Joint Administrative Procedures Committee

JOE NEGRON RICHARD CORCORAN President Speaker

THE FLORIDA LEGISLATURE JOINT ADMINISTRATIVE PROCEDURES COMMITTEE

Representative George R. Moraitis, Jr., Chair KENNETH J. PLANTE Senator Kevin Rader, Vice Chair COORDINATOR Senator Frank Artiles Room 680, Pepper Building Senator Daphne Campbell 111 W. Madison Street Senator George B. Gainer Tallahassee, Florida 32399-1400 Senator Keith Perry Telephone (850) 488-9110 Representative Jason Fischer Fax (850) 922-6934 Representative Michael Grant www.japc.state.fl.us Representative Sam H. Killebrew [email protected] Representative Amy Mercado Representative Barrington A. “Barry” Russell

JOINT ADMINISTRATIVE PROCEDURES COMMITTEE

Representative George R. Moraitis, Jr., Chair

Meeting Packet

Thursday, February 9, 2017 4:00 p.m. – 6:00 p.m. 12 House Office Building

JOE NEGRON RICHARD CORCORAN President Speaker

THE FLORIDA LEGISLATURE JOINT ADMINISTRATIVE PROCEDURES COMMITTEE

COMMITTEE MEETING AGENDA

February 9, 2017

12 House Office Building

4:00 p.m. – 6:00 p.m.

CALL TO ORDER AND ROLL CALL

WELCOME AND INTRODUCTION OF MEMBERS

TAB 1 Overview of Committee Responsibilities

TAB 2 Committee Status Report

TAB 3 Proposed Committee Rules

TAB 4 Presentation by the Department of Business and Professional Regulation, Division of Pari-mutuel Wagering, on the status and impact of recent decisions on rulemaking and the operation of cardrooms.

TAB 5 Presentation by the Department of Health, Office of Compassionate Use, on the implementation of Article X, Section 29 of the Florida Constitution (“Amendment 2”).

TAB 6 Presentation by the Office of Fiscal Responsibility and Regulatory Reform (“OFARR”) on the Office’s role in the development and review of agency rules.

REPORTS AND APPEARANCES

TAB 1 RESPONSIBILITIES OF THE JOINT ADMINISTRATIVE PROCEDURES COMMITTEE ______

JAPC Duties Under Joint Rule Four of the Florida Legislature

The committee’s duties and responsibilities described in Joint Rule 4.6 include:

Maintaining a continuous review of the statutory authority on which each rule is based, and advising agencies whenever such authority is significantly affected.

Maintaining a continuous review of rules and identifying and requesting agencies to repeal any rule or rule provision which reiterates or paraphrases any statute or for which statutory authority has been repealed.

Reviewing administrative rules and advising agencies of its findings.

Performing the duties prescribed by chapter 120 regarding the adoption and promulgation of rules.

Generally reviewing agency action pursuant to the operation of the Administrative Procedure Act.

Reporting to the Legislature at least annually and recommending needed legislation or other appropriate action. The report shall include:

 The number of objections voted by the committee and the outcome of such objections.  The number of suspensions recommended by the committee and the outcome of such recommendations.  The number of administrative determinations filed on the invalidity of a proposed or existing rule and the outcome of such determinations.  The number of petitions for judicial review filed on the invalidity of a proposed or existing rule and the outcome of such petitions.  Any recommendations provided to the standing committees during the preceding year as to the advisability of considering changes to the delegated legislative authority to adopt rules in specific circumstances.

Consulting regularly with legislative standing committees regarding legislative authority for proposed rules and other matters relating to legislative authority for agency action.

Maintaining a continuous review of the rulemaking process, including a review of agency procedure and of complaints based on such procedure.

Establishing measurement criteria to evaluate whether agencies are complying with the delegation of legislative authority in adopting and implementing rules.

Maintaining a continuous review of statutes that authorize agencies to adopt rules and making recommendations to the appropriate standing committees of the House and Senate as to the advisability of considering changes to the delegated legislative authority to adopt rules in specific circumstances.

JAPC Responsibilities Under Section 120.54, F.S., Related to Agency Rulemaking

At least 21 days before the proposed adoption date, each agency is required to file with the committee a copy of each rule it proposes to adopt; a copy of any material incorporated by reference in the rule; a detailed written statement of the facts and circumstances justifying the proposed rule; a copy of any statement of estimated regulatory costs that has been prepared; a statement of the extent to which the proposed rule relates to federal standards or rules on the same subject; and the published notice of rulemaking. The published notice must include a short, plain explanation of the purpose and effect of the proposed action; the full text of the proposed rule or amendment and a summary thereof; a reference to the grant of rulemaking authority and a reference to the Florida Statutes or Laws of Florida being implemented or interpreted; a summary of the agency’s statement of the estimated regulatory costs, if one has been prepared; a statement that any person may provide the agency with information regarding the statement of estimated regulatory costs or a proposal for a lower cost regulatory alternative within 21 days after publication of the notice; a statement as to whether the proposed rule is expected to require legislative ratification; and the procedure for requesting a public hearing on the proposed rule. 120.54(3)(a)

If an agency determines that a proposed rule will affect small businesses, the agency is required to send notice of the proposed rule to the rules ombudsman in the Executive Office of the Governor not less than 28 days prior to adoption. If the rules ombudsman in the Executive Office of the Governor offers to the agency regulatory alternatives and the agency does not adopt all alternatives offered, the agency is required to file a detailed written statement with the committee explaining the reasons for failure to adopt such alternatives. The agency is required to send a copy of the statement to the rules ombudsman in the Executive Office of the Governor. 120.54(3)(b)

The adopting agency is required to file with the committee a notice of no change or technical change in a proposed rule at least 7 days before adoption. When any change is made in a proposed rule, other than a technical change, the adopting agency is required to file with the committee a notice of the change, along with the reasons for such change, at least 21 days prior to adoption. 120.54(3)(d)

At the time the rule is filed for adoption, the committee is required to certify whether the agency has responded in writing to all material and timely written comments or written inquiries made on behalf of the committee. 120.54(3)(e)4.

If the committee notifies the agency that an objection to a rule is being considered, the agency may postpone the adoption of the rule to accommodate review of the rule by the committee.

When an agency postpones adoption for this purpose, the 90-day period for filing the rule is tolled until the committee notifies the agency that it has completed its review. 120.54(3)(e)6.

Notice of the adoption by an agency of emergency rules, other than those of educational units or units of local government, shall be provided to the committee along with any material incorporated by reference in the rules. 120.54(4)(a)

The committee is required to review uniform rules of procedure adopted by the Administration Commission. 120.54(5)(a)

Agencies are empowered to adopt rules substantively identical to federal regulations using an expedited rulemaking process, which requires that the committee receive a copy of the agency’s notice of intent to adopt a rule at least 21 days prior to the date of filing for adoption. 120.54(6)

If a petition to initiate rulemaking by an agency is directed to an unadopted rule and the agency, after holding a public hearing, does not initiate rulemaking or otherwise comply with the requested action, the agency shall file a statement of its reasons with the committee. The committee is required to forward a copy of the statement to the substantive committees of the Legislature with primary oversight jurisdiction of the agency. JAPC or a committee with oversight jurisdiction may hold a hearing directed to the agency statement. The committee holding the hearing may recommend appropriate legislation. 120.54(7)

JAPC Review of Agency Rules Pursuant to 120.545, F.S.

The committee is required to examine each proposed rule, except for rules exempted by s. 120.81(1)(e) and (2), and its accompanying material, and each emergency rule, and may examine any existing rule to determine whether:

 The rule is an invalid exercise of delegated legislative authority pursuant to s. 120.52(8).  The statutory authority for the rule has been repealed.  The rule reiterates or paraphrases statutory material.  The rule is in proper form.  The notice given prior to adoption was sufficient to give adequate notice of the purpose and effect of the rule.  The rule is consistent with expressed legislative intent pertaining to the specific provisions of law which the rule implements.  The rule is necessary to accomplish the objectives of the specific law implemented.  The rule is a reasonable implementation of the law as it affects the convenience of the general public or persons particularly affected by the rule.  The rule could be made less complex or more easily comprehensible to the general public.  The rule’s statement of estimated regulatory costs complies with the requirements of s. 120.541 and whether the rule imposes regulatory costs on the regulated person, county, or city which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives.

 The rule will require additional appropriations.  If the rule is an emergency rule, there exists an emergency justifying the rule, the agency is within its statutory authority, and the rule was adopted in compliance with s. 120.54(4). 120.545(1)

The committee may request from an agency any information reasonably necessary for examination of a rule. The committee is required to consult with legislative standing committees with jurisdiction over the subject matter of rules examined. 120.545(2)

If the committee votes to object to a rule, it shall certify that fact to the agency along with a statement detailing its objections with particularity, within 5 days after the objection. The committee must notify the House Speaker and Senate President of the objection concurrent with certification to the agency. The agency is required to notify the committee of its intention to comply with the objection or its refusal to do so within 30 days, if headed by an individual, or within 45 days, if headed by a collegial body. If the agency fails to respond to the committee’s objection to a rule not yet in effect within the prescribed time limits, the committee is required to notify the Department of State that the agency, by its failure to respond, has elected to withdraw the rule. Failure of the agency to respond to an objection to a rule that is in effect constitutes a refusal to amend or repeal the rule. Failure of the agency to respond to an objection to a statement of estimated regulatory costs constitutes a refusal to prepare a corrected statement of estimated regulatory costs. If the agency refuses to meet the committee’s objection, the committee is required to file with the Department of State a notice of the objection for publication in the Florida Administrative Weekly. 120.545(2) - (7)

The committee is authorized to submit to the Senate President and House Speaker a recommendation that legislation be introduced to address the committee’s objection in the event that the agency fails to initiate administrative action consistent with the committee’s objection within 60 days after the objection, or then fails to proceed in good faith to complete such action. If the committee votes to recommend the introduction of legislation, the committee is required to certify that fact to the agency within 5 days. The committee may request that the agency temporarily suspend the rule or suspend the adoption of a proposed rule, pending consideration of proposed legislation during the next regular session of the Legislature. The agency must respond to the certification within 30 days, if headed by an individual, or within 45 days, if headed by a collegial body, by either temporarily suspending the rule or the adoption of a proposed rule, or notifying the committee that it refuses to do so. The agency’s failure to respond to the committee certification constitutes a refusal to suspend the rule or to suspend the adoption of the proposed rule. The committee is required to prepare proposed legislation to address the committee’s objection in accordance with the rules of the Senate and the House for prefiling and introduction in the next regular legislative session. The proposed legislation shall be presented to the Senate President and House Speaker with the committee recommendation. 120.545(8)

JAPC Responsibilities Under Miscellaneous Provisions of Chapter 120

The committee is authorized to notify the Department of State and the appropriate agency when a law is repealed that is implemented by an agency rule. 120.536(2)

An agency that is required to revise a statement of estimated regulatory costs must provide the statement to the committee at least 21 days before filing the rule for adoption. 120.541(1)(d)

A person subject to regulation by an agency rule may file a petition with the agency, with a copy to the committee, requesting a variance or waiver from the agency’s rule. A copy of the agency’s order granting or denying the petition shall be filed with the committee and shall contain a statement of the relevant facts and reasons supporting the agency’s action. 120.542

Any form used by an agency in its dealings with the public, along with any accompanying instructions, must be filed with the committee before it is used. 120.55(1)(a)

When the Department of State is in doubt whether a rule published in the official version of the Florida Administrative Code is still in full force and effect, the department is required to submit to the agency a request for a statement to that effect, and provide a copy to the committee. 120.555

The Division of Administrative Hearings is required to forward to the committee a copy of each petition seeking an administrative determination of the validity of a proposed or existing rule. A written notice from the chair of the committee stating that the committee will consider an objection to a challenged rule at its next scheduled meeting is evidence of good cause for a continuance of a scheduled hearing on the petition. The division is required to provide a copy of the administrative law judge’s final order to the committee. 120.56(1)

The final order of the administrative law judge on a petition challenging the validity of an agency statement not adopted as a rule pursuant to s. 120.54 is required to be transmitted to the committee by the division. 120.56(4)

A copy of each petition seeking a declaratory statement by an agency is required to be transmitted to the committee by the agency. 120.565

The Administration Commission is required to transmit to the committee a copy of a petition seeking an exemption from any requirement of chapter 120, a certified copy of the order granting or denying the petition, and a copy of any alternative procedures prescribed. 120.63

Not later than February 1 of each year, the Division of Administrative Hearings is required to issue a written report to the committee including: (1) a summary of the extent and effect of agencies’ use of administrative law judges, court reporters, and other personnel in proceedings under chapter 120; (2) recommendations for change or improvement in the APA or any agency’s practice or policy with respect thereto; (3) recommendations as to those types of cases or disputes which should be conducted under the summary hearing process described in s. 120.574; and (4) a report regarding each agency’s compliance with the filing requirement in s. 120.57(1)(m). 120.65(8)

By October 1st of each year, each agency head and the agency’s principal legal advisor, must file a certification with the committee indicating that they have reviewed the agency’s regulatory plan and the agency regularly reviews its rules during the identified period to determine if the

5 rules remain consistent with the agency’s rulemaking authority and laws implemented. 120.74(2)

Each agency must file a certification with the committee once it has published a notice of rule development and upon filing a deadline extension of regulatory plan certification per the requirements in s.120.74(4) and (5). 120.74(6)

An agency must deliver a written explanation for failing to comply with the requirements of s. 120.74(2)(a) or s. 120.74(5), within 15 days after written demand from the committee. 120.74(8)

TAB 2 (Status Report) TAB 3

RULES OF THE

JOINT

ADMINISTRATIVE

PROCEDURES

COMMITTEE

February 2017

TABLE OF CONTENTS

RULE ONE - RELATIONS WITH THE LEGISLATURE AND THE PUBLIC

1.1 Legislative Inquiries 1.2 Ombudsman 1.3 Open Meetings 1.4 Public Records

RULE TWO - OPERATION OF COMMITTEE RULES

2.1 Interpretation of Rules 2.2 Waiver of Rules 2.3 Amendment of Rules 2.4 Supplementary Rules of Order

RULE THREE - STAFF REVIEW OF AGENCY RULES

3.1 General Rule Review Procedures 3.2 Review Criteria 3.3 Agency Notification 3.4 Notification of Failure to Meet Statutory Requirements 3.5 Certification of Proposed Rules 3.6 Preparation of Proposed Objections

RULE FOUR - MEETINGS OF THE COMMITTEE

4.1 Notice 4.2 Basis of Objection 4.3 Objections to Rules

RULE FIVE - ACTION AFTER NO OBJECTION

5.1 Notification of Action 5.2 Reporting on Deferred Rules 5.3 Reconsideration of Rule

RULE SIX - ACTION FOLLOWING OBJECTION

6.1 Certification of Objection 6.2 Monitoring Agency Response 6.3 Failure to Correct a Proposed Rule 6.4 Failure to Correct an Existing Rule 6.5 Failure to Correct a Statement of Estimated Regulatory Costs 6.6 Change of Rule to Address Objection 6.7 Change of Statute Subsequent to Objection

RULE ONE RELATIONS WITH THE LEGISLATURE AND THE PUBLIC

1.1 Legislative Inquiries The Committee shall respond to legislative inquiries regarding agency action pursuant to the operation of the Administrative Procedure Act.

1.2 Ombudsman Committee members and staff receive complaints, comments, and questions from the general public relating to agency action pursuant to the operation of the Administrative Procedure Act. The staff shall not represent any person, but if informed of matters within the statutory charge of the Committee, the staff shall investigate and take such action as is required by Chapter 120, Florida Statutes, and these rules.

1.3 Open Meetings All meetings of the Committee shall be noticed and open to the public, subject only to the authority of the presiding chair to maintain order and decorum. Meetings of the Committee shall be conducted pursuant to Joint Rule 4.2(2)(b).

1.4 Public Records There shall be available for public inspection in Tallahassee the retained papers and records developed or received in the course of Committee business including: (a) Rule notices, proposed rules, and supporting documents filed with the Committee pursuant to the Administrative Procedure Act; (b) Copies of correspondence sent or received by the Committee or its staff relating to any proposed, existing, or emergency rule or rule filing; (c) Minutes and electronic recordings of all Committee meetings, with the records of attendance of members and records of any votes taken; and (d) Final objections voted and reports presented by the Committee and final staff reports and proposed objections submitted by Committee staff. Provided, however, that this rule shall not affect legislative records specifically protected by law or by rule of the Senate or House of Representatives.

RULE TWO OPERATION OF COMMITTEE RULES

2.1 Interpretation of Rules The presiding chair shall interpret all Committee rules and decide all questions of order, pursuant to Joint Rule 4.2(3) and (4).

2.2 Waiver of Rules Committee rules shall be waived or suspended by a majority vote of all members of the Committee of each house present and voting.

2.3 Amendment of Rules Proposed changes to these rules shall be transmitted to the Committee staff by any Committee member. The staff shall report to the Committee as soon as practicable thereafter. Consideration of such a report shall always be in order. All votes to amend the Committee rules shall be taken pursuant to Joint Rule 4.2(4).

2.4 Supplementary Rules of Order In the absence of an applicable Joint Rule or Committee Rule, the Rules of the house of which the Chair is a member shall apply.

RULE THREE STAFF REVIEW OF AGENCY RULES

3.1 General Rule Review Procedures The Committee staff shall review all proposed agency rules and accompanying information submitted to the Committee pursuant to the Administrative Procedure Act. An agency shall be requested to provide any required materials not filed. In deference to the quasi-judicial nature of rule challenge proceedings conducted by the Division of Administrative Hearings under section 120.56(2), the Committee shall temporarily suspend its review of the issues identified in a rule challenge upon notification that a petition seeking an administrative determination has been filed. Review of the challenged issues will be resumed after the administrative law judge’s order becomes final or when appellate review is complete.

3.2 Review Criteria Rules, supporting documents, and material incorporated by reference shall be evaluated under the criteria set forth in section 120.545, F.S., the procedural requirements of Chapter 120, F.S., and the relevant provisions of the agency’s enabling act. In determining whether or not to recommend that the Committee object to a rule, the staff shall give particular attention to prior objections of the Committee, orders of administrative law judges, Attorney General’s Opinions, and decisions of the courts of this state. The staff shall recommend that the Committee object to any rule which constitutes an invalid exercise of delegated legislative authority, as defined in subsection 120.52(8), F.S.

3.3 Agency Notification The Committee staff shall communicate to an agency questions and concerns regarding a rule before recommending that the Committee object to the rule. If such questions and concerns

14 are resolved through the rulemaking process or otherwise, the rule shall not be recommended for Committee objection.

3.4 Notification of Failure to Meet Statutory Requirements The Committee staff shall notify the Department of State of the failure of an agency to timely file required materials or notices with the Committee or to otherwise comply with any of the time limitations or other requirements for rulemaking established in the Administrative Procedure Act.

3.5 Certification of Proposed Rules After notification by an agency that it intends to file a proposed rule for adoption, the Committee staff shall certify that there were no material and timely written comments or written inquiries from the Committee, that the agency has responded in writing to all such correspondence, or that the agency has failed to respond to all such correspondence. The certification shall be filed with the Department of State.

3.6 Preparation of Proposed Objections For each rule to which an objection is recommended, the Committee staff shall prepare a brief report detailing the proposed objections with particularity. Copies of the report shall be sent to the agency, to the legislative committees with jurisdiction over the subject area of the rule, and to the Speaker of the House of Representatives and the President of the Senate.

RULE FOUR MEETINGS OF THE COMMITTEE

4.1 Notice The Committee staff shall inform an agency of the time and place of any Committee meeting at which agency action will be considered. Notice of the date, time, and place of each meeting and, if an objection to a rule is recommended, the name of the agency and number of the rule, shall be filed in accordance with applicable joint rules. If there is sufficient time following the call of the Chair, notice of Committee meetings shall be published in the Florida Administrative Register.

4.2 Basis of Objection Committee objections shall be based solely on the criteria contained in section 120.545, Florida Statutes. Rules are evaluated under existing statutory authority, and the merits of the agency action are irrelevant to the question of statutory authority.

4.3 Objections to Rules Motions on agency rule objections shall be stated in the affirmative as a motion to object to the rule, but the member making the motion may request a vote against it. A motion to defer consideration of the rule shall have precedence over a motion to object to a rule. 15

The Committee shall not object to a rule under challenge at the Division of Administrative Hearings or on appeal from an order issued in such proceedings. The finding of an administrative law judge that a petitioner has failed to demonstrate the invalidity of a rule shall not preclude subsequent objection by the Committee on the same grounds, but the staff shall give due consideration to the analysis and order of the administrative law judge before recommending Committee objection.

RULE FIVE COMMITTEE ACTION AFTER NO OBJECTION

5.1 Notification of Action The staff shall notify an agency when the Committee votes to defer consideration of one of the agency’s rules. If the Committee voted to defer consideration of the rule to allow its amendment by the agency or to await the enactment of law authorizing the rule, the notice shall also advise the agency of this reason for the Committee action. The Committee shall concurrently provide notice of the Committee action to the Speaker of the House of Representatives, to the President of the Senate, and to the legislative standing committees that have jurisdiction over the subject areas addressed in the rule.

5.2 Reporting on Deferred Rules When the Committee votes to defer consideration of a rule, the staff shall place the rule on the agenda of each succeeding meeting until the Chair directs otherwise or until the Committee votes on the proposed objection to the rule. If the Committee voted to defer consideration of the rule to allow its amendment by the agency or to await the enactment of law authorizing the rule, the staff shall report on the status of these actions.

5.3 Reconsideration of Rule The Committee shall have authority to consider any rule for objection at any time notwithstanding the fact that it may have earlier considered objection to the same rule and the motion to object failed or it may have earlier voted to defer consideration of the rule. A vote to object to a rule may also be reconsidered at any time. A motion to reconsider an objection to a rule must be made by a member voting in favor of the objection.

RULE SIX COMMITTEE ACTION FOLLOWING OBJECTION

6.1 Certification of Objection Not later than 5 days after a Committee meeting the staff shall certify that the Committee has objected to any proposed, existing, or emergency rule to the agency whose rule has been examined, and include with that certification a statement detailing the Committee’s objections 16 with particularity. The Committee shall concurrently provide notice of the objection and a copy of the statement to the Speaker of the House of Representatives, to the President of the Senate, and to the legislative standing committees that have jurisdiction over the subject areas addressed in the rule.

6.2 Monitoring Agency Response The Committee staff shall continue to monitor each rule to which objection has been voted and which has not been corrected, and shall periodically report the status of the rule to the members of the Committee.

6.3 Failure to Correct a Proposed Rule If within 30 days of receipt of the objection certification, or within 45 days if the agency is headed by a collegial body, an agency notifies the Committee that it refuses to modify or withdraw a proposed rule to which objection has been voted, as provided in paragraph 120.545(3)(a), F.S., the Committee shall send notice to the Department of State. The notice shall indicate the date the Committee objected to the rule and shall have a copy of the objection report attached for publication in the Florida Administrative Register. The Committee shall request that the published objection report be referenced in the history note to the rule in the Florida Administrative Code. If within 30 days of receipt of the objection certification, or within 45 days if the agency is headed by a collegial body, an agency fails either to modify or withdraw the proposed rule, or alternatively to notify the Committee that it refuses to modify or withdraw the rule, the Committee shall request the Department of State to publish a withdrawal notice and strike the rule from the department’s files, as provided by subsection 120.545(4), F.S.

6.4 Failure to Correct an Existing Rule If an agency either fails to respond to the objection or alternatively notifies the Committee that it refuses to amend or repeal an existing rule to which objection has been voted within 30 days of receipt of the objection certification, or within 45 days if the agency is headed by a collegial body, as provided in paragraph 120.545(3)(b), F.S., the Committee shall send notice to the Department of State. The notice shall indicate the date the Committee objected to the rule and shall have a copy of the objection report attached for publication in the Florida Administrative Register. The Committee shall request that the published objection report be referenced in the history note to the rule in the Florida Administrative Code.

6.5 Failure to Correct a Statement of Estimated Regulatory Costs If an agency either fails to respond to the objection or alternatively notifies the Committee that it refuses to prepare a corrected Statement of Estimated Regulatory Costs within 30 days of receipt of the objection certification, or within 45 days if the agency is headed by a collegial body, as provided in paragraph 120.545(3)(c), F.S., the Committee shall send notice to the Department of State. The notice shall indicate the date the Committee objected to the rule and shall have a copy of the objection report attached for publication in the Florida Administrative Register. The Committee shall request that the published objection report be referenced in the history note to the rule in the Florida Administrative Code. 17

6.6 Change of Rule to Address Objection The staff shall report the modification, withdrawal, amendment or repeal of a rule to address a Committee objection at the next public meeting of the Committee. If the agency initially failed to respond or otherwise refused to correct the rule and the history note to the rule in the Florida Administrative Code references the Committee objection, as provided in subsection 120.545(7), F.S., the Committee shall also notify the Department of State that the rule has now been corrected. The notice shall indicate the date that the rule was repealed or amended and shall request that the history note reflect that the rule was corrected to address the Committee objection.

6.7 Change of Statute Subsequent to Objection If a statutory change is made which eliminates the basis for an objection and the history note to the rule in the Florida Administrative Code references the Committee objection, the Committee shall notify the Department of State. The notice shall indicate the date that the statute was amended and shall request that the history note reflect that the objection is no longer valid.

TAB 4 INDEX TO TAB 4

Page 20 Section 285.710, Fla. Stat.: Compact Authorization [see 285.710(7) and (13)].

Page 23 Section 849.086, Fla. Stat.: Cardrooms authorized [see 849.086(1)(b)].

Page 31 Division of Pari-mutuel Wagering Rule 61D-11.001, F.A.C.: Definitions.

Page 33 Division of Pari-mutuel Wagering Rule 61D-11.002, F.A.C.: Cardroom Games.

Page 34 Letter dated April 25, 2011, from Milton Chapman, Director, Division of Pari- mutuel Wagering to Mr. Dennis Hone, Cardroom Manager, Ebro Greyhound Park.

Page 35 Petition Contesting Final Agency Action dated May 16, 2011, filed on behalf of Ebro Greyhound Park.

Page 42 Letter dated August 4, 2011, from Milton Chapman, Director, Division of Pari- mutuel Wagering to Mr. Dennis Hone, Cardroom Manager, Ebro Greyhound Park.

Page 43 Letter dated June 24, 2015, from the Seminole Tribe of Florida to Governor Scott.

Page 48 Final Order in Dania Entertainment Center, LLC, et al. v. Department of Business and Professional Regulation, Division of Pari-mutuel Wagering, DOAH Case Nos. 15-7010RP-7016RP and 15-7022RP, dated August 26, 2016.

Page 100 Recommended Order in Department of Business and Professional Regulation, Division of Pari-mutuel Wagering v. Jacksonville Kennel Club, Inc., DOAH Case No. 16-1009, dated August 1, 2016.

Page 154 Final Order in Department of Business and Professional Regulation, Division of Pari-mutuel Wagering v. Jacksonville Kennel Club, Inc., DOAH Case No.: 16- 1009, DBPR Case No. 2015-053213, dated October 26, 2016.

Page 162 Opinion on the Merits, Seminole Tribe of Florida v. State of Florida, Consolidated Case No. 4:15cv516-RH/CAS, dated November 9, 2016, U.S. District Court, Northern District of Florida.

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The 2016 Florida Statutes

Title XIX Chapter 285 View Entire Chapter PUBLIC BUSINESS INDIAN RESERVATIONS AND AFFAIRS 285.710 Compact authorization.— (1) As used in this section, the term: (a) "Compact" means the Gaming Compact between the Seminole Tribe of Florida and the State of Florida, executed on April 7, 2010. (b) "Covered games" means the games authorized for the Seminole Tribe of Florida under the compact. (c) "Documents" means books, records, electronic, magnetic and computer media documents, and other writings and materials, copies thereof, and information contained therein. (d) "Indian Gaming Regulatory Act" or "IGRA" means the Indian Gaming Regulatory Act, Pub. L. No. 100-497, Oct. 17, 1988, 102 Stat. 2467, codified at 25 U.S.C. ss. 2701 et seq., and 18 U.S.C. ss. 1166- 1168. (e) "State" means the State of Florida. (f) "State compliance agency" means the Division of Pari-mutuel Wagering of the Department of Business and Professional Regulation which is designated as the state agency having the authority to carry out the state's oversight responsibilities under the compact. (g) "Tribe" means the Seminole Tribe of Florida or any affiliate thereof conducting activities pursuant to the compact under the authority of the Seminole Tribe of Florida. (2)(a) The agreement executed by the Governor and the Tribe on November 14, 2007, published in the Federal Register on January 7, 2008, and subsequently invalidated by the Florida Supreme Court in the case of Florida House of Representatives, et al. v. The Honorable Charles J. Crist, No. SC07-2154, (2008), is not ratified or approved by the Legislature, is void, and is not in effect. (b) The agreement executed by the Governor and the Tribe on August 28, 2009, and August 31, 2009, respectively, and transmitted to the President of the Senate and the Speaker of the House of Representatives, is not ratified or approved by the Legislature, is void, and is not in effect. (3) The Gaming Compact between the Seminole Tribe of Florida and the State of Florida, executed by the Governor and the Tribe on April 7, 2010, is ratified and approved. The Governor shall cooperate with the Tribe in seeking approval of the compact from the United States Secretary of the Interior. (4) The Governor shall preserve all documents, if any, which relate to the intent or interpretation of the compact and maintain such documents for at least the term of the compact. (5) If any provision of the compact relating to covered games, revenue-sharing payments, suspension or reduction in payments, or exclusivity is held by a court of competent jurisdiction or by the Department of the Interior to be invalid, the compact is void. (6) If a subsequent change to the Indian Gaming Regulatory Act, or to an implementing regulation thereof, mandates the retroactive application of such change without the respective consent of the

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state or Tribe, the compact is void if the change materially alters any provision in the compact relating to covered games, revenue-sharing payments, suspension or reduction of payments, or exclusivity. (7) The Division of Pari-mutuel Wagering of the Department of Business and Professional Regulation is designated as the state compliance agency having the authority to carry out the state's oversight responsibilities under the compact authorized by this section. (8)(a) The Governor is authorized to execute an agreement on behalf of the state with the Indian tribes in this state, acting on a government-to-government basis, to develop and implement a fair and workable arrangement to apply state taxes on persons and transactions on Indian lands. Such agreements shall address the imposition of specific taxes, including sales taxes and exemptions from those taxes. (b) The agreement shall address the Tribe's collection and remittance of sales taxes imposed by chapter 212 to the Department of Revenue. The sales taxes collected and remitted by the Tribe shall be based on all sales to non-tribal members, except those non-tribal members who hold valid exemption certificates issued by the Department of Revenue, exempting the sales from taxes imposed by chapter 212. (c) The agreement shall require the Tribe to register with the Department of Revenue and remit to the Department of Revenue the taxes collected. (d) The agreement shall require the Tribe to retain for at least a period of 5 years records of all sales to non-tribal members which are subject to taxation under chapter 212. The agreement shall permit the Department of Revenue to conduct an audit not more often than annually in order to verify such collections. The agreement shall require the Tribe to provide reasonable access during normal operating hours to records of transactions subject to the taxes collected. (e) The agreement shall provide a procedure for the resolution of any disputes about the amounts collected pursuant to the agreement. For purposes of the agreement for the collection and remittance of sales taxes, the agreement must provide that the Tribe agrees to waive its immunity, except that the state may seek monetary damages limited to the amount of taxes owed. (f) An agreement executed by the Governor pursuant to the authority granted in this section shall not take effect unless ratified by the Legislature. (9) The moneys paid by the Tribe to the state for the benefit of exclusivity under the compact ratified by this section shall be deposited into the General Revenue Fund. Three percent of the amount paid by the Tribe to the state shall be designated as the local government share and shall be distributed as provided in subsections (10) and (11). (10) The calculations necessary to determine the local government share distributions shall be made by the state compliance agency based upon the net win per facility as provided by the Tribe. The local government share attributable to each casino shall be distributed as follows: (a) Broward County shall receive 22.5 percent, the City of Coconut Creek shall receive 55 percent, the City of Coral Springs shall receive 12 percent, the City of Margate shall receive 8.5 percent, and the City of Parkland shall receive 2 percent of the local government share derived from the Seminole Indian Casino-Coconut Creek. (b) Broward County shall receive 25 percent, the City of Hollywood shall receive 55 percent, the Town of Davie shall receive 10 percent, and the City of Dania Beach shall receive 10 percent of the local government share derived from the Seminole Indian Casino-Hollywood. (c) Broward County shall receive 25 percent, the City of Hollywood shall receive 55 percent, the Town of Davie shall receive 10 percent, and the City of Dania Beach shall receive 10 percent of the local government share derived from the Seminole Hard Rock Hotel a Casino-Hollywood.

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(d) Collier County shall receive 100 percent of the local government share derived from the Seminole Indian Casino-lmmokalee. (e) Glades County shall receive 100 percent of the local government share derived from the Seminole Indian Casino-Brighton. (f) Hendry County shall receive 100 percent of the local government share derived from the Seminole Indian Casino-Big Cypress. (g) Hillsborough County shall receive 100 percent of the local government share derived from the Seminole Hard Rock Hotel & Casino-Tampa. (11) Upon receipt of the annual audited revenue figures from the Tribe and completion of the calculations as provided in subsection (10), the state compliance agency shall certify the results to the Chief Financial Officer and shall request the distributions to be paid from the General Revenue Fund within 30 days after authorization of nonoperating budget authority pursuant to s. 216.181(12). (12) Any moneys remitted by the Tribe before the effective date of the compact shall be deposited into the General Revenue Fund and are released to the state without further obligation or encumbrance. The Legislature further finds that acceptance and appropriation of such funds does not legitimize, validate, or otherwise ratify any previously proposed compact or the operation of class III games by the Tribe for any period prior to the effective date of the compact. (13) For the purpose of satisfying the requirement in 25 U.S.C. s. 2710(d)(1)(B) that the gaming activities authorized under an Indian gaming compact must be permitted in the state for any purpose by any person, organization, or entity, the following class III games or other games specified in this section are hereby authorized to be conducted by the Tribe pursuant to the compact: (a) Slot machines, as defined in s. 551.102(8). (b) Banking or banked card games, including baccarat, chemin de fer, and blackjack or, 21 at the tribal facilities in Broward County, Collier County, and Hillsborough County. (c) Raffles and drawings. (14) Notwithstanding any other provision of state law, it is not a crime for a person to participate in the games specified in subsection (13) at a tribal facility operating under the compact entered into pursuant to this section. History.—s. 1, ch. 2009-170; s. 1, ch. 2010-29; s. 12, ch. 2011-4.

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Select Year: 2016 V Go

The 2016 Florida Statutes

Title XLVI Chapter 849 View Entire Chapter CRIMES GAMBLING 849.086 Cardrooms authorized.- (1) LEGISLATIVE INTENT.-lt is the intent of the Legislature to provide additional entertainment choices for the residents of and visitors to the state, promote tourism in the state, and provide additional state revenues through the authorization of the playing of certain games in the state at facilities known as cardrooms which are to be located at licensed pari-mutuel facilities. To ensure the public confidence in the integrity of authorized cardroom operations, this act is designed to strictly regulate the facilities, persons, and procedures related to cardroom operations. Furthermore, the Legislature finds that authorized games as herein defined are considered to be pari-mutuel style games and not casino gaming because the participants play against each other instead of against the house. (2) DEFINITIONS.-As used in this section: (a) "Authorized game" means a game or series of games of poker or dominoes which are played in a nonbanking manner. (b) "Banking game" means a game in which the house is a participant in the game, taking on players, paying winners, and collecting from losers or in which the cardroom establishes a bank against which participants play. (c) "Cardroom" means a facility where authorized games are played for money or anything of value and to which the public is invited to participate in such games and charged a fee for participation by the operator of such facility. Authorized games and cardrooms do not constitute casino gaming operations. (d) "Cardroom management company" means any individual not an employee of the cardroom operator, any proprietorship, partnership, corporation, or other entity that enters into an agreement with a cardroom operator to manage, operate, or otherwise control the daily operation of a cardroom. (e) "Cardroom distributor" means any business that distributes cardroom paraphernalia such as card tables, betting chips, chip holders, dominoes, dominoes tables, drop boxes, banking supplies, playing cards, card shufflers, and other associated equipment to authorized cardrooms. (f) "Cardroom operator" means a licensed pari-mutuel permitholder which holds a valid permit and license issued by the division pursuant to chapter 550 and which also holds a valid cardroom license issued by the division pursuant to this section which authorizes such person to operate a cardroom and to conduct authorized games in such cardroom. (g) "Division" means the Division of Pari-mutuel Wagering of the Department of Business and Professional Regulation. (h) "Dominoes" means a game of dominoes typically played with a set of 28 flat rectangular blocks, called "bones," which are marked on one side and divided into two equal parts, with zero to six dots, called "pips," in each part. The term also includes larger sets of blocks that contain a correspondingly higher number of pips. The term also means the set of blocks used to play the game.

