)(b), F.A.C. The auditor determined that the agreements between Lauren, Inc. and the location owners, involving the placement of vending machines at the various location owner's premises, were agreements made for the license to use real property and not for the rental of tangible personal property. Therefore, the auditor assessed use tax on these transactions. In addition, the auditor assessed use tax on the purchases made by Lauren, Inc. for the coin-operated machines, parts, and accessories. The only issue maintained by you is whether or not the agreements between Lauren, Inc. and the location owners were agreements for the license to use real property or whether the agreements constitute the rental of tangible personal property and would therefore, exempt the purchases of the coin operated vending machines, parts, and accessories as provided under Rule 12A-1.044(2)(B), F.A.C. In the Notice of Reconsideration, the Department cited Section 66 of Chapter 86-152, Laws of Florida, which, the Department stated in the Notice, "amended Section 212.031, Florida Statutes, (F.S.), effective July 1, 1986, to make licenses to use real property, as well as leases, subject to tax." The Notice of Reconsideration also contained the following excerpt from Rule 12A-1.070, Florida Administrative Code: "(g) An agreement whereby the owner of real property grants another person permission to install and maintain a full service coin-operated vending machine, coin-operated amusement machine, coin-operated laundry machine, or any like items, on the premises is a taxable use of real property. The consideration paid by the machine owner to the real property owner is taxable." [Emphasis in original.] In addition, the provisions of subsections (2)(a), (b) and (c) of the Rule were recited in the Notice of Reconsideration. Allen stated her "conclusion" as follows in the Notice of Reconsideration: A review of the agreements presented in the audit file was made by this writer and the following conclusion was made: The agreements clearly reflect that Lauren, Inc. is installing, placing, operating and maintaining the coin-operated vending machines on the various location owner's realty for a percentage of the gross proceeds. Nowhere in the agreements does it state that Lauren, Inc. is leasing or renting the coin- operated vending machines to the location owner for a percentage of the gross proceeds. The agreements do, however, specifically state that the location owner will provide a space for Lauren, Inc. to install, operate, service, and maintain a coin-operated vending machine on the location owner's premises. The agreements made between Lauren, Inc., the owner of the machines[,] is and has been since July 1, 1986, a taxable license to use real property. Before that date, amounts paid for leases of real property were taxable, but licenses to use were not. Black's Law Dictionary defines a license to use real property as: "a privilege to go on premises for a certain purpose, but does not operate to confer on, or vest in a licensee any title, interest, or estate in such property." The agreements did not confer to Lauren, Inc. any "title, interest, or estate" in the location owner's realty, but, instead, only permitted Lauren, Inc. to come onto the property and place the coin- operated vending machines on the property for the purpose of making the machines available to those who wanted to use them. It is the Department's decision that the subject tax was assessed correctly pursuant to Rule 12A- 1.070(1)(g), F.A.C. and 12A-1.044(2)(a) and (c), F.A.C. and in accordance with Departmental policies and procedures. The audit findings shall remain as assessed in the enclosed closing statement. Particularly in light of the provision of Rule 12A-1.070, Florida Administrative Code, set forth in the Notice of Reconsideration, the agreements that Petitioner had provided the Department were reasonably susceptible to the interpretation that they were, as Allen had concluded, "taxable license[s] to use real property," notwithstanding that the parties to these agreements had intended that they be interpreted otherwise. The Notice of Reconsideration advised Petitioner of its right "to file a petition for a Chapter 120 administrative hearing with the Department." Petitioner filed such a petition with the Department on May 8, 1992. The Department referred the matter to the Division of Administrative Hearings on June 18, 1992, for the assignment of a Hearing Officer to conduct the hearing Petitioner had requested. The hearing was held on October 6, 1992. Two witnesses testified at the hearing, Matthews and Manley Lawson, a member of the Board of Directors of the Florida Amusement and Vending Association. In addition to the testimony of these two witnesses, a total of 11 exhibits were offered and received into evidence. The evidence presented at hearing was supplemented by a stipulation into which the parties had entered prior to hearing. On November 23, 1992, the Hearing Officer issued a Recommended Order recommending that the Department "enter a final order withdrawing the assessment that is the subject of the instant proceeding." The Hearing Officer's recommendation was based upon the following Conclusions of Law set forth in his Recommended Order: The instant case is governed by the version of Rule 12A-1.044, Florida Administrative Code, that was in effect during the audit period (referred to herein as the "Rule"). It read in pertinent part as follows: "(2) Vending and amusement machines, machine parts, and locations. When coin-operated vending and amusement machines or devices dispensing tangible personal property are placed on location by the owner of the machines under a written agreement, the terms of the agreement will govern whether the agreement is a lease or license to use tangible personal property or whether it is a lease or license to use real property. If machines are placed on location by the owner under an agreement which is a lease or license to use tangible personal property, and the agreement provides that the machine owner receives a percentage of the proceeds and the location operator receives a percentage, the percentage the machine owner receives is rental income and is taxable. The tax is to be collected by the machine owner from the location operator. The purchase of the records, needles, tapes, cassettes, and similar items, machines, machine parts and repairs, and replacements thereof by the machine owner is exempt. If machines are placed on location by the owner under an agreement which is a lease or license to use real property, and the agreement provides that the machine owner receives a percentage of the proceeds and the location operator receives a percentage, the percentage the location operator receives is income from the lease or license to use real property and is taxable. The tax is to be collected by the location operator from the machine owner. The purchase of the records, needles, tapes, cassettes, and similar items, machines, machine parts, and repairs and replacements thereof by the machine owner is taxable. * * * (4) The purchase of amusement machines or merchandise vending machines and devices is taxable, unless purchased for exclusive rental. * * * The following examples are intended to provide further clarification of the provisions of this section: Example: The owner of Town Tavern enters into a lease agreement with Funtime Company. Under the terms of the agreement, Funtime will provide coin-operated video game machines to Town Tavern, with Funtime retaining title to the machines and providing repairs or replacement parts as necessary. As consideration for the rental of the machines, Town Tavern will give Funtime 60 percent of the proceeds from the machine. By the terms of the agreement, this arrangement is a lease of tangible personal property and Funtime, as the lessor, must collect tax from Town Tavern on the portion of the proceeds it receives. The purchase of the video game machines, machine parts, and repairs thereof by Funtime Company is exempt. The portion of the proceeds retained by Town Tavern is not taxable. Example: An amusement and vending machine owner enters into a license agreement with City Airport, which grants the machine owner the right to place amusement and vending machines in Concourse A. The amusement machines consist of several electronic games and a pinball machine. The vending machines consist of soft drink, snack food, and candy machines. City Airport has the right to designate the areas within the concourse where the machines will be located; the machine owner and owner's employees are to stock the machines and provide repairs as needed. As consideration under the agreement, City Airport will receive 15 percent of all proceeds from the machines. By the terms of the agreement, this arrangement is a license to use real property, and City Airport, as the licensor, must collect tax from the machine owner." 