ORDERS:
FINAL DECISION
STATEMENT OF CASE
This matter comes before me upon request for a Hearing by the Respondents after being cited
for violating S.C. Code Ann. § 12-21-2804(A)(Supp. 1996). The South Carolina Department of
Revenue ("Department") contends that the Respondents operated more than five (5) video poker
machines in a "single place or premises." A Hearing was held before the Administrative Law Judge
Division on May 29, 1997.
I find the Respondents did not violate Section 12-21-2804(A).
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 evidence:
1. Notice of the time, date, place and subject matter of the Hearing was given to the Petitioner
and the Respondents.
2. The Department issued a Violation Report against Tim's Amusements Inc. charging the
Respondents with operating in violation of S.C. Code Regs. § 117-190 (Supp. 1996) by not having
"at least one separate employee on the premises during business hours."
3. The Department's agents conducted an inspection at Mardi Gras on June 13, 1996. The
Respondents' location was a mall-type arrangement housing three video game rooms - Chief's, RB's
and James' Place. Each room contained five (5) Class III video game machines. All three rooms
opened into a commons area. The Department contends that RB's was open without an employee
on the premises. The Respondents contend that this location was closed at the time of the inspection
and even if it was not, there was an employee in both Chief's and RB's. However, I do not find the
witnesses presented on behalf of the Respondents credible. On the other hand, the witness for the
Department could not completely remember specifics of the inspection . Therefore, the following
facts are limited.
4. At least four individuals were playing the Class III video games at the location during the
inspection. Those individuals were Art Burgess, King Richardson, an employee of Mr. Richardson,
and an unknown man. When the Department's agents arrived at the location the unknown man
entered the location ahead of them and proceeded to RB's. The Department's agents entered Chief's
first and stayed approximately three (3) minutes. Thereafter, they inspected RB's and found George,
an employee of King Richardson, and the unknown man playing the video poker machines. The
Respondents contend that Art Burgess was in RB's when the Department's agents arrived and left
that location to meet with the agents in Chief's.
5. This evidence establishes that the game rooms were open for business. However, the
evidence did not sufficiently establish that no employee was in RB's when the Department's agents
arrived at the location.
6. I find that the above facts fail to prove that the Respondents violated the Video Game
Machines Act by failing to have at least one separate employee on the premises during business
hours.
CONCLUSIONS OF LAW
Based upon the 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. Code Ann. § 1-23-320 (Supp. 1996).
2. The Department contends that the Respondents violated S.C. Code Ann. § 12-21-2804(A)(Supp. 1996). That section provides:
After July 1, 1994, the commission [Department] may not issue nor
authorize to be maintained any licenses or permits for more than five
machines authorized under Section 12-21-2720(A)(3) at a single
place or premises.
3. Machines licensed under Section 12-21-2720(A)(3) include video games with a free play
feature operated by a slot in which a coin or thing of value is deposited. S.C. Code Ann. § 12-21-2720 (Supp. 1996).
4. S.C. Code Ann. § 12-21-2804(A) (Supp.1996) states that the penalty for failing to comply
with the maximum number of machines in a "single place or premises" is the revocation of the
licenses of machines located in the establishment.
5. S.C. Code Ann. § 12-21-2804(F) (Supp. 1996) states that a person who violates Section 12-21-2804(A) may be fined up to Five Thousand ($5,000.00) Dollars.
6. The Video Game Machines Act ("Act") does not define the term "single place or premises."
7. The Department contends that the Respondents violated S.C. Code Ann. § 12-21-2804(A)(Supp. 1996). Section 2804(A) prohibits the operation of more than five video game
machines authorized under S.C. Code Ann. § 12-21-2720(A)(3) at a "single place or premises."
However, the Video Game Machines Act does not define the term "single place or premises." On
June 23, 1995, 27 S.C. Code Regs. 117-190 (Supp. 1996) became effective. It defines "single place
or premises" for purposes of interpreting the Video Game Machines Act, including Section 12-21-2804(A). It provides:
A "single place" or "premises" means a structure surrounded by
exterior walls or firewalls consistent with the requirements of the
applicable building code (or where no building code is applicable, a
one hour rated firewall), provided such exterior walls and fire walls
may not have any windows, doors or other openings leading to
another area where video game machines are located.
If a structure surrounded by exterior walls has two or more areas
where video game machines are located, each surrounded by exterior
walls or fire walls as defined and required above, the Department
must review all the facts and circumstances to determine if each area
in reality constitutes a single place or premise for video game
machines. In determining whether each entity is in fact a single place
or premises, the Department of Revenue will consider the following
factors: (1) Does each entity or business have a separate electric
utility meter? (2) Does each entity or business have at least one
separate employee on the premises during business hours? (3) Does
each entity or business have a separate local business license where
required? (4) Does each entity or business have separate sales tax
licenses? A positive answer to these four questions is required for
each area to be considered a "single place or premise" for purposes
of the Video Game Machines Act.
8. The Department contends that the Respondents violated Regulation 117-190 by failing to
maintain an employee in each business. The Department asserts that if an employee is not within
the four walls of the business at the time of an inspection, the business is not a "single place or
premises" as defined in Regulation 117-190. Therefore, the Department insists that the mere absence
of an employee from the business constitutes conclusive proof that the owner violated the statute.
