The Issue Whether Section (2) of Rule 59C-1.012(2), Florida Administrative Code (the "CON Administrative Hearing Procedures Rule" or the "Rule") constitutes an invalid exercise of delegated legislative authority? Whether Section (2) of the Rule, in effect, was repealed July 1, 1998, by the adoption of the Uniform Rules of Procedure?
Findings Of Fact The Right to a Comparative Hearing Section (2) of the CON Administrative Procedures Rule provides a method by which a co-batched applicant whose CON application has been approved in a proposed decision by AHCA and then challenged by another party may invoke the right to a comparative hearing. The right to a comparative hearing in CON proceedings has as its source due process considerations found by the United States Supreme Court in a federal case that did not involve CONs but in a context that shared with the CON arena the need for comparative review: Ashbacker Radio Corp. v. FCC, 326 U.S. 327, 66 S. Ct. 148, 90 L.ED. 108 (1945). These due process considerations have been described as follows: The so-called Ashbacker doctrine, enunciated by the Court has been adopted in Florida. When the decision on one application will substantially prejudice other simultaneously pending applications because all applicants are competing for a franchise to serve a market that only one of them in practical effect will be given authorization to serve the applications are mutually exclusive. In this situation, any of the applicants may request a comparative hearing in which the merits of all applications will be tried together and against each other. Section 2.32, Boyd, Overview of the Administrative Procedure Act, Florida Administrative Practice, Florida Bar, 6th Ed. (2001), p. 2-38. The Ashbacker doctrine has been applied by Florida Courts to CON proceedings involving co-batched applicants. See Bio-Medical Applications of Clearwater, Inc. v. Dept. of Health & Rehabilitative Services, 370 So. 2d 19 (Fla. 2d DCA 1979); Bio-Medical Applications of Ocala, Inc. v. Dept. of Health & Rehabilitative Services, 374 So. 2d 88 (Fla. 1st DCA 1979); and South Broward Hospital District v. Dept. of Health & Rehabilitative Services, 385 So. 2d 1094 (Fla. 4th DCA 1980). In the Second DCA's Bio-Medical decision, above, the Court found a due process right in co-batched applicants to comparative hearings involving the other co-batched applicants and recognized the flexibility of the Agency's predecessor, HRS to devise "administrative procedures [that] will be promulgated to deal with administrative problems in affording comparative hearings, if any such problems are anticipated." Bio-Medical Applications of Clearwater, Inc., above, at 25, e.s. The right to a comparative hearing in CON proceedings has been codified in statute. Section 408.039(5)(c), Florida Statutes, provides, "only applicants considered by the agency in the same batching cycle are entitled to a comparative hearing on their applications." Section 408.039(5)(c), Florida Statutes, is among the statutes implemented by the CON Administrative Procedures Rule. Section (2) of the Rule is the provision at issue in this proceeding. The Parties Baptist is a licensed hospital located in Duval County, Florida. In the second batching cycle for 2001, Baptist applied to the Agency for Health Care Administration (the "Agency" or "AHCA") for a certificate of need ("CON") to establish a new 92- bed satellite hospital also in Duval County. The CON was preliminarily awarded by AHCA in a proposed decision contained in a State Agency Action Report (the "SAAR") issued December 14, 2001. The Agency for Health Care Administration is responsible for administering the certificate of need program under the Health Facility and Services Development Act, Sections 408.031-408.045, Florida Statutes. It promulgated the Rule with which this proceeding is concerned: Rule 59C-1.012, Florida Administrative Code. St. Vincent's and St. Luke's, like Baptist, are licensed hospitals located in Duval County, Florida. Also like Baptist, the two are the beneficiaries of proposed decisions in the SAAR although St. Vincent's, as explained below, was not as successful preliminarily as it had hoped during the events that precipitated this rule challenge. Precipitating Events A number of other applications were co-batched with Baptist's application in the second 2001 batching cycle. Three of the other co-batched applications were filed by St. Vincent's and St. Luke's. St. Luke's application was for a replacement hospital. St. Vincent's filed two applications, one a partial application for a 135-bed hospital; the other a full application for a 170-bed hospital, both to be located in the facility St. Luke's would leave if it is ultimately successful in its attempt to gain approval for the replacement hospital. Following review and evaluation of the applications, AHCA issued its SAAR and notices of intent on December 14, 2001. A SAAR sets forth in writing AHCA's findings of fact and determination upon which decisions are made with regard to CON applications. If there are no challenges filed timely to any of the decisions in the SAAR, the proposed decisions in the SAAR become final agency action. If there is a challenge then all of the action of AHCA in the SAAR remains preliminary pending the outcome of further administrative proceedings although, as more fully explained below, there are occasions when a decision in a SAAR is challenged but nonetheless it or other decisions are severed from the SAAR. Upon severance, they become final agency action while administrative proceedings continue with regard to other decisions contained in the SAAR. In the December 14, 2001, SAAR, the Agency explained the four proposed decisions with regard to the four co-batched applications of the three hospitals in this proceeding. The Agency approved Baptist's application for a 92-bed acute care satellite hospital, granted St. Vincent's partial application for a new 135-bed acute care hospital, and granted St. Luke's application for a new replacement hospital. But it denied St. Vincent's full application for a new 170-bed acute care hospital. Two weeks after the issuance of the SAAR, on December 28, 2001, AHCA published its notices of intent. The publication informed the public of AHCA's proposed decisions on the four co-batched applications as announced in the SAAR. In accord with the requirement of Section 408.039(4)(c), Florida Statutes, the notices were published in the Florida Administrative Weekly (Vol. 27, No. 52). With regard to providing a point of entry into additional administrative proceedings and in accord with Section 408.039(5), the publication stated: A request for administrative hearing, if any, must be made in writing and must be actually received by this department within 21 days of the first day of publication of this notice in the Florida Administrative Weekly pursuant to Chapter 120, Florida Statutes, and Chapter 59C-1, Florida Administrative Code. On the twenty-first day after publication, Memorial Healthcare Group, Inc., d/b/a Memorial Hospital Jacksonville ("Memorial"), an existing provider of acute care hospital services in Duval County, filed a petition challenging AHCA's preliminary approval of St. Vincent's partial application. On the same date, January 18, 2002, St. Vincent's filed a petition challenging the preliminary denial of its full application for a new 170-bed hospital. No party challenged the decision to issue a certificate of need to Baptist or St. Luke's within the twenty-one day period set forth in the notice. Thirty-five days after publication of the proposed decisions, and fourteen days after the filing of the Memorial and St. Vincent's petitions but within the time period allowed for by Section (2) of the Rule, St. Vincent's filed a third petition related to the co-batched applications. This petition of St. Vincent's invoked its right to a comparative hearing in which all approved applications, including Baptist's, would be at issue. The second of St. Vincent's two petitions was filed well beyond the 21-day period provided by AHCA as a point of entry into administrative proceedings for challenging decisions announced in the SAAR. The authority for filing the petition later than the 21-day period provided for in AHCA's December 28, 2001, notice is the object of this proceeding: Section (2) of the CON Administrative Hearing Procedures Rule. The Rule and its Development Rule 59C-1.012, Florida Administrative Code, is entitled "Administrative Hearing Procedures." It is one of two chapters of AHCA Rules in Volume 59C of the Florida Administrative Code that appear under the caption, "CERTIFICATE OF NEED." See Volume 59C, Florida Administrative Code. The first chapter, 59C-1, which includes the Rule, is entitled: "Procedures For the Administration of Sections 408.031 -- 408.045, Florida Statutes, Health Facility and Services Development Act." Rule 59C-1.012 states in paragraph (a) of subsection (2): If a valid request for administrative hearing is timely filed challenging the noticed intended award of any certificate of need application in the batch, that challenged granted applicant shall have ten days from the date the notice of litigation is published in the Florida Administrative Weekly to file a petition challenging any or all other cobatched applications. Rule 59C-1.012(2)(a), Florida Administrative Code. There is no contention in this proceeding that St. Vincent's filed its petition challenging AHCA proposed decision to approve Baptist's application in anything other than a timely manner under Section (2) of the Rule, that is, within its ten-day period: "10 days from the date the notice of litigation [to be distinguished from an AHCA notice of intended action or of proposed decision] is published in the Florida Administrative Weekly." Baptist hopes to defeat St. Vincent's petition with a motion to dismiss (see DOAH Case No. 02-0943CON) that depends on the outcome in this case; if Section (2) of the Rule is invalidated then there is no authority for the filing of St. Vincent's request for comparative hearing later than the 21- day period during which the other petitions were filed. A ruling, therefore, on the motion awaits the conclusion of this proceeding. Subsection (2) of the Rule was added by an amendment to the Rule in December of 1992 (the "1992 Amendment"). The Rule has not been amended since. The certification package for the 1992 Amendment to add Subsection (2) to the Rule was submitted to the Bureau of Administrative Code under cover of a letter dated November 24, 1992. In the certification, signed by the Department's General Counsel, the "[s]pecific [r]ulemaking [a]uthority" for the amendment is "408.15(8), Florida Statutes." Petitioner's Exhibit 4. Under "Law Being Implemented, Interpreted or Made Specific" are listed "408.039(5), F.S." and "120.57, 120.59, F.S." Id. The language in the amendment that added the present Section (2) to the Rule is markedly different from language originally proposed in the process that culminated in the present language. The different language proposed earlier is contained in an Inter-Office Memorandum dated January 31, 1992. The memorandum references "proposed amendments to [the Rule] . . . circulated for internal office review and comment." See Petitioner's Exhibit 1. This earlier version of the amendment did not allow any additional time beyond twenty-one days from the publication of a notice of proposed decisions or a notice of intent for a co-batched CON applicant to request a comparative hearing. The proposal provided only a twenty-one day period from publication of the notice of the Agency's proposed decision as the time for requesting a comparative hearing. The language of this earlier version recognized the difficulty posed for granted applicants among a batch of applicants. There may be no reason for an approved applicant to seek further administrative proceedings with regard to a proposed decision that is favorable unless and until that proposed decision is challenged by another party. Such a challenge may not be filed until the last minute of the twenty- first day leaving the applicant without time to request a comparative hearing or requiring the applicant to draft a request for such a hearing and stand on watch in the AHCA Clerk's office, ready to file it in case a petition contesting the approval of its application is filed at the last minute. The earlier version, therefore, provided that once a petition challenging any proposed decision in a SAAR was filed that there were implications for the other applications in the same batch: (2) If any portion of the agency decision contained in the State Agency Action Report is challenged by any person authorized by s. 381.709(5)(b), F.S., all applications in the batch are at issue, with the following exceptions: [a denied applicant who has not challenged the denial]. [an application severed from the remainder of the batch by stipulation of the parties under other certain conditions] (Petitioner's Exhibit 1, 5th page of a ten-page document with no page numbers. The language in the quote, above, is underscored in the exhibit since it is language proposed to be added by a rule