decided: May 10, 1985.
YOUNG J. LEE, INDIVIDUALLY AND IN HER CAPACITY AS A SHAREHOLDER OF HITE'S FRIENDLY DRUG STORE NO. 5, INC., ET AL., PETITIONER
COMMONWEALTH OF PENNSYLVANIA, BUREAU OF STATE LOTTERIES, DEPARTMENT OF REVENUE, RESPONDENT
Original jurisdiction in case of Young J. Lee, Inc., t/a Hite's Friendly Drug Store v. Commonwealth of Pennsylvania, Bureau of State Lotteries, Department of Revenue.
Samuel P. Kamin, for petitioner.
Nancy A. Patterson, Assistant Counsel, with her, George T. Bell, Chief Counsel, for respondent.
President Judge Crumlish, Jr. and Judges Rogers, Williams, Jr., MacPhail, Doyle, Barry and Colins. Opinion by Judge Barry. Judge Williams, Jr. did not participate in the decision in this case. Judge MacPhail dissents. Dissenting Opinion by Judge Doyle.
[ 89 Pa. Commw. Page 215]
This case comes before us following a Pennsylvania Supreme Court order reversing our grant of a supersedeas and remanding the case for further proceedings. The question to be considered on remand is whether the revocation of a lottery sales agent's license, issued to Young J. Lee, Inc., t/a Hite's Friendly Drug Store (Petitioner), without a pre-revocation or post-revocation hearing, violates the due process clause of the Fourteenth Amendment of the United States Constitution.
The Petitioner's lottery license was revoked pursuant to Section 7(b) of the State Lottery Law (Law), Act of August 26, 1971, P.L. 351, as amended, 72 P.S. § 3761-7(b) and its accompanying regulation, 61 Pa. Code § 805.17. Section 7(b) of the Law authorizes the Secretary of the Department of Revenue to revoke a lottery license for various reasons including the conviction of a crime involving moral turpitude*fn1 or being found guilty of any fraud or misrepresentation.*fn2
On December 7, 1981 the Petitioner, by its president, Young J. Lee, entered a guilty plea in the Court of Common Pleas of Allegheny County to ten counts of theft by deception.*fn3 When the Bureau of State Lotteries (Bureau) learned of this it sent Petitioner a notice of revocation citing as the reason for its action the guilty plea of Petitioner as well as Petitioner's
[ 89 Pa. Commw. Page 216]
breach of the terms of the contract between Petitioner and the Bureau. Petitioner requested the Bureau to stay its revocation action pending further review. The Bureau did so and conducted a further review considering facts submitted by Petitioner. The Bureau did not, however, hold a due process hearing. Petitioner's license was then revoked effective July 19, 1982. An appeal to this Court followed and Judge Blatt, in addition to ruling on numerous preliminary motions, granted a stay of the Bureau's order. The Pennsylvania Supreme Court reversed the granting of the stay, but did not reach the due process claim finding that it was not yet ripe for review. Young J. Lee, Inc. v. Department of Revenue, Bureau of State Lotteries, 504 Pa. 367, 474 A.2d 266 (1983). The Supreme Court also determined that Petitioner's appeal was within this Court's appellate jurisdiction and stated:
With respect to the requirement that the legal remedy before the Board of Claims must be inadequate before the Commonwealth Court has jurisdiction, the adequacy of a licensee's remedy in the Board of Claims for revocation of a license for an indefinite term is doubtful. That Board has jurisdiction only of claims arising under "contracts" and then only to award money damages. It has no authority to order the Department to hold a hearing. . . . (Footnote omitted.)
Id. at 378, 474 A.2d at 271. Before considering the constitutional question raised we must respond to the Bureau's contention that Petitioner failed to notify the State Attorney General's Office of its constitutional challenge to a Pennsylvania statute pursuant to Pennsylvania Rule of Appellate Procedure 521(a), which requires such notice in situations where "the Commonwealth or any officer thereof, acting in his official capacity, is not a party. . . ." Inasmuch as the Commonwealth
[ 89 Pa. Commw. Page 217]
in the pursuit of one's livelihood. Petitioner also cites Goldsmith v. United States Board of Tax Appeals, 270 U.S. 117 (1926). In Goldsmith the Court determined that a due process hearing was constitutionally required prior to denying an attorney the right to practice law pursuant to the grant of a state license in a certain tax forum. Finally, Petitioner cites Willner v. Committee on Character and Fitness, 373 U.S. 96 (1963), in which the Court ruled that due process must be accorded an individual prior to a denial of admission to the bar.
