SCF, Inc. v. Florida Thoroughbred Breeders' Association, Inc. etc. , 227 So. 3d 770 ( 2017 )

IN THE DISTRICT COURT OF APPEAL
FIRST DISTRICT, STATE OF FLORIDA
SCF, INC.,
NOT FINAL UNTIL TIME EXPIRES TO
Appellant, FILE MOTION FOR REHEARING AND
DISPOSITION THEREOF IF FILED
v.
CASE NO. 1D16-3211
FLORIDA THOROUGHBRED
BREEDERS' ASSOCIATION,
INC. DBA FLORIDA
THOROUGHBRED BREEDERS'
AND OWNERS'
ASSOCIATION, INC.; AND
DEPARTMENT OF BUSINESS
AND PROFESSIONAL
REGULATION, DIVISION OF
PARI-MUTUEL WAGERING,
Appellees.
_____________________________/
Opinion filed October 16, 2017.
An appeal from an order of the Division of Pari-Mutuel Wagering, Department of
Business & Professional Regulation.
David S. Romanik of David S. Romanik, P.A., Oxford, for Appellant.
J. Stephen Menton and Tana D. Storey of Rutledge Ecenia, P.A., Tallahassee, for
Appellee Florida Thoroughbred Breeders’ Association, Inc.
Jason L. Maine, Dwight O. Slater, Chevonne T. Christian, and Caitlin Rose Mawn,
Tallahassee, for Appellee Department of Business & Professional Regulation.
MAKAR, J.
Florida-grown thoroughbred racehorses, and the prize money they earn,
underlie this dispute involving a breeder, the industry association that controls in-
state thoroughbred racing, and the Florida agency providing regulatory oversight.
The question we address is whether the breeder has legal standing to challenge the
annual plan for distribution of owners’ and breeders’ awards as non-compliant with
statutory requirements.
I.
Ocala is the county seat of Marion County, Florida, both of which promote
their North Florida community as the “Horse Capital of the World™” due to its
rich history of equestrian farms and success in national thoroughbred racing,
including the first Florida-bred horse to win the Kentucky Derby (Needles, in
1956) and the last horse to win the Triple Crown (Affirmed, in 1977) before
American Pharoah (who has a Florida connection to Affirmed’s bloodline) ended
the streak in 2015 by winning the “Grand Slam” of American horse racing. 1 Over
the years, Florida’s equestrian success has transformed the niche North Florida
cottage industry of the early 1900s into a major economic force in the state:
1
See generally Charlene R. Johnson, Central Florida Thoroughbreds: A History of
Horses in the Heart of Florida, (2014) (detailing the equine history of Central
Florida); American Pharoah, Wikipedia, https://en.wikipedia.org/wiki/American_-
Pharoah (last visited April 17, 2017) (Triple Crown of Kentucky Derby, Preakness
Stakes, and Belmont Stakes plus the Breeders’ Cup Classic).
2
The equine industry in Florida is big business. Florida ranks only
behind Texas and California with respect to the total number of horses
(500,000). Approximately 440,000 Floridians are involved in the
industry as horse owners, service providers, employees, and
volunteers. Even more participate as spectators at equine-related
events. The horse racing industry alone has a greater overall economic
impact than baseball’s spring training. All equine activities generate
approximately $5 billion for Florida’s economy. People from all
walks of life are involved in Florida’s total equine industry, from the
wealthiest families (e.g., the Bloomberg, Steinbrenner, Gates, and
Onassis families) to your regular Joe farmers, horse trainers, children
and retirees.[2]
As the industry and its gambling revenues grew, the legal and regulatory structure
overseeing its operation also expanded, though the heart of thoroughbred breeding
and its administration remained in the Ocala area.