amendment. In order to emphasize part of that language, however, the underscoring has been eliminated with the exception of the language emphasized.) The import of this different version of what became the language in the Rule is that there are other ways (albeit ways that may not function as smoothly as the method provided by the Rule) that applicants could invoke their right to a comparative hearing. A challenge to the Rule as proposed to be amended in accord with the language in the interoffice memorandum of January of 1992 was filed. In order to settle the matter, the Agency made changes. These changes are reflected in a memorandum dated April 7, 1992, from "Lesley Mendelson" (the "Mendelson memorandum") to "Liz Dudek" and "Bob Pannel." After discussion of several proposals by interested parties, one of which is designed to cure problems posed by "the price extracted from granted applicants to enter into a stipulation which would allow the granted applicant to be severed from the batch" (Petitioner's Exhibit 2), the Mendelson Memorandum recommends the language the agency settles on eventually as "the new paragraph 2(b)": (b) If a timely petition is filed challenging one or more intents to grant an application in the same batching cycle, the challenged granted applicant(s) shall have 10 days to file a petition challenging any or all notices of intent in the same batching cycle. (Petitioner's Exhibit 2.) This language with changes not material to this proceeding eventually was incorporated into Section (2) of the Rule. Stamped received September 9, 1992, AHCA submitted a notice of proposed rulemaking to the Bureau of Administrative Code in the Department of State. The notice proposes with modification of language insignificant to this proceeding the concept proposed in the Mendelson's memorandum. The Agency describes the proposed changes to Rule 59C-1.012 (the "1992 Amendment") as procedural in nature: The purpose of the proposed amendments . . . is to clarify and revise the existing rule regarding the definitions and procedures relating to administrative hearings . . . . The proposed amendments . . . set forth administrative hearing procedures for batched Certificate of Need applications . . . . (Petitioner's Exhibit 3.) In answer to the question of what prompted the development of the 1992 Amendment now in the Rule, Elizabeth Dudek, AHCA Deputy Secretary for Managed Health Care and Health Quality, and the Director of the Certificate of Need Office at the time 1992 Amendment were proposed, testified: [I]t was not uncommon at that point [prior to the 1992 Amendments] to have a nursing home case with 20 or more applicants and try to deal with who filed what when, even with letters of intent, and not uncommon to have at that point after a CON decision was made, to have CON consultants, their attorneys, lining the halls to see who would . . . file a petition or challenge against one of the parties in the case. And also not uncommon that there were, in a large case, individuals who might have had an approval but basically were held captive by the entire process . . . . So there was not still a process that was as streamlined as it could have been and basically cut back on some of the uncertainty and just the volume of what was going on. So one of the things that we looked to do with this rule is try to further . . . narrow and clarify what the process would be with respect to outcomes of CON decisions; and then how people would progress further from that . . . (Tr. 117, 118). Ms. Dudek went on to testify that the problem addressed by the 1992 Amendment did not occur in cases where the issues were between one applicant and the Agency or in cases of expedited review. The issues the 1992 Amendment were intended to resolve relate to co-batched applicants and stem from the rights of co-batched applicants to comparative review. Comparative Review Under the statutory scheme for administration of the CON Program, a CON is required for the establishment of certain types of health care facilities (such as a hospital or nursing home), for the establishment of additional beds at an existing facility, and for the establishment of certain services. Persons seeking a CON must file an application in what is known as a "batching cycle." See Section 408.039(1), Florida Statutes, and Florida Administrative Code Rule 59C-1.010. In a batching cycle, all applications seeking approval for the same type of facility, beds, or services undergo "comparative review" by the Agency. "Comparative review" is defined as follows: "Comparative review" means the process by which Certificate of need applications, submitted in the same batching cycle for beds, services or programs for the same planning area, as defined by applicable rules, are competitively evaluated by the agency through final agency action for purposes of awarding a Certificate of Need. (Emphasis added.) See Florida Administrative Code Rule 59C-1.002(11). The Agency proposes a decision to approve or deny a CON application and then denied applicants are afforded rights to further administrative proceedings pursuant to Section 408.039, Florida Statutes. Existing facilities and programs may challenge also the Agency's proposed decision to approve a CON application for a competing facility or program. Section 408.039(5) contains the statutory provisions related to administrative hearings on CON decisions: Within 21 days after publication of notice of the State Agency Action Report and Notice of Intent, any person authorized under paragraph (c) to participate in a hearing may file a request for an administrative hearing; failure to file a request for hearing within 21 days of publication of notice shall constitute a waiver of any right to a hearing and a waiver of the right to contest the final decision of the agency. A copy of the request for hearing shall be served on the applicant. Hearings shall be held in Tallahassee unless the administrative law judge determines that changing the location will facilitate the proceedings. The agency shall assign proceedings requiring hearings to the Division of Administrative Hearings of the Department of Management Services within 10 days after the time has expired for requesting a hearing. Except upon unanimous consent of the parties or upon the granting by the administrative law judge of a motion of continuance, hearings shall commence within 60 days after the administrative law judge has been assigned. All parties, except the agency, shall bear their own expense of preparing a transcript. In any application for a certificate of need which is referred to the Division of Administrative Hearings for hearing, the administrative law judge shall complete and submit to the parties a recommended order as provided in ss. 120.569 and 120.57. The recommended order shall be issued within 30 days after the receipt of the proposed recommended orders or the deadline for submission of such proposed recommended orders, whichever is earlier. The division shall adopt procedures for administrative hearings which shall maximize the use of stipulated facts and shall provide for the admission of prepared testimony. * * * The applicant's failure to strictly comply with the requirements of s. 408.037(1) or paragraph (2)(c) is not cause for dismissal of the application, unless the failure to comply impairs the fairness of the proceeding or affects the correctness of the action taken by the agency. The agency shall issue its final order within 45 days after receipt of the recommended order. If the agency fails to take action within such time, or as otherwise agreed to by the applicant and the agency, the applicant may take appropriate legal action to compel the agency to act. When making a determination on an application for a certificate of need, the agency is specifically exempt from the time limitations provided in s. 120.60(1). The right to a comparative hearing is codified in paragraph (c) of the statute providing administrative proceedings related to CONs: (c) In administrative proceedings challenging the issuance or denial of a certificate of need, only applicants considered by the agency in the same batching cycle are entitled to a comparative hearing on their applications. Existing health care facilities may initiate or intervene in an administrative hearing upon a showing that an established program will be substantially affected by the issuance of any certificate of need, whether reviewed under s. 408.036(1) or (2), to a competing proposed facility or program within the same district. Section 408.039(5), Florida Statutes. It is this provision that statutorily confers on co-batched applications "entitle[ment] to a comparative hearing on their applications." Id. "Comparative hearing" is defined to mean: (10) "Comparative hearing" means a single hearing, conducted pursuant to s. 120.57, F.S., and s. 59C-1.012, F.A.C., held to review all pending applications in the same batching cycle and comparatively reviewed by the agency. (Emphasis added.) See Rule 59C-1.002(10), Florida Administrative Code. Participation in Comparative Review Proceedings Under current procedure, all co-batched applicants do not automatically participate in comparative review because of one of the applicants' request for administrative proceedings following issuance of the SAAR. If the request does not relate to the denial of another co-batched applicant and the denied applicant fails to challenge the denial within the 21-day period then the denied applicant has no right to participate. It participates only if its denial has been challenged by another, a rare event. (See tr. 124). The denied applicant, by failing to challenge its own denial waives its right to comparative review. Approved applicants, moreover, that are challenged are not invariably fated to endure a comparative hearing until it is completed. Once a co-batched applicant has challenged the approved application, the proceedings related to the comparative hearing commence. But under the Rule, if all challenges to the approval are subsequently voluntarily dismissed as well as any to the fixed need pool, the approved applicant is severed from the batch. The severed applicant then receives a CON separately from action with regard to its co-batched applicants by final agency action. The same happens if no one challenges an approved applicant and there is no challenge to the fixed need pool, yet other challenges are made to other proposed decisions announced by the SAAR. (This was the scenario with regard to Baptist prior to St. Vincent's request for a comparative hearing.) The approved unchallenged applicant is severed from the batch and receives the certificate of need awarded by the SAAR by separate final agency action. These processes are codified in sub-paragraphs(b) and (c) of Section (2) of the Rule. St. Vincent's Interest in a Comparative Hearing Applications for CONs in the same batching cycle are not necessarily mutually exclusive. It is possible, for example, that both St. Vincent's and Baptist's could emerge from administrative hearings with the CONs for which they applied. Nonetheless, their proposals might be mutually exclusive. In the proceeding brought against St. Vincent's, Memorial might be able to prove that the District has a need for a number of beds that would allow either St. Vincent's approval or Baptist's but not both. If the hearing is not a comparative hearing but simply Memorial versus St. Vincent's then in light of such proof of mutual exclusivity, St. Vincent's application would have to be denied since Baptist's had been approved. On the other hand, if a comparative hearing is held, and St. Vincent proved that its application is superior to Baptists and that it was otherwise entitled to a CON, then its application could still be granted in the face of Memorial's proof of mutual exclusivity. In such a case, Baptist's would have to be denied. St. Vincent's interests, therefore, propelled it to request a comparative hearing once Memorial challenged AHCA's proposed decision to approve the St. Vincent's CON application. Baptist, in turn, hopes to avoid a comparative hearing with St. Vincent's. Its hope is based on what it sees as the invalidity of Section (2) of the Rule against which it has launched a two-pronged attack. Baptist's Two-pronged Attack Baptist sees Section (2) of the Rule to be in contravention of statutory authority. It reads the applicable statutes to require the filing of a request for comparative hearing within the 21-day period following the publication of the notice of the SAAR without authority for the filing later in the 10-day window as authorized by Section (2) of the Rule. Baptist also argues that Section (2) of the Rule was repealed when the Uniform Rules of Procedure were adopted and AHCA failed to obtain an exception for the section by July 1, 1998. Subsumed in this argument is the contention that the provision of the 10-day window conflicts with one of the Uniform Rules: Rule 28-106.111, Florida Administrative Code, the "Uniform Point of Entry Rule." The Uniform Point of Entry Rule Rule 28-106.111, Florida Administrative Code, which became effective April 1, 1997, provides, in pertinent part: (2) Unless otherwise provided by law, persons seeking a hearing on an agency decision which does or may determine their substantial interest shall file a petition for hearing with the agency within 21 days of receipt of written notice of the decision. * * * (4) Any person who receives written notice of an agency decision and who fails to file a written request for a hearing within 21 days waives the right to request a hearing on such matters. The subject of the Uniform Point of Entry Rule is what is referred to in case law as "point of entry." Point of entry is that opportunity that must be provided by an agency to a party to participate in administrative proceedings after an agency decision has determined the party's substantial interests and through which the party enters administrative proceedings and thereby gains access to the decision-making process by which the agency determines the party's substantial interests. Indeed, the title of Chapter 28-106, is "Decisions Determining Substantial Interests." The Chapter is one set of what makes up an assemblage of rules required by the Administrative Procedure Act: the Uniform Rules of Procedure. Uniform Rules of Procedure In 1996, the Florida Legislature, in response to an ongoing examination of the Model Rules of Procedure (see Chapter 28-1 through 5 of the Florida Administrative Code, now repealed) initiated by the Governor's Office and as part of a revision of the Administrative Procedure Act, enacted Section 120.54(5), Florida Statutes. The section mandates adoption of "one or more sets of Uniform Rules of Procedure." Section 120.54(a)1., Florida Statutes. As a result of the mandate, the Uniform Rules of Procedure were adopted. Chapter 28-106 is one set of the Uniform Rules. Events that led up to the adoption of the Uniform Rules of Procedure were described at hearing by William E. Williams, a member of the Executive Council of the Administrative Law Section of the Florida Bar prior to 1996 and the Section Chair in 1996, when the Legislature mandated the adoption of the Uniform Rules of Procedure: The Model Rules of Procedure . . . had been in place for about 25 years and although the thought early on was to make them apply to all agencies, the Model Rules really did not. . . . they applied to the extent that agencies didn't adopt rules on the same subject; so the agency had the ability to essentially trump the Model Rules by adopting their own rules of procedure. * * * The administrative law section took a position . . . that by having each agency adopt its own procedural rules . . . was confusing to the practicing bar and the public because different time parameters were provided for in various agency rules. * * * [W]hat became 120.54(5) was essentially a product of the input of the administrative law section with regard to Uniform Rules of Procedure that would be uniformly applicable to all agencies in the absence of that agency seeking an exception under certain circumstances. (Tr. 50-52). Among the requirements in Section 120.54(5)(b)4., is one that rules be adopted for the "filing of petitions for administrative hearings pursuant to s. 120.569 or s. 120.57." This requirement stemmed from the concern of The Administrative Law Section of the Bar that differing points of entry times, one in the Model Rules, another in rules specific to an agency, could create a trap for the unwary. This concern was expressed in a white paper issued by the section entitled "Administrative Law Section Ideological and Legislative Position on APA 'Reform'": Uniform model rules of procedure that govern actions of every agency benefit the people by avoiding procedural traps and obstacles. Allowing agencies to create special procedural rules that vary from agency to agency defeats citizen participation in government and handicaps citizens who question agency actions. The agency rules are difficult for citizens and lawyers to locate. They are traps for the unwary. (Petitioner's Exhibit 7, p. 2-3.) To ease the concern expressed by the Administrative Law Section about "traps for the unwary" with regard to points of entry, the Uniform Rules of Procedure provide for a twenty- one day point of entry to seek a hearing on an agency decision (Rule 28-106.111, Florida Administrative Code). No exceptions are provided in the Uniform Rules. At the same time, exceptions were allowed by Section 120.54(5). Chapter 96-159, Laws of Florida, moreover, provided agencies a reasonable time period to review their procedural rules and seek exceptions as necessary. The statute is explicit with regard to exceptions: * * * [T]he uniform rules shall be the rules of procedure for each agency subject to this chapter unless the Administration Commission grants an exception to the Agency under this subsection. An agency may seek exceptions to the uniform rules of procedure by filing a petition with the Administration Commission. The Administration Commission shall approve exceptions to the extent necessary to implement other statutes, to the extent necessary to conform to any requirement imposed as a condition precedent to receipt of federal funds or to permit persons in this state to receive tax benefits under federal law, or as required for the most efficient operation of the agency as determined by the Administration Commission. The reasons for the exceptions shall be published in the Florida Administrative Weekly. Agency rules that provide exceptions to the uniform rules shall not be filed with the department unless the Administration Commission has approved the exceptions. Each agency that adopts rules that provide exceptions to the uniform rules shall publish a separate chapter in the Florida Administrative Code that delineates clearly the provisions of the agency's rules that provide exceptions to the uniform rules and specifies each alternative chosen from among those authorized by the uniform rules. Section 120.54(5)(a), Florida Statutes. After adoption of the Uniform Rules, the Office of the Governor sent a memorandum from "Debby Kearney" to "All Agency General Counsels" (the "Kearney Memorandum"). The Kearney Memorandum provided state agencies with a copy of the Uniform Rules and notified them of the requirement to file for exceptions if different procedures were necessary to conduct proceedings before their agency or as required by law. The memorandum was specific regarding the need to apply for exceptions. Even if an agency had specific statutory authority for a procedure different from that in the Uniform Rules, the agencies were reminded of the requirement that they seek approval of the exception: The working group on the Uniform Rules was quite emphatic that the intent evident in the statute is that every procedural rule that is different from or is in addition to a Uniform Rule, be included on the listings of exceptions. Obviously, if a difference is required by statute or case law, this will be the easier case; however, all must go through this procedure. (Petitioner's Exhibit 9, emphasis in original.) The Administration Commission followed up by providing forms to request an exception, and again reiterated the importance of requesting one, whether it be for something different, or something in addition to, the Uniform Rules: To assist agencies in requesting exceptions, the Administration Commission staff has prepared a model petition format outlining the information that will be necessary for the Commission to review the petitions and make a decision. As communicated in Ms. Kearney's memorandum, EVERY procedural rule that is different from or in addition to a Uniform Rule, must go through the exception process. The format is divided into two sections. Section I includes procedures that are covered by the Uniform Rules. Section II includes procedures that are not covered by the Uniform Rules; however, the procedure must be necessary and the agency must be authorized to have the procedure. (Petitioner's Exhibit 10, emphasis added.) Subsequent to these two memoranda, questions arose from agencies regarding the scope of application of the Uniform Rules of Procedure. In particular, agencies expressed concern regarding permit and license application procedures prior to intended agency action. To answer these concerns, on March 4, 1998, the Administration Commission under the signature of its Secretary, Bob Bradley, issued another memorandum (the "Bradley Memorandum"). The Bradley Memorandum explains that "free form" procedures (those that precede notification of agency action, entry into formal proceedings and the carrying out of challenges to agency action through resolution by final order) were not within the scope of the Uniform Rules and therefore did not require exceptions: Section 120.54(5)(b), Florida Statutes, requires the Commission to adopt uniform rules of procedure for specific subjects . . . . There are a myriad of other procedural matters, such as permit or license application procedures, which precede formal proposed agency action and, thus, are not addressed by the [Uniform Rules]. * * * Exceptions to procedural rules which lie beyond the scope of rules contained in the [Uniform Rules are] not required . . . . (Petitioner's Exhibit 11.) The Agency for Health Care Administration did not apply for, nor, consequently, did it receive, an exception to the Uniform Rules to cover the procedure for invoking an approved applicant's right to a comparative hearing contained in Section (2) of the Rule. At hearing, AHCA offered no evidence or explanation regarding its course of not seeking an exception to the Uniform Rules of Procedure. Restrictions to Agency Rule-Making Authority The 1996 amendments to Chapter 120 (Ch. 96-159, Laws of Florida, Petitioner Exhibit 14), in addition to requiring one or more sets of Uniform Rules of Procedure, also limited agency discretion in rule adoption. Prior to that time, agencies could adopt rules if there was a general grant of authority and the rule was reasonably related to the law being implemented. The 1996 amendments restricted agency rule-making authority to those which "implement, interpret, or make specific the particular powers and duties granted by the enabling statute." Prior to these amendments, agencies had broad discretion to adopt rules which were "reasonably related to the purpose of the enabling legislation." See Chapter 96-159, Section 9, Laws of Florida (Petitioner's Exhibit 14; Tr. Pages 93-96). In 1999, this rule-making authority was limited even further, rejecting the "class of powers and duties" analysis of St. Johns River Water Management District v. Consolidated-Tomoka Land Co., 717 So. 2d 72 (Fla. 1st DCA 1998), which interpreted agency rule-making authority more broadly than the Legislature had intended. (See "intent" language of Chapter 99-379, Laws of Florida.) Chapter 99-379, Section 3, Laws of Florida, amended Section 120.536, Florida Statutes, to clarify that: No agency shall have authority to adopt a rule only because it is reasonably related to the purpose of the enabling legislation and is not arbitrary and capricious or is within the agency's class of powers and duties, nor shall an agency have the authority to implement statutory provision setting forth general legislative intent or policy. Statutory language granting rulemaking authority or generally describing the powers and functions of an agency shall be construed to extend no further than implementing or interpreting the specific the particular powers and duties conferred by the same statute. (Petitioner's Exhibit 15.) By both Chapters 96-159 and Chapters 99-379, Laws of Florida, agencies were provided a period of time to review and conform their rules to the stricter rule-making standards of that legislation (Tr. p. 96) The record reflects that AHCA took no action to modify Rule 59C-1.012, in light of these new legislative directives. Legislative Recognition of the Rule in 1997 In 1997, the Florida Legislature recognized all of AHCA's rules, including the CON Administrative Hearings Procedure Rule, that then implemented the CON statutes by declaring the rules effective and enforceable: The rules of the agency in effect on June 30, 1997 shall remain in effect and shall be enforceable by the agency with respect to ss. 408.031-408.045 until such rules are repealed or amended by the agency . . . . See Chapter 97-270, Laws of Florida. This law was codified as Section 408.0455, Florida Statutes, with an effective date of July 1, 1997, two months after the effective date of the adoption of the Uniform Rules of Procedure and exactly one year prior to the deadline for approval of exceptions to the Uniform Rules, July 1, 1998.
The Issue The issues for disposition in this case are whether proposed rules 61D-11.001(17) and 61D-11.002(5), Florida Administrative Code, which consist of the repeal of said rules, constitute an invalid exercise of delegated legislative authority as defined in section 120.52(8), Florida Statutes; and whether the Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering’s (Respondent), failure to prepare a statement of estimated regulatory costs constituted a material failure to follow the applicable rulemaking procedures or requirements set forth in chapter 120.
