Court Opinion

ID: 9670671
Source: CourtListenerOpinion
Date Created: 2023-08-24 03:24:07.500226+00
Date Added: 2024-06-11T18:16:05.891610
License: Public Domain

HENDERSON, Justice,
(dissenting).
This is another gambling case which has reached the highest court of this state. I would affirm the decision of the circuit court.
Although I agree with the majority’s determination that Sodak/IGT are not Operators or retailers, unconstitutionality need not be based on a finding that they are operators or retailers; rather, their performance of operator-functions alone violates the statutory split between operator/retailer and manufacturer/distributor. The majority disagreed with the trial court’s ruling that ARSD 20:18:17:24.14 violated sections of SDCL ch. 42-7B by unlawfully permitting slot machine manufacturers and distributors to perform functions statutorily reserved to operators and retailers. Thus, I respectfully dissent.
Per SDCL 42-7B-4(16), an operator is defined as:
any person who places slot machines upon his own business premises or any person who, individually or jointly pursuant to an agreement whereby consideration is paid for the right to place slot machines or gaming tables, engages in the business of placing and operating slot machines or gaming tables within the city of Deadwood[.]
This statute does not stand alone. Border States Paving, Inc. v. Dept. of Revenue, 437 N.W.2d 872, 874 (S.D.1989). We must read on. The Legislature further clarified the responsibilities of operators under SDCL 42-7B-17:
Any operator is responsible to provide audit and security measures relating to slot machines, as prescribed by this chapter and the commission. The operator shall insure slot machine specifications comply with those set forth in this chapter and the rules of the commission. [Emphasis added.]
*76These statutes, plus SDCL 42-7B-22(l) which prohibits a slot machine manufacturer or distributor from being licensed as an operator or retañer, reveal a clear intention by the South Dakota Legislature to separate (a) those who profit from manufacturing and distribution from (b) those who, as operators and retaüers, depend upon the play of the machines for profit.
With this in mind, let us examine the relationship between Sodak/IGT and Quar-termania operators. Sodak is the exclusive distributor of IGT gaming equipment in South Dakota. Together, Sodak/IGT offer communication and management services, including some audit and security functions for Quartermania operators. Additionally, Quar-termania’s central computer generates weekly invoices stating the amount the operator owes for Quartermania services. The amount is based on the total coins played per machine for the week, multiplied by 6%. So-dak/IGT then receives a percentage of the take. Quite literally, manufacturers and distributors improperly depend upon the play of the machine to make a profit under this system.
Sodak/IGT perform auditing and security tasks — functions which are the operator’s responsibility as the language of SDCL 42-7B-17 mandates. Aman v. Edmunds Cent. School Dist., 494 N.W.2d 198, 199 (S.D.1992); Appeal of AT & T Info. Sys., 405 N.W.2d 24, 27 (S.D.1987). This fact is uncontroverted. The law permits an operator to delegate the performance of these functions to someone else, providing the operator remains legally responsible for these obligations. However, as SDCL 42-7B-22(l) plainly indicates, when it comes to manufacturers and operators, never the twain shall meet. As the “reasonable natural and practical meaning, as intended by the Legislature” indicates, In re Sioux Valley Hospital Ass’n, 513 N.W.2d 562 (S.D.1994) (citing Norgeot v. State, 334 N.W.2d 501, 503 (S.D.1983)), via SDCL 42-7B-17 and 42-7B-22(l), an operator may indeed delegate these responsibüities, but the same statutes disqualify manufacturers and distributors from such delegation.
When South Dakota voters approved of gaming in Deadwood, they did so with an intent that Deadwood gambling casinos be operated under restrictions and strict control. For example, part of that control includes betting limits, which voters reinforced in the September 4, 1993 statewide special election by rejecting a proposed increase in said limits. The people of South Dakota are the source of authority and their intentions should be honored. Regulation over who can do what is also found in SDCL chap. 42-7B. Control is reflected by public policy statements found in SDCL 42-7B-2.1:
(1) The success of gaming is dependent upon public confidence and trust that licensed gaming is conducted honestly and competitively, that the rights of the creditors of licensees are protected and that gaming is free from criminal and corrup-tive elements;
(2) Public confidence and trust can only be maintained by strict regulation of all persons, locations, practices, associations and activities related to the operation of licensed gaming establishments and the manufacture or distribution of gaming devices and equipment [.] [Emphasis added.]
Sodak/IGT is not being paid a flat fee for these services, but a percentage of the drop. Once the slot machines have been sold, the manufacturer or distributor is supposed to lose financial interest in the slot machines. Under the majority decision, that does not happen.
The statutes cited herein envision a separation, but the questioned rule has assimüat-ed operators and manufaeturers/distributors into one. This opens a window for potential corruption whfle eliminating supervision. We should not countenance such a rule. Nor do I intend to insinuate any improper behavior on behalf of the operators or Sodak/IGT; rather, public policy and statutes demand that we lessen the temptation for such. Although operators are not prohibited from delegating their responsibilities, those responsibilities cannot be delegated to manufacturers or distributors. The task must be delegated elsewhere.
ARSD 20:18:17:24.14 is an administrative regulation birthed by the South Dakota Gaming Commission and unlawfully permits *77slot machine manufacturers and distributors to perform certain functions statutorily reserved to operators and retailers, an unconstitutional and invalid exercise of legislative power by the Gaming Commission. See Matter of Application No. 5189-3, 467 N.W.2d 907 (S.D.1991). Sodak/IGT are not, in fact, “operators”; rather, Sodak/IGT perform operator-functions that manufacturers and distributors are prohibited from performing. Hence, Sodak/IGT need not “place” or “operate” slot machines to act as operators. By enacting the rule in question, the Gaming Commission stepped beyond its legislative authority and violated Art. Ill, § 1 of the South Dakota Constitution. See Matter of Ackerson, Karlen & Schmitt, 335 N.W.2d 342 (S.D.1983). The people’s will has been subserved and frustrated.
I am authorized to state that Justice SABERS joins this dissent.