At the epicenter of the industry are two entities: the Florida Department of
Business & Professional Regulation, Division of Pari-Mutuel Wagering, which is
the regulatory arm of the state, and the Florida Thoroughbred Breeders’
Association, Inc., also known as Florida Thoroughbred Breeders’ & Owners’
Association (FTBOA), which is a unique Ocala-based, private, non-profit
corporation that has been granted legal authority to promote Florida’s
thoroughbred industry and receive monies and distribute awards to owners of the
top Florida-bred thoroughbred competitors. In its own words, it “administers the
2
Amanda Simmons Luby & Renée E. Thompson, Taking Notice of Florida’s
Antiquated Equine Lien Laws, Fla. B.J., November 2014, at 16, 16 (footnote
omitted).
3
lucrative awards program which encourages individuals to participate in the
industry in the Sunshine State.”3 FTBOA was initially established in 1945 and was
specifically designated by the Legislature in 1977 to collect and distribute
wagering prize monies as awards, section 550.38, Florida Statutes (1977), Chapter
77-167, Laws of Florida, which were considered an “important factor[] in
attracting the entry of well-bred horses in Florida racing meets, which in turn helps
to produce maximum racing revenues for the state and the counties.” Id. § 550.262,
Fla. Stat. (1977).
A recurrent theme in FTBOA’s history is the tension between the
association’s economic interests and those of the breeders and owners, each
seeking a share of the pool of funds dedicated to promoting the State’s economic
interests and encouraging development of successful home-grown thoroughbred
racehorses. 4 This tension has persisted through good economic times in the
3
See About FTBOA, Florida Thoroughbred Breeders’ & Owners’ Association,
https://www.ftboa.com/News/About-Us (last visited April 14, 2017).
4
Years ago, the Florida Supreme Court and this Court nullified statutes that lacked
direction on how revenues generated for the promotion of Florida-bred racehorses
were to be used. See Horsemen’s Benevolent & Protective Ass’n, Fla. Div. v. Div.
of Pari-Mutuel Wagering, Dep’t of Bus. Reg., 397 So. 2d 692, 695 (Fla. 1981)
(Striking down a statute “contain[ing] no provision for how the funds paid to the
horsemen’s association must be spent or that they must be spent in furtherance of
the legitimate state objective herein advanced,” such that the “statute effectually
requires payment of money to a private association to do with as it chooses.”); see
also Fla. Horsemen Benevolent & Protective Ass’n v. Rudder, 738 So. 2d 449, 452
(Fla. 1st DCA 1999) (Striking down statute that “places no obligation upon the
association as to how funds deducted pursuant to the statute are to be expended and
4
industry, as well as the bad times (such as when federal tax laws changed in the
1980s making equine investments less remunerative), the focus often being on how
awards are determined. Thoroughbred breeders’ awards were initially set by
statute, see Chapter 63-161, Laws of Florida (establishing section 550.38), but over
the decades, that system evolved into one in which FTBOA is empowered to
decide the amount and distribution of awards. Ch. 92-348, § 31, Laws of Fla.
(establishing section 550.26165 and specifying the percentage of race purses to be
distributed as awards to registered Florida-bred horses, such as up to twenty
percent, but not less than fifteen percent, from available funds); see also Ch. 2000-
354, § 25, Laws of Fla. (amending section 550.26165(1)). Whether set by statute or
by the discretion of FTBOA, the goal of the breeders’ awards are “to encourage the
agricultural activity of breeding racehorses in this state.” § 550.26165, Fla. Stat.
(1993).5
With this brief historical overview, we turn to the central feature of this case,
which is the statutory mandate that FTBOA annually create a “uniform rate and
procedure for the payment of breeders’ and stallion awards” that “must provide for
the maximum possible payments within revenues.” §§ 550.2625(3)(h),
550.26165(2), Fla. Stat. (2017). FTBOA “shall make breeders’ and stallion award
it specifies no benefit that is to be received by owners or trainers.”).
5
Until 1999, the complete statutes of Florida were published only in odd-years,
supplements in even-years. Because section 550.26165 was enacted in December
1992, after the supplement was published, it first appears in the 1993 statute book.
5
payments in strict compliance with the established uniform rate and procedure
plan.” Id. § 550.2625(3)(h). And the fund of undistributed breeders’ awards shall
not be allowed “to grow excessively.” Id. § 550.26165(4).