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(i) "Gross receipts" means the total amount of money received by a cardroom from any person for participation in authorized games. (j) "House" means the cardroom operator and all employees of the cardroom operator. (k) "Net proceeds" means the total amount of gross receipts received by a cardroom operator from cardroom operations less direct operating expenses related to cardroom operations, including labor costs, admission taxes only if a separate admission fee is charged for entry to the cardroom facility, gross receipts taxes imposed on cardroom operators by this section, the annual cardroom license fees imposed by this section on each table operated at a cardroom, and reasonable promotional costs excluding officer and director compensation, interest on capital debt, legal fees, real estate taxes, bad debts, contributions or donations, or overhead and depreciation expenses not directly related to the operation of the cardrooms. (I) "Rake" means a set fee or percentage of the pot assessed by a cardroom operator for providing the services of a dealer, table, or location for playing the authorized game. (m) "Tournament" means a series of games that have more than one betting round involving one or more tables and where the winners or others receive a prize or cash award. (3) CARDROOM AUTHORIZED.—Notwithstanding any other provision of law, it is not a crime for a person to participate in an authorized game at a licensed cardroom or to operate a cardroom described in this section if such game and cardroom operation are conducted strictly in accordance with the provisions of this section. (4) AUTHORITY OF DIVISION.-The Division of Pari-mutuel Wagering of the Department of Business and Professional Regulation shall administer this section and regulate the operation of cardrooms under this section and the rules adopted pursuant thereto, and is hereby authorized to: (a) Adopt rules, including, but not limited to: the issuance of cardroom and employee licenses for cardroom operations; the operation of a cardroom; recordkeeping and reporting requirements; and the collection of all fees and taxes imposed by this section. (b) Conduct investigations and monitor the operation of cardrooms and the playing of authorized games therein. (c) Review the books, accounts, and records of any current or former cardroom operator. (d) Suspend or revoke any license or permit, after hearing, for any violation of the provisions of this section or the administrative rules adopted pursuant thereto. (e) Take testimony, issue summons and subpoenas for any witness, and issue subpoenas duces tecum in connection with any matter within its jurisdiction. (f) Monitor and ensure the proper collection of taxes and fees imposed by this section. Permitholder internal controls are mandated to ensure no compromise of state funds. To that end, a roaming division auditor will monitor and verify the cash flow and accounting of cardroom revenue for any given operating day. (5) LICENSE REQUIRED; APPLICATION; FEES.-No person may operate a cardroom in this state unless such person holds a valid cardroom license issued pursuant to this section. (a) Only those persons holding a valid cardroom license issued by the division may operate a cardroom. A cardroom license may only be issued to a licensed pari-mutuel permitholder and an authorized cardroom may only be operated at the same facility at which the permitholder is authorized under its valid pari-mutuel wagering permit to conduct pari-mutuel wagering activities. An initial cardroom license shall be issued to a pari-mutuel permitholder only after its facilities are in place and after it conducts its first day of live racing or games.

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(b) After the initial cardroom license is granted, the application for the annual license renewal shall be made in conjunction with the applicant's annual application for its pari-mutuel license. If a permitholder has operated a cardroom during any of the 3 previous fiscal years and fails to include a renewal request for the operation of the cardroom in its annual application for license renewal, the permitholder may amend its annual application to include operation of the cardroom. In order for a cardroom license to be renewed the applicant must have requested, as part of its pari-mutuel annual license application, to conduct at least 90 percent of the total number of live performances conducted by such permitholder during either the state fiscal year in which its initial cardroom license was issued or the state fiscal year immediately prior thereto if the permitholder ran at least a full schedule of live racing or games in the prior year. If the application is for a harness permitholder cardroom, the applicant must have requested authorization to conduct a minimum of 140 live performances during the state fiscal year immediately prior thereto. If more than one permitholder is operating at a facility, each permitholder must have applied for a license to conduct a full schedule of live racing. (c) Persons seeking a license or a renewal thereof to operate a cardroom shall make application on forms prescribed by the division. Applications for cardroom licenses shall contain all of the information the division, by rule, may determine is required to ensure eligibility. (d) The annual cardroom license fee for each facility shall be $1,000 for each table to be operated at the cardroom. The license fee shall be deposited by the division with the Chief Financial Officer to the credit of the Pari-mutuel Wagering Trust Fund. (6) BUSINESS AND EMPLOYEE OCCUPATIONAL LICENSE REQUIRED; APPLICATION; FEES.- (a) A person employed or otherwise working in a cardroom as a cardroom manager, floor supervisor, pit boss, dealer, or any other activity related to cardroom operations while the facility is conducting card playing or games of dominoes must hold a valid cardroom employee occupational license issued by the division. Food service, maintenance, and security employees with a current pari-mutuel occupational license and a current background check will not be required to have a cardroom employee occupational license. (b) Any cardroom management company or cardroom distributor associated with cardroom operations must hold a valid cardroom business occupational license issued by the division. (c) No licensed cardroom operator may employ or allow to work in a cardroom any person unless such person holds a valid occupational license. No licensed cardroom operator may contract, or otherwise do business with, a business required to hold a valid cardroom business occupational license, unless the business holds such a valid license. (d) The division shall establish, by rule, a schedule for the renewal of cardroom occupational licenses. Cardroom occupational licenses are not transferable. (e) Persons seeking cardroom occupational licenses, or renewal thereof, shall make application on forms prescribed by the division. Applications for cardroom occupational licenses shall contain all of the information the division, by rule, may determine is required to ensure eligibility. (f) The division shall adopt rules regarding cardroom occupational licenses. The provisions specified in s. 550.105(4), (5), (6), (7), (8), and (10) relating to licensure shall be applicable to cardroom occupational licenses. (g) The division may deny, declare ineligible, or revoke any cardroom occupational license if the applicant or holder thereof has been found guilty or had adjudication withheld in this state or any other state, or under the laws of the United States of a felony or misdemeanor involving forgery, larceny, extortion, conspiracy to defraud, or filing false reports to a government agency, racing or gaming commission or authority. 25 http://www.leg.state fl us/Statutes/index.cfm?App mode=Displav Statute&Searc. 1/31/2017 Statutes & Constitution :View Statutes : Online Sunshine Page 4 of 8

(h) Fingerprints for all cardroom occupational license applications shall be taken in a manner approved by the division and then shall be submitted to the Florida Department of Law Enforcement and the Federal Bureau of Investigation for a criminal records check upon initial application and at least every 5 years thereafter. The division may by rule require an annual record check of all renewal applications for a cardroom occupational license. The cost of processing fingerprints and conducting a record check shall be borne by the applicant. (i) The cardroom employee occupational license fee shall not exceed $50 for any 12-month period. The cardroom business occupational license fee shall not exceed $250 for any 12-month period. (7) CONDITIONS FOR OPERATING A CARDROOM. - (a) A cardroom may be operated only at the location specified on the cardroom license issued by the division, and such location may only be the location at which the pari-mutuel permitholder is authorized to conduct pari-mutuel wagering activities pursuant to such permitholder's valid pari-mutuel permit or as otherwise authorized by law. Cardroom operations may not be allowed beyond the hours provided in paragraph (b) regardless of the number of cardroom licenses issued for permitholders operating at the pari-mutuel facility. (b) Any cardroom operator may operate a cardroom at the pari-mutuel facility daily throughout the year, if the permitholder meets the requirements under paragraph (5)(b). The cardroom may be open a cumulative amount of 18 hours per day on Monday through Friday and 24 hours per day on Saturday and Sunday and on the holidays specified in s. 110.117(1). (c) A cardroom operator must at all times employ and provide a nonplaying dealer for each table on which authorized card games which traditionally use a dealer are conducted at the cardroom. Such dealers may not have a participatory interest in any game other than the dealing of cards and may not have an interest in the outcome of the game. The providing of such dealers by a licensee does not constitute the conducting of a banking game by the cardroom operator. (d) A cardroom operator may award giveaways, jackpots, and prizes to a player who holds certain combinations of cards specified by the cardroom operator. (e) Each cardroom operator shall conspicuously post upon the premises of the cardroom a notice which contains a copy of the cardroom license; a list of authorized games offered by the cardroom; the wagering limits imposed by the house, if any; any additional house rules regarding operation of the cardroom or the playing of any game; and all costs to players to participate, including any rake by the house. In addition, each cardroom operator shall post at each table a notice of the minimum and maximum bets authorized at such table and the fee for participation in the game conducted. (f) The cardroom facility is subject to inspection by the division or any law enforcement agency during the licensee's regular business hours. The inspection must specifically include the permitholder internal control procedures approved by the division. (g) A cardroom operator may refuse entry to or refuse to allow any person who is objectionable, undesirable, or disruptive to play, but such refusal may not be on the basis of race, creed, color, religion, gender, national origin, marital status, physical handicap, or age, except as provided in this section. (8) METHOD OF WAGERS; LIMITATION.- (a) No wagering may be conducted using money or other negotiable currency. Games may only be played utilizing a wagering system whereby all players' money is first converted by the house to tokens or chips which shall be used for wagering only at that specific cardroom. (b) The cardroom operator may limit the amount wagered in any game or series of games.

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(c) A tournament shall consist of a series of games. The entry fee for a tournament may be set by the cardroom operator. Tournaments may be played only with tournament chips that are provided to all participants in exchange for an entry fee and any subsequent re-buys. All players must receive an equal number of tournament chips for their entry fee. Tournament chips have no cash value and represent tournament points only. There is no limitation on the number of tournament chips that may be used for a bet except as otherwise determined by the cardroom operator. Tournament chips may never be redeemed for cash or for any other thing of value. The distribution of prizes and cash awards must be determined by the cardroom operator before entry fees are accepted. For purposes of tournament play only, the term "gross receipts" means the total amount received by the cardroom operator for all entry fees, player re-buys, and fees for participating in the tournament less the total amount paid to the winners or others as prizes. (9) BOND REQUIRED.-The holder of a cardroom license shall be financially and otherwise responsible for the operation of the cardroom and for the conduct of any manager, dealer, or other employee involved in the operation of the cardroom. Prior to the issuance of a cardroom license, each applicant for such license shall provide evidence of a surety bond in the amount of $50,000, payable to the state, furnished by a corporate surety authorized to do business in the state or evidence that the licensee's pari-mutuel bond required by s. 550.125 has been expanded to include the applicant's cardroom operation. The bond shall guarantee that the cardroom operator will redeem, for cash, all tokens or chips used in games. Such bond shall be kept in full force and effect by the operator during the term of the license. (10) FEE FOR PARTICIPATION.—The cardroom operator may charge a fee for the right to participate in games conducted at the cardroom. Such fee may be either a flat fee or hourly rate for the use of a seat at a table or a rake subject to the posted maximum amount but may not be based on the amount won by players. The rake-off, if any, must be made in an obvious manner and placed in a designated rake area which is clearly visible to all players. Notice of the amount of the participation fee charged shall be posted in a conspicuous place in the cardroom and at each table at all times. (11) RECORDS AND REPORTS.- (a) Each licensee operating a cardroom shall keep and maintain permanent daily records of its cardroom operation and shall maintain such records for a period of not less than 3 years. These records shall include all financial transactions and contain sufficient detail to determine compliance with the requirements of this section. All records shall be available for audit and inspection by the division or other law enforcement agencies during the licensee's regular business hours. The information required in such records shall be determined by division rule. (b) Each licensee operating a cardroom shall file with the division a report containing the required records of such cardroom operation. Such report shall be filed monthly by licensees. The required reports shall be submitted on forms prescribed by the division and shall be due at the same time as the monthly pari-mutuel reports are due to the division, and such reports shall contain any additional information deemed necessary by the division, and the reports shall be deemed public records once filed. (12) PROHIBITED ACTIVITIES.— (a) No person licensed to operate a cardroom may conduct any banking game or any game not specifically authorized by this section. (b) No person under 18 years of age may be permitted to hold a cardroom or employee license, or engage in any game conducted therein.

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(c) No electronic or mechanical devices, except mechanical card shufflers, may be used to conduct any authorized game in a cardroom. (d) No cards, game components, or game implements may be used in playing an authorized game unless such has been furnished or provided to the players by the cardroom operator. (13) TAXES AND OTHER PAYMENTS.- (a) Each cardroom operator shall pay a tax to the state of 10 percent of the cardroom operation's monthly gross receipts. (b) An admission tax equal to 15 percent of the admission charge for entrance to the licensee's cardroom facility, or 10 cents, whichever is greater, is imposed on each person entering the cardroom. This admission tax shall apply only if a separate admission fee is charged for entry to the cardroom facility. If a single admission fee is charged which authorizes entry to both or either the pari-mutuel facility and the cardroom facility, the admission tax shall be payable only once and shall be payable pursuant to chapter 550. The cardroom licensee shall be responsible for collecting the admission tax. An admission tax is imposed on any free passes or complimentary cards issued to guests by licensees in an amount equal to the tax imposed on the regular and usual admission charge for entrance to the licensee's cardroom facility. A cardroom licensee may issue tax-free passes to its officers, officials, and employees or other persons actually engaged in working at the cardroom, including accredited press representatives such as reporters and editors, and may also issue tax-free passes to other cardroom licensees for the use of their officers and officials. The licensee shall file with the division a list of all persons to whom tax-free passes are issued. (c) Payment of the admission tax and gross receipts tax imposed by this section shall be paid to the division. The division shall deposit these sums with the Chief Financial Officer, one-half being credited to the Pari-mutuel Wagering Trust Fund and one-half being credited to the General Revenue Fund. The cardroom licensee shall remit to the division payment for the admission tax, the gross receipts tax, and the licensee fees. Such payments shall be remitted to the division on the fifth day of each calendar month for taxes and fees imposed for the preceding month's cardroom activities. Licensees shall file a report under oath by the fifth day of each calendar month for all taxes remitted during the preceding calendar month. Such report shall, under oath, indicate the total of all admissions, the cardroom activities for the preceding calendar month, and such other information as may be prescribed by the division. (d)1. Each greyhound and jai alai permitholder that operates a cardroom facility shall use at least 4 percent of such permitholder's cardroom monthly gross receipts to supplement greyhound purses or jai alai prize money, respectively, during the permitholder's next ensuing pari-mutuel meet. 2. Each thoroughbred and harness horse racing permitholder that operates a cardroom facility shall use at least 50 percent of such permitholder's cardroom monthly net proceeds as follows: 47 percent to supplement purses and 3 percent to supplement breeders' awards during the permitholder's next ensuing racing meet. 3. No cardroom license or renewal thereof shall be issued to an applicant holding a permit under chapter 550 to conduct pari-mutuel wagering meets of quarter horse racing unless the applicant has on file with the division a binding written agreement between the applicant and the Florida Quarter Horse Racing Association or the association representing a majority of the horse owners and trainers at the applicant's eligible facility, governing the payment of purses on live quarter horse races conducted at the licensee's pari-mutuel facility. The agreement governing purses may direct the payment of such purses from revenues generated by any wagering or gaming the applicant is authorized to conduct under Florida law. All purses shall be subject to the terms of chapter 550. 28 htto://www.lea state.fl us/Statutes/index.cfm?App_mode=Display_Statute&Searc... 1/31/2017 Statutes & Constitution :View Statutes • Online Sunshine Page 7 of 8

(e) The failure of any licensee to make payments as prescribed in paragraph (c) is a violation of this section, and the licensee may be subjected by the division to a civil penalty of up to $1,000 for each day the tax payment is not remitted. All penalties imposed and collected shall be deposited in the General Revenue Fund. If a licensee fails to pay penalties imposed by order of the division under this subsection, the division may suspend or revoke the license of the cardroom operator or deny issuance of any further license to the cardroom operator. (f) The cardroom shall be deemed an accessory use to a licensed pari-mutuel operation and, except as provided in chapter 550, a municipality, county, or political subdivision may not assess or collect any additional license tax, sales tax, or excise tax on such cardroom operation. (g) All of the moneys deposited in the Pari-mutuel Wagering Trust Fund, except as set forth in paragraph (h), shall be utilized and distributed in the manner specified in s. 550.135(1) and (2). However, cardroom tax revenues shall be kept separate from pari-mutuel tax revenues and shall not be used for making the disbursement to counties provided in former s. 550.135(1). (h) One-quarter of the moneys deposited into the Pari-mutuel Wagering Trust Fund pursuant to paragraph (g) shall, by October 1 of each year, be distributed to the local government that approved the cardroom under subsection (16); however, if two or more pari-mutuel racetracks are located within the same incorporated municipality, the cardroom funds shall be distributed to the municipality. If a pari- mutuel facility is situated in such a manner that it is located in more than one county, the site of the cardroom facility shall determine the location for purposes of disbursement of tax revenues under this paragraph. The division shall, by September 1 of each year, determine: the amount of taxes deposited into the Pari-mutuel Wagering Trust Fund pursuant to this section from each cardroom licensee; the location by county of each cardroom; whether the cardroom is located in the unincorporated area of the county or within an incorporated municipality; and, the total amount to be distributed to each eligible county and municipality. (14) SUSPENSION, REVOCATION, OR DENIAL OF LICENSE; FINE.- (a) The division may deny a license or the renewal thereof, or may suspend or revoke any license, when the applicant has: violated or failed to comply with the provisions of this section or any rules adopted pursuant thereto; knowingly caused, aided, abetted, or conspired with another to cause any person to violate this section or any rules adopted pursuant thereto; or obtained a license or permit by fraud, misrepresentation, or concealment; or if the holder of such license or permit is no longer eligible under this section. (b) If a pari-mutuel permitholder's pari-mutuel permit or license is suspended or revoked by the division pursuant to chapter 550, the division may, but is not required to, suspend or revoke such permitholder's cardroom license. If a cardroom operator's license is suspended or revoked pursuant to this section, the division may, but is not required to, suspend or revoke such licensee's pari-mutuel permit or license. (c) Notwithstanding any other provision of this section, the division may impose an administrative fine not to exceed $1,000 for each violation against any person who has violated or failed to comply with the provisions of this section or any rules adopted pursuant thereto. (15) CRIMINAL PENALTY; INJUNCTION.- (a)1. Any person who operates a cardroom without a valid license issued as provided in this section commits a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084. 2. Any licensee or permitholder who violates any provision of this section commits a misdemeanor of the first degree, punishable as provided in s. 775.082 or s. 775.083. Any licensee or permitholder who commits a second or subsequent violation of the same paragraph or subsection within a period of 3 years 29 htto.//www lea state fl us/Statutes/index.cfm?App_mode=Display_Statute&Searc .. 1/31/2017 Statutes & Constitution View Statutes . Online Sunshine Page 8 of 8

from the date of a prior conviction for a violation of such paragraph or subsection commits a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084. (b) The division, any state attorney, the statewide prosecutor, or the Attorney General may apply for a temporary or permanent injunction restraining further violation of this section, and such injunction shall issue without bond. (16) LOCAL GOVERNMENT APPROVAL.-The Division of Pari-mutuel Wagering shall not issue any initial license under this section except upon proof in such form as the division may prescribe that the local government where the applicant for such license desires to conduct cardroom gaming has voted to approve such activity by a majority vote of the governing body of the municipality or the governing body of the county if the facility is not located in a municipality. (17) CHANGE OF LOCATION; REFERENDUM.- (a) Notwithstanding any provisions of this section, no cardroom gaming license issued under this section shall be transferred, or reissued when such reissuance is in the nature of a transfer, so as to permit or authorize a licensee to change the location of the cardroom except upon proof in such form as the division may prescribe that a referendum election has been held: 1. If the proposed new location is within the same county as the already licensed location, in the county where the licensee desires to conduct cardroom gaming and that a majority of the electors voting on the question in such election voted in favor of the transfer of such license. However, the division shall transfer, without requirement of a referendum election, the cardroom license of any permitholder that relocated its permit pursuant to s. 550.0555. 2. If the proposed new location is not within the same county as the already licensed location, in the county where the licensee desires to conduct cardroom gaming and that a majority of the electors voting on that question in each such election voted in favor of the transfer of such license. (b) The expense of each referendum held under the provisions of this subsection shall be borne by the licensee requesting the transfer. History.—s. 20, ch. 96-364; s. 26, ch. 2001-64; s. 1913, ch. 2003-261; s. 4, ch. 2003-295; s. 4, ch. 2005-288; s. 1, ch. 2007- 130; s. 1, ch. 2007-163; s. 24, ch. 2009-170; ss. 4, 5, ch. 2010-29.

30 httD://www.lea,state.fl us/Statutes/index cfm?ADD mode=Displav Statute&Searc. 1/31/2017 61D-11.001 Definitions. (1) "Activity related to cardroom operations" or "cardroom activity". (a) Includes any and all activities 1elated to the operation of the caidroom, including activities that lequire a person to come m contact with or work within the cardroom gaming aiea, all aspects of management, all aspects of record keeping, all aspects of administration, all aspects of supervision, and all activities that support the caidioom operation in any way, unless such activity is specifically excluded from this definition. (b) Does not include the following: 1. Incidental transit through the cardroom gaming aiea during which time the individual in no way a. Comes into contact with cardroom furnishings, table tops, patrons or pations' property, lockboxes or similar secured items, surveillance equipment or associated support equipment, surrounding structure for any incidental duty that enables in any way unrestricted access to the above-listed items; or b. Takes part in, officiates, or observes cardroom activity. 2. Incidental maintenance work performed undei the direct and constant visual supervision of an individual possessing a cunent cardroom oi pari-mutuel/cardroom combination license; or 3. Food seivice employees who perform duties that do not at any time requiie the employee's presence within the caidioom area. 4. Promotional support employees who participate in a limited event but do not' a. Influence the operations of the cardroom; or b. Come in contact with money, chips, cards, or dominoes held by the house oi othei participants in the tournament, oi c. Woik in the cardroom for more than 10 days per event and not more than two events in a state fiscal year. Such promotional support employees are not prohibited from participating as players in a tournament (2) "All-in" means when a player commits all of his or her chips or tokens into a pot (3) "Ante" means a predetermined wager that each player is requiied to make in some poker games piior to any cards being dealt in order to participate in the round of play. (4) "Bet" means to wager an amount signified by the number of chips or tokens contributed to a pot on any betting round. (5) "Betting round" means a complete wagering cycle in a hand of poker after all playeis have called, folded, checked, or gone all-in (6) "Blind" means a predetermined bet a player or players must place on the table before the cards are dealt. (7) "Business Entity" means a sole piopiietorship, general or limited partnership, corporation, business tiust, joint venture, or unincorporated association. (8) "Button" means a ciicular object moved clockwise around a poker table to denote the assigned dealer for each hand. (9) "Buy-in" means the amount of money requiied by the cardroom operator to entei and participate in a game. (10) "Cardioom gaming area" means any area of a licensed facility designated by the cardroom operator in its flooi plan in which authorized games are played oi where any type of cardroom opeiations may occur, such as handling of cash, chips, tokens, dominoes, or caids. The cardroom gaming area shall include entrances and exits (11) "Cardroom surveillance" means the employees and systems with capability to obseive and electronically record activities being conducted in a caidroom and its supporting areas (12) "Cashiers' Cage" means a physical structure that houses cashieis and serves as the central location foi the exchange of currency and chips. (13) "Chips or tokens" means a money substitute, redeemable for cash, issued and sold by a cardroom operator for use in cardioom games. (14) "Clearing hands" means displaying the front and back of both hands, with fingers spread over the table in sufficient distance fiom all other players and objects for suiveillance recording. (15) "Cross-cash chips" means cashing chips from one licensed caidroom operator's facility at a different licensed cardroom operator's facility. (16) "Dedicated camera" means a color video camei a that continuously records a specific activity. (17) "Designated playei" means the player identified by the button as the player in the dealei position (18) "Diop" means the procedure to remove drop boxes before counting the total amount of money, chips, and tokens removed fiom the drop box.

31 (19) "Drop Box" means a locked containei permanently marked with the number conesponding to a permanent number on the card or domino table. (20) "Facility" means the cardroom, any storage aiea for card or domino tables, cards, chips, tokens, dominoes, diop boxes, tip boxes, records relating to caidroom activity, and othei cardioom supplies, the count room, and imprest vault. (21) "Fanning" means spieading a deck of caids in front of the imprest tray so that each card can be identified by suiveillance cameras. (22) "Game" means the completion of all betting rounds and final determination of a winner based upon the comparison of all cards dealt and held by playeis at the end of all betting at a table (23) "Hand" means the group of cards dealt to a player in a game. (24) "Imprest tray" means any tray in which a predetermined dollar amount of chips, tokens, or U S. currency is kept. (25) "Jackpot" means a cumulative pool of money collected fiom card games that is awaided to a playei or players who hold a certain combination of cards specified by a cardroom operator. (26) "Licensee" means a person or entity holding any license issued by the division for purposes of cardroom operations. (27) "Opeiate" means to conduct authorized games pursuant to Section 849.086, F.S. (28) "Playing light" means diawing chips or tokens fiom the pot to show how much a player owes when the player is out of chips or tokens in an effort to allow a playei to continue without chips or tokens, until more chips or tokens are earned (29) "Pot" means the total amount wageied in a game or seiies of games of poker or dominoes. (30) "Proposition player" means a player who is employed by a cardroom operator, but who uses his own money to initiate or play in games. (31) "PTZ Camera" means a light-sensitive coloi video camera that has pan, tilt, and zoom capabilities. (32) "Raise" means to increase the size of the preceding bet. (33) "Re-buy" means the additional tournament chips or tokens purchased by playeis according to the schedule of re-buys prominently displayed in the cardroom during tournament play. (34) "Round of play" means, for any game of poker, the process by which cards are dealt, bets are placed and the winner is determined and paid m accoidance with the rules of Chapter 61D-11, F.A.C. (35) "Shift" means a peiiod of time designated by the employer during which an employee works when a licensed caidioom is open to conduct business pursuant to Rule 61D-11.012, F.A.C. (36) "Shift" means a player in a game provided by or employed by a cardroom operator who only bets with money provided by the cardroom operator. (37) "Showdown" means the point in a poker game in which aft hands are fully levealed to aft other players and the hand with the best combination becomes the winner. (38) "Shuffle" means the process of mixing oi rearranging a deck of cards to remove the probability that a predetermined series of cards may be drawn from the deck aftei it is mixed or rearranged. (39) "Side bets" means additional wagers made between two or more persons on the outcome or any portion of an authorized game other than wagers authorized pursuant to Chapter 849, F.S. (40) "Supporting areas" means those areas supporting the operation of the caidroom including, but not limited to, surveillance, cashiers' cages, podiums, vaults, and count rooms. (41) "Suiveillance room" means a secuie location m a paii-mutuel facility used for cardroom surveillance. (42) "Surveillance system" means a system of video cameras, monitors, recoiders, and other ancillaiy equipment used for cardioom surveillance (43) "Tip box" means a locked container into which aft dealer tips must be inserted (44) "Tournament chrps" means chips that have no cash value that ate used in tournament play (45) "Vault" means a secuie location where chips and currency aie maintained.

Rulemaking Authority 550 0251(12), 849 086(4), (11) FS Law Implemented 849 086 FS History-New 1-7-97, Amended 5-9-04, 9-7-08, 7-21-14

32 61D-11.002 Cardroom Games. (1) The cardroom operator or management company shall furnish all cards, dominoes, chips and tokens. (2) The cardroom opeiator shall piominently display a list of all games available for play in the cardioom that are authorized pursuant to Chapter 849, F.S. (3) The cardroom operator shall maintain a copy of the rales of play including wagering requirements The rules of play shall be made available to the division or to playeis upon lequest. (4) A cardroom opeiatoi who has reasonable cause to believe that a player in an authoiized game has acted oi is acting in one of the following manneis may lequire the player to leave the game or facility. (a) If a player is not playing the game solely to impiove his or hei chance of winning; (b) If a player is taking or attempting to take action to impiove another player's chance of winning, (c) If a player communicates any information to anothei player which could assist the other playei in any manner respecting the outcome of a game. (5) Card games that utilize a designated player that covers other players' wagers shall be governed by the cardroom operator's house lules. The house rales shall' (a) Establish uniform requiiements to be a designated player, (b) Ensure that the dealer button rotates aiound the card table in a clockwise fashion on a hand by hand basis to provide each player desiring to be the designated playei an equal opportunity to participate as the designated player; and (c) Not lequire the designated player to cover all potential wagers.

Rulemaking Authority 550 0251(12), 849 086(4), (11) FS Law Implemented 550 0251(6), 849 086(4) FS History-New 1-7-97, Amended 5-9-04, 4- 12-06, 9-7-08, 7-21-14

33 Florida Department^ Division of Pari-Mutuel Wagering D] irinocc/f? K 1Wllton Champion, Director D U -> 11 IC jy fy/J, Office of the Director Professional 1940 North Monroe Street pcj^i 'ia-Frin Tallahassee, Florida 32399-1035 ntjyuiduUI i Phone 850 488 9130 • Fax 850,488-0550

Charlie Liem, Secretary Rick Scott, Governor

April 25, 2011

Mr. Dennis Hone Cardroom Manager Ebro Greyhound Park 6558 Dog Track Road Ebro, Florida 32437-1142

Dear Mr Hone'

On behalf of the division, I would like to thank you for the time you spent coming to Tallahassee to demonstrate the game of Double Hand/Pai Gow Poker.

An authorized game is defined by Section 849 086, Florida Statutes, as a game of poker or dominoes played in a nonbanking manner While the house does not actively participate in the game you demonstrated, the game you demonstrated on behalf of the cardroom uses a player's (or player's) funds to establish a bank against which the players play. Thus, the game which was demonstrated constitutes a banking game as that term is defined by Section 849 086(2)(b), Florida Statutes, which defines "banking game" as follows:

"Banking game" means a game in which the house is a participant in the game, taking on players, paying winners, and collecting from losers or in which the cardroom establishes a bank against which participants olav

A game in which the designated Dealer/Player plays heads up against other players is a common element of banking games that are prohibited by Section 849.086(12)(a), Florida Statutes, and the Dealer/Piayer holds the advantage commonly associated with the house in casino gaming. Therefore, the division has determined that the playing or dealing of this game would violate Section 849.086(12)(a), Florida Statutes, which prohibits the conduct of any banking game. A violation under Section 849.086, Florida Statutes, could result in a fine, suspension, or revocation of your cardroom license.

This letter constitutes final agency action. If you wish to challenge this decision, you must file a petition within 21 days in accordance with Rule 28-106.201, Florida Administrative Code, with Rhonda Bryan, Agency Clerk, Department of Business and Professional Regulation; 1940 North Monroe Street, Tallahassee, Florida, 32399.

cc: Stockton Hess, President Ebro Greyhound Park

LICENSE EFFICIENTLY. REGULATE FAIRLY. WWW.IVIYFLORIDALICENSE.COM 34 STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF PARI-MUTUEL WAGERING

EBRO GREYHOUND PARK,

Petitioner, Case No. vs.

STATE OF FLORIDA, DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,

Respondent.

PETITION CONTESTING FINAL AGENCY ACTION

Ebro Greyhound Park (the "Petitioner") hereby petitions the Department of Business and

Professional Regulation, Division of Pari-Mutuel Wagering's (the "Division") for an evidentiary hearing in accordance with Sections 120.569 and 120.57(1), Florida Statutes, and Rule 28-

106.201, Florida Administrative Code, in response to the Division's April 25, 2011, letter to

Petitioner declaring the Double Hand Poker game to be in violation of Section 849.086(12)(a),

Florida Statutes, and in support thereof states as follows:

Parties

1. The affected state agency is the State of Florida, Department of Business and

Professional Regulation, Division of Pari-Mutuel Wagering, 1940 North Monroe Street,

Tallahassee, Florida 32399. The Division is the state agency authorized to administer section

849.086 and regulate the operation of cardrooms under the section in

law. See § 849.086(4), Fla. Stat. (2010).

35 2. The Petitioner is a Florida corporation authorized to conduct business in Florida.

The Petitioner owns and operates Ebro Greyhound Park which is located at 6558 Dog Track

Road, Ebro, Florida 32437 ("Facility"). For purposes of this proceeding, the Petitioner's address is that of its undersigned counsel.

3. The Petitioner is represented by Gary Rutledge and Mike Barry, of Rutledge,

Ecenia & Purnell, P.A., located at 119 South Monroe Street, Suite 202, Tallahassee, Florida

32301. Counsel's telephone number is (850) 681-6788 and facsimile number is (850) 681-6515.

Statement of Facts

4. The Petitioner is the holder of a valid pari-mutuel permit issued by the Division pursuant to chapter 550 for the conduct of greyhound racing ("Permit"). The Permit authorizes the Petitioner to conduct pari-mutuel wagering pursuant to chapter 550 at its Facility. Petitioner conducts greyhound racing at the Facility pursuant to the Permit,

5. Pursuant to the Permit, the Petitioner is the holder of a cardroom operator's license issued by the Division pursuant to Section 849.086(5) ("License"). The License authorizes the Petitioner to operate a cardroom and conduct authorized games therein pursuant to chapter 849 at its Facility. The games are pari-mutuel in nature, in which the players wager and compete against fellow players (i.e., poker) - as opposed to casino games, in which players wager and compete against the house (i.e., blackjack).

6. The Division maintains a list and descriptions of all authorized games, which is posted at http://www.mvfloridalicense.com/dbpr/nmw/PMW-AuthorizedCardGames.html, A

cardroom may conduct any game found on this list without obtaining separate approval by the

Division. If a cardroom wishes to conduct a game not found on this list, it must request approval

and authorization from the Division. When the Division grants approval, it is effectively

2 36 granting a license to conduct the requested game. The game is then added to the list of authorized games, and is available for play at all cardrooms in Florida.

7. Petitioner requested authorization from the Division to conduct a game called

"Double Hand Poker" at its Facility pursuant to Section 849.086, Florida Statutes. The game possesses the basic characteristics of poker. It involves the dealing and playing of two hands of cards, rounds of wagering and a rotating designated player.

8. The Division approved the request to conduct Double Hand Poker ("Approved

Game"). This approval is evidenced by the following: (1) e-mail communications to that effect from Melynda Childree, a Cardroom Coordinator at the Division, to Dennis Hone, Manager of

Petitioner's Cardroom, (2) the addition of Double Hand Poker to the Division's master list of authorized games, and (3) the addition of a description of Double Hand Poker to the Division's website.

9. Shortly after approval, the Petitioner began offering the Approved Game for play at its Facility.

10. Subsequently, the Petitioner and the Division exchanged communications regarding certain minor changes to the parameters of the Approved Game, including with regards

to jackpots and the number of turns by the designated player. As a result of these

communications, the description of the Approved Game was revised accordingly. The Division

re-posted the updated description on its website, where it remains to date.

11. On April 8, 2011, in response to various inquiries and requests from the Division,

the Petitioner conducted a demonstration of certain games, including Double Hand poker, for

Division staff at the Division's headquarters in Tallahassee.

3 37 12. On April 25, 2011, without any prior notice, the Division sent a letter to the

Petitioner indicating the Division "has determined that the playing or dealing of this game would violate Section 849.086(12)(a), Florida Statutes." In its letter, the Division concluded that the demonstrated game constitutes a banking game as defined by Section 849.086(2)(b). The

Division further indicated that the letter "constitutes final agency action," and provided a notice of administrative rights, including the deadline to file a petition within 21 days in accordance with Rule 28-106.201, Florida Administrative Code. This Petition is filed accordingly.

13. While the actual or intended legal effect of the Division's letter is not entirely clear to the Petitioner, the Petitioner is compelled to regard the Division's action as a rescinding

of its approval of the Approved Game months after it was approved and, more importantly, a summary revocation of the license to conduct the Approved Game without notice or a hearing.

14. At present, the disputed facts include: whether the Petitioner's demonstration and

the Division's consideration of such demonstration was confined to the Approved Game;

whether alternative versions were taken into account by the Division; whether the game

demonstrated to the Division is identical to the game approved by the Division and/or the game

as it is played at the Facility; and whether the game as approved by the Division is identical to

the game as it is played at the Facility.

Standing

15. Section 120.569, Florida Statutes, provides that a party whose substantial interests

are affected by an agency action is entitled to an administrative hearing, The Petitioner's

substantial interests are affected by the Division's action on April 25, 2011, because it purports

to summarily revoke a license granted by the Division. The Petitioner has been prematurely and

improperly denied its rights to the use of the license granted to it by the Division in accordance

4 38 with Section 849.086. As a result, the Petitioner has standing to challenge the Division's action in this proceeding.

Statement of the Law

16. Procedurally, the Division has failed to comply with the applicable requirements m taking action in this matter. The Petitioner is entitled to notice and the opportunity for an administrative hearing before any action by the Division becomes final or takes effect.

17. Section 120.60(5), Florida Statutes, provides as follows:

No revocation, suspension, annulment, or withdrawal of any license is lawful unless, prior to the entry of a final order, the agency has served, by personal service or certified mail, an administrative complaint which affords reasonable notice to the licensee of facts or conduct which warrant the intended action and unless the licensee has been given an adequate opportunity to request a proceeding pursuant to ss. 120.569 and 120.57.

18. The Division's action constitutes a revocation of the license granted to the

Petitioner for the conduct of the Approved Game. Here, the Division simply informed the

Petitioner of its final decision, without having provided the required notice and opportunity for a hearing. By failing to provide to the Petitioner with reasonable notice and an adequate opportunity to request a hearing before taking final agency action, the Division's action is in violation of Section 120.60(5), Florida Statutes, and is therefore invalid.

19. Substantively, the Division's action constitutes an improper application of

Florida law with regard to the Approved Game.

20. Section 849.086(2), Florida Statutes, defines the following terms:

(a) "Authorized game" means a game or series of games of poker or dominoes which are played in a nonbanking manner.

5 39 (b) "Banking game" means a game in which the house is a participant in the game, taking on players, paying winners, and collecting from losers or in which the cardroom establishes a bank against which participants play.

