GRABBA-LEAF, LLC v. Department of Business and Professional etc.

FIRST DISTRICT COURT OF APPEAL

STATE OF FLORIDA

_____________________________

No. 1D16-4273

_____________________________

GRABBA-LEAF, LLC,

Appellant,

v.

DEPARTMENT OF BUSINESS AND

PROFESSIONAL REGULATION,

DIVISION OF ALCOHOLIC

BEVERAGES AND TOBACCO,

Appellee.

___________________________

On appeal from the Division of Administrative Hearings.

J. Lawrence Johnston, Administrative Law Judge.

November 6, 2018

OSTERHAUS, J.

Grabba-Leaf, LLC, filed an unadopted rule challenge in 2016,

just after the Florida Department of Business and Professional

Regulation issued a memorandum to distributors of tobacco

products changing its practice of taxing tobacco wraps. The memo

stated that the Department would no longer tax “homogenized

tobacco wraps” because of a court decision, but would continue

taxing “whole leaf” tobacco wraps as “tobacco products.” The

Department interpreted whole leaf wraps to qualify as “loose

tobacco suitable for smoking” under the definition of “tobacco

products.” § 210.25(12), Fla. Stat. But Grabba-Leaf argues that the

Department’s policy and interpretation of the statute required

formal agency rulemaking, not simply just a memo to tobacco

distributors. We agree. Because the policy and practice set forth in

the memo alters the Department’s tax policy, makes new

distinctions between taxable and non-taxable tobacco wraps, and

includes taxing whole leaf tobacco products that aren’t clearly

covered by the applicable statutory definition, we conclude that the

Department’s statement constitutes an unadopted rule.

I.

The appellant, Grabba-Leaf, is a licensed distributor of

tobacco wrap products (known colloquially as “blunt wraps”). After

the federal government began taxing blunt wraps in 2009, the

State of Florida followed suit by applying its “other tobacco

products” tax to tobacco wraps. Florida’s blunt wrap distributors

were not pleased. Distributor Brandy’s Products, Inc., challenged

the State’s tax on the basis that its wraps were not taxable “tobacco

products” as defined by § 210.25, Florida Statutes. And its

argument ultimately prevailed before this court. See Brandy’s

Prods., Inc. v. Dep’t of Bus. & Prof’l Regulation, 188 So. 3d 130, 133

(Fla. 1st DCA 2016) (reversing the agency’s determination that

Brandy’s blunt wraps “are taxable ‘tobacco products’”).

Following the Brandy’s decision, the Department amended its

tax policy to carve out Brandy’s Products-like tobacco wraps, but

continue taxing other wraps. The Department sent a

memorandum to licensed distributors of tobacco products taking

the position that “homogenized tobacco wrap products,” like those

sold by Brandy’s Products, would not be taxed. But that it would

continue taxing whole leaf blunt wraps as “tobacco products.” See

§§ 210.276 & 210.30, Fla. Stat.

In response to the memo, Grabba-Leaf challenged the new tax

policy as an unadopted rule. See § 120.56(4), Fla. Stat. The

challenge culminated below in an administrative hearing, where

Grabba-Leaf argued that the Department was unlawfully

enforcing interpretations of the statute and of the opinion in

Brandy’s without having satisfied its rulemaking obligations.

An administrative law judge, however, concluded that

rulemaking wasn’t required. In his view, the Department’s memo

applied the plain meaning of a clear and unambiguous statute to

Grabba-Leaf’s wraps: “[I]t is readily apparent that whole leaf, non-

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homogenized cigar wraps meet [§ 210.25(12)’s] statutory definition

of loose tobacco suitable for smoking.” Grabba-Leaf timely

appealed this final order.

II.

We review the ALJ’s conclusions of law in this unadopted rule

challenge de novo. See Volusia Cty. Sch. Bd. v. Volusia Home

Builders Ass’n, Inc., 946 So. 2d 1084, 1089 (Fla. 5th DCA 2006).

Grabba-Leaf’s argument on appeal strikes at the heart of the

Department’s authority, in the absence of rulemaking, to assess

taxes against products that only arguably fall within the

parameters of a tax statute. Grabba-Leaf doesn’t argue that its

wraps cannot be taxed as “tobacco products” under the statute (not

yet at least). Rather, it argues that the Department must initiate

rulemaking before applying that tax to its whole leaf tobacco

wraps, because it isn’t clear that they are “loose tobacco suitable

for smoking.” § 210.25(12), Fla. Stat.

A.

Florida’s Constitution divides the power of the state

government between three branches: the legislative, executive,

and judicial branches. Art. II, § 3, Fla. Const. Each branch

possesses “its own powers and responsibilities.” Bush v. Schiavo,

885 So. 2d 321, 329 (Fla. 2004). Generally speaking, the Florida

Constitution grants the power to make the laws to the legislative

branch and the power to execute the laws to the executive branch.