Monies distributed as breeders’ awards are limited “to breeders of registered
Florida-bred horses winning horseraces” and, under the current statutory structure,
must be within certain parameters. For example, “awards shall be given at a
uniform rate to all winners of the awards, shall not be greater than 20 percent of the
announced gross purse, and shall not be less than 15 percent of the announced
gross purse if funds are available.” § 550.26165(1), Fla. Stat. To provide a floor
below which FTBOA awards should not go, “[p]riority shall be placed upon
imposing [restrictions such as caps on winnings and deferred payments] in lieu of
allowing the uniform rate to be less than 15 percent of the total purse payment.” Id.
§ 550.2625(3)(h). To cover its own expenses, FTBOA is authorized to withhold up
to ten percent of permitholder’s payments “as a fee for administering the payments
of awards and for general promotion of the industry.” Id. In 2009, FTBOA was
told to become more responsive to competition from other states’ “rapidly
changing” programs and given more flexibility to “design competitive awards
programs” for inclusion in its annual plan, such as paying awards for second and
third place finishes and paying awards “that are greater than 20 percent and less
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than 15 percent of the announced gross purse” and so on. Ch. 2009-170, § 12,
Laws of Fla. (adding subsection (5) to section 550.26165).
FTBOA’s annual plan “must be approved by the [D]ivision before
implementation. In the absence of an approved plan and procedure, the authorized
rate for breeders’ and stallion awards is 15 percent of the announced gross purse
for each race.” § 550.2625(3)(h), Fla. Stat. FTBOA must “keep accurate records
showing receipts and disbursements of such payments” and “annually file a full
and complete report to the [D]ivision showing such receipts and disbursements and
the sums withheld for administration.” The Division may “audit the records and
accounts” of FTBOA “to determine that payments have been made to eligible
breeders and stallion owners in accordance with this section.” Id. § 550.2625(3)(i).
The Division “may order [FTBOA] to cease and desist from receiving funds and
administering funds received under this section” upon a finding of non-compliance
“with any provision of this section[.]” Id. § 550.2625(3)(j).
Since 1996, Southern Cross Farms, doing business as SCF, Inc., has been
among the hundreds of thoroughbred breeders and owners in the Ocala area. It has
been successful, receiving breeders’ awards from FTBOA every year since 1998
(save 2001), representing thirty-one racehorses earning approximately $138,000 in
award monies. Recently, SCF earned $17,405.00 in breeders’ awards in 2015 (four
different horses) and intended to race these same horses in 2016 (one of which it
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alleged in its amended petition had already won a breeders’ award in 2016); it also
alleged it had “3 two-year Florida-bred horses in final preparation for launching
their racing careers in 2016 at the racetracks in South Florida.” SCF’s membership
in FTBOA lapsed, but that does not prevent it from eligibility to receive awards.
In response to the Division’s approval of FTBOA’s proposed plan for the
2016 race year, SCF initiated an administrative proceeding to challenge the plan’s
compliance with statutory requirements, principally those related to FTBOA’s
responsibility to ensure that award amounts are set appropriately. SCF filed an
amended petition, but the administrative law judge (ALJ) granted the motions to
dismiss of FTBOA and the Division, finding that SCF lacked standing because its
substantial interests were not affected by the Division’s “mere approval” of the
plan. Despite SCF’s unbroken track record of awards in the fifteen years leading
up to its administrative challenge, the ALJ found it “much too speculative” that
SCF would again receive awards that might be diminished by FTBOA’s actions. In
addition, the ALJ recognized that although SCF had an interest in how the plan is
“ultimately implemented, it has no interest whatsoever in the agency action in the
present matter, i.e., approval of the Plan by the Division.” The ALJ noted that if
SCF were a member of FTBOA, which is not required to win awards, it could
“petition [FTBOA] in some fashion to seek redress or input about the proposed
plan before it is submitted to the Division. But once the Division approves the
8
Plan, it is in place and cannot be disturbed.” Based on the ALJ’s order, the
Division dismissed SCF’s amended petition with prejudice, resulting in this appeal.
