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. McNickels, Inc. , and AAA Entertainment Corp., Heritage Plaza, Hilton Head Island, S.C.

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
McNickels, Inc. , and AAA Entertainment Corp., Heritage Plaza, Hilton Head Island, S.C.
 
DOCKET NUMBER:
98-ALJ-17-0616-CC

APPEARANCES:
Petitioner & Representative: South Carolina Department of Revenue, Jeffrey M. Nelson

Respondents & Representative: McNickels, Inc. & AAA Entertainment Corp, H. Fred Kuhn

Parties Present: All parties present
 

ORDERS:

FINAL ORDER AND DECISION

I. Statement of the Case


The South Carolina Department of Revenue (DOR) seeks revocation of three video poker licenses, a $5,000 fine against the location owner and $5,000 against the machine owner, and an order prohibiting the use of any Class III video poker licenses at the premises in dispute located at Heritage Plaza, Hilton Head, South Carolina, for a period of 6 months from the date of the license revocation. McNickles, Inc. (McNickles) as the machine owner and AAA Entertainment Corp. (AAA) as the location owner oppose DOR's position and assert the administrative violation should be dismissed. This disagreement places jurisdiction in the Administrative Law Judge Division. S.C. Code Ann. §§ 12-60-1310, 12-60-1320, 1-23-600 (Supp. 1998).

The hearing in this matter was held February 25, 1999 at the Edgar Brown Building, Columbia, South Carolina. Based upon the evidence and the arguments presented, the three licenses are revoked, a fine of $4,000 is imposed on AAA and a fine of $2,000 is imposed on McNickles. Further, McNickles and AAA are not required to prohibit the use of the Class III machines at the location for a period of six months but rather, McNickles and AAA are denied the privilege of using the three machines here in dispute for a period of six months from the time the revocation becomes final.







II. Issues


1. Did McNickles or AAA violate the single place or premises requirement of S.C. Code Ann. § 12-21-2804(A) (Supp. 1998) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1998) by failing to have at least one separate employee on the premises during business hours?

2. Have McNickles's and AAA's procedural due process rights been violated by an alleged delay in notification of any violation?

3. If a violation of the single place or premises requirement occurred, are McNickles and AAA 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 McNickles and AAA denied the privilege of using the three machines for a period of six months from the time the revocation becomes final?

4. If a violation of the single place or premises requirement occurred, is McNickles (the machine owner) not liable for a penalty due to having no involvement in the management affairs of the location?

5. If a violation of the single place or premises requirement occurred, what monetary penalty, if any, is proper for McNickles and AAA?

III. Analysis


A. Single Place or Premises: Employee On Premises


1. Positions of Parties

DOR asserts the single place or premises requirement of S.C. Code Ann. §12-21-2804(A) has been violated due to the Respondenets' failure to have a separate employee on the premises during business hours. McNickles and AAA disagree on the interpretation used by DOR. McNickles and AAA argue the employee does not need to be within the four walls of the premises. Rather, McNickles and AAA argue the separate employee requirement is satisfied if the employee has a clear line of sight to the customers playing the machine.

2. Findings of Fact

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

A. Background Facts

McNickles holds several licenses for Class III video game machines with those licenses utilized at Heritage Plaza on Hilton Head Island. The building at the Hilton Head Island address contains a video game business in a mall-type structure housing three video game rooms. Two of the rooms each had five video poker machines and one room (the room in question here) housed a single Blackjack machine with three player stations. The room with the Blackjack machine identified AAA Amusements as the holder of the retail license. The license numbers associated with each station of the Blackjack machine are 026413, 026414, and 026415.

On November 22, 1996, SLED conducted an inspection of the video game businesses at the Hilton Head Island address. The inspection included listing the license numbers for machines located in AAA Amusement, taking photographs of the location, examining the retail sales tax licenses, and talking to an employee at the location.

As a result of the inspection, the SLED Agent issued a citation against McNickles and AAA for violation of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1998) for operation of more than five machines in a single place or premises. 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 as to McNickles as the owner and licensee of the machines and a $5,000 fine as to AAA as the owner of the location.