Various agencies within the executive branch perform the role of

interpreting and enforcing Florida’s laws in everyday areas of life,

including taxation. But their authority is constrained. Executive

agencies can neither assume the power to enact law nor exercise

unrestricted discretion in carrying out the laws. See Sims v. State,

754 So. 2d 657, 668 (Fla. 2000) (recognizing that “the Legislature

may not delegate the power to enact a law or the right to exercise

unrestricted discretion in applying the law”). Agency

interpretations and applications must comport with the laws they

are carrying out. And if they cannot be squared with the laws, their

interpretations and applications must give way. See, e.g., Verizon

Bus. Purchasing, LLC v. Dep’t of Revenue, 164 So. 3d 806, 812 (Fla.

1st DCA 2015) (“Judicial deference does not require that courts

adopt an agency’s interpretation of a statute when the agency’s

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interpretation cannot be reconciled with the plain language of the

statute.”).

An agency statement that “implements, interprets, or

prescribes law or policy or describes the procedure or practice

requirements of an agency” is considered a “rule.” §§ 120.52(16),

120.56(4)(a), Fla. Stat. Statements that are rules cannot be

enforced unless they are formally adopted in accordance with

requirements set forth in chapter 120. See § 120.54, Fla. Stat. If an

agency statement meets the definition of a rule, but hasn’t been

adopted as a rule under chapter 120, then it is considered an

“unadopted rule.” § 120.52(20), Fla. Stat. Agencies may not enforce

an unadopted rule against a party’s substantial interests.

§ 120.57(e)1., Fla. Stat.; Coventry First, LLC v. State, Office of Ins.

Regulation, 38 So. 3d 200, 203 (Fla. 1st DCA 2010) (quoting Dep’t

of Revenue v. Vanjaria Enters., Inc., 675 So. 2d 252, 255 (Fla. 5th

DCA 1996)).

If an agency statement merely reiterates a law, or declares

what is “readily apparent” from the text of a law, however, the

statement is not considered a rule. See, e.g., Amerisure Mut. Ins.

Co. v. Dep’t of Fin. Servs., 156 So. 3d 520, 532 (Fla. 1st DCA 2015);

St. Francis Hosp., Inc. v. Dep’t of Health and Rehab. Servs., 553

So. 2d 1351, 1354 (Fla. 1st DCA 1989). The parties’ arguments in

this case focus on this rulemaking exception. We must decide

whether the Department’s 2016 memorandum, setting forth its

post-Brandy’s intention to tax only whole leaf blunt wraps,

amounts to a simple reiteration of what is “readily apparent” from

the text of § 210.25(12).

B.

After this court’s decision in Brandy’s, the Department issued

a memorandum interpreting our opinion to prohibit the taxation

of blunt wraps made partly of tobacco, but not of whole leaf wraps

consisting completely of tobacco. In accordance with its

interpretation, the Department altered its practice of taxing all

wraps and announced going forward that it would only be taxing

“whole leaf, non-homogenized” wraps. In changing its policy, the

Department did not initiate rulemaking. 1 Rather, it viewed its

1 The Division of Alcoholic Beverages and Tobacco possesses

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policy as reiterating the court’s decision and as carrying out its

obligation to tax “loose tobacco suitable for smoking.” § 210.25(12),

Fla. Stat. 2 The Department considers itself free to forgo

rulemaking because its policy is “readily apparent from its literal

reading” of the statute.

We aren’t convinced, however, that its authority to tax whole

leaf blunt wraps is readily apparent from the statute. Whether and

how § 210.25(12)’s “tobacco products” definition applies to blunt

wraps is not an easy question. Prior to 2009, the statute wasn’t

applied to blunt wraps. 3 After that, the Department began

interpreting the statute to apply to all blunt wrap products. When

Brandy’s Products challenged the tax, this court determined that

the “loose tobacco” part of the statute didn’t apply to its blunt

wraps. A debate exists about the breadth of our Brandy’s opinion.

Some language in the Brandy’s opinion suggests that it forbade the

taxation of blunt wraps across the board:

authority to adopt rules to enforce chapter 210, part II’s provisions

for taxing loose tobacco products. See § 210.75, Fla. Stat.

2 On July 1, 2016, the definition of “tobacco products” was

moved, without being amended, from subsection 210.25(11) to

subsection 210.25(12). Although this dispute pre-dated the change,

this opinion will use and refer to the current subsection, which lists

the following “tobacco products” as taxable:

[L]oose tobacco suitable for smoking; snuff; snuff flour;

cavendish; plug and twist tobacco; fine cuts and other

chewing tobaccos; shorts; refuse scraps; clippings,

cuttings, and sweepings of tobacco, and other kinds and

forms of tobacco prepared in such manner as to be

suitable for chewing; but “tobacco products” does not

include cigarettes . . . or cigars.

§ 210.25(12), Fla. Stat. (emphasis added).

3 Blunt wraps weren’t taxed as “loose tobacco suitable for

smoking” until 2009, some 24 years after § 210.25(12) was first

enacted. See Ch. 85-141, §§ 1, 5, at 1023-29, Laws of Fla. (1985).