The Respondents contend that the Department's interpretation of "premises" is "so rigid,
narrow, impractical and nonsensical that it furthers neither the literal interpretation nor the presumed
intent of the legislature." To the contrary, the Department argues that this criterion is necessary to
curtail casino type operations in South Carolina. However, the Department cannot curtail such
operations by violating the Respondents' due process rights or by applying fundamentally flawed
reasoning. Furthermore, the Department's approval of multiple video game businesses under one
roof created the very quagmire they seek to rectify by requiring that an employee remain within the
four walls of each game room at all times.
In order to meet constitutional due process standards, a statute and therefore a regulation
must give sufficient notice to enable a reasonable person to comprehend what is prohibited. State
v. Crenshaw, 274 S.C. 475, 266 S.E.2d 61, cert. denied, 449 U.S. 883, 101 S. Ct. 236, 66 L. Ed. 2d
108 (1980); Toussaint v. State Board of Medical Examiners, 303 S.C. 316, 400 S.E.2d 488 (1991)
(the constitutional standard for vagueness is the practical criterion of fair notice to those to whom
the law applies). Furthermore, penal statutes must be strictly construed against the state in favor of
the citizen. Feldman v. S.C. Tax Commission, 203 S.C. 49, 26 S.E.2d 22 (1943). In that regard,
Regulation 117-190 does not specifically state that, if an employee is not on the premises at all times,
then a violation is presumed.
The Department's interpretation that an employee must physically remain within the four
walls of each video game room at all times is based upon the presumption that all businesses
maintain employees on the premises at all times; otherwise, the business is closed.(1) Therefore, the
Respondent's business should have been closed, as each game room did not have an employee on
the premises. Pursuant to that conclusion, the Department applies an irrebuttable or conclusive
presumption that once the Department shows that an employee is not on the premises, that business
does not qualify as a single place or premise.
Application of the proposition that the businesses should be closed whenever an employee
leaves the premises creates a bright line standard to follow in future cases. A bright line test certainly
creates both clarity and a straightforward method of dealing with this issue. However, if the bright
line standard is not clearly supported by unassailable facts it becomes a standard of convenience that
is simply not supported by due process. "This court has no legislative powers. In the interpretation
of statutes our sole function is to determine and, within constitutional limits, give effect to the
intention of the legislature. We must do this based upon the words of the statutes themselves. To
do otherwise is to legislate, not interpret. The responsibility for the justice or wisdom of legislation
rests exclusively with the legislature, whether or not we agree with the laws it enacts." Busby v. State
Farm Mut. Auto. Ins. Co., 280 S.C. 330, 312 S.E.2d 716 (S.C. App. 1984).
To declare the existence of a presumption of fact, the court must determine that "the result
presumed must be one which a reasonable person would draw from certain facts which have been
proven to him. Its basis is logic [sic], its source is probability, and it rests on the observed
connection between facts." Lawrence v. Southern Ry., 169 S.C. 1, 167 S.E. 839 (1933). I do not find
support in the general knowledge of how businesses are conducted that all businesses, especially
those in a "mall type" setting, close every time an employee steps out of the business. It is
foreseeable that an employee of a business in a mall setting could step out of the business
momentarily to service a customer's needs or for some business or personal reason.
If the Department's evidence shows that no employee was working within the four walls of
the Respondent's businesses, the Department has established a prima facie case or a rebuttable
presumption that the business is not a "single place or premises." The rebuttable presumption is
supported by the general knowledge that businesses do not operate for any extended period of time
without their employees present. Additionally, an employee's role and on-the-job conduct is within
the Respondent's control. Therefore, once the Department establishes a prima facie case, the burden
shifts to the Respondent to produce evidence that the business actually had a separate employee
specifically assigned to that business. See, Stanley Smith & Sons v. D.M.R., Inc., 307 S.C. 413, 415
S.E.2d 428 (Ct. App. 1992). Furthermore, the Respondent must demonstrate that the employee's
absence from the game room was of short duration and reasonable under the circumstances. A
violation of Reg. 117-190 will still occur whenever an employee is absent from the premises for a
prolonged period of time, or the reasons for the absence does not involve a reasonable business or
personal need. Such determinations will depend greatly on the specific factual circumstances, and
must be evaluated on a case-by-case basis.
ORDER
Based upon the Findings of Fact and Conclusions of Law, it is hereby:
ORDERED that the Respondents did not violate S.C. Code Ann. § 12-21-2804(A) (Supp.
1996) and that the violations issued against the Respondents are hereby dismissed.
AND IT IS SO ORDERED.
___________________________
Ralph King Anderson, III
Administrative Law Judge
Columbia, South Carolina
August 7, 1997
1. If the Department's reasoning is not based upon the premise that all businesses maintain employees on
the premises at all times, otherwise the business is closed, then their reasoning is flawed. If all businesses do not
close when an employee leaves the premises, their conclusion is based upon the premise that some or most
businesses maintain employees on the premises at all times, otherwise the business is closed. Creation of an
irrebuttable presumption based upon historical facts that sustain the presumption only under some, but not all of
the possible circumstances would be fundamentally unfair. |