South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. Video Gaming Consultants, Inc.

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Video Gaming Consultants, Inc.
 
DOCKET NUMBER:
96-ALJ-17-0088-CC

APPEARANCES:
For the Petitioner: Nicholas P. Sipe, Esq.

For the Respondents: H. Buck Cutts, Esq. - Video Gaming Consultants, Inc.

S. Jahue Moore, Esq. - Slots of Fun, Inc.
 

ORDERS:

FINAL DECISION

STATEMENT OF CASE


This is a case brought by the Respondents for a contested case hearing on the administrative citations issued by the South Carolina Department of Revenue ("Department") for advertising for the playing of video poker machines in violation of S.C. Code Ann. § 12-21-2804(B) (Supp. 1996) and S.C. Code Regs. 117-190.2 (Supp. 1996).

By Order dated August 9, 1996, the above-captioned cases were consolidated for hearing purposes, each retaining its separate caption and docket number. A hearing on these matters was held on August 22, 1996 at the office of the Administrative Law Judge Division ("ALJD"). Any issues raised in the proceedings or hearing of this case but not addressed in this Order are deemed denied. ALJD Rule 29(B).





ISSUES


1. Did the Respondent Video Gaming Consultants, Inc., by using and displaying the term "Jackpot Video Games" in conjunction with a symbol of a pot of gold, advertise for the playing of video poker machines?

2. Did the Respondent Video Gaming Consultants, Inc., by using and displaying the term "Stop Here Try Our Poker Video Games," advertise for the playing of video poker machines?

3. Did the Respondent Slots of Fun, Inc., by using and displaying the term "Slots of Fun," advertise for the playing of video poker machines?

4. Is the prohibition against advertising overly broad in its enforcement such that it infringes on Constitutionally protected rights of free speech?

FINDINGS OF FACT


Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, taking into consideration the burden of persuasion by the parties, I make the following Findings of Fact by a preponderance of the evidence:

1. Notice of the time, date, place and subject matter of the hearing was timely given to the Petitioner and the Respondents.

2. Video Gaming Consultants, Inc. is a corporation chartered by the South Carolina Secretary of State. Video Gaming Consultants, Inc. operates a video gaming business known as Jackpot Video Games, located at 2751 Highway 17, Garden City, Horry County, South Carolina.

3. Jackpot Video Games contains Class III video poker machines which are licensed pursuant to S.C. Code Ann. 2720(A)(3).

4. On July 27, 1995, Revenue Officer D. Dean visited the business known as Jackpot Video Games. No other video game machines, other than those licensed under S.C. Code Ann. 2720(A)(3), were on the premises. Maintaining machines for play appeared to be Jackpot Video Games' only source of income. Jackpot Video Games displayed a sign stating "Stop Here Try Our Poker Video Games" and two signs with the words "Jackpot Video Games" in front of its business. Depictions of pots of gold overflowing with gold coins were displayed on the two "Jackpot Video Games" signs. The three signs were clearly visible from the public thoroughfare. As a result of the inspection, the Department issued a citation against Video Gaming Consultants, Inc. for advertising for the playing of machines in violation of S.C. Code Ann. § 12-21-2804(B). The Department seeks to impose a fine in the amount of $2,000 for this offense.

5. On September 25, 1995, Revenue Officer D. Dean again visited Jackpot Video Games. No other video game machines, other than those licensed under S.C. Code Ann. 2720(A)(3), were on the premises. Jackpot Video Games continued to display the two signs with the words "Jackpot Video Games" in front of its business. Depictions of pots of gold overflowing with gold coins were also still displayed on the two "Jackpot Video Games" signs. The two signs were clearly visible from the public thoroughfare. As a result of the inspection, the Department issued a citation against Video Gaming Consultants, Inc. for advertising for the playing of machines in violation of S.C. Code Ann. § 12-21-2804(B). The Department seeks to impose a fine in the amount of $2,500 for this offense.

6. Slots of Fun, Inc. is a corporation chartered by the South Carolina Secretary of State. Slots of Fun, Inc. operates a video mall known as The Royal Flush, located at 1618 Charleston Highway, Suite C, West Columbia, Lexington County, South Carolina.

