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Department of Business & Professional Regulation v. Dania Entertainment Center, LLC

Florida Court of Appeals, First District

November 8, 2017

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF PARI-MUTUEL WAGERING, Appellant,
v.
DANIA ENTERTAINMENT CENTER, LLC; DAYTONA BEACH KENNEL CLUB, INC.; JACKSONVILLE KENNEL CLUB, INC.; MELBOURNE GREYHOUND PARK, LLC; BONITA-FORT MYERS CORP.; INVESTMENT CORPORATION OF PALM BEACH; WEST FLAGLER ASSOCIATES, LTD.; TAMPA BAY DOWNS, INC.; AND TBDG, ACQUISITION, LLC d/b/a TGT POKER AND RACEBOOK, Appellees.

         NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED

         An appeal from the Division of Administrative Hearings. E. Gary Early, Administrative Law Judge.

          Jason L. Maine, General Counsel, and Dwight O. Slater, Chief Appellate Counsel, Florida Department of Business & Professional Regulation, Tallahassee, for Appellant.

          John M. Lockwood, Thomas J. Morton, and Kala Kelly Shankle of The Lockwood Law Firm, Tallahassee, for Appellees Dania Entertainment Center, LLC; Daytona Beach Kennel Club, Inc.; Jacksonville Kennel Club, Inc.; Melbourne Greyhound Park, LLC; Bonita-Fort Myers Corp.; Investment Corporation of Palm Beach; West Flagler Associates, Ltd.; and Christopher Kise, James A. McKee, and Joshua Hawkes of Foley & Lardner, LLP, Tallahassee, for Appellees Tampa Bay Downs, Inc. and TBDG Acquisition, LLC, d/b/a TGT Poker and Racebook.

          WOLF, J.

         Appellant, the Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering, challenges an order of an Administrative Law Judge from the Division of Administrative Hearings concluding that the Division's notice of intent to repeal Florida Rules of Administrative Procedure 61D-11.001(17) and 61D-11.002(5) was an invalid exercise of delegated legislative authority. We agree with the ALJ that the repeal had the effect of a rule. The Division has failed to challenge on appeal the ALJ's conclusion that the rule was invalid for failure to comply with section 120.54(1), Florida Statues, which governs the preparation and consideration of statements of estimated regulatory costs. We, therefore, affirm that portion of the order. However, we specifically reject the portion of the ALJ's order that concluded the Division does not have the authority to repeal the rules that it previously adopted. Both sides agree that the Division has this authority.[1]

         Facts

         The ALJ made extensive factual findings that have not been disputed on appeal. Appellees are all cardrooms that are regulated by the Division. As part of this oversight, cardrooms are required to submit to the Division for approval their "internal controls, " which 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. R. Admin. P. 61D-11.019(4)(i).

         In 2011, the Division began authorizing internal controls for a particular type of card game called a "designated player game." As defined by the ALJ:

[In a] designated player game . . . a designated player plays his or her hand against each other player at the table, instead of all players competing against each other. . . . However, a designated player is not a cardroom operator.
In traditional "pool" poker games, each player bets into a central pool, with the winning hand(s) among all of the players collecting from the pool of bets, minus the cardroom rake.
In designated player games, each player at the table makes an individual bet, and compares their hand against the designated player's hand. If the player's hand is better than the designated player's hand, then the designated player pays the player from the designated player's stack of chips. If the designated player's hand is better than the player's hand, then the designated player collects the player's wager. At an eight-seat table, it is as though there are seven separate "player versus designated player" games.

         As requests to offer these games increased, the Division initiated rulemaking in order "to establish the parameters under which designated player games would be authorized." Over the course of the next several years, the Division conducted a series of rulemaking workshops and received feedback from the cardrooms, which included proposed versions of the rules. The goal of both the Division and the industry was to avoid violating the statutory prohibition against offering a "banking game, " which 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.

         Ultimately, the industry suggested a version of a rule that stated the designated player cannot be required to cover all of the potential wagers that could be made by the other players. The cardrooms explained, "Multiple jurisdictions have determined a key element to a banked card game is the house requiring all wagers be covered. We propose this language to distinguish between lawful games and impermissible banked games."

         In July 2014, three years after the rulemaking process began, the Division adopted two new rules that had been proposed by the cardrooms. Rule 61D-11.001(17) defines the term "designated player":

"Designated player" means the player identified by the button as the player in the ...

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