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. Power Player, Inc., d/b/a Power Play II, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Power Player, Inc., d/b/a Power Play II and Power Play, III, and Riptide Construction Co., Inc.
 
DOCKET NUMBER:
98-ALJ-17-0171-CC

APPEARANCES:
Petitioners & Representative: South Carolina Department of Revenue, Carol I. McMahan

Respondents & Representative: Power Player, Inc., d/b/a Power Play, II and Power Play, III, and Riptide Construction Co., Inc., Buck Cutts

Parties Present: All Parties
 

ORDERS:

FINAL ORDER AND DECISION

I. Statement of the Case


The South Carolina Department of Revenue (DOR) seeks a fine of $5,000 each against Power Player, Inc., d/b/a Power Play, II and Power Play, III, and Riptide Construction, Co., Inc., the revocation of licenses on eight Class III video poker machines, and a six month prohibition on the use of any Class III machines at the offending location for a period of six months. Power Player, Inc., d/b/a Power Play, II and Power Play, III (Power Player), and Riptide Construction Co., Inc. (Riptide) oppose DOR's position and assert no violation occurred, thus, no fine, no revocation, and no prohibition on use of Class III machines should be imposed.

This disagreement places jurisdiction in the Administrative Law Judge Division (ALJD). S.C. Code Ann. §§ 12-60-1310, 12-60-1320, 1-23-600 (Supp. 1997). Based upon the evidence and the argument presented by the parties, the licenses for the eight machines are revoked, a six month prohibition on the use of those eight machines is imposed, beginning with the date of this order, a fine of $5,000 is imposed on Riptide, and a $5,000 fine is imposed on Power Player.



II. Issues

1. Did Riptide or Power Player violate the single place or premises requirement of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) by failing to have at least one separate employee on the premises during business hours or failing to properly configure the business location?

2. If a violation occurred, are all eight of Power Player and Riptide's licenses subject to revocation despite an alleged lack of knowledge relative to the failure to have at least one separate employee on the premises during business hours?

3. If a violation occurred, are Power Player and Riptide denied the use of any Class III machines at the location for a period of six months from the time the revocation becomes final or are Power Player and Riptide denied the privilege of using the eight machines for a period of six months from the time the revocation becomes final?

4. If a violation occurred, what monetary fine, if any, should be imposed on Power Player and Riptide?

III. Analysis

A. Single Place or Premises


1. Positions of Parties

DOR asserts the single place or premises requirement of Regs. 117-190 was violated due to the lack of an employee in the game rooms identified as Power Play II and Power Play III. Additionally, DOR asserts the single place or premises requirement of Regs. 117-190 was violated due to the game rooms being improperly configured. In DOR's view, the improper configuration consists of the game room housing Power Play II leading directly to the game room housing Power Play III.

Power Player and Riptide disagree. First, they argue no employee was required in Power Play III since that room was closed. Second, they argue that an employee is not required to be physically present within the four walls of each game room. Finally, Power Player and Riptide argue the game rooms are properly configured.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:





A. General Background

Power Player and Riptide hold several licenses for Class III video game machines with at least eight of those licenses utilized at 208 South Frasier Street, Georgetown, South Carolina. The building at the Georgetown address contains a video game business in a mall-type structure housing three video game rooms. Power Player holds the requisite number of retail sales tax licenses for the three video game rooms. The game rooms have the following names and house the following machines:

Power Play II 3806255, 3806040, 3806256, 3929656, and 3929657

Power Play 3929655, 3929654, 3929653, 3929652, and 3929651

Power Play III 3805917, 3806258, and 3929658

The machines in dispute are the ones in Power Play II and Power Play III. Three of the machines in Power Play II are owned by Riptide (3806255, 3806040, 3806256) and two are owned by Power Play (3929656, 3929657). Two of the machines in Power Play III are owned by Riptide (3805917, 3806258) and one is owned by Power Play (3929658).

On August 13, 1997, SLED conducted an inspection of the video game businesses at the Georgetown address. The inspection included walking into each area, listing the license numbers for machines located in the three game rooms, taking photographs of the location, examining the business licenses, retail tax licenses, and utility meters for the location, and talking to an employee at the location.

