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 (hereinafter referred to as "DOR") for alleged 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) at

2 Heritage Plaza, Pope Avenue, Hilton Head, South Carolina. The primary issue for determination is whether Respondents violated R. 117-190 and S.C. Code § 12-21-2804 by not having "at least one separate employee on the premises during business hours." A contested case hearing in this matter was held in Columbia, South Carolina, on January 7, 1998. Based upon the relevant and probative evidence and the applicable law, I find the retail operators violated R. 117-190 and S.C. Code § 12-21-2804. Accordingly, the ten machine licenses in the subject rooms are revoked, and no Class III machines shall be operated in the subject rooms at the location for a period of six (6) months. Respondent Timothy Hayes is ordered to pay a fine of Four Thousand Dollars ($4,000). Respondent Video Games, Inc. is ordered to pay a fine of Four Thousand Dollars ($4,000).

DISCUSSION

The material facts are not in controversy in this case. Respondents admit that no employees were in either of the two subject game rooms at the time of the inspection of the premises, but argue that an employee need not remain within the physical four walls of a game room at all times to be in compliance with the law. Two employees in the common area, one on the telephone and the other tending bar, were assigned to the respective game rooms. Respondents claim that to require an employee to be physically present in a game room is an overbroad and expanded interpretation of R. 117-190. Rather, Respondents submit that if an employee is located outside of the game room, but in close enough proximity to serve the needs of the customers in that game room, the employee meets the "at least one separate employee on the premises during business hours" legal requirement.

I have consistently applied a bright line test in "single place or premises" cases in which the issue is the presence of an employee. The language of the regulation imposes a requirement of having a "separate employee on the premises." The language is not ambiguous and must be taken in its literal and ordinary meaning. Lail v. Richland Wrecking Company, Inc., 280 S.C. 532, 313 S.E.2d 342 (Ct. App. 1984). To employ the rules of statutory construction to find that "on the premises" allows an employee to be "away from the premises" violates the principle that the rules of statutory construction are provided to remove doubt, never to create doubt. See 73 Am. Jur. 2d Statutes § 146, citing Englewood Water Dist. v. Tate, 334 So.2d 626 (Fla. App. 1976).

Section 12-21-2804(A) prohibits the operation of more than five Class III video game machines at a single place or premises. DOR promulgated R. 117-190 to clarify the statutory requirements of § 12-21-2804(A) and to assist in its implementation. Regulation 117-190 merely sets forth a four-prong test to determine whether a particular business location is a "single place or premises" and provides that for a location to be considered a "single place or premise" for purposes of the Video Game Machines Act, it must have: (1) a separate electric utility meter; (2) at least one separate employee on the premises during business hours; (3) a separate local business license where required; and (4) a separate State sales tax license.

In this case, where at least two interior rooms which contain video game, each room is a separate "video game area" under R. 117-190. A video game room fails to be a "single place or premises" at which Class III machines may be legally operated if the room does not have an employee physically within the four walls of the game room. An employee cannot be on the premises of an identified space if the employee is physically elsewhere. Accordingly, once the employee physically leaves the space of the video game area, the employee is no longer "on the premises."

A court must not seek ways to rewrite statutes or regulations. To depart from the plainly expressed meaning causes the tribunal to legislate rather than interpret since "the wisdom of legislation rests with the Legislature, and it is the province of the Courts to construe, not to make, the laws . . . @ Creech v. South Carolina Pub. Serv. Auth., 200 S.C. 127, 146, 20 S.E.2d 645, 652 (1942). In short, an ALJ cannot add conditions to the "on the premises" language of the regulation trying to provide exceptions that seek to improve upon what the General Assembly has plainly promulgated. 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) is a valid regulation that neither expands nor adds to the statute.

The purpose of the regulation is to provide a high degree of certainty to defining a separate place or premises. The very reason for the promulgation is that no statutory definition was provided. In accordance with the purpose sought, the regulation adopts site specific criteria. Indeed, the regulation counts walls, limits openings in the walls, prevents access from one area to another, and even details the type of walls that can be used. Given the regulations's site specific analysis, the most consistent view is that the plain language of "on the premises" limits the employee to the physical space of the four walls. On the contrary, inconsistency with the regulation results if "on the premises" requires examining whether the employee's line of sight covers more than one area or whether the reason the employee is away is a proper reason. In short, the regulation is site specific and requires that "on the premises" be within the four walls of the area under review.

Respondents contend that if a violation did occur, the maximum $5,000.00 penalty which may be imposed is an aggregate monetary fine limitation for the single violation, rather than the maximum penalty which may be assessed against each party involved in a single violation. That argument is not persuasive. S.C. Code Ann. § 12-21-2804(F) (Supp. 1997) provides: "A person violating subsections (A), (B), (D), or (E) of this section is subject to a fine of up to five thousand dollars to be imposed . . . .". Clearly, the fine is directed at each person in violation. Just as in criminal law, where multiple defendants involved in a single incident face separate charges and sentences, multiple parties involved in the operation of a video gaming location are subject to separate penalties as individuals.