3/ At issue in the instant case is whether the agreements Petitioner entered into with location operators during the audit period were, as claimed by Petitioner, leases or licenses to use tangible personal property, within the meaning of subsection (2)(b) of the Rule, or whether they were, as asserted by Respondent, leases or licenses to use real property, within the meaning of sub- section (2)(c) of the Rule. After having carefully examined the record in the instant case, particularly the stipulations and evidence regarding the contents of the agreements in question, how the agreements were interpreted by Petitioner and the other parties to the agreements, and the trade customs prevailing at the time, the Hearing Officer finds that the agreements were leases or licenses to use tangible personal property, within the meaning of subsection (2)(b) of the Rule, and that therefore the assessment issued against Petitioner, which was predicated upon a contrary finding, is not valid. See Blackhawk Heating & Plumbing Co., Inc., v. Data Lease Financial Corp., 302 So.2d 404, 407 (Fla. 1974)("[i]n the construction of written contracts, it is the duty of the court, as near as may be, to place itself in the situation of the parties, and from a consideration of the surrounding circumstances, the occasion, and apparent object of the parties, to determine the meaning and intent of the language employed;" "[w]here the terms of a written agreement are in any respect doubtful or uncertain, or if the contract contains no provisions on a given point, or if it fails to define with certainty the duties of the parties with respect to a particular matter or in a given emergency, and the parties to it have, by their own conduct, placed a construction upon it which is reasonable, such construction will be adopted by the court, upon the principle that it is the duty of the court to give effect to the intention of the parties where it is not wholly at variance with the correct legal interpretation of the terms of the contract"); Oakwood Hills Company v. Horacio Toledo, Inc., 599 So.2d 1374, 1376 (Fla. 3d DCA 1992)("[i]t is a recognized principle of law that the parties' own interpretation of their contract will be followed unless it is contrary to law;" "the court may consider the conduct of the parties through their course of dealings to determine the meaning of a written agreement"); International Bulk Shipping, Inc. v. Manatee County Port Authority, 472 So.2d 1321, 1323 (Fla. 2d DCA 1985)("[w]hile we agree that the language of Item 220 [of the tariff] does not clearly cover the shifting charges at issue, we observe that a court may consider trade customs and prior dealings between the parties to give meaning to the provision"); Bay Management, Inc., v. Beau Monde, Inc., 366 So.2d 788, 793 (Fla. 2d DCA 1978)("where a contract fails to define with certainty the duties of the parties, and the parties by their conduct have placed a reasonable construction on it, . . . such construction should be adopted by the court"). Accordingly, the assessment should be withdrawn. The Department, on January 15, 1993, issued a Final Order adopting the Hearing Officer's Findings of Fact and Conclusions of Law and his recommendation that the subject assessment be withdrawn.
Findings Of Fact Based upon the oral and documentary evidence presented at the final hearing and the entire record in this proceeding, the following findings of fact are made: Petitioner Conklin Shows, Inc., is a Florida corporation with its principal place of business in West Palm Beach, Florida. Conklin is engaged in the business of providing midway attractions for large fairs. The company services between five and eight fairs per year and provides rides as well as food and game concessions. In most instances, Conklin provides a turn-key operation whereby it provides all rides and concessions, sells tickets, collects all fees and charges, and pays the particular fair authority the amount set forth in the underlying agreement between the parties. Conklin owns and operates some of the rides that it provides and also owns a few food concessions. It also contracts with independent ride owners as well as food and game concession owners to provide the services necessary for a particular fair. Southeast Florida and Dade County Youth Fair Association, Inc. (the "Association") is a corporation which conducts an annual youth fair, in Dade County, Florida (the "Fair") in accordance with Chapter 616, Florida Statutes. Conklin has provided midway attractions, including rides, games and food concessions, for the Fair since the late 1970s. Initially, Conklin provided a complete turn-key operation for the Fair. In 1980 or 1981, the Fair advised Conklin that it wanted to modify the arrangement so that the Fair collected and dispersed all monies and retained the right to book attractions independently. Consequently, the parties modified their agreement so that the Association sold all the tickets used by the Fair-goers for admission and for rides. In other words, cash was not accepted from the public for admission and/or rides. The evidence indicates that cash was accepted at game and food booths. The Association employed all ticket sellers, sold admissions and tickets and paid the appropriate taxes on the sales. As discussed below, at the end of each day, the Association distributed the proceeds of the ticket sales and settled up with the food and game concessionaires. Conklin was paid an agreed upon percentage of the proceeds of the ticket sales after taxes. As part of the settlement, Conklin reimbursed the Association for certain expenses. In approximately March of 1990, DOR began an audit of Conklin at its offices in West Palm Beach. The audit was conducted primarily by Ms. Van T. Ho, a tax auditor with DOR. The audit covered the period between June 1, 1985 through February 28, 1990. Ms. Ho concluded that certain contractual arrangements between Conklin and its subcontractors who provided rides, games and food concessions for the Fair should be construed as the sublease or sublicense of the rental of real property. Since Conklin had not remitted sales tax to the State of Florida for these subleases or sublicenses, she concluded that sales tax should be assessed against Conklin. In addition, Ms. Ho reviewed Conklin's records regarding purchases of parts and materials and concluded that appropriate sales tax had not been paid on certain purchases. The audit results with the additional assessed taxes, penalties and interest were incorporated in a Notice of Intent to Make Sales and Use Tax Audit Changes dated October 24, 1990 (the "Notice of Intent.") In the Notice of Intent, DOR advised Conklin that it had been found liable on various transactions subject to tax under Chapter 212, Florida Statutes, during the period June 1, 1985 through February 28, 1990. The Notice of Intent sought a total of $655,982.04 for taxes, penalties and interest through October 24, 1990 with additional interest at the rate of $142.69 per day. A Notice of Proposed Assessment was issued by DOR on April 25, 1991. Conklin protested the proposed assessment in a letter dated June 19, 1991. Ultimately, DOR issued a Notice of Decision dated May 27, 1992 upholding the audit findings. Conklin timely initiated this administrative challenge to DOR's Notice of Decision. At the commencement of the hearing in this matter, DOR announced that it was no longer contending that Conklin was subletting real property. Instead, DOR asserted that Conklin's contractual arrangements for ride subcontracts and for food and game concessions should be construed as licenses to use real property. Since the sales tax on a license to use real property did not become effective until July 1, 1986, DOR conceded that the assessment against Conklin should be reduced to delete any sales taxes related to the fairs conducted in February of 1985 and 1986. As set forth in the Preliminary Statement, DOR set forth its recalculated assessment in a late-filed exhibit which was submitted on March 26, 1993. The parties stipulated that the recalculation submitted on March 26, 1993, should be accepted as an amendment to Petitioner's Exhibit 1. According to that amendment, Petitioner is seeking a total of $468,520.80 for taxes, penalties and interest allegedly due through January 17, 1991 with a per diem interest rate of $105.58. For purposes of this proceeding, the proposed assessment can be broken down into four categories: (1) sales tax allegedly due from Petitioner on rental or license income from subcontractors who provided rides at the Fair; (2) sales tax allegedly due as the result of the sublease or sublicense of real property by Conklin to food concessionaires; (3) sales tax allegedly due as the result of the sublease or sublicense of real property by Conklin to game concessionaires; and (4) purchase tax allegedly due on parts and materials bought by Conklin which it claims were utilized in manufacturing or repairing rides for export. Rides During the years 1987 through 1990, Conklin contracted to provide rides to the Association for the Fair. Conklin was required to provide a specific number of rides in certain categories together with all personnel required to operate the rides. Conklin was also responsible for all expenses attributable to the operation and maintenance of the equipment. During all of the years in question, the Association sold the tickets for all rides, collected the proceeds and paid the applicable sales tax and remitted the agreed percentage of the after-tax receipts to Conklin. Conklin was paid a sliding scale percentage of the net revenues from the rides. Conklin typically contracted to provide more rides than it owned. In order to satisfy its contractual obligation, Conklin entered into agreements with independent ride owners. These subcontractors would provide all transportation, assembly and disassembly necessary for the ride, together with all personnel required for operation. Conklin did not take possession or exercise any direction or control over the physical operations of the ride. The subcontractor was responsible for all expenses related to the operation and maintenance of the ride and was required to reimburse Conklin for a proportionate part of the common expenses. Conklin agreed to pay the ride owner a percentage of the receipts attributable to that ride after sales tax. Each ride owner collected tickets from the Fair attendees. The subcontractors would turn their tickets over to Conklin. Conklin turned in the tickets for all rides provided by it and its subcontractors to the Association. After Conklin was paid its percentage by the Association, Conklin would pay the subcontractors a percentage attributable to their particular ride in accordance with the agreement between Conklin and that subcontractor. Conklin retained a portion of the amount received from the Association for all of the subcontracted rides. The subcontractors did not make any payments to Conklin nor did Conklin make any payments to the Association. The Association set the times of operation and other general policies for the Fair, but exercised no direction or control over the physical operation of any of the rides. In each case, the owner of the equipment furnished the operator and all operating supplies and made the particular ride available at the time dictated by the Association. DOR contends that the difference between the amount received by Conklin from the Association for rides provided by subcontractors and the amount paid by Conklin to the subcontractors was taxable because it arose from a sublicense of real property. 