II.
The issue presented is whether SCF has standing to bring an administrative
challenge against FTBOA’s approved annual plan for breeders’ awards as being
non-compliant with the statutory requirements for such a plan. This question is
answered by analyzing whether SCF has a “substantial interest” to be determined
in the proceeding challenging the statutory compliance of FTBOA’s plan.
§ 120.52(13)(b), Fla. Stat. To determine whether a third-party has a substantial
interest in the outcome of a proceeding for standing purposes, the test set out in
Agrico Chemical Company v. Department of Environmental Protection, 406 So. 2d
478, 482 (Fla. 2d DCA 1981), is applied, consisting of two questions: 1) will the
party suffer injury in fact, which is of sufficient immediacy to entitle it to a section
120.57 hearing; and 2) does the party have a substantial injury of a type or nature
for which the proceeding is designed to protect? Id. “The first aspect of the test
deals with the degree of injury. The second deals with the nature of the injury.” Id.But first we address the claim of FTBOA and the Division that this case is
moot because all awards for the 2016 year have been issued and paid, leaving no
meaningful remedy for SCF; they say SCF seeks an advisory opinion on “what
should be included in future” plans and that SCF’s legal claims are not ones that
9
would recur. But SCF does not seek payment or rescission of 2016 awards.
Instead, the primary relief it requests in this appeal is the determination that it had
standing to pursue its claims of statutory non-compliance against FTBOA and the
Division, an important issue that is likely to recur and over which we have
jurisdiction despite it being moot as to the 2016 plan. Godwin v. State, 593 So. 2d
211, 212 (Fla. 1992) (mootness does not deprive appellate court of jurisdiction
where issue is likely to recur).
Turning back to the merits, SCF alleged that the 2016 plan did not comply
with statutory mandates and thereby contained breeders’ awards that were below
levels that should otherwise have been met and for which SCF would be eligible
and likely would have received in some measure due to its having done so for
seventeen of the past eighteen years. As to the second part of the Agrico test, it is
clear that SCF meets its requirements. To begin, the Legislature’s stated purpose of
the statutory framework at issue is to “encourage the agricultural activity of
breeding and training racehorses in this state” by distributing “awards to breeders
of registered Florida-bred horses winning horseraces.” See § 550.26165(1), Fla.
Stat. SCF’s petition alleges a scope of interest and activities (breeding and racing
thoroughbred horses in Florida), and relief requested (an annual plan that complies
with statutes that seek to maximize the payment of breeders’ awards) that
demonstrates the type of substantial interest that can be administratively addressed
10
and resolved. Indeed, the raison d’être for the plan to establish breeders’ awards of
optimal magnitude is to encourage the very activity in which SCF has successfully
engaged. See § 550.26165(2) (annual plan “must provide for the maximum
possible payments within revenues”).
This type of economic interest has been recognized as sufficient to establish
standing in this same industry. In Florida Horsemen Benevolent & Protective
Association v. Rudder, three Florida thoroughbred owners—who were not
members of an association representing most thoroughbred racehorse owners and
trainers—sued the association, asserting economic harm. 738 So. 2d 449, 451 (Fla.
1st DCA 1999). The claimed injury was that the purse the three owners might have
received was reduced by a statutory one-percent deduction paid directly to the
association. Id. Because the “purses that the [owners] would otherwise receive are
diminished by the one percent deduction made in favor of the [association]. These
[owners] therefore satisfy the general standing requirement that the case involve an
actual controversy as to the issue or issues presented.” Id. at 451. Given that the
Florida thoroughbred owners in Rudder had standing in a civil court, and that
“[e]xpansion of public access to the activities of governmental agencies was one of
the major legislative purposes of the new Administrative Procedure Act,” 6 it
6
See Fla. Home Builders Ass’n v. Dep’t of Labor & Emp’t Sec., 412 So. 2d 351,
352-53 (Fla. 1982); Rosenzweig v. State Dep’t of Transp., 979 So. 2d 1050, 1053
(Fla. 1st DCA 2008) (“[O]ne of the major legislative purposes of the
11
follows that SCF’s substantial interests are sufficient under the second part of the
Agrico test.
