The state could be on the hook for $450,000 in legal fees after a judge sided with cardroom operators in a dispute over controversial “designated player” games.
Lawyers for the cardrooms that won a ruling about the games say they are entitled to $50,000 – the statutory cap on legal fees in disputes with state agencies – for each of their nine clients, totaling $450,000.
But the state maintains that attorneys for the gambling operators are only entitled to split $50,000 in fees.
Administrative Law Judge E. Gary Early, who set a hearing on the issue for Jan. 16, sided with gambling operators in West Palm Beach, Jacksonville, Melbourne, Miami and other parts of the state last year. Early ruled that Florida gambling overseers were wrong to do away with a rule governing designated-player card games without replacing the regulations.
First launched in 2012, the games have become wildly popular among gamblers and are now hosted by most pari-mutuels that operate cardrooms in Florida. The industry argued that doing away with the rule, adopted in 2014, would put an end to games that bring in $87 million a year.
Regulators proposed doing away with the rule in 2015, insisting that the way the games were being conducted – and not the games themselves – violated a state gambling law, which prohibits pari-mutuels from acting as the “bank.”
Under Florida law, a “banking game” is defined as one “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.” Pari-mutuel cardrooms are allowed to conduct games in which players compete only against each other.
Lawyers representing the gambling operators convinced Early that doing away with the regulation effectively prohibited the cardrooms from offering the lucrative games.
An appeals court last month upheld Early’s decision, paving the way for John Lockwood, who represents seven gambling operators, and Christopher Kise, who represents two, to move forward with their request for legal fees.
“This was a very expensive case to litigate and the cardrooms want to recoup as much as possible,” Lockwood told The News Service of Florida.
Whether the $50,000 statutory cap on fees applies per party or in the aggregate could hinge on a 20-year-old case in which Early was a private lawyer who represented companies in a dispute with state regulators over reimbursements related to a petroleum-contamination site cleanup program. Early was on the winning side in the 1997 decision granting fees to all of the parties involved in the environmental case. The lawyers never received the fees, however, because an appeals court overturned the underlying ruling in the case.
In his Dec. 4 order setting the gambling-related hearing for next month, Early gave lawyers until Jan. 11 to file memorandums for legal consideration “which may include citation to legislative history, for which official recognition will be taken.”
Administrative Law Judge P. Michael Ruff‘s 1997 order in the environmental case included a lengthy analysis of the legislative history of the fees, which he said supported his decision that the then-$15,000 cap “is to apply to each party forced to bring a proceeding before the Division of Administrative Hearings.”
The law “provides that when an agency prevails in a rules challenge proceeding, the agency is entitled to recover its costs and fees from any party that participated for an improper purpose,” Ruff wrote.
“Similarly, the attorney’s fee provision with regard to an agency acting without substantial justification must be read in the same light so as to avoid dilution of the financial ability of a party to bring an action challenging an agency’s illegal rule-making,” the judge wrote.
The law only limits the amount of the attorney fees, not the number of parties entitled to the awards, Ruff concluded.
“Accordingly, each party to the proceeding where a proposed rule is declared invalid is entitled to an award of attorney’s fees that does not exceed $15,000,” Ruff wrote.
Ruff also provided a detailed legislative history of the law, concluding that lawmakers intended that fees would be paid to each party instead of divided between the parties.
“If the award of fees in multi-party litigation is diluted and restricted in cases where an agency is found to have acted without substantial justification, the Legislature’s intent to level the playing field and allow for effective participation by the private sector will have been thwarted,” Ruff wrote.
State gambling regulators’ handling of designated-player games has been a source of controversy in state and federal courts.
The games were at the heart of a dispute between the Seminole Tribe of Florida and the state over the tribe’s ability to offer blackjack at most of its casinos. Siding with the tribe last year, U.S. District Judge Robert Hinkle ruled that the designated-player games effectively breached an agreement with the Seminoles that gave them the “exclusive” right to conduct banked games until 2015.
Because the state allowed the pari-mutuel operators to hold the games, Hinkle decided that the tribe could continue to offer blackjack for the remainder of its 20-year deal with the state, which ends in 2030.
Republished with permission of the News Service of Florida.