Findings Of Fact Respondent is the state agency charged with regulating pari-mutuel wagering pursuant to chapter 550, Florida Statutes, and cardrooms pursuant to section 849.086, Florida Statutes. Each Petitioner currently holds a permit and license under chapter 550 to conduct pari-mutuel wagering and a license under section 849.086 to conduct cardroom operations. Petitioners offer designated player games at their respective cardrooms. The rules proposed for repeal, rules 61D-11.001(17) and 61D-11.002(5), relate to the play of designated player games. Rule 61D-11.001(17) provides that “‘[d]esignated player’ means the player identified by the button as the player in the dealer position.” Rule 61D-11.002(5) provides that: Card games that utilize a designated player that covers other players’ potential wagers shall be governed by the cardroom operator’s house rules. The house rules shall: Establish uniform requirements to be a designated player; Ensure that the dealer button rotates around the table in a clockwise fashion on a hand to hand basis to provide each player desiring to be the designated player an equal opportunity to participate as the designated player; and Not require the designated player to cover all potential wagers. Both rules were adopted on July 21, 2014. Both rules list sections 550.0251(12), and 849.086(4) and (11) as rulemaking authority, and section 849.086 as the law implemented. Designated Player Games A designated player game is a subset of traditional poker games in which a designated player plays his or her hand against each other player at the table, instead of all players competing against each other. The term “designated player game” is used synonymously with “player banked games.”3/ However, a designated player is not a cardroom operator. In traditional “pool” poker games, each player bets into a central pool, with the winning hand(s) among all of the players collecting from the pool of bets, minus the cardroom rake. In designated player games, each player at the table makes an individual bet, and compares their hand against the designated player’s hand. If the player’s hand is better than the designated player’s hand, then the designated player pays the player from the designated player’s stack of chips. If the designated player’s hand is better than the player’s hand, then the designated player collects the player’s wager. At an eight- seat table, it is as though there are seven separate “player versus designated player” games. Designated player games were first played at the Ebro (Washington County Kennel Club) cardroom in 2011. The game, known as “double hand poker,” was demonstrated to Respondent, and subsequently approved for play. Though the internal control that describes the rules of game play was not offered in evidence, a preponderance of the evidence demonstrates that the game used a designated player. After Respondent’s approval of Ebro’s double hand poker, Respondent entered an order rescinding its approval due to concerns that the use of a designated player resulted in the establishment of a banking game. That decision was challenged, and subsequently withdrawn, with the result being that “Ebro may immediately resume play of Double Hand Poker as approved by the division.” In 2012, the Palm Beach Kennel Club cardroom began offering “tree card poker” with a designated player. Although tree card poker had been approved by Respondent, the designated player element had not. Thus, since the game was not being played in accordance with the approved internal control, it was unauthorized. Respondent investigated the playing of tree card poker at Palm Beach Kennel Club. A video demonstration was provided that showed two hands of tree card poker being played with a designated player. The video depicted a single designated player playing his hand against each other player at the table, and paying or collecting wagers based on each individual hand. After having reviewed the demonstration video, Respondent ultimately determined that the use of a designated player did not violate the prohibition against banking games as defined. The Adoption of the Designated Player Rules As requests for approval of internal controls for games using designated players became more common, Respondent determined that it should adopt a rule to establish the parameters under which designated player games would be authorized. On December 16, 2013, after having taken public comment at a series of rulemaking workshops, Respondent published proposed rule 61D-11.002(5) which provided as follows: 61D-11.002 Cardroom Games. * * * Card games that utilize a designated player that covers other players’ wagers shall: Allow for only one designated player during any single hand; Not require the designated player to cover all wagers that could be made by the other players in the game; Not allow other players to cover wagers to achieve winnings that the designated player could have won had he or she covered the same wagers; Not allow or require a player to buy in for a different amount than any other player in the game in order to participate as the designated player; and Rotate a button or other object to designate which player is the designated player. The button or other object shall rotate clockwise around the table to give each player the opportunity to participate as the designated player. On February 14, 2014, a challenge to the proposed rule was filed that objected to restrictions on the manner in which designated player games could be conducted. The rule challenge hearing was continued, and the case placed in abeyance pending negotiations between the parties. On March 14, 2014, Respondent filed a Notice of Change to the proposed rule 61D-11.002, which added the following provisions to proposed rule 61D-11.002: The designated player shall: Cover the table minimum for each participating player; and Pay each player an amount above the table minimum equal to their pro rata share of the pot in the event the designated player cannot cover all wagers. A public hearing on the changes to the proposed rule was held on May 8, 2014. As to the designated player provisions of the proposed rule, Respondent received the following comment: [I]f we could modify this . . . taking the existing paragraph 5 and come up with three new criteria, one being uniform requirements for a designated player included within the house rules; allowing for the dealer button to rotate on a hand-by-hand basis for qualified designated players; also, not requiring the designated player to cover all potential wagers, but nonetheless allowing the house rules to set a designated minimum buy-in amount or just a chip count. I think if we had those particular parameters, we would allow the preservation of this game to continue in its current fashion . . . . And . . . we’re going to avoid [] any argument that the department has somehow created a banked card game, because the biggest thing here is that we’re not requiring that the designated player meet all the theoretical payouts of the game. On May 19, 2014, written comments were submitted on behalf of several pari-mutuel facilities. Those comments included proposed language that is identical to the rule that was ultimately adopted, and included the following: Multiple jurisdictions have determined a key element to banked card games is the house requiring all wagers be covered. We propose this language to distinguish between lawful games and impermissible banked games. On June 9, 2014, Respondent filed a Notice of Change that adopted the industry’s proposed language, and changed proposed rule 61D-11.002 to its present form. On June 13, 2014, the challenge to proposed rule 61D-11.002(5) was voluntarily dismissed, and the case was closed. On July 21, 2014, rule 61D-11.002(5) became effective. There can be little doubt that Respondent understood that it was, by its adoption of rule 61D-11.002(5), recognizing player banked games in which a designated player plays his or her hand against each other player at the table. The rule is substantial evidence that, as of the date of adoption, Respondent had determined that designated player games did not violate the prohibition against “banking games” as that term is defined in section 849.086. Internal Controls Over the course of several years, beginning generally in 2011 and extending well into 2015, Respondent was presented with internal controls from cardrooms around the state for playing designated player games. Internal controls are required before a particular game may be offered, and describe the rules of the game and the wagering requirements. The internal controls submitted by the Jacksonville Kennel Club; the Daytona Beach Kennel Club; the West Flagler Associates/Magic City Poker Room; and the Naples/Ft. Myers Greyhound Track Cardroom, described games in which designated players played their hand against those of the other players at the table, and paid and collected wagers from the designated player’s chip stack based on the rank of the designated player’s hand against the individual players. The games described did not involve pooled wagers, and clearly described player banked games. Respondent approved the internal controls for each of the four facilities. The process of approving internal controls occasionally included the submission of video demonstrations of the games described in the internal controls for which approval was being sought. Approval of internal controls was never done without the review and assent of Respondent’s legal department or the division director. With regard to the rules of the designated player games that underwent review and approval by Respondent, “all of them are about the same, few differences.” From 2011 through mid-2015, Respondent approved internal controls for playing one-card poker, two-card poker, three-card poker, Florida Hold ‘Em, and Pai Gow poker using designated players at numerous cardroom facilities. A preponderance of the evidence establishes that Respondent was aware of the fact that, for at least several facilities, “eligible” designated players were required to meet minimum financial criteria, which ranged from a minimum of $20,000 in chips, up to $100,000 in chips. In the case of the Daytona Beach Kennel Club cardroom, internal controls called for a designated player to submit an application, agree to a background check, and submit a deposit of $100,000. Respondent approved those internal controls. DBPR Training In August 2015, Mr. Taylor was invited by the Bestbet cardroom in Jacksonville4/ to participate in a training session it was offering for its employees. Mr. Taylor is an investigator for Respondent, and visited the pari-mutuel facilities at least once per week. Mr. Taylor was invited by the facility to get an overview of how the cardroom games that had been approved by Respondent, including designated player games, were played. The games that were the subject of the training were substantially similar to those depicted in the April 2012 training video, and those he had observed during his weekly inspections. The designated player games for which training was provided had been approved by Respondent. In September 2015, training in designated player games was provided at Respondent’s Tallahassee offices to several of its employees. Mr. Taylor perceived the training “as an overview to give us an idea of what we are going to see.” Neither Mr. Taylor nor any other participant in the training offered any suggestion that the training was being provided in anticipation of a shift in Respondent’s practice of approving the internal controls for designated player games. Current Rulemaking On September 23, 2014, Respondent published a Notice of Development of Rulemaking. The notice cited 15 of the 30 subsections of chapter 61D-11 as being the subject areas affected by the notice, and provided that “[t]he purpose and effect of the proposed rulemaking will be to address issues discovered in the implementation and practical application of cardroom rules adopted on July 21, 2014.” There is nothing in the notice to suggest that Respondent had modified its position on designated player games, and its continued approval of institutional controls approving such games is strong evidence that it had not. On August 4, 2015, Respondent published a Notice of Meeting/Workshop Hearing for a rule workshop to be held on August 18, 2015. The Notice listed each rule in chapter 61D-11 as the “general subject matter to be considered,” including those related to games of dominos. Respondent asserted that it had “posted a version of amended cardroom rules that included the [repeal of rule 61D-11.005] on its website,” though such was not published, nor did Respondent provide a record citation in support of its assertion. On October 29, 2015, Respondent published its proposed amendments to chapter 61D-11. Rule 61D-11.001(17), which defines the term “designated player” as “the player identified by the button as the player in the dealer position,” was proposed for repeal. Rule 61D-11.002(5), as set forth above, which had established the standards for designated player games, was proposed for repeal. Rule 61D-11.005 was proposed for amendment to add subsection (9), which provided that “[p]layer banked games, established by the house, are prohibited.” On December 2, 2015, the Division held a public hearing on the proposed amendments. During the public hearing, Mr. Zachem made it clear that the intent of the proposed amendments was to change the Division’s long-standing and consistently applied construction of section 849.086 as allowing designated player games to one of prohibiting designated player games, and in that regard stated that: The rules pertaining to designated player games are now going to be correlated with the statute that is the prohibition against designated player games. The statute does not allow designated player games. There has to be a specific authorization for a type of game in statute, and there is none in 849.086 pertaining to designated player games . . . . When some of these definitions in other areas were created, I don’t think that the concept of what these games could even become was fathomed by the division. Given the process by which internal controls for designated player games were approved by Respondent, including written descriptions and video demonstrations of play, the suggestion that Respondent could not “fathom” the effect of its rules and decisions is not accepted. On December 11, 2015, Petitioners individually filed petitions challenging the validity of the proposed rules. The cases were consolidated and ultimately placed into abeyance pending efforts to resolve the issues in dispute. Agency Action Concurrent with Rulemaking After the December 2015 public hearing, and prior to the adoption of any amendments to chapter 61D-11, Respondent filed a series of administrative complaints against cardrooms offering designated player games. Those administrative complaints were very broadly worded, and reflected Respondent’s newly-developed position that designated player games constituted “a banking game or a game not specifically authorized by Section 849.086, Florida Statutes.” In that regard, Mr. Zachem testified that a cardroom could have been operating in full compliance with its Respondent-approved internal controls and still have been the subject of an administrative complaint.5/ The position of Respondent was made clear by Mr. Zachem’s statement that if a cardroom has an approved designated player game “where a banker is using their table, their dealer, their facility they [the cardroom] are establishing a bank.”6/ Thus, there can be little doubt that Respondent now construes section 849.086 to mean that player banked games constitute prohibited “banking games” because, by allowing the player banked game in its facility, the cardroom “establishes” a bank against which participants play. After the December public hearing, Ms. Helms was instructed that she was to no longer approve internal controls if they included provisions regarding designated players. That blanket instruction came with no conditions. Since that instruction, the internal controls for at least one facility have been disapproved, despite their being “about the same” as internal controls that had been previously approved for other facilities. Ms. Helms testified that after the December 2015 rule hearing, “things kind of turned around” with regard to Respondent’s position on designated player games. She then rethought her selection of words, stating instead that “things changed.” Given the totality of the evidence in this case, Ms. Helms’ statement that the position of Respondent towards designated player games “turned around” is the more accurate descriptor. Notice of Change On January 15, 2016, the Division published a Notice of Change/Withdrawal of proposed rules. Through the issuance of this notice, the Division withdrew proposed rule 61D-11.005(9). The proposed repeal of rules 61D-11.001(17) and 61D-11.002(5) remained unchanged. Since that notice of change, the preponderance of the evidence demonstrates that Respondent has stopped approving internal controls that propose the offering of designated player games, and has continued to take action against facilities that offer designated player games. Respondent’s statements and actions, including those made in the course of this proceeding, demonstrate that Respondent intends the repeal of rules 61D-11.001(17) and 61D-11.002(5), to effectuate the prohibition of designated player games despite the withdrawal of proposed rule 61D-11.005(9). Lower Cost Regulatory Alternative When it proposed the subject amendments to rule 61D-11 on October 29, 2014, Respondent had not prepared a statement of estimated regulatory costs. Rather, the notice of proposed rule provided that: The agency has determined that this rule will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the agency. The agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: the economic review conducted by the agency. Any person who wishes to provide information regarding the statement of estimated regulatory costs, or to provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice. On November 19, 2015, in conjunction with the rulemaking process described above, a number of licensed cardroom operators, including some of the Petitioners, timely submitted a good faith proposal for a lower cost regulatory alternative (“LCRA”) to the proposed amendments to chapter 61D-11 that would have the effect of prohibiting designated player games, citing not only the creation of rule 61D-11.005(9), but the repeal of rule 61D-11.002(5). A preponderance of the evidence demonstrates that the LCRA indicated that the rule was likely to directly or indirectly increase regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. The LCRA, as described in the letter of transmittal, also concluded that regulatory costs could be reduced by not adopting the proposed rule amendments, thus maintaining Respondent’s previous long-standing interpretation of section 849.086, and thereby accomplishing the statutory objectives. Respondent employed no statisticians or economists, and there was no evidence to suggest that any such persons were retained to review the LCRA. Though Mr. Zachem did not “claim to be an expert in statistics,” he felt qualified to conclude that the LCRA was “a bit of a challenging representation.” Thus, Respondent simply concluded, with no explanation or support, that “the numbers that we received were unreliable.” Respondent did not prepare a statement of estimated regulatory costs or otherwise respond to the LCRA. Respondent argues that its abandonment of proposed rule 61D-11.005(9), which was the more explicit expression of its intent to prohibit designated player games, made the LCRA inapplicable to the rule as it was proposed for amendment after the January 15, 2016, notice of change. That argument is undercut by the fact that Respondent did not amend its statement of estimated regulatory costs as a result of the change in the proposed rule. Moreover, the evidence is overwhelming that Respondent, by its decision to disapprove internal controls that included designated player games, and its enforcement actions taken against cardrooms offering designated player games, specifically intended the amendments repealing the designated player standards to have the effect of prohibiting designated player games. Thus, despite the elimination of the specific prohibition on designated player games, there was no substantive effect of the change. Therefore, the LCRA remained an accurate expression of Petitioners’ estimated regulatory costs of the proposed rule. Ultimate Findings Respondent has taken the position that the repeal of rule 61D-11.005(9) was undertaken “[f]or clarity with the industry.” That position is simply untenable. Rather, Respondent has taken an activity that it previously found to be legal and authorized and, by repealing the rule and simply being silent on its effect, determined that activity to be prohibited. By so doing, Respondent has left it to “the industry” to decipher the meaning and effect of a statute that is, quite obviously, ambiguous and in need of the interpretive guidance that has been and should be provided by rule. The evidence is conclusive that, by its repeal of rule 61D-11.002(5), Respondent simply changed its mind as to whether playing with a designated player constituted the establishment of a prohibited banking game.7/ It previously determined that such games were lawful under the terms of section 849.086; it has now determined they are not. Though there is substantial evidence to suggest that the reason for the change was related to the renegotiation of the Seminole Compact, the reason is not important. What is important is that Respondent has taken divergent views of the statute in a manner that has substantially affected the interests of Petitioners. For Respondent to suggest that its repeal of the rules is a clarification, a simplification, or a reflection of the unambiguous terms of the statute, and that Petitioners should just tailor their actions to the statute without any interpretive guidance from Respondent, works contrary to the role of government to provide meaningful and understandable standards for the regulation of business in Florida. Respondent cannot, with little more than a wave and well-wishes, expect regulated businesses to expose themselves to liability through their actions under a statute that is open to more than one interpretation, when the agency itself has found it problematic to decipher the statute under which it exercises its regulatory authority.
