SC Administrative Law Court Decisions

This matter comes before me upon Respondents' request for a contested case hearing after being cited by the South Carolina Department of Revenue (DOR) for administrative violations of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) of the Video Game Machines Act and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996). The primary issue for determination is whether the Respondents failed to have "at least one separate employee on the premises during business hours" in four video game rooms. DOR contends that the four game rooms were each open and operational without an employee present as required by law. Respondents challenge the validity of Regulation 117-190 and of the relief requested, and dispute DOR's interpretation of the statute and regulation.

A contested case hearing in this matter was held in Columbia, South Carolina on October 2, 1997. Based upon the relevant and probative evidence and the applicable law, I find Respondents violated Regulation 117-190 and S.C. Code § 12-21-2804. Accordingly, the nineteen machine licenses in the subject rooms are hereby revoked. No Class III machines shall be operated at the location at 40 B Palmetto Parkway, Hilton Head Island, for a period of six months. Fines of $5,000 against Coastal Coin, Inc., of $5,000 against Mid-South, Inc. and of $5,000 against Video Gaming Consultants, Inc. are hereby imposed.

By a preponderance of the evidence, I find:

1. A video gaming business in a mall-type structure containing four video-gaming rooms and a common area operates at 40 B Palmetto Parkway, Hilton Head Island, South Carolina.
2. Gateway Enterprises, Inc. is the licensee of the nineteen Class III video game machines located in the four rooms at 40 B Palmetto Parkway, Hilton Head Island.
3. Coastal Coin, Inc. serves as retail operator for Room 1, which houses five Class III machines.
4. Mid-South, Inc. operates Room 2 (d/b/a Monte Carlo), which has four machines, and Room 4 (d/b/a Jackpot Video Games), which has five machines.
5. Video Gaming Consultants, Inc. operates the five machines in Room 3.
6. Gateway had no management role in operation of rooms, but only leased machines to the operators.
7. Revenue Officer J. Bruce Owens inspected the video-gaming businesses at 40 B Palmetto Parkway at 2 p.m. on June 13, 1996.
8. The main entrance to 40 B Palmetto Parkway opens into a common area, which contains a payout counter and a lounge.
9. All four rooms at 40 B Palmetto Parkway were open for business at time of the inspection.
10. Revenue Officer Owens questioned persons in the game rooms to determine if any were employees.
11. At the time of the inspection, Room 1 (Coastal Coin, Inc.) contained two people, neither of which were employees.
12. At the time of the inspection, Room 2 (Mid-South, Inc. d/b/a Monte Carlo) contained one person, who was not an employee.
13. At the time of the inspection, the door to Room 3 (Video Gaming Consultants, Inc.) was closed, and it did not contain any people; however, the room had no sign to indicate it was "closed," the door was not locked, and lights were on in the room, which could be seen through the door window.
14. At the time of the inspection, Room 4 (Mid-South, Inc. d/b/a Jackpot Video Games) contained one person, who was not an employee.
15. The following video game machine licenses were affixed to machines located in the respective game rooms:

Room 1 Room 2 Room 3 Room 4

3805617 3805611 036306 036304

3805618 3805612 036307 036305

3805619 3805613 036308 036311

3805620 3805614 036309 036315

3805610 036310 036316

1. The inspection occurred at about the normal time for the daily opening of business.
2. Revenue Officer Owens provided a manager, Betty Paul, with a Regulatory Violation and Proposed Assessment Report resulting from the inspection of June 13, 1996.
3. Notice of the time, date, place and subject matter of the hearing was given to the Petitioner and Respondents.

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 and decide this matter pursuant to the state Administrative Procedures Act (APA), S.C. Code Ann. §§ 1-23-310 et seq. (1976 & Supp. 1996), S.C. Code § 12-4-30(D), and §§ 12-60-1310 to -1350 of the South Carolina Revenue Procedures Act.
2. The Video Game Machines Act, S.C. Code Ann. §§ 12-21-2770, et seq. (Supp. 1996), became effective on July 1, 1993 to regulate the video game machines industry and to prevent large-scale casino type gambling operations in the State of South Carolina. See Reyelt v. South Carolina Tax Comm'n, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993); see also 1994 Op. S.C. Att'y Gen. 21.
3. Video Game Machines Act § 12-21-2804(A) prohibits a person from applying for, receiving, maintaining, or permitting to be used permits for the operation of more than five Class III machines at a single place or premises.
4. DOR regulations clarify the meaning of "single place or premises" (for purposes of the Video Games Machines Act):

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 a separate state sales tax license?

