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. Stephen Lipscomb, d/b/a American Amusement and Greg D. Travis, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Stephen Lipscomb, d/b/a American Amusement and Greg D. Travis, 3799 White Horse Road, Greenville, S.C.
 
DOCKET NUMBER:
97-ALJ-17-0750-CC

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

For Respondent Stephen Lipscomb: Zoe Sanders Nettles, Esquire

For Respondent Greg Travis: Mark Hardee, Esquire
 

ORDERS:

FINAL ORDER AND DECISION

STATEMENT OF THE CASE

This matter comes before me for a hearing pursuant to S.C. Code Ann. §§ 1-23-310, et seq. (Supp. 1997) and S.C. Code Ann. § 12-4-30(D) (Supp. 1997) for alleged administrative violations. Petitioner alleges that on January 23, 1997, Respondents violated S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) and 27 S.C. Code Regs. 117-190 (Supp. 1997) by permitting licenses to be used for the operation of more than five (5) Class III video game machines at a single place or premise. The Department of Revenue alleges the business "Jokers," located at 3799A White Horse Road, Greenville, South Carolina, and within the business, G.T.'s Express Mart, failed to have a separate employee during business hours, in violation of 27 S.C. Code Regs. 117-190. Initially, the Department alleged violations against two other businesses, "The Gold Rush" and "Aladdins," also located within the G.T.'s Express Mart. At the hearing the Department dismissed the alleged violations against Aladdins and the Gold Rush and stipulated that it was only asserting that Jokers had failed to comply with S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) and 27 S.C. Code Regs. 117-190 (Supp. 1997). Therefore, the alleged violations against Aladdins and the Gold Rush are dismissed with prejudice by the stipulation of the parties and are not discussed herein.

Petitioner seeks a $10,000 fine for the alleged violations of S.C. Code Ann. § 12-21-2804(A) (Supp. 1995), revocation of the four (4) video game machine licenses located at the business Jokers, 3799A White Horse Road, Greenville, South Carolina, and preclusion of the issuance of video game machine licenses at the location for six (6) months from the date of license revocation. Respondents assert that no violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) and 27 S.C. Code Regs. 117-190 (Supp. 1997) occurred at Jokers because there was a separate employee within Jokers during business hours and at the time of the alleged violation. Respondents further assert that the $10,000 fine sought by the Department for the alleged violation is excessive and that, even if a violation occurred, §12-21-2804(A) does not authorize revocation of video poker machine licenses. Respondents assert that the statute and regulation at issue are penal and must be strictly construed in favor of Respondents. Respondents further challenged the validity of that portion of § 12-21-2804(A) which permits revocation of licenses, arguing that it is unconstitutionally vague. Respondent Steve Lipscomb, d/b/a American Amusement ("American Amusement"), further asserts alternatively that even if a violation occurred, which is denied, § 12-21-2804 does not authorize American Amusement, as the machine and license owner, to be penalized for a violation of the employee requirement when American Amusement had no control over the employees hired by the location owner, and when American Amusement had no intent to violate the employee requirement but had taken all possible measures within its control to make sure the location complied with the law. American Amusement asserts that if it is determined that more than five licenses were permitted to be used in violation of § 12-21-2804(A), it is the location owner only that permitted such improper use and the location owner only that § 12-21-2804 allows to be penalized.

After notice to all parties, a hearing was held at the Administrative Law Judge Division, 1205 Pendleton Street, Columbia, South Carolina. The issues before this tribunal are (1) whether Respondents violated S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) and S.C. Code Regs. 117-190 by failing to have an employee on the premises; (2) if so, what is the proper penalty for such violation; and (3) whether a Class III machine and license owner who places Class III machines in a business, but has no control over the hiring of employees in the subject business may be penalized for a violation by the business of the employee requirement.

Based upon the following Findings of Fact and Conclusions of Law, this tribunal concludes that no violation of S.C. Code Ann § 12-21-2804(A) (Supp. 1997) occurred, as an employee was present at Jokers during business hours and at the time of the alleged violation.

FINDINGS OF FACT

Having carefully considered all testimony and arguments presented at the hearing of this matter, and taking into account the credibility and accuracy of the evidence, I make the following Findings of Fact by a preponderance of the evidence:

1. This Division has personal and subject matter jurisdiction.

2. Notice of the date, time and nature of the hearing was timely given to all parties.

3. On January 23, 1997, the video game machine business Jokers was owned and operated by Greg Travis.

4. Jokers is located at 3799A White Horse Road, Greenville, South Carolina.

5. Jokers is located within the business G.T.'s Express Mart, which is owned by Greg Travis.

6. G.T.'s Express Mart is a convenience store.

7. The only video game machine business at issue in this case is Jokers.

8. American Amusement, which is owned by Steve Lipscomb, owns the Class III video game machines and licenses on the machines located in Jokers.