As a result of the inspection, the SLED Agents issued a citation against Power Player and Riptide for violating S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) due to operating more than five machines in a single place or premises. Additionally, Power Player and Riptide were cited for having an improper direct access from one game room to another. Copies of the Violation Report were left with the employee on duty. In addition to revocation and a six month prohibition on the use of Class III machines, DOR also seeks a $5,000 fine against Power Player and a $5,000 fine against Riptide.

B. Disputed Facts

No facts are in dispute concerning the presence of electric utility meters, the presence of a local business license for the businesses involved, or the presence of the required retail sales tax licenses. Rather, this dispute asks whether Power Player and Riptide had at the time of the inspection a separate employee for each of the game rooms during business hours and whether the game rooms were properly configured.

1. Employee On the Premises

At the time of the August 13, 1997 inspection, two SLED Agents entered the game room identified as Power Play II and played the machines in that room for ten to twenty minutes. No employee was within that game room. The SLED Agents then entered the game room identified as Power Play and found an employee in that game room.

As to the third game room identified as Power Play III, no employee was in the room. At the time of the inspection, the lights were on in the game room, the door was open, and a single male customer was playing one of the machines. However, before SLED agents left the location, the door to Power Play III was closed. In addition, while no sign was present when the inspection began, by the time the inspection concluded, the door had a hand printed sign taped on it stating "Closed."

2. Game Room Configuration

The SLED Agents obtained entrance to the location through a door at the back of the building. Upon entering the building, the SLED Agents were in a game room identified as Power Play II, with five video poker machines along the left wall. On the right wall was a door which opened into another game room identified as Power Play III. Inside Power Play III were three video poker machines. The access from Power Play II to Power Play III was by a single door with no common area separating the two game rooms.

3. Conclusions of Law

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

A. Statutory and Regulatory Requirements for Single Place or Premises

For machines authorized under § 12-21-2720(A)(3), i.e. Class III machines, no person may maintain licenses or permits for more than five Class III machines at a single place or premises. S.C. Code Ann. § 12-21-2804 (Supp. 1997). The statute does not explain what constitutes a single place or premises. A definition is supplied, however, by Regulation 117-190.

Regulation 117-190 concentrates its analysis of a single place or premises by examining the physical characteristics of the structure enclosing the Class III machines. For example, a "single place" or "premises" cannot have walls "windows, doors or other openings leading to another area where video game machines are located." Further, the regulation gives particular attention to exterior walls surrounding two or more video game areas. If at least two interior structures exist (i.e., each having a proper four wall configuration) and if Class III video games are located within each interior structure, then each interior structure is a video game area.

A decision on whether each video game area is a single place or premises is reached by a facts and circumstances methodology imposed by Regs. 117-190. Under the regulation, DOR "must review all the facts and circumstances to determine if each area in reality constitutes a single place or premise for video game machines." While a facts and circumstances review is normally very general, the regulation requires the existence of at least four facts. Indeed, a failure to meet any one of these criteria results in the video game area not being a separate place or premise. The criteria are: (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?

B. Law Addressing Single Place or Premises

1. Employee On the Premises

DOR asserts two game rooms at the Georgetown location were without a separate employee on the premises as required by Regs. 117-190. However, in deciding this issue, a difference of opinion exists on whether the employee must be within the four walls of the area in question in order to meet the "on the premises" requirement.

One view is that an employee is not considered to be "on the premises" when the employee is working outside the game room and the Class III video game machines are operational and accessible to customers; i.e., an employee must be present in the room. (The four-walls position.) S.C. Dep't of Revenue and Taxation v. Mickey Stacks, 95-ALJ-17-0742-CC (March 8, 1996). A contrary view is that the requirement is met even if the employee is outside the four walls so long as the employee's physical position enables the employee to observe the room and the employee is performing his job functions at the employee's location. (The within-view-of-the-four-walls position). South Carolina Department of Revenue v. Great Games, Inc., Docket No. 96-ALJ-17-0204-CC, (January 22, 1997). In a similar vein, a view exists that an employee's absence from the room is permissible if the absence is for a short period and the absence is for a justifiable reason, e.g., personal physical needs. (The short-legitimate-absence position). DOR v. Ace Music Company of Spartanburg, Inc., 97-ALJ-17-0309-CC (October 19, 1997).