21. The Approved Game, like all other versions of poker on the Division's list of authorized games, is by definition a non-banking card game played in the conventional maimer of pari-mutuel wagering - where players compete against one another and not the house. The mere use of a designated player (which is commonplace in poker rooms throughout Florida and the United States) does not transform a pari-mutuel game into a banking game.

22. The Division wrongly concluded that under the rules of the Approved Game, the

Petitioner "establishes a bank against which participants play." As the description makes clear, it is the players that determine the wagering - not the cardroom. The rules of the Approved Game provide "bets are paid to the extent the designated player's money is in action." This is fundamentally different than a banking game, in which payouts are set by the house and are not contingent upon the wagering behavior of another player.

23. Even if assuming, arguendo, that the playing and wagering against a designated player constitutes a bank, this feature of the Approved Game is permissible under chapter 849 because it is the players of the game that create the bank - not the cardroom. The statutory definition of "banking game" only includes games "in which the cardroom establishes a bank against which participants play." The statute plainly prohibits a cardoom from establishing a bank, but it plainly does not prohibit a player from doing so.

WHEREFORE, the Petitioners request the following relief:

6 40 A. That the Division refer this petition to the Division of Administrative Hearings for the purpose of conducting an evidentiary hearing for resolution of disputed issues of material fact and law pursuant to Section 120,57(1), Florida Statutes; and

B. That a final order be issued determining that the Division's final agency action on

April 25, 2011, constitutes an improper revocation of the Petitioner's license to conduct the

Approved Game; and

C. Any further relief as may be deemed appropriate,

RESPECTFULLY SUBMITTED this [ Mkdav of May, 2011.

Michael J. Barry (FBN 6461? Gary R. Rutledge (FBN 222674) Rutledge, Ecenia, & Purnell, P.A. 119 South Monroe Street, Suite 202 Tallahassee, Florida 32301 (850) 681 -6788 (850) 681 - 6515 (facsimile)

Attorneys for Petitioner

7 41 rionaa uepartmentg_ Division of Pari-Mutuel Wagering Milton Champion, Director Business^)) Office of the Director Professional 1940 North Monroe Street Tallahassee, Florida 32399-1035 Regulation Phone. 850 488.9130 • Fax. 850.488-0550

Ken Lawson, Secretary Rick Scott, Governor

August 4, 2011

Mr. Dennis Hone Cardroom Manager Ebro Greyhound Park 6558 Dog Track Road Ebro, Florida 32437-1142

Dear Mr. Hone:

This letter follows my initial correspondence to you on April 25, 2011, regarding the game of Double Hand/Pai Gow Poker.

In January, the division approved the play of Double Hand Poker, and that approval has continued in effect to this day. In the April letter, the division conveyed its determination as a final agency action, that "the game which was demonstrated" during a meeting held with the division did not comport with the proscription of banking games found in Section 849.086, Florida Statutes. On May 16, 2011, in response to the April letter, Ebro timely filed a Petition Contesting Final Agency Action (Petition). As there is no evidence that Ebro intends to operate Double Hand Poker in an unapproved manner, the division hereby rescinds its letter and final agency action of April 25, 2011, and therefore, considers Ebro's petition to be rendered moot Ebro may immediately resume play of Double Hand Poker as approved by the division.

Director

MC/lm

cc: Stockton Hess, President Ebro Greyhound Park

LICENSE EFFICIENTLY. REGULATE FAIRLY. WWW MYFLORIDALlCENSE.COM 42 SEMINOLE TRIBE OF FLORIDA

JAMES E.BILUE Tribal Officers; Chairman TONY SANCHEZ, JR 6300 Stirling Road Suite 430 Vice-Chairman Hollywood, Flanda33024 (954) 966-6300 E\t. 11390 LAVONNE KIPPENBERGER E-MAIL; Secretary [email protected] WEBSITE: PETER HAHN httn //'i 'I ii' wmitiolelithe < out Treasurer

June 24, 2015

Via Hand Delivery

Governor Rick Scott The Capitol Tallahassee, FL 32301

Re: Notice of Commencement of Compact Dispute Resolution Procedures

Dear Governor Scott:

This letter hereby provides the State of Florida ("State") with written notice, in compliance with Pait XIII. A of the Gaming Compact Between the Seminole Tribe of Florida and the State of Florida ("Compact"), that it is formally initiating the Compact's dispute lesolution procedures in order to confirm: (1) its present right to continue offering banked card games fot the remaining term of the Compact, which expires in 2030, and (2) its right to stop making exclusivity payments to the State under the Compact and to instead make those payments into an escrow account.1

As you know, the Seminole Tribe ("Tribe") entered into the Compact with the Slate under the Indian Gaming Regulatory Act ("IGRA") on Apiil 7, 2010. The Compact has a teim of 20 years, but the Tribe's authorization to conduct "banking or banked card games" under the Compact terminates after five years unless authorization is renewed by the paities or "the State peimits any other person, organization or entity [except another tube under IGRA] to conduct such games." Compact, Part XVI.B. If the authorization of banked card games sunsets, then the Tribe has an additional 90-day grace period in which to close the games. Compact, Part XVI.C.

As detailed below, the State has elected to peimit other entities to conduct banked card games within the State. As a result, the Tribe has the right to continue conducting banked card games after the sunset date pursuant to Part XVI.B of the Compact. The State's action to permit other entities to conduct banked card games also violates the Tiibe's exclusivity rights under Part

1 These proceduies are available when the pailies dispute the propei inleiprctation of the teims and conditions of the Compact or when one party believes another has failed to comply with lequirements of the Compact. Compact, Pait xni.

"BUT I HAVE PROMISES TO KEEP & MILES TO GO BEFORE I SLEEP" 43 SEMINOLE TRIBE OF FLORIDA

XII of the Compact. Further, the State's action also allows the Tribe to expand the locations in which it presently operates banked card games. Compact, Part III.F.2.

Various State officials, including members of the Florida Legislature, have taken the position that the Tribe's right to offer banked caid games will terminate later this year unless the Tiibe's authority to offer these games is extended thiough action by the Legislature.2 The Tribe disputes that interpretation and is initiating this piocess to confirm that under the Compact it is permitted to continue offering banked card games until the Compact terminates in 2030 without any fuither action by the State.3

The State Permits Pari-Mutuels to Conduct Electronic House-Banked Card Games

The State's Department of Business and Professional Regulation ("DBPR") has since February of 2011 permitted pari-mutuels to conduct electronic house-banked card games, including blackjack and baccarat.

On February 17, 2011, DBPR issued a variance that allowed pari-mutuels in Miami-Dade and Broward Counties to offer a house-banked form of blackjack played with electronic cards and a live host/dealer.4 Although not addressed m DBPR's variance, pari-mutuels are also offering and openly advertising other forms of house-banked card games played with electronic cards, including baccarat.5

Electronic house-banked card games, and specifically blackjack and baccarat, qualify as "banking or banked card games" for purposes of the Compact. The Compact specifically lists blackjack and baccarat as "banking or banked card games." Compact, Part III.F.2. That the games are played with electronic cards does not change their status as house-banked card games. Further, the fact that the games may be permissibly played as a slot machine under State law does preclude them from independently meeting the definition of "banking or banked card game" for purposes of the sunset provision in the Compact.

The Tribe has repeatedly put the State on notice that the electronic blackjack games permitted by the State qualify as a banked card game under the Compact. First, the Tribe in a February 28, 2011, letter to you asseited that DBPR's authorization violates the Compact's exclusivity provisions. Then, on July 23, 2012, the Tribe sent another letter to you indicating that the electronic blackjack was directly competing with the Tribe's banked card games because they opeiated in a nearly identical manner, the only difference being that they used electronic rather than paper cards ~ a distinction we asseit is a distinction without a difference.

2See, e.g., Imp //mi.inn chslucal coni/2QI5/02/25/i;amhlini>-dcal-cnoi mous-e.u iniiilu.tn-liH-lhis-se.sMon/ (last visited June 12,2015) 3 Even if the Tribe is incoriect in its inteiptetation of the Compact, it has a federal right under the IGRA to continue offering banked card games under a new or amended Compact, or puisuant to Class lit piocedures issued by the Secretai y of the Intei 101. 4 Pinal Order, DigiDeal Corp. v Div. of Pan-Mutuel Wagering, Div of Pan-Mutuel Wagering (Feb 17, 2011). 5 See Hick Sortal, Isle Acids Electronic Baccarat, SOUTHFLORIDA (Nov. 16,2012), http.//vvvvw.southfloiida.com/gambling/south-florida-gambhng-blog/sf-baccarat-at-isle-casino-20121115-story.html; MAGIC CITY CASINO, http://www.magiccitycasino.com/(last visited June 12. 2015). 2 44 r 1 SEMINOLE TRIBE OF FLORIDA

It is the Tribe's position that the authorization of banked card games in the form of electronic blackjack and baccarat is sufficient in itself to trigger the exception to the sunset provision found in Part XVI.B of the Compact.

The State Permits Commercial Cardrooms to Conduct Player-Banked Card Games

In addition, since at least January of 2011, DBPR has permitted cardrooms to conduct player-banked card games within the State, including double hand poker and three card poker.

The Compact provides that the Tribe may continue to offer banked card games if the State "permits" other entities to conduct banked card games within the State. Compact, Part XVI.B. While no further action by the Legislature has occuried, DBPR has interpreted Florida law to allow cardrooms to conduct player-banked card games within the State.

In January of 2011, DBPR approved the operation of player-banked double hand poker in cardrooms.6 The game description for double hand poker indicates that the game involves a rotating "designated playei" against whose hand players' hands are compared, and it states that bets are paid to the extent the designated player's money is in action,7 On August 4,2011, DBPR explicitly approved the operation of double hand poker at Bbro Greyhound Park8 after Ebro argued that the veision of the game played at its facilities was either a pari-mutuel wagering game or a legal player-banked card game.9 Since then, other entities have begun operating such player-banked card games, including three card poker at Gulfstieam, Tampa Bay Downs, and Ebro.10

DBPR issued rules that became effective on July 21,2014, that govern the conduct of player-banked card games. The rules added a new section of the regulations to permit and govern card games that "utilize a designated player that covers other players' wagers." FLA. ADMIN. CODE ANN. r. 61D-11.002(5) (2014). Although the rules require that each player be offered the opportunity to act as the designated player, they do not prohibit one player from continuously serving as the designated player. Id. The rules further provide that designated players may not be required to cover all potential wagers, but they do not prohibit a player from

6 See Letter from Milton Champion, Director, Div. of Pari-Mutuel Wagering, to Dennis Hone, Cardroom Manager, Ebro Greyhound Park (Aug 4,2011) (referring to January 2011 approval of double hand poker), available at http7/www.floridagamingwatch,com/wp-content/uploads/2011/08/Double-hand-poker.pdf. 7 See Memorandum from Div, of Pari-Mutuel Wagering re Double Hand Poker, available at http://www.flondagamingwatch com/wp-content/uploads/2011/08/DoubleHand-DBPR-rules.pdf. 8 See Champion, supra, at 1 9 Petition Contesting Final Agency Action at 6, Ebro Greyhound Park v, Div. of Pau-Mutuel Wagering, Div. of Pari-Mutuel Wagering (May 16,2011), available at http://www.floridagamingwatch.com/wp- content/uploads/2011/05/Ebro-Petition-Contesting-Final-Agency-Action,pdf. 10 Nick Sortal, 3-Card Poker (Florida Version) Comes to Gulfstream, SOUTHFLORIDA (Feb. 11,2014), http://www southflorida com/gambling/south-florida-gambling-blog/sf-florida-three-card-poker-20140211 - story.html; Three Card Poker, TAMPA BAY DOWNS, http://www.tampabaydnwns.com/event/2015/02/28/poker/three-card-poker (last visited June 12. 2015): Cut rent Games, EBRO GREYHOUND PARK & POKER ROOM, http://www.goebro.com/poker/poker-cash-games.html (last visited June 12, 2015). 3 45 I SEMINOLE TRIBE OF FLORIDA

doing so. Id. Since the tules permit a player to continuously serve as the designated player and cover all wagers, such a game constitutes a player-banked game. See, e.g., Oliver v. County of Los Angeles, 66 Cal. App. 4th 1397,1408 (1998) ("a game will be determined to be a banking game if under the rules of that game, it is possible that the house, anothei entity, a player, or an observer can maintain a bank or operate as a bank during the play of the game.").

There is no basis to dispute the fact that, as interpreted by DBPR, Florida law now allows for the play of player-banked games. The question then is whether player-banked card games qualify as "banking or banked card games" for puiposes of the Compact.

In the gaming industry, player-banked card games are commonly understood to be a form of banked card game.11 While the Compact does not define "banking or banked card game," it lists as examples baccarat, chemin de fer, and blackjack (21), which may all be played either as player-banked or house-banked. Compact, Part III.F.2.12 The National Indian Gaming Commission also considers player-banked card games to be a form of banked card game, See, e.g., NIGC Bull. No 95-1 (Apr. 10,1995), All Banking Card Games Fall Within Class HI Gaming, available at http://www.nigc.gov/Reading_Room/Bulletins/Bulletin_No._1995-l.aspx.

Since the State has elected to permit a type of banked card game to be played in the State, the protection provided for the Tribe in Part XVI.B of the Compact has been triggered and the Tribe is theiefore permitted to continue offering its banked card games for the remaining term of the Compact.

The Tribe is Entitled to Stop Making Revenue Sharing Payments to the State

Under the Compact, the Tribe is permitted to make certain revenue sharing payments into an escrow account rather than to the State if the State allows through an administrative action new Class III or other casino-style gaming that was not in operation as of February 1, 2010. Compact, Part XII.A. New gaming encompasses both gaming at new locations and new forms of gaming at existing locations, and table games are considered Class HI or other casino-style gaming. Compact Part, XII.A. If the State legislature does not act to reverse the administrative action within 12 months, the escrow funds are returned to the Tribe and the revenue sharing payments cease. Compact Pait, XII.A. New gaming in Miami-Dade and Bioward Counties is treated differently under the Compact but still may trigger lesser revenue sharing payments. Compact, Pait XII.B.3-4.

As previously discussed, the State allowed entities to conduct player-banked card games throughout the State. Therefore, the Tribe is entitled to stop making revenue sharing payments

11 See JOHN SCARNE, SCARNE'S NEW COMPLETE GUIDE TO GAMBLING 830 (1986) (defining "banking game" as "[a]ny betting scheme that gives the operator or a player a percentage or odds advantage over his opponents" and "banker" to include "player who accepts bets from other players in a private banking game"); ALBERT H MOREHEADETAL„THENEW COMPLETE HOYLE REVISED 673 (1991) (defining "bank" to include "dealer in gambling game" and "banker" to include "[d]ealer against whom all others bet" and "player who keeps, sells and accounts for the chips"). 12 The issue in not whether a game meets the State's defining of "banking game," (Section 849.086(2)(b), Fla. Stat.), but whether the game constitutes a banking or banked game under the Compact. 4 46 SEMINOLE TRIBE OF FLORIDA

to the State under the Compact and to instead make those payments into an escrow account. While the Tribe could have exercised its right to do so immediately, it has thus far elected to continue making its payments to the State and, as a gestute of good faith, intends to continue making its payments to the State pending the resolution of this dispute.

Conclusion

Pursuant to Pait XIII.A of the Compact, the Tribe and State must meet and confer within 30 days of the State's receipt of this notice. If a resolution is not reached at that meeting, the Tribe has a right to pursue mediation and, if that process proves unsuccessful after 60 days, seek to vindicate its rights under the Compact in federal district court in accordance with the Compact's dispute resolution procedures. Compact, Part XIII.C.

Puisuant to Part XIII.B of the Compact, I hereby cettify that to best of my knowledge, information, and belief formed after reasonable inquiry, this request for interpretation of the Compact is warranted and made in good faith and not for any improper purpose.

Sho Na Bish,

Janiqs E. Biilie Chaimian, Tiibal Council cc: Timothy Cerio, Esq. General Counsel to the Governor The Capitol Tallahassee, FL 32301

Andy Gaidiner President of the Florida Senate 409 The Capitol 404 South Monroe Street Tallahassee, FL 32399-1100

Steve Crisafxilli Speaker of the Florida House of Repiesentatives 420 The Capitol 402 South Monroe Street Tallahassee, FL 32399-1300

Jim Shore, Esq. Geneial Counsel Seminole Tribe of Florida 6300 Stilling Road Hollywood, FL 33024 5 47 STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS

DANIA ENTERTAINMENT CENTER, LLC,

Petitioner,

vs. Case No. 15-7010RP

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,

Respondent. / DAYTONA BEACH KENNEL CLUB, INC. ,

Petitioner, vs. Case No. 15-7011RP

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,

Respondent. / JACKSONVILLE KENNEL CLUB, INC.,

Petitioner, vs. Case No. 15-7012RP

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,

Respondent. /

48 MELBOURNE GREYHOUND PARK, LLC,

Petitioner,

vs. Case No. 15-7013RP

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,

Respondent. / BONITA-FORT MYERS CORPORATION,

Petitioner, vs . Case No. 15-7014RP

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,

Respondent. / INVESTMENT CORPORATION OF PALM BEACH,

Petitioner, vs. Case No. 15-7015RP

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,

Respondent. /

2 49 WEST FLAGLER ASSOCIATES, LTD.,

Petitioner,

vs. Case No. 15-7016RP

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,

Respondent. / TAMPA BAY DOWNS, INC.; AND TBDG ACQUISITION, LLC, d/b/a TGT POKER AND RACEBOOK,

Petitioners, vs. Case No. 15-7022RP

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,

Respondent. /

FINAL ORDER

A final hearing was conducted in this case on July 19,

2016, in Tallahassee, Florida, before E. Gary Early,

Administrative Law Judge with the Division of Administrative

Hearings.

APPEARANCES

For Petitioners Dania Entertainment Center, LLC; Daytona Beach Kennel Club, Inc.; Jacksonville Kennel Club, Inc.; Melbourne Greyhound Park, LLC; Bonita-Fort Myers Corporation; Investment Corporation of Palm Beach; and West Flagler Associates, Ltd.:

3 50 John M. Lockwood, Esquire Thomas J. Morton, Esquire Kala K. Shankle, Esquire The Lockwood Law Firm 106 East College Avenue, Suite 810 Tallahassee, Florida 32301

For Petitioners Tampa Bay Downs, Inc.; and TBDG Acquisition, LLC, d/b/a TGT Poker and Racebook:

Christopher M. Kise, Esquire James A. McKee, Esquire Joshua M. Hawkes, Esquire Foley & Lardner LLP 106 East College Avenue, Suite 900 Tallahassee, Florida 32301

For Respondent: William D. Hall, Esquire Louis Trombetta, Esquire Caitlin R. Mawn, Esquire Department of Business and Professional Regulation Capital Commerce Center 2601 Blair Stone Road Tallahassee, Florida 32399-2202

STATEMENT OF THE ISSUES

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.

4 51 PRELIMINARY STATEMENT

On December 14, 2015, Dania Entertainment Center, LLC;

Daytona Beach Kennel Club, Inc.; Jacksonville Kennel Club, Inc.;

Melbourne Greyhound Park, LLC; Bonita-Fort Myers Corp.;

Investment Corp. of Palm Beach; West Flagler Associated, Ltd.;

Tampa Bay Downs Inc.; and TBDG Acquisition, LLC, d/b/a TGT Poker

& Racebook (collectively "Petitioners"), filed petitions to

challenge the validity of the proposed repeal of rules 61D-

11.001(17) and 61D-11.002(5), and the proposed adoption of rule

61D-11.005(9) .1/ The petitions were consolidated on December 18,

2015, and set for final hearing on January 13 and 14, 2016.

On December 23, 2015, the parties filed a joint motion to place the consolidated cases in abeyance and, as grounds therefore, indicated that Respondent was preparing a notice of change to revise the proposed rules. The motion was granted and the final hearing was continued and the case abated.

On January 15, 2016, Respondent published a Notice of

Change/Withdrawal that withdrew proposed rule 61D-11.005(9).

The proposed repeal of rules 61D-11.001(17) and 61D-11.002(5) was unchanged. On February 4, 2016, Petitioners filed amended petitions challenging the proposed repeal of rules 61D-

11.001(17) and 61D-11.002(5). The case was thereafter set for final hearing on April 13 and 14, 2016.

5 52 On February 10, 2016, Respondent filed motions to dismiss

each of the amended petitions, arguing that the proposed repeal

of rules 610-11.001(17) and 61D-11.002(5) "will [not] have the

effect of rule or [] prohibit any activity." Responses were

filed and, after due consideration, the motions were denied.

The final hearing was again continued for good cause shown

and rescheduled for July 19 and 20, 2016.

On July 15, 2016, the parties filed their Joint Prehearing

Stipulation, and concurrently filed a Joint Motion for Oral

Argument in Lieu of Evidentiary Hearing, by which the parties

agreed to the authenticity and admissibility of all exhibits

listed in the Joint Prehearing Stipulation as constituting the

evidentiary record. Accordingly, the parties advised that an

evidentiary hearing was no longer necessary and requested that

the final hearing be limited to oral argument on the legal issues framed by the Joint Prehearing Stipulation. That motion was granted, and oral argument was held on July 19, 2016.

In the Joint Prehearing Stipulation, the legal issues were framed by Petitioners as:

Specifically, the Proposed Rules are an invalid exercise of delegated legislative authority under section 120.52(8), Florida Statutes, because: (1) the Division has materially failed to follow the applicable rulemaking procedures or requirements set forth in chapter 120, Florida Statutes [section 120.52(8) (a)]; (2) the Division has exceeded its grant of rulemaking

6 53 authority [section 120.52(8)(b)]; (3) the Proposed Rules, as interpreted by the Division, enlarge, modify or contravene the specific provisions of the law implemented [section 120.52(8)(c)]; (4) the Proposed Rules, as interpreted by the Division, impose regulatory costs which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives [section 120.52(8) (f)]; and (5) the Proposed Rules, as interpreted by the Division, are unconstitutional. 12/1

The issue of the constitutionality of the proposed rules being

beyond the jurisdiction of the Division of Administrative

Hearings is not determined in this Final Order, though the

record of this proceeding may form the basis for the issue to be

raised on appeal. Key Haven Assoc. Enters., Inc. v. Bd. of Trs.

of the Int. Imp. Trust Fund, 427 So. 2d 153 (Fla. 1982).

At the final hearing, the parties presented legal argument.

Joint Exhibit 1 was received in evidence, consisting of the

deposition testimony of Jonathan Zachem, Respondent's Division

Director. Petitioners' Exhibits 1 through 44 were received in

evidence, which included the deposition testimony of Joe

Dillmore, Respondent's Deputy Division Director; Lisa Helms,

Respondent's Cardroom Coordinator; Steve Kogan, Respondent's

Chief of Investigations; Chuck Taylor, an investigator with

Respondent; and Ken Lawson, Secretary of the Department of

Business and Professional Regulation. Respondent's Exhibits 1 through 3 were received in evidence, which included the

7 54 deposition testimony of Jamie Shelton, President of Jacksonville

Kennel Club. The deposition testimony has been given weight as

though the witnesses offered live testimony. The stipulated

facts have been accepted and considered in the preparation of

this Final Order.

On July 28, 2016, Petitioners filed a Supplement to Motion

for Official Recognition requesting that the undersigned take

official recognition of the State of Florida's Response to

Motion for Summary Judgment filed in the United States District

Court, Northern District of Florida in case number 4.-15-CV-

00516-RH-CAS. No objection was filed. The motion is granted.

The parties did not order a transcript. The parties were

to file post-hearing submittals by August 3, 2016. Upon motion, that date was extended to August 5, 2016. Each party timely filed Proposed Final Orders.

References to statutes are to Florida Statutes (2015), unless otherwise noted.

FINDINGS OF FACT

1. 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.

2. 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.

8 55 Petitioners offer designated player games at their respective cardrooms.

3. The rules proposed for repeal, rules 61D-11.001(17) and

61D-11.002(5), relate to the play of designated player games.

4. Rule 61D-11.001(17) provides that "x[d]esignated player' means the player identified by the button as the player in the dealer position."

5. 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:

(a) Establish uniform requirements to be a designated player;

(b) 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

6. 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

7. 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

9 56 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.

8. 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.

9. 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.

10. 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

10 57 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."

11. 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.

12. 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

13. 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

11 58 parameters under which designated player games would be

authorized.

14. 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.

k k k

(5) Card games that utilize a designated player that covers other players' wagers shall:

(a) Allow for only one designated player during any single hand;

(b) Not require the designated player to cover all wagers that could be made by the other players in the game;

(c) 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;

(d) 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

(e) 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.

15. 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

12 59 hearing was continued, and the case placed in abeyance pending negotiations between the parties.

16. 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:

(6) The designated player shall:

(a) Cover the table minimum for each participating player; and

(b) 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.

17. 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

13 60 requiring that the designated player meet all the theoretical payouts of the game.

18. 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.

19. 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.

20. 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 610-11.002(5) became effective.

21. 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.

14 61 Internal Controls

22. 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.

23. 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.

24. Respondent approved the internal controls for each of the four facilities.

25. 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.

15 62 26. 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."

27. From 2011 through mid-2015, Respondent approved internal controls for playing one-card poker, two-card poker, three-card poker, Florida Hold AEm, and Pai Gow poker using designated players at numerous cardroom facilities.

28. 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

29. In August 2015, Mr. Taylor was invited by the Bestbet cardroom in Jacksonville47 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.

16 63 30. 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.

31. 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

32. 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.

17 64 33. 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.

34. On October 29, 2015, Respondent published its proposed amendments to chapter 61D-11.

35. 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.

36. Rule 61D-11.002(5), as set forth above, which had established the standards for designated player games, was proposed for repeal.

37. 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."

38. 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

18 65 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.

39. 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

40. 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

19 66 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/

41. 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.

42. 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.

20 67 43. 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

44. 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 610-11.001(17) and 61D-11.002(5), to effectuate the prohibition of designated player games despite the withdrawal of proposed rule 61D-11.005(9).

21 68 Lower Cost Regulatory Alternative

45. 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.

46. 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

22 69 indirectly increase regulatory costs in excess of $200,000 in the

aggregate within one year after the implementation of the rule.

47. 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.

48. 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."

49. Respondent did not prepare a statement of estimated regulatory costs or otherwise respond to the LCRA.

50. 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

23 70 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

51. Respondent has taken the position that the repeal of

rule 610-11.005(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.

52. 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

24 71 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.

53. 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.

25 72 CONCLUSIONS OF LAW

54. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties to this proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2015).

55. Section 120.56(1)(a) provides that "any person substantially affected by ... a proposed rule may seek an administrative determination of the invalidity of the rule on the ground that the rule is an invalid exercise of delegated legislative authority."

Standing

56. Petitioners operate pari-mutuel facilities, and each has been licensed to operate a cardroom. Petitioners have been approved to offer designated player games at their cardrooms.

If allowed to become effective, Petitioners would be affected by

Respondent's stated purpose for the proposed rule, i.e. to prohibit player banked games. Therefore, each Petitioner is substantially affected in a manner and degree sufficient to confer administrative standing in this case. See, e.g., Abbott

Labs, v. Mylan Pharms., 15 So. 3d 642, 651 n.2 (Fla. 1st DCA

2009); Dep't of Prof'l Reg., Bd. of Dentistry v. Fla. Dental

Hygienist Ass'n, 612 So. 2d 646, 651 (Fla. 1st DCA 1993); see also Cole Vision Corp. v. Dep't of Bus. & Prof'l Reg.,

688 So. 2d 404, 407 (Fla. 1st DCA 1997) (recognizing that "a less demanding standard applies in a rule challenge proceeding

26 73 than in an action at law, and that the standard differs from the

^substantial interest' standard of a licensure proceeding.").

If the rule directly regulates a party's behavior or limits its

rights, it will cause injury in fact to the party. Prof'1

Firefighters v. Dep't of HRS, 396 So. 2d 1194 (Fla. 1st DCA

1981).

57. Petitioners have demonstrated their standing in this

proceeding.

Rule Repeal

58. Section 120.52(16) defines a rule, with exceptions

that do not apply here, as:

"Rule" means each agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the procedure or practice requirements of an agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule. The term also includes the amendment or repeal of a rule.

59. A repeal of a rule is subject to challenge, so long as the repeal satisfies the definition of a rule that it is "an agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the organization, procedure, or practice requirements of an agency."

Fed'n of Mobile Home Owners of Fla., Inc. v. Fla. Manufactured

Hous. Ass'n, Inc., 683 So. 2d 586, 590-91 (Fla. 1st DCA 1996); see also Osterback v. Agwunobi, 873 So. 2d 437, 439 (Fla. 1st DCA

27 74 2004) ("An agency's repeal of a rule is considered a rule subject to challenge when it has xthe effect of creating or implementing a new rule or policy.'"). The proposed repeal of rules 61D-

11.001(17) and 61D-11.002(5) has the effect of implementing

Respondent's new policy with regard to designated player games.

60. The policy that Respondent intends to implement by the rule is clearly a change in the direction of the agency since it adopted the designated player rules. The ability of Respondent to change direction in reaction to what it perceives to be changed or better understood circumstances is not questioned.

However, eliminating all interpretive rules, leaving regulated entities to decipher the agency's current policy regarding the construction of its enabling legislation, is not the appropriate way to change direction. As stated by the First District Court of Appeal:

Aside from AHCA's decision to reinterpret the governing statutes, that is, to simply "change its mind," there is no good reason why the agency's abrupt change of established policy, practice and procedure should be sanctioned. Without question, an agency must follow its own rules, but if the rule, as it plainly reads, should prove impractical in operation, the rule can be amended pursuant to established rulemaking procedures. However, "absent such amendment, expedience cannot be permitted to dictate its terms." That is, while an administrative agency "is not necessarily bound by its initial construction of a statute evidenced by the adoption of a rule," the agency may implement its changed

28 75 interpretation only by "validly adopting subsequent rule changes." The statutory framework under which administrative agencies must operate in this state provides adequate mechanisms for the adoption or amendment of rules. See Section 120.535 and 120.54, Florida Statutes. To the extent that the results sought by an agency cannot be accomplished by changes in the administrative rules, interested parties must seek a remedy in the legislature. (emphasis added)(internal citations omitted).

Cleveland Clinic Fla. Hosp. v. Ag. for Health Care Admin.,

679 So. 2d 1237, 1242-1243 (Fla. 1st DCA 1996).

Burden of Proof

61. Section 120.56(2)(a) was amended by chapter 2016-116,

Laws of Florida, and altered the Petitioners' burden from that of "going forward" to "prov[ing] by a preponderance of the evidence that the petitioner would be substantially affected by the proposed rule." The 2016 version of section 120.56(2)(a) applies to Petitioners in this case. See Walker & LaBerge, Inc. v. Halligan, 344 So. 2d 239, 243 (Fla. 1977) ("Burden of proof requirements are procedural in nature . . . [and] could be abrogated retroactively because (no one has a vested right in any given mode of procedure.'") (Internal citations omitted); see also Shaps v. Provident Life & Accident Ins. Co., 826 So. 2d

250, 254 (Fla. 2002) ("[G]enerally in Florida the burden of proof is a procedural issue.").

29 76 62. Petitioners established that they are substantially

affected by the proposed rule. Upon that showing by

Petitioners, Respondent "has the burden to prove by a

preponderance of the evidence that the proposed rule is not an

invalid exercise of delegated legislative authority as to the

objections raised." § 120.56(2)(a), Fla. Stat.

63. "A 'preponderance' of the evidence is defined as 'the

greater weight of the evidence,' ... or evidence that 'more

likely than not' tends to prove a certain proposition."

(citations omitted) Gross v. Lyons, 763 So. 2d 276, 280 n.l

(Fla. 2000).

64. When a substantially affected person seeks a

determination of the invalidity of a proposed rule pursuant to section 120.56(2), the proposed rule is not presumed to be valid or invalid. § 120.56(2)(c), Fla. Stat.

Rulemaking Standards

65. Section 120.52(8) defines an "invalid exercise of delegated legislative authority." As Petitioners have framed the issues in the Joint Prehearing Stipulation, only sections

120.52(8)(a), (8)(b), (8) (c), and (8)(f) are at issue in this proceeding. Those provisions establish that a rule is an invalid exercise of delegated legislative authority under the following circumstances:

30 77 (8) "Invalid exercise of delegated legislative authority" means action that goes beyond the powers, functions, and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one of the following applies:

(a) The agency has materially failed to follow the applicable rulemaking procedures or requirements set forth in this chapter;

(b) The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(3)(a)l.;

(c) The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(3) (a)1.;

•k -k -k

(f) The rule imposes regulatory costs on the regulated person, county, or city which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives.

66. In addition to the subsections of 120.52(8) specifically pled, the "flush left" paragraph at the end of section 120.52(8) has been described as "a set of general standards to be used in determining the validity of a rule in all cases." S.W. Fla. Water Mgmt• Dist. v. Save the Manatee

Club, Inc., 773 So. 2d 594, 597-598 (Fla. 1st DCA 2000). The

"flush left" section provides that:

A grant of rulemaking authority is necessary but not sufficient to allow an agency to adopt a rule; a specific law to be implemented is also required. An agency may

31 78 adopt only rules that implement or interpret the specific powers and duties granted by the enabling statute. 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 provisions 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 powers and duties conferred by the enabling statute.

Statement of Estimated Regulatory Costs

67. Section 120.541(1), which governs the preparation and consideration of statements of estimated regulatory costs, provides, in pertinent part, that:

(a) Within 21 days after publication of the notice required under s. 120.54(3) (a), a substantially affected person may submit to an agency a good faith written proposal for a lower cost regulatory alternative to a proposed rule which substantially accomplishes the objectives of the law being implemented. The proposal may include the alternative of not adopting any rule if the proposal explains how the lower costs and objectives of the law will be achieved by not adopting any rule. If such a proposal is submitted, the 90-day period for filing the rule is extended 21 days. Upon the submission of the lower cost regulatory alternative, the agency shall prepare a statement of estimated regulatory costs as provided in subsection (2), or shall revise its prior statement of estimated regulatory costs, and either adopt the alternative or provide a statement of the reasons for

32 79 rejecting the alternative in favor of the proposed rule.

(b) If a proposed rule will have an adverse impact on small business or if the proposed rule is likely to directly or indirectly increase regulatory costs in excess of $200,000 in the aggregate within 1 year after the implementation of the rule, the agency shall prepare a statement of estimated regulatory costs as required by s. 120.54(3) (b) .

(c) The agency shall revise a statement of estimated regulatory costs if any change to the rule made under s. 120.54(3)(d) increases the regulatory costs of the rule.

(d) At least 21 days before filing the rule for adoption, an agency that is required to revise a statement of estimated regulatory costs shall provide the statement to the person who submitted the lower cost regulatory alternative and to the committee and shall provide notice on the agency's website that it is available to the public.

(e) Notwithstanding s. 120.56(1)(c), the failure of the agency to prepare a statement of estimated regulatory costs or to respond to a written lower cost regulatory alternative as provided in this subsection is a material failure to follow the applicable rulemaking procedures or requirements set forth in this chapter.

68. Section 120.541(2) provides, in pertinent part, that:

A statement of estimated regulatory costs shall include:

(a) An economic analysis showing whether the rule directly or indirectly:

1. Is likely to have an adverse impact on economic growth, private sector job creation or employment, or private sector investment

33 80 in excess of $1 million in the aggregate within 5 years after the implementation of the rule;

2. Is likely to have an adverse impact on business competitiveness, including the ability of persons doing business in the state to compete with persons doing business in other states or domestic markets, productivity, or innovation in excess of $1 million in the aggregate within 5 years after the implementation of the rule; or

3. Is likely to increase regulatory costs, including any transactional costs, in excess of $1 million in the aggregate within 5 years after the implementation of the rule.

69. Section 120.541(3) provides that;

If the adverse impact or regulatory costs of the rule exceed any of the criteria established in paragraph (2)(a), the rule shall be submitted to the President of the Senate and Speaker of the House of Representatives no later than 30 days prior to the next regular legislative session, and the rule may not take effect until it is ratified by the Legislature.

General Provisions Related to Gambling

70. Gambling in Florida is historically disfavored, to the extent of criminalizing casino-type gambling. The keeping of

"gambling houses" is a third-degree felony. § 849.01, Fla.

Stat. Playing or engaging in any game of chance, including cards, for money or "other thing of value" is a second-degree misdemeanor. § 849.08, Fla. Stat.

34 81 71. The Florida Legislature has established a narrow

exception to these criminal statutes by allowing certain card

games to be played in cardrooms at licensed pari-mutuel

facilities "if such game and cardroom operation are conducted

strictly in accordance with the provisions of this section."

§ 849.086(3), Fla. Stat. "The legislature finds that authorized

games as herein defined are considered to be pari-mutuel style

games and not casino gaming because the participants play

against each other instead of against the house." § 894.086(1),

Fla. Stat.

72. An "authorized game" is "a game or series of games of

poker or dominoes which are played in a non-banking manner."

§ 849.086(2) (a), Fla. Stat.

73. A "banking game" is a "game in which the house is a

participant in the game, taking on players, paying winners, and

collecting from losers or in which the cardroom establishes a

bank against which participants play." § 849.086(2)(b), Fla.

Stat.