7. The Royal Flush contains Class III video poker machines which are licensed pursuant to S.C. Code Ann. 2720(A)(3).

8. On November 20, 1995, Revenue Officer William Byers visited The Royal Flush to conduct a routine inspection. No other devices that accept money through slots, other than those licensed under S.C. Code Ann. 2720(A)(3), were on the premises. Slots of Fun, Inc. displayed two signs stating "Slots of Fun," one placed in front of the building and the other displayed across the facade of the business. Both signs were clearly visible from the public thoroughfare. As a result of the inspection, the Department issued a citation against Slots of Fun, Inc. for advertising for the playing of machines in violation of S.C. Code Ann. § 12-21-2804(B) and S.C. Code Reg. 117-190.2. The Department seeks to impose a fine in the amount of $500 for this offense.

9. The sign "Jackpot Video Games," when advertised, informs the public that video poker game machines are available for play on the premises. Moreover, the sign "Stop Here Try Our Poker Video Games," when advertised, calls to the attention of the general public that video game machines are available for play on the premises. Based on the above facts, I find that the appropriate fine for the Respondent, Video Gaming Consultant, Inc. is $2,500.

10. The sign "Slots of Fun," when advertised, calls to the attention of the general public that video game machines are available for play on the premises. Based on the above facts, I find that the appropriate fine for the Respondent, Slots of Fun, Inc., is $500.

11. Dr. Valerie P. Loranz is Executive Director of the Compulsive Gambling Center in Baltimore, Maryland. Dr. Loranz earned a Masters degree from Penn State in Community Psychology. She wrote her dissertation on compulsive gambling. She earned a Doctorate degree from the University of Pennsylvania. Again, her dissertation topic was compulsive gambling. She has published about 80 articles on various aspects of compulsive gambling. Dr. Loranz was qualified as an expert in the area of the diagnosis and treatment of pathological gambling, the impact of gambling on society in general, and the relationship between gambling and crime.

12. Dr. William Norman Thompson is a professor of Public Administration at the University of Nevada, Las Vegas. Over the past ten years, Dr. Thompson has been a consultant for a panoply of gambling organizations. He has written approximately 100 articles on gambling and four published books. Dr. Thompson was qualified as an expert in the general area of gambling and specifically in the area of the economic impact of gambling upon society.

13. Joseph Crawford Cook was a founding partner of Cook, Luke and Associates, a Columbia based advertising firm. Mr. Cook sold that firm in 1991 and since that date has been an independent consultant in marketing and advertising. Mr. Cook was qualified as an expert in advertising.

14. Based on the testimony of Drs. Loranz and Thompson and Mr. Cook, I find the following attributes exist concerning gambling in society. Pathological gambling, the clinical term used to describe compulsive gamblers, is a very disruptive illness that occurs in some individuals who choose to gamble. The increase of the legalization of various forms of gambling increases the occurrence of pathological gambling in society. Various direct and indirect economic and social costs accompany pathological gambling, including crime, loss of productivity, broken homes, bankruptcy, etc. In fact, pathological gambling affects the entire society, in the work environment and the family environment. Specifically, there is a strong relationship between compulsive gambling and crime. Money is the substance of the pathological gambling addiction. Once the compulsive gambler exhausts all legal access to money, he routinely commits crimes to get money. Thus the greater the prevalence of gambling, the greater the prevalence of crime. Consequently, the reduction of gambling reduces the potential for pathological gambling, and the resulting amount of social harm.

15. The purpose of advertising is to create demand, and to entice people to try a product. Advertising increases the demand for gambling. Conversely, the reduction in the advertising of gambling reduces the amount of gambling. Since the advertisement of gambling increases the amount of gambling, and the increase in gambling produces a potential social harm upon society, the advertising of gambling has a direct potential social cost upon society. In other words, advertisements, by increasing the prevalence of gambling, increase the potential deleterious impact upon society.

16. Advertisements fail to communicate the addictiveness of gambling. Advertisements, specifically those such as "Slots of Fun," suggest that gambling is entertaining. However, for the compulsive gambler, gambling is not entertaining.