5

[W]e agree with the ALJ that ‘giving the words used in

section 210.25(11) their plain and ordinary signification,

the definition . . . does not include blunt wraps within its

reach.

[W]e agree with the ALJ that the agency’s purported

failure of proof on [whether blunt wraps are “suitable for

smoking”] is so completely overshadowed by the

conclusion that blunt wraps are not loose tobacco as to be

superfluous to the outcome of this case.

Brandy’s, 188 So. 3d at 132 & n.2 (quotation omitted). At least one

court has interpreted Brandy’s to extend, for instance, to Grabba-

Leaf’s whole leaf wraps. 4

But the dissent correctly points out that Brandy’s limited its

relief to Brandy’s Products’ own wraps: “we reverse the agency’s

determination that the blunt wraps distributed by Appellant are

taxable ‘tobacco products.’” And the make-up of Brandy’s Products’

wraps and Grabba-Leaf’s wraps are different. It is into this

interpretive vacuum that the Department’s 2016 memorandum

introduced a composition-based distinction between blunt wrap

products. It took the position in its memorandum that Brandy’s

only applied to “homogenized” blunt wraps, and not to “whole leaf”

blunt wraps. This differentiation between blunt wraps was novel

for purposes of interpreting § 210.25(12) and Brandy’s, because

neither draws a composition-based distinction between blunt wrap

products. And so, while the Department was right that Brandy’s

Products’ wraps were only partly made of tobacco, and Grabba-

Leaf’s wraps are 100%, whole tobacco leaves, it isn’t clear that this

is a distinction with a difference for tax purposes. Nonetheless, the

Department’s memo to tobacco distributors established this new

4 In a tax refund case brought by Grabba-Leaf in South

Florida, a trial court citing Brandy’s refunded more than $828,000

in overpaid taxes to Grabba-Leaf associated with its whole leaf

blunt wraps. See Grabba-Leaf, LLC v. Dep’t of Bus. & Prof’l

Regulation, No. 2015-CA-12414-25 (Fla. 17th Cir. Ct. Oct. 25,

2016), aff’d sub nom. Dep’t of Bus. & Prof’l Regulation v. Grabba-

Leaf, LLC, No. 4D16-4166, 2017 WL 5195127 (Table) (Fla. 4th

DCA, Nov. 9, 2017).

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composition-based taxing regime for blunt wraps. Under its terms,

the Department would no longer be taxing the Brandy’s-like

wraps, but would continue taxing whole leaf wraps. According to

the memo, distributors would now have to “consider the

composition of the product” to determine their tax liability and

“seek clarification from the product manufacturer if necessary.”

We think this new approach required agency rulemaking. Not

only did it represent a tax policy change for the Department, but

the Department’s interpretation isn’t clearly correct under

§ 210.25(12), as might excuse it from having to satisfy rulemaking

requirements. As we noted in Brandy’s, the statute itself doesn’t

define “loose tobacco.” So we must construe these terms “in their

plain and ordinary sense.” State v. Brake, 796 So. 2d 522, 528 (Fla.

2001) (citing State v. Mitro, 700 So. 2d 643, 645 (Fla. 1997)). In

Brandy’s, we relied on the dictionary definition of “loose,” which is

“not rigidly fastened or securely attached,” “not brought together

in a bundle, container, or binding,” “not dense, close, or compact in

structure or arrangement,” and “not solid.” Brandy’s, 188 So. 3d at

132 (citing Loose, Merriam–Webster Online Dictionary,

www.merriam-webster.com/dictionary/loose). The definition of

“tobacco” is also important here, which is: “the leaves of cultivated

tobacco prepared for use in smoking or chewing or as snuff, [or] the

manufactured products of tobacco.” Tobacco, Merriam–Webster

Online Dictionary, www.merriam-webster.com/dictionary/tobacco.

Because cultivated and prepared leaves are themselves “tobacco,”

it isn’t clear that use of the modifier “loose” in the tax statute

applies to whole leaf wraps. Rather, “loose” would appear to be

surplusage as applied to these wraps.

In addition to straight textual problems with “loose,” the rest

of the “tobacco products” definition identifies products that are

further manufactured from tobacco leaves. “[S]nuff; snuff flour;

cavendish; plug and twist tobacco; fine cuts and other chewing

tobaccos; shorts; refuse scraps; clippings, cuttings, sweepings” do

not consist of whole leaves, but of cultivated tobacco fragments.

§ 210.25(12), Fla. Stat. Similarly, the prototypical “loose tobacco”

product, on which the ALJ and parties alike agree is “loose

tobacco,” is filler tobacco. Like the other stuff in § 210.25(12), filler

tobacco is shredded and chopped from cultivated tobacco leaves for

smoking in a pipe, blunt wrap, or other suitable vessel. Filler

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tobacco, too, is structurally distinct from a whole leaf tobacco wrap,

which is comparatively compact, unbroken, and solid, such that it

can bundle, contain, and secure loose filler tobacco. This also leads

to the conclusion that blunt wraps are different than the “tobacco

products” included in the statute because they aren’t similarly

“loose.” 5

Along this line, it is noteworthy that other state and federal

definitional statutes specifically identify tobacco leaves and wraps

when they are meant to be included. Section 569.002(6), Florida

Statutes, for instance, defines “tobacco products” to include both

“loose tobacco leaves” and “products made from tobacco leaves, in

whole or in part, . . . which can be used for smoking.” 26 U.S.C.