The Bureau attempts to distinguish these cases, arguing that in every one of them, an individual's livelihood was at stake. The Bureau points out that a lottery sales agent is statutorily prohibited from engaging "in business exclusively as a lottery sales agent." 72 P.S. § 3761-7(a). Thus, according to the Bureau's argument, monies received from the sales of lottery tickets are merely a secondary source of income. These revenues, however, may constitute a substantial portion of a licensee's income. Furthermore, lottery sales have the effect of increasing traffic in a licensee's store, thereby increasing sales of non-lottery items. Based on these factors, we are unwilling to hold that the loss of a lottery license has only an insubstantial effect on the licensee's livelihood.
The Bureau also argues that the legal relationship between it and Petitioner is based on a contract and in that sense, is not a true license. However, the Supreme Court, in its opinion remanding this matter to us, stated, ". . . A lottery license which permits the licensee to sell state lottery tickets and to receive a commission from the Commonwealth on each sale has features of both a license and a contract between the Commonwealth and the licensee." Young J. Lee, Inc., 504 Pa. at 378, 474 A.2d at 271 (plurality opinion). That this relationship has dual aspects does not persuade
[ 89 Pa. Commw. Page 219]
us to conclude that the protections afforded a license are no longer a concern to us.
Finally we are persuaded by admitted dicta of the Supreme Court in Young J. Lee, Inc. Mr. Justice Hutchinson, speaking for himself, Mr. Justice Flaherty and Mr. Justice Zappala, stated, "While we agree . . . that the suspension of a license to sell lottery tickets does not require a predetermination hearing, due process may require that the licensee be afforded an opportunity to be heard before a final revocation. . . ." Id. at 378, 474 A.2d at 271 (emphasis added). Furthermore, Mr. Chief Justice Roberts, in a concurring opinion joined by Mr. Justice Larsen, stated, "Nor has appellee established any likelihood that it will prevail on the merits of its challenge to the revocation of its license at the pre-revocation hearing to which it is entitled." Id. at 382, 474 A.2d at 273 (emphasis added). In summation, we believe that petitioner's lottery license gives it a legitimate protected property right which entitles it to due process protection. As petitioner's license was revoked without being afforded these protections, its license must be reinstated until due process is afforded to petitioner.*fn4
Now, May 10, 1985, the July 8, 1982 determination of the Bureau of State Lotteries revoking Petitioner's license is reversed and the license is ordered to be reinstated.
[ 89 Pa. Commw. Page 220]
Judge Williams, Jr. did not participate in the decision in this case.
Judge MacPhail dissents.
Order revoking license reversed. License ordered reinstated.
Dissenting Opinion by Judge Doyle:
I dissent. The cases cited by Petitioner clearly involve situations where an individual's livelihood is at stake. Despite its recognition that a lottery sales agent is statutorily prohibited from engaging in business exclusively as such an agent, the majority finds a property right stating that revenue from the sale of lottery tickets " may constitute a substantial portion of a licensee's income." (Emphasis added.) The majority further writes, "lottery sales have the effect of increasing traffic in a licensee's store, thereby increasing sales of non-lottery items." The majority apparently is taking judicial notice of these "facts." The determination that a property right exists based upon these "facts" is, in my view, error.
I believe that the relationship between the Bureau and the lottery sales agent is primarily and essentially contractual in nature. See Transamerica Insurance Co. v. Judie, 30 Pa. Commonwealth Ct. 259, 263, 373 A.2d 478, 480 (1977). The application for a sales agent's license is an offer; the approval by the Bureau is the acceptance; the agreements by both parties to be bound by the Law (including those provisions of the Law allowing for license revocation for the reasons
[ 89 Pa. Commw. Page 221]
enunciated in Section 7(b), among which reasons is conviction of a crime involving moral turpitude) and the Bureau's regulations constitute the consideration.*fn1 When Petitioner entered its guilty plea, the Bureau, therefore, under general principles of contract, had the right to terminate the contract.
Further examination of the Bureau's regulations indicates that the benefit conferred upon the licensee (a five per cent commission on sales) is conditioned upon the licensee's own performance. See 61 Pa. Code §§ 805.8 and 805.10. Thus, no vested rights are acquired which would trigger due process. I therefore believe that a lottery license conveys, at most, an expectancy.
[ 89 Pa. Commw. Page 222]
Although the Pennsylvania Supreme Court in Young J. Lee, Inc. v. Department of Revenue, Bureau Page 222} of State Lotteries, 504 Pa. 367, 474 A.2d 266 (1983) indicated that the lottery license has features of both a license and a contract, that does not mean that it is in fact a license which triggers due process rights. Additionally, Mr. Justice Hutchinson indicated that due process may require a hearing.
The legislature knows full well how to indicate its desire that a hearing be held prior to revocation of a license. See e.g. Section 471 of the Liquor Code, Act of April 12, 1951, P.L. 90, as amended, 47 P.S. § 4-471. It gave no such indication of its intent when it passed the Law. Compare, e.g., The New York state lottery for education law, N.Y. Tax Law § 1607 (Consol. 1984).
Accordingly, I would affirm the Bureau's determination.