DISCUSSION


S.C. Code Ann. § 12-21-2804(B) (Supp. 1996) provides:

No person who maintains a place or premises for the operation of machines licensed under Section 12-21-2720(A)(3) may advertise in any manner for the playing of the machines nor may a person offer or allow to be offered any special inducement to a person for the playing of machines permitted under Section 12-21-2720(A)(3).

The clear meaning and intent of the section is to prohibit any form of advertising of the playing of video game machines and to prohibit any form of encouragement to persons to play video game machines by persons who maintain "a place or premises" where machines are operated. Constitutional issues have been raised in this case regarding the validity of this statute and the regulation that defines advertising for purposes of interpreting the statute.

The Respondents contend the State's prohibition against advertising violates the First Amendment to the United States Constitution pursuant to the U.S. Supreme Court's holding in 44 Liquormart v. Rhode Island, 64 U.S.L.W. 4313 (U.S. May 13, 1996). The Respondents further state that this Division should declare S.C. Code Ann. § 12-21-2804(B) and S.C. Code Regs. 117-190.2 to be void and unconstitutional. The Department, on the other hand, maintains that the ban on advertising satisfies the four-prong test announced in Central Hudson Gas v. Public Serv. Comm'n of New York, 447 U.S. 557 (1980), and therefore the ban does not violate the requirements of the First Amendment to the Constitution.

Commercial speech is entitled to only limited protection under the First Amendment. Greater New Orleans Broadcasting Ass'n v. U.S., 69 F.3d 1296 (5th Cir. 1995). The four-part Central Hudson test governs whether commercial speech is protected by the First Amendment. Id. In Central Hudson, the Supreme Court propounded the following test:

[I]t at least must concern lawful activity and not be misleading. Next, it must be determined whether the asserted governmental interest to be served by the restriction on commercial speech is substantial. If both inquiries yield positive answers, it must then be decided whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.

As to the first prong, the Department concedes that the speech concerns lawful activity. The signs, "Stop Here Try Our Poker Video Games," "Jackpot Video Games" and "Slots of Fun," call the public's attention to the fact that there were machines on the premises licensed pursuant to S.C. Code Ann. 12-21-2720(A)(3). The businesses exclusively engage in providing to the public the opportunity to play Class III video poker machines. The signs advertise the playing of the machines but are misleading in that they suggest more than what is actually available. Specifically, the term "jackpot" is deceiving to the public. A "jackpot" suggests to the public "a top prize or reward." The American Heritage College Dictionary 1018 (3rd ed. 1993). In South Carolina, video poker machine operators may not pay out more than $125 in winnings within any 24-hour period. Consequently, stressing a jackpot in advertising when the maximum payoff on video poker is only $125 misleads the public concerning the potential winnings. This is not what the public would perceive as a jackpot. Furthermore, the gold coins displayed on the signs further reinforce the image of large potential gambling winnings. Likewise, stating that slots are fun appear to tell the public that the sole purpose is entertainment and fun. As established by expert testimony, entertainment would be limited to small bets, and one could not run up the odds. Therefore, the commercial speech involved here is not entitled to First Amendment protection because it fails to satisfy the first prong.

To satisfy the second prong, the state must prove a substantial interest to be achieved by restricting the Respondent's speech. South Carolina's asserted interests in prohibiting the advertisement of the playing of machines are: to prevent an increase in the demand for gambling; to prevent an increase in crime; to prevent the deceptive message that easy money is available for nothing; to protect the youth of South Carolina from the harmful influence of gambling; to minimize the serious harmful effects of gambling on the health, safety and welfare of its citizens; to discourage public participation in gambling; and to minimize the growth of pathological gambling in the State of South Carolina. One of the above state's interests is discouraging public participation in commercial gambling, thereby minimizing the wide variety of social ills that have historically been associated with such activities. That interest was found to be substantial in Greater New Orleans Broadcasting Ass'n, supra. Further, the Federal District Court in Reyelt et al. v. S.C. Tax Comm'n, C.A. No. 6-93-1491-3 (D.S.C. Nov. 15, 1993), in upholding the "Video Game Machines Act", held that South Carolina had a substantial governmental interest in reducing the demand for gambling among its residents. I also find that South Carolina has a substantial public interest in regulating the advertising of video poker for the reasons set forth in the above findings of fact.