Rulemaking Authority

74. "[I]t is well established that the legislature has

broad discretion in regulating and controlling pari-mutuel

wagering and gambling under its police powers." Div. of Pari-

Mutuel Wagering, Dep't of Bus. Reg, v. Fla. Horse Council, Inc.,

464 So. 2d 128, 130 (Fla. 1985). Thus, the authority of the

35 82 legislature to empower the Division to adopt pari-mutuel rules to establish standards for cardroom operations and activities is recognized by the undersigned.

75. Despite the foregoing broad grant of authority, the authority to adopt rules is not without limits. See

St. Petersburg Kennel Club v. Dep't of Bus. & Prof'l Reg.,

719 So. 2d 1210, 1211 (Fla. 2d DCA 1998)(holding that neither section 550.0251(12) nor section 849.086(4) (a), Florida Statutes

(Supp. 1996), authorized Respondent to adopt a definition of

"poker," or to approve games based thereon).

76. Rules 61D-11.001 and 61D-11.002 list sections

550.0251(12) and 849.086(4) and (11) as the rulemaking authority.

77. Section 550.0251(12) provides that:

The division shall have full authority and power to make, adopt, amend, or repeal rules relating to cardroom operations, to enforce and to carry out the provisions of s. 849.086, and to regulate the authorized cardroom activities in the state.

78. Section 849.086(4), entitled "Authority of Division," provides, in pertinent part, that:

The Division of Pari-mutuel Wagering of the Department of Business and Professional Regulation shall administer this section and regulate the operation of cardrooms under this section and the rules adopted pursuant thereto, and is hereby authorized to:

36 83 (a) Adopt rules, including, but not limited to: the issuance of cardroom and employee licenses for cardroom operations; the operation of a cardroom; recordkeeping and reporting requirements; and the collection of all fees and taxes imposed by this section.

(b) Conduct investigations and monitor the operation of cardrooms and the playing of authorized games therein.

•k k k

(d) Suspend or revoke any license or permit, after hearing, for any violation of the provisions of this section or the administrative rules adopted pursuant thereto.

79. Section 849.086(11) establishes the requirement that cardroom operators keep and maintain records of cardroom operations, with "[t]he information required in such records shall be determined by division rule," and to report such records "on forms prescribed by the division." That statutory section is not applicable to the proposed rules at issue.

80. Petitioners have characterized the dispute in this case as centering on "the frequency in which the designated player button must be rotated around the poker table and offered to players." To the contrary, the preponderance of the evidence demonstrates that the fundamental disagreement is whether the manner in which the games are being played, in which the players

37 84 play against a banked designated player rather than against each other with a pooled pot, constitutes a "banking game" that is prohibited by section 849.086(12)(a) .

The Designated Player Rules

81. The rules proposed for repeal, rules 61D-11.001(17) and 61D-11.002(5), relate to the play of designated player games.

82. Rule 61D-11.001(17) provides that "A[d]esignated player' means the player identified by the button as the player in the dealer position."

83. 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:

(a) Establish uniform requirements to be a designated player;

Internal Control Rules

84. Rule 61D-11.019, entitled "Internal Controls,"8/ and last amended on July 21, 2014, provides, in pertinent part, that:

38 85 (1) Initial applications for a cardroom license shall include a complete set of written internal controls established in compliance with Section 849.086, F.S., and the rules promulgated thereunder. Subsequent changes to the internal controls must be submitted to the division for approval prior to implementation, as one complete set, in a format which will include underlining additions and striking through deletions, since the last date of approved revisions with a footnote of the current revision date.

(2) Failure of any cardroom operator to follow the internal controls once approved by the division shall be a violation of these rules.

k k k

(4) The cardroom manager or general manager shall sign and submit the internal controls to the division. The internal controls shall at a minimum contain the following:

k k k

(i) A list of all authorized games offered for play and a description of the rules of play and wagering requirements for each game[.]

Invalid Exercise of Delegated Legislative Authority

85. Petitioners have alleged that the proposed rules at issue constitute an invalid exercise of delegated legislative authority pursuant to subsection 120.52(8)(a), (b), (c), and (f).

39 86 A. 120.52(8)(a) - Respondent materially failed to follow applicable rulemaking procedures or requirements

86. When it proposed the subject amendments to chapter

61D-11, Respondent had not prepared a statement of estimated regulatory costs, relying on its determination that such was not required since the amendments would have little economic effect.

87. On November 19, 2015, Petitioners timely filed a written LCRA that, on its face, demonstrated that the proposed rule was likely to have adverse impact in excess of $1 million in the aggregate within five years after the implementation of the rule. When that LCRA was filed, a statutory obligation was triggered that required Respondent to prepare a statement of estimated regulatory costs and either adopt the LCRA or provide a statement of the reasons for rejecting the alternative in favor of the proposed rule. § 120.541(1)(a), Fla. Stat.

88. Respondent did not prepare a statement of estimated regulatory costs or respond to a written lower cost regulatory alternative. Other than vague assertions that the numbers provided to it by Petitioners were "unreliable," assertions that were made without the assistance of qualified economists or statisticians, Respondent provided little in support of its decision.

89. Section 120.541(1)(e) provides that:

Notwithstanding s. 120.56(1)(c), the failure of the agency to prepare a statement of

40 87 estimated regulatory costs or to respond to a written lower cost regulatory alternative as provided in this subsection is a material failure to follow the applicable rulemaking procedures or requirements set forth in this chapter.

90. As a result of its failure to comply with section

120.541, Respondent has materially failed to follow the applicable rulemaking procedures or requirements set forth in chapter 120.

B. 120.52(8)(b) - Respondent has exceeded its grant of rulemaking authority

91. As a legislative function, rulemaking is within the exclusive authority of the legislature. S.W. Fla. Water Mgmt.

Dist. v. Save the Manatee Club, Inc., 773 So. 2d at 598. It is not sufficient that the rule is "within the agency's powers and duties," there must be a specific grant of rulemaking authority.

Id. at 598-99.

92. The opinions in Southwest Florida Water Management

District, supra, and Board of Trustees of the Internal

Improvement Trust Fund v. Day Cruise Association, Inc.,

794 So. 2d 696 (Fla. 1st DCA 2001), recognize that the flush- left paragraph of section 120.52(8) is applicable to challenges involving allegations that an agency has exceeded its rulemaking authority, and is intended to restrict and narrow the scope of agency rulemaking. As established in Day Cruise:

41 88 It is now clear, agencies have rulemaking authority only where the Legislature has enacted a specific statute, and authorized the agency to implement, and then only if the (proposed) rule implements or interprets specific powers or duties, as opposed to improvising in an area that can be said to fall only generally within some class or powers or duties the Legislature has conferred on the agency.

794 So. 2d at 700. Nonetheless, "[i]t follows that the authority for an administrative rule is not a matter of degree.

The question is whether the statute contains a specific grant of legislative authority for the rule, not whether the grant of authority is specific enough." S.W. Fla. Water Mqmt. Dist. v.

Save the Manatee Club, Inc., 773 So. 2d at 599.

93. An "authorized game" is "a game or series of games of poker or dominoes which are played in a non-banking manner."

§ 849.086(2)(a), Fla. Stat. A "banking game" is a "game in which the house is a participant in the game, taking on players, paying winners, and collecting from losers or in which the cardroom establishes a bank against which participants play."

§ 849.086(2)(b), Fla. Stat.

94. Section 849.086(1) provides that "authorized games as herein defined" have been determined by the Legislature to be pari-mutuel style games because players play against each other, and do not play against the cardroom operator.

42 89 95. Respondent has cited sections 550.0251(12) and

849.086(4) and (11) as the rulemaking authority for rules

61D-11.001 and 61D-11.002. As set forth above, the authority in section 849.086(11) regarding recordkeeping and reporting is not applicable to the issues in this case.

96. In St. Petersburg Kennel Club v. Department of Business and Professional Regulation, 719 So. 2d 1210, 2011 (Fla. 2d DCA

1998), the Second District Court of Appeal determined that neither section 550.0251(12) nor section 849.086(4) "state, for example, that the Division shall have the authority to make rules which set forth the definition of poker."

97. Section 550.0251 has been amended twice since the 1996 version of Florida Statutes cited in St. Petersburg Kennel Club.

Neither of the amendments made changes to the rulemaking authority in section 550.0251(12).

98. Section 849.086 has been amended eight times since the

1996 version of Florida Statutes cited in St. Petersburg Kennel

Club. None of the amendments made changes to the rulemaking authority in section 849.086(4).

99. As with the effort in St. Petersburg Kennel Club, the effort to further define, prohibit, or limit activities authorized by statute, in this case by the repeal of a rule that authorized and set standards for designated player (i.e. player banked) games, exceeds Respondent's rulemaking authority.

43 90 See also Calder Race Course, Inc. v. Dep't of Bus. & Prof,l Reg.,

Case No. 04-2950RX (Fla. DOAH Dec. 21, 2004), aff'd per curiam

Dep't of Bus. & Prof'1 Reg, v. Calder Race Course, Inc., 913 So.

2d 601 (Fla. 1st DCA 2005).

100. As set forth herein, the result in this case is predicated on the fact that Respondent developed a rule that specifically recognized a particular manner of game play as being allowable and, by repealing that rule, has established a policy that the same manner of game play is not allowable. The effort to restrict gameplay by the repeal of the rules, and by so doing to establish what is an "authorized game," is beyond the authority conferred under sections 550.0251(12) and 849.086(4).

101. The undersigned fully recognizes the seemingly incongruous result created by this conclusion, as did Respondent.

See Respondent's Proposed Final Order, 5[ 60. ("These exact statutory sections were also cited when the rules were first promulgated in July 2014 .... However, if the Petitioners' position is accepted, then the current version of the rules would be invalid because those sections were the exact ones cited when the rule was enacted."). That may well be the case. However, no party has argued that the existing rules are an invalid exercise of delegated legislative authority. Thus, the validity of the existing rules is not before the undersigned.9/

4491 C. 120.52(8)(c) - The rule enlarges, modifies, or contravenes the specific provisions of law implemented

102. An agency is limited in its rulemaking authority to

implementing and interpreting specific laws and may not

promulgate a rule simply because the subject matter of the rule

is within the general scope of its powers and duties. In that

regard, "[u]nder Section 120.52(8)(c), the test is whether a

(proposed) rule gives effect to a ^specific law to be

implemented,' and whether the (proposed) rule implements or

interprets ^specific powers and duties.'" Bd. of Trs. of the

Int. Imp. Trust Fund v. Day Cruise Ass'n, 794 So. 2d at 701.

103. Respondent has cited section 849.086 as the law implemented by rules 61D-11.001 and 61D-11.002.

104. The issue is, therefore, whether Respondent's proposed repeal of rule 61D-11.001(17) and 61D-11.002(5) , which has the effect of establishing a prohibition on designated player games, implements specific powers and duties established by section 849.086.

105. The powers and duties established by section 849.086 do not include the establishment of rules to define the manner of play or wagering for "authorized games."10/

106. A preponderance of the evidence demonstrates that, by its repeal of the rules at issue, Respondent intends to not only repeal the conditions for implementing authorized designated

45 92 player games, but to repeal the authority for such games

altogether, a restriction on "authorized games" that is not apparent from section 849.086.

107. For the reasons set forth herein with regard to whether the repeal of rules 61D-11.001(17) and 61D-11.002(5) exceed Respondent's rulemaking authority, and recognizing the apparent incongruity created thereby, the undersigned similarly concludes that the repeal of the rules has been undertaken with the specific intent to define, prohibit, or limit activities authorized by statute, and thus enlarges, modifies, or contravenes the specific provisions of law implemented.

D. 120.52(8)(f) - The rule imposes regulatory costs on the regulated person which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives

108. Petitioners argue that the proposed repeal is invalid because Respondent is imposing regulatory costs on Petitioners that could be reduced through the adoption of less costly regulatory alternatives that substantially achieve the statutory objectives. The statutory objectives are, generally, "to provide additional entertainment choices for the residents of and visitors to the state, promote tourism in the state, and provide additional state revenues." § 849.086(1), Fla. Stat.

109. In support of its argument, Petitioners refer to the

LCRA filed on their behalf. While the existence of the LCRA was

46 93 acknowledged by all parties, and evidence was sufficient to

establish that it triggered the duties set forth in section

120.541, the LCRA itself was not entered in evidence.

110. It was the generally stated position of Respondent

throughout the proceeding that the repeal of rules 61D-

11.001(17) and 61D-11.002(5) had no real effect on the ability

of Petitioners to allow designated player games at their

cardrooms (though that position was not supported by the evidence). Thus, Petitioners' argument that the rule unnecessarily imposed regulatory costs has some facial merit.

However, given that the LCRA was not entered in evidence, and given that the proposed repeal is invalid for the independent grounds set forth herein, it is unnecessary to calculate the effect of alternatives on the regulatory costs occasioned thereby.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the proposed repeal of rules 61D-

11.001(17) and 61D-11.002(5) constitutes an invalid exercise of delegated legislative authority.

47 94 DONE AND ORDERED this 26th day of August, 2016, in

Tallahassee, Leon County, Florida.

E. GARY EARLY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl. us

Filed with the Clerk of the Division of Administrative Hearings this 26th day of August, 2016.

1/ A petition was also jointly filed by St. Petersburg Kennel Club, Inc.; Sarasota Kennel Club, Inc.; Washington County Kennel Club, Inc.; and Fronton Holdings, LLC, and was assigned as Case No. 15-7055. That petition was voluntarily dismissed on February 12, 2016, and the case closed on February 15, 2016.

2/ As set forth in the Order of Pre-hearing Instructions, the parties were, in their prehearing stipulation, to identify all issues of fact and law remaining for consideration in this proceeding. The failure to identify issues of fact or law remaining to be litigated has been held to constitute a waiver and elimination of those issues. See Palm Beach Polo Holdings, Inc. v. Broward Marine, Inc., 174 So. 3d 1037 (Fla. 4th DCA 2015).

Petitioners did not identify section 120.52(8)(d), which provides that a proposed rule is an invalid exercise of delegated legislative authority if "[t]he rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency, as being a basis for its challenge. Under the facts of this case, which includes Respondent's decision to deny internal controls with designated player games, had that section been raised, it may well have

48 95 proven to be an additional reason for the invalidation of the proposed rule.

3/ Mr. Zachem explained, convincingly, that as a general rule, most poker games are designated player games. Using the example of Texas Hold AEm, the "designated player" would be rotated around the table, with that person, though not physically dealing cards, being in the position of being dealt last. Advantages with regard to antes and being able to assess the bets of other players go with the table position of the "designated player. The button passes after each hand, with each player at the table having the sequential opportunity to be the "designated player," i.e., the player in the dealer position. Given the advantages attendant to that position, there would be little or no reason to decline the button. Thus, the stipulation that, for purposes of this rule challenge, "designated player game" are synonymous with "player banked games" more accurately describes the situation in which players individually play against a player with a designated amount of chips, a situation that Respondent has now determined to constitute a player maintained (but cardroom established) "bank."

4/ It was not clear whether the Bestbet cardroom is affiliated with the Orange Park Kennel Club or the Jacksonville Kennel Club, both of which operate cardrooms.

5/ The games as played, as depicted in the December 7, 2015 surveillance videos entered in evidence, differed in certain respects from those depicted in the April 2012 demonstration video, and approved in the internal controls. Nonetheless, the basic component of the games, i.e., that the designated players were individually playing their hands against the other players at the table, was consistent. The games, their manner of play, and the extent to which the games as played deviated from those approved in the internal controls, were ably described by Judge Van Wyk in her Recommended Order in Department of Business and Professional Regulation, Division of Pari-mutuel Wagering v. Jacksonville Kennel Club, DOAH Case No. 16-1009. A review of that Order, which is not yet final, suggests that Judge Van Wyk's conclusion that "on December 7, 2015, Jacksonville operated cardroom games in a banking manner, or unauthorized games in violation of section 849.086" was based more on the case-specific proof that the games conducted on that date deviated from the internal controls, and was not a sweeping conclusion that designated player games as approved constituted prohibited banking games.

49 96 67 No explanation was provided as to how that interpretation squares with section 849.086(7)(c) . ("The providing of . . . dealers by a licensee does not constitute the conducting of a banking game by the cardroom operator.").

7 / Respondent has attempted to soften its position by arguing that it has no issue with designated player games, but that its concern is that the (previously approved) internal controls and house rules discourage the rotation of the button, and thus participation by more designated players regardless of whether they meet the uniform requirements. The preponderance of the evidence in this case demonstrates that Respondent's goal was a more fundamental desire to rid cardrooms of player-banked games established through the use of designated players.

87 The procedure for the approval of internal controls has existed in substantially similar form since September 7, 2008.

97 It is significant that Respondent did not propose the repeal of rules 61D-11.001(17) and 61D-11.002(5) on the basis that it had determined that it lacked rulemaking authority for those rules. Rather, the October 29, 2015, notice of proposed rule provided that "[t]he purposes and effects of the proposed rules are to update the guidelines that govern cardrooms in the state of Florida. Each of the above listed rules has been updated for clarity, efficiency, and congruency with statute," which suggests that Respondent believed it had the requisite authority to adopt the amendments, and intended the proposed amendments to have some substantive effect. The January 15, 2016, notice of change did not suggest otherwise.

107 Until section 849.086(8) was last amended in 2009, the Legislature established wagering limits and requirements, with the requirements having been amended several times since the initial enactment of section 849.086 in 1996. That authority is now to be exercised by the cardroom operator. Ch. 2009-170, § 24, Laws of Fla.

50 97 COPIES FURNISHED:

William D. Hall, Esquire Louis Trombetta, Esquire Caitlin R. Mawn, Esquire Department of Business and Professional Regulation Capital Commerce Center 2601 Blair Stone Road Tallahassee, Florida 32399-2202 (eServed)

Jonathan Zachem, Director Division of Pari-Mutuel Wagering Department of Business and Professional Regulation Capital Commerce Center 2601 Blair Stone Road Tallahassee, Florida 32399-2202 (eServed)

Jason Maine, General Counsel Department of Business and Professional Regulation Capital Commerce Center 2601 Blair Stone Road Tallahassee, Florida 32399-2202 (eServed)

Ken Lawson, Secretary Department of Business and Professional Regulation Capital Commerce Center 2601 Blair Stone Road Tallahassee, Florida 32399-2202 (eServed)

John M. Lockwood, Esquire Thomas J. Morton, Esquire Kala K. Shankle, Esquire The Lockwood Law Firm 106 East College Avenue, Suite 810 Tallahassee, Florida 32301 (eServed)

51 98 Christopher M. Kise, Esquire James A. McKee, Esquire Joshua M. Hawkes, Esquire Foley & Lardner LLP 106 East College Avenue, Suite 900 Tallahassee, Florida 32301 (eServed)

Robert W. Clark, Esquire Clark Mueller Bierley, PLLC 102 West Whiting Street Tampa, Florida 33602 (eServed)

Ernest Reddick, Chief Alexandra Nam Department of State R. A. Gray Building 500 South Bronough Street Tallahassee, Florida 32399-0250 (eServed)

Ken Plante, Coordinator Joint Administrative Procedures Committee Room 680, Pepper Building 111 West Madison Street Tallahassee, Florida 32399-1400 (eServed)

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing one copy of a Notice of Appeal with the agency clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the appellate district where the party resides. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed.

52 99 STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,

Petitioner, vs. Case No. 16-1009

JACKSONVILLE KENNEL CLUB, INC.,

Respondent. /

RECOMMENDED ORDER

A final hearing was conducted in this case on May 31 and

June 1, 2016, in Tallahassee, Florida, before Suzanne Van Wyk, an Administrative Law Judge with the Division of Administrative

Hearings.

APPEARANCES

For Petitioner: William D. Hall, Esquire Louis Trombetta, Esquire Department of Business and Professional Regulation 2601 Blairstone Road Tallahassee, Florida 32399-2202

For Respondent: John M. Lockwood, Esquire Thomas J. Morton, Esquire Kala Kelly Shankle, Esquire The Lockwood Law Firm 106 East College Avenue, Suite 810 Tallahassee, Florida 32301

100 STATEMENT OF THE ISSUES

Whether Jacksonville Kennel Club violated section

849.086(12)(a), Florida Statutes (2015), by conducting unauthorized card games in its cardroom, and section

849.086(6)(c), by allowing unlicensed persons to work in its cardroom; and, if so, whether the Division should be estopped from prosecuting Jacksonville Kennel Club. Also at issue is whether the allegations of the Administrative Complaint constitute an unadopted rule in violation of section

120.57(1)(e)l., Florida Statutes.

PRELIMINARY STATEMENT

On or about January 25, 2016, Petitioner, Department of

Business and Professional Regulation, Division of Pari-Mutuel

Wagering ("Petitioner" or "Division"), served its Administrative

Complaint in Case No. 2015-053213 on Respondent, Jacksonville

Kennel Club, Inc. ("Respondent" or "Jacksonville"). The 18- count Administrative Complaint alleged that, on December 7,

2015, Respondent operated unauthorized card games at several of its gaming tables, and allowed persons to work in its cardroom without an occupational license.

On February 15, 2016, Respondent filed its Petition for

Formal Administrative Hearing by which it disputed the facts alleged in the Administrative Complaint, and alleged that the allegations in the Administrative Complaint constitute an

2 101 unadopted rule (presumably in violation of section

120.57(1) (e)l.). The matter was referred to the Division of

Administrative Hearings on February 19, 2016.

The case was originally assigned to Administrative Law

Judge Bruce McKibben, but was transferred to the undersigned on

February 29, 2016.1/ The final hearing was scheduled for May 31 through June 3, 2016, and commenced as scheduled.2/ The parties timely filed a Joint Prehearing Stipulation which clarified

Respondent's allegation that the Division had relied on an unadopted rule in violation of section 120.57(1)(e)l.

Respondent contemporaneously filed a Motion in Limine to exclude evidence or argument related to California law on the subject of gaming, which was denied.

At the final hearing, the Division presented the testimony of David Journey, a Jacksonville cardroom dealer. Jacksonville presented the testimony of its president, Jamie Shelton, and

Noah Carbone, cardroom manager for the Palm Beach Kennel Club.

The parties jointly introduced the testimony of Charles Wayne

Taylor, a Division investigator, and Deborah Giardina,

Jacksonville's vice president of poker operations, who was accepted as an expert in cardroom management and cardroom operations.

Petitioner's Exhibits PI through P12 were admitted in evidence. Petitioner's 12, the deposition transcript of

3 102 Arley Johnson, Jacksonville's cardroom manager, has been given the evidentiary weight as if the deponent offered live testimony at the final hearing.

Respondent's Exhibits Rl through R26 were admitted in evidence. Respondent's Exhibit 20, the deposition transcript of the Department's Secretary, Ken Lawson, has been given the evidentiary weight as if the deponent offered live testimony at the final hearing.

The parties' Joint Exhibits J1A through J1I, and J2 through

J7 were also admitted in evidence. Exhibit J3 is the deposition transcript of Jonathan Zachem, the Division Director; J4 is the deposition transcript of Daniel J. Dillmore, the Deputy Division

Director; J5 is the deposition transcript of Lisa Helms,

Division Operations Review Specialist; J6 is the deposition transcript of Steve Kogan, the Division's Chief of

Investigations; and J7 is the deposition transcript of

Mr. Taylor. Each of these transcripts has been given the evidentiary weight as if the deponent offered live testimony at the final hearing.

In addition, the undersigned took official recognition of specified Notices of Development of Rulemaking for Florida

Administrative Code Rules 61D-11.001 and 11.002,3/ and of United

States District Court Case No. 4:15-CV-00516-RH--CAS in the

Northern District of Florida.

4 103 A three-volume Transcript of the proceedings was filed on

June 14, 2016. On June 27, 2016, the undersigned granted

Jacksonville's unopposed request for an extension of time to file proposed recommended orders, giving the parties until

July 15, 2016, to make said filings. The parties timely filed

Proposed Recommended Orders, which have been duly considered in the preparation of this Recommended Order.

All references herein to the Florida Statutes are to the

2015 version, unless otherwise noted.

FINDINGS OF FACT

1. The Division is the state agency charged with regulating pari-mutuel wagering activities in Florida pursuant to chapter 550 and section 849.086, Florida Statutes.

2. At all times material to the Administrative Complaint,

Jacksonville held a permit from the Division to conduct pari- mutuel wagering, and operated a cardroom under license number 145-1002.

3. Gambling in Florida is historically disfavored, to the extent of criminalizing casino-type gambling. The keeping of

"gambling houses" is a third-degree felony. See § 849.01, Fla.

Stat. Playing or engaging in any game of chance, including cards, for money or "other thing of value" is a second-degree misdemeanor. See § 849.08, Fla. Stat.

5 104 4. The Florida Legislature has carved out a narrow exception to these criminal statutes by allowing certain card games to be played only in cardrooms at licensed pari-mutuel facilities strictly regulated by the State. See § 849.086(3),

Fla. Stat. "The legislature finds that authorized games as herein defined are considered to be pari-mutuel style games and not casino gaming because the participants play against each other instead of against the house." § 894.086(1), Fla. Stat,

(emphasis added).

5. In Florida, an "authorized game" is "a game or series of games of poker or dominoes which are played in a non-banking manner." § 849.086(2)(a), Fla. Stat. A "banking game" is a

"game in which the house is a participant in the game, taking on players, paying winners, and collecting from losers or in which the cardroom establishes a bank against which participants play." § 849.086(2)(b), Fla. Stat, (emphasis added). Thus, in

Florida, only non-banking games are authorized games.

6. The Division has the sole authority to issue cardroom and employee licenses for cardroom operations, collect fees and taxes imposed by statute, and adopt rules for cardroom recordkeeping and reporting requirements. See § 849.086(4)(a),

Fla. Stat. The Division is authorized to monitor the operation of cardrooms and the playing of authorized games, to investigate any alleged violation of the statute, and to suspend or revoke

6 105 any license or permit for said violation. See §§ 849.086(4)(b) and (d), Fla. Stat.

7. Applicants for a cardroom license must submit a complete set of written internal controls to the Division for approval. See Fla. Admin. Code R. 61D-11.019(1). The internal controls must include "a list of all authorized games offered for play and a description of the rules of play and wagering requirements for each game." Fla. Admin. Code R. 61D-

11.019(4)(i) . Subsequent changes to the internal controls, including the addition or deletion of authorized games, must be submitted to the Division for approval.

8. In 2014, the Division adopted rule 61D-11.012(5), governing "designated-player games,"4/ which provides as follows:

(5) Card games that utilize a designated player that covers other players' wagers shall be governed by the cardroom operator's house rules. The house rules shall:

(a) Establish uniform requirements to be a designated player;

(b) Ensure that the dealer button rotates around the card table in a clockwise fashion on a hand by hand basis to provide each player desiring to be the designated player an equal opportunity to participate as the designated player; and

9. In a game of standard poker (or player-pool poker), all players play against each other, and the player with the winning

7 106 hand is paid out of the "pot," the total of all players' bets.

In a designated-player game, each player plays solely against the designated player, his or her hand being compared to the designated player's hand. Payment to players with a winning hand is made from the designated player's chips and players' losses are taken by the designated player.

10. In a designated-player game, the designated player has a mathematical advantage over the other players. In order to balance the odds, the opportunity to be the designated player typically passes from player to player in a clockwise fashion on a hand-to-hand basis. This rotation of the designated player is referred to as "passing the button," and usually involves placement of a circular disk or other object at the designated player's position for the particular hand.

Designated-Player Games at Jacksonville

11. Jacksonville became interested in offering designated- player games subsequent to adoption of rule 61D-11.002(5).

During the summer of 2015, Jacksonville began preparing to offer one-card poker, two-card poker, three-card poker, Ultimate Texas

Hold'em (also known as Florida Hold'em), and Pai Gow poker

(collectively, the "designated-player games" or "the games") to its customers. Jacksonville investigated how other facilities offered and played the games, obtained information on leasing the games, developed internal controls to describe the rules of

8 107 play and wagering requirements for the games, and created a new floor plan for the tables at which the games would be offered.

12. Jacksonville began offering the games on September 17,

2015, with six designated-player tables. In December 2015,

Jacksonville added 12 designated-player tables.

13. Prior to opening its designated-player tables,

Jacksonville submitted its revised cardroom floorplan to the

Division for approval. The Division inspected the cardroom in

September, and approved the arrangement of gaming tables and the placement of security cameras.

14. On October 23, 2015, Jacksonville submitted its internal controls to the Division for approval. The internal controls were approved by the Division, but the record does not reflect the date of approval.

Jacksonville' s Internal Controls

15. In one-card poker, each player must make a primary wager (ante bet), then is dealt one card. Each player's card is compared to the designated player's card. If the player's card is ranked higher than the designated player's card, he or she wins. If the player's card is ranked lower than the designated- player' s card, he or she loses. If the player's card is of the same rank as the designated player's card, the player has the option to "extend the hand" (or go to "war" with the designated player) by making a tie wager equal to his or her ante bet.

9 108 16. With regard to one-card poker, Jacksonville's internal controls read as follows:

Both the player and the [d]esignated [p]layer also have the option to decline extending the hand .... If . . . the player or the [d]esignated [p]layer chooses not to extend the hand he or she has the option to surrender half their primary wager.

k k k

The [d]esignated [p]layer option will be rotated in a clockwise fashion around the table at the completion of every hand.

k k k

After the collection of all losing wagers and the payment of all winning wagers, the dealer shall collect all cards, offer the rotation of the [d]esignated [p]layer position, and begin a new hand.

17. In two-card poker, each player must make an ante bet and may also make a bonus bet. Each player is then dealt four cards to make the best two-card poker hand. After inspecting his or her hand, each player may choose to fold, forfeiting both the ante and the bonus bets; or make a call bet equal to the ante bet. If a player makes a call bet, he or she discards the two unused cards. Each player's hand is then compared to the designated player's hand to determine the winner. The winning hand between the player and designated player is the higher- ranked hand.

10 109 18. The designated player pays the ante bet and call bets.

If the player's hand wins over the designated player's hand, the player is eligible to be paid on the bonus bet, as long as the player's hand is one of the ranked hands on the bonus bet payout table (e.g., two red aces pay at 30:1, mixed aces at 10:1) . A chart listing all payout amounts must be posted at the gaming table.

19. Of note, Jacksonville's internal controls for two-card poker read, "[e]ach player, including the designated player, will be dealt four cards to make the best two card poker hand .... The player may inspect their hand and then choose" whether to fold or make a call bet. The internal controls also provide that "[t]he designated player's hand . . . rotates on a hand-by-hand basis unless there are no eligible designated players or the eligible designated players waive their turn[.]"

20. Three-card poker is very similar to two-card poker.

Each player makes an ante bet and may make a "pair plus" bet, then is dealt three cards. After each player inspects his or her cards, he or she may choose to either fold, forfeiting the ante bet and, if applicable, the pair plus bet, or make a call bet equal to the ante bet. Each hand is then compared to the designated player's hand and the higher hand wins based on the following poker hand rankings (lowest to highest): high card, pair, flush, straight, three of a kind, and straight flush.

11 110 21. The designated player pays both the ante bet and call bets. If the player's hand wins over the designated player's hand, the player is eligible to be paid on the pair plus bet, if the player's hand is one of the ranked hands on the pair plus payout table (e.g., mini royal pays at 200:1, three-of-a-kind at

30:1). A chart listing all payout amounts must be posted at the gaming table.

22. Of note, Jacksonville's internal controls for three- card poker state that "[e]ach player, including the designated player, will be dealt three cards. The players may inspect their hand and then choose" whether to fold or make a call bet.

Further, the internal controls provide that "[t]he designated player's hand . . . rotates on a hand-by-hand basis unless there are no eligible designated players or the eligible designated players waive their turn[.]"

23. In Pai Gow poker, each player makes a minimum ante bet, then is dealt seven cards. Each player inspects his or her cards and arranges them into two-card and five-card hands, the goal being to make the highest possible two-card and five-card poker hands. Players have the option to have their hand played

"the house way," a default arrangement made by the dealer.

Positions in which the player has chosen the house way are marked with a "house way button."

12 111 24. After all players' hands are arranged, the designated player's hand will be opened, and, according to the internal controls, "the designated player will inspect and arrange the hand to their liking." Each of the player's hands are then compared to the designated player's hands, and wins and losses are determined as follows: If both of the player's hands are ranked higher than the designated player's hands, the player wins and is paid on his or her wager; if both of the player's hands are ranked lower than the designated player's hands, the player loses and the designated player is paid; if the player wins one hand and loses the other, it is a "push" (the bet receives no action and is pushed back to the player). If one of the player's hands is of equal rank to the designated player's hand, the designated player's hand is considered higher ranking.

25. Of note, Jacksonville's internal controls for Pai Gow poker state, "[t]he designated player position rotates in a systematic and continuous way unless all players eligible to be the [d]esignated [p]layer pass the designated player position."

26. In Florida Hold'Em, each player makes an ante bet and a blind bet equal to the ante bet, and may make an additional bonus, or trips, bet. Each player is then dealt two cards, which they inspect, then decide whether to check or make a play bet of three or four times the ante bet. At this stage, three community cards are dealt in the middle of the table (the flop

13 112 cards). The players inspect their two-card hand and the flop cards, then choose whether to check or make a play bet of two times the ante bet. Next, two community cards are dealt in the middle of the table (the turn/river cards). Players then inspect their two-card hand, along with the flop and turn/river cards, and choose whether to fold (forfeiting the ante bet, blind bet, and trips bet) or make a play bet equal to the ante bet.

27. Each player's hand is then compared to the designated player's hand, and the player is paid on his or her ante bet and play bet if the player's hand outranks the designated player's hand (based on the standard five-card poker hand rankings). If the player's hand wins over the designated player's hand, the player is eligible to be paid on the blind bet, if the player's hand is one of the ranked hands on the blind bet payout chart

(e.g., full house pays at 3:1; straight flush at 50:1).

Likewise, if the player's hand is ranked higher than the designated player's hand, he or she is eligible to be paid on the trips bet if the player's hand is one of the hands ranked on the trips payout table (e.g., full house pays at 10:1; royal flush at 50:1) . A chart listing all payout amounts must be posted at the gaming table. All ties will result in a push for the ante, blind, and play bets.

14 113 28. Of note, Jacksonville's internal controls for Florida

Hold'em provide that "[ejach player, including the designated player, will be dealt two cards" and that "the players may inspect their hand and then choose" whether to fold, or make a play bet. Similarly, after the flop cards are dealt, "the players may inspect their two card hand with the three flop cards and then choose" whether to check the hand or make a play bet. Again, after the turn/river cards are dealt, the internal controls provide, "the players may inspect their two card hand, the three flop cards and two turn/river cards then choose" whether to fold or make a play bet. The internal controls specifically state that "each player and the designated player will make their best five card hand out of seven cards."

The Rake

29. Licensed cardrooms in Florida derive a fee from each hand played at open card tables. The fee is known as the

"rake," and is determined based on the total of all players' bets. In standard card games, the dealer takes the rake from the pot. In a designated-player game, the dealer calculates the rake based on total players' bets, but takes the rake from the designated player's chips.

30. Jacksonville has established a separate rake schedule for games with more than one designated player. The house rake for games with more than one designated player is five times the

15 114 rake amount for single designated-player games. For example, if there is one designated player and the total bet at the table is between five and 49 dollars, the house takes $1. If there are two designated players at the table, the house takes $5 based on the same range of total bets.

31. The dual-rake structure is included in Jacksonville's dealer training manual, not in its internal controls. The dealer training manual was not submitted to the Division for approval.

32. Having more than one designated player at a table would slow the game play. The slower the play, the fewer hands are completed. The fewer hands completed, the less rake is taken by the house.

33. The dual rake structure dissuades a designated player from joining a table that already has a designated player.

Designated Players at Jacksonville

34. Prior to opening its designated-player games,

Jacksonville established uniform requirements and an application form for a person to become a designated player.

35. The basic requirements for a designated player at

Jacksonville are successful completion of employment, criminal, and credit background checks. In addition, each designated player must wire to Jacksonville $30,000 from a "legitimate bank." Each designated player is required to have a minimum of

16 115 $30,000 available at the table to cover other players' bets.

However, the designated player is not required to cover all

bets.

36. Corporate entities are eligible to become designated

players. Each corporate applicant (including limited liability

companies and partnerships) is required to disclose all direct

and indirect owners of more than five percent interest in the

business, each of whom is also subject to an employment,

criminal, and credit background check.

37. The evidence conflicted as to which persons or

entities were approved designated players at Jacksonville as of

December 7, 2015--the relevant date for the Administrative

Complaint. In response to a subpoena duces tecum from the

Division, Jacksonville produced only one designated-player

application form executed prior to December 7, 2015--that of

Dr. James Joyner, M.D. However, Deborah Giardina,

Jacksonville's vice president of poker operations, testified that Elevated, LLC, d/b/a Knighted Gaming ("Elevated"), applied in September 2015 and became an approved designated player at

Jacksonville in September 2015. Ms. Giardina testified that failure to include Elevated's original application in response to the subpoena request was an "oversight" on her part.5/

38. Regardless of whether Elevated was approved by

Jacksonville through its application process prior to

17 116 December 7, 2015, Elevated began providing designated players at

Jacksonville in September 2015, and was providing designated players on December 7, 2015. Every designated player in the cardroom at Jacksonville on December 7, 2015, was an Elevated employee.

Game Play: December 7, 2015

39. Jacksonville has 12 designated player tables, numbered

71 through 82, which are arranged in an elliptical pattern.

