Untitled Texas Attorney General Opinion ( 2016 )

KEN PAXTON
ATTORNEY GENERAL OF TEXAS
August 9, 2016
Mr. J. Winston Krause Opinion No. KP-0107
Chairman
Texas Lottery Commission Re: Authority of the Texas Lottery
Post Office Box 16630 Commission to deny, suspend, or revoke a
Austin, Texas 78761-6630 lottery ticket sales agent license in specific
instances (RQ,.0096-KP)
Dear Chairman Krause:
You ask whether the Texas Lottery Commission ("Commission") in specific instances may
deny, suspend, or revoke a lottery ticket sales agent license ...
where the Commission has evidence ... that an applicant or licensee
has conducted or allowed illegal gambling activity at its retail
location but [the person] has not been convicted of gambling or a
gambling-related offense. 1
You also ask several questions conditioned on the outcome of our analysis. See Request Letter at
1-2. You tell us that your questions relate to "instances where there has not been a final
adjudication of guilt," but you do not specify whether the evidence in question has resulted in
formal charges being filed against the applicant or licensee. Id. at 1. To provide context for your
specific questions, we review the Commission's general authority with regard to sales agent
licensure, recognizing that a state agency has no inherent substantive powers of its own. Tex. Nat.
Res. Conservation Comm 'n v. Lakeshore Util. Co., 164 S.W.3d 368, 377 (Tex. 2005). Instead, an
agency's authority is limited to those p0wers expressly conferred upon it by the Legislature or
from which may be implied the powers reasonably necessary to exercise its express powers. Id
The State Lottery Act ("Act") in chapter 466 of the Texas Government Code governs the
operation and administration of the lottery. See generally TEX. Gov'T CODE §§ 466.001-.453.
The Legislature has given the Commission "broad authority" over the lottery and has charged it
with exercising "strict control and close supervision over all lottery games ... to promote and
ensure integrity, security, honesty, and fairness in the operation and administration of the lottery."
Id. § 466.014(a). To sell lottery tickets, a person not employed by the Commission must be
1
See Letter from Mr. J. Winston Krause, Chair, Tex. Lottery Comm'n, to Honorable Ken Paxton, Tex. Att'y
Gen. at I (Feb. I 0, 2016), https://www.texasattomeygeneral.gov/opinion/requests-for-opinion-rqs ("Request
Letter").
Mr. J. Winston Krause - Page 2 (KP-0107)
licensed as a sales agent. Id. § 466.151 (a). The Act sets forth the Commission's authority with
respect to sales agent licenses. First, the Commission "may issue a license ... only if the director
finds that the person's experience, character, and general fitness are such that the person's
participation as a sales agent will not detract from the integrity, security, honesty, and fairness of
the operation of the lottery." Id. § 466.151(e). Second, the Commission must "adopt rules under
which, before issuing a license to an applicant, the director shall consider" five particular factors, 2
in addition to "any other factor that the director considers appropriate." Id. § 466.154. Third, the
Commission must deny, suspend, or revoke a license after a hearing if it finds that certain
circumstances exist. See id. § 466.155( a), (e)-(f). Pertinent to your questions, these circumstances
include the Commission finding that an applicant or a sales agent ( 1) has been "convicted of a ...
gambling or a gambling-related offense" under certain circumstances; (2) "is or has been a
professional gambler"; or (3) "has violated [chapter 466] or a rule adopted under [that] chapter."
Id. § 466.155(a)(l)(A)-(B), (5). The Commission also has authority under the Occupations Code
to deny, suspend, or revoke a license on certain grounds related to criminal history. 3 Such grounds
include a conviction on "an offense that directly relates to the duties and responsibilities of the
licensed occupation." TEX. Occ. CODE§ 53.021(a)(l).
You first ask generally about the effect of an applicant or licensee having "been placed on
deferred adjudication for gambling or a gambling-related offense." Request Letter at 1.
Occupations Code subsection 53.02l(d) authorizes a licensing authority to consider certain
deferred adjudications to be convictions. 4 Subsection 53.021(d) provides that if, after considering
2
The five factors are:
(I) the financial responsibility and security of the applicant and the business or
activity in which the applicant is engaged; (2) the public accessibility of the
applicant's place of business or activity; (3) the sufficiency of existing sales
agents to serve the public convenience; (4) whether individuals under 18 years
of age constitute a majority of the applicant's customers or as customers provide
a majority of the applicant's sales volume; [and] (5) the volume of expected
sales.
TEX. Gov'T CODE § 466.154(1 )-(5).