The third prong addresses whether the regulation directly advances the governmental interest asserted. The Court in Central Hudson found this immediate connection between advertising and demand by stating that the corporation would not contest the advertising ban unless it believed that promotion would increase its sales. Here, the Department established through expert testimony that there is a direct relationship between advertising and the amount of gambling, that a reduction in advertising will reduce gambling in general, and will significantly minimize the increase in the growth of pathological gamblers in South Carolina. In Reyelt, the Court found "that a ban on the advertising for the playing of video game machines will directly advance South Carolina's asserted objective of reducing the demand for playing these machines among South Carolinians." Reyelt at 11, supra. A reduction in gambling will materially meet South Carolina's stated interest. In Greater New Orleans, the Court stated "[I]t is axiomatic that the purpose and effect of advertising is to increase consumer demand." The purpose of advertising is to create demand and to entice people to try a product. The Department has demonstrated that the ban on advertising directly advances the State's interests, and does so to a material degree.

South Carolina is entitled to use the less than strict fourth prong, that there is a reasonable fit between the abridgement of speech and that stated interest, as the ban is to protect consumers from misleading, deceptive, or aggressive sales practices. See State Univ. of New York v. Fox, 492 U.S. 469 (1989). Also, South Carolina is entitled to the relaxed fourth prong of Central Hudson because the state has not entirely prohibited the dissemination of commercial messages. See 44 Liquormart v. Rhode Island, 64 U.S.L.W. 4313 (U.S. May 13, 1996). The ban at issue only applies to persons who maintain a place or premises for the operation of machines, those persons who would most likely engage in deceptive or overly aggressive advertising. The manufacturers could advertise as well as organizations such as Chambers of Commerce or Tourism, as noted in Reyelt. Further, the persons who operate the businesses can advertise their premises, as long as the playing of machines is excluded from such advertising.

The South Carolina restriction on advertising satisfies the criteria established in Central Hudson. Specifically, S.C. Code Ann. § 12-21-2804(B) is not violative of the First Amendment to the Constitution since the government's interest in regulating the advertising of gambling is substantial, the restrictions on speech directly advance South Carolina's asserted interest, and the restrictions are no more extensive than necessary to serve that interest. This use of the Central Hudson test was recently affirmed in 44 Liquormart, supra.

CONCLUSIONS OF LAW


Based upon the above Findings of Fact, I conclude as a matter of law the following:

1. The Administrative Law Judge Division has jurisdiction to hear this matter pursuant to S.C. Code Ann. § 12-4-30(D) (Supp. 1996) and S.C. Ann. § 1-23-320 (Supp. 1996).

2. The Department contends that the Respondent violated S.C. Code Ann. § 12-21-2804(B) (Supp. 1996). That section provides:

No person who maintains a place or premises for the operation of machines licensed under Section 12-21-2720(A)(3) may advertise in any manner for the playing of the machines nor may a person offer or allow to be offered any special inducement to a person for the playing of machines permitted under Section 12-21-2720(A)(3).

3. Pursuant to S.C. Code Ann. § 12-21-2798 (Supp. 1996), the Department promulgates rules and regulations pertaining to machines and persons licensed.

4. 27 S.C. Code Regs. 117-190.2 (Supp. 1996) defines advertising as "any attempt to call attention to, or make known, to the general public that video game machines as defined in Code Section 12-21-2772(5) are available for play."

5. S.C. Code Ann. § 12-21-2772(5) (Supp. 1996) defines machine as "an electronic video games machine that, upon insertion of cash, is available to play or simulate the play of games as authorized by the commission utilizing a video display and microprocessors in which the player may receive free games or credits that can be redeemed for cash."

