Thisopinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3 IN THE MATTER OF RIH ACQUIS

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3.

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

IN THE MATTER OF RIH

ACQUISITIONS NJ, LLC FOR

REFUND OF SLOT MACHINE

LICENSE FEES.

_______________________________

Telephonically argued January 11, 2017 Decided February 2, 2017

Before Judges Sabatino, Nugent and Haas.

On appeal from the New Jersey Department of Law and Public Safety, Division of Gaming Enforcement.

Gilbert L. Brooks argued the cause for appellant RIH Acquisitions NJ, LLC (Duane Morris LLP, attorneys; Mr. Brooks, Chris Soriano, John Kahn, Adam Berger, and Trevor Taniguchi, on the briefs).

Mary A. Carboni, Deputy Attorney General, argued the cause for respondent New Jersey Division of Gaming Enforcement (Christopher S. Porrino, Attorney General, attorney; David Rebuck, Assistant Attorney General, of counsel; Mary Jo Flaherty, Assistant Attorney General, Charles F. Kimmel, Deputy Attorney General, Tracy E. Richardson, Deputy Attorney General, and Ms. Carboni, on the brief).

PER CURIAM

This appeal concerns a narrow issue of statutory construction arising under the Casino Control Act, N.J.S.A. 5:12-1 to -233 ("the Act"). The issue involves N.J.S.A. 5:12-140, a provision that authorizes the State to collect from casinos an annual $500 license fee for every slot machine "maintained for use or in use in any licensed casino establishment in this State." N.J.S.A. 5:12-140(a). The fee provision in its entirety reads as follows

a. In addition to any other tax or fee imposed by this act, there is also hereby imposed an annual license fee of $500.00 upon every slot machine; maintained for use or in use in any licensed casino establishment in this State.

b. License fees imposed under the provisions of this section shall be imposed as of the first day of July of each year with regard to all slot machines maintained for use or in use on that date, and on a pro rata basis thereafter during the year with regard to all slot machines maintained for use or placed in use after July 1.

[N.J.S.A. 5:12-140(a) and (b) (emphasis added).]

The dispute here largely revolves around the "pro rata basis" language in subsection (b) of this provision.

Appellant RIH Acquisitions NJ, LLC ("RANJ") is the former operator of the now-defunct Atlantic Club Casino ("Atlantic Club"). As part of its operations, the Atlantic Club maintained for use 1,641 slot machines as of July 1, 2013. Before that date, the casino timely paid in full the annual $500 fee per machine due to the State.

About four months later, in November 2013, the casino filed a Chapter 11 bankruptcy petition. After a hearing in the bankruptcy court, RANJ sold the Atlantic Club's gaming equipment, including all of its slot machines, to the Tropicana Atlantic City Corp., operator of the Tropicana Casino. Shortly thereafter, the Atlantic Club ceased all gaming operations on January 13, 2014.

RANJ thereafter sought a refund in the amount of $374,267.72, contending it was entitled to a pro rata refund for the remaining portion of the fiscal year from January 14, 2014 through June 30, 2014, in which its slot machines would no longer be in its possession or use. The refund claim was referred from the Division of Taxation to the Division of Gaming Enforcement ("DGE").

The DGE denied appellant's request, stating in an April 1, 2015 letter of decision that N.J.S.A. 5:12-140(b) only provides for pro rata adjustments of the annual fee when slot machines are added to, not removed from, service by a casino during a fiscal year. Moreover, the DGE noted that a casino regulation, N.J.A.C. 13:69A-9.19(b), expressly states that amounts paid by casino licensees to the State "shall not be refundable[,]" except for certain specified charges that are distinct from slot machine license fees.