I agree with the four-walls position and respectfully disagree with both the within-view-of-the-four-walls position and the short-legitimate-absence position. While at first blush it may seem reasonable to provide exceptions to the four-walls rule, closer analysis dictates otherwise.

First, relying upon the rules of statutory construction to justify exceptions to the plain language is unwarranted. The language "on the premises" 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 but never to create doubt. See 73 Am Jur 2d Statutes § 146, citing Englewood Water Dist. v. Tate, 334 So 2d 626 (Fla. App. 1976).

Here, the language of the statute and the regulation is clear. The statute and regulation allow no more than five machines in a single place or premises. Where, as is the case in this matter, at least two interior structures exist with machines inside those structures, each interior structure is a "video game area." None of the video game areas can acquire the status of a separate single place or premises unless an employee is "on the premises during business hours." The premises, upon which the employee must be "on," is the space identified as the "video game area." An employee cannot be on the premises of an identified space if the employee is physically someplace else. Accordingly, once the employee physically leaves the space of the video game area, the employee is no longer "on the premises."

Second, a court can not seek ways to rewrite statutes or regulations. To depart from the plainly expressed meaning causes the tribunal to legislate rather than interpret since "[t]he responsibility for the justice or 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), (superseded on other grounds by S.C. Code Ann. § 5-7-30). In short, an ALJ cannot add conditions to the "on the premises" language of the regulation in an effort to provide exceptions that seek to improve upon what the General Assembly has plainly promulgated.

Finally, the purpose of the regulation under review dictates a holding that "on the premises" means exactly what it says. 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 that the walls must be one-hour firewalls. 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.

In proving that no employee was on the premises, DOR bears the burden of proof. See 2 Am. Jur. 2d Administrative Law § 360 (1994) (burden of proof generally rests with the party who asserts the affirmative of an issue). Under the facts of this case, DOR has met that burden.

Here, Power Player and Riptide hold several licenses for Class III video game machines. Power Player operates a video gaming business in a mall-type structure containing three video gaming rooms located at 208 South Frasier Street, Georgetown, South Carolina. At the time of the inspection, no employee was in Power Play II or Power Play III. Accordingly, a violation of Section 12-21-2804(A) occurred on August 13, 1997 at the video gaming businesses located at 208 South Frasier Street, Georgetown, South Carolina.

2. Closed Business Hours

Power Player and Riptide argue that no employee was required in Power Play III since the business hours had ended in that game room due to the room being closed. DOR asserts the room was open.

Business hours begin at the moment a location opens for the transacting of its business. See Jolly v. Marion Nat. Bank, 267 S.C. 681, 231 S.E.2d 206, (1976) (a shareholder's access to records during business hours is allowed as long as the access is for those hours of those days during which business could be transacted). However, deciding when business hours conclude is a factual issue based upon the totality of the circumstances for the time period in dispute. See Dym v. Merit Oil Corporation, 36 A.2d 276 (Conn. 1944) (even for a facility which appeared to be closed for the night, a weighing of the facts can find a facility open where no closed sign is conspicuously displayed at the entrance to the premises and where doors at the facility are unlocked.). In this case, when considered as a whole, the evidence demonstrates that the business in dispute was open for business at the time of the SLED Agents' inspection.

Here, the facts demonstrate that Power Play III had its lights on, the door was open, and a player was playing the machines. Such facts demonstrate the machines were accessible by the public and the machines were operational. In short, the business hours were still continuing in Power Play III at the time of the inspection. Only after the SLED Agent inspection was underway did a sign on the door appear, and only then was the door closed. On the whole, the evidence establishes that Power Play III had no employee on the premises, the game room was open, the machines were accessible to the public, and the game room's business hours had not ended as of the time of the inspection. Accordingly, a violation of the single place or premises requirement of 117-190 occurred due to the failure to have an employee on the premises of Power Play III.