3 Chapter 53 of the Occupations Code applies to state licensing agencies except where specifically excluded
and generally addresses the consequences of criminal convictions for the purpose of occupational licensing. See
generally TEX. Occ. CODE§§ 53.001-.105; see also id § 53.002 (listing persons and entities excluded from coverage,
none of which affect the Commission or its licensees).
4 For purposes of section 53.021, a licensing authority normally may not consider a person to be "convicted"
if (I) the person entered a guilty or no lo contendere plea; (2) the person received deferred adjudication and was
placed on community supervision; and (3) at the end of the supervision, the judge dismissed the proceedings and
discharged the person. Id.§ 53.02l(c).
Mr. J. Winston Krause - Page 3 (KP-0107)
certain specified factors, 5 the licensing authority determines that the person would pose a
continued threat to public safety, or that employment in the licensed occupation would give the
person "an opportunity to repeat the prohibited conduct," the licensing authority may consider a
person to have been "convicted" regardless of the dismissal or discharge status of the criminal
proceedings ifthe person has been charged with specified offenses. 6 Id. § 53.021(d)(l)-(2).
However, subsection 53.021(a-1) generally does not authorize a licensing authority to
deny, suspend, or revoke a license for convictions on Class C misdemeanors. Id. § 53.021(a-l).
Gambling is a Class C misdemeanor. TEX. PENAL CODE§ 47.02(d). Because agencies possess no
inherent substantive authority, and no statute we are aware of grants the authority you ask about,
state law does not allow the Commission to deny, suspend, or revoke a license due to a person
having received deferred adjudication for the offense of gambling. But the Commission may
consider a deferred adjudication on a gambling-related offense to be a conviction for purposes of
subsection 53.021(a) ifthe circumstances meet the requirements of subsection 53.021(d), and in
such circumstances it is authorized to deny, suspend, or revoke a license. 7
Next, you ask whether the Commission or the executive director may "consider the
presence of illegal gambling activity at a proposed or existing lottery retail location in determining
whether an applicant ... possesses the character or fitness required to serve as a lottery sales agent,
and for that reason deny an application" under subsection 466.151(e) of the Act. 8 Request Letter
at 2. The Act does not define "character" or "general fitness" for purposes of subsection
466.151 (e). Courts give undefined words their common, ordinary meaning unless a different result
is clearly indicated by statute. William Marsh Rice Univ. v. Refaey, 459 S.W.3d 590, 593 (Tex.
2015). The ordinary meaning of "character" encompasses "the mental and moral qualities
distinctive to an individual." THE NEW OXFORD AMERICAN DICTIONARY 290-91 (3d ed. 2010).
"Fitness" commonly means "the quality of being suitable to fulfill a particular role or task." Id. at
654; see also TEX. Occ. CODE § 53.023(a) (directing a licensing authority, in determining a
convicted person's "fitness to perform the duties" and responsibilities of a licensed occupation, to
5
Sections 53.022 and 53.023 of the Occupations Code list the factors that a licensing authority must consider.
See id. §§ 53.022 (concerning whether the conviction directly relates to the occupation at issue), .023 (involving a
person's fitness to perform the duties and discharge the responsibilities of the occupation at issue).
6
The specified offenses are: (I) an offense under article 62.001(5) of the Code of Criminal Procedure; or
(2) some other offense, ifthe period of supervision has not ended or it ended less than five years ago, or if a conviction
on that offense would automatically make the person ineligible for the license. Id.§ 53.021(d)(l).
7
The offenses of gambling promotion, keeping a gambling place, communicating gambling information,
and possession of a gambling device, equipment, or paraphernalia are all Class A misdemeanors. TEX. PENAL CODE
§§ 47.03(b), .04(c), .05(c), .06(e).
8
You also ask about suspending or revoking an existing license under this proposal; however, the provision
conditioning the Commission's issuance ofa sales agent license based on a person's character and fitness is, by its
own terms, applicable only to the initial issuance of the license. See TEX. Gov'T CODE§ 466.15 l(e) (describing the
prerequisites for the director to "issue a license").
Mr. J. Winston Krause - Page 4 (KP-0107)
consider such things as age, the passage of time, conduct, work activity, rehabilitative efforts, and
personal recommendations). These definitions, taken together with subsection 466.ISI(e)'s
reference to a person's "experience,'' suggest that subsection 466.ISI(e) contemplates ongoing,
personal qualities of the applicant and not merely the incidence of an activity in proximity to the
person's location. 9 However, specific factual circumstances could exist where there is a
connection between the incidence of such activity and the applicant, such that the applicant's
"character" and "fitness," as those terms are commonly understood, are called into question.