B. Disputed Facts Decided

This dispute asks whether McNickles and AAA had at the time of the inspection at least one separate employee on the premises of each of the game rooms during business hours. The evidence establishes that at the time of the inspection, no employee was in the game room identified as AAA Amusements. Instead, the employee remained predominately at the receptionist desk near the front entrance to the building and occasionally entered other gaming rooms on a sporadic basis. From the receptionist's desk the employee had a clear line of sight and was able to observe the SLED Agent as the Agent played the machines. However, during the twenty minutes the machine was being played by the SLED Agent, no employee ever entered the room.

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. 1998). 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 and 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. Under such circumstances the inquiry becomes whether each video game area is a single place or premises allowing five machines within each 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 four 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 Employee on the Premises

The issue in dispute in this case is criterion (2): Does each entity or business have at least one separate employee on the premises during business hours? DOR asserts that at least one game room at the Hilton Head Island location was 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 regulation'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.

C. Law Applied to Facts

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, McNickles holds several licenses for Class III video game machines and operates a video gaming business in a mall-type structure containing three video gaming rooms located at Heritage Plaza. The location here in dispute is operated by AAA Amusements. As to that game room, no employee was within the four walls of that room. Accordingly, a violation of Section 12-21-2804(A) occurred on November 22, 1996 at the video gaming businesses located at Heritage Plaza.

B. Due Process: Delay


1. Positions of Parties

Both McNickles and AAA argue that DOR violated procedural due process by creating an unreasonable delay in issuing the citation. DOR asserts no procedural due process was violated since the July 11, 1997 citation was timely issued.

2. Findings of Fact

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

Several licenses for Class III video game machines are in use at the three video gaming rooms located at Heritage Plaza. The location was inspected by an agent of SLED on November 22, 1996. The inspection resulted in the agent's issuance of a Preliminary Findings Report dated November 22, 1996, finding a violation due to the lack of a separate employee on the premises. Subsequently, DOR confirmed the preliminary findings by the issuance of a citation to McNickles and AAA on July 11, 1997 and the issuance of a Final Determination on August 19, 1998.

The citation was issued almost eight months after the date the alleged violation occurred, and the Final Determination was issued twenty-one months after the date of the alleged violation. However, no loss of witnesses, or loss of evidence, or other hardship resulted from the delay in issuing either the citation or the Final Determination. Further, the delay in issuing the Final Determination resulted from an order of remand directed by the Honorable Judge John Geathers. Such a remand required disregarding an earlier Final Determination dated February 20, 1998. In addition, the citation itself was issued after DOR concluded its review of the matter as reported to it by SLED.

3. Conclusions of Law

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

A. Introduction

Here, McNickles and AAA argue DOR violated procedural due process by creating an unreasonable delay in issuing a citation. DOR asserts no procedural due process was violated since the citation was timely issued.

B. Applicable Law

In general, the complaining party must show that prejudice resulted from the manner in which the administrative process was handled. Palmetto Alliance, Inc. v. South Carolina Public Service Comm'n, 282 S.C. 430, 319 S.E. 2d 695 (1984). At a minimum, a party complaining that due process is violated by a delay must show the delay caused actual prejudice. See State v. Brazell, 325 S.C. 65, 480 S.E.2d 64 (1997) (one alleging that a preindictment delay violated due process must prove the delay caused substantial actual prejudice to the right to a fair trial); G. H. Walker & Co. v. State Tax Comm'n, 403 N.Y.S. 2d 811 (1978) (in the absence of a showing that a delay caused prejudice, even a delay of nine and one-half years by the State Tax Commission in holding a hearing did not deny due process to the petitioners); State v. Chavis, 261 S.C. 408, 412, 200 S.E.2d 390, 392 (1973) ("where, as in the instant case, there is nothing other than an unexplained delay on the part of the reporting officials, unaccompanied by any showing of real prejudice to the driver, the driver is not entitled to any relief because of delay in imposing the suspension."). In fact, a showing that the delay was reasonable tends to diminish the impact of any prejudice shown. See State v. Strassburg, 352 N.W.2d 215 (Ct. App. 1984) (a delay in commencement of a proceeding was reasonable considering the amount of preparation required before the state could file its petition).

