Law filed an application with the City in 2007 to obtain an “on-sale alcoholic beverage permit,” and in 2009 his application was granted. However, during the pendency of Law’s application the City enacted a zoning regulation limiting the location of premises with on-sale alcoholic beverage permits and video lottery machines, and also requiring that a conditional use permit be obtained. Thus, Law’s permit was conditioned on that if he chose to install video lottery machines in his establishment, he would need to obtain a conditional use permit and meet the additional location standards.
After Law received his permit, he brought a declaratory judgment action seeking to determine whether the municipality had authority to enact the video lottery machine ordinance. The City asserted four different reasons that this regulation was within its municipal authority. First, the regulation was valid as it was a zoning regulation concerning the location of the building and was not a regulation of the machines. Next, the City claimed that under home rule law, the City could provide stricter regulations than those of the state. Third, the City claimed that although there is a comprehensive regulatory scheme concerning these machines, there is not preemption as the state did not regulate location. Lastly, the City claimed that state statutes regulating these machines are unconstitutional, as the legislature delegated control over these machines to a commission.
The Supreme Court noted that municipalities have the authority to zone, but this authority does not extend into fields that are completely occupied by the State. The court determined that if state preemption were to exist, it would have to be implied, as there was no express statement of preemption. In looking at the text of the state statutes covering these machines, the court found there was field occupation and thus preemption of the local regulation, as “it is reasonable to infer that the Legislature intended the State to have all power to control, regulate, and manage video lottery.” Further supporting preemption of zoning, the statutory scheme provided the executive director of the South Dakota Lottery Commission with the authority to approve or disapprove a video lottery machine license on the basis of the establishment’s location. Given this strong intent to fully occupy the field, the court found the City was without authority to regulate these machines, including that the City’s home rule authority does not give them permission to supplement the state regulations.
Lastly, the court found that in enacting the legislative video lottery machine scheme, the State Legislature did not violate the South Dakota Constitution, as the Legislature did not interfere with municipal property or functions, as would be required.
Law v. Sioux Falls, 804 N.W.2d 428 (S. Ct, S.D. 2011)
The opinion can be accessed at: http://www.sdjudicial.com/Uploads/opinions/25897.pdf