Whether the Commission could consider the presence of illegal gambling activity in any given
circumstance would likely depend on the facts. Accordingly, we do not reach your question
regarding a formal rule that would have described such authority. 10 See Request Letter at 2.
To the extent the Commission can consider the presence of illegal gambling when
examining an applicant's character and fitness, you ask whether the Commission is authorized to
determine "whether (i) a particular activity is illegal gambling under Texas Penal Code section
47.02, or (ii) a particular machine is a gambling device under Penal Code section 47.01(4)," subject
to an administrative hearing. 11 Id. As a state agency, the Commission has the powers expressly
conferred on it by the Legislature and those implied powers that are reasonably necessary to carry
out the express powers. Tex. Mun. Power Agency v. Pub. Util. Comm 'n of Tex., 253 S.W.3d 184,
192-93 (Tex. 2007). The Commission is expressly authorized to make findings to support
licensing decisions, including findings regarding character and fitness in connection with a license
application. See TEX. Gov'T CODE § 466.151 (e) (referring to the issuance of a license to a person
"only ifthe director.finds that the person's experience, character, and general fitness are such that
the person's participation as a sales agent will not detract from the integrity, security, honesty, and
fairness of the operation of the lottery" (emphasis added)); see also id. § 466.155(a) (requiring
denial, suspension, or revocation of a license if the Commission "finds that" certain circumstances
pertain to the applicant or sales agent). The Commission also has express authority to "conduct
an investigation of' a sales agent or applicant and obtain criminal history record information from
various law enforcement entities. Id. § 466.201(a)(l); see also id. § 466.203(a) (authorizing the
executive director to request that the Department of Public Safety "perform a background
investigation of' a sales agent or applicant). To the extent that certain activity occurring at a retail
location could reflect on an applicant's character or fitness, the Commission may need to determine
whether that activity would be illegal. Thus, the Commission's express authority to make findings
regarding an applicant's character and fitness could form the basis from which a court could infer
authority for the Commission to use its investigatory authority to determine whether a particular
9
We do not mean to suggest that the conditions present at a particular location are irrelevant, as a person
desiring "to operate more than one location to sell tickets must submit a separate application for each location." TEX.
GOV'T CODE § 466.152( d).
10
While the director may consider "any ... factor" he or she believes is appropriate before issuing a license,
such consideration must be pursuant to rules adopted by the Commission. Id. § 466.154(6).
11 We understand your question to be limited to a licensing context and not meant for purposes of determining
whether a criminal violation of the Penal Code has occurred.
Mr. J. Winston Krause - Page 5 (KP-0107)
activity would constitute illegal gambling, or a particular item would constitute an illegal gambling
machine, under the Penal Code.
You also ask whether the Commission may broaden its regulatory definition of
"professional gambler" to include "a person who conducts or allows illegal gambling activity at a
proposed or existing lottery retail location." Request Letter at 2. Subsection 466.155(a)(l)(B) of
the Act mandates the denial, suspension, or revocation of a license if the Commission finds that
the applicant or sales agent "is or has been a professional gambler." TEX. Gov'T CODE
§ 466.155(a)(l)(B). The Act does not define "professional gambler." Again, courts give
undefined words their common, ordinary meaning unless a different result is clearly indicated by
statute. William Marsh Rice Univ., 459 S.W.3d at 593. Typically, the designation of a person as
engaging in an activity on a "professional" basis distinguishes him or her from one who engages
in the activity on a casual or social basis. See THE NEW OXFORD AMERICAN DICTIONARY 1394 (3d
ed. 2010) (defining a "professional" as one "engaged in a specified activity as one's main paid
occupation rather than as a pastime"). 12 Whether the Commission may broaden this definition
without exceeding its rulemaking authority depends on whether the rule's provisions are "in
harmony with the general objectives of the" statute. Pruett v. Harris Cty. Bail Bond Bd., 249
S.W.3d 447, 452 (Tex. 2008) (quotation marks omitted). Harmony exists if a rule does "not
impose additional burdens, conditions, or restrictions in excess of or inconsistent with relevant
statutory provisions." Harlingen Family Dentistry, P.C. v. Tex. Health & Human Servs. Comm 'n,
