This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).




In the Matter of the Premises Permits

of the Knights of Columbus Council 1621,

License No. 02187.

Filed August 19, 1997


Holtan, Judge


Minnesota Gambling Control Board

Joseph H. Louwagie, Sara J. Runchey, 533 West Main Street, Marshall, MN 56258 (for Relator Knights of Columbus)

Hubert H. Humphrey III, Attorney General, Dennis D. Ahlers, Assistant Attorney General, 1200 NCL Tower, 445 Minnesota Street, St. Paul, MN 55101 (for Respondent)

Considered and decided by Willis, Presiding Judge, Crippen, Judge, and Holtan, Judge.



Relator challenges the Gambling Control Board's 90-day suspension of relator's premises permits. Because each premises violated the rule prohibiting illegal gambling and because neither the rule nor the Board's enforcement of it deprived relator of due process, we affirm.


Relator Knights of Columbus Council 1621 had premises permits to conduct lawful gambling at two establishments in which a video game machine simulating casino card games was on top of the bar. Although the machines provided no pecuniary award to players, they were "gambling devices" within the meaning of Minn. Stat. § 609.75, subds. 4, 8 (1994). Possessing a gambling device is illegal gambling pursuant to Minn. Stat. § 609.755 (1994).

A special agent visited the two premises, saw the video game machines, removed them, and reported their presence to the compliance review group of the Gambling Control Board (Board). The compliance review group determined that the machines were illegal gambling and that sanctions were warranted. Following a contested case hearing, an Administrative Law Judge (ALJ) found that the Board had not met its burden of proof that relator had knowledge of or consented to the video games, concluded that the charges should be dismissed, and recommended no sanctions.

The Board reviewed the record, the stipulated facts, and the ALJ's report, rejected the ALJ's recommendation, and imposed a 90-day suspension of relator's premise permits for the two premises where video game machines had been found.


1. Substantive Due Process

Relator first challenges Minn. R. 7861.0050 (1995) as violative of substantive due process. Minimal judicial scrutiny is the appropriate standard of review for whether an administrative rule violates due process because it is not rationally related to its legislative objective. In re Thief River Falls Amateur Hockey Ass'n, 515 N.W.2d 604, 606 (Minn. App. 1994).

Minn. R. 7861.0050 (1995), subpt. 1, prohibits illegal gambling at a site for which there is a premises permit to conduct lawful gambling. Subpart 3 provides for discipline for infractions; the premises permit may be suspended for ninety days after a first violation, for two years after a second violation, and for five years after a third violation. Prior to 1995, the rule provided a harsher penalty: a year's suspension of the premises permit for any violation. This harsher version was held not to violate substantive due process.

[T]he agency rule is rationally related to maintaining the integrity of, and public confidence in, lawful gambling because it ensures that the public can enter an establishment where there is lawful gambling and be confident that no illegal gambling has been conducted on the premises.

Id. at 606. If the harsher penalty provided prior to 1995 did not violate due process, it is only logical to conclude that the current rule does not do so.

2. Failure to Issue a Cease and Desist Order[1]

Relator argues that it was denied due process because the Board suspended its premises permits without issuing a prior cease and desist order. The rule under which relator's premises permits were suspended requires no notice, and a cease and desist order would have been moot because the video game machines were immediately removed from the sites.

Relator argues that Minn. Stat. § 349.152, subd. 3 (1994), does provide for a cease and desist order to be issued. However, that statute is permissive, not mandatory. It provides two alternatives: when a violation has occurred or is about to occur, the Board may issue a cease and desist order or it may bring an action in district court to enjoin the violative act or practice and enforce compliance. The procedures the Board must follow in suspending a premises permit and in handling a contested case are set out at Minn. Stat. § 349.155, subds. 4, 5 (1994). Relator does not contend that these procedures were not followed.

3. Illegal Gambling in Violation of Minn. Stat. § 609.755

Relator did not know that any statute was violated because its agents possessed the video game machines, and neither relator nor its agents used the machines. Relator contends that the Board has not proved that illegal gambling actually occurred at the sites, only that illegal video game machines were found there. Minn. Stat. § 609.755 (1994) provides that whoever "except where authorized by statute, possesses a gambling device" is guilty of a misdemeanor. Minn. Stat. § 609.75, subd. 4, provides that "'[g]ambling device' also includes a video game of chance, as defined in subdivision 8." It is undisputed that the machines found on the sites were video games of chance as described in subdivision 8. Because the statute provides that possession is itself a violation, regardless of use, a violation occurred.

Relator's argument was rejected in Thief River.

[The licensee] argues that the rule is unfair in its application because it penalized [the licensee], even though [the licensee] had no knowledge of the wrongdoing and did not participate in the illegal activity * * *.

Because Minn. R. 7865.0050 provides for increased penalties for organizations that actually participate in the illegal activity, it appears that the agency realized that an "innocent" organization could be penalized. * * * The purpose of the rule is not penal, but was enacted to protect the public. * * * Thus, the rule was applied as intended and is not unconstitutional.

Id. at 606-07. The fact that the rule was modified to provide less harsh penalties for "innocent" organizations further shows the agency's intent to protect the public without draconian measures. See also the Board's statement of need and reasonableness for the modification of the rule ("It is also necessary in order to be fair to those organizations who may not have been aware that illegal gambling was being conducted at the site of their leased premises.").

In changing the mandatory suspension from a year to 90 days, the Board clearly intended to be less severe with organizations that, like relator, were not culpable; however, the Board did not intend them to go unpunished altogether. Both the rule and its application here are in accord with the Board's legitimate functions, and neither deprived relator of due process.


[ ]* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.

[ ]1 We note that relator did not argue before the ALJ that the Board's failure to issue a cease and desist order deprived relator of due process. Therefore, that issue has arguably not been preserved for appeal. See Rouland v. Thorson, 542 N.W.2d 681, 684 (Minn. App. 1996) (support obligor who "did not raise an issue to the ALJ regarding the child's needs" held to have waived right to challenge the absence of findings on the child's needs because "[t]his court will not consider issues that the court below has not first considered and decided."). However, in the interest of completeness, we will address it. See Minn. R. Civ. App. P. 103.04, permitting the court to review any matter "as the interests of justice may require."