6. Words used in a statute should be given their plain and ordinary meaning. Multimedia, Inc. v. Greenville Airport Comm'n, 287 S.C. 521, 339 S.E.2d 884 (Ct. App. 1986); Hughes v. Edwards, 265 S.C. 529, 220 S.E.2d 231 (1975). When the terms of a statute are plain and unambiguous, the courts must apply those terms according to their literal meaning, without resort to subtle or forced construction in an attempt to limit or expand the scope of the statute. Holley v. Mount Vernon Mills, Inc., 312 S.C. 320, 440 S.E.2d 373 (1994); First Baptist Church of Mauldin v. City of Mauldin, 308 S.C. 226, 417 S.E.2d 592 (1992). Likewise, if a statute's language is plain and unambiguous and conveys clear and definite meaning, there is no occasion for employing rules of statutory interpretation, and the court has no right to look for or impose another meaning. Miller v. Doe, 312 S.C. 444, 441 S.E.2d 319 (1994).

7. The terms of S.C. Code Ann. § 12-21-2804(B) are plain and unambiguous. The clear meaning and intent of the section is to prohibit any form of advertising of the playing of video game machines and to prohibit any form of encouragement to persons to play video game machines by persons who maintain "a place or premises" where machines are operated. Accordingly, there is no reason to apply the rules of statutory construction.

8. The signs "Stop Here Try Our Poker Video Games" and "Jackpot Video Games" clearly call public attention to the fact that there were on the premises machines licensed under S.C. Code Ann. § 12-21-2720(A)(3). The gold coins displayed on the signs further reinforce the image of potential gambling winnings. These signs indicate clear attempts to call attention to or make known to the general public that video game machines are available for play.

9. The sign "Slots of Fun" also clearly makes it known to the public that machines licensed under S.C. Code Ann. § 12-21-2720(A)(3) are available for play. The term "slot machine" is commonly used for a gambling device. These machines are operated by slots in which a player deposits coins to engage in play. Slots of Fun, Inc. advertised the fact that video game machines were on the premises.

10. The Respondents violated S.C. Code Ann. § 12-21-2804(B) (Supp. 1996) by advertising for the playing of machines. The penalty for failure to comply with S.C. Code Ann. §12-21-2804(B) is a fine of up to $5,000. S.C. Code Ann. § 12-21-2804(F) (Supp. 1996).

11. S.C. Code Ann. § 12-21-2791 (Supp. 1996) limits cash payouts for credits earned for free games during any twenty-four-hour period to no more than $125.

12. Commercial speech is entitled to less protection under the First Amendment. The four-part Central Hudson test governs whether commercial speech is protected by the First Amendment. Greater New Orleans Broadcasting Assoc. v. U.S., 69 F.3d 1296 (5th Cir. 1995).

13. Commercial speech involves an "expression related solely to the economic interests of the speaker and its audience" and do "no more than propose a commercial transaction." Greater New Orleans Broadcasting, supra. (citing Virginia Pharmacy Bd. v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976)).

14. According to Central Hudson, in order for commercial speech to be protected by the First Amendment:

"[I]t at least must concern lawful activity and not be misleading. Next, it must be determined whether the asserted governmental interest to be served by the restriction on commercial speech is substantial. If both inquiries yield positive answers, it must then be decided whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest."

15. The advertising involved here is of lawful activity. However, this advertising does not satisfy the first prong of the Central Hudson test because it is misleading.

16. The second prong of the test is satisfied because South Carolina's asserted governmental interest is substantial. The current interest the restriction now serves is the proper factor to consider. Bolger v. Youngs Drug Products Corp., 463 U.S. 60, 71-73 (1983). In addition, the State may readjust its views and emphases in light of current knowledge of its governmental interest. Doe v. Bolton, 410 U.S. 179, 190-191 (1973).

One of South Carolina's asserted interests is discouraging public participation in commercial gambling, thereby minimizing the wide variety of social ills that have historically been associated with such activities. This interest was found to be substantial in Greater New Orleans Broadcasting Ass'n v. U.S., 69 F.3d 1296 (5th Cir. 1995). South Carolina also has a substantial interest in protecting its youth from the constant bombardment of a message that wealth is available without hard work and study. Additionally, the State has a substantial interest in protecting consumers from the aggressive and misleading advertising that winning is easy and that one can change his or her lifestyle merely by taking a chance. South Carolina also has a substantial interest in reducing the growth of pathological gambling. Pathological gamblers lose everything they own, and often commit crimes in order to raise money to fuel their sickness. Finally, the Court in Posadas de Puerto Rico Assocs. v. Tourism Co. of P.R., 478 U.S. 328, 341 (1986) found that:

[E]xcessive casino gambling among local residents . . . would produce serious harmful effects on the health, safety and welfare of the Puerto Rican citizens, such as the disruption of moral and cultural patterns, the increase in local crime, the fostering of prostitution, the development of corruption, and the infiltration of organized crime.