2/ Conklin, on the other hand, argues that its contractual arrangement with the subcontractors should be viewed as a nontaxable service transaction since it paid the subcontractors who in turn provided the rides together with operating personnel and expenses. As discussed in the Conclusions of Law below, Conklin's interpretation is consistent with the language of the subcontracts and more accurately reflects the relationship created by the parties. The mere fact that a ride was operated on real estate owned by another party should not be conclusive of whether the arrangement should be viewed as a license of real property as opposed to a rental of equipment. Food Concessions Conklin executed separate agreements with the Association to provide certain food and game concessions for the Fair during the years 1987 through 1990. The contracts between the Association and Conklin for food and game concessions were entitled "License Agreement for Exhibitors and Concessionaires." Those agreements specifically provided: It is understood and agreed the below described space is not leased to the Licensee [Conklin], rather he is a Licensee and not a lessee thereof. Under the food concession agreements, Conklin was obligated to provide specific food concessions, including all labor and operating expenses. The contract between the Association and Conklin designated specific areas at the Fair where the concessions were to be set up. The Association was entitled to a percentage of the gross receipts of the sales by the concessions. Conklin did not own any of the equipment utilized in connection with the food concessions. It entered into agreements with concessionaires to provide the personnel, equipment, goods and materials utilized. The concessionaire was responsible for all of the expenses involved with the concession. The concessionaire collected all of the money and settled daily with the Association by paying the Association the percentage due under its agreement with Conklin (which was normally twenty-five percent) together with the tax on that amount and the sales tax on all sales. The Association remitted the taxes on the rental (license) amount and the sales. Conklin was not privy to the settlement between the food concessionaires and the Fair. It was given a copy of the settlement sheet. The concessionaire paid Conklin a percentage of the gross based upon its agreement with Conklin. That percentage was normally between seven and ten percent. In the Notice of Assessment, DOR lumped food and game concessions together and assessed tax based upon its determination of the amount received by Conklin. The evidence presented at the hearing in this case established that the Notice of Assessment mistakenly included gross revenues rather than the net received by Conklin from game concessions. Petitioner's Exhibit 13 sets forth the correct amounts received by Conklin from food and game concessions during the years in question. During the years 1987, 1989 and 1990, the amounts received by Conklin from food concessions at the Fair were $11,919.73, $11,521.21 and $13,034.49 respectively. The Notice of Assessment indicates that there was no taxable income from food and game concessions in 1988. No explanation was given for this anomaly. Although there was no assessment for food and game concessions for 1988 in DOR's Notice of Assessment, Petitioner's Exhibit 13 indicates that Conklin received $16,975.22 from food and game concessions that year of which $11,938.44 was apparently attributable to food concessions. DOR contends the amounts received by Conklin from the food concessionaires were taxable because the arrangement constituted a sublicense of real property. Conklin contends that the money received from food concessions is exempt from taxation for the years since 1988 pursuant to Section 212.031(1)(a)(10), Florida Statutes. In its Proposed Recommended Order, Conklin conceded that this exemption did not come into effect until 1988. Consequently, Conklin admitted that it owed tax on the proceeds it received from the food concessions in 1987 ($11,919.73.) The evidence presented in this case was insufficient to conclude that Conklin was entitled to the exemption for the years subsequent to 1987. The exemption relied upon by Conklin is limited to a publicly owned arena, sports stadium, convention hall, exhibition hall, auditorium or recreational facility. While the parties agree that the Fairs in question were conducted pursuant to Chapter 616, Florida Statutes, no evidence was presented to establish that the Fair was conducted in one of the specified exempt facilities. Game Concessions With respect to the game concessions, Conklin agreed to provide a certain number of game booths and to pay a set fee to the Association for each game along with a five percent rental realty tax on that fixed amount. 3/ Conklin did not own or operate any game concessions itself. It contracted with the owner/operators of the various games. The owner/operator would provide all of the equipment and personnel. The game owner was responsible for collecting the money, paying all expenses of operation, paying the applicable sales tax to the Association and also paying the Association the contractual percentage and rental taxes set forth in the agreement between Conklin and the Association. The net profits from the game were to be split equally between Conklin and the owner of the game. In the event of a loss, Conklin was responsible for contributing one-half of the net amount. As discussed in the Conclusions of Law below, the amounts received by Conklin from the game concessions should be treated as the proceeds on joint venture partnerships between Conklin and the various concessionaires and, therefore, should not be taxable. If this conclusion is rejected and the amounts received by Conklin are viewed as taxable license or rental payments, the tax should be assessed on the share Conklin actually received. As set forth in Findings of Fact 17 above, the evidence established that DOR's calculation in the Notice of Assessment of the tax allegedly owed by Conklin for food and game concessions was incorrectly based upon the gross receipts for the game concessions rather than the net profits that Conklin actually received. During the years 1987, 1989 and 1990, Conklin's share of the profits from the games operated under its name amounted to $5,792.65, $1,554.64 and $1,179 respectively. The Notice of Assessment indicated there were no taxable receipts from food and game concessions in 1988. Petitioner's Exhibit 13 indicates that Conklin received $16,975.22 from food and game concessions that year, of which $5,036.78 was apparently attributable to game concessions. Exports Conklin is also engaged in the business of repairing and manufacturing games and rides. In the course of the manufacture or repair of these games and rides, Conklin purchases parts and supplies. Conklin's accountant testified that it paid the appropriate tax on all of its purchases except those items which were segregated out as being integral parts of products that were exported to Canada. DOR's auditor claims that she requested and was not provided with any documentation to support the exemption claim. While Petitioner's accountant claims that the company has documentation that the items in question were used in the manufacture and repair of items that were exported and this documentation was made available to DOR's auditor, no such documents were presented at the hearing in this matter to confirm that the final products were in fact exported. Consequently, the evidence was insufficient to establish that Conklin had complied with the applicable rule requirements and was entitled to the exemption it claimed. Penalties In 1984 and 1985, Conklin provided rides and concessions to the Martin County Fair under its usual turn-key system where it sold all the tickets. During those years, DOR sent an enforcement officer to the fair to ensure that all taxes were paid. The DOR enforcement officer reviewed all of Conklin's books and collected the sales tax from all the concessionaires. Although Conklin inquired as to whether it was paying all appropriate taxes, the