The Issue Whether the proposed repeal of Rule 61D-11.027, Florida Administrative Code, is an invalid exercise of delegated legislative authority because the repeal has the effect of creating or implementing a new rule or policy.
Findings Of Fact The Florida Legislature enacted Section 849.086, Florida Statutes, in 1996. The law authorized the establishment of “cardrooms” at licensed pari-mutuel facilities and dictated the parameters by which games may be conducted at such facilities. In essence, the cardrooms conduct games wherein the players compete against one another. The participants do not wager against “the house.” Instead, the house, that is, the pari-mutuel facility, conducts the games in a non-banking manner. This means the house does not have a financial interest in the outcome of the game(s). For purposes of this case, it is determined that the players who win share fractions of the “pot” created by the entry fees paid to participate in the game(s). The Petitioners in this cause are licensed facilities that have operated cardrooms. Each Petitioner holds a pari- mutuel wagering permit and a valid cardroom license. The Respondent is the state agency charged with the responsibility of administering Section 849.086, Florida Statutes (2005). Section 849.086, Florida Statutes, was amended in 2003 by Section 4, Chapter 2003-295, Laws of Florida. The 2003 amendment imposed a $2.00 bet limitation, with a maximum of three raises per round of betting. This change to the statute required the Respondent to revisit the rules governing cardrooms and, more specifically, the concept of poker “tournaments” being conducted at pari-mutuel facilities. To that end, and after extensive rule-making proceedings, the Respondent adopted rules that were incorporated in Florida Administrative Code Chapter 61D-11. The Respondent intended for the rules to address concerns regarding the $2.00 bet and raise limitations as well as how “re-buys” might affect or potentially allow a violation of such provisions. A “re-buy” describes when a card player is allowed to purchase more chips from the house during a game(s). Florida Administrative Code Rule 61D-11.027 was adopted on May 9, 2004. It was then challenged by pari-mutuel facilities who alleged the rule encompassed more than the statute authorized. Such challenge (DOAH Case No. 04-2950RX), was granted. The Final Order found that the rule (Florida Administrative Code Rule 61D-11.027(2)(a)) exceeded the Agency’s grant of rulemaking authority, modified the specific law implemented, and was arbitrary. Accordingly, the Final Order (DOAH Case No. 04-2950RX) determined that the rule violated Subsections 120.52(8)(b), (c), and (e), Florida Statutes. The Florida First District Court of Appeal affirmed the Final Order by a Per Curiam decision issued on October 28, 2005. Thereafter, the Respondent proceeded with the emergency repeal of the tournament rule in its entirety and issued an advisory letter to all cardroom license holders. The Respondent represented that it cannot reconcile the holding of the court with the explicit language of Section 849.086(8), Florida Statutes (2005). At the hearing, the Respondent represented that additional rulemaking will be necessary. The Respondent does not dispute that tournaments are permissible under the statute. Moreover, the parties agree that prior to the rule, repeal tournaments were conducted using tokens or chips that did not have value. Tournaments were played at licensed cardroom facilities during the period commencing in May 2004 through November 9, 2005. During that time (the period the rule was in effect) counties, cities, and the state received income from the monies remitted by the cardroom facilities. Additionally, the cardrooms employed persons to work the facilities to conduct the various games. After the repeal of the rule, revenues from the cardrooms decreased substantially. Similarly, the cardrooms did not need the number of employees as games were not being conducted. Tournaments at the St. Petersburg Kennel Club have not been conducted since January 17, 2006. From November 2005 through January 17, 2006, the tournaments at the St. Petersburg Kennel Club were conducted using chips or tokens that had “fractional value.” The “fraction” did not correspond to the entry fee charged for the tournament. It is not known whether or not re-buys during the tournaments were allowed. The Respondent issued a Memorandum to Pari-Mutuel General Managers at Cardroom Facilities and Cardroom Managers on January 12, 2006, that provided in part: In light of the recent ruling by the First District Court of Appeals, the Division’s administrative rules regarding tournaments have been repealed on an emergency basis, and are scheduled to be repealed permanently. The Division distributed a memorandum to all cardroom operators regarding Clarification of Cardroom Tournament Rules and Jackpots on November 9, 2005. The Division has also expressed on numerous occasions a serious concern of cardroom operators issuing chips in a fashion that does not represent an even value exchange for money in an attempt to circumvent the $2 bet and three raise limitation outlined in Chapter 849.086(8)(b), Florida Statutes. [Italics in original.] The November 9, 2005, Memorandum referred to in paragraph 14 above provided, in pertinent part: This memorandum is intended to clarify issues regarding the recent ruling by the First District Court of Appeals which affirmed an earlier ruling of the Division of Administrative Hearings (DOAH). The DOAH ruling found that various cardroom rules, which were challenged by Dania Jai Alai and Calder Race Course, are invalid. These rules addressed tournaments, jackpots, the Division’s approval of games, and gifts that enable play in an authorized game. As a result of the ruling, today the Division filed emergency rules to ensure that tournaments are played in compliance with the bet limitation of Section 849.086(8)(b), Florida Statutes. * * * The Final Order that was affirmed by the First District Court of Appeals invalidated the Division’s rules regarding entry fees, re-buys and single table tournaments. The judge held that tournament play is authorized by the cardroom statute. Therefore, cardrooms may set their own entry fees and allow re-buys in tournaments and hold single table tournaments. * * * Unauthorized activity, such as conducting wagering on tournaments that does not conform with the wagering restrictions found in Section 849.086(8)(b), Florida Statutes, or offering of jackpots or gifts that do not comply with the requirements that cardrooms be operated in strict conformity with the statute as required by Section 849.086(3), Florida Statutes, may result in disciplinary action. The memorandums identified above did not change or modify the Respondent’s position regarding whether tournaments are legal or permitted by the statute. To the contrary, the memorandums merely advised the cardroom facilities that they would be held to the statutory standard regarding wagering and that jackpots and gifts would be prohibited. Prior to the appeal of the rule, the Respondent routinely approved tournaments that were based upon the following scheme: A participant paid a $32 buy-in and paid the house $13 for the fee to conduct the tournament. Then the participant received a number of no-value chips that were used to play a multiple number of games of poker. At the end of the designated time, number of games, or whenever the designated end occurred (on the same day of play), winners were announced based upon the number of chips they held. Participants were “ranked” and awarded cash prizes from the pot of entry fees. The $32 entry fee was a mathematical calculation thought to assure that no participant would violate the statute’s bet and raise limitations. Whether or not the “all in” concept violated the statute was not considered as the chips were deemed to have no value in and of themselves. This “no value” chip was a fiction that the Respondent supported as, in theory, the $32 player buy-in comported with a mathematical calculation that was within the statutory guideline. The payouts were determined based upon the number of participants and were set by percentage with the first place person receiving the largest payout. Additionally, participants under the approved scheme were not allowed re-buys. That assured that all participants started with the same number of chips and had the same “betting” potential. Finally, winners were not paid or could not receive prizes outside the “pot” created by the entry fees. A nominal gift (such as a T-shirt) was not considered a violation. Prizes such as giant television sets or vacations were not acceptable. All winnings were to be paid from the buy-in fees and all buy-in fees were to be returned to the players in winnings.