The Court further stated that:

We have no difficulty in concluding that the Puerto Rico Legislature's interest in the health, safety, and welfare of its citizens constitutes a "substantial" governmental interest.

The above-stated findings by the Court were not overruled by 44 Liquormart v. Rhode Island, 116 S. Ct. 1495 (1996). In addition, the Court in Reyelt et al. v. S.C. Tax Comm'n, C.A. No. 6-93-1491-3 (D.S.C. Nov. 15, 1993) at p. 10 found that South Carolina had "shown a substantial government interest in banning advertising by video game machine operators." The Court found that gambling by South Carolina residents would have the same deleterious effects that were feared by the legislature of Puerto Rico, and reduction of demand for gambling was a substantial interest.

17. The third prong that must be satisfied is whether the restriction directly advances the governmental interest asserted, and does so "to a material degree." Edenfield v. Fane, 507 U.S. 761, 771 (1993). The Court in Reyelt found that the restriction directly advanced South Carolina's asserted governmental objective of reducing the demand for playing these machines among South Carolinians. Here, the State established through expert testimony that there is a direct relationship between advertising and the amount of gambling, that the prohibition against advertising will preclude the growth in gambling in general, and will significantly minimize the increase in growth of pathological gamblers in South Carolina. A reduction in gambling growth will materially meet South Carolina's stated interests. In Greater New Orleans at 1301 the Court stated "It is axiomatic that the purpose and effect of advertising is to increase consumer demand." The Department met its burden of showing that the ban on advertising directly advances the State's interests, and does so to a material degree.

18. South Carolina is entitled to the relaxed fourth prong of Central Hudson for two reasons. First, South Carolina has not entirely prohibited the dissemination of these commercial messages. See 44 Liquormart at 1507. S.C. Code Ann. § 12-21-2804(B) (Supp. 1995) only prohibits the person who maintains a place or premises for the operation of machines from advertising. Others may advertise the playing of machines with impunity. Also, even the person who maintains the premises may advertise his or her business as long as the video poker machines are not advertised. The second reason that the ban is entitled to the relaxed prong is that one stated governmental interest is to protect consumers from aggressive gambling advertising that depicts easy riches or something for nothing that has the potential to exert undue influence over consumers, especially those in the lower income brackets that can least afford gambling. See 44 Liquormart at 1507.

19. The relaxed fourth prong is that there must be a reasonable fit between the abridgment of speech and that stated interest. South Carolina has met this burden. The ban on advertising is not complete. Businesses can advertise, they just can't advertise the playing of machines, which has been shown through expert testimony to be harmful. The purpose of advertising is to create demand, and to entice people to try a product. Testimony has shown that for many, financial ruin and significant harm will result from trying the product at issue here. The prohibition against advertising will keep many who would otherwise try the product from doing so. This alone makes the fit reasonable and satisfies the forth prong.

20. Even if the State had to satisfy the strict fourth prong test, the prohibition against advertising is not more extensive than necessary to serve the asserted State interests. Only the party who would be most likely to engage in deceptive advertising is barred. In addition, other less intrusive methods will not serve the stated interests. Education could not be efficiently dispersed, and has not shown to be effective with pathological gamblers. Increasing taxes, increasing prices, or changing the odds to make it harder for the gambler to win would not deter the compulsive gambler, and would merely increase the harmful effects of gambling.

21. The Administrative Law Judge Division has the authority to determine whether S.C. Code Ann. § 12-21-2804 (B) (Supp. 1996) is constitutional. According to S.C. Code Ann. §1-23-630 (Supp. 1996):

Each of the law judges of the division has the same power at chambers or in open hearing as do circuit court judges, and to issue those remedial writs as are necessary to give effect to its jurisdiction.