9. American Amusement and Greg Travis entered into a contract whereby American Amusement and Greg Travis agreed that American Amusement would have the exclusive right for five years to place all coin operated amusement equipment upon the premises located at 3799A White Horse Road, Greenville, South Carolina. In consideration for permitting American Amusement to place machines at G.T.'s Express Mart, the profits from the machines were divided 50% to Greg Travis and 50% to American Amusement.

10. Pursuant to the contract between Greg Travis and American Amusement, American Amusement placed video game machines at G.T.'s Express Mart, which included the placement of four video poker machines in Jokers.

11. American Amusement did not manage, operate or maintain Jokers. American Amusement maintained the machines, retrieved money from the machines and received a percentage of the profits generated by its machines. American Amusement did not have the authority to hire, fire or schedule employees to work in Jokers.

12. In the contract between American Amusement and Greg Travis, Greg Travis agreed to comply with all laws governing the operation of video game machines.

13. On January 23, 1997 SLED agents B. A. Asbill, A. D. Jackson and S. Tindal conducted an inspection of G.T.'s Express Mart and the business Jokers located at 3799A White Horse Road, Greenville, South Carolina.

14. As a result of the inspection, the Department issued a citation against Respondent Greg Travis and a citation against American Amusement. The Respondents protested the violation. The Department denied the protest. Respondents sought a hearing before the Administrative Law Judge Division.

15. The Department seeks a $5,000 fine from each Respondent for the alleged violation of S.C. Code Ann. 12-21-2804(A) (Supp. 1997), revocation of four video game machine licenses located at Jokers at 3799A White Horse Road, Greenville, South Carolina, and preclusion of the issuance of video game licenses at Jokers for six months from the date of the license revocation.

16. At the time of the inspection, the facts relating to the single place and premise requirements of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) in S.C. Code Regs. 117-190 were as follows:

a. Jokers was open for business at the time of the inspection.

b. At the time of the inspection, there was one employee, Garland Travis, working on the premises of Jokers.

c. Mr. Garland Travis at the time of the inspection had "signed in" as an employee to work at Jokers at the time of the inspection.

d. SLED Agent Jackson photographed Garland Travis at the time of the inspection.

e. As an employee for Jokers during the time of the inspection, Garland Travis assisted various players who were playing the machines in Jokers by getting them change. Further, Mr. Garland Travis, as an employee of Jokers during the time of inspection, was not playing the machines, but sat on a stool and watched the various players play the machines and assisted them in various ways including giving change.

17. During the inspection, SLED Agent Asbill asked the G.T.'s Express Mart store clerk, Debbie Durham, whether Garland Travis was the employee for Jokers. Debbie Durham stated to Agent Asbill that Garland Travis was not the employee working in Jokers.

18. At the time of the inspection, Debbie Durham had only been employed by Greg Travis at G.T.'s Express Mart for a short period, approximately a month, and was the store clerk for G.T.'s Express Mart.

19. SLED Agent Asbill saw Mr. Garland Travis in the business Jokers at the time of the inspection.

20. The reason SLED Agent Asbill decided a violation occurred at Jokers was because Debbie Durham stated that Garland Travis was not the employee working in Jokers. Debbie Durham told Agent Asbill that Billy Travis, who was sweeping up and emptying the trash, going in and out of the location at the time of the inspection, was the attendant for Jokers.

21. SLED Agent Jackson was also present at the time of the inspection. Agent Jackson saw Garland Travis in the location Jokers. SLED Agent Jackson also photographed Garland Travis during the inspection. However, no photographs were ever produced by the Department.

22. At the time of the inspection, Garland Travis was an employee of Jokers and was working at Jokers at the time of the inspection. Garland Travis was paid for his work as an employee of Jokers at the time of the inspection, and he had "signed in" on the employee "sign in sheet" to work

in Jokers the night of the inspection. Garland Travis testified that Agent Jackson took Garland Travis' picture while Garland Travis was working at Jokers during the time of the inspection.

23. Greg Travis testified that he employed Garland Travis to work at Jokers at the time of the inspection and employed him often to work as an employee for his video poker businesses. 24. Greg Travis testified that at the time of the investigation he had been employing Debbie Durham as store clerk for G.T.'s Express Mart for approximately a month, and that she was mistaken when she informed SLED Agent Asbill that Garland Travis was not the employee for Jokers.

25. Garland Travis is the grandfather of Greg Travis.

26. Garland Travis is a credible witness and was able to testify in a credible manner about his working as an employee at Jokers at the time of the inspection.

27. Greg Travis is a credible witness and was able to testify in a credible manner about his employing his grandfather, Garland Travis, to work at Jokers at the time of the inspection.

28. Lloyd Godfrey, another employee of Greg Travis' video poker businesses at G.T.'s Express Mart, testified that he was present at the time of the inspection and that Garland Travis was the employee for Jokers.

29. Bill Travis, another employee of Greg Travis' video poker businesses located at G.T.'s Express Mart, testified that he was present and working at the time of the inspection and that Garland Travis was the employee for Jokers at the time of the inspection.

30. Debbie Durham did not testify at the hearing. Her statements were submitted through the testimony of SLED Agent Asbill.