DOR enforcement officer never indicated to Conklin that it was obligated to pay rental realty taxes on its subcontractual arrangements with ride owners and/or food and game concessionaires. Thus, there was some justification for Conklin's belief that it was not obligated to pay taxes on the ride subcontracts and the food and game concessions. Conklin's understanding of the law should have been reexamined with the adoption of the statutory clarification for the imposition of sales tax on a license to use real property. See section 66 of Chapter 86- 152 of the Laws of Florida effective July 1986. However, none of the statutory or rule provisions relied upon by DOR clearly address contractual arrangements such as those Conklin had with its ride subcontractors where the purported sublicensee made no payments to the alleged sublicensor. In view of these factors, it would be inappropriate to impose penalties on Conklin for "taxable income" it allegedly received from the ride subcontracts. Similarly, even if Conklin's contention that its arrangements with game concessionaires should be viewed as a joint venture is rejected, penalties should not be imposed since the statutory and rule provisions do not clearly address this situation. With respect to the food concessions, Conklin has conceded that it owes tax on the amount received from food concessionaires in 1987. Conklin has offered no justification for the failure to pay the tax on this amount other than to claim that it did not believe any tax was due because of comments (or lack thereof) by DOR representatives during the 1984-85 Martin County Fair. However, the basis for imposing a tax on a sublicense of real estate was significantly clarified in 1986. Thus, Conklin's purported reliance on the comments made in 1984 and 1985 should not be given much weight. Penalties on the assessment on food concession receipts from 1987 are appropriate. For the years subsequent to 1988, Conklin relies on the exemption set forth in Section 212.031(1)(a)(10), Florida Statutes. While it is possible that the exemption applies, the evidence presented at the hearing in this matter was insufficient to establish that this exemption was applicable. Consequently, penalties on the food concession receipts subsequent to 1988 are not appropriate. Following the issuance of the Notice of Proposed Assessment, Conklin admitted that it owed taxes on certain purchases that were made from out of state companies and shipped into the state. Conklin paid the tax on those items prior to the hearing in this matter. It is not clear what, if any, penalty was assessed with the late payment of the tax on these items. With respect to the remaining items, Conklin has steadfastly maintained its position that the items were utilized in connection with products that were exported. However, Conklin failed to convince DOR's auditor of the merits of its position and failed to provide sufficient evidence at the hearing in this matter to justify its claim. In view of all the circumstances, there is no basis for a waiver of penalties on this portion of the Notice of Assessment.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a Final Order amending the Notice of Assessment to: (a) delete all taxes, penalties and interest assessed against Conklin for the ride subcontracts and game concessions; (b) affirming the assessment of tax against Conklin for the amount it received from food concessionaires during the years 1987 through 1990 (the amount of the assessment should be amended to reflect the net proceeds Conklin received rather than the gross revenues reflected in the original Notice of Assessment) and imposing penalties and interest on the amount of tax due; and (c) affirming the assessment of taxes, penalties and interest for the purchase of items that were allegedly used in the repair or manufacture of goods for export. DONE and ENTERED this 13th day of January 1994, at Tallahassee, Florida. J. STEPHEN MENTON 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 13th day of January, 1993.
The Issue The first issue in this case is the amount of attorneys' fees to assess against Respondent, Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering (Respondent or Division), pursuant to an Order of the First District Court of Appeal (First DCA) granting a motion by Petitioner, Ft. Myers Real Estate Holdings, LLC (Petitioner or Ft. Myers REH), for attorneys' fees pursuant to section 120.595(5), Florida Statutes (2010),1/ and remanding the case to DOAH to assess the amount. The second issue is whether Petitioner is entitled to recover attorneys' fees and costs incurred in this proceeding, and, if so, in what amount.
Findings Of Fact For reasons that the First DCA found to be a "gross abuse of agency discretion," the Division rendered a Final Order dismissing Ft. Myers REH's petition for a formal administrative hearing to contest the Division's denial of Ft. Myers REH's amended application for a quarter horse racing permit. The premise of the Division's Final Order was that Petitioner could not prove that it meets the requirements for a permit, hence its claimed injury was not "redressable." Ft. Myers REH appealed the Final Order. The Notice of Appeal to the First DCA was filed on April 5, 2010, signed by Cynthia Tunnicliff for Pennington, Moore, Wilkinson, Bell and Dunbar, P.A. (the Pennington firm). After two motions to extend the deadline for filing the initial brief, Ft. Myers REH filed its Initial Brief on July 26, 2010. With the Initial Brief, Ft. Myers REH filed a motion for an award of attorneys' fees under section 120.595(5), asserting that the agency action which precipitated the appeal was a gross abuse of the agency's discretion. The motion's prayer for relief asked for "entry of an order awarding the Appellant the attorneys' fees it has incurred prosecuting this appeal, pursuant to . . . Section 120.595(5)." As stated in the opinion, the First DCA found that the Division's Final Order was "contrary to the basic, settled principle of administrative law that a person whose substantial interests are determined by an agency is entitled to some kind of hearing . . . to challenge the agency's decision[.]" The court determined that the dismissal of Ft. Myers REH's petition was "so contrary to the fundamental principles of administrative law" that Petitioner was entitled to an award of attorneys' fees under section 120.595(5). To assess reasonable attorneys' fees, a starting place is necessarily the time records of Petitioner's appellate legal team. Although Judge Farmer offered his opinion that the time records had little to no significance in this case, nonetheless, even Judge Farmer accepted the time-based attorneys' fees shown on those time records as the base amount to which a multiplier should be applied. Therefore, the undersigned examined the time records in the context of the appellate record and considered the conflicting opinions of the parties' experts to assess whether the time incurred by Petitioner's legal team was reasonable in light of the steps needed to successfully prosecute the appeal. There was extensive motion practice in the appeal, which significantly increased the amount of time that might otherwise be considered reasonable for an appeal of an order summarily dismissing a petition for administrative hearing, with no record to speak of from proceedings below, such as would be developed in a trial or administrative hearing. Several motions were filed by the Division, including a motion to dismiss the appeal, which resulted in an Order to Show Cause directing Ft. Myers REH to demonstrate why the appeal should not be dismissed. The Division also filed two different motions to strike, one directed to Ft. Myers REH's response to the Order to Show Cause why the appeal should not be dismissed, and the other directed to the reply brief; both of these motions were denied. Ft. Myers REH filed even more motions than the Division. In addition to the motion for attorneys' fees pursuant to section 120.595(5) and two perfunctory motions for enlargement of time to file the initial brief, Ft. Myers REH also filed a motion for substitution of counsel, making the mid-stream decision that David Romanik, whose expertise was in gaming law, should be counsel of record instead of Cynthia Tunnicliff, whose expertise was in administrative and appellate law, even though both attorneys remained involved before and after the substitution. More substantively, in reaction to the Division's motion to dismiss, Ft. Myers REH filed a motion to supplement the record and a motion for judicial notice, which were denied; a motion to consolidate the appeal with a separate mandamus action it had filed, which was denied; and a motion to strike the Division's response to the motion to supplement the record, or, in the alternative, a motion for leave to respond to new legal issues raised in the Division's response, both of which were denied. The basis for the Division's motion to dismiss was that a newly enacted law rendered the appeal moot, because under the new law, Ft. Myers REH could no longer qualify for the quarter horse racing permit for which it had applied. The Division sought to invoke the general rule that the law in effect at the time of a final decision applies to determine whether to grant or deny an application for a permit or other form of license. See Lavernia v. Dep't of Prof'l. Reg., 616 So. 2d 53, 54 (Fla. 1st DCA 1993). Ft. Myers REH's motion flurry, even though unsuccessful, was a reasonable response to the Division's position in that Ft. Myers REH sought