452 S.W.3d 479, 486 (Tex. App.-Austin 2014, pet. dism'd).
We find no clear indication in subsection 466.155(a)(l) that the Legislature intended a
meaning other than the common, ordinary meaning of "professional gambler." See TEX. Gov'T
CODE § 466.155(a)(l)(A)-(E) (prohibiting, in addition to being or having been a professional
gambler, having certain convictions, being an officer or employee of the Commission or a lottery
operator, or having certain family relationships with any such persons). Because a person who
conducts or allows illegal gambling activity at a retail location may not be doing so as his or her
main paid occupation, the Legislature did not suggest in subsection 466 .15 5(a)(1) that the
definition of "professional gambler" should encompass more than its common meaning. Thus, a
court would likely conclude that a rule broadening the definition beyond its common meaning
would impose additional conditions or restrictions on the scope of the term the Legislature used
and therefore exceed the Commission's rulemaking authority.
Finally, we consider your question on whether
the Commission's express function to generate revenue for the State
Lottery Account (under [the Act] sections 466.351 and 466.355)
impl[ies] authority for the Commission to consider the presence of
illegal gambling activity at an applicant's or licensee's proposed or
existing lottery retail location in deciding whether to deny, suspend,
12
The Commission's current definition incorporates this common understanding. See 16 TEX. ADMIN. CODE
§ 401.153(b)(2) (Texas Lottery Commission, Qualifications for a License) (defining "professional gambler" as "a
person whose profession is, or whose major source of income derives from, playing games of chance for profit").
Mr. J. Winston Krause - Page 6 (KP-0107)
or revoke a lottery license, if the Commission determines the illegal
activity threatens revenue generated from the lawful sale of lottery
tickets[.]
Request Letter at 2. Section 466.351 of the Act provides that "all revenue received from the sale
of tickets ... shall be deposited in the state treasury" and directs the Commission to establish
procedures for handling and delivering the revenue. TEX. Gov'T CODE § 466.351 (a)-( e). Section
466.355 describes the state lottery account within the general revenue fund, sets forth its
permissible uses and distributions, and addresses earned interest and certain fund transfers. Id.
§ 466.355(a)-(c). Although these provisions indicate an intent on the part of the Legislature that
the lottery produce revenue for the State, the Commission may not imply unlimited authority to
act in furtherance of that goal. Administrative agencies "may exercise only those powers the law,
in clear and express statutory language, confers upon them." Subaru of Am., Inc. v. David
McDavid Nissan, Inc., 84 S.W.3d 212, 220 (Tex. 2002). "Courts will not imply additional
authority to agencies, nor may agencies create for themselves any excess powers." Id. By enacting
sections 466.351 and 466.355, the Legislature did not authorize the Commission to deny, suspend,
or revoke a license due solely to the presence of illegal gambling activity at the licensee's retail
location, and a court is unlikely to infer authority from sections 466.351 and 466.355 for the
Commission to do so.
Mr. J. Winston Krause - Page 7 (KP-0107)
SUMMARY
The language the Legislature utilized in section 53.021 of
the Occupations Code does not authorize the Lottery Commission
to deny, suspend, or revoke a sales agent license due to deferred
adjudication for the offense of gambling. The Commission may
comply with applicable statutes and consider deferred adjudication
on a gambling-related offense to be a conviction if the circumstances
meet the requirements of subsection 53.02l(d), thereby authorizing
it to deny, suspend, or revoke a license.
Whether the Commission may consider the presence of
illegal gambling activity at an applicant's retail location in
examining an applicant's character and fitness under subsection
466.151(e) of the State Lottery Act would depend on the facts. To
the extent the Commission may consider the presence of illegal
gambling activity, a court would likely conclude that the
Commission's express authority to make findings under subsection
466.151(e) implies the authority to determine whether a particular
activity would constitute illegal gambling, or a particular item would
constitute an illegal gambling machine, under the Penal Code.
A court would likely conclude that a rule broadening the
scope of the term "professional gambler" to include a person who
conducts or allows illegal gambling activity at a proposed or existing
lottery retail location would exceed the authority the Legislature has
granted to the Commission.
A court is not likely to infer authority from sections 466.351
and 466.355 of the Act for the Commission to consider the presence
of illegal activity at a retail location in deciding whether to deny,
suspend, or revoke a sales agent license.
Very truly yours,
KEN PAXTON
Attorney General of Texas
Mr. J. Winston Krause - Page 8 (KP-0107)
JEFFREY C. MATEER
First Assistant Attorney General
BRANTLEY STARR
Deputy First Assistant Attorney General
VIRGINIA K. HOELSCHER
Chair, Opinion Committee
BECKY P. CASARES
Assistant Attorney General, Opinion Committee