The Issue The issue is whether respondent's alcoholic beverage license should be disciplined for the reasons stated in the notice to show cause.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background At all times relevant hereto, respondent, Lehigh Acres Memorial Post #4174, VFW of U. S., Inc. (respondent or club), held alcoholic beverage license number 46-00555, series 11-C, issued by petitioner, Department of Business Regulation, Division of Alcoholic Beverages and Tobacco (Division). Respondent used the license to sell alcoholic beverages at its club located at 18 South Homestead Road, Lehigh Acres, Florida. Under the license, respondent was authorized to sell alcoholic beverages to its members and guests, provided such guests signed a guest book and the members paid for all drinks. Described by respondent's qualified representative as a "day of infamy", October 29, 1989, was the day on which petitioner conducted a search of respondent's licensed premises. The search was conducted after Division investigator Steven H. Thompkins visited the club on three prior occasions in October 1989 in an undercover capacity. Those visits were prompted by an anonymous complaint that the club was engaged in illegal gambling activities. Based upon information uncovered during the three visits, a search warrant was obtained from a local judge, and two Division investigators and three Lee County deputy sheriffs entered the licensed premises on Sunday afternoon, October 29, during the midst of a Bingo game being attended by forty or fifty club members and their guests. Thereafter, a notice to show cause was issued by the Division alleging that respondent had violated chapter 561 in several respects. The issuance of the notice to show cause prompted respondent to initiate this proceeding. Search Warrant A search warrant was obtained by Thompkins and an assistant state attorney from a local county judge on October 27, 1989. The probable cause was based upon an affidavit filed by Thompkins which requested that the judge issue the warrant to search the premises of the club in "the daytime or the nighttime, or on Sunday as the exigencies of the occasion demand or require." Although the warrant was executed on a Sunday, the warrant did not refer to Sunday or specifically authorize a search to be made on a Sunday. Rather, after referring to Thompkins' affidavit, describing the premises to be searched, and citing the type of gambling paraphernalia believed to be on the premises, the warrant read in relevant part as follows: THESE ARE THEREFORE to command you with proper and necessary assistants of the law enforcement agencies, to enter and to search the above described premises referred to as VFW Post 4174, 18 South Homestead Road, Lehigh Acres, Lee County, Florida, for the property described above: a daily number book, betting pool sheets for baseball, pull tab cards for a game of chance instant bingo, two video poker machines, a green bag or envelope, and papers or documents or currency used in connection with the gambling operation. When the warrant was executed on the club premises, the affidavit was not physically attached to the warrant. This finding is based on uncontroverted testimony presented by respondent. Count (1) Count (1) of the notice to show cause alleges that between October 15 and October 22, 1989, respondent, through its agents Walter Adams and Cindy Carboni, "did sell alcoholic beverages to a nonmember to wit: Stephen Thompkins." Respondent has stipulated that Adams, a club bartender, did sell a beer Thompkins on October 15 and 22, 1989, and a mixed drink on October 22, 1989. The record also shows that Thompkins purchased a mixed drink from Carboni on October 19, 1989. All sales were in the club bar on the licensed premises. Thompkins was not a member of the club, had not signed in on the club's guest book, and was not a member's guest. The record further shows that Thompkins did not mislead or deceive the club bartenders into believing that he was a member or guest. Therefore, the allegation in Count I has been sustained. Count 2(a) Part (a) of the second count charges that between October 15 and 29, 1989, the club possessed "Bingo pull tabs tickets and door prize raffle tickets within (its) licensed premises which are gambling devices and had `been used for gambling purposes contrary to F.S. 849.231(1)." Each Sunday afternoon around 1:45 p.m., the club conducted a Bingo game. In order to play Bingo and receive a Bingo card, a patron had to purchase a minimum of four double numbered tickets at fifty cents per ticket. Half of the ticket was retained by the club and used as the basis for a drawing at intermission. On his October 22, 1989, visit, agent Thompkins was a winner on the drawing and received a Florida Lottery Wild Winner's ticket as a prize. For fifty cents each, a patron could also purchase Bingo pull tab cards which are small cards having five removable tabs. These cards were sold only on Sundays by Robert Wagner, a club officer, during the 3:30 p.m. intermission. If the right combination (e.g. the letters "BINGO") was underneath the tabs, a customer could win cash prizes. Indeed, on Thompkins' first visit, one of the forty tickets he purchased for $20 was a winner, and Thompkins received a $51 cash prize. The club also conducted a daily drawing wherein patrons purchased for twenty-five cents a chance to win by placing their names in small capsules which were kept in a large plastic jar. At the end of each day a capsule was drawn out of the jar at random, and the name selected won a prize. To keep track of the participants, the club required them to write their names in a "daily book" (a stenographer's pad) while the prize money was retained in a coffee can kept for that purpose. In addition to the daily drawings, the club conducted what was called a weekly 50:50 drawing which involved essentially the same procedure as the daily drawing, that is, patrons purchased chances by placing their names into small capsules which were kept in a plastic jar until the lucky capsule wad drawn once a week. In both games, the club retained a portion of the moneys wagered by the patrons. Thus, the club was engaged in gambling activities as alleged in the notice to show cause. Count (2)(b) The second portion of Count (2) alleges that between October 15 and 29, 1989, the club "did possess World Series Baseball Pool Sheets and two (2) video poker machines which are gambling devices and had been used for gambling purposes." In the club bar, the bartender (Adams) maintained a World Series pool sheet, which was a large card with ten numbered spaces across the top and ten numbered spaces down, or one hundred spaces in all. Individuals participating in the pool signed their names in various blocks of the card indicating what they thought the score would be. Each chance cost twenty-five cents, and on his first visit, Thompkins purchased twelve chances for three dollars. Such a sheet was also maintained for subsequent World Series games. Therefore, it is found that the club possessed baseball pool sheets for gambling purposes. During the time period in question, the club maintained two Greyhound electric video game machines on its licensed premises. One was known as "Hi Lo Joker Poker", the other as "Super Poker." Each game required a minimum quarter deposit to play. Agent Thompkins observed several club patrons play the machines and Thompkins himself played the Joker Poker machine, albeit unsuccessfully. The club bartender explained to Thompkins that a minimum of forty points had to be earned on the machine before credit would be recorded and that every forty points equaled ten dollars in credits or winnings. Through the expert testimony of Pinellas County sheriff's detective Brian Beery, it was established that the two machines had been modified by a computer chip so that their character was no longer amusement in nature but instead were illegal gambling machines. In their modified state, the machines could be reset and cleared after each player with a remote control device operated by the bartender. Moreover, the payoff odds were controlled by the club. According to Beery's uncontradicted testimony, the club retained 56% of all moneys deposited in the machines. Beery added that the machines are generally modified at the lessee's or renter's direction and that the owner of the machines shares in the profits. The name of the owner of the machines is not of record. According to the club's past commander, the machines had been on the premises for less than two weeks prior to the October 29 raid. This was not controverted. Even so, for those two weeks, the club was utilizing video poker machines for gambling purposes as alleged in the notice to show cause. Count (3) The third count charges that between October 15 and 29, 1989, respondent maintained "a gambling house by allowing video poker machines, "bingo" pull tabs tickets and door prize raffles to be used for gambling purposes within (its) licensed premises." The evidence detailed in findings of fact 7, 8 and 11 supports a finding that the club maintained video machines, Bingo pull tab tickets and door prize raffles for gambling purposes during the time period in question. Count (4) The last count alleges that respondent "did conduct lottery drawings by having 3rd and 4th game World Series Baseball Pool and conducting drawings at the intermission of bingo each Sunday." Respondent has admitted that Walter Adams, the club's bartender, conducted a World Series pool for two games during the 1989 series. A description of such activities is found in finding of fact 10. The club's only defense to this allegation was that Adams was not authorized to conduct the pool, and the canteen (bar) was not under the post commander's direct responsibility. Even so, this charge has been sustained. The evidence also shows that during the intermission of the Bingo game on October 15 and 22, 1989, Robert Donahue, a post member, conducted a drawing for a prize. Additional findings as to this allegation are contained in finding of fact 7. Therefore, this charge has been established. Penalty and Mitigating Evidence The Division's district supervisor has recommended that respondent's license be revoked. This recommendation is based on the fact that pursuant to a consent agreement executed in October 1986 respondent suffered a $2,000 fine and a thirty day suspension of its license for illegal gambling activities. Further, the supervisor pointed out that: the club has been lectured on illicit gambling as recently as August 7, 1989. Moreover, the club was given a verbal warning concerning illegal alcoholic sales to non- members on January 16, 1986. Finally, the Division calculated what it believed to be the amount of profits realized by the club from its gambling activities. These profits exceeded $5,000 which, according to the supervisor, is the threshold amount of illegal income to justify revocation of a license. In mitigation, the club contended that it did not know that many of the activities were illegal and that it was simply engaged in activities that are commonplace in other clubs and business enterprises. Moreover, the club points out that much of its profits from gambling were donated to charitable causes. In addition, the club building is now in need of a new roof and the club contends it cannot afford to lose the revenues that are generated by the liquor license. Finally, the club maintains that Adams' activities were not authorized, and the club should not be penalized for his actions.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty as charged in the notice to show cause and that its license be REVOKED. DONE and ENTERED this 19th day of October, 1990, in Tallahassee, Florida. DONALD R. ALEXANDER 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 19th of October, 1990.
The Issue The issues in these cases are whether the following rules promulgated by the Respondent, the Department of Business Regulation [now the Department of Business and Professional Regulation], Division of Pari-mutuel Wagering, are valid exercises of delegated legislative authority: F.A.C. Rules 61D-1.002(18) [formerly 7E-16.002(18)] and 61D-1.006 [formerly 7E-16.006]; and emergency rules 7ERR92-2(18) and 7EER92-6.
Findings Of Fact On or about September 30, 1991, the Petitioner, John R. Witmer, applied to the Respondent, the Department of Business Regulation (now the the Department of Business and Professional Regulation), Division of Pari-mutuel Wagering (the Division), for a three-year occupational license as a veterinarian. The license was issued with a scheduled expiration in 1994. In October, 1993, the Division filed an Administrative Complaint alleging that the Petitioner violated emergency rule 7EER92-2(18) and F.A.C. Rule 61D-1.002(18) (formerly codified as F.A.C. Rule 7E-16.002(18)) on November 11, 1992, and April 2, 1993. The charges remain pending and have been referred to the Division of Administrative Hearings, where they have been given DOAH Case No. 93-6638. On or about June 18, 1992, the Division released the legal opinion of its General Counsel that, if certain provisions of the statutes governing pari- mutuel wagering were allowed to sunset on July 1, 1992, the Division legally would be unable to regulate pari-mutuel wagering adequately, and pari-mutuel wagering would become illegal in Florida. In response to the legal opinion, several tracks and jai alai frontons filed suit in circuit court seeking declaratory and injunctive relief. On or about June 30, 1992, a temporary injunction was issued in the court case requiring the parties to maintain the status quo in effect on June 30, 1992, until further order. A final hearing in the court case was held on August 10, 1992. The court's Final Order held that the statutes that remained in effect after July 1, 1992, were "legally sufficient and not in violation of Article X, Section 7, of the Florida Constitution (1968) [a prohibition against lotteries not sanctioned by law]." The court dissolved the temporary injunction effective August 25, 1992. After the court decision, notwithstanding the earlier legal opinion issued by its General Counsel, the Division determined that it had the necessary statutory authority to promulgate emergency rules to implement what remained of the pari-mutuel wagering statutes after July 1, 1992. Approximately $1.7 billion in cash was being wagered annually. Taxes collected on the wagers amounted to approximately $105 million a year. The possibilities for cheating and stealing to obtain a piece of the action illegally are endless, requiring effective regulation and constant vigilance. It is not unusual, for example, for cheaters to attempt to drug race animals illegally. As a result, some 85,000 urine and blood samples are taken from race animals annually. It was determined that, under the remnants of the statutes that remained after July 1, 1992, there were three areas vital to the public's welfare for which sanctions or rulemaking, or both, were necessary: (1) regulation of the pari-mutuel wagering pool; (2) regulation relative to the collection of taxes; and (3) regulation of the administration of medicines and drugs to racing animals. Fifty-four emergency rules, designated 7EER92-1 through 7EER92-54, were promulgated on or about August 24, 1992. (These compare to the 340 rules previously promulgated under the authority of, and to implement, the entirety of Chapter 550, Fla. Stat. (1991), in effect before July 1, 1992.) In addition, the Division requested that the tracks and frontons promulgate "in-house" rules in an attempt to maintain, as a practical matter, the status quo as of June 30, 1992, to the extent possible. On or about November 22, 1992, the emergency rules were replaced by permanent rules, designated F.A.C. Rule Chapter 7E-16, and F.A.C. Rule Chapter 7E-4 was repealed. On or about December 16, 1992, the Legislature enacted Chapter 92-348, Laws of Florida (1992), a new comprehensive statute governing dog and horse racing pari-mutuel wagering. It replaced the prior law. The final bill analysis and economic impact statement produced by the House of Representatives Committee on Regulated Industries referred to Chapter 92-348 as a "revision" of the law on the subject. The Division suggested to the Senate Commerce Committee that an earlier Senate version of the bill contain a retroactive "savings clause" to specify that the Division would have jurisdiction to prosecute disciplinary proceedings against occupational licensees that were pending on July 1, 1992, under the Division's emergency rules and under the provisions of what would become Chapter 92-348. No such provision was included in Chapter 92-348. On or about December 17, 1992, the Division transmitted to the Department of State, Bureau of Administrative Code, as "technical changes" under F.A.C. Rule 1S-1.002(9), "corrections" to the statutory authority for, and law implemented by, F.A.C. Rule Chapter 7E-16. The "corrections" substituted appropriate provisions from Chapter 92-348. The Division interprets F.A.C. Rule 1S-1.002(9) to apply to changes in the statutory authority for, and law implemented by, rules. F.A.C. Rule Chapter 7E-16 later was redesignated as F.A.C. Rule Chapter 61D-1. Between July 1 and December 16, 1992, the Division issued some 11,000 occupational licenses and denied some 22 applications. During this time period, the Division collected some $400,000 in occupational license fees. The fees were part of the more than $800,000 collected in the fiscal year ending June 30, 1993. During the period from July 1 to December 16, 1992, the Division dismissed more than 80 pending disciplinary matters out of concern for whether the Division still had authority to impose sanctions for the violations in question. In addition, during that time period, out of the same concerns, the Division declined to prosecute more than 260 other cases in which track judges or stewards had found violations.