to demonstrate that one of the exceptions to the general rule, as recognized in Lavernia, was applicable. See, e.g., Dep't of HRS v. Petty-Eifert, 443 So. 2d 266, 267-268 (Fla. 1st DCA 1983)(under the circumstances of that case, applicants were entitled to have the law applied as it existed when they filed their applications). In its opinion, the First DCA acknowledged both the Division's mootness argument and Ft. Myers REH's contention that there were circumstances that would preclude the Division from applying the statutory changes to the permit application. The court deemed these issues more suitable for fleshing out in the administrative hearing on remand. See Ft. Myers, 53 So. 3d at 1162-1163. In addition to the other motions, Ft. Myers REH also filed a motion for an award of attorneys' fees and costs pursuant to section 57.105, in which Ft. Myers REH asserted that the Division's motion to dismiss the appeal was unsupported by material facts and then-existing law. The court considered and denied the section 57.105 motion. There were four attorneys who worked on the appeal on behalf of Ft. Myers REH: David S. Romanik from Oxford, Florida; and Cynthia Tunnicliff, Marc Dunbar, and Ashley Mayer, all of the Pennington firm in Tallahassee, Florida. The first three of these attorneys are long-time practitioners with substantial experience and particular areas of expertise. Mr. Romanik, who became the counsel of record in the middle of the appeal, is an attorney with 35 years' experience, gained in private practice and in executive, legal, and consulting positions in the racing/gaming industry. He was described as the "general counsel, sort of," for the Florida interests of Green Bridge Company, which is the parent company of, and primary investor in, Ft. Myers REH. While Mr. Romanik has some experience in administrative litigation and appellate practice, his primary area of expertise is in gaming law. Ms. Tunnicliff is a shareholder of the Pennington firm, with vast experience and a well-established excellent reputation for her expertise in administrative law and administrative litigation under the Administrative Procedure Act (APA), chapter 120, as well as in appellate practice. Ms. Tunnicliff's appellate experience is documented in well over 100 appeals in which she has appeared as counsel of record, spanning the last 25 years. Marc W. Dunbar has been practicing law for 17 years, and he also is a shareholder of the Pennington firm. Like Mr. Romanik, Mr. Dunbar's recognized area of legal expertise is in gaming law. For the last 13 years, he has been head of the firm's gaming law practice group, and he has substantial experience in gaming law and in providing consulting services to the pari-mutuel industry. Mr. Dunbar's testimony was that this has been the focus of his practice and has grown over the years such that it is now virtually all he does. Ashley Mayer was the lone associate who worked on the appeal. Ms. Mayer graduated in 2009 with high honors from Florida State University College of Law, where she was a member of the moot court team. Those who worked with her regularly at the Pennington firm, including Ms. Tunnicliff and Mr. Dunbar, thought very highly of her work as a one-year associate. Based on the expert opinions offered for and against the reasonableness of the time records for these four attorneys, including the hourly rates applied to the time entries, the undersigned finds as follows: there are some obvious flaws and less obvious insufficiencies in the time records that require adjustment; there is a large amount of duplication, which is tolerable to some extent given the stakes, but which exceeds a tolerable degree and requires some adjustment; the hourly rates for the two gaming law experts are too high for the non-gaming law legal services they each provided, requiring adjustment; and that the hourly rate for the one-year associate is too high, requiring adjustment. The time records of each of the four timekeepers will be addressed in turn, starting with the one-year associate, Ms. Mayer. As an example of an obvious flaw in the time records, the very first time entry is for researching and analyzing case law regarding bringing a civil rights lawsuit under 42 U.S.C. section 1983, for 2.8 hours. Another time entry described work related to a separate mandamus action, which Petitioner sought unsuccessfully to consolidate with the appeal. These entries are unrelated to the appeal. In addition, Ms. Mayer performed research regarding the process for assessing appellate attorneys' fees by remand to the lower tribunal. These entries do not relate to the appeal or to litigating over the entitlement to attorneys' fees. Several of Ms. Mayer's entries do not reflect legal work, but, rather, administrative or secretarial work, such as retrieving a law review article from the law library, conferring with a secretary regarding formatting briefs, and revising documents to conform to others' edits. Other than these entries, Ms. Mayer's time records seem generally appropriate, in that she performed a large amount of research before the initial brief, she performed drafting, and she continued to carry out research assignments throughout the appeal. Of the total 66.7 hours claimed, a reduction of 6.4 hours is warranted to account for the inappropriate entries. 60.3 hours are reasonable for Ms. Mayer. An hourly rate of $225 was applied to Ms. Mayer's time. Petitioner's expert attested, in general and in the aggregate, to the reasonableness of the hourly rates in Petitioner's time records for attorneys with comparable experience and skill, but gave no specific information regarding the basis for his opinions. Respondent's expert disagreed and testified that in her opinion, an hourly rate of $225.00 for a one-year associate was excessive. She based her opinion on The Florida Bar's 2010 Economics and Law Office Management Survey, which reported that for the north region of Florida, 47 percent of all attorneys at any experience level charge an hourly rate of $200.00 or less. In the opinion of Respondent's expert, a reasonable hourly rate for Ms. Mayer would be $150.00, instead of $225.00. While Respondent's expert's information was also somewhat generalized, the undersigned finds that based on the limited information provided, a reasonable rate for a highly skilled, but not very experienced attorney one year out of law school, would be $185.00 per hour. A reasonable attorney's fee for Ms. Mayer's legal work on the appeal is $11,155.50. Turning to Ms. Tunnicliff's time records, the hourly rate for Ms. Tunnicliff of $400.00, though high, is accepted as appropriately so. The rate is comparable to the rates charged by other attorneys of comparable skill and experience in the same locale, as ultimately agreed to by both parties' experts. Ms. Tunnicliff's time entries show that in general, she limited her hours appropriately to a high level of supervision, direction, and review, while allowing others, particularly Ms. Mayer, to conduct the more time-intensive research and drafting efforts. Based on the expert testimony and a review of the time record entries, a few adjustments to Ms. Tunnicliff's records are necessary. One-half hour is subtracted for an entry related to mandamus, because the mandamus action was separate and unrelated to work done to prosecute the appeal at issue. Another adjustment is necessary because of an error in the time records: The billing summary shows that Ms. Tunnicliff's total time was 31.6 hours, which was multiplied by the hourly rate to reach the fees sought for Ms. Tunnicliff's time. However, the individual time entries add up to a total of only 24.6 hours. With the additional deduction of one-half hour for work unrelated to the appeal, a total of 24.1 hours will be allowed for Ms. Tunnicliff's time. Applied to the agreed reasonable hourly rate, a reasonable attorney's fee for Ms. Tunnicliff's work on the appeal is $9,640.00. The time records for the two gaming law experts present more difficult issues, because the legal questions presented in the appeal were not gaming law questions; they were administrative law questions and, indeed, "basic, settled" administrative law questions. While certainly gaming law was the substantive, regulatory context in which these issues arose, it is clear from the time entry descriptions of exhaustive, duplicative legal research on rights to administrative hearings, party standing, and what law applies in license application proceedings, that at their core, the questions presented were general administrative law principles and were treated as such. Yet not only one, but two highly specialized gaming law experts whose experience and specialized expertise allow them to command hourly rates of $450 when practicing gaming law, spent most of the total attorney time prosecuting this administrative law appeal. Mr. Romanik's time records claim 195.5 total hours at $450 per hour, while Mr. Dunbar's time records claim 80.6 total hours, of which 30.2 were claimed at the rate of $450 per hour, while 50.4 additional hours were claimed at $300 per hour. The reduced $300 per-hour fee was an adjustment made at the urging of Petitioner's expert to account for research time spent not within Mr. Dunbar's area of expertise. Mr. Romanik's time records require adjustment. In general, many of the types of criticisms of these records by Respondent's expert are accepted, although the undersigned does not agree with the degree of adjustments deemed warranted by Respondent's expert. In general, Mr. Romanik's time entries reflect