For purposes of our appellate review, we treat the April 1, 2015 denial letter as constituting the DGE's final administrative agency decision. See R. 2:2-3(a)(2); see also Silviera-Fancisco v. Bd. of Educ. of City of Elizabeth, 224 N.J. 126, 137 (2016) (treating as a final reviewable agency decision "one in which the agency communicates with 'unmistakable written notice the finality' of its decision") (quoting In re CAFRA Permit No. 87-0959-5, 152 N.J. 287, 301 (1997)).1

RANJ now appeals. It contends that subsection (b) of N.J.S.A. 5:12-140 should be read reciprocally, so as to allow not only pro rata increases in the annual fees when a casino acquires additional slot machines during a fiscal year, but also pro rata refunds to licensees for annual fees they previously paid for slot machines they cease using or maintaining. RANJ contends it would be fundamentally unfair for the statute to be read to only permit pro rata increases and not pro rata refunds. Further, RANJ argues that the non-refundability regulation, N.J.A.C. 13:69A-9.19(b), is contrary to the plain meaning of the statute and must be invalidated as ultra vires.

In reviewing the legal issues presented, we are mindful that "[i]t is settled that '[a]n administrative agency's interpretation of statutes and regulations within its implementing and enforcing responsibility is ordinarily entitled to our deference.'" Wnuck v. N.J. Div. of Motor Vehicles, 337 N.J. Super. 52, 56 (App. Div. 2001) (quoting In re Appeal by Progressive Cas. Ins. Co., 307 N.J. Super. 93, 102 (App. Div. 1997)). Courts will normally afford such deference unless the agency's interpretation is "plainly unreasonable." N.J. Turnpike Auth. v. AFSCME, Council 73, 150 N.J. 331, 351 (1997) (internal citations omitted). "Absent arbitrary, unreasonable or capricious action, the agency's determination must be affirmed." Wnuck, supra, 337 N.J. Super. at 56 (citing R & R Mktg., L.L.C. v. Brown-Forman Corp., 158 N.J. 170, 175 (1999)).

We also recognize the DGE's specific expertise and broad "general responsibility for the implementation" of the Act and its associated regulations. N.J.S.A. 5:12-76. That said, we need not be bound by the regulatory agency's opinions on purely legal issues. See Levine v. State, Dep't of Transp., 338 N.J. Super. 28, 32 (App. Div. 2001) (citing G.S. v. Dep't of Human Servs., Div. of Youth & Family Servs., 157 N.J. 161, 170 (1999)); see also Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973).

Having carefully considered the parties' arguments, we are persuaded that the agency's interpretation of N.J.S.A. 5:12-140 to authorize only pro rata fee increases, and not pro rata refunds, for slot machines used by a licensee during only part of a fiscal year is manifestly correct. We are likewise persuaded that the associated regulation in N.J.A.C. 13:69A-9.19(b) stating such annual fees "shall not be refundable" is also valid and consistent with the statute.

The original version of N.J.S.A. 5:12-140 enacted by the Legislature in 1977 read as follows

a. In addition to any other tax or fee imposed by this act, there is also hereby imposed an annual license fee of $200.00 upon every slot machine which is subject to the occupational tax on coin operated devices under the provisions of the Federal Internal Revenue Code of 1954 and the amendments thereof and supplements thereto.

b. License fees imposed under the provisions of this section shall be imposed as of the first day of July of each year with regard to all slot machines in use on that date, and on a pro rata basis thereafter during the year with regard to all slot machines placed in use after July 1.

[See 1977 version of N.J.S.A. 5:12-140 recited in Assembly, No. 3602 (1979).]

Two years later, the provision was amended to insert the phrase "maintained for use" in both subsections (a) and (b), among other changes which included an increase in the annual fee per machine from $200 to $500. See Assembly No. 3602 (1979).

RANJ argues that the Legislature's intent in inserting the phrase "maintained for use" into the statute contemplated affording pro rata refunds to casino licensees such as itself when they sell or otherwise dispose of slot machines during the course of a fiscal year and no longer use or maintain for use such machines. RANJ contends that such an interpretation allowing for pro rata refunds for years of only partial use is especially justified in a situation such as this one, in which a casino ceased its activities entirely in the midst of a fiscal period.