The Issue The issue in this existing rule challenge filed pursuant to section 120.56(3), Florida Statutes (2015),1/ is whether Florida Administrative Code Rule subparagraphs 59C-1.008(2)(a)2. and (2)(a)3. are invalid exercises of delegated legislative authority for the reasons alleged by Petitioner.
Findings Of Fact The Parties Petitioner is the sole existing provider of hospice services in hospice service area 5B, Pinellas County. Respondent AHCA is the state agency responsible for administering the Health Facility and Services Development Act (the Act), codified at sections 408.031 through 408.0455, Florida Statutes. The Act sets forth Florida’s certificate of need (CON) regulatory program, pursuant to which AHCA determines whether there is a community need for regulated health care facilities and services as a prerequisite to licensure and operation. As part of its responsibilities under the Act, AHCA is required to establish, by rule, uniform need methodologies for CON-regulated health facilities and services. One such need methodology, for new hospice programs, is set forth in rule 59C- 1.0355. The rule defines 27 service areas, and AHCA uses the numeric formula in rule 59C-1.0355(4)(a) to calculate numeric need for each of the 27 service areas. Other rules in chapter 59C-1 establish need methodologies for other regulated services and facilities, such as for nursing facility beds (rule 59C- 1.036), inpatient comprehensive medical rehabilitation services (rule 59C-1.039), hospital inpatient psychiatric services (rule 59C-1.040), and hospital inpatient substance abuse services (rule 59C-1.041). Intervenors Brookdale Hospice, LLC; Chapters Hospice of Pinellas County, Inc.; VITAS Healthcare Corporation of Florida; and Covenant Hospice, Inc. (collectively Intervenors), each filed a CON application to establish a new hospice program in Pinellas County, in the first batching cycle in 2015 for “other beds and programs.” The FNP Rule--What is Challenged; What is Not Challenged Rule 59C-1.008 is a lengthy rule, titled “Certificate of Need Application Procedures.” “Fixed Need Pools” is the subject of rule 59C-1.008(2). Within the “Fixed Need Pools” rule paragraph, sub-paragraph (a) addresses “Publication of Fixed Need Pools.” In its current form, it provides as follows: The Agency shall publish in the Florida Administrative Register at least 15 days prior to the letter of intent deadline for a particular batching cycle the Fixed Need Pools for the applicable planning horizon specified for each service in applicable Agency rules contained in Rules 59C-1.031- .044, F.A.C. Any person who identifies an error in the Fixed Need Pool numbers must advise the Agency of the error within 10 days of the date the Fixed Need Pool was published in the Florida Administrative Register. If the Agency concurs in the error, the Fixed Need Pool number will be adjusted and re-published in the first available edition of the Florida Administrative Register. Failure to notify the Agency of the error during this time period will result in no adjustment to the Fixed Need Pool number for that batching cycle. Except as provided in subparagraph 2. above, the batching cycle specific Fixed Need Pools shall not be changed or adjusted in the future regardless of any future changes in need methodologies, population estimates, bed inventories, or other factors which would lead to different projections of need, if retroactively applied. Petitioner has not challenged the validity of rule 59C- 1.008(2)(a)1., nor has Petitioner challenged the rest of rule 59C-1.008(2). The challenge is directed only to rule 59C- 1.008(2)(a)2. and 3. Thus, although the challenged provisions are collectively referred to for convenience as the FNP rule, in fact, the challenged provisions are only a very small part of the actual rule provisions on fixed need pools. Also not challenged by Petitioner is Florida Administrative Code Rule 59C-1.002(19), defining “fixed need pool” as follows: “Fixed Need Pool” means the identified numerical need, as published in the Florida Administrative Register, for new beds or services for the applicable planning horizon established by the Agency in accordance with need methodologies which are in effect by rule at the time of publication of the Fixed Need Pools for the applicable batching cycle. Petitioner did not challenge the validity of the fixed need pool rule provision addressing comparative review. Rule 59C-1.008(2)(e) provides in pertinent part: Comparative Review. Applications submitted to the Agency in the same batching cycle for the same service or beds having the same Certificate of Need methodology in the same district or subdistrict, as defined in applicable rules, shall be comparatively reviewed through final Agency action against the same Fixed Need Pools in existence at the initial review. The Fixed Need Pools and other relevant planning information shall be used by the Agency to review the application against all applicable statutory review criteria contained in Section 408.035, F.S., and applicable rules, and policies. Finally, Petitioner has not challenged the FNP rule on the ground that the rule is arbitrary or capricious. Although Petitioner made a few references on the record to suggest that the 10-day period to notify AHCA of a fixed need pool errors is too short, the Petition does not contend that the FNP rule is invalid because it is unreasonable, arbitrary, or capricious. Indeed, in a prior proceeding, Petitioner lauded the reasonableness of the 10-day notice period, and the importance of closing the door to any attempt to change fixed need pools for a batching cycle based on errors discovered after the 10-day period. In Petitioner’s words, the FNP rule procedures are “crafted to rapidly identify errors in the initial publication of the Fixed Need Pool so there is closure and finality. Subparagraph 3 of the rule works to ‘close the books’ on the current batching cycle so that would-be applicants have certainty: hence the term ‘Fixed’ Need.”3/ (AHCA OR-2 at 7). To address Petitioner’s legal position that the challenged FNP rule is invalid under section 120.52(8)(b), (8)(c), and the flush-left paragraph, it is helpful to consider the background evolution of the concept of comparative review under the CON program and the role of fixed need pools in carrying out that concept. Background--Evolution of Comparative Review and Fixed Need Pools Prior to 1979, the CON program, then mandated by federal law, was administered by AHCA’s predecessor, the Department of Health and Rehabilitative Services (HRS). Need was considered both at the state level and regionally, first by health systems agencies (HSAs) and later, by local health councils. HRS would make decisions on applications after considering the recommendations, if any, of the HSAs, and then applicants were entitled to “fair hearings” to contest the decision on their applications. However, there was no procedural mechanism to group together multiple pending applications seeking to address the need in the same service area for the same service, so that the competing proposals could be reviewed comparatively, in relation to each other. In the landmark case of Bio-Medical Applications of Clearwater v. Department of Health & Rehabilitative Services, 370 So. 2d 19 (Fla. 2d DCA 1979) (Bio- Medical), the court described the fundamental principle embodied in the Ashbacker doctrine, pronounced in Ashbacker Radio Corporation v. Federal Communications Commission, 326 U.S. 327, 66 S. Ct. 148, 90 L. Ed. 108 (1945): In Ashbacker, the Supreme Court laid down a general principle that an administrative agency is not to grant one application for a license without some appropriate consideration of another bona fide and timely filed application to render the same service; the principle, therefore, constitutes a fundamental doctrine of fair play which administrative agencies must diligently respect and courts must be ever alert to enforce. Bio-Medical, 370 So. 2d at 23. The court then held that this same principle required application of the Ashbacker doctrine to state CON proceedings: We are not the first to observe that where need is determined in accordance with a quantitative standard; that is, by number of units, a fixed pool of needed investments is thereby created. Opposing applicants necessarily become competitors for that fixed pool. . . . The Ashbacker court held that a comparative hearing was required where there were two applications pending . . . . Similarly, we hold that Ashbacker applies in proceedings for a certificate of need[.] Id. at 23-24. The court rejected the argument that whether applicants are entitled to comparative hearings should be addressed under the general administrative rule on consolidation (then in the model rules of procedure), requiring a motion to consolidate and vesting discretion in the hearing officer to grant or deny the motion. Instead, the court admonished: [T]he burden of initiating comparative review does not lie solely with an interested applicant. There should be a self-starting mechanism within HRS. . . . [I]t is for an administrative agency to devise means of achieving comparative consideration, including an appropriate mechanism for determination by the agency whether Ashbacker requires a comparative hearing in a particular case.[4/] . . . Neither the federal law, nor the state law (including the Administrative Procedure Act), nor the HRS rules, contain provisions establishing specific procedures for accommodating the need for comparative hearings in certificate of need proceedings. We are confident that administrative procedures will be promulgated to deal with administrative problems in affording comparative hearings, if any such problems are anticipated. Id. at 24-25. After Bio-Medical, the CON laws were amended to direct HRS to provide by rule for “applications to be submitted on a timetable or cycle basis; provide for review on a timely basis; and provide for all completed applications pertaining to similar types of services, facilities, or equipment affecting the same service area to be considered in relation to each other no less often than two times per year.” Ch. 80-187, § 4, Laws of Fla. (1980). With minor changes (to delete the reference to equipment and change the minimum cycle frequency to once yearly), this language remains intact. See § 409.039(1), Fla. Stat. Although the timetable basis for application filing helped bring about initial comparative review by HRS of similar applications, serious problems developed after HRS’s initial decisions, when administrative hearings were requested and multiple batches could be pending at the same time, with later batches sometimes being finally decided before earlier batches. In another landmark case, Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So. 2d 700 (Fla. 1st DCA 1985) (Gulf Court), the court described the problems sorting out comparative review rights, which had not been well anticipated by HRS. Gulf Court held that in order to stay true to the right to comparative review in the context of the CON laws, HRS had to require that CON applications filed in a batching cycle address a specific need projection, which would be the “fixed” need pool applicable to that batching cycle.5/ Id. at 706-707. As the first step to respond to Gulf Court, HRS immediately began to interpret its need methodology rules to “fix” the data ingredients used to calculate numeric need as of HRS’s initial review of the applications, so that the numeric need could not be changed through updated data offered in administrative hearings. This interpretation, applied immediately after Gulf Court to applications reviewed in 1985, was challenged on appeal in Meridian, Inc. v. Department of Health and Rehabilitative Services, 548 So. 2d 1169 (Fla. 1st DCA 1989). The court endorsed HRS’s implementation of Gulf Court: We conclude that the construction given [the nursing facility bed need methodology rule] by HRS is neither arbitrary nor capricious, but is completely in accord with the purposes of the act and the principles of comparative review espoused in Gulf Court. The logic of HRS’s position is unassailable. It gives effect to the notion that, pursuant to applicable principles of comparative review, the number of beds in the fixed pool in the July 1985 planning cycle (July 1988) to which the applicants’ applications were addressed (as shown by the formula) would become set at July 1985 for purposes of comparative review, even though new data coming to light in later months or years might reflect a different bed need when factored into the formula. If the number of beds in the fixed pool could be altered by new information developed after the initial applications were filed, there would be no basis for ever fixing the number in the pool, and the evils in the system addressed in Gulf