Respondents also argue that if the violations did occur, the machine licenses must not and cannot be revoked because all of the licenses have now expired. DOR asserts that the licenses were valid at the time the violation occurred and that a penalty for a violation attaches not at the time of the contested case hearing, but at the time of the occurrence of the violation. Further, DOR maintains that revocation is an integral part of the penalty imposed, as it is a necessary step leading to the six-month ban of video game machine license use on those premises. Section 12-21-2804(A)(Supp. 1997) provides that DOR "shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section." (Emphasis added). The use of the word "shall" indicates a mandatory imposition of the penalty. There is no room for statutory construction when the legislature uses such definitive terms. Revocation of expired licenses is permissible. If Respondents' argument was allowed to prevail, then machine operators whose licenses expired before a decision in a pending matter would enjoy a windfall. It would also encourage the delay of adjudications on these matters. Such a ruling would be contrary to judicial efficiency and to the spirit and intent of the statute and regulation.

Respondents also seek a stay of any penalty which may be imposed by this tribunal. Under the Administrative Procedures Act, the filing of a petition for judicial review of a final order of an administrative law judge does not stay the enforcement of the administrative decision, but the administrative law judge or the reviewing court may grant a discretionary stay upon appropriate terms. See ALJD Rule 29(D); See also Thompson v. Watts, 278 S.C. 230, 294 S.E.2d 245 (1982). Respondents failed to offer compelling reasons for a stay of the administrative decision rendered in this matter. The potential loss of income alleged by Respondents during the pendency of an appeal of this final order does not outweigh the public

harm of inconsistent and ineffective enforcement of the Video Game Machines Act and related regulations.

Respondents also assert the statute is penal in nature rather than remedial. A statute is penal if it punishes and remedial where it encourages compliance. This statute is not criminal, but rather seeks to regulate an industry by ensuring compliance with the rules and regulations governing the industry through sanctions. Section 12-21-2804(F) contemplates this distinction between criminal and civil penalties by allowing for a referral to the Attorney General for criminal prosecution if the individual case warrants.

I make the following Findings of Fact by a preponderance of the evidence:

On June 13, 1996, Respondents operated a video gaming business at 2 Heritage Plaza, Pope Avenue, Hilton Head, South Carolina that consisted of a mall-type structure with three video game rooms.

At approximately 2:00 p.m. on June 13, 1996, Revenue Officers Linda Thurman and Marlene Kinney conducted an inspection of the location.

The inspection included examining each of the open game rooms, taking photographs of the location, examining the business and sales tax licenses for the game rooms, listing the owner information and license numbers for each of the machines in the game rooms, drawing a diagram of the location's floor plan, and determining the number and location of any employees for the open game rooms.

Three game rooms were open for business with Class III machines available for play by customers.

Games rooms "A" and "B," The Arcade and Full House Games, each contained five Class III video game machines.

Neither The Arcade nor Full House Games had an employee present on the premises at the time of inspection.

The third room, game room "C", contained four Class III video game machines, and at the time of inspection had one employee and one patron on the premises.

At the time of the inspection, the employee assigned to The Arcade was using the telephone in the common area.

At the time of the inspection, the employee assigned Full House Games was tending bar in the common area.

A single customer was present at the bar in the common area.

No customers were in either Full House Games or The Arcade.

Before leaving the location, Revenue Officers Thurman and Kinney completed a violation report and left a copy with an employee at the location.

Approximately thirty to forty minutes after leaving the location, the revenue officers returned to the location to redo their floor plan sketch and to issue the correct copy of the violation report.

Upon the return visit, Full House Games and The Arcade were still open and operating without employees on the premises.

The following Class III video game machine licenses were affixed to Class III video game machines located at Full House Games: 026154, 026156, 026157, 026315, 026298.

The following Class III video game machine licenses were affixed to Class III video game machines located at The Arcade: 026299, 026160, 026304, 026152, 026302.

Video Arcade, Inc. holds the business retail license for Full House Games.

Timothy Hayes holds the business retail license for The Arcade.

Timothy Hayes and Video Arcade, Inc. were in control of the management and operations and held supervisory authority of the two game rooms.

The machine licenses owner is Brothers Amusement, Inc.

No evidence was offered to indicate that licensee Brothers Amusement, Inc. had any management, control, or supervisory authority over either of the game rooms.

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

The Administrative Law Judge Division has jurisdiction to hear and decide this matter pursuant to the Administrative Procedures Act (APA), S.C. Code Ann. §§ 1-23-310 et seq. (1986 & Supp. 1996), S.C. Code § 12-4-30(D), and §§ 12-60-1310 through 12-60-1350 of the South Carolina Revenue Procedures Act (RPA).

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.

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).

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).