excessive hours spent by Mr. Romanik, doing tasks that were duplicative of tasks more appropriately performed by Ms. Mayer, which were, in fact, performed by Ms. Mayer, including research and initial drafting. Perhaps one reason for the sheer number of hours invested by Mr. Romanik was that he was performing research on basic, settled principles of administrative law, such as standing, hearing rights, licensing proceedings, what happens when the law changes while a license application is pending, and other questions of administrative procedure. Mr. Romanik's time records also reflect too many basic drafting tasks, such as initially drafting a request for oral argument. The time records also show excessive secretarial or administrative tasks, such as listing and downloading cases and uploading briefs. Not only did Mr. Romanik's specialized expertise in gaming law not facilitate his performing these tasks efficiently, but he inefficiently performed these tasks very expensively, i.e., at the claimed rate of $450 per hour. Nonetheless, Mr. Romanik apparently did the lion's share of work in redrafting the initial brief (initially drafted by Ms. Mayer), drafting the reply brief, drafting the numerous motions and responses to the Division's motions, and performing well at the oral argument. The high stakes and good outcome cannot be denied. Yet the total time claimed would be high at the hourly rate claimed, if Mr. Romanik were the sole attorney working on the appeal. Given his role as the "general contractor," it is conceivable that many of his hours were invested, or should be considered as having been invested, as "client" time in which Mr. Romanik was serving as the client liaison for the prosecution of the appeal to oversee the work done by the attorneys prosecuting the appeal. Regardless of how Mr. Romanik's hours are characterized, they were excessive and duplicative. To adjust for excessive time in tasks outside Mr. Romanik's area of expertise and for duplication, the undersigned finds that Mr. Romanik's time should be reduced by 83 hours. Reflecting the high stakes and good outcome, as well as the aggressive motion practice in the appeal, a reasonable--though still very high--number of hours for Mr. Romanik to have spent in prosecuting this appeal (with the substantial help of three other attorneys) is 112.50 hours. With almost all of the time Mr. Romanik spent in this appeal falling in areas outside of his recognized legal expertise, the undersigned finds that a high, but reasonable, hourly rate to apply to Mr. Romanik's time is $325.00. Essentially, Mr. Romanik's legal services fell more within the legal expertise of Ms. Tunnicliff. If $400.00 per hour is the acknowledged reasonable rate for someone of Ms. Tunnicliff's experience and expertise, the rate to apply to Mr. Romanik's time should be less, although not substantially so, recognizing that Mr. Romanik's gaming law expertise was a big advantage. If intricate issues of gaming law were involved in this appeal, as opposed to just being the substantive, regulatory context in which basic, settled principles of administrative law arose, then perhaps Mr. Romanik could command his standard hourly rate. Instead, with the predominant focus of Mr. Romanik's work, as reflected in his time entries on administrative and appellate law and procedure, the reasonable rate that will be applied to the reasonable time total found above is a blended rate that is discounted because of reduced expertise in the main area, but increased because of expertise in a collateral area. Applying the reasonable rate of $325.00 per hour to 112.50 hours for Mr. Romanik yields a reasonable attorney's fee of $36,562.50 for Mr. Romanik's prosecution of the appeal. Mr. Dunbar's time records suffer from the same essential problem as Mr. Romanik's--he is a gaming law expert, but his expertise was hardly utilized. If it was not necessary to tap into Mr. Romanik's gaming law expertise to any great extent, then it was not necessary and redundant to have a second gaming law expert substantially involved in the appeal. Additional problems with Mr. Dunbar's time records include several time entries with inadequate descriptions (e.g., "Research" or "Research re: key cite authority") and other entries with descriptions that did not seem to relate to the appeal (e.g., several entries two months after the initial brief was filed for "Research re: standards for appellate review of motion denial" when there was no denied motion for which appellate review was sought). Mr. Dunbar's time records had a large number of entries for performing basic research on questions of administrative law or appellate practice, such as standing, hearing rights, standards for supplementing the record on appeal, standards for motions to strike and to consolidate appeals, standards for reply briefs, and similar descriptions. Substantial adjustments are in order to remove the inadequately described time entries and the entries seemingly unrelated to this appeal and to substantially reduce the duplicative research done by Mr. Dunbar outside of his area that was also done by Ms. Mayer and/or Mr. Romanik and/or Ms. Tunnicliff. While some overlap is tolerable to ensure that all bases are covered, the time entries do not sufficiently establish what was added by Mr. Dunbar's substantial time- performing tasks outside his area of expertise to the already substantial time allowed for Mr. Romanik outside his area of expertise. Mr. Dunbar's reasonable time spent as a fourth attorney prosecuting this appeal is reduced by 43 hours, to 37.6 hours. A little more than half of the 37.6 hours found to be reasonable were in the non-research category, such as Mr. Dunbar's review and comment on the draft briefs and motions and assistance in preparation for oral argument. The research hours found reasonable were those that appeared to augment, but not duplicate, work by one or more other attorneys. As with Mr. Romanik, a blended reasonable hourly rate is applied, which recognizes that even for the non-research time allowed for Mr. Dunbar, his work was primarily outside his recognized legal expertise, although his expertise provided benefit in understanding the context in which the issues arose. An hourly rate of $300.00 is reasonable for 37.6 hours of work done by Mr. Dunbar in prosecuting this appeal, equaling a reasonable attorney's fee of $11,280.00. The following summarizes the number of hours, hourly rate, and resulting fee found to be reasonable for each of the four attorneys who aided in prosecuting the appeal: Attorney Hours Hourly Rate Fee Mayer 60.3 $185 $11,155.50 Dunbar 37.6 $300 $11,280.00 Romanik 112.5 $325 $36,562.50 Tunnicliff 24.1 $400 $ 9,640.00 Total hours by all attorneys: 234.50 Total time-based fees: $68,638.00 As previously alluded to, the stakes of this appeal were very high, in that without success in the appeal, Petitioner would have no chance of obtaining the quarter horse racing permit for which it had applied. While success in the appeal would not assure Petitioner that it would ultimately prevail in its effort to secure a permit, winning the appeal was a necessary step to keep the permit application alive and allow Petitioner to take the next step in the process. If, at the end of the long road ahead, Petitioner secures the sought-after permit, the value of that permit could be in the neighborhood of $70 million. Given the stakes, a higher amount of hours and greater degree of duplication were allowed than might normally be considered reasonable. The undersigned finds that there was not a huge risk factor with regard to the outcome of the appeal. While in a general sense and statistically speaking, odds always may be greatly against success in an appeal, those across-the-board statistics are mitigated in this case by such a clear violation of a "basic, settled" and "fundamental" principle of administrative law and due process. The complexity and novelty of the issues on appeal are reflected, as one would expect, in the number of hours found to be reasonable for Petitioner's team of attorneys to have spent in prosecuting this appeal. Even as reduced, the total hours found reasonable for this appeal are nearly three times the amount of time Respondent's expert would expect in the typical appeal. Thus, the hours found to have been reasonably invested were substantially higher than typical for an appeal, when one might have expected less hours than typical since this appeal did not follow a trial or administrative hearing. No evidence was presented to show that any of the four attorneys on Petitioner's appeal team were precluded from taking other work because of their role in the appeal or that there were any time constraints placed on the attorneys, either by the client or the circumstances. The evidence was not entirely clear regarding the nature of the arrangements with Ft. Myers REH for payment of attorneys' fees for the appeal. Two separate contingency fee agreements were admitted in evidence. One agreement, "[a]s of August 15, 2010[,]" was between Ft. Myers REH and Mr. Romanik (and his firm, David S. Romanik, P.A.). The operative term of the agreement provided that "[u]pon and after the execution of this fee agreement, the [Romanik] Firm shall handle this matter and all aspects of it on a contingent fee basis." The "matter" covered by the agreement was broadly described as "the pursuit of the issuance by the Division of Pari-Mutuel Wagering of a quarter horse racing and wagering permit . . . ." Therefore, from August 15, 2010, forward, Mr. Romanik and his firm