Ropes and stanchions are used to block access to the oblong

"internal" area between and behind the tables. The internal area between the tables is not open to the general public.

40. Each designated-player table is a semi-circle, and the dealer stands or sits at the back of the table facing the players. Each table contains player spots on the curved side numbered one through eight clockwise from the left of the dealer.

41. Joint Exhibits JlA through Jll are videos from

Jacksonville surveillance cameras of tables 71 through 79. Each video shows one hour of play at each table, from 8:00 to 9:00 p.m., on December 7, 2015.

42. Tables 71 and 72 are three-card poker tables.

Throughout the video, the designated player sat at seat eight, the seat to the right of the dealer. The designated player maintained multiple racks of chips in a variety of

18 117 denominations. The designated player at table 72 had approximately $50,000 in chips during play.

43. At one point in play at table 72, a third person who was not a player at the table, stood beside the designated player and reached into his chip racks, and, according to the credible testimony of a Jacksonville dealer, began making change from those chips. In each game, each winning player was paid from the designated-player's chips. The wager of each losing player was placed by the dealer in front of the designated player's chip racks.

44. Throughout play at tables 71 and 72, the designated player never looked at, or even touched, his cards. Thus, contrary to the internal controls, the designated player did not inspect his hand and choose whether to fold or make a call bet.

Nor did the designated player make a wager to initiate the hand.

The designated player was not actually dealt a hand of cards, but rather the dealer played the designated player's cards.

45. At neither table 71 nor table 72 did the "button" pass to any player other than the designated player. Contrary to the internal controls, no player other than the player in seat eight was offered the button. In the video, the location of the button was sometimes indiscernible.

46. Tables 75, 77, and 79 are one-card poker tables. As with the three-card poker games, the designated player sat in

19 118 seat eight, to the right of the dealer. During play at table 75, an unidentified person appeared in the secured area behind the table and handled the designated player's chips.

47. At approximately 19 minutes into the video of table 75, the designated player stood up and was replaced by another designated player in front of the same racks containing substantial quantities of chips. At approximately 31 minutes in, the designated player stood up and was again replaced by another designated player at the same chip racks. At approximately 52 minutes in, an unidentified individual appeared next to the designated player and placed an entire tray of chips in front of the designated player and removed a row of chips from one of the trays (appearing to, once again, make change for the designated player).

48. Activity at the designated player's position at table 77 followed suit. The designated player got up at around

47 minutes in and was replaced by another designated player.

Throughout play, the button at table 77 remained at seat eight.

49. As with the three-card poker games, the designated players at the one-card poker tables never touched their cards.

Contrary to the approved internal controls, the designated player did not have the option to decline extending the hand.

Contrary to the approved internal controls, the designated- player option did not rotate around the table at the completion

20 119 of each hand. Contrary to the approved internal controls, the dealer did not offer the rotation of the designated-player position at the end of each hand.

50. Tables 76 and 78 are Florida Hold'em tables. The designated player at both tables sat at seat eight.

Approximately 25 minutes in, the designated player at table 76 stood up and was replaced by another player in front of the same racks of chips. At approximately 37 minutes into the video of table 78, the designated player stood up and was replaced by the designated player who had earlier left table 76. At 44 minutes into the video of table 78, an unidentified person appeared at the back of the table next to the designated player and removed entire chip trays from the designated players stack and left the table.

51. Throughout play at tables 76 and 78, the button remained in front of the dealer's imprest tray (a tray with rows of chips in varying denominations from which the dealer makes change for players and sells chips to players), except when the designated player's cards were dealt. The dealer "capped" the designated player's cards (placed the button on top of the designated player's cards while face down), then moved the button to the side when he revealed the designated player's cards. The designated player's hand did not rotate "on a hand- by-hand basis," as referenced in the internal controls.

21 120 52. The designated player never looked at his cards, thus, contrary to the internal controls, did not inspect the cards and

"make his best five card hand out of the seven cards." The designated player made no decisions regarding play of the game, despite the specific internal controls as to the decisions to be made by the players after the initial cards, flop cards, and turn/river cards are dealt. Rather than the designated player, the dealer played the designated player's cards.

53. Table 74 is a Pai Gow poker table. The designated player was seated at seat eight. Approximately nine minutes into the video of table 74, the designated player stood up and left the table and was replaced by another designated player.

About 28 minutes in, an unidentified person reached around the designated player and moved around the trays of chips, as well as the chips therein. Again, at about 49 minutes in, the designated player left the table and was replaced by another designated player. A hand was still in play when the second designated player left the table.

54. Throughout play, the dealer used the button the same way as the dealer at the Florida Hold'em tables — capped the designated player's cards, then placed it in front of the imprest tray to reveal the designated player's cards. Contrary to the internal controls, the designated-player position did not

"rotate in a systematic and continuous way." Because only one

22 121 designated player was present at the table at any one time, there was no point in offering the button to other players.

55. Contrary to the internal controls, the designated player did not "inspect and arrange [his] hand to [his] liking."

Nor did the designated player use the house way button. His cards were played by the dealer. According to the credible testimony of a Jacksonville dealer, the dealers are trained to always set the designated player's cards the house way. The internal controls do not reference this practice.

56. Table 73 is a two-card poker table. At approximately nine minutes in, the designated player stood up and left the table, although a hand was still in play. He was replaced by another designated player. At approximately 17 minutes in, an unidentified person reached into one of the designated player's chip trays, then picked up chips in front of the designated player and placed them into a row in the chip tray. That person subsequently removed chips from another tray in front of the designated player and placed them on the table. At approximately 47 minutes in, an unidentified person approached the designated player from the back of the table and handed her two empty chip racks, which she added to her stacks.

57. Throughout the video, the designated player never looked at the four cards dealt him or her by the dealer. Thus, contrary to the internal controls, neither he nor she inspected

23 122 the cards and decided which two cards to keep and which to discard, or whether to make a call bet based on those cards.

The designated player made no wagers at all. The dealer decided which two cards were the designated player's best cards, and then proceeded to compare each player's cards to the designated player's cards, beginning with the player to the dealer's left.

Each winning hand was paid from the chips in front of the designated player. Losing players wagers were placed in front of the designated player.

58. Throughout play, the dealer used the button the same as the dealers in Florida Hold'em and Pai Gow poker. Contrary to the internal controls, the designated player's hand did not rotate on a hand-by-hand basis.

59. The operation of the designated-player tables on

December 7, 2015, was typical of the operation of the games on most days. The Jacksonville cardroom opens at 10:00 a.m. and the facility usually opens six designated-player tables.

Ms. Giardina testified that the number of designated players who enter the facility always corresponds with the number of tables opened by the management. The designated players always sit at seat eight, always operate with at least $30,000 in chips, and always rotate with frequency among the designated player tables.

According to David Journey, a Jacksonville poker dealer, the designated players are always the same people.

24 123 60. The videos clearly show that the designated players' involvement in the games is limited. The designated players make no ante bet, do not handle their cards, do not make any decisions regarding arrangement of their cards, and do not instruct the dealer with regard to any of those decisions.

Indeed, the only action observed on the part of the designated players was placing various denominations of chips on the table for the dealer's convenience in obtaining the rake, and organizing chips paid out to the designated player into stacks at the table and into the trays at seat eight. To characterize those actions as playing the game is a stretch, at best. The banker in a game of monopoly takes a more active role.

Clearing Hands

61. Cardroom dealers are trained to "clear their hands" by turning their outstretched palms up toward the ceiling, then back down to the table. Dealers clear their hands when they first come to a table as well as when they leave. During play, they clear their hands after placing cards into the shuffler (or shoe), after taking the rake, after placing a winning player's chips in front of him or her, and when exchanging a player's cash for chips from the imprest tray. It appears to be habit with the dealers observed in the video.

62. Without exception, the designated players frequently cleared their hands, especially after handling and organizing

25 124 chips in the trays in front of them. Some of them cleared their hands upon taking their seat at the table.

63. The designated players at Jacksonville are industry insiders, perhaps as dealers at other facilities.

Approval of the Games

64. Jacksonville argues that the Division approved the games and is, thus, estopped from bringing the instant

Administrative Complaint.

65. The Division did approve Jacksonville's internal controls for each of the games, but the games were not being played according to those internal controls.6/

66. Jacksonville argues that, in addition to its internal controls, the Division approved the games in the specific manner in which they were being played on December 7, 2015.

67. Jacksonville is not the first or only cardroom in

Florida to offer designated-player games. Jacksonville modeled its games after other cardrooms which were offering the games before Jacksonville began offering the games.

68. Jacksonville leased the games from SHFL Entertainment

(formerly known as Shuffle Master), a manufacturer of casino game products. Infrastructure obtained from SHFL Entertainment

(also known as "collateral on the floor") included the tables and shuffling machines.

26 125 69. Along with its games, SHFL Entertainment provides written rules and procedures. Respondent introduced in evidence a letter from Daniel Russell, an attorney for SHFL

Entertainment, dated February 8, 2013, to Dewayne Baxley, the

Division's then-chief of auditing. The letter reads as follows:

On behalf of my client, SHFL Entertainment, attached hereto please find (1) a detailed description of a cardroom game entitled ^Three Card Poker' and (2) a computer disk containing a video which documents the method by which the game AThree Card Poker' is played.

If you have any questions or require additional information, please do not hesitate to contact me at your earliest convenience.

Attached to the letter is a three-page document with the

SHFL Entertainment logo titled "Three Card Poker: Florida Card

Room Version Rules & Procedures."

70. The procedures include the following notable provisions:

The player/dealer position rotates in a systematic and continuous way so the deal does not constantly remain with a single person.

Player/dealer's [sic] are never required to cover all opposing players' wagers. The house never participates as a player/dealer. The house never takes a percentage of the wagers placed in the game.

71. The rules and procedures are similar in some respects to Jacksonville's internal controls for three-card poker which

27 126 were approved by the Division. But, they differ in some regards. For example, the SHFL Entertainment rules specify the game is to be played with an automatic card shuffling device with two standard 52-card decks. Jacksonville's internal controls specify dealing from a 52-card deck.

72. No credible evidence was introduced on which the undersigned could find that the Three-Card Poker rules and procedures submitted on February 8, 2013, by SHFL Entertainment, were ever approved in any manner by the Division.

73. Next, Jacksonville introduced two email exchanges between John Lockwood, Respondent's counsel,7/ and Jason Maine, the Division's then-chief attorney.

74. The first email exchange was initiated on May 21,

2015, by Mr. Lockwood, and reads, "Jason, I have attached rules of play for pai gow poker. This is a designated player game we would like to offer in Florida. Please let me know when you have time to discuss." The exhibit did not include the attachment.

75. Mr. Maine responded to Mr. Lockwood's email on

June 23, 2015, as follows: "John, [p]lease review these issues identified in your Pai Gow Poker game submission."

76. The exhibit includes the referenced attachment, which reads, as follows:

28 127 ® A dice cup is used to determine the first active position and all action proceeds clockwise from this position.

o The starting position is to be based off of the Designated Player Button. See Rules 61D-11.001(8), 61D-11.002(5)(b)

« The designated player position rotates in a systematic and continuous way unless all players pass the designated player position. The house never participates as a designated player.

o This language should indicate all 'eligible' players-there will be some confusion if someone says 'J didn't want to pass the opportunity to be DP' when they aren't eligible.

• There is no jackpot component to this game-please verify all wagers imposed.

77. Because the exhibit does not include the rules of play reviewed by Mr. Maine (and other Division staff), it is impossible to conclude that they correspond with the approved internal controls for Jacksonville's Pai Gow poker games.

However, the email exchange is evidence that the Division was on notice that Florida cardrooms would be "passing the button" only to eligible designated players at Pai Gow tables.8/ Further,

Jacksonville's approved internal controls for Pai Gow poker state, "[t]he designated player position rotates in a systematic and continuous way unless all players eligible to be the

Designated Player pass the designated player position."

29 128 78. The second email exchange is in reference to the rules of game play for Florida Hold'em, and was originated by

Mr. Lockwood on June 23, 2015. The email reads, "Jason, I made some minor revisions. Ultimately, I don't think we need the sentence referencing xin action.' It is duplicative based upon the existing rules governing qualification and the player's hand exceeding the designated player's hand."

79. The exhibit does not include the particular rules of play which are being revised, but the inference is that the rules provided by SHFL Entertainment were being reviewed.

80. Mr. Maine responded to Mr. Lockwood's email on July 7,

2015, as follows:

I have had the opportunity to review your submission of rules of game play for ^Florida Hold'em.' The game, as described, appears to be in compliance with present law from section 849.086, Florida Statutes, and Chapter 61D-11, Florida Administrative Code.

^Florida Hold'em' may be played only in a licensed cardroom, operated by a pari-mutuel permitholder, pursuant to section 849.086, Florida Statutes. If a licensed cardroom operator elects to offer your cardroom game, the Division will need notification of such through the cardroom operator's internal control procedures, in accordance with Chapter 61D-11, Florida Administrative Code.

81. The email is insufficient to establish that the

Division pre-approved the particular way the game of Florida

Hold' em was played at Jacksonville when the game opened in

30 129 September 2015. The email reiterates that the facility's internal controls would govern operation of the game at a

particular cardroom.

Game Demonstrations/Training

82. In August 2015, what was alternately referred to at final hearing as a "meeting" and a "training," took place at

Jacksonville. This gathering was requested by Senator Robert

Bradley, chair of the Senate Committee on Regulated Industries.

83. The gathering was attended by Senator Bradley and some

Senate staff members; Jamie Shelton, Jacksonville's president;

Ms. Giardina; Mr. Journey; Jonathan Zachem, the Division director; Lou Trombetta, Division counsel; and Mr. Taylor.

84. The participants toured the Jacksonville cardroom floor, then proceeded to a training room in the back where a training table was set up. At least some of the participants played two to three hands of each of the designated-player games. Ms. Giardina recalled discussing the rules of play, the wagers and odds, the seat position of the designated player, and

"taking chips from that person seated at the table."9/

85. Jacksonville management also explained the process for approving designated players, including background checks.

86. In September 2015, the Division conducted a training on designated-player games for Division investigators. The training was conducted by Mr. Trombetta. Mr. Taylor attended

31 130 with his partner, Tony McDowell. The participants played a hand

or two of each of the designated-player games to familiarize the

investigators with the games being played in the cardrooms in their region. Mr. Taylor consistently described the training as a "general overview" of the games.

87. Mr. Taylor is the Division investigator whose territory includes Jacksonville. He visits Jacksonville roughly once a week and observes games in play at the cardroom. Thus,

Mr. Taylor visited Jacksonville and observed the games in play approximately 11 times between the date Jacksonville began offering the games and December 7, 2015.

88. Mr. Taylor was in the Jacksonville cardroom on

December 7, 2015, and obtained the surveillance videos which formed the basis of the instant Administrative Complaint.

89. While Mr. Taylor testified that the designated-player games he observed at Jacksonville on December 7, 2015, were played "in the same manner" as the games were played in the training sessions in August and September 2015, he admitted on cross-examination that the play was not identical. One key difference was that during training, the designated player did not get up and leave during play only to be replaced by a different designated player. When discussing the rules of game play, there was no mention of charging a rake five times greater for a second designated player to participate.

32 131 90. The designated-player games introduced as Joint

Exhibits A through I, were not operated in a manner in which the players play against each other. The designated players were not playing the games at all. The designated players merely served as a warm body to do no more than watch over the chips from which winnings were paid and to which losses were credited.

Mr. Journey testified, credibly, that the designated players' only role is to watch the money. In essence, the designated players were the keepers of the bank against which the other players were playing.

91. Ms. Giardina pointedly highlighted how little difference there is between the way a house-banked game is played in Las Vegas and the way designated-player games are played at Jacksonville, as follows: "The difference is the dealer is reaching over and paying out of a different stack. So it's different. " 10/

CONCLUSIONS OF LAW

A. Authority

92. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties to this proceeding. §§ 120.569 and 120.57(1), Fla. Stat.

93. "(I]t is well established that the legislature has broad discretion in regulating and controlling pari-mutuel wagering and gambling under its police powers." Div. of Pari-

33 132 Mutuel Wagering, Pep't of Bus. Reg, v. Fla. Horse Council, Inc.,

464 So. 2d 128, 130 (Fla. 1985). Thus, the Division has the authority to "conduct investigations and monitor the operation of cardrooms and the playing of authorized games therein," as well as "(sjuspend or revoke any license or permit, after hearing, for any violation of the provisions of this section[.]"

§§ 849.086(4)(b) and (d), Fla. Stat.

B. Legal Standards

94. Section 849.086(12)(a), which forms the basis for the violations alleged in Counts One through Nine of the

Administrative Complaint, provides that "[n]o person licensed to operate a cardroom may conduct any banking game or any game not specifically authorized by this section."

95. A "banking game" is defined in section 849.086(2) as

"a game in which the house is a participant in the game, taking on players, paying winners, collecting from losers, or in which the cardroom establishes a bank against which participants play." (emphasis added).

96. An "authorized game" is defined as "a game or series of games of poker or dominoes which are played in a nonbanking manner."

97. The Division alleges, in Counts One through Nine of the

Administrative Complaint, that, on December 7, 2015, Jacksonville

34 133 operated banking games or games not specifically authorized by section 849.086.

98. Section 849.086(6)(c), which forms the basis for

Counts 10 through 18 of the Administrative Complaint, provides, in pertinent part, that "[n]o licensed cardroom operator may employ or allow to work in a cardroom any person unless such person holds a valid occupational license."

99. A "cardroom operator" is defined in section 849.086(2)(f) as follows:

[A] licensed pari-mutuel permitholder which holds a valid permit and license issued by the division pursuant to chapter 550 and which also hold a valid cardroom license issued by the division pursuant to this section which authorizes such person to operate a cardroom and to conduct authorized games in such cardroom.

100. Section 849.086(6)(a) requires that

[A] person employed or otherwise working in a cardroom as a cardroom manager, floor supervisor, pit boss, dealer, or any other activity related to cardroom operations while the facility is conducting card playing or games of dominoes must hold a valid cardroom employee occupational license issued by the division. Food service, maintenance, and security employees with a current pari-mutuel occupational license and a current background check will not be required to have a cardroom employee occupational license. (emphasis added).

101. The Division alleges, in Counts 10 through 18 of the

Administrative Complaint, that, on December 7, 2015, Jacksonville

35 134 allowed the person in seat eight at tables 71 through 79 to work in Respondent's cardroom without a valid occupational license.

C. Burden of Proof

102. The Division bears the burden of proving the specific allegations of fact that support the charges alleged in the

Administrative Complaint by clear and convincing evidence.

§ 120.57(1)(j), Fla. Stat.; Dep't of Banking & Fin., Div. of Sec, and Inv. Prot. v. Osborne Stern & Co., 670 So. 2d 932 (Fla.

1996); see also Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987);

Fox v. Dep't of Health, 994 So. 2d 416 (Fla. 1st DCA 2008); Kany v. Fla. Eng'rs Mgmt. Corp., 948 So. 2d 948 (Fla. 5th DCA 2001)}

Dieguez v. Dep't of Law Enf., Crim. Just. Stds. & Training

Comm'n, 947 So. 2d 591 (Fla. 3d DCA 2007); Pou v. Dep't of Ins. and Treas., 707 So. 2d 941 (Fla. 3d DCA 1998).

103. Clear and convincing evidence "requires more proof than a ^preponderance of the evidence' but less than ^beyond and to the exclusion of a reasonable doubt.'" In re Graziano,

696 So. 2d 744, 753 (Fla. 1997). The clear and convincing evidence level of proof:

entails both a qualitative and quantitative standard. The evidence must be credible; the memories of the witnesses must be clear and without confusion; and the sum total of the evidence must be of sufficient weight to convince the trier of fact without hesitancy.

Clear and convincing evidence requires that the evidence must be

36 135 found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.

In re Davey, 645 So. 2d 398, 404 (Fla. 1994) (quoting, with approval, Slomowitz v. Walker, 429 So. 2d 797, 800 (Fla. 4th DCA

1983)); see also In re Henson, 913 So. 2d 579, 590 (Fla. 2005).

"Although [the clear and convincing] standard of proof may be met where the evidence is in conflict, it seems to preclude evidence that is ambiguous." Westinqhouse Elec. Corp. v. Shuler Bros.,

590 So. 2d 986, 989 (Fla. 1st DCA 1991).

104. Section 849.086(12) is penal in nature, and must be strictly construed, with any ambiguity construed against the

Division. Penal statutes must be construed in terms of their literal meaning, and words used by the Legislature may not be expanded to broaden the application of such statutes. Elmariah v. Pep7t of Bus. & Prof'1 Reg., 574 So. 2d 164, 165 (Fla. 1st

DCA 1990); see also Beckett v. Pep't of Fin. Servs., 982 So. 2d

94, 100 (Fla. 1st DCA 2008); Whitaker v. Dep't of Ins., 680

So. 2d 528, 531 (Fla. 1st DCA 1996); Dyer v. Dep't of Ins. &

37 136 Treas. , 585 So. 2d 1009, 1013 (Fla. 1st DCA 1991); Davis v. Pep't

of Prof'1 Reg., 457 So. 2d 1074, 1076 (Fla. 1st DCA 1984).

D. Counts One through Nine of the Administrative Complaint

105. The Division proved the facts underlying Counts One

through Nine of the Administrative Complaint by clear and

convincing evidence. Jacksonville's operation of designated-

player games is no more than a systematic banking of games in the

cardroom. The corporate application requirements, combined with

the dual-rake structure, are disincentives to the rotation of the button and participation in the game by truly interested designated players. The result is game play in which employees from an outside corporate designated player sit either idly at racks of chips, or, alternately, organize the chips for the convenience of the dealer in taking the rake and place chips into the racks according to denomination.

E. Estoppel

106. Having concluded that the Division proved Jacksonville operated games in a banking manner in violation of section

849.086(12), the issue of estoppel, as raised by Jacksonville, must be addressed.

107. In its Petition for Formal Administrative Hearing,

Jacksonville alleged that "[t]he Division is estopped from prohibiting the Respondent from offering designated player games that were previously approved by the Division." Respondent's

38 137 argument is that the Division approved the designated-player games before Jacksonville began offering the games, and is thus estopped from changing its position.

108. It is well established that:

The elements which must be present for application of estoppel are: Ml) a representation as to a material fact that is contrary to a later-asserted position; (2) reliance on that representation; and (3) a change in position detrimental to the party claiming estoppel, caused by the representation and reliance thereon.' As a general rule, estoppel will not apply to mistaken statements of the law, but may be applied to erroneous representations of fact.

Equitable estoppel will apply against a governmental entity xonly in rare instances and under exceptional circumstances'.... The reasonable expectation of every citizen xthat he will be dealt with fairly by his government,' can form the basis for application of equitable estoppel against a governmental entity.

Council Bros, v. City of Tallahassee, 634 So. 2d 264, 266 (Fla.

1st DCA 1994).

109. Jacksonville must establish more than the usual elements of estoppel. "[A] party seeking to invoke estoppel against the government must establish affirmative conduct by the government going beyond mere negligence; that the government's act will cause serious injustice; and the imposition of estoppel will not unduly harm the public interest." Alachua Cnty. v.

39 138 Cheshire, 603 So. 2d 1334, 1337 (Fla. 1st DCA 1992) (citations omitted).

110. "A positive act on the part of some officer of the state upon which the aggrieved party had a right to rely and did rely to its detriment" must be established by clear and convincing evidence. Assoc. Indus. Ins. Co. v. Dep't of Labor &

Emp. Sec., 923 So. 2d 1252, 1256 (Fla. 1st DCA 2006)(citations omitted).

111. The only affirmative conduct on behalf of a representative of the Division to which Respondent can point is the email exchanges between Mr. Lockwood and Mr. Maine regarding the submission of Florida Hold'em and Pai Gow poker to the

Division for review in April and May 2015, respectively. In

July, Mr. Maine emailed Mr. Lockwood that he had reviewed the rules of game play for the two games and that the games "as described" appear to be in compliance with section 849.086. The emails are insufficient evidence that the games Florida Hold'em and Pai Gow poker, as played on December 7, 2015, were approved by the Division such that it should be estopped from filing the instant Administrative Complaint. The emails do not include the attachments for the undersigned to discern the rules of play described therein.

112. Even if the rules of play were introduced in evidence and proved to be identical to Jacksonville's internal controls

40 139 approved by the Division for those games, the email

representations would not establish affirmative conduct

approving the games as they were played on December 7, 2015.

The games played on December 7, 2015, were not played consistently with the approved internal controls.

113. Furthermore, the representations by Mr. Maine that the games "as described" appear to be in compliance with the statute were made in July 2015, prior to Jacksonville's implementation of its designated-player house rules, dual-rake structure, and approval of any designated-player applications.

Thus, the Division had no knowledge at that time that the games would be operated with a single corporate designated player at each table, with no opportunity for the designated-player position to rotate, and with a built-in disincentive for the position to rotate. All of these facts are material to the allegations contained in the Division's Administrative

Complaint. Thus, the emails are not evidence of a representation of material fact that is contrary to the later- asserted position set forth in the Administrative Complaint.

114. Next, Respondent argues that the Division was well- aware of how the games were being operated throughout Florida

(not just at Jacksonville) and was, at least, complicit therein.

As such, Respondent argues the Division is estopped from asserting that the operation of the games is contrary to the

41 140 statute. Respondent's argument is based on the totality of the

circumstances: (1) the Division's familiarity with the games

being played at other cardrooms under its regulatory authority;

(2) the Division training presented to its inspectors in

September; and (3) the Division's participation in the October

"demonstration" of the games at Jacksonville. In essence,

Respondent asks the undersigned to connect the dots to reveal a

complete picture of estoppel. If the evidence were clear and

convincing, connection of the dots would be unnecessary.

115. Based on the foregoing, the undersigned concludes

that the Division made no affirmative representation to

Jacksonville that the designated-player games, as played on

December 7, 2015 (and, evidently, consistently since it opened

the games in September 2015), were approved pursuant to

section 849.086. At the most, Respondent proved that the

Division was negligent in failing to stop the games as soon as

it became apparent that Jacksonville was operating the games in

a banking manner. Negligence on the part of the government is insufficient for estoppel to lie. See Cheshire, 603 So. 2d at

1337.

116. Assuming, arguendo, Respondent proved the Division affirmatively approved the operation of the designated-player games as conducted on December 7, 2015, Respondent would still have to prove that the Division's change of position would cause

42 141 serious injustice, and that the imposition of estoppel would not unduly harm the public. See Id.

117. As to the issue of injustice, Jacksonville established that it made economic investments of at least

$300,000 and hired 85 employees to get the games up and running at the cardroorn. Mr. Shelton established that he would lose

$1 million gross monthly income if the games are shut down.

118. Respondent's argument assumes that Jacksonville could not operate designated-player games per se, rendering all the collateral on the floor and personnel involved in designated- player games of no economic value to Jacksonville. That assumption misconstrues the issue. The issue in this case is not whether designated-player games can be played at

Jacksonville, but whether the games can be operated specifically as they were being operated at Jacksonville. The evidence does not establish that Jacksonville could not operate designated- player games in a manner consistent with its approved internal controls. No evidence was introduced to demonstrate that operating them in that manner would have a serious negative economic impact on Jacksonville, much less cause a serious injustice.• • • 13 /

119. Finally, and more importantly, imposition of estoppel in the instant case would be contrary to the public interest.

The cardroom statute provides for strict regulation of

43 142 procedures "[t]o ensure the public confidence in the integrity of the cardroom operations." § 849.086(1), Fla. Stat. Given the strict statutory prohibition against gambling, the intricate regulatory scheme imposed, and the narrow carve out for cardrooms, the games cannot be allowed to continue to operate in the current manner. The basic tenant of the cardroom statute is that authorized games are not casino gaming because the participants "play against each other." As currently operated, the designated player is a player in name only. The existing operation of the games does no more than establish a bank against which participants play.

120. Based on the foregoing, the undersigned concludes that the Division is not estopped from maintaining the instant action against Jacksonville based on the allegation that it has allowed the designated-player games to be played in a banking manner.

F. Counts 10 through 19 of the Administrative Complaint

121. In counts 10 through 19 of the Administrative

Complaint, the Division contends Jacksonville allowed the person in seat eight at tables 71 through 79 to work in Respondent's cardroom without a valid occupational license.

122. The Division did not carry its burden with respect to these counts.

44 143 123. The Division contends that the designated players must be licensed pursuant to section 849.086(6)(a), which requires that "a person employed or otherwise working in a cardroom as a cardroom manager, floor supervisor, pit boss, dealer, or any other activity related to cardroom operations while the facility is conducting card playing or games of dominoes must hold a valid cardroom employee occupational license issued by the division."

(emphasis added).

124. The Division has adopted Florida Administrative Code

Rule 61D-11.001 to implement section 849.086. The rule defines

"activity related to cardroom operations" as

[A]ny and all activities related to the operation of the cardroom, including activities that require a person to come in contact with or work within the cardroom gaming area, all aspects of management, all aspects of recordkeeping, all aspects of administration, all aspects of supervision, and all activities that support the cardroom operation in any way, unless such activity is specifically excluded from this definition.

125. The definition is broad in scope, but it is not limitless. For an activity to be subject to licensing pursuant to the rule, the activity must be related to, or support, the operation of the cardroom.

126. The Division proved that the designated players are industry insiders, likely dealers at other locations. However, the role of the designated players at Jacksonville was passive--

45 144 not actually playing the games, but rather watching over the chip racks belonging to their corporate employer.

127. While the Division did prove that, mysteriously, the same number of designated players walk through the door each morning as the number of designated-player tables Jacksonville opens, it is a stretch to conclude those individuals12/ support the "operation of the cardroom," or otherwise relate to that operation. On the contrary, the evidence supports a conclusion that the designated players themselves are unnecessary for the operation of the games. The evidence cannot support contradictory conclusions that the individual designated players' activity is both vital to the operation of the cardroom and meaningless to the operation of the games within the cardroom.

G. Unadopted Rule Pursuant to Section 120.57(1)(e)l.

128. Finally, Respondent alleged that the Division's position opposing the designated-player games, as stated in the

Administrative Complaint, are agency statements defined as rules in section 120.52(16), which have not been adopted as rules, pursuant to section 120.54(1)(a).13/ If proven, pursuant to section 120.57(1)(e)l., the Division would not be able to rely upon those statements in the instant action determining

Jacksonville's substantial interests.

129. To prevail on this defense, Respondent must prove that the allegations are "statements of general applicability

46 145 which implements, interprets, or prescribes law or policy."

§ 120.52(16), Fla. Stat.

130. The Administrative Complaint essentially contains

only two allegations. First, in Counts One through Nine, that

Respondent "operated a banking game or a game not specifically

authorized by [s]ection 849.086, Florida Statutes" at each

respective table. Second, in Counts 10 through 18, that

"Respondent allowed the person seated in seat 8 at the corner of

[each] table ... to work in Respondent's cardroom" without a

valid occupational license.

131. At the final hearing, Respondent's counsel lamented

the conclusory nature of the Division's allegations in the

Administrative Complaint.14/ He complained that "they're saying, you add up all this minutia, and all of a sudden you have a banking game. But none of the minutia is set forth in their administrative complaint." The Administrative Complaint does not specify that operating the games with a single corporate designated player, who is required to bring a minimum of $30,000 to each table, and who takes no active role in the game, constitutes operating a banking game in violation of 849.086.

Perhaps such an allegation would meet the definition of a rule, but that is not the allegation in the operative Administrative

Complaint. The allegations can hardly be characterized as

47 146 Division statements. They are merely conclusions that

Respondent violated the statute on the date in question.

132. Further, the operative allegations do not implement, interpret, or prescribe law or policy. Having reviewed all the testimony and documentary evidence introduced at final hearing, the undersigned found clear and convincing evidence that the way in which the games were operated did indeed violate 849.086 by establishing a bank against which participants play.

133. To the extent that the allegations constitute an agency statement, they do not interpret or implement the law.

The statements simply reiterate the narrow statutory exemption from the prohibition against casino gambling--card games in which participants play against each other instead of the house.

See § 849.086(1), Fla. Stat.

134. As stated by the First District Court of Appeal in

State Board of Administration v. Huberty, 46 So. 3d 1144, 1147

(Fla. 1st DCA 2010):

As we said in St. Francis Hospital, Inc. v. Department of Health and Rehabilitative Services, 553 So. 2d 1351, 1354 (Fla. 1st DCA 1989):

It is well established that an agency interpretation of a statute which simply reiterates the legislature's statutory mandate and does not place upon the statute an interpretation that is not readily apparent from its literal reading, nor in and of

48 147 itself purport to create certain rights, or require compliance, or to otherwise have the direct and consistent effect of the law, is not an unpromulgated rule, and actions based upon such an interpretation are permissible without requiring an agency to go through rulemaking.

See North Star Assoc., Inc. v. Dep't of Fin. Servs., Case

No. 11-2433RU (Fla. DOAH July 1, 2011)(agency's statement that registrations as a claimant's representative are licenses is apparent from a literal reading of the statute); My Friend Home

Care, Inc. v. Ag. for Health Care Admin., Case No. 10-2657RU

(Fla. DOAH July 6, 2010)(agency's denial of licensee's renewal application based upon actions occurring within two years of the renewal application date was readily apparent from the plain language of the statute and, thus, not an unadopted rule); cf.

Leonard v. Dep't of Mgmt. Servs., Case No. 11-1529 (Fla. DOAH

Sept. 8, 2011; Fla. DMS Nov. 10, 2011)(agency's definition of the phrase "active" employment as synonymous with perfect attendance is an interpretation not readily apparent from a literal reading of the statute); Vazquez v. Dep't of Health,

Case No. 08-0490RU (Fla. DOAH Apr. 9, 2008); aff'd, 11 So. 3d

994 (Fla. 1st DCA 2009)(agency statement that statute imposes a

"rebuttable presumption" and establishes what will be considered a "prima facie case" was not a simple reiteration of the

49 148 statutory mandate and was, in fact, "contrary to any reasonable interpretation of the statute.").

135. Based upon the foregoing, the allegations in the

Administrative Complaint are founded upon the literal statutory prohibitions and, thus, Respondent failed to carry its burden with respect to this affirmative defense.

Conclusion

136. As set forth in the Findings of Fact herein, the

Division proved by clear and convincing evidence that, on

December 7, 2015, Jacksonville operated cardroom games in a banking manner, or unauthorized games in violation of section

849.086. Thus, the Division proved the allegations in Counts

One through Nine of the Administrative Complaint that

Jacksonville violated section 849.086.

137. As set forth in the Findings of Fact herein, the

Division failed to prove by clear and convincing evidence that, on December 7, 2015, Jacksonville allowed persons to work at the facility without required occupational licenses. Thus, the

Division failed to prove the allegations in Counts 10 through 18 of the Administrative Complaint, which must be dismissed.

138. The Division seeks an administrative fine of $500 for each count of the Administrative Complaint which is proven by clear and convincing evidence. Due to the precedential nature

50 149 of the case, the Division asks the undersigned not to impose any penalty beyond that amount.

RECOMMENDATION

Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED that a final order be entered:

(1) Finding that Jacksonville Kennel Club, Inc., violated section 849.086(12), as stated in counts One through Nine of the

Administrative Complaint, and imposing an administrative fine of

$4,500 against Respondent; and,

(2) Dismissing Counts 10 through 18 of the Administrative

Complaint against Jacksonville Kennel Club.

DONE AND ENTERED this 1st day of August, 2016, in

Tallahassee, Leon County, Florida.

SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.f1.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of August, 2016.

ENDNOTES

1/ The instant case was transferred to the undersigned when it was consolidated with DOAH Case Nos. 16-1008, 16-1010, and 16- 1839, administrative complaints against other pari-mutuel

51 150 facilities in Florida. The cases were subsequently severed from Case No. 16-1009 and closed.

27 The time required to hear the case was significantly shorter than that scheduled because the related cases were severed and closed. The final hearing was conducted on May 31 and June 1, 2016. q / The rulemaking notices were also admitted m evidence as Respondent's Exhibits R23 and R24.

47 While cardrooms in Florida began offering designated player games prior to 2014, Florida had not previously adopted any rules governing those games.

57 In response to the discovery request, Jacksonville included an application from Elevated dated December 29, 2015, which Ms. Giardina described as an amendment to its previous application.

67 Further, as noted above, Jacksonville began offering the games prior to submitting its internal controls to the Division for approval.

77 Mr. Lockwood represents other cardrooms in Florida in addition to Jacksonville.

87 While the emails are hearsay, they supplement testimony that the games leased from SHFL Entertainment have to be adapted to meet Florida's requirements. (T.135:18-136:5 and 187:20- 188:23).

97 T.186:6-7.

107 T.164:10-12.

117 The evidence does suggest that operating the games as per the approved internal controls will likely have an economic impact on Elevated, but that consideration is irrelevant to the issue sub judice.

127 Petitioner did establish that unidentified persons had access to the non-public elliptical area behind the designated- player tables, and those persons appeared to be making change for the designated players. However, the Administrative Complaint does not allege that Respondent allowed unidentified persons to work in the cardroom without a valid occupational

52 151 license. Counts 10 through 19 of the Administrative Complaint are limited to the "person seated in seat 8" at each table.

13/ Respondent did not address this issue in its Proposed Recommended Order, but the record does not establish that Respondent abandoned the issue. The undersigned addresses the issue in an abundance of caution.