31. The statement of Debbie Durham made to SLED Agent Asbill and introduced into evidence through Agent Asbill, that Garland Travis was not an employee of Jokers, is not reliable and credible evidence, when weighed against the credible testimony of Greg Travis that Debbie Durham was merely a clerk who had been employed only a month or so for G.T.'s Express Mart and was not familiar with the operation of the video poker business Jokers located within G.T.'s Express Mart.

32. Further, the testimony by Billy Travis and Lloyd Godfrey that Garland Travis was working in Jokers at the time of the violation is credible. Both Lloyd Godfrey and Billy Travis were present at the time of the inspection and presented credible and reliable testimony that they had knowledge of the persons employed to operate Greg Travis' video poker businesses including Jokers.

33. American Amusement had no control over the number of employees hired by Greg Travis to attend to the video poker machines placed in Jokers.

34. American Amusement did not hire employees for Jokers, did not fire employees for Jokers and did not schedule employees for Jokers.

35. Pursuant to Greg Travis' contract with American Amusement, it was Greg Travis' responsibility to comply with all laws regarding the operation of video poker machines, including the requirement of having a sufficient number of employees to attend to the video poker businesses.

CONCLUSIONS OF LAW AND DISCUSSION

A. Jurisdiction

1. Pursuant to S.C. Code Ann. § 12-4-30(D) (Supp. 1997) and S.C. Code Ann. § 1-23-320 (Supp. 1997), the Administrative Law Judge Division has jurisdiction to hear this matter.



B. Violation

1. Respondent American Amusement is the machine and license owner of video game machines licensed under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1997).

2. The Video Game Machines Act ("Act"), which regulates video game machine activity in South Carolina, was enacted in 1993 and became effective on July 1, 1993. This Act is found at S.C. Code Ann. § 12-21-2770, et seq. (Supp. 1997). The purpose of the Video Game Machines 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 1994 Op. Atty. Gen. No. 94-21 at 51; 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).

3. The Department alleges that on January 23, 1997, Respondents violated S.C. Code Ann. § 12-21-2804(A)(Supp. 1997) and 27 S.C. Code Regs. 117 § 190 (Supp. 1997) by permitting licenses to be used for the operation of more than five (5) Class III video game machines at a single place or premises. Section 12-21-2804(A) provides:

No person shall apply for, receive, maintain, or permit to be used, and the commission shall not allow to be maintained, permits or licenses for the operation of more than eight machines authorized under Section 12-21-2720(A)(3) at a single place or premises for the period beginning July 1, 1993, and ending July 1, 1994. After July 1, 1994, the commission may not issue nor authorize to be maintained any licenses or permits for more than five machines authorized under S.C. Code Ann. § 12-21-2720(A)(3) at a single place or premises . . . .

4. On June 23, 1995, regulations were promulgated which further clarify the provisions of the Video Game Machines Act. Specifically, 27 S.C. Code Regs. 117-190 was promulgated to

clarify the meaning of the phrase "single place or premises" as set forth in Section 12-21-2804(A). This regulation, effective June 23, 1995, provides in relevant part:

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.

5. The issues before this tribunal are whether the business Jokers satisfied the employee requirement during the time of the inspection and, if not, whether the machine and license owner may be penalized for such a violation of S.C. Code Ann. § 12-21-2804.

6. Regarding the issue of whether the business Jokers satisfied the employee requirement during the time of the inspection, the evidence presented at the hearing is overwhelming that Garland Travis was an employee at Jokers at the time of the inspection. Garland Travis repeatedly stated in a credible manner that he was employed at Jokers at the time of the inspection. Further, it was undisputed by the Department that Garland Travis was present in Jokers at the time of the violation. SLED agents Asbill and Jackson both testified that Garland Travis was present at Jokers. Agent Jackson testified that he photographed Garland Travis at the time of the inspection. SLED agent Asbill testified that the reason he thought Garland Travis was not an employee of Jokers was because the store clerk, Debbie Durham, stated he was not. However, at the time of the inspection, Debbie Durham had only been employed by Greg Travis for a short time as a clerk for G.T.'s Express Mart, and did not manage or supervise the video poker business Jokers and those employed to work therein. The overwhelming evidence supports the conclusion that Garland Travis was the employee assigned to Jokers and that he was working within the confines of Jokers at the time of the inspection. Therefore, no violation of S.C. Code Ann. 12-21-2804(A) or 27 S.C. Code Regs. 117-190 occurred. Having determined that no violation occurred, it is unnecessary to address the remaining arguments advanced by the Respondents.

Therefore, for all the foregoing reasons, the imposition of the $5,000 fine against both Respondents, the revocation of American Amusement's Class III licenses and the denial of licenses in the location for a period of six months from the date of revocation must fail.

ORDER

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

ORDERED that the citations against the Respondents for violation of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Regs. 117-190 are hereby dismissed.

AND IT IS SO ORDERED.

Marvin F. Kittrell

Chief Judge



March 24, 1998

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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