We disagree. The text of the subsection (b) says nothing about refunds. Instead, it establishes two distinct sources of a fee calculation: (1) a baseline fee corresponding to "all slot machines maintained for use or in use" determined "as of the first day of July of each [fiscal] year"; and (2) a supplemental fee calculated "on a pro rata basis thereafter during the year with regard to all slot machines maintained for use or placed in use after July 1." N.J.S.A. 5:12-140(b). The statute is conspicuously silent about making fee adjustments for any slot machines discontinued from use or no longer maintained for use during the course of the fiscal year.

The DGE argues that the 1979 amendment has the effect of preventing casinos from exploiting a potential "loophole." Through such a loophole, licensees conceivably could artificially reduce their annual fee amount by temporarily removing from "use" numerous slot machines on July 1 of a fiscal year, and then restoring them back to use shortly thereafter. By inserting the words "maintained for use" into the statute, the Legislature closed such a potential loophole. That is a sensible interpretation of the statute as a whole and the likely objective of the 1979 amendment to N.J.S.A. 5:12-140. Although the DGE cites to no published legislative committee reports or sponsor statements corroborating this explanation, the chronology, text, and structure of the statute nevertheless are consistent with its compelling position.2 RANJ points to no legislative history materials supporting its contrary interpretation.

RANJ further argues that the State unfairly receives a windfall in slot machine fees paid by an operator at the outset of a fiscal year in situations when that operator goes out of business during the midst of that year and thus no longer requires the agency's ongoing inspections and oversight. We recognize that the DGE, as well as the Casino Control Commission, are administrative agencies funded by gaming licensees. We also recognize that a different provision in the Act, N.J.S.A. 5:12-143(b), establishes a State fund for operating expenses.

However, the up-front payment of casino license fees to cover such anticipated operating expenses may be credited at the end of a fiscal year towards the following year, or refunded for a licensee that has ceased operations, if the State's actual regulation costs prove to be less than the original collected fees. See N.J.A.C. 13:69A-9.4(a) (delineating the facets of annual casino license fees); N.J.A.C. 13:69A-9.19(d) (authorizing credits for surplus casino license fees paid by casinos towards the next fiscal year); N.J.A.C. 13:69A-9.19(e) (authorizing refunds for surplus casino license fees paid by licensees who have ceased operations). These provisions dealing with annual "casino license fees" are distinct from the slot machine fees established in N.J.S.A. 5:12-140, and have been declared non-refundable in N.J.A.C. 13:69A-9.19(b).

We do not regard the non-refundability provision in subsection (b) of the regulation to be ultra vires. To the contrary, that regulation is harmonious with what we have ascertained to be the plain meaning of the corresponding statute.

Although appellant contends that it is fundamentally unfair for the State to treat annual slot machine fees as non-refundable, it is noteworthy that no industry member apparently objected to the regulation when it was proposed in September 2011, see 43 N.J.R. 2436(a), and adopted in November 2011. See 43 N.J.R. 3386(a) (indicating no comments from objectors were received). Nor was the agency's adoption of the regulation challenged in any appeal to this court. R. 2:2-3(a)(2); see, e.g., In re Adoption of N.J.A.C. 12:17-9.6, 395 N.J. Super. 394 (App. Div. 2007). Moreover, the alleged unfairness of having to pay a non-refundable annual fee to a governmental agency for a license is not inherently obvious. Indeed, it is commonplace for citizens to pay non-refundable fees for such things as driver's licenses and beach tags without being entitled to a pro rata refund if they no longer need the item during the course of the applicable period.

We have considered appellant's remaining arguments and conclude they lack sufficient merit for discussion. R. 2:11-3(e)(1)(E).

1 Because we are satisfied that the April 1, 2015 correspondence represents the DGE's final agency decision, we need not consider whether appellant RANJ adequately exhausted any alleged administrative remedies. The agency's legal position is plain and final, and there would have been no point in RANJ attempting to pursue review by a higher official with the agency. Indeed, both parties urge the court to reach the merits of the appeal.

2 We respectfully reject the suggestion in the agency's brief that we rely on any anecdotal or institutional knowledge allegedly possessed on this subject by agency officials. The intended meaning of a codified provision cannot be properly proven or disproven by such means without proper support in the record. See R. 2:5-4.