C. Application of Law to Facts

Here, no persuasive evidence demonstrates prejudice by the delay in issuing the citation or the Final Determination. Neither McNickles nor AAA established facts showing a loss of witnesses or loss of evidence or any other hardship resulting from the delay. Accordingly, no rights to procedural due process were violated by the delay in issuing the citation or Final Determination.

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. McNickles and AAA 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:

McNickles placed a Class III, Blackjack machine with a three player station in a game room known as AAA Amusements. At the time of the inspection on November 22, 1996, AAA operated the location and held a retail license 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. McNickles'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. McNickles's Blackjack machine with its three player stations effectively became unlicensed, and those unlicensed stations were incapable of being lawfully operated until new licenses were issued. See S.C. Code Ann. § 12-21-2776 (Supp. 1998) (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.

Following the statutory language revoking the machine licenses in the offending establishment, the statute immediately and succinctly 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. 1998). 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. 1998). 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 a further license beyond the establishment license required by Article 19. Specifically, Article 20 requires a location license 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. 1998) (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. 1998). 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]." S.C. Code Ann. § 12-21-2788 (Supp. 1998); S.C. Code Ann. § 12-21-2786 (Supp. 1998). (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. 1998). Again, the General Assembly could have directed that the retail license be revoked if it wished to close the location for six months. It did not so direct.

Accordingly, at least three areas of location or establishment licenses are available for revocation. Despite these location licenses, § 12-21-2804(A) directs the revocation of only "licenses of machines" and not location licenses. 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. Being aware of the difference, the statutory language of § 12-21-2804(A) provided for the revocation of the licenses for the machines and made no mention of revocation of an establishment license.

Such a conclusion is consistent with a plain and unforced reading of the statute which shows that a symmetry exists between the revocation of the machine licenses and the imposition of a six month prohibition on re-licensing the affected machines. The symmetry is broken by the dead location view since the revocation of a machine license produces a closure of a location 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.

D. Applicability of Penalty to Machine Owner


1. Positions of Parties

DOR asserts that a fine of $5,000 is due from McNickles as the holder of the machine license. McNickles argues it is not liable for a penalty since as a machine owner it had no part in violating the single place or premises requirement. In response to McNickles's argument, DOR asserts that a violation of S.C. Code Ann. § 12-21-2804 has been established and that a fine is imposed on the license holder. Further, the fine is not dependent upon a showing of scienter or that knowledge of the violation was present in McNickles.

2. Findings of Fact

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

No dispute exists that McNickles has no management control of any employee working for the game rooms involved in this case. Rather, the day-to-day management control over employees at the three game rooms was totally outside McNickles and was in AAA. However, despite a lack of daily control, McNickles shared profits and losses with the location operator. Accordingly, control of the licenses to the Class III machines is in McNickles.

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 pertinent question is: a fine against whom?

A. Persons Liable

The person liable for the fine is the "person violating" section 12-21-2804(A). S.C. Code Ann. § 12-21-2804(F) (Supp. 1997). For periods beginning after July 1, 1994 (obviously the case in this matter), the person violating § 12-21-2804(A) is the one who "maintain[s] any licenses or permits for more than five machines authorized under Section 12-21-2720(A)(3) at a single place or premises."(4) S.C. Code Ann. §§ 12-21-2804(A) (Supp. 1997). Persons maintain licenses for more than five machines if they "continue or preserve in or with; to carry on." Black's Law Dictionary 953 (6th ed. 1990). See Merriam-Webster OnLine Dictionary, 1998 (maintain means "to continue or persevere in: carry on, keep up" or "to support or provide for.").(5)

Who carries on the license in this case? At least in part, McNickles does. The license is used by McNickles to share in the profits or losses produced by the license. Likewise, it is not insignificant that McNickles provides the very license needed to operate the machines. As such, McNickles, as one of the maintainers of the licenses, is liable for a fine. S.C. Code Ann. § 12-21-2804(F) (Supp. 1997).