agreed to be compensated on a contingent fee basis for not only the appeal, but also, any subsequent administrative hearings if the appeal was successful and any other administrative or judicial litigation required to secure the permit. Services would be considered successfully completed upon commencement of Ft. Myers REH's gaming operation pursuant to the permit. For such successful services, the Romanik firm would receive $5 million. In addition, the agreement provided that the firm would be entitled to "any and all fees that may be awarded" by any court or administrative tribunal. No evidence was presented regarding the prior fee arrangement that was in place until August 15, 2010, when the contingent fee arrangement took effect. Mr. Romanik and his firm entered into a separate contingency fee agreement with the Pennington firm to secure the Pennington firm's assistance, as a subcontractor, in prosecuting the appeal of the Division's dismissal of Ft. Myers REH's request for an administrative hearing to contest the denial of its quarter horse permit application. The agreement, dated September 1, 2010, was called "a revised representation agreement," which superseded "all prior agreements related to this matter." Payment for services under the agreement was contingent on success in the appeal and was set at "the greater of $100,000 or any fee award from the court, if any." No prior representation agreement for services provided by the Pennington firm in the appeal before September 1, 2010, either with Mr. Romanik and his firm or with Ft. Myers REH, was offered into evidence. However, Mr. Dunbar testified that before the Pennington firm entered into a contingency fee arrangement with Mr. Romanik and his firm, the Pennington firm provided services to Ft. Myers REH under a standard fee agreement by which the Pennington firm attorneys provided legal services for which they billed and were paid at their standard hourly rates. As of August 16, 2010, the standard fee agreement between Ft. Myers REH and the Pennington firm was apparently still in place, because in the motion for section 57.105 sanctions served on Respondent on August 16, 2010, and subsequently filed with the First DCA on September 20, 2010, Mr. Dunbar represented that Ft. Myers REH "had retained the [Pennington law firm] to represent it in this matter and has agreed to pay its attorneys a reasonable fee for their services." This statement was not qualified by any contingency, such as that Ft. Myers REH only agreed to pay a reasonable fee to the Pennington firm if the appeal was successful. Thus, although Mr. Dunbar seemed to indicate in his testimony that the September 1, 2010, contingent fee agreement was intended to apply retroactively, that testimony is inconsistent with the representation in the section 57.105 motion signed by Mr. Dunbar. The evidence establishes that contingency fee agreements were entered into midway through the appeal. The greater weight of the credible evidence was insufficient to prove that before August 15, 2010, the attorneys providing services in the Ft. Myers REH appeal would only be paid if the appeal was successful. Thus, the undersigned finds that the fee arrangements for the appeal were partially contingent. The contingent fee agreements were reached as an accommodation to Ft. Myers REH's desire for such arrangements, rather than as an enticement that had to be offered by Ft. Myers REH in order to secure competent counsel to represent it in the appeal. No evidence was presented detailing the nature and length of Petitioner's relationship with its team of attorneys. As noted, Mr. Romanik has a relationship with Petitioner and its parent that is akin to general counsel over the parent's Florida interests, though it is unknown how long this relationship has existed. The Pennington firm, likewise, has done work for Petitioner and its parent before and has sent invoices for legal services to Mr. Romanik for his review, approval, and transmittal to the parent for payment. It is unknown how extensive or over what period of time this relationship existed. Petitioner established that it incurred an additional $28,087.00 in attorneys' fees charged for litigating the reasonable amount of attorney's fees in this proceeding, plus $44,016.00 in expert witness fees. In addition, Petitioner incurred $1,094.43 for expense items, of which $409.50 represents the cost of the final hearing transcript, and the balance represents costs for copying, courier service, and postage. Respondent did not dispute the reasonableness of those attorneys' fees, expert witness fees, and costs.
The Issue The issue presented here concerns the entitlement of the Petitioners to be granted licenses to work in the Mutuels Department of the Fronton, Inc., a Florida Jai Alai concession located in West Palm Beach, Florida. More specifically, the matter to be resolved concerns the Respondent's refusal to license the named Petitioners in the aforementioned capacity based upon the alleged activities of those Petitioners during the 1977 season of the New Port Rhode Island Jai Alai Fronton. The Petitioners are alleged to have conspired to commit a fraudulent or corrupt practice in relation to the game of jai alai and committing fraud or corruption in relation to the game through conspiring to use and using positions as handicappers in misleading the public for the Petitioners' benefit, contrary to Rule 7E-3.12, Florida Administrative Code. It is further alleged that the Petitioners have violated Rule 7E-3.05, Florida Administrative Code, by associating with their fellow co-Petitioner with a knowledge that the co-Petitioner has violated State of Florida's rules and regulations related to jai alai by conspiring to commit and committing a corrupt and fraudulent practice in relation to the game of jai alai as specified in the discussion of Rule 7E-3.12, Florida Administrative Code. The Respondent also claims that it has information, to include the information related in the discussion of the two rules provisions, which information is a prima facia indication that the Petitioners are not of good moral character as required by Chapter 550, Florida Statutes, because of their conduct in the relation to the game of jai alai, which conduct would cause a reasonable man to have substantial doubt about the Petitioners' honesty, fairness and respect for the rights of others and would erode the public's confidence and the honest outcome of jai alai matches in the State of Florida. 1/
Findings Of Fact Prior to the season for the jai alai known as the Fronton, Inc., located in West Palm Beach, Florida, for the years 1980-81, the Petitioners In the above-styled actions made application for an occupational license to be granted by the Respondent. The licenses requested were to work as employees of the Fronton, Inc., in the mutuels department. The applications for licensure on the part of the Petitioners concerned re-licensure for the upcoming jai alai season in West Palm Beach, Florida. The Petitione'rs had never been denied an occupational license by the Respondent in the past. After reviewing the license applications, the Division Director of the Division of Pari-Mutuel Wagering issued letters on November 4, 1980, directed to the named Petitioners, denying their license requests. A copy of that correspondence may be found as Respondent's Composite Exhibit No. 1, admitted into evidence. The grounds for license denial were as set forth In the issues statement of this Recommended Order. The letters of denial indicated the Opportunity for the Petitioners to request a Section 120.57, Florida Statutes, hearing and the Petitioners availed themselves of that opportunity. Subsequent to the request for a formal hearing pursuant to Subsection 120.57(1), Florida Statutes, the Respondent forwarded the case to the Division of Administrative Hearings for a formal hearing. That hearing was conducted on the dates as stated in the introductory portion of this Recommended Order. At the time of the hearing, and continuing to the point of the entry of this Recommended Order, the parties are still desirous of being granted the subject occupational licenses. These licenses are required by the terms and conditions set forth in Section 550.10, Florida Statutes (1980). The Petitioners have complied with all procedural requirements for licensure and are entitled to be licensed unless the grounds for license denial as stated in the November 4, 1980, correspondence are well-founded. During the 1977 jai alai season at the Rhode Island Jai Alai in New Port, Rhode Island, Petitioner Gallo was employed as a sellers" This employment involved punching tickets in the mutuels area of the Fronton where tickets are issued to bettors. Petitioner Barth also worked at the Fronton in the calculating room as an employee of the Fronton. This is the area where the money is collected from the bettors and tabulated. In that racing season, while employed by the Fronton in Rhode Island, Gallo, Barth and one Robert Fusco, were involved as partners in a venture known as "list betting." Each of the partners had contributed five to six thousand dollars ($5,000.00 to $6,000.00) for the purpose of conducting "list betting." In particular, the "list betting" involved the placement of numerous combinations of numbers on each jai alai game in an effort to win the trifecta portion of the wagering on the individual games. To be successful in the trifecta wager, it was necessary that the three-number combination which constitutes an individual wager comport with the individual team performance