§ 5702(o) similarly identifies filler tobacco separately from

wraps—“tobacco which . . . is suitable for use . . . for making

cigarettes and cigars [and] wrappers thereof”—in defining what

are federally taxable tobacco products. In contrast, the definition

in § 210.25 doesn’t mention tobacco leaves or wraps, but only “loose

tobacco.”

That countervailing arguments exist that whole-leaf blunt

wraps are “loose” tobacco suitable for smoking is not the test for an

exemption from rulemaking. Rather, the test is whether an agency

statement reiterates a law, or declares what is “readily apparent”

from the text of a law. Amerisure Mut. Ins. Co., 156 So. 3d at 532.

Because § 210.25(12) does not clearly include whole leaf tobacco

wraps, we conclude that the Department cannot by memorandum

extend the statutory definition to cover them and disregard its

rulemaking obligations.

Finally, we recognize the limits of our holding and of the issue

presented here. We haven’t been called upon to finally resolve the

question of whether whole leaf blunt wraps are “loose tobacco

5 We recognized in Brandy’s that “tax statutes [must] be

construed narrowly, not broadly.” 188 So. 3d at 132. “[T]axes may

be collected only within the clear definite boundaries recited by the

statute.” Id. (quoting Maas Bros., Inc. v. Dickinson, 195 So. 2d 193,

198 (Fla. 1967)). And “any ambiguity in the provision of a tax

statute must be resolved in the taxpayer’s favor.” Verizon, 164 So.

3d at 809.

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suitable for smoking.” 6 And we needn’t do that in order to resolve

Grabba Leaf’s unadopted rule challenge. Rather, we more

modestly conclude that the Department’s memo—which

recognizes two different classes of blunt wraps, one taxable and

one not—does not simply reiterate § 210.25(12)’s text. See St.

Francis Hosp. Inc., 553 So. 2d at 1354. The Department’s memo

constitutes a “rule” because it is a statement of general

applicability that implements and interprets the law. § 120.52(16),

Fla. Stat. And it constitutes an “unadopted rule” because

rulemaking procedures weren’t followed, and it is not “readily

apparent” from the statute itself that non-homogenized, whole leaf

blunt wraps can be taxed as “loose tobacco suitable for smoking.”

Cf. Dep’t of Revenue v. U.S. Sugar Corp., 388 So. 2d 596, 598 (Fla.

1st DCA 1980) (concluding that an agency-adopted policy

distinction was not “readily apparent” in the statute and

constituted an unadopted rule).

III.

For these reasons, we conclude that the Department’s

memorandum setting forth a policy to tax whole leaf non-

homogenized blunt wraps constitutes an unadopted

administrative rule that cannot be enforced.

REVERSED.

WOLF, J., concurs; KELSEY, J., dissents with opinion.

_____________________________

Not final until disposition of any timely and

authorized motion under Fla. R. App. P. 9.330 or

9.331.

6 We don’t finally resolve the “loose” issue here as relates to

whole-leaf wraps, or whether whole-leaf blunt wraps can be

considered “suitable for smoking” under § 210.25(12). See also

Brandy’s, 188 So. 3d at 132 n.2 (also not resolving whether blunt

wraps are “suitable for smoking”).

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_____________________________

KELSEY, J., dissenting.

I respectfully dissent because I conclude that the

Administrative Law Judge did not err in holding that the agency’s

memorandum was not an unadopted rule, but rather merely

announced this Court’s ruling in Brandy’s Products, Inc. v.

Department of Business & Professional Regulation, 188 So. 3d 130

(Fla. 1st DCA 2016), and adhered to the plain meaning of the

taxing statute. Under Florida’s Administrative Procedure Act,

neither act requires rulemaking. That resolves this case entirely

in favor of the agency. The ALJ correctly dismissed Appellant’s

Petition to Determine Invalidity of Agency Statement filed under

section 120.56(4) of the Florida Statutes, and we should affirm.

A rule is an “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.”

§ 120.52(16), Fla. Stat. (2018). The agency’s “statement” here—its

memorandum noting that the Brandy’s decision was released, that

this Court held that the specific products there at issue were not

taxable, that the decision did not address whole-leaf tobacco

wraps, and thus that such whole-leaf wraps would continue to be

taxed (as they had been since 2009 under the plain language of the

taxing statute)—did not implement the statute, did not interpret

the statute, and did not prescribe law or policy. The agency’s

statement merely reiterated the holding of the then-new Brandy’s

decision, and state that the pre-existing taxation of non-Brandy’s

products (under the plain meaning of the statute) would continue.

Under the APA, this was not an unadopted agency rule.

