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Administrative Law Court
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SC Administrative Law Court Decisions

SCDOR vs. AAA Entertainment Corp.

South Carolina Department of Revenue

South Carolina Department of Revenue

AAA Entertainment Corp.

Petitioner & Representative: South Carolina Department of Revenue, Nicholas P. Sipe, Esq.

Respondent & Representative: AAA Entertainment Corp., H. Fred Kuhn, Jr., Esq.

Parties Present: All parties



I. Statement of the Case

The South Carolina Department of Revenue (DOR) seeks to impose a $4,000 biennial license fee against AAA Entertainment Corp. (AAA) since AAA operated a Class III video machine without obtaining a license. AAA, the machine owner, opposes DOR's position.

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)) with the hearing in this matter held on February 22, 2000 at the Edgar Brown Building, Columbia, South Carolina. Based upon the evidence and the argument presented, I conclude the prior judgment in Department of Revenue v. AAA Entertainment Corp., 98-ALJ-17-0726-CC (March 19, 1999) bars DOR from now seeking to impose the $4,000 license fee.

II. Issue

Is DOR's action against AAA for the $4,000 license fee barred by res judicata?

III. Analysis

1. Findings of Fact

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

AAA owned one Class III video game machine which it maintained for use at a place of business located at 20 Simmons Road, Burton, South Carolina. At that address on July 2, 1998, SLED Agents conducted an inspection of AAA's video machine. The inspection included walking into the location and searching for the license number on the machine.

During the inspection, the SLED Agents determined after a thorough examination of the machine that the machine was unlicensed. Further, the unlicensed machine was in an establishment that was open for business, was turned on, operational, and accessible to customers. Since no license was on the machine, the SLED Agents issued a citation to AAA for a violation of S.C. Code Ann. Sec. 12-21-2720(A) (Supp. 1998) for maintaining for use an unlicensed Class III machine. Further, DOR established a fine of $2,500. After a hearing before the Administrative Law Judge Division, the Administrative Law Judge imposed a fine of $2,500. Department of Revenue v. AAA Entertainment Corp., 98-ALJ-17-0726-CC (March 19, 1999).

On March 24, 1999, DOR sought to impose upon AAA a demand for payment of a $4,000 license fee. The fee was alleged to be due since the July 2, 1998 inspection demonstrated the machine was in operation on that date. No evidence establishes that the March 24, 1999 demand for payment resulted from any follow-up inspection beyond that made on July 2, 1998 inspection. Rather, the evidence establishes the March 24, 1999 demand for payment resulted from the July 2, 1998 inspection.

2. Conclusions of Law

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

Res judicata relies upon the principle that the public interest is best served by having an end to litigation. First Nat. Bank of Greenville v. U.S. Fidelity & Guaranty Co., 207 S.C. 15, 35 S.E.2d 47 (1945). That principle is accomplished by prohibiting litigation in a second action of any issues that were actually litigated or that might have been litigated in a prior action. To trigger this prohibition, the first and second actions must be between the identical parties, the subject matter in the second action must be the same as in the prior litigation, and the first action must have culminated in a final judgment. Griggs v. Griggs, 214 S.C. 177, 51 S.E.2d 622 (1949); Pye v. Aycock, 325 S.C. 426, 480 S.E.2d 455 (Ct. App. 1997). As to the last element of deciding if the first action culminated in a final judgment, a final unappealed decision of an administrative agency is properly considered as a final judgment for res judicata purposes. See Earls v. Aycock, 276 S.C. 471, 279 S.E.2d 614 (1981) (holding that the mere fact an administrative agency rather than a judicial body rendered the previous decision does not prevent the application of res judicata). When these criteria are met, the claim sought to be raised in the second action cannot be raised since the claim is extinguished by the first action. Restatement (Second) of Judgments § 24 (1980).

Here, the facts demonstrate a prior action between the same parties resulted in a final decision on March 19, 1999 in Department of Revenue v. AAA Entertainment Corp., 98-ALJ-17-0726-CC. In that decision DOR sought and obtained a fine against AAA of $2,500 for not having a license to operate a Class III machine.

Additionally, the subject matter in this action is the same as that in the prior action. In both actions DOR sought then and seeks now to impose a monetary charge for AAA's failure to obtain a license to operate a Class III machine. Indeed, the machine involved in the prior action is the identical machine in dispute in the current action. Further, the facts for both actions originate from a single inspection of July 2, 1998. Thus, the facts upon which DOR now relies to seek a $4,000 license fee are the same facts that were relied upon to obtain the $2,500 fine in the previous action. Accordingly, the subject matter is the same in both and DOR could have asserted in the first action that an unlicensed and operating machine requires not only a $2,500 fine but also a $4,000 license fee.

Therefore, because DOR could have litigated the imposition of the $4,000 license fee in the prior enforcement action, the current enforcement action is barred by res judicata.

IV. Order

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

DOR's imposition of a $4,000 license fee against Respondent AAA Entertainment, Corp. is hereby dismissed.



Administrative Law Judge

Dated: March 23, 2000

Columbia, South Carolina

Brown Bldg.






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