C. Room Configuration

A "single place" or "premises" cannot have walls "windows, doors or other openings leading to another area where video game machines are located." Regulation 117-190. Here, the game room identified as Power Play II (when viewed from the back entrance of the building) held five video poker machines along its left wall. On the right wall of that game room, a single door led directly into another game room identified as Power Play III. Power Play III held three video poker machines and was accessible from Power Play II by a single door with no common area separating the two game rooms. Accordingly, the room configuration violates Regulation 117-190.

B. Revocation

1. Positions of Parties

Riptide argues that as a machine owner, it knew nothing of the employee violation. Thus, Riptide argues it cannot have its licenses revoked. DOR argues that since a violation of S.C. Code Ann. § 12-21-2804 has been established, a revocation of all machines at the location is required. DOR asserts the violation is not dependent upon scienter and that a lack of knowledge by Riptide is no defense.





2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

A violation of the single place or premises requirement occurred at Power Player's location on August 13, 1997. Of the eight machines found in violation, five are owned by Riptide and all are housed in the game rooms owned by Power Player. Riptide has no management control of any employee working for Power Player and Power Player exercises day-to-day management control over employees at its three game rooms.

3. Conclusions of Law

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

A. Statutory Requirements for Revocation

DOR "shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section." S.C. Code Ann. § 12-21-2804(A) (Supp.1997). Here, the establishment does not meet the demands of the single place or premises requirement. Accordingly, the machine licenses located therein must be revoked.

B. Lack of Knowledge

Riptide's lack of knowledge of the employee arrangements is not a basis for denying the revocation. The General Assembly did not impose a duty of finding the violator had any degree of intention such as "knowingly," "intentionally" or "willfully." Moreover, the General Assembly has demonstrated that when it wanted to impose scienter as a part of a violation it did so by specific language. See S.C. Code Ann. §12-21-2804(F) (upon a determination that a violation is wilful, criminal prosecution may be pursued). Since the statutory language does not impose knowledge as a requirement, none can be added.

Instead of an intention to violate the law, all the statute demands is proof that a license is being maintained for more than five machines at a single place or premises. Accordingly, the fact that Riptide did not know of the employee problem does not halt the imposition of the revocation of all eight licenses.

C. Six Month Prohibition


1. Positions of Parties

DOR asserts the statute requires a prohibition on the use of any Class III machines at the location for a period of six months from the time the revocation becomes final. Power Player and Riptide argue that if a revocation is applied, no six month penalty should be imposed on the location, but only on the machines in use at the time of the violation.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

Power Player and Riptide placed several Class III machines in the three game rooms at the Georgetown location. At the time of the inspection on August 13, 1997, Power Player operated the location housing the three game rooms and held proper retail licenses issued by DOR pursuant to Chapter 36 of Title 12 of the S.C. Code. At the time of the inspection, the location was a licensed establishment.

Judicial notice is taken of the published decisions of the Administrative Law Judge Division and of the numerous instances in which DOR has argued before the Division that S.C. Code Ann. § 12-21-2804(A) imposes a six month prohibition on the use of any Class III machine at the offending location. However, judicial notice is also taken of the extensive opposition to DOR's view. In hearings before the Division, license holders routinely and repeatedly object to DOR's position.

3. Conclusions of Law

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

A. Prohibition Applicable to Machines or to Location

1. Introduction

The following language of § 12-21-2804 is in issue:

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 the revocation.

This language has produced two interpretations. DOR's interpretation is that once a license for a Class III machine in a location is revoked, the location is prohibited from having any Class III machines on its premises for a period of six months from the date of the revocation. This view is the "dead location" interpretation. Power Player and Riptide's interpretation is that once the location has a revocation of a Class III machine license, the machines within the establishment (but not the establishment itself) are prohibited from being re-licensed as Class III machines for a period of six months from the date of the revocation. This view is the "dead machines" interpretation. Considering the plain language of the statute and applying the legislative intent as gleaned from applicable factors, the six month prohibition applies to the machines involved and not to the location involved.





2. Legislative Intent

Courts do not legislate. Rather, when asked to interpret the meaning of a statute, the task is solely that of seeking to effectuate the legislature's intent. Laird v. Nationwide Ins. Co., 243 S.C. 388, 134 S.E.2d 206 (1964). In deciding legislative intent, the first and most basic inquiry is whether the language of the statute is plain and unambiguous and whether the statute conveys a clear and definite meaning. If the answer is yes, no occasion exists 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, 317 S.C. 434, 454 S.E.2d 890 (1995).