for win, place and show. As example, if the individual number combination bet was 8-1-2, then the number (8) team would need to win, the number (1) team would need to place, and the number (2) team would need to show. The partnership was betting from a list of trifecta combinations which were the result of research conducted by the partnership on the subject of other jai alai seasons. The list of those numbers utilized in the betting may be found as Petitioners' Exhibit No. 4, admitted into evidence. The partnership utilized the "list betting" system for all games during the 1977 season up to August 24, 1977, when the partnership was dissolved. The philosophy of the "list betting" was to win often enough and in sufficient amounts of money to offset the cost of high volume betting. In this pursuit, the partnership leaned toward the utilization of trifecta combination numbers which would grant the largest return in a winning payoff, as opposed to being concerned with the frequency of the payoff of the chosen combination trifecta number. In addition, the skill of the players in the jai alai game was not a critical factor. The amount of money being spent on the individual games varied from five, to, eight hundred dollars ($500.00 to $800.00) and, as a result of the "list betting" activities of the partnership, the partnership realized a profit. The money that was won was constituted of the proceeds from the trifecta pool In a given game less cost deductions extracted by the State and the Fronton. The money pool that remained after these cost items had been deducted was divided between the winning ticket holders in the trifecta pool on an equal basis. Therefore, the fewer winning tickets, the larger the monetary return. After August 24, 1977, the Petitioners still continued to make trifecta bets, but not as part of the partnership. One of the other functions that the Petitioners performed together with another Fronton employee, Thomas F. Dietz, was the position as handicapper. (Dietz was a statistician at the Fronton.) Dietz and the Petitioners each would pick a single combination of three numbers to be placed on the game programs for each of the games during the meet under a code identification. Gallo was under the heading Massachusetts; Barth, Rhode Island; and Dietz, Connecticut. Dietz, In turn, made a determination about the "consensus" of the handicappers and made a three-number combination entry on the program under the heading "consensus." These handicap, picks, are depicted in copies of the racing programs which are found in the Respondent's Composite Exhibit No. 4, admitted into evidence. Gallo stopped making handicap selections some three or four days after August 24, 1977, and Dietz stopped his handicap selections on September 15, 1977. Barth made handicap selections for the entire season. It is not certain what the Fronton intended in having the handicappers place their "handicap line" on the game programs; however, the only compensation which the handicappers would receive from the Fronton for their efforts was a. monetary prize of twenty-five dollars ($25.00) to be awarded at the end of each month for that handicapper who selected the most quiniela predictions. (A quiniela nick is a combination of three numbers in which the successful bettor must have selected the win and place numbers in his three-number selection, without regard for the order of selection. As an example, if the quiniela picked by the bettor was the combination 1-2-3, and the winning number was (2) and the place number was (3), the bettor would win the quiniela selection.) There was no testimony on the subject of the betting public's perception of the "handicap line" found on the programs and nothing about those programs identifies the intended purpose. An analysis of those number combinations on the program, which are picks of a combination of three numbers within the range of (1) through (8)(the numbers representing the players in their game position), leads to the conclusion that the numbers could have been utilized by the betting public as trifecta or quiniela bets. The successful utilization of those numbers as a trifecta pick would always entail success as a quiniela selection, but a successful quiniela bet would not always be a successful trifecta bet. The established breakdown of betting patterns in the jai alai season shows that 55 to 60 percent of bets were made as quinielas. Management expressed no Opposition during the course of the season to the fact that the Petitioners were "list bettors"; employees of the Fronton and handicappers during the same time period. Moreover, it was not, per se, a violation of the regulatory statutes and rules in Rhode Island for an employee to be a "list bettor." It is the juxtaposition of "list bettor/employee/handicapper, which has put the question of the Petitioners' current request for licensure in Florida at issue. In this regard, the witness Dietz' testimony establishes the fact that on numerous occasions, during the 1977 jai alai season in Rhode Island, Gallo requested that Dietz change the numerical order of his picks in his position as handicapper for the individual games as appeared on the programs, because Gallo was of the persuasion that the Dietz selections interfered with the Opportunity for Gallo and Barth to be successful in their trifecta "list betting." Whether the fact of Dietz' changes in his "handicap line" brought about greater success for the Petitioners "list betting" system was not established in the course of the hearing. It is apparent that there was a substantial difference in the utilization of the numbers in Petitioners' Exhibit No. 4 (constituted of "list betting" combination numbers), in Barth's program selection In the "handicap line" several weeks prior to August 24, 1977, and several weeks beyond that point, the August date being the date that the partnership was dissolved. The comparison of these numbers demonstrates that Barth utilized the number combinations found in Petitioners' Exhibit No. 4, four times as much in the several week period beyond August 24, 1977, as contrasted with the several week period prior to August 24, 1977. Gallo had stopped handicapping some three or four days after August 24, 1977, so a comparison of the utilization of numbers in Petitioners' Exhibit No. 4, as a basis for handicap selections is limited to three or four days prior to August 24, 1977, and three or four days beyond that date. Again, Gallo used the numbers from the list for handicap selections subsequent to August 24, 1977, for that three or four day period as compared to the three or four day period prior to that date, roughly four times as frequently. A similar comparison of Dietz' handicap selections from several weeks prior to August 24, 1977, and several weeks after August 24, 1977, in the sense of the utilization of number combinations that were found in the Petitioners' Exhibit No. 4; shows that Dietz used those number combinations essentially with the same frequency prior to and after August 24, 1977. This analysis of the matter takes into account the fact that Gallo and Barth, on a few occasions, did not act as handicappers. An analysis of the Gallo, Barth and Dietz choice of handicap numbers and the comments of Gallo made to Dietz about changing Dietz' number combinations when Dietz was handicapping, leads to the conclusion that the Petitioners felt that there was some relationship between exempting the numbers from their list in Petitioners' Exhibit No. 4 from the handicap selections and Dietz altering his numbers on the handicap selections and success in the Petitioners' "list betting" pursuit. This is further substantiated by the fact that around August 24 or 25, 1977, Dietz asked Gallo why the nature of his selections in handicapping had changed and Gallo replied to the effect that he, Gallo, had stopped his "list betting" activities so he could now use "good numbers' without hurting his winnings. The evidence in this case does not reveal the success that the Petitioners had in this pursuit due to the choice not to use numbers from their list in their handicap selections and due to the change of Dietz' handicap selections promoted by the Petitioner Gallo. The lack of data on the question of the overall effect of removing the Petitioners' numbers in their Exhibit No. 4, from the "handicap line" and the further lack of testimony on the question of the public's utilization of the "handicap numbers," does not allow factual conclusions to be drawn on the question of the effect of the Petitioners' action on the outcome of betting; and the possible additional money to be realized by the Petitioners through the implementation of their technique of withholding the numbers from their list and influencing Dietz to change his numbers on order of finish, which caused the public to use the "handicap numbers" for trifecta betting, thereby decreasing the general public's opportunity to be successful In the trifecta bet.
Recommendation Based upon a full consideration of the facts found and the conclusions of law reached herein, it is RECOMMENDED: That Richard Joseph Barth and John Randy Gallo he denied occupational licenses to work in the mutuels department of the Fronton, Inc., West Palm Beach, Florida, for the 1981-82 season and that this recommendation he effectuated by the entry of a final order agreeing with the findings of fact, conclusions of law and recommendations set forth. DONE and ENTERED this 2nd day of November, 1981, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 2nd day of November, 1981.