14/ Respondent is correct that the allegations are conclusory, but Respondent neither moved for a more definite statement nor requested an order limiting introduction of evidence to specific factual allegations.

COPIES FURNISHED:

William D. Hall, Esquire Department of Business and Professional Regulation 2601 Blair Stone Road Tallahassee, Florida 32399-2202 (eServed)

John M. Lockwood, Esquire The Lockwood Law Firm Suite 810 106 East College Avenue Tallahassee, Florida 32301 (eServed)

Thomas J. Morton, Esquire The Lockwood Law Firm Suite 810 106 East College Avenue Tallahassee, Florida 32301 (eServed)

Kala Kelly Shankle, Esquire The Lockwood Law Firm Suite 810 106 East College Avenue Tallahassee, Florida 32301 (eServed)

53 152 Louis Trombetta, Esquire Department of Business and Professional Regulation 2601 Blair Stone Road Tallahassee, Florida 32399-2202 (eServed)

Jonathan Zachem, Director Department of Business and Professional Regulation Division of Pari-Mutuel Wagering Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-2202 (eServed)

Jason Maine, General Counsel Department of Business and Professional Regulation Capital Commerce Center 2601 Blair Stone Road Tallahassee, Florida 32309 (eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

54 153 FILED Department of Biekiess and Professional Angulation AGENCY CLERK

STATE OF FLORIDA CLERK RondaL Bryan DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATIC Date 10/26/2016 DIVISION OF PARI-MUTUEL WAGERING FHe# 2016-08261

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING,

Petitioner, DBPR Case No. 2015-053213 v. DOAH Case No. 16-1009

JACKSONVILLE KENNEL CLUB, INC.

Respondent. /

FINAL ORDER

Pursuant to section 120.60(1), Florida Statutes and Rule 28-106,103 of the Florida

Administrative Code, the Department of Business and Professional Regulation, Division of

Pari-Mutuel Wagering ("the Division") files the following Final Order. This cause came

before the Division for the purpose of considering the Recommended Order issued by

Administrative Law Judge Suzanne Van Wyk ("ALJ Van Wyk") on August 1, 2016, in DOAH

case number 16-1009, a copy of which is attached as Exhibit "A". The Department of

Business and Professional Regulation ("Petitioner") filed exceptions to the Recommended

Order, to which Jacksonville Kennel Club, Inc., ("Respondent") filed a response and those

exceptions and response are attached as composite Exhibit "B". Respondent also filed

exceptions to the Recommended Order to which Petitioner filed a response and those

exceptions and response are attached as composite Exhibit "C"

Background

On January 25, 2016, the Department issued and Administrative Complaint against

Respondent in DBPR case number 2015-053213, alleging violations of certain provisions of

Chapters 550 and 849, Florida Statutes Respondent filed a Petition for Formal

Administrative Hearing on February 15, 2016. ALJ Van Wyk convened a formal

Filed October 28, 2016 8:00 AM Division of Administrative154 Hearings administrative hearing on May 31, and June 1, 2016, and issued a Recommended Order on

August 1, 2016, recommending the Division enter a final order finding Respondent violated

section 849.086(12), Florida Statutes, as stated in counts one through nine of the

Administrative Complaint, and imposing an administrative fine of $4,500 against

Respondent and; dismiss counts ten through eighteen of the Administrative Complaint.

The Respondent and Petitioner filed exceptions to ALJ Van Wyk's Recommended

Order, accordingly. After a complete review of the record in this matter, the Division rules as

follows:

AGENCY STANDARD FOR REVIEW

Pursuant to Section 120.57(1 )(l), Fla. Stat., the Division may not reject or modify

findings of fact unless it first determines, from a review of the entire record, and states with

particularity, that the findings of fact were not based on competent substantial evidence

"Competent substantial evidence is such evidence that is 'sufficiently relevant and material

that a reasonable mind would accept it as adequate to support the conclusion reached

Comprehensive Medical Access, Inc. v. Office of Ins. Regulation, 983 So. 2d 45, 46 (Fla. 1st

DCA 2008)(quoting DeGroot v. Sheffield, 95 So. 2d 912, 916 (Fla. 1957)).

Pursuant to Section 120.57(1 )(l), Fla. Stat., when rejecting or modifying conclusions

of law or interpretations of administrative rules, the Division must state with particularity its

reasons for rejecting or modifying such conclusion of law or interpretation of administrative

rules and must make a finding that its substituted conclusion of law or interpretation of

administrative rule is as or more reasonable that that which was rejected or modified.

RULINGS ON PETITIONER'S EXCEPTIONS

Exception #1

I. Petitioner takes exception to the finding of fact in Paragraph #34 of page 16 of the Recommended Order.

155 2. The Division rejects Petitioner's Exception #1.

Exception #2

3. Petitioner takes exception to the conclusion of law in Paragraph #122 of page

44 of the Recommended Order.

4. The Division rejects Petitioner's Exception #2.

Exception #3

5. Petitioner takes exception to the conclusion of law in Paragraph #123 of page

45 of the Recommended Order

6. The Division rejects Petitioner's Exception #3.

Exception #4

7 Petitioner takes exception to the conclusion of law in Paragraph #127 of page

46 of the Recommended Order.

8. The Division rejects Petitioner's Exception #4.

RULINGS ON RESPONDENT'S EXCPETIONS

Exception #1

9. Respondent takes exception to the findings of fact set forth in Paragraph #10 of page 8 of the Recommended Order.

10. The Division rejects Respondent's Exception #1

Exception #2

11. Respondent takes exception to the findings of fact set forth in Paragraph #33 of page 16 of the Recommended Order.

12. The Division rejects Respondent's Exception #2

Exception #3

13. Respondent takes exception to the findings of fact set forth in Paragraph #44 of page 19 of the Recommended Order.

3 156 14. The Division rejects Respondent's Exception #3.

Exception #4

15. Respondent takes exception to a portion of the finding of fact set forth in

Paragraph #45 of page 19 of the Recommended Order.

16. The Division rejects Respondent's Exception #4.

Exception #5

17. Respondent takes exception to a portion of the finding of fact set forth in

Paragraph #51 of page 21 of the Recommended Order.

18. The Division rejects Respondent's Exception #5.

Exception #6

19. Respondent takes exception to the finding of fact set forth in Paragraph #52 of page 22 of the Recommended Order.

20. The Division rejects Respondent's Exception #6.

Exception #7

21. Respondent takes exception to the finding of fact set forth in Paragraph #54 of page 22 of the Recommended Order

22. The Division rejects Respondent's Exception #7

Exception #8

23 Respondent takes exception to a portion of the finding of fact set forth in

Paragraph #58 of page 24 of the Recommended Order.

24. The Division rejects Respondent's Exception #8.

Exception #9

25. Respondent takes exception to a portion of the finding of fact set forth in

Paragraph #59 of page 24 of the Recommended Order.

26. The Division rejects Respondent's Exception #9.

4 157 Exception #10

27. Respondent takes exception to a portion of the finding of fact set forth in

Paragraph #60 of page 25 of the Recommended Order.

28. The Division rejects Respondent's Exception #10.

Exception #11

29. Respondent takes exception to the finding of fact set forth in Paragraph #63 of page 26 of the Recommended Order.

30. The Division rejects Respondent's Exception #11.

Exception #12

31. Respondent takes exception to the finding of fact set forth in Paragraph #89 of page 32 of the Recommended Order.

32. The Division rejects Respondent's Exception #12.

Exception #13

33. Respondent takes exception to the finding of fact set forth in Paragraph #91 of page 33 of the Recommended Order.

34. The Division rejects Respondent's Exception #13.

Exception #14

35. Respondent takes exception to the conclusion of law set forth in Paragraph

#105 of page 33 of the Recommended Order.1

36. The Division rejects Respondent's Exception #14.

Exception #15

37. Respondent takes exception to the conclusions of law set forth in Paragraphs

#106-120 of pages 38-44 of the Recommended Order.

38. The Division rejects Respondent's Exception #15.

1 Paragraph #105 is located at page 38 of the Recommended Order

158 Exception #16

39. Respondent takes exception to the conclusion of law set forth in Paragraph

#111 of page 40 of the Recommended Order.

40. The Division rejects Respondent's Exception #16.

Exception #17

41. Respondent takes exception to the conclusion of law set forth in Paragraph

#113 of page 41 of the Recommended Order, considering the Division has rejected

Respondent's exception to the conclusion of law set forth in Paragraph #105 of the

Recommended Order.

42. The Division rejects Respondent's Exception #17.

Exception #18

43. Respondent takes exception to the conclusion of law set forth In Paragraph

#119 of page 44 of the Recommended Order, considering the Division has rejected

Respondent's exception to the conclusion of law set forth in Paragraph #105 of the

Recommended Order.

44. The Division rejects Respondent's Exception #18.

Exception #19

45. Respondent takes exception to the conclusion of law set forth in Paragraph

#126 of page 45 of the Recommended Order.

46. The Division rejects Respondent's Exception #19.

Exception #20

47. Respondent takes exception to the conclusion of law set forth in Paragraph

#132 of page 48 of the Recommended Order.

48. The Division rejects Respondent's Exception #20.

Exception #21

159 49. Respondent takes exception to the conclusion of law set forth in Paragraphs

#136 and 138 of pages 50-51 of the Recommended Order.

50. The Division rejects Respondent's Exception #21,

Exception #22

51. Respondent takes exception to the recommended penalty set forth on page

51 of the Recommended Order.

52. The Division rejects Respondent's Exception #22.

FINDINGS OF FACT

53. The Findings of Fact in the Recommended Order, as set forth in Exhibit A are approved adopted and incorporated to the Final Order by reference.

CONCLUSIONS OF LAW

54. The Conclusions of Law in the Recommended Order, as set forth in Exhibit A are approved adopted and incorporated to the Final Order by reference

WHEREFORE, IT IS ORDERED AND ADJUDGED THAT'

1. Respondent, Jacksonville Kennel Club, Inc violated counts one through nine of the Administrative Complaint.

2. Respondent, Jacksonville Kennel Club, Inc., shall pay an administrative fine in the amount of $4,500.00, due within 30 days of the effective date of this Order.

3. Said payment shall be mailed to the Division of Pari-Mutuel Wagering, 2601

Blair Stone Road, Tallahassee, Florida 32399-1035. The case number should be referenced on the face of the check.

4. This order shall become effective on the date of the filing with the

Department's Agency Clerk.

160 DONE and ORDERED this 26th day of October. 2016 in Tallahassee, Leon County,

Florida.

KEN LAWSON, Secretary Department of Business and Professional Regulation

Anthony X Glover, Director Division of Pari-Mutuel Wagering Department of Business and Professional Regulation 2601 Blair Stone Road Tallahassee, Florida 32399-1035

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing Final Order has been provided by U.S. and/or interoffice mail to: (1) Jacksonville Kennel Club, Inc., c/o John Lockwood, Esq., Kala Shankle, Esq. and Thomas J. Morton, Esq., The Lockwood Law Firm, 106 East College Avenue, Suite 810, Tallahassee, Florida 32301; and (2) William D. Hall, Esq, and Louis Trombetta, Esq., Department of Business and Professional Regulation, 2601 Blair Stone Road, Tallahassee, Florida 32399-2202 on this the 26th day of October, 2016,

NOTICE OF RIGHT TO APPEAL UNLESS WAIVED

Unless expressly waived, any party substantially affected by this Final Order may seek judicial review by filing an original Notice of Appeal with the Agency Clerk of the

Department of Business and Professional Regulation at 2601 Blair Stone Road,

Tallahassee, Florida 32399-2202 ([email protected]), and a copy of the notice, accompanied by the filing fees prescribed by law, with the clerk of the appropriate

District Court of Appeal within thirty (30) days of rendition of this order, in accordance with

Rule 9 110, Fla. R. App. P., and section 120.68, Florida Statutes.

8 161 Case 4:15-cv-00516-RH-CAS Document 103 Filed 11/09/16 Page 1 of 36

Page 1 of36

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF FLORIDA TALLAHASSEE DIVISION

SEMINOLE TRIBE OF FLORIDA,

Plaintiff, CONSOLIDATED v. CASE NO. 4:15cv516-RH/CAS

STATE OF FLORIDA,

Defendant.

OPINION ON THE MERITS

The Seminole Tribe of Florida operates casinos under a Compact entered into with the State of Florida under the Indian Gaming Regulatory Act, 25 U.S.C.

§§ 2701-2721 ("IGRA"). The Compact became effective in 2010 and has a 20-year term. The Compact authorizes the Tribe to conduct banked card games—blackjack, for example—only during the first five years. That period has now ended. But there is an exception to the five-year limitation. The limitation does not apply—the Tribe may continue to conduct banked card games for the entire 20-year term— if "the

State permits any other person [except another tribe] to conduct such games."

The Tribe and the State have filed lawsuits against one another that have

Consol idated Case No 4 15cv516-RH/C AS 162 Case 4:15-cv-00516-RH-CAS Document 103 Filed 11/09/16 Page 2 of 36

Page 2 of36

been consolidated. The cases present two central issues: whether the exception to

the five-year limitation has been triggered; and whether the State has breached a

duty under IGRA to negotiate in good faith for a modification of the Compact.

This order sets out the court's findings of fact and conclusions of law

following a bench trial. The order declares that the exception has been triggered—

that the Tribe may conduct banked card games for the Compact's 20-year term. The

order awards no further relief on the failure-to-negotiate claim.

The Tribe filed the first of these cases against the State in this district,

asserting, in count one, that the Tribe has authority to conduct banked card games for

the Compact's full 20-year term. The Tribe asserts, in count two, that the State has

breached its duty to negotiate with the Tribe in good faith.

The State filed the second of these cases four days later against the Tribe in the

Middle District of Florida, asserting that the Tribe is improperly continuing to

conduct banked card games. In count one, the State asserts the Tribe's conduct of

banked card games violates the Compact, and in count two, the State asserts the

Tribe's conduct of the games violates IGRA (because IGRA allows a tribe to conduct

gaming of this kind only if authorized by the state where the gaming will occur). The

Middle District transferred the State's case here, where it was consolidated with the

Tribe's case.

Consolidated Case No 4 15cv516-RH/CAS 163 Case 4:15-cv-00516-RH-CAS Document 103 Filed 11/09/16 Page 3 of 36

Page 3 of 36

The State asserted Eleventh Amendment and sovereign immunity from the

Tribe's count two. In response, the Tribe asserted that the State waived its immunity by filing its own lawsuit. That led the State to announce, at the outset of the trial, that it wished to voluntarily dismiss its count two, rather than suffer a waiver. This order grants the voluntary dismissal, which, in light of the ruling on the merits, makes no difference anyway.

Indian tribes have their own sovereignty. Even so, Congress can adopt laws

governing conduct on Indian lands. IGRA is such a law.

IGRA gives a tribe "exclusive jurisdiction" on its Indian lands over some

forms of gaming—denominated "class I." 25 U.S.C. § 2710(a). Class I gaming

includes social games played for prizes of minimal value or traditional Indian

gaming that is part of a tribal ceremony or celebration. Id. § 2703(6). Class I

gaming is not at issue here.

IGRA allows a tribe to conduct "class II" gaming on its Indian lands if the

state where the lands are located allows anyone else to conduct such gaming. Id.

§ 2710(b)(1). Bingo is an example of a class II game. Id. § 2703(7)(A)(i). So is a

card game such as traditional poker. See id. § 2703(7)(A)(ii). But class II does not

include "banking card games, including baccarat, chemin de fer, or blackjack

(21)," id. § 2703(7)(B)(i), or "slot machines of any kind," id. § 2703(7)(B)(ii).

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Class III includes any form of gaming not included in class I or II. Id.

§ 2703(8). "Slot machines" and "banking card games"—the kind of gaming at

issue in this case—thus are within class III. IGRA allows a tribe to conduct class

III gaming on its Indian lands only if the state where the lands are located enters

into a compact with the tribe allowing it to conduct such gaming.

Under this framework, a state can prohibit or regulate class III gaming on

Indian lands, so long as it similarly prohibits or regulates gaming by others. See id.

§ 2710(d)(1)(B). But a state's authority over gaming on Indian lands is not

unlimited. IGRA obligates a state to negotiate with a tribe on this subject in good

faith. Id. § 2710(d)(3)(A). And IGRA imposes limits on a state's ability to exact

payments from a tribe for allowing gaming. See id. § 2710(d)(3)(C). Payments can

be made only if supported by a benefit the state confers on the tribe. See, e.g.,

Rincon Band of Luiseno Mission Indians of Rincon Reservation v.

Schwarzenegger, 602 F.3d 1019, 1033 (9th Cir. 2010) {quotingIn re Indian

Gaming Related Cases, 331 F.3d 1094 (9th Cir. 2003)).

Ill

Acting under this framework, the State of Florida and the Seminole Tribe of

Florida entered into a gaming compact ("the Compact") in 2010. Under the

Compact, "the Tribe is authorized to operate Covered Games on its Indian lands,

as defined in the Indian Gaming Regulatory Act, in accordance with the provisions

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of this Compact." State's Ex. 1 ("Compact") at § IV.A. The Compact defines

"Covered Games" to include "Banking or banked card games, including baccarat,

chemin de fer, and blackjack (21)," with an exception for two locations.

For this purpose the words "banking" and "banked" are synonyms. There is

no difference in the meaning ascribed to these terms in the gaming industry, in

relevant legal authorities, or in the Compact. Instead, the Compact uses the terms

as alternative references to the same thing, much as one might say the number of

eggs in a carton is usually "a dozen or 12." For convenience, this order ordinarily

refers only to "banked" games, not "banking or banked" games, except when

quoting.

Florida law allows gaming under compacts with Indian tribes and in limited

other circumstances. Under Florida Statutes § 849.086, licensed parimutuel

facilities may operate cardrooms, but the statute explicitly forbids "banking" card

games. Fla. Stat. § 849.086(12)(a).

Because of this statute, the Tribe's authority under the Compact to conduct

banked card games afforded the Tribe the right to conduct banked card games

without competition from cardrooms. This was perhaps the most important benefit

the Tribe obtained under the Compact. The most important benefit to the State was

more than a billion dollars. Because IGRA prohibits a state from receiving a share

of a tribe's gaming revenue except to defray expenses or in exchange for a benefit

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conferred on the tribe, the Tribe's billion-dollars-plus payments to the State under

the Compact were justified in large part as compensation for the exclusive right to

conduct banked card games—exclusive, that is, except for any competition from

other tribes or other types of games.

The term of the Compact is 20 years, but there is a five-year limitation for

banked card games, subject to two exceptions:

This Compact shall have a term of twenty (20) years (240 months) beginning on the first day of the month following the month in which the Compact becomes effective under Section A of this Part; provided, however, that the authorization for the Tribe to conduct banking or banked card games as defined in Part III, Section F(2) shall terminate on the last day of the sixtieth (60th) month after this Compact becomes effective unless [1] the authorization to conduct such games is renewed by the parties or [2] the State permits any other person, organization or entity, except for any other federally recognized tribe pursuant to Indian Gaming Regulatory Act, provided that the tribe has land in federal trust in the State as of February 1, 2010, to conduct such games.

Compact § XVI.B. (bracketing and emphasis added).

The five-year period ended in 2015. The "authorization to conduct such

games" has not been "renewed by the parties," so the first exception to the five-

year limitation does not apply. The Tribe has continuing authority to conduct banked card games only if the second exception applies, that is, only if the State has "permit[ted] any other person," not including another Indian tribe, "to conduct such games." For convenience, this order uses "person" to include an

"organization or entity." Cf. Fla. Stat. § 1.01(3) (similarly defining "person").

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The Tribe says the State has permitted others to conduct two kinds of banked

card games: games in which a designated player (rather than a facility or facility

employee) acts as the bank; and games played with electronic cards. The State

denies that these are banked card games.

The critical issue is the proper construction of "banking or banked card

games" as that term is used in the Compact's § XVI.B. The term is sufficiently

ambiguous on its face to allow parol evidence, including evidence of the usage in

the industry. See, e.g.,Hinote v. Brigman, 44 Fla. 589, 33 So. 303 (Fla. 1902)

(construing a contract for "saw logs" based on evidence of the "well-understood

meaning among those habitually dealing in that commodity"); In re Gulf Coast

Orthopedic Center, Inc., 297 B.R. 865, 869 (Banlcr. M.D. Fla. 2003) (citing Carr

v. Stockton, 84 Fla. 69, 92 So. 814 (Fla. 1922)); 17A AM. JUR. 2D Contracts § 353

(2016) (collecting cases) ("[W]ords connected with a particular or peculiar trade

are to be given the signification attached to them by experts in such art or trade

... [and] [tjechnical words are to be interpreted as usually understood by persons

in the profession or business to which they relate. ..."). In addition, parties

ordinarily are presumed to contemplate existing law when they enter into a

contract. See, e.g., Belcher v. Belcher, 271 So. 2d 7, 9 (Fla. 1972); Southern

Crane Rentals, Inc. v. City of Gainesville, 429 So. 2d 771, 773 (Fla. 1st DCA

1983).

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Card games can be categorized in an infinite number of ways. For present

purposes, games are properly divided into two categories: those in which the

players play against each other, and those in which the players play not against

each other but against a bank. An example in the first category is traditional poker.

A common pot is funded by the players, with the winnings paid from the pot. It is a

zero-sum game, with winnings equal to losses, subject only to any rake paid to the

facility. An example in the second category is traditional blackjack. It is not a zero-

sum game. On any given deal, all players can win, or all players can lose, or there

can be both winners and losers. There is no common pot. The essential feature of a

"banked" game is this: the bank pays the winners and collects from the losers.

This understanding of a "banked" game accords with the Compact, IGRA,

the Florida statute defining this term, industry usage, ordinary English, and the

parties' intent.

Under the Compact (as quoted above), the five-year limitation applies to

"banking or banked card games as defined in Part III, Section F(2)." Section F(2)

provides in full: "Banking or banked card games, including baccarat, chemin de

fer, and blackjack (21); provided, that the Tribe shall not offer such games at its

Brighton or Big Cypress Facilities unless and until the State of Florida permits any

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other person, organization or entity to offer such games." Compact § III.F.2. That

definition closely tracks IGRA. See 25 U.S.C. § 2703(7)(B)(i) (excluding from

class II gaming—and thus including in class III—"banking card games, including

baccarat, chemin de fer, or blackjack (21)").

Baccarat, chemin de fer, and blackjack are all games in which there is no

common pot, the players do not compete against one another, and instead a bank

pays the winners and collects from the losers. In baccarat and blackjack, the bank

is most often a dealer employed by the facility—in effect, the facility itself,

commonly denominated the "house." In chemin de fer, the bank is always one of

the players. This makes clear that, under the Compact and IGRA, banked games

include both house-banked games and player-banked games.

In asserting the contrary, the State says chemin de fer is rare to the point of

nonexistent—no longer played in this country and rarely played elsewhere. But

IGRA and the Compact refer to this game. And the reference is fully consistent

with what would be true anyway: banked card games include games banked by the

house or by someone else, including a player. That Congress and then the parties

reached back to an antiquated game to find an unmistakable example of a player-

banked game makes it more clear, not less, that they intended the Compact's

reference to banked games to include player-banked games. There is absolutely no

basis for the State's apparent position that this was just a mistake by those

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involved in drafting IGRA or by the representatives of the State and the Tribe who

drafted the Compact. Quite the contrary.

I find that the Tribe was represented in the negotiations by individuals with

long experience in this industry who well understood the terms they used. The

reference to chemin de fer was not a mistake.

Along the same lines, a Florida statute defines a "banking game" as "a game

in which [1] the house is a participant in the game, taking on players, paying

winners, and collecting from losers or [2] in which the cardroom establishes a bank

against which participants play." Fla. Stat. § 849.086(2)(b) (bracketing added). The

first part of the definition—the part following the bracketed [1]—describes a

house-banked game, that is, a game played in the manner that is typical for

blackjack and baccarat, two of the examples listed in the Compact and IGRA. The

second part of the definition—the part following the bracketed [2]—describes a

game banked by anyone else, including a player, that is, a game played in the

manner of chemin de fer, the other example listed in the Compact and IGRA.

The State says, though, that when a player acts as the bank, the cardroom

does not "establish" the bank within the meaning of § 849.086(2)(b). Not so. When

the cardroom devises and runs the game and sets the rules, including the

requirement that a player act as the bank, the cardroom "establishes" a bank. Any

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notion that players just happen in off the street and decide on their own to establish

a bank is wholly fanciful.

This understanding of § 849.086(2)(b) comports with the entire purpose of

distinguishing banked games (those with a bank) from unbanked games (those in

which the players compete against each other for the proceeds of a common pot).

The statute's preamble makes this clear: "The legislature finds that authorized

games [that is, games allowed in parimutuel cardrooms] are considered to be pari-

mutuel style games and not casino gaming because the participants play against

each other instead of against the house." Fla. Stat. § 849.086(1) (emphasis added).

This recognizes that, as set out above, there are two relevant categories of card

games: banked and unbanked. And while the quoted sentence also refers to the

"house," this is understandable shorthand given the predominance at that time of

games in which the bank was the house. The statute's later definition of a banked

game to include games in which the bank is not the house—games described in

bracketed clause [2] as quoted above—makes clear that the bank need not be the

house.

In sum, nothing in this or any other Florida statute suggests that a game is not

"banked" when the bank is a player rather than the house.

The accepted usage in the industry is the same: a banked game is one in

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which there is no common pot but instead there is a bank who pays the winners

and collects from the losers. Under the accepted industry usage, a game with a

bank is a banked game, whether the bank is the house, a third party, or a player.

The Tribe's expert, whose testimony on this I credit, so testified. I do not credit the

testimony of the State's expert, who said, in effect, that the term "banked" has no

meaning within the industry and instead can be understood only by reference to a

given jurisdiction's laws. And for what it's worth—not much—the State's expert

misinterpreted Florida law.

This definition also accords with ordinary English. A "poisoned apple" is a

"poisoned apple," whether poisoned with arsenic, hemlock, or something else. A

"banked game" is a "banked game," whether banked by the house, a player, or

someone else. The State has suggested no meaning of the term "bank" that works

in this context other than the term's obvious meaning: the person who pays the

winners and collects from the losers. Thus a "banked game," as a matter of

ordinary English, is a game in which someone, that is, a "bank," pays the winners

and collects from the losers.

Finally, this was also the understanding of the Tribe and the State when they

entered into the Compact. The Tribe agreed to pay more than a billion dollars to

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the State, primarily for the right to provide banked card games without competition

from the cardrooms or others, save only other tribes. The Tribe certainly did not

intend this exclusive right to be easily evaded.

The most important practical significance of the distinction between banked

and unbanked games is perhaps this. Many prospective gaming customers are

willing to compete on a given hand against the bank, even knowing the bank has a

mathematical advantage. But a substantial subset of those prospective customers

are unwilling to compete on a given hand against other players—players of

unknown but quite possibly superior ability. And in any event, the nature of the

game one is playing is substantially different when one is competing against a

bank or, in contrast, against other players.

When the Tribe and the State entered into the Compact, the cardrooms were

not in the running for the subset of players unwilling to compete on a given hand

against other players. The Tribe's understanding at that time—and almost surely the State's—was that cardrooms could not provide that kind of game. The Tribe paid an enormous sum for the right to serve the subset, free from cardroom

competition. When the cardrooms later set up designated-player games, they were

able to compete for players in the subset—players who did not wish to match skills with other players on a given hand. The Tribe would not have entered the Compact on these terms had it known this would be allowed.

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In sum, the parties' understanding, when they entered into the Compact,

was that the term "banking or banked games" included both house-banked and

player-banked games. This included games later offered as "designated player"

games.

In a prototypical banked game—blackjack, for example—the proprietor of

the facility employs the dealer, who acts as the bank. The dealer has an advantage

under the rules of the game, and so, in the long run, the facility makes money. The

facility has no inherent incentive to allow anyone else to act as the dealer. But if

the governing law prohibits a facility from offering banked games, the facility can

attempt to evade the prohibition by arranging for or allowing another person or

entity to become the bank, and asserting that the resulting game is somehow not a

banked game. The substitute bank can be a person who is ostensibly a player in the

game and who may or may not have an arrangement with the facility.

Florida parimutuel cardrooms embarked on this course in 2011, not long after the Tribe and the State entered into the Compact. The Legislature has delegated the task of regulating cardrooms to the Department of Business and Professional

Regulation, which proudly touts its excellent relationship with all its regulated entities. See ECF No. 99 at 54. The Department allowed the cardrooms to conduct their player-banked games and indeed advised the cardrooms in writing that their

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games complied with Florida law. See Tribe's Ex. 20 (e-mail from DBPR to

Miami Jai-Alai Cardroom); Tribe's Ex. 21 (e-mail from DBPR to Tampa Bay

Downs); Tribe's Ex. 52 (e-mail from DBPR to Daytona Beach Kennel Club). The

Tribe raised objections in its quarterly meetings with the Department but did not

vigorously press the issue because it wished to maintain its own excellent

relationship with the Department and knew that negotiations to extend the five-

year limitation and to modify the Compact in other respects would soon be

underway.

A particularly egregious example of the cardrooms' attempt to evade the

prohibition on banked card games was a cardroom's game providing for a "player"

to act as the bank but requiring the "player" to pass a background check and post a

cash bond of $100,000. See Tribe's Ex. 51. The assertion that this game was just

players competing against one another, without a "bank" established by the

facility, should have been a nonstarter. But the Department assured the cardroom

in writing that the game was compliant with Florida law. The assurance provided a

"safe harbor," protecting the facility from prosecution for conducting an illegal

banked game. ECF No. 99 at 5-6.

The Department's designated representative at trial testified that the person

who gave the assurance may have been acting outside the scope of her authority—

in the nomenclature of tort law, on a "frolic." ECF No. 99 at 50. The assertion is

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incorrect. The assurance was consistent with Department policy allowing player-

banked games. And in any event, the employee was performing precisely the task

the Department had delegated to her. She was acting within the course and scope

of her authority for the Department.

Doubling down on its policy of allowing parimutuel facilities to conduct

player-banked games, but perhaps recognizing that the games as conducted were a

rather obvious evasion of the law, the Department adopted a rule explicitly

allowing and regulating the practice. Florida Administrative Code Rule 61d-

11.002(5) took effect on July 21, 2014. The rule allows parimutuel cardroom

games "with a designated player that covers other players' wagers"—a player

bank—so long as the cardroom meets three conditions.

First, the cardroom must "[establish uniform requirements to be a designated

player." Fla. Admin. Code R. 61D-11.002(5)(a). By its terms, the provision would

allow a uniform requirement that every "designated player" undergo a background

check and post a $100,000 bond, or that every "designated player" meet other

terms that a typical player walking in off the street could not or would not wish to

meet. The condition thus would allow a cardroom to ensure that, from the

viewpoint of a typical player, the "designated player" would be indistinguishable

from the house.

Second, using the cardrooms' nomenclature, under which a "dealer button"

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identifies the "designated player" for any given hand, the rule requires a cardroom

to "[e]nsure that the dealer button rotates around the card table in a clockwise

fashion on a hand by hand basis to provide each player desiring to be the

designated player an equal opportunity to participate as the designated player." Id.,

R. 6 ID-11.002(5)(b). The theory is that if every player takes a turn as the bank, the

game becomes more like players competing against one another, as they do, for

example, in traditional poker. But when there is a bank, in each hand each player is

still playing against the bank, not against the other players as in traditional poker; it

is still a banked game. Moreover, to act as the designated player or bank, a player

still must meet the cardroom's uniform requirements, which, as set out above, may

as a practical matter limit a player from taking on the role of bank. And many

players will not wish to act as the bank, even if given the "opportunity" to do so. A

designated-player game is attractive to participants precisely to the extent it

mirrors a traditional banked game—precisely to the extent that players are allowed

to play against the bank without competing against other players, who may be

more skilled.

Third, the cardroom must "[n]ot require the designated player to cover all

potential wagers." Id., R. 61D-11.002(5)(c). This is window dressing of no practical import. Even in a traditional house-banked game, the house is not

required to cover all potential wagers; the house can and typically does set a limit

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on the amount a player can wager. And in the unlikely event that an actual player

in the game elected to act as the bank but then refused to accept individual wagers

below the limit, the effect would be simply that some players would not play that

hand (or would wager only any lower amount still available from the "designated

player's" allotment). For those who were able to play, this would not change the

nature of the game from banked to nonbanked. The players whose wagers were

covered would still play only against the bank, not against other players, and the

bank would still pay winners and collect from losers. Those unable to play that

hand would simply sit out the hand—much as if they went to the restroom.

Nothing in the Compact, IGRA, or Florida law suggests that these three

conditions somehow change a player-banked game into a nonbanked game. Nor

can the plain-language meaning of "banked" somehow support the assertion that a

player-banked game is "banked" when it does not meet these conditions but

nonbanked when it does meet these conditions. Perhaps most importantly, when

they entered into the Compact, the parties did not believe a game that meets these

conditions would somehow be deemed nonbanked. A player-banked game that

meets these conditions, like one that does not, is still a banked game.

Probably in response to the Tribe's insistence that the State's approval of

these games has abrogated the five-year limitation on the Tribe's own conduct of

banked games, the Department has proposed to repeal this rule. See Notice of

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Proposed Rule, 41 Fla. Admin. Reg. 5112 (Oct. 29,2015). But in the consolidated cases now before this court, the State has explicitly asserted that the rule is valid and remains in effect. The Department continues to allow parimutuel cardrooms to conduct banked games so long as they comply with the rule.

In sum, the history is this. There were no player-banked games at parimutuel cardrooms when the parties entered into the Compact. The parties did not expect the Tribe to have to compete against such games. But the Department permitted cardrooms to conduct banked games as early as 2011, formally approved the practice by adopting a rule in 2014, continues to permit the games, and asserts the rule is valid today. This has triggered the Compact's explicit exception to the five- year limitation on the Tribe's conduct of banked card games. The Compact allows the Tribe to conduct banked card games for the Compact's full 20-year term.

In reaching this conclusion, I have not overlooked the State's insistence that only the Florida Legislature, through a duly enacted statute, may authorize gaming.

No statute authorizes parimutuel cardrooms to conduct banked card games.

Instead, Florida Statutes § 849.086(12)(a) prohibits the practice.

The statute authorizes the Department of Business and Professional

Regulation to adopt rules that "regulate the operation of cardrooms." Id.

§ 849.086(4). But Florida construes grants of rulemaking authority much more

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narrowly than most jurisdictions. See Fla. Stat. § 120.536; see also Dep't of Bus. &

Prof'I Regulation v. Calder Race Course, Inc., 23 Fla. L. Weekly D1795 (Fla. 1st

DCA July 29, 1988). One court has held that the Department may not adopt rules

defining what is or is not a banked game within the meaning of § 849.086. See St.

Petersburg Kennel Club v. Dep't of Bus. & Prof'I Regulation, 719 So. 2d 1210

(Fla. 2d DCA 1998); see also Dania Entertainment Center, LLC v. DBPR, Div.

Pari-mutuel Wagering, Case No. 15-7010RP, at 43-44 (Fla. DOAH August 26,

2016), appeal filed, DBPR v. Dania Enter. Ctr., LLC, Case No. 1D16-4275 (Fla.

1st DCA Sep. 22, 2016); DBPR, Div. Pari-mutuel Wagering v. Jacksonville

Kennel Club, Inc., Case No. 16-1009, 38-42 (Fla. DOAH August 1, 2016). I assume without deciding that, as suggested by these authorities, the Department's rule authorizing player-banked games, Florida Administrative Code Rule 61D-

11.002(5), is invalid.

This does not change the result. The issue in this litigation is not whether the rule is valid. The issue is the meaning of the Compact's exception to the five-year limitation on the Tribe's conduct of banked card games. The exception applies if the State "permits any other person ... to conduct such games." It is inconceivable that the parties meant that the State, through the officials to whom it delegated the authority to regulate cardrooms, could allow cardrooms to conduct banked games, issue written assurances that the games comply with state law,

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adopt a rule approving the practice, but then assert that the exception was not

triggered because the Legislature itself had not taken the action. The most

reasonable construction of the Compact's language—and the understanding of

both sides in entering into the Compact—was that the five-year limitation would

not apply if the State, through its regulators, permitted cardrooms or others

(excluding only other Indian tribes) to conduct banked card games.

In arguing the contrary, the State relies on cases arising in other contexts that

say nothing about the proper construction of this Compact. See, e.g., California v.

Cabazon Bank of Mission Indians, 480 U.S. 202 (1987) (addressing the meaning

of a statute that predated IGRA and allowed six states to apply their criminal laws

to conduct on Indian lands); Seminole Tribe ofFla. v. Fla., 1993 WL 475999

(S.D. Fla. Sept. 22, 1993) (recognizing that a statute is not repealed merely by

nonuse), effectively vacatedfor lack of jurisdiction, Seminole Tribe of Fla. v. Fla.,

517 U.S. 44 (1996). These cases and others cited by the State cast not the slightest

doubt on the rather obvious proposition that a state agency's affirmative act—

including the agency's formal adoption of a rule—constitutes an act of the state.

This ruling does not mean that the Tribe can conduct gaming the Legislature

did not authorize. The Legislature duly enacted a statute approving the Compact.

The Compact authorized the Tribe to conduct banked card games—for five years

or 20, depending on future events. If, as now has occurred, the State, through the

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Department of Business and Professional Regulation, permitted others to conduct

banked card games, the Compact authorized the Tribe to conduct banked card

games for 20 years. By approving the Compact, the Legislature authorized the

Tribe to conduct banked card games for 20 years.