However, where an ambiguity prevents the statute from conveying a clear and definite meaning, the court must find the legislative intent through statutory construction. See Abell v. Bell, 229 S.C. 1, 91 S.E.2d 548 (1956) ("But where the language of the statute gives rise to doubt or uncertainty as to the legislative intent, the search for that intent may range beyond the borders of the statute itself; for it must be gathered from a reading of the statute as a whole in the light of the circumstances and conditions existing at the time of its enactment.") An ambiguity arises when the meaning of the language is doubtful or provides "doubleness of meaning." Chapman v. Metropolitan Life Ins. Co., 172 S.C. 250, 173 S.E. 801, 803 (1934); see also Southeastern Fire Ins. Co. v. S.C. Tax Comm'n, 253 S.C. 407, 171 S.E.2d 355 (1969) (language is ambiguous when it is capable of being understood by reasonably well-informed persons in either of two or more senses.).

Here, I am not convinced that the language is devoid of a clear and definite meaning. A plain and unforced reading requires a dead machine result and does not support a dead location result. However, even if the statute creates an ambiguity, an inquiry into statutory construction still leads me to conclude that the legislature imposed a six month prohibition on the machines and not on the location.

a. Plain Meaning

The plain meaning of a statute is best determined by reading the statute as a whole so that phraseology of an isolated section is not controlling. City of Columbia v. Niagara Fire Insurance Company, 249 S.C. 388, 154 S.E.2d 674 (1967). When read as a whole, S.C. Code Ann. § 12-21-2804(A) states that DOR is required to "revoke the licenses of machines located in an establishment which fails to meet the requirements of [§ 12-21-2804]." Under that language, a failure to satisfy the single place or premises requirement causes a revocation of all of the machine licenses in the establishment that failed to meet the test. As a result of that violation, an establishment becomes filled with unlicensed machines.

In fact, that is precisely what has happened in this case. Power Player and Riptide's eight machines effectively became unlicensed, and those unlicensed machines were incapable of being lawfully operated until new licenses were issued. See S.C. Code Ann. § 12-21-2776 (Supp. 1997) (all machines must be licensed). This factual and legal background supplies the proper context for an unforced reading of the plain language of the six month prohibition.



Having revoked all of the machines in the establishment, the statutory language then immediately states "[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 the revocation." In other words, the specific machines that lost their licenses due to the revocation are prohibited from receiving a new machine license until a six month period has elapsed.

When relying upon the plain meaning of words in a statute, the words must be applied without resorting to a subtle or forced construction to limit or expand the statute's operation. Stephen v. Avins Constr. Co., 324 S.C. 334, 478 S.E.2d 74 (Ct. App. 1996). The interpretation expressed above provides a plain, unforced reading that answers an obvious need raised by the revocation language. Obviously, to make the revocation meaningful, a fixed period is needed. Otherwise, the owner would be able to acquire a new license the same day as the revocation and begin operating the same machine almost immediately. In my view, the six month period simply tells the owner that the machine is dead for six months and serves to give teeth to the revocation of the machine license.(1)

In contrast to the plain reading of the language that supports the dead machine interpretation, a reading giving a dead location requires a forced construction. For example, to impose a six month limitation on the location requires reading additional language into the statute so that the statute states "no license may be issued for a machine TO BE PLACED in an establishment in which a license has been revoked for a period of six months from the date of the revocation." (Capitalized words added). Obviously, a court may not add words to a statute but can only apply the statutory language given by the General Assembly. Banks v. Columbia Ry., Gas & Electric Co., 113 S.C. 99, 101 S.E. 285 (1919).

Accordingly, § 12-21-2804(A) imposes a six month prohibition on the issuance of licenses for those Class III machines that were in an establishment at the time a license for a machine in that establishment was revoked. No prohibition is imposed on the location itself.

b. Statutory Construction

While I believe a plain reading requires a dead machine interpretation, even if resort to statutory construction is required, such an inquiry does not support a dead location view.

