SC Administrative Law Court Decisions

By a preponderance of the evidence, I find:

1. Twin Peaks, a nightclub located at 409 Blossom Street, Columbia, South Carolina, houses two video gaming businesses owned and operated by the above named Respondents. The location is a mall-type structure including two video poker rooms and a common area containing tables and a stage area.
2. The two game rooms located at 409 Blossom Street, Columbia, South Carolina are named "Blossoms" and "Dan's Place." Each game room contained 5 Class III gaming machines.
3. Respondent Pillas Shumpert, Inc. is the owner and licensee of the five Class III video poker machines located in Blossoms and two of the Class III machines in Dan's Place.
4. Respondent F.F. Inc. is the owner and licensee of two of the Class III machines located in Dan's Place.
5. Respondent Fred McCary is the owner and licensee of one of the Class III machines located in Dan's Place.
6. Respondent Vista Investments, Inc. is the retailer for all ten (10) Class III machines located in Blossoms and Dan's Place.
7. On August 29, 1996, the Department's agent, William Byars, conducted an inspection of the Respondents' video gaming businesses.
8. Both game rooms, Blossoms and Dan's Place, were open for business at the date and time of inspection.
9. The inspection included walking into the common area and the open game rooms, listing the license numbers for machines located in the open game rooms, taking photographs of the location, examining the business licenses, retail tax licenses, and utility meters for the location, and talking to employees and the manager of the location.
10. The following video game machine licenses were affixed to machines located in the respective game rooms. The corresponding licensee/owner for each machine is noted parenthetically:

Blossoms Dan's Place

634166 (Pillas Shumpert, Inc.) 3810529 (Fred McCary)

634170 " 634172 (Pillas Shumpert, Inc.)

634167 " 634171 "

634169 " 3810490 (F.F. Inc.)

634168 " 3810491 "

1. At the time of inspection, Revenue Officer Byars entered the subject location and observed employees located in the common area.
2. At the time of the inspection, customers were present in both of the game rooms playing the machines.
3. At the time of the inspection, no employees were located on the premises of either of the game rooms.
4. Revenue Officer Byars also noted that the two game rooms were connected by a common doorway.
5. As a result of his inspection, Revenue Officer Byars issued a Regulatory Violation and Proposed Assessment Report, citing Respondents with an alleged violation of S.C. Code § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) for operation of more than five (5) machines in a single place or premise without an employee present in Blossoms and Dan's Place.
6. On July 2, 1997, Respondents noticed their intent to challenge the Department's citation by requesting a contested case hearing before this tribunal pursuant to ALJD Rule 11.
7. On July 15, 1997, Prehearing Statements were ordered to be filed and served by each party.
8. On July 23, 1997 Petitioner filed a Prehearing Statement alleging the above mentioned violations.
9. Respondents failed to file a Prehearing Statement, as ordered by this tribunal on July 15, 1997.
10. By my letter of August 27, 1997, Respondents were informed of their failure to comply and warned of the consequences of default under ALJD Rule 23 if they did not immediately file a Prehearing Statement.



11. As of the date of this Order, Respondents have not responded to this tribunal's Order for a Prehearing Statement or its subsequent letter.
12. Notice of the time, date, place and subject matter of the contested case hearing was sent to the Petitioner and the Respondents on September 12, 1997.
13. The hearing was scheduled for October 17, 1997, at 9:00 a.m. After allowing fifteen (15) minutes from the scheduled time of commencement, the hearing was conducted with Respondents in absentia.

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 S.C. Code Ann. § 12-4-30(D) (Supp. 1996) and S.C. Code Ann. § 1-23-320 (Supp. 1996).
2. The Video Game Machines Act ("Act") which regulates video game machine activity in South Carolina was enacted in 1993, became effective on July 1, 1993, and is codified at S.C. Code Ann. §§ 12-21-2770, et seq. (Supp. 1996). The purpose of the Act is 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. S.C. 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. S.C. Code Ann. § 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 (5) Class III machines at a single place or premises.
4. 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996), promulgated by DOR, clarifies the meaning of the phrase "single place or premises" as set forth in Section 12-21-2804(A). The regulation provides in relevant part (emphasis added):

A "single place" or "premises" means a structure surrounded by exterior walls or fire walls 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 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.

1. S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) expressly authorizes DOR to enforce the provisions of this section and also 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.
2. 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 who observes a witness is in the best position to judge the witness's demeanor and veracity and 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).
3. Respondents failed to have "one separate employee" in either Blossoms or Dan's Place during business hours, in violation of the requirement set forth in R. 117-190.
4. Failing to satisfy one requirement is a sufficient ground constituting a violation of the single place or premises requirements of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996).
5. Respondents violated S.C. Code Ann. § 12-21-2804 by operating video machines in two locations which fail to meet all requirements of the "single place or premises" criteria set forth in 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996).
6. S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) further provides: "No 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."
7. S.C. Code Ann. § 12-21-2804(F) (Supp. 1996) provides that a person who violates S.C. Code Ann. § 12-21-2804(A) is subject to a fine of up to $5,000.
8. ALJD Rule 23 permits the administrative law judge to dismiss a contested case adverse to the defaulting party. A default occurs "when a party fails to plead or otherwise prosecute or defend, fails to appear at a hearing without the proper consent of the judge or fails to comply with any interlocutory order of the administrative law judge."
9. Respondent's failure to (1) comply with my July 15, 1997 Order to file Prehearing Statements and (2) appear at the October 17, 1997 contested case hearing after receiving proper notice constitutes default.

ORDER

IT IS THEREFORE ORDERED that the following ten (10) video game machine licenses held by the following Respondents (noted parenthetically), located at 409 Blossom Street, Columbia, South Carolina are revoked:

Blossoms Dan's Place

634166 (Pillas Shumpert, Inc.) 3810529 (Fred McCary)

634170 " 634172 (Pillas Shumpert, Inc.)

634167 " 634171 "

634169 " 3810490 (F.F. Inc.)

634168 " 3810491 "

IT IS FURTHER ORDERED that no video game machine licenses shall be utilized at Respondents' place of business for a period of six (6) months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that Respondents F.F. Inc., Fred McCary, Pillas Shumpert, Inc., and Vista Investments, Inc. shall each pay a fine of $5,000 to the South Carolina Department of Revenue ($20,000 total fine).

AND IT IS SO ORDERED.

_____________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

November 17, 1997

Columbia, South Carolina