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.

27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) (emphasis added).

1. Words used in a statute should be given their ordinary and popular meaning, unless there is something in the statute which requires a different interpretation. Hughes v. Edwards, 265 S.C. 529, 220 S.E.2d 231 (1975).
2. The language of S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) is not unconstitutionally vague or violative of due process. "The constitutional standard for vagueness is the practical criterion of fair notice to those to whom the law applies." Huber v. South Carolina State Bd. of Physical Therapy Examiners, 316 S.C. 24, 446 S.E.2d 433 (1994) (reh'g denied July 28, 1994); Toussaint v. State Bd. of Med. Examiners, 303 S.C. 316, 400 S.E.2d 488 (1991).
3. The phrase "on the premises" is unambiguous and does not merely mean having the same number of employees as the number of rooms.
4. Section 12-21-2804(A) (Supp. 1996) provides that the penalty for exceeding the maximum number of video game machines permitted in a single place or premises requires the revocation of the licenses of machines located in the establishment.
5. The trier of fact must weigh and pass upon the credibility of evidence presented. See S.C. Cable Television Ass'n v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992). The trial judge is in the best position to weigh witnesses's demeanor and veracity and to evaluate their testimony. See Mann v. Walker, 285 S.C. 194, 328 S.E.2d (Ct. App. 1985); Marshall v. Marshall, 282 S.C. 534, 320 S.E.2d 44 (Ct. App. 1984); McAlister v. Patterson, 278 S.C. 481, 299 S.E.2d 322 (1982); Peay v. Peay, 260 S.C. 108, 194 S.E.2d 392 (1973).
6. Respondents Coastal Coin, Inc., Mid-South, Inc. and Video Gaming Consultants, Inc. failed to have "one separate employee" within their respective businesses at 40 B Palmetto Parkway, in violation of Regulation 117-190.
7. Section 12-21-2804(F) (Supp. 1996) provides that a person who violates § 12-21-2804(A) is subject to a fine of up to $5,000.
8. Under Section 12-21-2804(A), a license on a video poker machine must be revoked by virtue of its misuse under the Act, regardless if the actual violator is the retail licensee, machine owner, or lessee. A monetary fine under § 12-21-2804(F), however, must only be imposed upon those persons directly involved in the management or operation of the location in violation of Section 12-21-2804(A).
9. Respondents Coastal Coin, Inc., Mid-South, Inc. and Video Gaming Consultants, Inc. the retail operators, violated S.C. Code Ann. § 12-21-2804 by operating video machines in locations failing to meet all requirements of the "single place or premises" criteria set forth in Regulation 117-190.
10. Because Gateway Enterprises, inc., was merely the owner/licensee of the machines in question, but exercised no control or management of the subject game rooms being operated by the retailers, Gateway should not be assessed a monetary penalty for the failure to maintain a separate employee for each game room under the provisions of S.C. Code Ann. §§ 12-21-2804(A) and 12-21-2804(F).
11. Section 12-21-2804(A) further provides that "[n]o license may be issued for a machine in an establishment in which a license has been revoked for a period of six months from the date of revocation."
12. Pursuant to ALJD Rule 29(B), any issues or motions raised at the hearing but not addressed in this Order are deemed denied.

ORDER

IT IS THEREFORE ORDERED that the following Class III video game machine licenses held by Respondent Gateway Enterprises, Inc. and located at 40 B Palmetto Parkway, Hilton Head Island, are revoked:

Room 1 Room 2 Room 3 Room 4

3805617 3805611 036306 036304

3805618 3805612 036307 036305

3805619 3805613 036308 036311

3805620 3805614 036309 036315

3805610 036310 036316

IT IS FURTHER ORDERED that no video game machine licenses shall be utilized at 40 B Palmetto Parkway, Hilton Head Island, for a period of six months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that Respondents Coastal Coin, Inc., Mid-South, Inc. and Video Gaming Consultants, Inc. shall each pay a fine of $5,000, respectively, to the South Carolina Department of Revenue.

AND IT IS SO ORDERED.

_____________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

This the _____ day of November, 1997

Columbia, South Carolina