A commonly applied rule of statutory construction is that where the same words are used in an enactment more than once, it is presumed the words have the same meaning throughout unless a different meaning is necessary to avoid an absurd result. Busby v. State Farm Mut. Auto. Ins. Co., 280 S.C. 330, 312 S.E.2d 716 (Ct. App. 1984). Likewise, when the legislative body defines a term, the use of that term in the enactment must be interpreted as having the defined meaning. Windham v. Pace, 192 S.C. 271, 6 S.E.2d 270 (1939).

In the Video Game Machines Act (Act), Class III machines must be licensed under Article 19 before placement or operation on the premises of a "licensed establishment." S.C. Code Ann. § 12-21-2778 (Supp. 1997). The legislature defined "licensed establishment" as an "establishment owned or managed by a person who is licensed pursuant to Article 19 of this chapter for the location of coin-operated nonpayout video machines with a free play feature." S.C. Code Ann. § 12-21-2772(4) (Supp. 1997). To impose a location penalty, the legislature could simply have stated the establishment may not be a licensed establishment for six months. No such statement was made.

Additionally, Article 20 imposes, at a minimum, a separate and additional license for an establishment. Specifically, a location license is required since "[e]ach . . . licensed establishment must be licensed by [DOR] pursuant to Article 19 of this chapter and this article before a machine . . . is placed for public use in this State."(2) S.C. Code Ann. § 12-21-2784 (Supp. 1997) (emphasis added). The location license of Article 20 is identified as an "establishment license for machine placement." S.C. Code Ann. § 12-21-2788 (Supp. 1997). In fact, DOR is required to revoke "an establishment license for machine placement" when the placement of machines does not meet "the provisions of Article 19 of this chapter and the [corresponding] rules and regulations promulgated by [DOR]." Id. ; S.C. Code Ann. § 12-21-2786 (Supp. 1997).(3) Again, the General Assembly could have easily penalized the location by revoking the establishment license for machine placement. Finally, the location may not house Class III machines "unless the location is licensed pursuant to the provisions of Chapter 36 of Title 12." S.C. Code Ann. § 12-21-2703 (Supp. 1997). Accordingly, at least three areas of location or establishment licenses are available for revocation, but § 12-21-2804(A) chooses to revoke only "licenses of machines."

These statutes demonstrate that the General Assembly was cognizant of the difference between a license for a machine and a license involving an establishment or location. In section 12-21-2804(A), the General Assembly provided for the revocation of the licenses for the machines and made no mention of revocation of an establishment license.

A common sense reading shows a symmetry exists between the revocation and the six month prohibition on re-licensing the affected machines, and further, that the symmetry is broken by the dead location view. No symmetry results from revoking a machine license and then concluding the location is penalized for six months. Had the General Assembly meant to revoke the establishment or location license it could have easily done so by specifying the revocation of a specific establishment license. Accordingly, the normal rules of statutory construction support the dead machine interpretation.

c. Deference To Agency

DOR argues its position should be followed since it is the agency charged with administering the video games law. DOR believes the facts are well established that it has consistently applied its interpretation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). Further, under such circumstances, DOR believes that its position is reasonable and should be accorded great deference. Finally, in deciding whether to deviate from DOR's position, DOR asserts compelling reasons must be established. In significant part, I disagree with DOR's analysis as it relates to the weight to be accorded that agency's interpretation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

i. Consistently Applied Position

No doubt exists that DOR has consistently applied its position. Judicial notice is taken of the published decisions of the Administrative Law Judge Division and of the numerous instances in which DOR has advanced its position in hearings before the Division. DOR has consistently viewed S.C. Code Ann. § 12-21-2804(A) as imposing a six month prohibition on the use of any Class III machine at the offending location.

However, judicial notice is also taken of the extensive opposition to DOR's view. In hearings before the Division, license holders routinely and repeatedly object to DOR's position. The validity of that position is now pending in the S.C. Supreme Court in the case of Gateway Enterprise, Inc., v. DOR. Thus, the position of DOR is not one which has found routine acceptance by the affected public. On the contrary, DOR's position is far from a settled view.

ii. Deference To DOR's Position

The issue in interpreting a statute is what did the legislature intend. Laird v. Nationwide Ins. Co., 243 S.C. 388, 395 S.E.2d 206 (1964). Depending upon the nature of the language under review, an agency's view may or may not be entitled to deference.