Next, as to the first part of the Agrico test, FTBOA and the Division claim
that SCF had nothing more than a speculative prospect of earning an award in
2016; they also argue that the prospects of SCF earning a larger award (if the plan
complied with statutes) are irrelevant and likewise speculative. But the proper
inquiry is on the likelihood of injury, not that it be certain. With the past as a
predictor, it was substantially certain that SCF would win another award in 2016
(at the time of its amended petition it had already done so). Indeed, none of the
three thoroughbred owners in Rudder had the fifteen-year consecutive string of
awards that SCF had achieved at the time of its petition, making the case for SCF’s
standing that much stronger.
As to whether SCF might earn a larger award, FTBOA and the Division
assert that SCF has no direct injury from the adoption of the plan and that potential
future applications of the plan to SCF were speculative. In short, they claim that
the legislative grant of authority to FTBOA to develop a plan of breeders’ awards
that compete with those of other states “does not contemplate participation by
individual breeders seeking to protect their individual economic interests.” Such a
conclusion—and that of the ALJ that SCF has “no express entitlement” to a
Administrative Procedure Act was the expansion of public access to the activities
of governmental agencies[.]”).
12
statutory award—overlooks that much of the impetus and focus of the statutory
framework is to optimize payouts to top Florida-bred horse owners whose horses
excel in Florida races, SCF being one. Because the statutory framework was set up
to provide economic inducements for Florida breeders like SCF to operate
successful equestrian programs in-state, it would be a curious conclusion that none
of them individually or as a group has a legal basis to complain about the plan’s
compliance with statutory guidelines as to awards. Fla. Home Builders Ass’n, 412
So. 2d at 354.
FTBOA and the Division point out that a proposed plan must be submitted
at least sixty days before the beginning of the payment year, such that “there is
simply no time or contemplation” for a third-party challenge to be made; instead,
only FTBOA and the Division are allowed to be involved in the approval process.
The finality of the plan once approved, and the statutory admonition that it not be
modified thereafter absent “the most compelling reasons,” section 550.26165,
Florida Statutes, is a two-edged sword. Though the compacted time-frame may
suggest that third-party challenges might be problematic, the seeming
irreversibility of the plan once finalized weighs in favor of the interests asserted by
SCF; absent early correction, statutory compliance may never be achievable, as
this case demonstrates. Moreover, the finality of the plan weighs in favor of
allowing a challenge. Unlike the situation in Suwannee River Area Council Boy
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Scouts of America v. State, Department of Community Affairs, 384 So. 2d 1369,
1374 (Fla. 1st DCA 1980), which involved a “binding letter” process that merely
determined “whether another layer of government must be dealt with by a
developer,” the plan under scrutiny here is a final one not subject to any layer of
government scrutiny other than by the Division. As we said in Ybor III, Limited v.
Florida Housing Finance Corporation, 843 So. 2d 344, 346 (Fla. 1st DCA 2003),
the “administrative need for decisional finality is a nullity if the road toward
closure does not permit a reasonable point of entry for an aggrieved applicant to
speak and be heard.” The Legislature has neither expressly nor impliedly said that
the very persons the statutory framework was designed to benefit—breeders of
Florida thoroughbred racehorses—are to be excluded from administratively
challenging a plan that, by statute, is intended to benefit them; and we are
disinclined to do so absent clearer legislative direction. See Rosenzweig, 979 So.
2d at 1054 (“[I]t is clear that if anyone has the ability to challenge the
Department’s interpretation of section 335.065, which specifically relates to
bicycle lanes, it would be those seriously involved in bicycling.”).
REVERSED.
WINSOR, J. and BROWN, JOHN, ASSOCIATE JUDGE, CONCUR.
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