A circuit court judge has the authority to declare a statute unconstitutional. Therefore, an administrative law judge has the authority to do so as well. However, it is well settled that a statute enacted by the legislature is presumed constitutional and the party attacking the statute bears the burden of proving its unconstitutionality beyond a reasonable doubt. Nichols v. S.C. Research Auth., 290 S.C. 415, 351 S.E.2d 155 (1986). The burden requires the party attacking constitutionality to " . . . negative every conceivable basis which might support it." N. Charleston Land Corp. v. N. Charleston, 281 S.C. 470, 316 S.E.2d 137 (1984) citing Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 364, 93 S. Ct. 1001, 1006, 35 L. Ed. 2d 351 (1973) (quoting Madden v. Kentucky, 309 U.S. 83, 88, 60 S. Ct. 406, 408, 84 L. Ed. 590 (1940)).

Furthermore, one attacking the constitutionality of a statute must meet this burden even where a statute allegedly violates First Amendment rights. See City of Beaufort v. Baker, 315 S.C. 146, 432 S.E.2d 470 (1993) (ordinance would not be presumed void even though its language raised substantial constitutional issues). Consequently, before section 12-21-2804(B) may be declared unconstitutional, the Respondents bear the burden of proving its unconstitutionality "beyond a reasonable doubt" and the burden requires the Respondents to " . . . negative every conceivable basis which might support it." N. Charleston Land Corp. v. N. Charleston supra. Respondents failed to meet this burden.

22. The Department has fully met its burden established by Central Hudson and 44 Liquormart. I, therefore, conclude that S.C. Code Ann. § 12-21-2804(B) (Supp. 1996) does not violate the requirements of the First Amendment to the Constitution.

23. It is a generally recognized principle of administrative law that the fact finder has the authority to impose an administrative penalty after the parties have had an opportunity to have a hearing and be heard on the issues. See Ohio Real Estate Comm'n v. Aqua Sun Investments, 655 N.E. 2d 266 (Ohio 1995); Shadow Lake of Noel, Inc. v. Supervisor of Liquor Control, 893 S.W. 2d 835 (Mo. App. S.D. 1995); Matter of Henry Youth Hockey Ass'n, 511 N.W. 2d 452 (Minn. App. 1994); Vermont Agency of Natural Resources v. Duranleau, 617 A.2d 143 (Vt. 1992); City of Louisville v. Milligan, 798 S.W. 2d 454 (Ky. 1990); Com., Dept. of Transp. v. Slipp, 550 A.2d 838 (Pa. 1988); Dept. of Transp. v. Miller, 528 A.2d 1030 (Pa. 1987); State Police v. Cantina Gloria's, 639 A. 2d 14 (Pa. 1994).

Prior to governmental restructuring, a commission sitting in its adjudicatory capacity imposed penalties for violations of statutory provisions its agency administered. In its capacity as the fact-finder, the Tax Commission would conduct an adjudicatory hearing in all contested cases arising under Title 12 of the South Carolina Code, and would render an order containing findings of fact and conclusions of law. As the fact-finder, it was the commission's prerogative "to impose the appropriate penalty based on the facts presented." Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633, 634 (1991). With the advent of restructuring and the abolition of the Tax Commission, however, the Administrative Law Judge Division was given the authority to hear "all contested cases, as defined by Section 1-23-310 and as previously considered by the three [Tax] commissioners. . . ." S.C. Code Ann. §12-4-30(D) (Supp. 1996). The Administrative Law Judge, as the current fact-finder, must also impose a penalty based on the facts presented at the contested case hearing. As parties are entitled to present evidence on all issues arising out of the contested agency action, it follows that the tribunal responsible for conducting the contested case proceedings as mandated by the legislature must have the authority to decide the issues based on the facts presented and make the final decisions on all the issues, including the appropriate penalty.

ORDER

Based upon the Findings of Fact and Conclusions of Law, it is hereby:

ORDERED that a fine of $2,500 is imposed upon the Respondent, Video Gaming Consultants, Inc. and a fine of $500 is imposed upon the Respondent, Slots of Fun, Inc.

AND IT IS SO ORDERED.



___________________________

Ralph King Anderson, III

Administrative Law Judge




Columbia, South Carolina

March 26, 1997


Brown Bldg.

 

 

 

 

 

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