VII

I also have not overlooked the State's reliance on a different provision of the

Compact. The language that is critical to this decision is in § XVI.B.: the five-year

limitation on banked card games does not apply if "the State permits any other

person ... to conduct such games." The State says, in effect, that this language

should be wholly ignored—that it has no meaning whatsoever—because of Part

XII. The assertion contravenes an accepted canon of construction: contractual

language ordinarily should not be stripped of all meaning. See, e.g., Mastrobuono

v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 64 (1995) ("[A] document should

be read to give effect to all its provisions and to render them consistent with each

other."). More importantly, Part XII will not bear the meaning the State ascribes to

it.

Part XII addresses the Tribe's required payments to the State. The subject is

not just banked card games but any kind of class III or casino-style gaming,

including, for example, slot machines, subject to limited exceptions. Part XII

provides that if a Florida statute or constitutional amendment allows class III or

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other casino-style gaming that was not authorized as of February 1, 2010, the

Tribe's required payments to the State will be reduced. Part XII does not address in

any way the Tribe's own ability to conduct gaming of any kind.

The obvious scope and purpose of Part XII can be illustrated by a plausible

hypothetical—a hypothetical of the kind the parties surely envisioned when they

entered into the Compact. Suppose in 2020 a constitutional amendment authorizes

slot machines statewide. It could happen. Under Part XII, this would reduce the

Tribe's required payments to the State, but it would not terminate the Tribe's own

ability to provide slot machines. The provision makes sense; the loss of exclusivity would reduce the value of the Tribe's ability to conduct its own gaming. Similarly, a loss of exclusivity for banked card games would reduce the required payments but would have nothing to do with the Tribe's own ability to conduct banked card games.

Part XII does not speak to the issue in this case: whether the Tribe may conduct banked card games for five years or 20. Instead, § XVI.B. speaks to that issue and is controlling.

VIII

One other provision of the Compact, § XVI.C., deserves mention.

As background, recall that under § XVIJB., there are two exceptions to the five-year limitation on the Tribe's authority to conduct banked card games: the

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Tribe may continue to provide such games if the authority to do so is "renewed by

the parties" or if "the State permits any other person ... to conduct such games."

The very next section, XVI.C., includes this provision: "The Tribe's

authorization to offer banked or banking card games shall automatically terminate

five (5) years from the Effective Date unless renewed by affirmative act of the

Florida Legislature." Standing alone—considered without regard to XVI.B.—this

language does not recognize the exception that applies when the State permits

another person to conduct such games.

The presence of these two apparently inconsistent provisions in such close

proximity to one another is curious. Two things are noteworthy about the drafting.

First, XVI.B. refers to "the State," while XVI.C. refers to the "Florida

Legislature." The parties used different terms and apparently meant different

things; they apparently recognized that "the State" can act not just through the

Legislature but in other ways. This supports the conclusion that when the

Department of Business and Professional Regulation permitted parimutuel

cardrooms to conduct banked card games and adopted a rule formally approving

the practice, "the State" permitted the cardrooms to conduct such games, within

the meaning of XVI.B. And this further supports the conclusion that XVI.B. and

XVI.C. are not mirror images; XVI.B. is broader.

Second, as both sides have agreed, the Compact was drafted by both parties,

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with one side initially drafting some provisions and the other side initially drafting

other provisions. The record includes no evidence on who initially drafted XVI.B.

or XVLC., but a good guess is that there were different authors.

The best reading of these provisions is this. There are two exceptions to the

five-year limitation on the Tribe's ability to conduct banked card games. One

exception, recognized in XVI.B. and clarified in XVI.C., is that the Tribe's ability

to conduct such games can be "renewed" by the parties—that is, by the Tribe and

the Florida Legislature. The word "renewed" is in both XVI.B. and XVI.C, and

while XVI.B. refers only to the "parties," it is uncontested that any renewal could

be approved only by the Legislature, as XVI.C. makes clear.

The second exception, set out only in XVI.B., is triggered when "the State permits any other person [except another tribe] to conduct such games." The parties did not limit this to action of the Legislature. And even though XVLC. does not again set out this exception, it is clearly included in XVI.B. The parties knew the provision was there and intended it to be part of the Compact. It cannot be read out of existence.

The conclusion that player-banked card games are banked card games, thus triggering the exception to the five-year limitation on the Tribe's conduct of banked card games, makes it unnecessary to determine whether electronic

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blackjack is also a banked card game. The issue is close—too close to resolve

when a ruling is not essential to the outcome of the case. This order briefly

explains this conclusion but expresses no opinion on how the issue would be

resolved.

Slot machines—or at least the slot machines at issue—are "banked" games,

because the player plays against the bank. Indeed, the machines are house-banked

games, because the player plays against the house. The issue is not whether

electronic blackjack is a banked game, but whether electronic blackjack is a card

game. This is so because the exception to the five-year limitation applies when the

State permits others to conduct banked "card games."

The State says all of the electronic blackjack games at issue are slot

machines, approved by the State under its protocols for slot machines. That is

correct. The State also says a slot machine can never be a card game, because the

categories are mutually exclusive. But nothing in Florida law or logic suggests that

the categories must be mutually exclusive.

To be sure, a blackjack-themed slot machine of the kind in use in Florida when the Compact was entered into—a game with a single player sitting at a machine with no human attendant—was much more like a traditional slot machine than like a card game. Calling such a machine a card game would be a stretch. This does not mean, though, that an electronic blackjack game can never be a card

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game.

This is not the first industry in which the digital age has changed how things

are done. The courts are an example. Materials that were traditionally presented on

paper are now commonly presented electronically. Apparently without exception,

courts have held that the statutes and rules that were written for paper materials are

fully applicable to electronic versions. See, e.g., Fed. R. Evid. 101(b)(6) (adopting,

as part of the restyling project that made no substantive changes, this provision: "a

reference to any kind of written material or any other medium includes

electronically stored information").

There is no apparent reason why the same approach should not apply to the

gaming industry. As individuals become ever more accustomed to electronic

innovations, it is not hard to imagine a world in which playing cards are more

often electronic than physical—in which cards in traditional form go the way of

telephone dials and vinyl records. Even so, no blackjack game has yet been played

in Florida in which the only change is from a physical card to an electronic card.

Nor does the record show that the State has permitted every version of electronic

blackjack that has been played in the State.

A ruling for the Tribe on this issue would provide an alternative basis for the

holding that the exception to the five-year limitation has been triggered. But the

issue is too close to be resolved in a case in which a ruling is not essential to the

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outcome.

A tribe that proposes to conduct class III gaming on its lands must "request the State in which such lands are located to enter into negotiations for the purpose of entering into a Tribal-State compact governing the conduct of gaming activities."

25 U.S.C. § 2710(d)(3)(A). The provision continues: "Upon receiving such a request, the State shall negotiate with the Indian tribe in good faith to enter into such a compact." Id. (emphasis added). The Tribe's count two seeks to enforce this requirement. The State says it has Eleventh Amendment and sovereign immunity from the claim.

By its terms, IGRA establishes a procedure under which a tribe may enforce

the state's duty to negotiate in good faith. The enforcement mechanism begins with

a lawsuit against the state in district court. But a state retains its Eleventh

Amendment and sovereign immunity from such a lawsuit. See, e.g., Seminole

Tribe ofFla. v. Florida, 517 U.S. 44 (1996) (holding that a state has Eleventh

Amendment immunity from a tribe's IGRA action to enforce the duty to negotiate

in good faith); Alden v. Maine, 527 U.S. 706 (1999) (recognizing the federal constitutional basis for a state's sovereign immunity separate and apart from the

Eleventh Amendment).

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The Compact includes an explicit waiver of the State's immunity for

"disputes between the State and the Tribe that arise under this Compact," so long as "the dispute is limited solely to issues arising under this Compact." Compact

§ XIII.D. The limitation to "issues arising under this Compact" means that a court's ability to resolve a dispute arising under the Compact does not bring with it the authority to resolve an ancillary dispute that does not arise under the Compact.

The State acknowledges that the waiver is valid and applies to the Tribe's count one—the claim asserting the Tribe's right under the Compact to conduct banked card games. The State says, though, that the waiver does not reach the

Tribe's count two, which seeks to enforce the State's duty to negotiate in good faith.

The Compact does not, by its terms, obligate the State to negotiate for an extension of the five-year limitation or for any other modification of the Compact.

The Tribe's failure-to-negotiate claim thus does not "arise under" the Compact. The

State has not explicitly waived its immunity from the Tribe's count two.

A state can also waive its immunity by its litigation conduct. See, e.g.,

Lapides v. Bd. of Regents of Univ. Sys. of Ga., 535 U.S. 613 (2002) (holding that a state waived its Eleventh Amendment immunity by removing an action to federal court). In general, a party who files a complaint waives jurisdictional objections to a compulsory counterclaim—that is, to a claim that "arises out of the transaction or

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Page 30 of 36 occurrence that is the subject matter of the" complaint. Fed. R. Civ. P. 13(a)(1)(A).

The principle applies to a state: "when a state waives its sovereign immunity by litigation conduct, that waiver opens the door to counterclaims regarded as compulsory within the meaning of Federal Rule of Civil Procedure 13(a)." Bd. of

Regents of Univ. of Wis. Sys. v. Phoenix Intern. Software, Inc., 653 F.3d 448, 470

(7th Cir. 2011).

Under the law of this circuit, however, a state's waiver of its immunity is limited to relief that mirrors the relief sought by the state itself:

[Wjhen the sovereign sues it waives immunity as to claims of the defendant which assert matters in recoupment—arising out of the same transaction or occurrence which is the subject matter of the government's suit, and to the extent of defeating the government's claim but not to the extent of a judgment against the government which is affirmative in the sense of involving relief different in kind or nature to that sought by the government or in the sense of exceeding the amount of the government's claims; but the sovereign does not waive immunity as to claims which do not meet the 'same transaction or occurrence test' nor to claims of a different form or nature than that sought by it as plaintiff nor to claims exceeding in amount that sought by it as plaintiff.

Frederick v. United States, 386 F.2d 481, 488 (5th Cir. 1967) (footnotes omitted).

Frederick is binding in the Eleventh Circuit. See Bonner v. City of Prichard, Ala.,

661 F.2d 1206, 1207 (11th Cir.1981) (en banc).

The takeaway is this. By filing a lawsuit, a state waives its immunity only from a claim that meets two conditions: (1) the claim arises from the same

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transaction or occurrence as the state's claim, and (2) the claim seeks relief of the

same kind as, and does not exceed the amount of, the state's claim. Here the first

condition is easily met. But the second condition limits the scope of the State's

waiver of its immunity.

The State's claims deal only with the five-year limitation. The State's waiver

of immunity thus extends only to the Tribe's claim that the State failed to

negotiate in good faith for an extension of the five-year period. The Tribe's claim

based on the State's duty to negotiate over other issues would, if successful, lead

to relief far exceeding an extension of the five-year period. See 25 U.S.C. §

2710(7)(B)(iii)-(vii). This claim is different in "kind and nature" and seeks relief

far in excess of that sought by the State.

To be sure, the Tribe asserts that the State's failure to negotiate in good faith

in general—including the failure to negotiate about issues other than the five-year

limitation—is a defense to the State's claims. Perhaps so. But Frederick measures

a waiver by the claims of the sovereign, not by the opposing party's defenses. The

State has not waived its immunity from the Tribe's claim of failure to negotiate on

issues other than the five-year limitation.

The State says its entry into the Compact in 2010 relieved the State from any obligation to negotiate further during the Compact's 20-year term. As the State

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Page 32 of 36 frames it, IGRA requires a state to negotiate a compact in the first instance, not to renegotiate during a compact's existence. Nothing in the statute supports that assertion, and the assertion makes no sense. Negotiation to one extent or another will or at least should always occur when a compact nears the end of its term and a tribe seeks to extend the existing compact or enter a new one. And changed circumstances may make it reasonable to enter negotiations on changes to a compact. IGRA obligates a state to participate in such negotiations in good faith.

To be sure, good faith may not require a state to reopen recently concluded negotiations. See Wisconsin Winnebago Nation v. Thompson, 22 F.3d 719, 724 (7th

Cir. 1994). And a tribe that has entered into a compact may have no claim against a state for failing to negotiate that very compact in good faith. See Pauma Band of

Luiseno Mission Indians of Pauma & Yuima Reservation v. Cal., 813 F.3d 1155,

1172 (9th Cir. 2015). But the fact that there is an existing compact does not, without more, relieve a state from its duty to negotiate in good faith. See Wisconsin

Winnebago, 22 F.3d at 724; Rincon Band of Luiseno Mission Indians v.

Schwarzenegger, 602 F.3d 1019 (9th Cir. 2010).

Here the State plainly had a duty to negotiate in good faith on an extension of the five-year limitation. The understanding of both the Tribe and the State, when they entered into the Compact, was that they would revisit the issue before the five years ended. This is confirmed not only by the testimony of the Tribe's negotiator,

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Page 33 of 36 which I credit, but also by the statute that authorized the Governor to negotiate the

Compact in the first instance. The statute provided:

It is the intent of the Legislature to review a compact entered into under the provisions of this section within 5 years after the compact is approved. It is the intent of the Legislature to consider the authorization of additional Class III games for operation by the Tribe based upon successful implementation of the compact and the history of compliance with the compact.

See Ch. 2009-170, sec. 1, Laws of Fla. (2009); Fla. Stat. § 285.710(11) (2009).

To be sure, this same language did not make it into the Compact itself or into the legislation ratifying the Compact. See Ch. 2010-29, sec. 1, Laws of Fla.

(2010). But IGRA imposed a duty on the State to negotiate on this issue in good faith.

Even though the State had a duty to negotiate in good faith, the Tribe is not entitled to a judgment at this time on its failure-to-negotiate claim. Three considerations drive this conclusion.

First, as it turns out, the five-year limitation never took hold, because, as set out above, an exception was triggered. The duty to negotiate about the Tribe's ability to continue to provide banked games is no longer of consequence.

Second, any duty to negotiate on other subjects—on the Tribe's ability to provide roulette or craps, for example, or on any extension of the Compact beyond

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Page 34 of 36 the 20-year term—is barred by sovereign immunity.

Third, the Tribe and, at least to a point, the State negotiated in good faith about the Tribe's proposed modifications to the Compact. The State was represented in the negotiations by the Governor (or at least members of his staff), officials of the Department of Business and Professional Regulation, a state senator, and a member of the state House of Representatives. These officials negotiated and indeed reached an agreement, which the Governor signed. The breakdown came when the Florida Legislature did not approve or even vote on the negotiated agreement.

The Tribe argues, with considerable force, that the Legislature did not act in good faith. Bills that never reached the floor called for an increase in revenue to the State and a decrease in the Tribe's exclusivity, suggesting bad faith. See

Rincon, 602 F.3d at 1037-39 (9th Cir. 2010); 25 U.S.C. § 2710(d)(4). But a bill that does not pass—and more clearly, a bill that never makes it to the floor—is not an act of the Legislature. Such a bill may give little indication of what the Legislature did or did not consider.

That a state must negotiate in good faith does not mean the state must agree to terms. Even good-faith negotiations sometimes fail. Here, in light of the ruling that the five-year limitation no longer applies and the State's sovereign immunity from the claim of failure to negotiate on other matters, and as a matter of equitable

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Page 35 of 36 discretion, no further declaratory or injunctive relief will be granted.

The Tribe and the State entered into the 2010 Compact with the Florida

Legislature's formal approval. The Compact authorized the Tribe to conduct banked card games for five years or 20, depending on future events. As it turned out, the Compact authorized the Tribe to conduct banked card games for 20 years.

The Tribe is entitled to relief confirming this conclusion. The Tribe is not entitled to any additional relief on its failure-to-negotiate claim. Accordingly,

IT IS ORDERED:

1. The State's oral motion to voluntarily dismiss count two of its complaint in Case No. 4:15cv588 is granted. Count two in that action is voluntarily dismissed without prejudice.

2. It is declared that the Seminole Tribe of Florida has the right under the

2010 Compact to provide banked card games for the Compact's entire 20-year term at the seven locations listed in Part IV.B. of the Compact.

3. All other claims in these consolidated cases are dismissed.

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Page 36 of 36

4. The clerk must enter a separate judgment in each case.

5. The clerk must close the file.

SO ORDERED on November 9, 2016.

s/Robert L. Hinkle United States District Judge

Consolidated Case No 4 15cv516-RH/CAS 197 TAB 5 INDEX TO TAB 5

Page 199 Notice of Development of Rulemaking, Rule No. 64-4.012 – Medical Marijuana for Debilitating Medical Conditions

Page 201 Article X, Section 29, Florida Constitution – Medical marijuana production, possession and use

Page 204 Section 381.986, Fla. Stat. – Compassionate Use of low-THC and medical cannabis [see 381.986(7)(j)].

Page 213 Section 120.52, Fla. Stat. – Definitions [see 120.(1)].

198 Notice of Development of Rulemaking

DEPARTMENT OF HEALTH RULE NO.: RULE TITLE: 64-4.012 Medical Marijuana for Debilitating Medical Conditions PURPOSE AND EFFECT: The purpose and effect of this rule is to implement provisions of Article X, Section 29 of the Florida Constitution, to set out clear guidance on use of terms and implementation of the amendment which went into effect on January 3, 2017. SUBJECT AREA TO BE ADDRESSED: The use of medical marijuana for debilitating medical conditions. RULEMAKING AUTHORITY: Ait. X, § 29(d), Fla. Const. LAW IMPLEMENTED: Art. X, § 29, Fla Const., 381.986 FS. A RULE DEVELOPMENT WORKSHOP WILL BE HELD AT THE DATES, TIMES AND PLACES SHOWN BELOW: Februaiy 6,2017,2.00 p.m. - 4:00 p.m. Duval County Health Department 900 University Blvd. North Jacksonville, FL 32211

February 7,2017,10:00 a.m. - noon Broward County Health Department 780 SW 24th Street Fort Lauderdale, FL 33315

February 8,2017, 9:00 a.m. - 11:00 a.m. Florida Department of Health, Tampa Bianch Laboratory 3602 Spectrum Blvd. Tampa, FL 33612

February 8,2017, 6:00 p.m. - 8:00 p.m. Orange County Health Department 6102 Lake Ellenor Drive Oilando, FL 32809

February 9, 2017, 4:00 p,m, - 6:00 p.m. Betty Easley Conference Center 4075 Esplanade Way, Room 148 Tallahassee, Florida 32399-0850

Individuals may also provide public comment during these woikshops by accessing the following weblinlc: http://www floridahealth.gov/piograms-and-services/office-of-compassionate-use/comment-form/index.html

Pursuant to the provisions of the Ameiicans with Disabilities Act, any peison requiring special accommodations to participate in this woikshop/meeting is asked to advise the agency at least 5 days befoie the workshop/meeting by contacting: Courtney Coppola at [email protected]. If you are hearing or speech impaiied, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice) THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE DEVELOPMENT AND A COPY OF THE PRELIMINARY DRAFT, IF AVAILABLE, IS: Courtney Coppola at [email protected].

THE PRELIMINARY TEXT OF THE PROPOSED RULE DEVELOPMENT IS:

64-4.012 Medical Maiijuana for Debilitating Medical Conditions (11 For the purposes of this chapter, in accordance with Article X. Section 29. Fla. Const., the following definitions shall apply:

199 fa") "Medical Marijuana Treatment Center fMMTQ" shall have the same definition as a dispensing organization ins. 381.986aVbl.F.S. (b) "Caregiver" shall mean a legal representative as defined by s. 381.986(l¥d'). F.S.. who is at least twentv-one ("211 years old and has successfully passed a Level 1 background scieening as defined in s. 435.03. F.S. (V) "Medical use" shall have the same definition as medical use in s. 381.986(1Yel F.S. CcP) "Qualifying patient" shall mean a qualified patient as defined by s. 381.986(lYh'). F.S.. who has been diagnosed to have a qualifying debilitating medical condition, has a physician certification, and who has a valid patient Compassionate Use Registry identification card. fe') "Qualifying debilitating medical condition" shall mean conditions eligible foi physician oidering contained in s. 381.986r2^, F.S.. or cancer, epilepsy, glaucoma, positive status for human immunodeficiency virus (IJIVt. acquired immune deficiency syndrome ('AIDS'), post-traumatic stiess disorder ("PTSD), amyotrophic lateral sclerosis fALSl. Crohn's disease. Parkinson's disease, multiple sclerosis. Also, anv debilitating medical conditions of the same kind or class as or comparable to those enumeiated. as determined by the Floiida Board of Medicine. if) The 45 day supply limitation set forth in s. 381.968(21fe). F.S. shall be an adequate supply for a qualifying patient's medical use. fg") A physician authorized to order medical marijuana means a qualified oidering physician who has met the requiiements of s. 381.986 (2-41 F.S fit) "Physician certification" means DH801 l-QCU-12/2016. "Physician Certification." which is incorporated by reference and available at http://www.flrules,org/Gatewav/reference.asp?No=Ref-#### and must be submitted with each "Compassionate Use Registry Identification Card Qualified Patient Application." A physician certification may only be provided after the physician has conducted a physical examination and a fall assessment of the medical history of the patient. In order for a physician certification to be issued to a minor, a parent or legal guardian of the minor must consent in writing. (21 All MMTCs. physicians, patients, and caregivers must be registered in the online Compassionate Use Registry as required by s. 381.986(5)(al. F.S . and Rule 64-4.009. F.A.C. All orders for medical marijuana must be entered into the legistrv for piocessing accordingly. (31 The process for registering as an MMTC shall be the same approval and selection process outlined in s. 381.986. F.S.. and Rule 64-4.002. F.A.C.. and subject to the same limitations and operational requirements contained therein. (41 All MMTCs shall follow the medical record keeping standards as set forth in Rule 64B8-9.003. F A C.. as adopted and incorporated herein. (5) All MMTCs shall abide by the security, product testing, labeling, inspection and safety standards set forth in s. 381 986. F.S and this chapter Rulemaking Authority Ait. X. § 29(dl, Fla. Const. Law Implemented Art. X. 8 29. Fla. Const.. 381.986 FS. Histoiv-New

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SECTION 29. Medical marijuana production, possession and use.— (a) PUBLIC POLICY. (1) The medical use of marijuana by a qualifying patient or caregiver in compliance with this section is not subject to criminal or civil liability or sanctions under Florida law. (2) A physician shall not be subject to criminal or civil liability or sanctions under Florida law solely for issuing a physician certification with reasonable care to a person diagnosed with a debilitating medical condition in compliance with this section. (3) Actions and conduct by a Medical Marijuana Treatment Center registered with the Department, or its agents or employees, and in compliance with this section and Department regulations, shall not be subject to criminal or civil liability or sanctions under Florida law. (b) DEFINITIONS. For purposes of this section, the following words and terms shall have the following meanings: (1) "Debilitating Medical Condition" means cancer, epilepsy, glaucoma, positive status for human immunodeficiency virus (HIV), acquired immune deficiency syndrome (AIDS), post-traumatic stress disorder (PTSD), amyotrophic lateral sclerosis (ALS), Crohn's disease, Parkinson's disease, multiple sclerosis, or other debilitating medical conditions of the same kind or class as or comparable to those enumerated, and for which a physician believes that the medical use of marijuana would likely outweigh the potential health risks for a patient. (2) "Department" means the Department of Health or its successor agency. (3) "Identification card" means a document issued by the Department that identifies a qualifying patient or a caregiver. (4) "Marijuana" has the meaning given cannabis in Section 893.02(3), Florida Statutes (2014), and, in addition, "Low-THC cannabis" as defined in Section 381.986(1 )(b), Florida Statutes (2014), shall also be included in the meaning of the term "marijuana." (5) "Medical Marijuana Treatment Center" (MMTC) means an entity that acquires, cultivates, possesses, processes (including development of related products such as food, tinctures, aerosols, oils, or ointments), transfers, transports, sells, distributes, dispenses, or administers marijuana, products containing marijuana, related supplies, or educational materials to qualifying patients or their caregivers and is registered by the Department. (6) "Medical use" means the acquisition, possession, use, delivery, transfer, or administration of an amount of marijuana not in conflict with Department rules, or of related supplies by a qualifying patient or caregiver for use by the caregiver's designated qualifying patient for the treatment of a debilitating medical condition. (7) "Caregiver" means a person who is at least twenty-one (21) years old who has agreed to assist with a qualifying patient's medical use of marijuana and has qualified for and obtained a caregiver identification card issued by the Department. The Department may limit the number of qualifying patients a caregiver may assist at one time and the number of caregivers that a qualifying patient may have at one time. Caregivers are prohibited from consuming marijuana obtained for medical use by the qualifying patient. (8) "Physician" means a person who is licensed to practice medicine in Florida. (9) "Physician certification" means a written document signed by a physician, stating that in the physician's professional opinion, the patient suffers from a debilitating medical condition, that the medical use of marijuana would likely outweigh the potential health risks for the patient, and for how long the physician recommends the medical use of marijuana for the patient. A physician certification may only be provided after the physician has conducted a physical examination and a full assessment of the medical history of the patient. In order for a physician certification to be issued to a minor, a parent or legal guardian of the minor must consent in writing. (10) "Qualifying patient" means a person who has been diagnosed to have a debilitating medical condition, who has a physician certification and a valid qualifying patient identification card. If the http://www.leg.state.fl.us/Statutes/index.cfm?Mode=Constitution&Submenu=3&Tab=statu...201 1/17/2017 Statutes & Constitution :Constitution : Online Sunshine Page 2 of 3

Department does not begin issuing identification cards within nine (9) months after the effective date of this section, then a valid physician certification will serve as a patient identification card in order to allow a person to become a "qualifying patient" until the Department begins issuing identification cards. (c) LIMITATIONS. (1) Nothing in this section allows for a violation of any law other than for conduct in compliance with the provisions of this section. (2) Nothing in this section shall affect or repeal laws relating to non-medical use, possession, production, or sale of marijuana. (3) Nothing in this section authorizes the use of medical marijuana by anyone other than a qualifying patient. (4) Nothing in this section shall permit the operation of any vehicle, aircraft, train or boat while under the influence of marijuana. (5) Nothing in this section requires the violation of federal law or purports to give immunity under federal law. (6) Nothing in this section shall require any accommodation of any on-site medical use of marijuana in any correctional institution or detention facility or place of education or employment, or of smoking medical marijuana in any public place. (7) Nothing in this section shall require any health insurance provider or any government agency or authority to reimburse any person for expenses related to the medical use of marijuana. (8) Nothing in this section shall affect or repeal laws relating to negligence or professional malpractice on the part of a qualified patient, caregiver, physician, MMTC, or its agents or employees. (d) DUTIES OF THE DEPARTMENT. The Department shall issue reasonable regulations necessary for the implementation and enforcement of this section. The purpose of the regulations is to ensure the availability and safe use of medical marijuana by qualifying patients. It is the duty of the Department to promulgate regulations in a timely fashion. (1) Implementing Regulations. In order to allow the Department sufficient time after passage of this section, the following regulations shall be promulgated no later than six (6) months after the effective date of this section: a. Procedures for the issuance and annual renewal of qualifying patient identification cards to people with physician certifications and standards for renewal of such identification cards. Before issuing an identification card to a minor, the Department must receive written consent from the minor's parent or legal guardian, in addition to the physician certification. b. Procedures establishing qualifications and standards for caregivers, including conducting appropriate background checks, and procedures for the issuance and annual renewal of caregiver identification cards. c. Procedures for the registration of MMTCs that include procedures for the issuance, renewal, suspension and revocation of registration, and standards to ensure proper security, record keeping, testing, labeling, inspection, and safety. d. A regulation that defines the amount of marijuana that could reasonably be presumed to be an adequate supply for qualifying patients' medical use, based on the best available evidence. This presumption as to quantity may be overcome with evidence of a particular qualifying patient's appropriate medical use. (2) Identification cards and registrations. The Department shall begin issuing qualifying patient and caregiver identification cards, and registering MMTCs no later than nine (9) months after the effective date of this section. (3) If the Department does not issue regulations, or if the Department does not begin issuing identification cards and registering MMTCs within the time limits set in this section, any Florida citizen shall have standing to seek judicial relief to compel compliance with the Department's constitutional duties. 202 http://www.leg.state.fl.us/Statutes/index.cfm?Mode=Constitution&Submenu=3&Tab=statu... 1/17/2017 Statutes & Constitution :Constitution : Online Sunshine Page 3 of 3

(4) The Department shall protect the confidentiality of all qualifying patients. All records containing the identity of qualifying patients shall be confidential and kept from public disclosure other than for valid medical or law enforcement purposes. (e) LEGISLATION. Nothing in this section shall limit the legislature from enacting laws consistent with this section. (f) SEVERABILITY. The provisions of this section are severable and if any clause, sentence, paragraph or section of this measure, or an application thereof, is adjudged invalid by a court of competent jurisdiction other provisions shall continue to be in effect to the fullest extent possible. History.-Proposed by Initiative Petition filed with the Secretary of State January 9, 2015; adopted 2016.

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Select Year: 2016 v Go

The 2016 Florida Statutes

Title XXIX Chapter 381 View Entire Chapter PUBLIC HEALTH PUBLIC HEALTH: GENERAL PROVISIONS 381.986 Compassionate use of low-THC and medical cannabis.— (1) DEFINITIONS.-As used in this section, the term: (a) "Cannabis delivery device" means an object used, intended for use, or designed for use in preparing, storing, ingesting, inhaling, or otherwise introducing low-THC cannabis or medical cannabis into the human body. (b) "Dispensing organization" means an organization approved by the department to cultivate, process, transport, and dispense low-THC cannabis or medical cannabis pursuant to this section. (c) "Independent testing laboratory" means a laboratory, including the managers, employees, or contractors of the laboratory, which has no direct or indirect interest in a dispensing organization. (d) "Legal representative" means the qualified patient's parent, legal guardian acting pursuant to a court's authorization as required under s. 744.3215(4), health care surrogate acting pursuant to the qualified patient's written consent or a court's authorization as required under s. 765.113. or an individual who is authorized under a power of attorney to make health care decisions on behalf of the qualified patient. (e) "Low-THC cannabis" means a plant of the genus Cannabis, the dried flowers of which contain 0.8 percent or less of tetrahydrocannabinol and more than 10 percent of cannabidiol weight for weight; the seeds thereof; the resin extracted from any part of such plant; or any compound, manufacture, salt, derivative, mixture, or preparation of such plant or its seeds or resin that is dispensed only from a dispensing organization. (f) "Medical cannabis" means all parts of any plant of the genusCannabis, whether growing or not; the seeds thereof; the resin extracted from any part of the plant; and every compound, manufacture, sale, derivative, mixture, or preparation of the plant or its seeds or resin that is dispensed only from a dispensing organization for medical use by an eligible patient as defined in s. 499.0295. (g) "Medical use" means administration of the ordered amount of low-THC cannabis or medical cannabis. The term does not include the: 1. Possession, use, or administration of low-THC cannabis or medical cannabis by smoking. 2. Transfer of low-THC cannabis or medical cannabis to a person other than the qualified patient for whom it was ordered or the qualified patient's legal representative on behalf of the qualified patient. 3. Use or administration of low-THC cannabis or medical cannabis: a. On any form of public transportation. b. In any public place. c. In a qualified patient's place of employment, if restricted by his or her employer. d. In a state correctional institution as defined in s. 944.02 or a correctional institution as defined in s. 944.241. e. On the grounds of a preschool, primary school, or secondary school. 204 http.//www.leg.state fl us/Statutes/index.cfm?App_mode=Display_Statute&Search. 2/3/2017 Statutes & Constitution :View Statutes • Online Sunshine Page 2 of 9

f. On a school bus or in a vehicle, aircraft, or motorboat. (h) "Qualified patient" means a resident of this state who has been added to the compassionate use registry by a physician licensed under chapter 458 or chapter 459 to receive low-THC cannabis or medical cannabis from a dispensing organization. (i) "Smoking" means burning or igniting a substance and inhaling the smoke. Smoking does not include the use of a vaporizer. (2) PHYSICIAN ORDERING.—A physician is authorized to order low-THC cannabis to treat a qualified patient suffering from cancer or a physical medical condition that chronically produces symptoms of seizures or severe and persistent muscle spasms; order low-THC cannabis to alleviate symptoms of such disease, disorder, or condition, if no other satisfactory alternative treatment options exist for the qualified patient; order medical cannabis to treat an eligible patient as defined in s. 499.0295: or order a cannabis delivery device for the medical use of low-THC cannabis or medical cannabis, only if the physician: (a) Holds an active, unrestricted license as a physician under chapter 458 or an osteopathic physician under chapter 459; (b) Has treated the patient for at least 3 months immediately preceding the patient's registration in the compassionate use registry; (c) Has successfully completed the course and examination required under paragraph (4)(a); (d) Has determined that the risks of treating the patient with low-THC cannabis or medical cannabis are reasonable in light of the potential benefit to the patient. If a patient is younger than 18 years of age, a second physician must concur with this determination, and such determination must be documented in the patient's medical record; (e) Registers as the orderer of low-THC cannabis or medical cannabis for the named patient on the compassionate use registry maintained by the department and updates the registry to reflect the contents of the order, including the amount of low-THC cannabis or medical cannabis that will provide the patient with not more than a 45-day supply and a cannabis delivery device needed by the patient for the medical use of low-THC cannabis or medical cannabis. The physician must also update the registry within 7 days after any change is made to the original order to reflect the change. The physician shall deactivate the registration of the patient and the patient's legal representative when treatment is discontinued; (f) Maintains a patient treatment plan that includes the dose, route of administration, planned duration, and monitoring of the patient's symptoms and other indicators of tolerance or reaction to the low-THC cannabis or medical cannabis; (g) Submits the patient treatment plan quarterly to the University of Florida College of Pharmacy for research on the safety and efficacy of low-THC cannabis and medical cannabis on patients; (h) Obtains the voluntary written informed consent of the patient or the patient's legal representative to treatment with low-THC cannabis after sufficiently explaining the current state of knowledge in the medical community of the effectiveness of treatment of the patient's condition with low-THC cannabis, the medically acceptable alternatives, and the potential risks and side effects; (i) Obtains written informed consent as defined in and required under s. 499.0295, if the physician is ordering medical cannabis for an eligible patient pursuant to that section; and (j) Is not a medical director employed by a dispensing organization. (3) PENALTIES.-

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(a) A physician commits a misdemeanor of the first degree, punishable as provided in s. 775.082 or s. 775.083, if the physician orders low-THC cannabis for a patient without a reasonable belief that the patient is suffering from: 1. Cancer or a physical medical condition that chronically produces symptoms of seizures or severe and persistent muscle spasms that can be treated with low-THC cannabis; or 2. Symptoms of cancer or a physical medical condition that chronically produces symptoms of seizures or severe and persistent muscle spasms that can be alleviated with low-THC cannabis. (b) A physician commits a misdemeanor of the first degree, punishable as provided in s. 775.082 or s. 775.083, if the physician orders medical cannabis for a patient without a reasonable belief that the patient has a terminal condition as defined in s. 499.0295. (c) A person who fraudulently represents that he or she has cancer, a physical medical condition that chronically produces symptoms of seizures or severe and persistent muscle spasms, or a terminal condition to a physician for the purpose of being ordered low-THC cannabis, medical cannabis, or a cannabis delivery device by such physician commits a misdemeanor of the first degree, punishable as provided in s. 775.082 or s. 775.083. (d) An eligible patient as defined in s. 499.0295 who uses medical cannabis, and such patient's legal representative who administers medical cannabis, in plain view of or in a place open to the general public, on the grounds of a school, or in a school bus, vehicle, aircraft, or motorboat, commits a misdemeanor of the first degree, punishable as provided in s. 775.082 or s. 775.083. (e) A physician who orders low-THC cannabis, medical cannabis, or a cannabis delivery device and receives compensation from a dispensing organization related to the ordering of low-THC cannabis, medical cannabis, or a cannabis delivery device is subject to disciplinary action under the applicable practice act and s. 456.072(1 )fn>. (4) PHYSICIAN EDUCATION.— (a) Before ordering low-THC cannabis, medical cannabis, or a cannabis delivery device for medical use by a patient in this state, the appropriate board shall require the ordering physician to successfully complete an 8-hour course and subsequent examination offered by the Florida Medical Association or the Florida Osteopathic Medical Association that encompasses the clinical indications for the appropriate use of low-THC cannabis and medical cannabis, the appropriate cannabis delivery devices, the contraindications for such use, and the relevant state and federal laws governing the ordering, dispensing, and possessing of these substances and devices. The course and examination shall be administered at least annually. Successful completion of the course may be used by a physician to satisfy 8 hours of the continuing medical education requirements required by his or her respective board for licensure renewal. This course may be offered in a distance learning format. (b) The appropriate board shall require the medical director of each dispensing organization to hold an active, unrestricted license as a physician under chapter 458 or as an osteopathic physician under chapter 459 and successfully complete a 2-hour course and subsequent examination offered by the Florida Medical Association or the Florida Osteopathic Medical Association that encompasses appropriate safety procedures and knowledge of low-THC cannabis, medical cannabis, and cannabis delivery devices. (c) Successful completion of the course and examination specified in paragraph (a) is required for every physician who orders low-THC cannabis, medical cannabis, or a cannabis delivery device each time such physician renews his or her license. In addition, successful completion of the course and examination specified in paragraph (b) is required for the medical director of each dispensing organization each time such physician renews his or her license.