-- Plain Meaning

No deference to an agency's position is warranted where the language presents a clear meaning. Glens Falls Insurance Co. v. City of Columbia, 242 S.C. 237, 130 S.E.2d 573 (1963) (no occasion arises for considering an agency's position where the language of the statute is plain and unambiguous and conveys a clear and definite meaning). Further, of particular significance to this case, the clear and definite meaning will always be applied despite an agency's contrary but consistently followed position. Davidson v. Eastern Fire & Cas. Ins. Co., 245 S.C. 472, 141 S.E.2d 135 (1965) ("An uninsured motorist endorsement that contravenes the requirements of the statute is, to that extent, invalid, regardless of the Department's approval of it.").

Here, the statute in dispute is plain and unambiguous. The plain language of § 12-21-2804(A) imposes a six month prohibition on the issuance of licenses for those Class III machines that were in an establishment at the time a license for a machine in that establishment was revoked. Thus, having found that the plain meaning of the statute establishes legislative intent, no deference to DOR's position is required.

-- Ambiguous Meaning

However, even if an ambiguity were found in the statute, a resort to rules of construction supports the view that the revocation affects the machines but not the location. In examining the rules of statutory construction, deference to DOR's view is not a meaningful indicator of legislative intent when compared to other more significant indicators.

When required to apply the rules of construction, the construction of a statute by an agency charged with administering that statute is entitled to most respectful consideration. Stephenson Finance Co. v. South Carolina Tax Comm'n, 242 S.C. 98, 130 S.E.2d 72 (1963). More particularly, however, the degree of respect rises to one of "great weight" only if the agency position "has been acquiesced in by the [Legislature] for a long period of time." Etiwan Fertilizer Co. v. South Carolina Tax Comm'n, 217 S.C. 354, 60 S.E.2d 682 (1950).

Here, the Video Game Machines Act became effective July 1, 1993. Thus, even assuming DOR's position was announced, enforced or in some way made known to the Legislature from the first day the statute became effective, DOR's position is five years old. Such a time frame is far too short to amount to a showing of acquiescence "by the Legislature for a long period of time." Id. Hence, the short period does not show strong evidence of acquiescence by the Legislature and does not allow "great weight" to be accorded to DOR's position. Such is especially so where the agency position is challenged repeatedly by the affected public. At best, only respectful consideration is due.

The Legislature is presumed to have knowledge of its own laws. See Ingram v. Bearden, 212 S.C. 399, 47 S.E.2d 833 (1948)(a machine was definitely outlawed by prior statute and the General Assembly was deemed to be aware of that fact). Respectful consideration to DOR's position (which consideration relies upon a presumption that the Legislature has knowledge of and gives tacit approval to the agency's actions) pales in comparison to the Legislature's presumptive knowledge of its own laws. The Legislature intentionally created licensed establishments and created machine licenses. Further, the Legislature defined licensed establishments and demonstrated it clearly knew the difference between machine licenses and establishment licenses. Thus, reliance upon the Legislature's knowledge of its own laws is a far superior indicator of legislative intent than reliance upon the respectful consideration of DOR's position.

iii. Compelling Reasons

While others may exist, at least two compelling reasons warrant deviating from DOR's view. First, DOR's position is inconsistent with the plain meaning of the statute such that reliance upon DOR's view places far too much weight on an administrative interpretation. See Stone Mfg. Co. v. South Carolina Employment Sec. Comm'n, 219 S.C. 239, 64 S.E.2d 644 (1951) citing F. W. Woolworth Co. v. United States, 91 F.2d 973, 976 (2d. Cir. 1937) ("At most, administrative practice is a weight in the scale, to be considered, but not to be inevitably followed. * * * While we are of course bound to weigh seriously such rulings, they are never conclusive."). Second, a compelling reason to deviate from DOR's view is that following the position perpetuates an administrative error. Fennell v. South Carolina Tax Commission, 233 S.C. 43, 103 S.E.2d 424 (1958) (an interpretation presented by an administrative position is not so sacrosanct as to be beyond the correction of error; it need not perpetuate error). In short, sufficient and compelling reasons exist to deviate from DOR's position.