B. Lack of Knowledge

For two reasons, the fact that McNickles had no day-to-day control over employees at the location does not prevent the imposition of a fine. First, the General Assembly did not impose a duty of finding the violator had any degree of intention such as "knowingly," "intentionally" or "willfully." 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. In fact, 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). Second, since the statutory language does not impose knowledge as a requirement, none can be added. Accordingly, lack of knowledge or intention does not halt the imposition of a fine against McNickles.

E. Amount of Penalty


1. Positions of Parties

DOR asserts that a fine of $5,000 is due from McNickles, as the holder of the machine license, and $5,000 is due from AAA as the location owner. Both McNickles and AAA argue the penalty is too severe.

2. Findings of Fact

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

AAA's policy is that an employee need not be assigned to a single game room but that an employee may serve more than one game room. Consistent with the stated policy, at the time of inspection on November 22, 1996, no employee was present in the game room in dispute.

McNickles places the machines with AAA and each share in the profits of the machines. Under this arrangement, management of the rooms in which the Class III machines are located is in AAA. However, actual maintenance and control of the Class III machines is in McNickles. In summary, as to the operation of the machines, AAA uses the game rooms for its retail business and McNickles uses the game rooms for its ownership of machines.

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. 1998). In this case the persons liable for the fine are McNickles and AAA. S.C. Code Ann. § 12-21-2804(F) (Supp. 1998).

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, the evidence establishes that AAA and McNickles violated section 12-21-2804(A). At the time of the violation, AAA had a policy of not requiring an employee to be physically present on the premises on the game room. Rather, AAA had a policy of requiring that an employee be in close proximity to the game room so that the room was within the line of sight of the machines. That policy is not consistent with the requirements of the statute and regulations. Nonetheless, the erroneous interpretation of the statute was taken in good faith and constitutes a mitigating factor in assessing a fine. Under all of the circumstances, a fine of $4,000 is appropriate.

McNickles differs from AAA in that McNickles has no management control at the location. While a party who derives income from the machines should not be dismissed from liability for violations on the very premises that produce the income, the lack of control over the factor that caused the violation is a mitigating factor. Here, McNickles's lack of control over employees is a factor to be considered in assessing a fine. Given McNickles's lesser control in this matter, McNickles is liable for a penalty of $2,000.

IV. Order


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

The three licenses for the three station Blackjack machine here in dispute are revoked, a fine of $4,000 is imposed on AAA and a $2,000 fine on McNickles. Further, McNickles and AAA are not required to prohibit the use of the Class III machines at the location for a period of six months. Instead, McNickles and AAA are denied the privilege of using the three station Blackjack machine here in dispute for a period of six months from the time the revocation becomes final.

AND IT IS SO ORDERED.

____________________________

RAY N. STEVENS

Administrative Law Judge

Dated: March 3, 1999

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" as required by Article 20 is not the retail sales tax license of S.C. Code Ann. § 12-36-510 (Supp. 1998) required by S.C. Code Ann. § 12-21-2703 (Supp. 1998). The name "retail license" is well known by the legislature. See 12-36-510 (Supp. 1998). 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 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. 1998).

4. The actual language of the statute is that DOR may not "authorize to be maintained" any licenses or permits for more than five Class III machines at a single place or premises. Given such language, the clear intent is that if DOR is not authorized to allow one to maintain more than five licenses, then the person who improperly maintains the excess number of licenses is the person who violates the statute.

5. In arriving at the meaning of words used in a statute, the primary rule is to ascertain and give effect to the legislature's intent or purpose as expressed in the statute. Green v. Thornton, 265 S.C. 436, 219 S.E.2d 827 (1975). The legislature's intent should be ascertained primarily from the plain language of the statute. 82 C.J.S. Statutes § 322 (b), at 571 (1953). Unless the statute requires a different interpretation, the words used must be given their ordinary meaning. Hughes v. Edwards, 265 S.C. 529, 220 S.E.2d 231 (1975).


Brown Bldg.

 

 

 

 

 

Copyright © 2022 South Carolina Administrative Law Court