1. The Plain Meaning of the Statute.

Even though this is an APA issue, and not a taxation issue as

in Brandy’s, the analysis properly begins with the plain language

of the taxing statute. The “other tobacco products” or OTP tax (i.e.,

not cigarettes, taxed in a separate part of the statute; or cigars, not

taxed), is imposed in what is now section 210.25(12), Florida

10

Statutes (2018) (formerly subsection (11)), using language

unchanged since its enactment in 1985 (emphasis added):

(12) “Tobacco products” means loose tobacco

suitable for smoking; snuff; snuff flour; cavendish; plug

and twist tobacco; fine cuts and other chewing tobaccos;

shorts; refuse scraps; clippings, cuttings, and sweepings

of tobacco, and other kinds and forms of tobacco prepared

in such manner as to be suitable for chewing; but “tobacco

products” does not include cigarettes, as defined by s.

210.01(1), or cigars.

As we correctly noted in Brandy’s, when construing a statute

we must first determine whether statutory language is clear and

unambiguous, and if it is, then we must look first to the plain

meaning of the statute. 188 So. 3d at 132. This Court in Brandy’s

expressly held that the specific statutory language at issue here–

“loose tobacco suitable for smoking”–“is clear and unambiguous.”

Id. To be taxable under the plain meaning of this statutory phrase,

tobacco must be both (a) “loose” and (b) “suitable for smoking.”

Brandy’s correctly employed a plain-meaning approach to defining

“loose tobacco,” but because we concluded that the product at issue

was not “loose tobacco,” we did not analyze whether the product

was “suitable for smoking.” Id. at 132 & n.2. We need to analyze

both phrases here.

(a) “‘Loose’ Tobacco.”

Our analysis in Brandy’s was specific to, and limited to, the

particular product at issue there. The parties, and apparently the

industry as a whole, refer to the Brandy’s-type products as

“homogenized” wraps. The dictionary definition of “homogenized”

is “to blend (diverse elements) into a mixture that is the same

throughout; to make uniform in structure or composition

throughout.” See Homogenize, Merriam-Webster Online

Dictionary, www.merriam-webster.com/dictionary/homogenize

(last visited August 30, 2018). Appellant’s representative in this

litigation freely admitted that the Brandy’s manufactured wrap

product “is made out of a few different things, not just tobacco,”

and thus is “homogenized” (his description). The wraps at issue in

Brandy’s were not 100% tobacco. They were not even

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predominantly tobacco. Instead, they were predominantly wood

pulp and gums used as adhesives, combined with tobacco pulp in

a manufacturing process to produce a cut-out tobacco-infused

paper rectangle that witnesses in that case as well as in this case

described as looking and feeling very much like a brown paper bag

or a thin piece of cardboard. See Brandy’s, 188 So. 3d at 131.

Evidence in this case established that the Brandy’s-type

manufactured products are patented.

Only that specific product with those specific characteristics

was at issue in Brandy’s, and this Court made that very clear as

the factual basis for its ruling. Id. at 131 (“[T]he narrow issue on

appeal is whether, as a matter of law, the product described by the

ALJ falls within the statutory definition of ‘tobacco products.’”)

(emphasis added); see also id. at 132 (“Accordingly, tobacco that is

densely bound together to make a solid, uniform, cohesive product

like the blunt wraps at issue in this case is not ‘loose tobacco’ for

purposes of section 210.25(11).”) (emphasis added). The function of

the product was not the basis for this Court’s decision. This Court

in Brandy’s, after finding the statutory term “loose tobacco” to be

“clear and unambiguous,” resorted only to the dictionary definition

of “loose,” that being “‘not rigidly fastened or securely attached,’

‘not brought together in a bundle, container, or binding,’ ‘not dense,

close or compact in structure or arrangement,’ and ‘not solid.’”

Brandy’s, 188 So. 3d at 132. The ALJ who rendered the

recommended order in Brandy’s had observed that “a blunt wrap

is no more loose tobacco than a piece of writing paper is loose

wood,” and that “[n]o tobacco, as such, is visible when examining a

blunt wrap, much less ‘loose’ tobacco or any other ‘loose’

ingredients for that matter.” Id. at 131. We agreed with that

analysis in Brandy’s. Id. Our holding in Brandy’s was that,

because the tobacco content of those wraps was by no means “loose”

from the other components of the wrap, that product was not

within the plain meaning of the taxing statute.

In contrast, Appellant’s wraps are natural, cured tobacco

leaves, not combined with any other ingredients. They are leaves

and only leaves, not tobacco-infused paper, not bound to or

combined with anything else. The undisputed evidence below with

respect to Appellant’s leaves was that “There’s nothing more,

nothing less, to it.” They look like leaves and feel like leaves—

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because they are leaves and only leaves. They are brown because

they have been air-cured. They come in a pouch, and their

packaging describes them as “natural tobacco wraps that are

inspected and selected from the finest tobacco leaves available,

ensuring a smooth smoke from beginning to end. Slow, smooth

burning.” The package includes a Surgeon General’s warning

about the danger of tobacco use. The packaging contains no patent

marking. The evidence showed that users might cut or tear the

leaves as needed; and Appellant’s counsel admitted at oral

argument that users could grind or chop the leaves for use as filler

tobacco, although he opined that they probably would not do so

because the leaves are selected for qualities that make them better

suited to use as an outside wrapper. It was also admitted at oral

argument that packages of whole tobacco leaves are available for

purchase, and that those are taxed under the OTP statute.