Court would be perpetuated. Id. at 1170-1171. As the court observed, “[T]he underlying organic statutory authority contemplates comparative review based upon a fixed pool of bed need set at the time of the initial applications.” Id. at 1171. HRS’s interpretation endorsed by the court in Meridian was refined through rule promulgation. Effective March 2, 1987, HRS adopted a “Fixed Need Pools” rule subsection, which was added to the Certificate of Need Application Procedures rule (then rule 10-5.008). The new “Fixed Need Pools” rule provided: Definition. A fixed need pool is defined as the identified need for new beds or services for the applicable planning horizon established by the department in accordance with need methodologies which are in effect by rule at the time of publication of the fixed need pools for the applicable batching cycle. Publication of Fixed Need Pools. The department shall publish in the Florida Administrative Weekly at least 15 days prior to the letter of intent deadline for a particular batching cycle the fixed need pools for the applicable planning horizon specified for each service in applicable departmental rules contained in 10-5.011, F.A.C. These batching cycle specific fixed need pools shall not be changed or adjusted in the future regardless of any future changes in need methodologies, population estimates, bed inventories, or other factors which would lead to different projections of need, if retroactively applied. Comparative Review. Applications submitted to the department in the same batching cycle for the same services in the same district or subdistrict, as defined in applicable rules, shall be comparatively reviewed through final agency action against the same fixed need pools in existence at the initial review. The fixed need pools and other relevant planning information shall be used by the department to review the application against all statutory review criteria contained in F.S. 381.494(6)(c), applicable rules, and policies. As Petitioner acknowledges, the reason why the FNP rule was adopted was to more completely “fix” the numeric need before the start of a batching cycle: Prior to the adoption of the Fixed Need Pool Rule, need was not “immutable” or a mere “historic artifact” that could not be revised after the start of a batching cycle. Instead, if AHCA preliminarily approved an application based on an erroneous need calculation, AHCA’s approval could be challenged on the basis that there is in fact no need under the rule methodology. Indeed, absent a stipulation, need would not become “fixed” (that is, not subject to correction) until the issuance of the final order and the exhaustion of any appeal. Suncoast’s Response in Opposition to the Joint Motion to Dismiss at 1 (emphasis added). The 1987 codification of the FNP rule is similar to the current provisions now found in rule 59C-1.002(19); rule 59C- 1.008(2)(a)1., 2., and 3.; and rule 59C-1.008(2)(e), quoted in paragraphs 5, 7, and 8 above. However, unlike the current FNP rule, the original FNP rule did not provide any window of time for errors to be called to HRS’s attention and corrected. The 10-day window to notify HRS of errors, as a limited exception to the “fixing” of the published numeric need, was first offered as a matter of policy and practice, as described in Health Quest Corp. v. Department of Health and Rehabilitative Services, Case No. 89-2623RX (Fla. DOAH Oct. 4, 1989), aff’d per curiam, 564 So. 2d 491 (Fla. 1st DCA 1990) (Health Quest). Health Quest determined that the original FNP rule was valid, as against a multi-faceted challenge described in more detail below. The practice of offering a 10-day window for notice of errors, initiated by HRS, was continued by AHCA as HRS’s successor beginning in 1992. When the practice was challenged as an unadopted rule, AHCA adopted the practice as a rule and the challenge was dismissed. Martin Memorial Med. Ctr. v. Ag. for Health Care Admin., Case No. 94-2917RU (Fla. DOAH Jan. 4, 1995). The codification of the 10-day window for notice of errors as a limited exception to the “fixing” of published need pools took effect October 12, 1994. The “Publication of Fixed Need Pools” rule was divided in three parts--the current form--as follows (rule changes shown in underline/strike-through format): The agency shall publish in the Florida Administrative Weekly at least 15 days prior to the letter of intent deadline for a particular batching cycle the fixed need pools for the applicable planning horizon specified for each service in applicable agency rules contained in 59C-1.031 to 59C-1.044, F.A.C. Any person who identifies an error in the fixed need pool numbers must advise the agency of the error within 10 days of publication of the number. If the agency concurs in the error, the fixed need pool number will be adjusted and re-published in the first available edition of the Florida Administrative Weekly. Failure to notify the agency of the error during this time period will result in no adjustment to the fixed need pool number for that batching cycle. Any other adjustments will be made in the first cycle subsequent to identification of an error, including those errors identified through administrative hearings or final judicial review. Except as provided in subparagraph 2. above, the These batching cycle specific fixed need pools shall not be changed or adjusted in the future regardless of any future changes in need methodologies, population estimates, bed inventories, or other factors which would lead to different projections of need, if retroactively applied. The FNP rule remained unchanged for the next ten years. In 2004, when rule 59C-1.008 was amended to reflect legislative changes (e.g., eliminating the requirement to file CON applications with local health councils, and increasing the CON application filing fee), AHCA also made two changes to rule 59C- 1.008(2)(a)2. In the first sentence, the language providing that a person must notify the agency “within 10 days of publication of the number” was changed to “within 10 days of the date the fixed need pool was published in the Florida Administrative Weekly.” This change was non-substantive, simply improving the language to make it clearer without changing the meaning. The other 2004 change was to delete the last sentence that had been in rule 59C-1.008(2)(a)2. (“Any other adjustments will be made in the first cycle subsequent to identification of an error, including those errors identified through administrative hearings or final judicial review.”). The deletion of this sentence appears to be another clean-up step, as the deleted sentence did not appear to add anything to the existing language that was left unchanged. Another 11 years have passed, with no changes to the FNP rule, except for a technical change made in 2012 when the name of the publication where fixed need pool notices would be published was changed from Florida Administrative Weekly to the Florida Administrative Register. Facts Related to Standing On April 3, 2015, AHCA published in the Florida Administrative Register the numeric fixed need pools for the review cycle with an April 20, 2015, letter-of-intent deadline. The published fixed need pool for hospice programs showed a need for one new hospice program in service area 5B. The published notice provided in pertinent part: Any person who identifies an error in the fixed need pool numbers must advise the agency of the error within ten (10) days of the publication. If the agency concurs with the error, the fixed need pool number will be adjusted and republished in the first available edition of the Florida Administrative Register. Failure to notify the agency of the error during this ten-day period waives a person’s right to raise the error at subsequent proceedings. Any other adjustments will be made in the first cycle subsequent to identification of the error including those errors identified through administrative hearings or final judicial review. Any person whose substantial interest is affected by this action and who timely advised the agency of an error in the action has a right to request an administrative hearing pursuant to Section 120.57, F.S. In order to request a proceeding under Section 120.57, F.S., a request for an administrative hearing must state with specificity which issues of material fact or law are in dispute. All requests for hearing shall be made to the Agency for Health Care Administration and must be filed with the agency clerk at 2727 Mahan Drive, Building 3, Room 3431, MS 3, Tallahassee, Florida 32308. All requests for hearing must be filed with the agency clerk within 21 days of this publication or the right to a hearing is waived. The deadline according to the notice and the challenged FNP rule to notify AHCA of alleged errors in the published fixed need pool numbers was April 13, 2015. Petitioner did not notify AHCA of an alleged error by that 10-day deadline. One other person timely notified AHCA of an alleged error, but that person withdrew the notice before AHCA made any determination. Accordingly, the 10-day deadline expired with no timely-filed pending notices of alleged errors. Intervenors timely filed letters of intent on or before the deadline of April 20, 2015, indicating their intent to file CON applications for new hospice programs in service area 5B. The deadline according to the notice and the Uniform Rules of Procedure, Florida Administrative Code Rule 28- 106.111(2), to file a request for an administrative hearing with regard to the published fixed need pools was April 24, 2015. Petitioner did not file a petition for an administrative hearing by the 21-day deadline of April 24, 2015. No evidence was presented that any other petition for administrative hearing was filed on or before April 24, 2015, to contest AHCA’s numeric need determinations set forth in the published fixed need pool notice. On May 7, 2015, AHCA issued a Final Order by which AHCA changed its interpretation of the hospice numeric need rule. Hernando-Pasco Hospice, Inc. v. Ag. for Health Care Admin., Case No. 14-5121CON (Fla. DOAH Mar. 11, 2015; Fla. AHCA May 7, 2015) (HPH). The HPH Final Order resulted from a hospice fixed need pool challenge that had been timely filed to contest the numeric need published in October 2014. The deadline to file initial CON applications addressing the fixed need pools published on April 3, 2015, was May 20, 2015. The minimum base filing fee that must be paid with the initial application filing is $10,000.00. Fla. Admin. Code R. 59C-1.008(3). Intervenors each filed initial applications, with the required filing fees, by the May 20, 2015, deadline. On June 1, 2015, Petitioner delivered a letter to AHCA notifying it of an alleged error in the hospice fixed need pool for service area 5B that had been published 59 days earlier, and requesting AHCA to correct the error. The alleged error was predicated on AHCA’s changed interpretation of the hospice numeric need rule in the May 7, 2015, HPH Final Order. While Petitioner’s June 1, 2015, letter acknowledged that notice of the alleged error was being given well outside of the 10-day window, Petitioner asserted that the 10-day period was not applicable, because AHCA was on notice by virtue of the HPH Recommended Order that its interpretation of the hospice numeric need rule was erroneous. Incongruously, Petitioner also claimed that third parties may have relied on AHCA’s position in the HPH litigation that the argument about how the hospice need rule should be interpreted did not involve an “error” cognizable in a fixed need pool challenge. The HPH Recommended Order did not accept AHCA’s litigation position in HPH that the matter was not a proper fixed need pool challenge, nor did it accept AHCA’s interpretation of the hospice need rule. But the status of the Recommended Order was just that--a recommendation, to which the parties were entitled to file exceptions for AHCA’s consideration prior to any final determination. On June 2, 2015, AHCA denied Petitioner’s request to correct the alleged error because the request was not timely filed pursuant to the challenged FNP rule. The grounds for the alleged error asserted by Petitioner did not arise until after the published fixed need pool, after the 10-day window to identify errors, and after the 21-day window to file a petition for an administrative hearing to contest the published fixed need pool. By the time the HPH Final Order established a new interpretation of the hospice need rule, with the deadlines for notifying AHCA of errors and for requesting an administrative hearing having passed with no timely-filed challenge to the published fixed need pool, applicants seeking to address the published fixed need pool reasonably relied on the existing FNP rule as having fixed for that batching cycle the numeric need published on April 3, 2015.