Within statutory limits, the amount of a fine is a matter of trial-court discretion. State v. Sheppard, 54 S.C. 178, 32 S.E. 146 (1899). An administrative law judge, as fact finder, has the prerogative "to impose an appropriate penalty based on the facts presented." Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 211, 407 S.E.2d 633, 634 (1991).

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' demeanor and veracity and to evaluate their testimony. See 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); 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).

Respondent Timothy Hayes failed to have "one separate employee" within The Arcade, in violation of R. 117-190.

Respondent Video Arcade, Inc. failed to have "one separate employee" within Full House Games, in violation of R. 117-190.

1. Respondent Timothy Hayes violated S.C. Code Ann. § 12-21-2804 by operating Class III video machines in locations failing to meet all requirements of the "single place or premises" criteria set forth in R. 117-190.

1. Respondent Video Arcade, Inc. violated S.C. Code Ann. § 12-21-2804 by operating Class III video machines in locations failing to meet all requirements of the "single place or premises" criteria set forth in R. 117-190.
2. If a statute's language is plain and unambiguous, and conveys a 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. Paschal v. State Election Comm'n, 454 S.E.2d 890, 317 S.C. 434 (1995); see Miller v. Doe, 312 S.C. 444, 441 S.E.2d 319 (1994).

1. Where the terms of the statute are clear, the court must apply those terms according to their literal meaning. Paschal v. State Election Comm'n, 454 S.E.2d 890, 317 S.C. 434 (1995); see Adkins v. Varn, 312 S.C. 188, 439 S.E.2d 822 (1993).

1. A court cannot construe a statute without regard to its plain and ordinary meaning, and may not resort to subtle or forced construction in an attempt to limit or expand a statute's scope. Paschal v. State Election Comm'n, 454 S.E.2d 890, 317 S.C. 434 (1995); see Berkebile v. Outen, 311 S.C. 50, 426 S.E.2d 760 (1993).

Section 12-21-2804(F) provides that only those persons directly involved in the management or operation of a location in violation of § 12-21-2804(A) are subject to monetary fines.

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.

Because Brothers Amusement, Inc. was merely the licensee of the machines in question and exercised no control or management of the subject game rooms or their employees operated by the retailers, Brothers Amusement 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).

The statute clearly states that a "person violating subsections . . . of this section is subject to a fine . . . ." S.C. Code Ann. § 12-21-2804(F) (Supp. 1996).

Each individual person or entity found in violation of the statute is subject to the monetary penalty for each individual violation.

Section 12-21-2804(A) also 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."

Revocation of the licenses is proper because the statute clearly states that the license "shall" be revoked. S.C. Code Ann. § 12-21-2804(A) (Supp. 1996).

Subsequent expiration of video machine licenses does not render the revocation a moot point because the licenses were valid at the time the violation occurred.

The granting of a stay of execution of a judgment is discretionary. Thompson v. Watts, 278 S.C. 230, 294 S.E.2d 245 (1982).

Loss from sanctions of state law violations is insufficient to warrant a stay of administrative penalties. See DOR v. Fountain of Luck, 97-ALJ-17-0324-CC (Jan. 26, 1998); cf. Mickey Stacks v. South Carolina Dep't of Revenue and Taxation, Court of Common Pleas, County of Richland, 96-CP-40-889 (June 24, 1996).

A statute that provides sanctions to further the goals of the government and public policy in promoting compliance with existing laws and regulations is remedial in nature. Cf. State v. Thrift, 312 S.C. 282, 440 S.E.2d 341 (1994); State v. Blick, 481 S.E.2d 452 (S.C. Ct. App. 1997) (administrative disciplinary action encouraging good behavior and rules compliance remedial in nature).

In the present case, a monetary penalty of $4,000 imposed upon each of the retail operators Timothy Hayes and Video Arcade, Inc. for violation of the "single place or premisses" provision is appropriate and reasonable.

Pursuant to ALJD Rule 29(B), any issues or motions raised at the hearing but not addressed in this Order are deemed denied.

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

ORDERED, that the ten (10) video game machine licenses (License Numbers 026154, 026156, 026157, 026315, 026298, 026299, 026160, 026304, 026152, 026302) located in the game rooms Full House Games and The Arcade at 2 Heritage Plaza, Pope Avenue, Hilton Head, South Carolina, are revoked.

IT IS FURTHER ORDERED that no Class III machines shall be operated in Full House Games and The Arcade, at 2 Heritage Plaza, Pope Avenue, Hilton Head, South Carolina, for a period of six (6) months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that the retailers, Timothy Hayes and Video Arcade, Inc. shall each pay a fine to the South Carolina Department of Revenue in the amount of Four Thousand Dollars ($4,000) no later than fifteen (15) days from the date of this Order for violation of the "single place or premises" statute and regulation.

AND IT IS SO ORDERED.

__________________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

April 10, 1998

Columbia, South Carolina