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(d) A physician who fails to comply with this subsection and who orders low-THC cannabis, medical cannabis, or a cannabis delivery device may be subject to disciplinary action under the applicable practice act and under s. 456.072(1 )(k). (5) DUTIES OF THE DEPARTMENT.-The department shall: (a) Create and maintain a secure, electronic, and online compassionate use registry for the registration of physicians, patients, and the legal representatives of patients as provided under this section. The registry must be accessible to law enforcement agencies and to a dispensing organization to verify the authorization of a patient or a patient's legal representative to possess low-THC cannabis, medical cannabis, or a cannabis delivery device and record the low-THC cannabis, medical cannabis, or cannabis delivery device dispensed. The registry must prevent an active registration of a patient by multiple physicians. (b) Authorize the establishment of five dispensing organizations to ensure reasonable statewide accessibility and availability as necessary for patients registered in the compassionate use registry and who are ordered low-THC cannabis, medical cannabis, or a cannabis delivery device under this section, one in each of the following regions: northwest Florida, northeast Florida, central Florida, southeast Florida, and southwest Florida. The department shall develop an application form and impose an initial application and biennial renewal fee that is sufficient to cover the costs of administering this section. An applicant for approval as a dispensing organization must be able to demonstrate: 1. The technical and technological ability to cultivate and produce low-THC cannabis. The applicant must possess a valid certificate of registration issued by the Department of Agriculture and Consumer Services pursuant to s. 581.131 that is issued for the cultivation of more than 400,000 plants, be operated by a nurseryman as defined in s. 581.011, and have been operated as a registered nursery in this state for at least 30 continuous years. 2. The ability to secure the premises, resources, and personnel necessary to operate as a dispensing organization. 3. The ability to maintain accountability of all raw materials, finished products, and any byproducts to prevent diversion or unlawful access to or possession of these substances. 4. An infrastructure reasonably located to dispense low-THC cannabis to registered patients statewide or regionally as determined by the department. 5. The financial ability to maintain operations for the duration of the 2-year approval cycle, including the provision of certified financials to the department. Upon approval, the applicant must post a $5 million performance bond. However, upon a dispensing organization's serving at least 1,000 qualified patients, the dispensing organization is only required to maintain a $2 million performance bond. 6. That all owners and managers have been fingerprinted and have successfully passed a level 2 background screening pursuant to s. 435.04. 7. The employment of a medical director to supervise the activities of the dispensing organization. (c) Upon the registration of 250,000 active qualified patients in the compassionate use registry, approve three dispensing organizations, including, but not limited to, an applicant that is a recognized class member of Pigford v. Glickman, 185 F.R.D. 82 (D.D.C. 1999), or In Re Black Farmers Litig., 856 F. Supp. 2d 1 (D.D.C. 2011), and a member of the Black Farmers and Agriculturalists Association, which must meet the requirements of subparagraphs (b)2.-7. and demonstrate the technical and technological ability to cultivate and produce low-THC cannabis.

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(d) Allow a dispensing organization to make a wholesale purchase of low-THC cannabis or medical cannabis from, or a distribution of low-THC cannabis or medical cannabis to, another dispensing organization. (e) Monitor physician registration and ordering of low-THC cannabis, medical cannabis, or a cannabis delivery device for ordering practices that could facilitate unlawful diversion or misuse of low-THC cannabis, medical cannabis, or a cannabis delivery device and take disciplinary action as indicated. (6) DISPENSING ORGANIZATION.-An approved dispensing organization must, at all times, maintain compliance with the criteria demonstrated for selection and approval as a dispensing organization under subsection (5) and the criteria required in this subsection. (a) When growing low-THC cannabis or medical cannabis, a dispensing organization: 1. May use pesticides determined by the department, after consultation with the Department of Agriculture and Consumer Services, to be safely applied to plants intended for human consumption, but may not use pesticides designated as restricted-use pesticides pursuant to s. 487.042. 2. Must grow low-THC cannabis or medical cannabis within an enclosed structure and in a room separate from any other plant. 3. Must inspect seeds and growing plants for plant pests that endanger or threaten the horticultural and agricultural interests of the state, notify the Department of Agriculture and Consumer Services within 10 calendar days after a determination that a plant is infested or infected by such plant pest, and implement and maintain phytosanitary policies and procedures. 4. Must perform fumigation or treatment of plants, or the removal and destruction of infested or infected plants, in accordance with chapter 581 and any rules adopted thereunder. (b) When processing low-THC cannabis or medical cannabis, a dispensing organization must: 1. Process the low-THC cannabis or medical cannabis within an enclosed structure and in a room separate from other plants or products. 2. Test the processed low-THC cannabis and medical cannabis before they are dispensed. Results must be verified and signed by two dispensing organization employees. Before dispensing low-THC cannabis, the dispensing organization must determine that the test results indicate that the low-THC cannabis meets the definition of low-THC cannabis and, for medical cannabis and low-THC cannabis, that all medical cannabis and low-THC cannabis is safe for human consumption and free from contaminants that are unsafe for human consumption. The dispensing organization must retain records of all testing and samples of each homogenous batch of cannabis and low-THC cannabis for at least 9 months. The dispensing organization must contract with an independent testing laboratory to perform audits on the dispensing organization's standard operating procedures, testing records, and samples and provide the results to the department to confirm that the low-THC cannabis or medical cannabis meets the requirements of this section and that the medical cannabis and low-THC cannabis is safe for human consumption. 3. Package the low-THC cannabis or medical cannabis in compliance with the United States Poison Prevention Packaging Act of 1970, 15 U.S.C. ss. 1471 et seq. 4. Package the low-THC cannabis or medical cannabis in a receptacle that has a firmly affixed and legible label stating the following information: a. A statement that the low-THC cannabis or medical cannabis meets the requirements of subparagraph 2.; b. The name of the dispensing organization from which the medical cannabis or low-THC cannabis originates; and

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c. The batch number and harvest number from which the medical cannabis or low-THC cannabis originates. 5. Reserve two processed samples from each batch and retain such samples for at least 9 months for the purpose of testing pursuant to the audit required under subparagraph 2. (c) When dispensing low-THC cannabis, medical cannabis, or a cannabis delivery device, a dispensing organization: 1. May not dispense more than a 45-day supply of low-THC cannabis or medical cannabis to a patient or the patient's legal representative. 2. Must have the dispensing organization's employee who dispenses the low-THC cannabis, medical cannabis, or a cannabis delivery device enter into the compassionate use registry his or her name or unique employee identifier. 3. Must verify in the compassionate use registry that a physician has ordered the low-THC cannabis, medical cannabis, or a specific type of a cannabis delivery device for the patient. 4. May not dispense or sell any other type of cannabis, alcohol, or illicit drug-related product, including pipes, bongs, or wrapping papers, other than a physician-ordered cannabis delivery device required for the medical use of low-THC cannabis or medical cannabis, while dispensing low-THC cannabis or medical cannabis. 5. Must verify that the patient has an active registration in the compassionate use registry, the patient or patient's legal representative holds a valid and active registration card, the order presented matches the order contents as recorded in the registry, and the order has not already been filled. 6. Must, upon dispensing the low-THC cannabis, medical cannabis, or cannabis delivery device, record in the registry the date, time, quantity, and form of low-THC cannabis or medical cannabis dispensed and the type of cannabis delivery device dispensed. (d) To ensure the safety and security of its premises and any off-site storage facilities, and to maintain adequate controls against the diversion, theft, and loss of low-THC cannabis, medical cannabis, or cannabis delivery devices, a dispensing organization shall: 1 .a. Maintain a fully operational security alarm system that secures all entry points and perimeter windows and is equipped with motion detectors; pressure switches; and duress, panic, and hold-up alarms; or b. Maintain a video surveillance system that records continuously 24 hours each day and meets at least one of the following criteria: (I) Cameras are fixed in a place that allows for the clear identification of persons and activities in controlled areas of the premises. Controlled areas include grow rooms, processing rooms, storage rooms, disposal rooms or areas, and point-of-sale rooms; (II) Cameras are fixed in entrances and exits to the premises, which shall record from both indoor and outdoor, or ingress and egress, vantage points; (III) Recorded images must clearly and accurately display the time and date; or (IV) Retain video surveillance recordings for a minimum of 45 days or longer upon the request of a law enforcement agency. 2. Ensure that the organization's outdoor premises have sufficient lighting from dusk until dawn. 3. Establish and maintain a tracking system approved by the department that traces the low-THC cannabis or medical cannabis from seed to sale. The tracking system shall include notification of key events as determined by the department, including when cannabis seeds are planted, when cannabis plants are harvested and destroyed, and when low-THC cannabis or medical cannabis is transported, sold, stolen, diverted, or lost.

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4. Not dispense from its premises low-THC cannabis, medical cannabis, or a cannabis delivery device between the hours of 9 p.m. and 7 a.m., but may perform all other operations and deliver low-THC cannabis and medical cannabis to qualified patients 24 hours each day. 5. Store low-THC cannabis or medical cannabis in a secured, locked room or a vault. 6. Require at least two of its employees, or two employees of a security agency with whom it contracts, to be on the premises at all times. 7. Require each employee to wear a photo identification badge at all times while on the premises. 8. Require each visitor to wear a visitor's pass at all times while on the premises. 9. Implement an alcohol and drug-free workplace policy. 10. Report to local law enforcement within 24 hours after it is notified or becomes aware of the theft, diversion, or loss of low-THC cannabis or medical cannabis. (e) To ensure the safe transport of low-THC cannabis or medical cannabis to dispensing organization facilities, independent testing laboratories, or patients, the dispensing organization must: 1. Maintain a transportation manifest, which must be retained for at least 1 year. 2. Ensure only vehicles in good working order are used to transport low-THC cannabis or medical cannabis. 3. Lock low-THC cannabis or medical cannabis in a separate compartment or container within the vehicle. 4. Require at least two persons to be in a vehicle transporting low-THC cannabis or medical cannabis, and require at least one person to remain in the vehicle while the low-THC cannabis or medical cannabis is being delivered. 5. Provide specific safety and security training to employees transporting or delivering low-THC cannabis or medical cannabis. (7) DEPARTMENT AUTHORITY AND RESPONSIBILITIES.— (a) The department may conduct announced or unannounced inspections of dispensing organizations to determine compliance with this section or rules adopted pursuant to this section. (b) The department shall inspect a dispensing organization upon complaint or notice provided to the department that the dispensing organization has dispensed low-THC cannabis or medical cannabis containing any mold, bacteria, or other contaminant that may cause or has caused an adverse effect to human health or the environment. (c) The department shall conduct at least a biennial inspection of each dispensing organization to evaluate the dispensing organization's records, personnel, equipment, processes, security measures, sanitation practices, and quality assurance practices. (d) The department may enter into interagency agreements with the Department of Agriculture and Consumer Services, the Department of Business and Professional Regulation, the Department of Transportation, the Department of Highway Safety and Motor Vehicles, and the Agency for Health Care Administration, and such agencies are authorized to enter into an interagency agreement with the department, to conduct inspections or perform other responsibilities assigned to the department under this section. (e) The department must make a list of all approved dispensing organizations and qualified ordering physicians and medical directors publicly available on its website. (f) The department may establish a system for issuing and renewing registration cards for patients and their legal representatives, establish the circumstances under which the cards may be revoked by or must be returned to the department, and establish fees to implement such system. The department must require, at a minimum, the registration cards to:

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1. Provide the name, address, and date of birth of the patient or legal representative. 2. Have a full-face, passport-type, color photograph of the patient or legal representative taken within the 90 days immediately preceding registration. 3. Identify whether the cardholder is a patient or legal representative. 4. List a unique numeric identifier for the patient or legal representative that is matched to the identifier used for such person in the department's compassionate use registry. 5. Provide the expiration date, which shall be 1 year after the date of the physician's initial order of low-THC cannabis or medical cannabis. 6. For the legal representative, provide the name and unique numeric identifier of the patient that the legal representative is assisting. 7. Be resistant to counterfeiting or tampering. (g) The department may impose reasonable fines not to exceed $10,000 on a dispensing organization for any of the following violations: 1. Violating this section, s. 499.0295, or department rule. 2. Failing to maintain qualifications for approval. 3. Endangering the health, safety, or security of a qualified patient. 4. Improperly disclosing personal and confidential information of the qualified patient. 5. Attempting to procure dispensing organization approval by bribery, fraudulent misrepresentation, or extortion. 6. Being convicted or found guilty of, or entering a plea of guilty or nolo contendere to, regardless of adjudication, a crime in any jurisdiction which directly relates to the business of a dispensing organization. 7. Making or filing a report or record that the dispensing organization knows to be false. 8. Willfully failing to maintain a record required by this section or department rule. 9. Willfully impeding or obstructing an employee or agent of the department in the furtherance of his or her official duties. 10. Engaging in fraud or deceit, negligence, incompetence, or misconduct in the business practices of a dispensing organization. 11. Making misleading, deceptive, or fraudulent representations in or related to the business practices of a dispensing organization. 12. Having a license or the authority to engage in any regulated profession, occupation, or business that is related to the business practices of a dispensing organization suspended, revoked, or otherwise acted against by the licensing authority of any jurisdiction, including its agencies or subdivisions, for a violation that would constitute a violation under Florida law. 13. Violating a lawful order of the department or an agency of the state, or failing to comply with a lawfully issued subpoena of the department or an agency of the state. (h) The department may suspend, revoke, or refuse to renew a dispensing organization's approval if a dispensing organization commits any of the violations in paragraph (g). (i) The department shall renew the approval of a dispensing organization biennially if the dispensing organization meets the requirements of this section and pays the biennial renewal fee. (j) The department may adopt rules necessary to implement this section. (8) PREEMPTION.- (a) All matters regarding the regulation of the cultivation and processing of medical cannabis or low- THC cannabis by dispensing organizations are preempted to the state.

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(b) A municipality may determine by ordinance the criteria for the number and location of, and other permitting requirements that do not conflict with state law or department rule for, dispensing facilities of dispensing organizations located within its municipal boundaries. A county may determine by ordinance the criteria for the number, location, and other permitting requirements that do not conflict with state law or department rule for all dispensing facilities of dispensing organizations located within the unincorporated areas of that county. (9) EXCEPTIONS TO OTHER LAWS.- (a) Notwithstanding s. 893.13, s. 893.135, s. 893.147, or any other provision of law, but subject to the requirements of this section, a qualified patient and the qualified patient's legal representative may purchase and possess for the patient's medical use up to the amount of low-THC cannabis or medical cannabis ordered for the patient, but not more than a 45-day supply, and a cannabis delivery device ordered for the patient. (b) Notwithstanding s. 893.13, s. 893.135, s. 893.147, or any other provision of law, but subject to the requirements of this section, an approved dispensing organization and its owners, managers, and employees may manufacture, possess, sell, deliver, distribute, dispense, and lawfully dispose of reasonable quantities, as established by department rule, of low-THC cannabis, medical cannabis, or a cannabis delivery device. For purposes of this subsection, the terms "manufacture," "possession," "deliver," "distribute," and "dispense" have the same meanings as provided in s. 893.02. (c) Notwithstanding s. 893.13, s. 893.135, s. 893,147, or any other provision of law, but subject to the requirements of this section, an approved independent testing laboratory may possess, test, transport, and lawfully dispose of low-THC cannabis or medical cannabis as provided by department rule. (d) An approved dispensing organization and its owners, managers, and employees are not subject to licensure or regulation under chapter 465 or chapter 499 for manufacturing, possessing, selling, delivering, distributing, dispensing, or lawfully disposing of reasonable quantities, as established by department rule, of low-THC cannabis, medical cannabis, or a cannabis delivery device. (e) An approved dispensing organization that continues to meet the requirements for approval is presumed to be registered with the department and to meet the regulations adopted by the department or its successor agency for the purpose of dispensing medical cannabis or low-THC cannabis under Florida law. Additionally, the authority provided to a dispensing organization in s. 499.0295 does not impair the approval of a dispensing organization. (f) This subsection does not exempt a person from prosecution for a criminal offense related to impairment or intoxication resulting from the medical use of low-THC cannabis or medical cannabis or relieve a person from any requirement under law to submit to a breath, blood, urine, or other test to detect the presence of a controlled substance. History.—s. 2, ch. 2014-157; s. 1, ch. 2016-123; s. 24, ch. 2016-145.

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Select Year: 2016 v Go

The 2016 Florida Statutes

Title X Chapter 120 View Entire PUBLIC OFFICERS, EMPLOYEES, AND ADMINISTRATIVE PROCEDURE Chapter RECORDS ACT 120.52 Definitions.-As used in this act: (1) "Agency" means the following officers or governmental entities if acting pursuant to powers other than those derived from the constitution: (a) The Governor; each state officer and state department, and each departmental unit described in s. 20.04; the Board of Governors of the State University System; the Commission on Ethics; the Fish and Wildlife Conservation Commission; a regional water supply authority; a regional planning agency; a multicounty special district, but only if a majority of its governing board is comprised of nonelected persons; educational units; and each entity described in chapters 163, 373, 380, and 582 and s. 186.504. (b) Each officer and governmental entity in the state having statewide jurisdiction or jurisdiction in more than one county. (c) Each officer and governmental entity in the state having jurisdiction in one county or less than one county, to the extent they are expressly made subject to this chapter by general or special law or existing judicial decisions.

This definition does not include a municipality or legal entity created solely by a municipality; a legal entity or agency created in whole or in part pursuant to part II of chapter 361; a metropolitan planning organization created pursuant to s. 339.175: a separate legal or administrative entity created pursuant to s. 339.175 of which a metropolitan planning organization is a member; an expressway authority pursuant to chapter 348 or any transportation authority or commission under chapter 343 or chapter 349; or a legal or administrative entity created by an interlocal agreement pursuant to s. 163.01(7). unless any party to such agreement is otherwise an agency as defined in this subsection. (2) "Agency action" means the whole or part of a rule or order, or the equivalent, or the denial of a petition to adopt a rule or issue an order. The term also includes any denial of a request made under s. 120.54(7). (3) "Agency head" means the person or collegial body in a department or other governmental unit statutorily responsible for final agency action. An agency head appointed by and serving at the pleasure of an appointing authority remains subject to the direction and supervision of the appointing authority, but actions taken by the agency head as authorized by statute are official acts. (4) "Committee" means the Administrative Procedures Committee. (5) "Division" means the Division of Administrative Hearings. Any document filed with the division by a party represented by an attorney shall be filed by electronic means through the division's website. Any document filed with the division by a party not represented by an attorney shall, whenever possible, be filed by electronic means through the division's website.

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(6) "Educational unit" means a local school district, a community college district, the Florida School for the Deaf and the Blind, or a state university when the university is acting pursuant to statutory authority derived from the Legislature. (7) "Final order" means a written final decision which results from a proceeding under s. 120.56, s. 120.565, s. 120.569, s. 120.57, s. 120.573, or s. 120.574 which is not a rule, and which is not excepted from the definition of a rule, and which has been filed with the agency clerk, and includes final agency actions which are affirmative, negative, injunctive, or declaratory in form. A final order includes all materials explicitly adopted in it. The clerk shall indicate the date of filing on the order. (8) "Invalid exercise of delegated legislative authority" means action that goes beyond the powers, functions, and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one of the following applies: (a) The agency has materially failed to follow the applicable rulemaking procedures or requirements set forth in this chapter; (b) The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54f3Ha)1.: (c) The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(3)(a)1.: (d) The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency; (e) The rule is arbitrary or capricious. A rule is arbitrary if it is not supported by logic or the necessary facts; a rule is capricious if it is adopted without thought or reason or is irrational; or (f) The rule imposes regulatory costs on the regulated person, county, or city which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives.

A grant of rulemaking authority is necessary but not sufficient to allow an agency to adopt a rule; a specific law to be implemented is also required. An agency may adopt only rules that implement or interpret the specific powers and duties granted by the enabling statute. 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 provisions 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 powers and duties conferred by the enabling statute. (9) "Law implemented" means the language of the enabling statute being carried out or interpreted by an agency through rulemaking. (10) "License" means a franchise, permit, certification, registration, charter, or similar form of authorization required by law, but it does not include a license required primarily for revenue purposes when issuance of the license is merely a ministerial act. (11) "Licensing" means the agency process respecting the issuance, denial, renewal, revocation, suspension, annulment, withdrawal, or amendment of a license or imposition of terms for the exercise of a license. (12) "Official reporter" means the publication in which an agency publishes final orders, the index to final orders, and the list of final orders which are listed rather than published. (13) "Party" means:

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(a) Specifically named persons whose substantial interests are being determined in the proceeding. (b) Any other person who, as a matter of constitutional right, provision of statute, or provision of agency regulation, is entitled to participate in whole or in part in the proceeding, or whose substantial interests will be affected by proposed agency action, and who makes an appearance as a party. (c) Any other person, including an agency staff member, allowed by the agency to intervene or participate in the proceeding as a party. An agency may by rule authorize limited forms of participation in agency proceedings for persons who are not eligible to become parties. (d) Any county representative, agency, department, or unit funded and authorized by state statute or county ordinance to represent the interests of the consumers of a county, when the proceeding involves the substantial interests of a significant number of residents of the county and the board of county commissioners has, by resolution, authorized the representative, agency, department, or unit to represent the class of interested persons. The authorizing resolution shall apply to a specific proceeding and to appeals and ancillary proceedings thereto, and it shall not be required to state the names of the persons whose interests are to be represented.

The term "party" does not include a member government of a regional water supply authority or a governmental or quasi-judicial board or commission established by local ordinance or special or general law where the governing membership of such board or commission is shared with, in whole or in part, or appointed by a member government of a regional water supply authority in proceedings under s. 120.569, s. 120.57, or s. 120.68, to the extent that an interlocal agreement under ss. 163.01 and 373.713 exists in which the member government has agreed that its substantial interests are not affected by the proceedings or that it is to be bound by alternative dispute resolution in lieu of participating in the proceedings. This exclusion applies only to those particular types of disputes or controversies, if any, identified in an interlocal agreement. (14) "Person" means any person described in s. 1.01, any unit of government in or outside the state, and any agency described in subsection (1). (15) "Recommended order" means the official recommendation of an administrative law judge assigned by the division or of any other duly authorized presiding officer, other than an agency head or member of an agency head, for the final disposition of a proceeding under ss. 120.569 and 120.57. (16) "Rule" means each agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the procedure or practice requirements of an agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule. The term also includes the amendment or repeal of a rule. The term does not include: (a) Internal management memoranda which do not affect either the private interests of any person or any plan or procedure important to the public and which have no application outside the agency issuing the memorandum. (b) Legal memoranda or opinions issued to an agency by the Attorney General or agency legal opinions prior to their use in connection with an agency action. (c) The preparation or modification of: 1. Agency budgets. 2. Statements, memoranda, or instructions to state agencies issued by the Chief Financial Officer or Comptroller as chief fiscal officer of the state and relating or pertaining to claims for payment submitted by state agencies to the Chief Financial Officer or Comptroller. 3. Contractual provisions reached as a result of collective bargaining.

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4. Memoranda issued by the Executive Office of the Governor relating to information resources management. (17) "Rulemaking authority" means statutory language that explicitly authorizes or requires an agency to adopt, develop, establish, or otherwise create any statement coming within the definition of the term "rule." (18) "Small city" means any municipality that has an unincarcerated population of 10,000 or less according to the most recent decennial census. (19) "Small county" means any county that has an unincarcerated population of 75,000 or less according to the most recent decennial census. (20) "Unadopted rule" means an agency statement that meets the definition of the term "rule," but that has not been adopted pursuant to the requirements of s. 120.54. (21) "Variance" means a decision by an agency to grant a modification to all or part of the literal requirements of an agency rule to a person who is subject to the rule. Any variance shall conform to the standards for variances outlined in this chapter and in the uniform rules adopted pursuant to s. 120.54 (5). (22) "Waiver" means a decision by an agency not to apply all or part of a rule to a person who is subject to the rule. Any waiver shall conform to the standards for waivers outlined in this chapter and in the uniform rules adopted pursuant to s. 120.54(5). History.—s. 1, ch. 74-310; s. 1, ch. 75-191; s. 1, ch. 76-131; s. 1, ch. 77-174; s. 12, ch. 77-290; s. 2, ch. 77-453; s. 1, ch. 78-28; s. 1, ch. 78-425; s. 1, ch. 79-20; s. 55, ch. 79-40; s. 1, ch. 79-299; s. 2, ch. 81-119; s. 1, ch. 81-180; s. 7, ch. 82-180; s. 1, ch. 83-78; s. 2, ch. 83-273; s. 10, ch. 84-170; s. 15, ch. 85-80; s. 1, ch. 85-168; s. 2, ch. 87-385; s. 1, ch. 88-367; s. 1, ch. 89-147; s. 1, ch. 91-46; s. 9, ch. 92-166; s. 50, ch. 92-279; s. 55, ch. 92-326; s. 3, ch. 96-159; s. 1, ch. 97-176; s. 2, ch. 97- 286; s. 1, ch. 98-402; s. 64, ch. 99-245; s. 2, ch. 99-379; s. 895, ch. 2002-387; s. 1, ch. 2003-94; s. 138, ch. 2003-261; s. 7, ch. 2003-286; s. 3, ch. 2007-196; s. 13, ch. 2007-217; s. 2, ch. 2008-104; s. 1, ch. 2009-85; s. 1, ch. 2009-187; s. 10, ch. 2010-5; s. 2, ch. 2010-205; s. 7, ch. 2011-208; s. 8, ch. 2012-116; s. 14, ch. 2013-173.

216 httpY/www leg state fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search 2/3/2017 TAB 6 STATE OF FLORIDA OFFICE OF THE GOVERNOR EXECUTIVE ORDER NUMBER 11-211 (Superseding Executive Order 11-72; Office of Fiscal Accountability and Regulatory Reform)

WHEREAS, government must be held accountable for efficient and effective performance; and

WHEREAS, no person, profession, occupation, or business should be subject to regulation by the State unless regulation is necessary to protect the public from harm or to promote the general welfare; and

WHEREAS, the people of the State of Florida deserve a regulatory process that is efficient, effective, understandable, lesponsive, and open to the public; and

WHEREAS, State regulations may impose duplicative, obsolete, and unnecessarily burdensome requirements on Florida's citizens and businesses; and

WHEREAS, continual review and assessment of existing and proposed regulations is necessary to ensure that the laws of the State are faithfully executed without unduly burdening the State's economy and imposing needless costs and requirements on citizens, businesses, and local governments; and

WHEREAS, fiscal accountability by all agencies is necessary to ensure integrity in State government; and

WHEREAS, while agency heads and personnel bring expertise to a particular subject matter, they are not directly accountable to the electorate and do not necessarily have an

217 incentive to take a systemic approach to regulatory problems, to budget constraints, or to the

overall regulatory burden imposed by the State on citizens and businesses; and

WHEREAS, the elected Governor has a democratic mandate, is directly answerable to

the people, and has the duty and power to assess the overall legality, efficiency, and operation of

government;

WHEREAS, at the federal and state levels, chief executives have recognized the need for

centialized, democratically accountable oversight and leadership respecting dispaiate agency

rulemaking, as reflected in dozens of executive orders by presidents, governors of other states,

and prior governors of Florida; and

WHEREAS, review and oversight of agency rulemaking is encompassed by the

Governor's powers and duties under the Constitution of the State of Florida to "take care that the

laws be faithfully executed" and to serve as "the chief administrative officer of the state

responsible for the planning and budgeting for the state"; and

WHEREAS, the Constitution of the State of Florida and the Florida Statutes establish that many agencies of State government are administered by an officer "appointed by and serving at the pleasure of the governor," and in order to determine whether an officer shall continue to serve at the Governor's pleasure, it is necessary for the Governor to set expectations and standards for that officer, and to measure agency performance against those expectations and standards, and

WHEREAS, pursuant to the Constitution of the State of Flonda, the Governor must transact all necessary business with officers of government, and may require information in writing from all executive or administrative State officers upon any subject relating to the duties of their offices, and

218 WHEREAS, pursuant to section 14.06, Florida Statutes, the Governor is authorized to

employ such persons as may be required from time to time to make such investigations as may,

in the judgment of the Governor, be necessary 01 expedient to efficiently conduct the affairs of

the State government; and

WHEREAS, Executive Orders 11-01 and 11-72 established the Office of Fiscal

Accountability and Regulatory Reform (OFARR) to ensure that agency rules (proposed and

existing) are efficient, are not overly burdensome, and faithfully adhere to statutes as enacted by

the Legislature; and

WHEREAS, upon establishment of OFARR, all agencies under the direction of the

Governor were required to obtain OFARR review and approval before developing new rules or

amending or repealing existing rules; and

WHEREAS, OFARR's review process has facilitated the Governor's exercise of the

power and duty to serve as the chief executive and administrative officer of the State; and

WHEREAS, the Legislature has determined that OFARR review of existing regulations may exempt an agency from the enhanced biennial review and compliance economic review otherwise mandated by section 120.745, Florida Statutes; and

WHEREAS, OFARR's review process has facilitated tire Governor's planning and budgeting for the State, and

WHEREAS, OFARR has reviewed thousands of rules and regulations and helped agencies rdentrfy over one thousand unnecessary and unauthorized rules and regulations for repeal; and

WHEREAS, since January 4, 2011, OFARR has reviewed hundreds of proposed agency rulemaking actions; and

219 WHEREAS, OFARR's review process has thus far been successful hi helping to ensure efficient and effective performance by State government; and

WHEREAS, the Supreme Court of Florida, in the case of Whiley v. Scott, No. SCI 1-592, issued an unsigned opinion joined by five Justices, which held that Executive Orders 11-01 and

11-72 "impermissibly suspended agency rulemaking to the extent that [they] included a requirement that [OFARR] must first permit an agency to engage in the rulemaking which has been delegated by the Florida Legislature"; and

WHEREAS, the majority opinion in Whiley.

(1) failed to address and apply the plain meaning of the first and sixth sections of

Article IV of the Constitution of the State of Florida, and thereby unreasonably

restrains the power of the Governor with respect to the supervision of agency

heads;

(2) failed to address the implications of the Court's precedent in Jones v. Chiles, 638

So. 2d 48 (Fla. 1994), which recognized the proper scope of executive power

under the Constitution of the State of Florida;

(3) failed to address the persuasive caselaw from the United States Supieme Court

and the highest courts of other states;

(4) failed to address the precedent set by dozens of executive orders issued by prior

governors of Florida;

(5) failed to address the Court's holding that "[t]he principles underlying the

governmental separation of powers antedate our Florida Constitution and were

collectively adopted by the union of states in our federal constitution," Clules v

Children A, B, C, D, E, & F, 589 So. 2d 260, 263 (Fla. 1991), and in light of that

220 precedent, failed to consider that Executive Oiders 11-01 and 11-72 cannot be

meaningfully distinguished from similar executive orders issued by the last four

presidents of the United States and the governors of at least twenty-nine other

states;

(6) relied on a 1983 Opinion of the Attorney General Opinion, which the Attorney

General distinguished and limited to its facts in an amicus brief in Whiley; and

WHEREAS, the dissenting opinions of two Justices in the Whiley case state the correct

interpretation of the Constitution of the State of Florida and present persuasive reasoning and

arguments in support of that interpretation; and

WHEREAS, notwithstanding the above, the majority opinion in Whiley is to be afforded

the deference due a judgment of the Supreme Court of the State of Florida

NOW, THEREFORE, I, RICK SCOTT, as Governor of Florida, by virtue of the authority

vested in me by Article IV of the Florida Constitution, and all other applicable laws, do hereby

promulgate the following Executive Order, to take immediate effect:

Section 1. Pursuant to the Governor's inherent constitutional powers and sections 14.06

and 120.745, Florida Statutes, OFARR, created by Executive Order 11-01, shall continue to operate within the Executive Office of the Governor. OFARR, as my designee, to the extent permitted by law, including without limitation chapter 120, Florida Statutes, shall have the following responsibilities and delegated powers, which I deem necessary to executmg my responsibilities as the chief executive and administrative officer of the State and to making such investigations as are necessary and expedient to conduct the affairs of State government.

1. Review proposed and existing agency rules and regulations to ensure that they do

not:

221 a, unnecessarily restrict entry into a profession or occupation;

b. adversely affect the availability of professional or occupational services to

the public;

c. unreasonably affect job creation or job retention,

d, place unreasonable restrictions on individuals attempting to find

employment;

e impose unjustified costs on business;

f. impose an unjustified overall cost and economic impact, including indirect

cost to consumers; or

g. contravene statutory rulemaking directives.

2. Analyze, or review the agency's analysis of, the impact of proposed and existing

rules on matters of public health, public safety, public welfare, job creation, and

other matters that may have an impact on the creation, expansion, or retention of

business interests in the State.

3 Make recommendations for altering or simplifying proposed or existing

regulations or regulatory processes of State agencies.

4. Require agencies to prepare a statement of estimated regulatory costs analyzing

the economic impact of agency rules, including an analysis of the effect of such

rules on the creation and retention of jobs within the State.

5. Work with other appropriate State officials and entities to identify rules and

regulations, particularly those relating to small businesses, that have an adverse or

disproportionate impact on business, and make recommendations for actions that

would alleviate those effects.

222 6. Review actions taken by State agencies to improve program performance, meet

program standards, and promote economy and efficiency. Identify the most

successful actions taken by agencies and set such activities as benchmarks for

other agencies. Recommend actions where no actions are currently being taken to

address performance and efficiency.

7. Using the agencies' measurements related to the core agency functions necessary

to implement each agency's statutory duties, design performance metrics that

agencies should meet, and measure expectations against results annually.

Section 2. Pursuant to the Governor's constitutional power to "require information in

writing from all executive or administrative state ... officers upon any subject relating to the

duties of their respective offices," I hereby direct all agencies headed by an officer serving at the

pleasure of the Governor to submit in writing to OFARR all proposed rulemaking notices, along

with the complete text of any proposed rule or amendment, and to make this written submission

at least one week pnor to the time such notices will otherwise be submitted for official

publication. Such agencies shall also submit any other written documentation required by

OFARR at such times as required by OFARR, consistent with law, including without limitation,

chapter 120, Florida Statutes.

Section 3. For State agencies not under the dnection of the Governor, OFARR shall

make itself available to conduct analyses of existing rules or proposed rulemaking, rule amendment, or rule repeal, as requested by agency heads.

Section 4. For each agency headed by an official serving at the pleasure of the Governor, the agency head shall designate a Fiscal Accountability Officer and a Regulatory Reform

Officer The Fiscal Accountability Officer shall be responsible for coordinating agency efforts

223 regarding fiscal accountability and performance accountability. The Regulatory Reform Officer shall be responsible for coordinating agency efforts regarding the evaluation and reduction of regulatory burdens. Both officers shall serve as liaisons between the agency and OFARR Each agency shall provide to OFARR, m writing and in a tmiely manner, the names of its Fiscal

Accountability Officer and Regulatory Reform Officer and any change in such designations

Section 5. For each agency headed by an official serving at the pleasure of the Governor, the agency head is directed to:

1. Identify the following:

a. actions taken by the agency to evaluate program performance, meet

program standards, and promote economy and efficiency;

b. all types of measurements collected by the agency to evaluate those

actions;

c. methods of capturing the measurements used by the agency; and

d. actions taken by the agency to improve program performance, meet

program standards, and promote economy and efficiency.

2. Review and evaluate the measurements identified in 1 b. above. Identify which

measurements relate to the agency's core functions necessary to implement the

agency's statutory duties

3. Report the above information as directed by OFARR within sixty days of this

Order.

4. Consider OFFAR's recommendations and proposed benchmarks relating to

program performance, program standards, and economy and efficiency.

224 Section 6. Consistent with Executive Order 11-01, and in order (i) to reduce the

regulatory burden on the citizens of Florida, (ii) to determine whether existing rules and

regulations remain justified and necessary, and (in) to determine whether such existing rules and

regulations are duplicative or unnecessarily burdensome, each agency headed by an official

serving at the pleasure of the Governor shall, beginning July 1, 2013, and by Jtily 1 of each

successive year, submit to OFARR in wnting an annual review of existing rules and regulations,

along with lecommendations as to whether any rules and regulations should be modified or

eliminated

For any rule or regulation that an agency identifies as duplicative, unnecessarily

burdensome, or no longer necessary, the agency shall coordinate with OFARR to pursue the

repeal or amendment of such rule or regulation in a timely and orderly manner.

Each agency is further directed to identify any legislative mandates that require the agency to continue to impose rules that the agency believes have a negative impact on business, job creation, or job retention m Florida.

Section 7. No later than July 1, 2012, and on July 1 of each successive year, each agency headed by an official serving at the pleasure of the Governor shall submit to OFARR in writing an annual regulatory plan that shall identify and describe each rule that the agency expects to begin promulgating during the next twelve-month period. OFARR may describe and require other infonnation to be included in this submission.

Section 8. The recommendations of OFARR shall constitute the strongly held views of the Governor regarding agency regulatory matters, and agency performance in light of OFARR's recommendations and benchmarks will be factors m the Governor's continual evaluation of his

Administration.

225 Section 9. This Order supersedes Executive Order 11-72.

IN TESTIMONY WHEREOF, I have hereunto set my hand and caused the Great Seal of the State of Florida to be affixed, at Tallahassee, the Capitol, this 19th day of

GOVERNOR

ATTEST:

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•—TN XI ; I '

226