Given the undisputed facts about the physical characteristics

of Appellant’s whole-leaf wraps, they fall within the dictionary

definition of “loose” tobacco, as we applied it in Brandy’s. Our

holding in Brandy’s means that tobacco is not “loose” when it is

mixed with wood pulp and gum to form a manufactured product in

which the different ingredients are bound uniformly and

inextricably to one another. The function of the product as a wrap

was not part of the analysis. In direct contrast to the Brandy’s

product, Appellant’s leaves are not mixed with anything. They are

not fastened or attached to anything or bound to anything. They

are not dense, close, compact, or solid in structure. They are

tobacco leaves, nothing else. They are loose tobacco within the

plain meaning of the statute. Appellant’s argument that only filler

tobacco is “loose” tobacco within the meaning of the statute,

improperly restricts the statute in a way that the Legislature did

not. St. Joe Paper Co. v. Dep’t of Rev., 460 So. 2d 399, 401-02 (Fla.

1st DCA 1984) (“The Department’s interpretation would require

the court to add the word “amended” to Section 214.14, and it is

axiomatic that the court is not free to add words to steer a statute

to a meaning which its plain wording does not supply.”). As the

ALJ observed, chopped or ground filler tobacco is loose tobacco, but

the Legislature did not limit loose tobacco to filler tobacco—and

neither can we. Appellant’s attempt to claim that its leaves are “a

solid, uniform, cohesive product” because they are leaves all the

way through themselves and the cells of the leaves are closely

13

bound to one another within the leaves, is a wholesale

misapplication of Brandy’s and its specific holding, which was

limited to the product at issue there and the fact that its minor

component ingredient of tobacco was bound inextricably to other

non-tobacco ingredients. Appellant’s leaves are loose tobacco. This

brings us to whether they are “suitable for smoking.”

(b) “Suitable for Smoking.”

The Brandy’s Court did not analyze this statutory phrase

because it became irrelevant in light of the clear finding that the

product at issue was not “loose” tobacco in the first place. 188 So.

3d at 132 & n.2. But because Appellant’s leaves are loose tobacco

within the meaning of the statute, it becomes necessary to move to

the second part of the test of OTP taxability and determine

whether tobacco leaves are “suitable for smoking” within the plain

meaning of the taxing statute.

The ALJ invoked the plain meaning of “suitable”—having the

qualities that are right, needed or appropriate for something. This

was consistent with the dictionary definition of the word. See

Suitable, Merriam-Webster Online Dictionary, www.merriam-

webster.com/dictionary/suitable (defining suitable as “adapted to a

use or purpose”) (last visited August 30, 2018). Appellant does not

challenge this interpretation of “suitable” standing alone, but

argues that the statute should be limited to tobacco suitable for

smoking “on its own.” The ALJ properly rejected this argument. In

construing a clear and unambiguous statute, we are not at liberty

to add words to it. St. Joe Paper, 460 So. 2d at 401-02. Our task is

to apply the plain meaning of “smoking.”

The dictionary defines “smoking” as the verb form of “smoke,”

meaning “to inhale and exhale the fumes of burning plant material

and especially tobacco.” See Smoke, Merriam-Webster Online

Dictionary, www.merriam-webster.com/dictionary/smoke (last

visited August 30, 2018). Florida law defines “smoking” in several

statutes. The Clean Indoor Air Act defines it as “inhaling,

exhaling, burning, carrying, or possessing any lighted tobacco

product, including cigarettes, cigars, pipe tobacco, and any other

lighted tobacco product.” § 386.203(10), Fla. Stat. (2018). The

medical marijuana statute defines it as “burning or igniting a

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substance and inhaling the smoke.” § 381.986(1)(n), Fla. Stat.

(2018). The public nuisance statute defines it as “possess[ing] any

ignited tobacco product or other ignited substance . . . .” § 823.12,

Fla. Stat. (2018). “Smoking,” used alone, is not limited to a product

being smoked with something else. Smoking is smoking. If the

Legislature had intended to limit “suitable for smoking” in the way

Appellants suggest, it could have done so, but has consistently

done the opposite and invoked a broad and plain-meaning

definition of “smoking.” It did so in the OTP statute. Thus, the ALJ

correctly construed “suitable for smoking” as extending to

Appellant’s tobacco leaves heated and consumed during the act of

smoking.

To support its restricted definition of “smoking” as limited to

“smoking on its own,” Appellant relied below on a Colorado

decision that was not yet final. The case became final well over a

year ago, and ended up being contrary to Appellant’s position,

although Appellant failed to notify us of that development. In

Colorado Department of Revenue v. Creager Mercantile Co., 395 P.