D. Amount of Penalty


1. Positions of Parties

DOR asserts that a $5,000 penalty is due from Power Player and another $5,000 penalty is due from Riptide. Both Power Player and Riptide argue the penalty is too severe.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

Power Player's policy is that an employee must be assigned to a single game room but that employee need not be in the game room at all times. Consistent with the stated policy, at the time of inspection on August 13, 1997, no employee was present in either Power Play II or Power Play III. Both entities share in the profits of the machines, with management of the rooms in Power Player. In summary, both entities use the game rooms to further their business interests.

3. Conclusions of Law

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

A violation of section 12-21-2804(A) results in the imposition of a fine. S.C. Code Ann. § 12-21-2804(F) (Supp. 1997). The person liable for the fine is the person who committed the violation. S.C. Code Ann. § 12-21-2804(F) (Supp. 1997). The only violation here is that of exceeding the five machine limit for a single place or premises.

A. Person Liable

Those persons to whom the five machine limit applies are those who either maintain a Class III machine for use or permit the use of a Class III machine on premises which they occupy. S.C. Code Ann. §§ 12-21-2720(A) and -2804(A) (Supp. 1997).

Here, Power Player permits Class III machines on premises that it occupies. Further, both Power Player and Riptide maintain the Class III machines each owns. Both Power Player and Riptide benefit from the machine license; therefore, both are responsible for compliance with section 12-21-2804(A). Further, the separate employee requirement in Regulation 117-190 applies to both the owner of the location as well as the machine owner. See McNickel's Inc. v. South Carolina Dep't. of Revenue, Op. No. 24819 (S.C.Sup.Ct. filed July 20, 1998)(Shealy Adv.Sh. # 26 at 31, 36).

Both Power Player and Riptide violated section 12-21-2804(A) and Regulation 117-190, and both are liable for a penalty.

B. Amount of Fine

Where the General Assembly authorizes a range for an administratively imposed penalty, the administrative adjudicator sitting as the fact-finder may set the amount of the penalty after a hearing on the dispute. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991). When penalty disputes are part of the factual issues for decision, the fact-finder must receive evidence and make a determination on all such factual disputes arising from the contested case. S.C. Code Ann. § 1-23-350 (Rev. 1986). Here, under all of the circumstances, a fine of $5,000 is appropriate for each party.

IV. Order


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

The licenses for the five machines of Power Play II (3806255, 3806040, 3806256, 3929656, and 3929657) and the three machines of Power Play III (3805917, 3806258, and 3929658) are revoked; a six month prohibition on the use of those eight machines is imposed, beginning with the date of this order; a fine of $5,000 is imposed on Riptide, and a $5,000 fine is imposed on Power Player.













AND IT IS SO ORDERED.



RAY N. STEVENS

Administrative Law Judge

Dated: August 27, 1998

Columbia, South Carolina

1. Certainly, the dead machine view allows the location owner to buy or lease new machines, purchase new licenses and begin operation almost immediately at the same location. However, the machine revocation penalty is meaningful since the cost includes new licenses, new machines, and leaves old machines that are worthless for six months. The General Assembly provided this result and a court should not rewrite statutes to provide a "better" penalty since such matters rest solely within the wisdom of the General Assembly. Creech v. South Carolina Pub. Serv. Auth., 200 S.C. 127, 20 S.E.2d 645 (1942).

2. The additional license of Article 20 also applies to other entities; machine manufacturers, distributors, and operators must obtain the Article 20 license.

3. The "establishment license for machine placement" is not the retail sales tax license of S.C. Code Ann. § 12-36-510 (Supp. 1997) required by S.C. Code Ann. § 12-21-2703 (Supp. 1997). The name "retail license" is well known by the legislature. Had the legislature meant "retail license" in § 12-21-2788 it would have used that name rather than the unusual name of "establishment license for machine placement." Rather, the Article 20 "establishment license" is the license required (albeit currently postponed in part until December 31, 1998) to assure Class III machines meet the technology demands of §§ 12-21-2782 and 12-21-2783. S.C. Code Ann. § 12-21-2784 (Supp. 1997).


Brown Bldg.

 

 

 

 

 

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