3d 741 (2017) (En Banc), the majority of the en banc Colorado

Supreme Court held that the Colorado statute imposing a tax on

other tobacco products (which differed from the Florida statute by

not being limited to “loose” tobacco), encompassed even

homogenized blunt wraps because they are “consumed by the act

of smoking” and are therefore “suitable for smoking.” 395 P. 3d at

745. While Creager interprets Colorado law and is not binding in

Florida, it is directly contrary to Appellant’s argument.

Appellants get the opposite of the Brandy’s answer on the tax

question—not because of any difference in the law, but because of

the material factual differences between the nature of the

manufactured products at issue in Brandy’s and the natural whole

tobacco leaves at issue here. Brandy’s Products succeeded in

establishing that its product was not taxable under section

210.25(11) (now (12)), by carefully distinguishing its product based

on its physical characteristics as a manufactured blend of

inseparable wood pulp, tobacco pulp, and gums. While Appellant

attempts to tag along on that result based on the function of its

product, function of the product is not a factor under the taxing

statute and was not a factor in Brandy’s. Appellant’s product is

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taxable. But as already noted, this is an APA rulemaking case, not

a tax case.

2. The Memorandum is not an Unadopted Rule.

The tax question informs the APA question. The question

before the Court is whether the agency’s post-Brandy’s

memorandum included an unadopted rule. The agency announced

this Court’s holding in Brandy’s, and stated that the status quo

pre-Brandy’s continued to apply to the whole leaf products not

addressed in Brandy’s. If Appellant’s product falls within the plain

meaning of the statutory language that we expressly held in

Brandy’s was “clear and unambiguous,” then it was taxable by

direct operation of the taxing statute. Thus, two propositions

become clear: no rulemaking was required to apply a clear and

unambiguous statute; and rulemaking is not required when an

agency reiterates a court holding. Neither agency statement is an

unadopted rule.

As the agency’s representative testified, the post-Brandy’s

agency memo did nothing other than “stop[] the taxation of the

homogenized product based on [Brandy’s],” leaving all other blunt

wrap products taxed as they had been since the State started

imposing the tax. The reasoning and result in Brandy’s serve to

highlight the factual distinctions between taxable and non-taxable

wrap products, leaving intact the State’s long-standing policy and

practice of taxing other tobacco products not like those in Brandy’s,

which was based on the plain language of the taxing statute itself.

No rulemaking was required.

(a) Unambiguous Statute Requires No Rule.

The parties here, as in Brandy’s, agreed that since 2009,

under statutory language in place since 1985, and without

adopting any rules to do so, the agency had been taxing both the

tobacco-infused paper product at issue in Brandy’s and the whole

leaves of tobacco at issue here. We noted in Brandy’s that “[t]he

agency’s decision to start taxing blunt wraps was not based on a

change in Florida law as the definition of ‘tobacco products’ in

section 210.25(11) has remained unchanged since its original

enactment in 1985.” 188 So. 3d at 131 n.1. The agency’s position

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all along has been that the statute imposed the tax by its plain

meaning, and therefore rulemaking was not required.

Florida law is clear that agencies are not required to

promulgate rules when those agencies merely apply the plain

language of a statute:

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

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 action

based upon such an interpretation are permissible

without requiring an agency to go through rulemaking.

Amerisure Mutual Ins. Co. v. Dep’t of Fin. Svcs., 156 So. 3d 520,

532 (Fla. 1st DCA 2015) (quoting St. Francis Hosp, Inc. v. Dep’t of

Health & Rehab. Svcs., 553 So. 2d 1351, 1354 (Fla. 1st DCA 1989)).

This fundamental premise of administrative procedure

harkens back to the early days of the Administrative Procedure

Act, when former Judge Robert P. Smith, Jr. of this Court

explained that rulemaking is required only for agency statements

intended “by their own effect” to make law:

[T]he Section 120.54 rulemaking procedures are imposed

only on policy statements of general applicability, i.e.,

those statements which are intended by their own effect

to create rights, or to require compliance, or otherwise to

have the direct and consistent effect of law.

McDonald v. Dep't of Banking & Fin., 346 So. 2d 569, 581 (Fla. 1st

DCA 1977) (emphasis added) (superseded by statute on other

grounds). This principle gives effect to the fundamental

proposition that the Florida Legislature alone makes statutory

law, and confers on state agencies only limited authority to make

rules that “implement or interpret the specific powers and duties

granted by the enabling statute.” § 120.536(1), Fla. Stat. (2018).

No agency has “the authority to implement statutory provisions

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setting forth general legislative intent or policy.” Id. Rulemaking

requirements were never intended to “encompass virtually any

utterance by an agency.” McDonald, 346 So. 2d at 581. Where a

statute is clear and unambiguous and can be interpreted according

to its plain meaning, there is neither authority nor need for agency

rulemaking. Id.

We have continued to rely on the language of McDonald’s

explanation that agencies must make rules only for statements

that “by their own effect” have the effect of law. We expressly

applied exactly that principle in Coventry First, LLC v. Office of

Insurance Regulation, 38 So. 3d 200 (Fla. 1st DCA 2010). In

pertinent part, we held that the agency’s letters to licensees

requesting information about out-of-state settlements, and its

procedures for obtaining such records, were not unadopted rules.

Id. at 204-05. Rather, the agency’s communications and

statements were authorized by statute, and did not themselves

have the effect of law, and therefore were not improper unadopted

rules. Id. at 205. In Agency for Health Care Administration v.

Custom Mobility, Inc., 995 So. 2d 984 (Fla. 1st DCA 2008), we

applied the McDonald’s language to hold that a formula for

calculating overpayments in audits was not an unadopted rule.

995 So. 2d at 986. It did not of itself have the effect of law and it

did not implement, interpret, or prescribe law or policy. Id. at 986-

87.

In St. Francis Hospital, Inc. v. Department of Health &

Rehabilitative Services, 553 So. 2d 1351, 1354 (Fla. 1st DCA 1989),

we held that an agency’s statement reiterating the literal meaning

of a statute without creating new rights, burdens, or law, is not an

unpromulgated rule:

[A]n 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

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

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permissible without requiring an agency to go through

rulemaking.

We applied this rule in State Board of Administration v.

Huberty, 46 So. 3d 1144 (Fla. 1st DCA 2010). The statute at issue

allowed state employees to elect to participate in the state

Investment Plan “in writing or by electronic means.” 46 So. 3d at

1146 (quoting § 121.4501(4)(a)1.a.). The agency prepared and

distributed a booklet advising state employees that the election

could be made online or by telephone. A state employee had given

the state clear instructions by recorded phone call to switch her

retirement account to the Investment Plan, but then became

disappointed in the Investment Plan’s performance. She claimed

that her telephonic instructions to switch her to the Investment

Plan should be rescinded because the agency did not adopt a rule

providing that telephonic communications were encompassed

within the statutory phrase “electronic means.” We rejected the

employee’s argument, and held that the agency’s plain-meaning

interpretation of the statute as including telephone

communications within “electronic means” did not require

rulemaking. The agency’s statement itself did not adversely affect

substantive rights, deny or withdraw a pre-existing right, impose

any new or additional requirements, or have “the direct and

consistent effect of law.” 46 So. 3d at 1147 (quoting Dep’t of Rev. v.

Vanjaria Enter., Inc., 675 So. 2d 252, 255 (Fla. 5th DCA 1996)). See

also, e.g., Envtl. Trust v. State, Dep’t of Envtl. Prot., 714 So. 2d 493,

498-99 (Fla. 1st DCA 1998) (holding that an agency statement

explaining “how an existing rule of general applicability will be

applied in a particular set of facts” is not itself an unadopted rule

and does not require agency rulemaking).

By the same token here, the agency’s memorandum did not

constitute an unadopted rule, because it merely presented exactly

what this Court had held in Brandy’s, followed by the statement

that nothing else had changed and products other than those

addressed in Brandy’s would continue to be treated the same way

they had been since 2009, under the plain meaning of the taxing

statute. Such other products had been taxed as Other Tobacco

Products (OTPs) since 2009 based on a plain meaning of the

statutory phrase “loose tobacco suitable for smoking” – the very

phrase that we expressly held in Brandy’s was “clear and

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unambiguous.” The agency’s memorandum did not change any

substantive rights, impose any new legal burden, or have the direct

effect of law.

Appellant argues that the agency’s memorandum was an

unadopted rule because it used the phrases “whole-leaf” and

“homogenized,” which are terms the statute does not use. This

argument is unavailing, because these phrases are merely

descriptors for the holding in Brandy’s and for Appellant’s product.

The parties in Brandy’s as well as here used these terms to

distinguish the two products based on their physical

characteristics, and testified that these are the industry terms for

the products. The agency’s use of undisputed shorthand synonyms

for the longer descriptive phrases used in Brandy’s did not

constitute improper rulemaking.

The agency changed nothing. We alone did, and only by

applying the plain language of the statute to the specific product

at issue in Brandy’s. Nothing changed for other products, including

the whole tobacco leaves at issue in this case. They were taxable

under the plain language of the statute from the inception of the

State’s taxation of them, and they remain so. The agency is not

required to promulgate rules upon issuance of this kind of an

appellate court decision, and is not required to promulgate rules

when it acts within the plain meaning of the taxing statute. To

hold otherwise would impose on all agencies a tremendous burden

to make rules for virtually every statute and court decision. That

is not the law of Florida. Therefore, the agency’s post-Brandy’s

memo is not an invalid un-adopted rule. The ALJ properly

dismissed Appellant’s Petition, and we should affirm.

_____________________________

Gerald J. Donnini II, Joseph C. Moffa, James McAuley, and

Jonathan W. Taylor of Moffa, Sutton, & Donnini, P.A., Fort

Lauderdale, for Appellant.

Pamela Jo Bondi, Attorney General, and Elizabeth Teegen,

Tallahassee, Assistant Attorney General, for Appellee.

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