Gem Fin. Serv., Inc. v. City of N.Y.Gem Fin. Serv., Inc. v. City of N.Y.
Plаintiff Gem Financial Service, Inc. ("Gem"), doing business as Gem Pawnbrokers,
I. Background
a. Factual background
Plaintiff Gem is a licensed collateral loan broker, also known as a pawnbroker, and second-hand dealer. (Def. Statement of Material Facts Pursuant to Local R. 56.1 ("Def. 56.1") ¶ 9, Docket Entry No. 86-1.) As of April of 2014, Gem had twenty separate retail stores throughout New York City. (Id. ¶ 10.)
In New York City, pawnbrokers and second-hand dealers have been subject to a variety of state and local regulations that require the recording and reporting of certain transactional information. (Id. ¶¶ 1, 5-8.) Pursuant to statute, including section 436, Defendant has broad supervisory authority over pawnbrokers and second-hand dealers, including the authority to question employees, examine premises and the records and merchandise thereon, and may issue summonses for failures to comply with the various requirements. (Id. ¶ 3.)
Beginning in 2010, the New York City Police Department ("NYPD") instituted a policy designed to "encourage" the use of LeadsOnline, a "wеb-based electronic data transfer" database which serves as a repository for information that pawnbrokers and second-hand dealers are required to record and store pursuant to statute. (Id. ¶ 22.) LeadsOnline allows police officers to download and view every uploaded transaction. (Memo re: Increase Voluntary Use of "LeadsOnline" Electronic Pawnshop Database ("Increase Use Memo"), annexed to Def. Mot. as Ex. R, Docket Entry No. 86-7.) The NYPD believed LeadsOnline would "allow for the gathering of information on crimes, criminals, and possibly the recovery of property." (Id. ) At the time, only sixteen out of approximately 145 pawnshops in New York City used LeadsOnline. (Id. )
Gem was an early adopter of LeadsOnline. In 2007, Gem approached the NYPD
The NYPD encouraged officers to "actively recruit[ ]" pawnshops, second-hand dealers, and other businesses to use LeadsOnline. (March 30, 2011 Leads Online Recruitment and Survey ("March 30, 2011 Memo"), annexed to Def. Mot. as Ex. R, Docket Entry No. 86-7.) Officers were also instructed to "approach [pawnbrokers] ... to explain the benefits and operation" of LeadsOnline. (May 12, 2010 Expansion of Voluntary Participation of Pawnbrokers in the "LeadsOnline" Database ("May 12, 2010 Memo"), annexed to Def. Mot. as Ex. R, Docket Entry No. 86-7.)
According to Gem, after it discontinued use of LeadsOnline, there was a noticeable increase in the police presence at its stores, beginning in the summer of 2011. (See Dambrot Aff. ¶ 3.) Joseph Taranto, a manager at one Gem store, testified that the number of police visits at his particular location increased from one to two times per day in 2010, to four to five times per day in the following years, pursuant to the efforts to increase the number of stores using LeadsOnline. (Joseph Taranto Dep. ("Taranto Dep.") 18:25-19:1, annexed to Pl. Mot. as Ex. II, Docket Entry No. 87-38.) Dambrot, Taranto, and other Gem employees also testified at their depositions that such interactions were often hostile, accompanied by threats of arrest, and business disruption.
Other pawnshops have testified to similar experiences. Joseph Buoninfante, the senior manager of Quick Cash USA, LLC, a pawnbroker chain with nearly twenty stores in New York City, explained that their stores experienced a sharp increase in the number of police visits beginning in 2012. (Joseph Buoninfante Aff. in Supp. of Pl. Mot. ("Buoninfante Aff.") ¶ 2, annexed to Pl. Mot. as Ex. J, Docket Entry No. 87-13.) According to Buoninfante, these visits were accompanied by threats and orders to hold jewelry. (Id. ) As a result, Quick Cash USA gave in to the NYPD's demands to use LeadsOnline. (Id. ¶ 3.) Upon doing so, the alleged harassment ceased.
In addition to the asserted hostile nature of the police visits, Gem also complains more generally about officers' seizures and holds of pledged items. Gem has specifically identified eight seizures and holds as examples of problematic police conduct. (Def. 56.1 ¶¶ 31, 52.) Gem contends that the specifically identified sеizures and holds are only examples of a much larger number of such actions. (Dambrot Aff. ¶¶ 2-3, 6-10; Sandra Lopez Dep. ("Lopez Dep.") 32:13-19, annexed to Pl. Mot. as Ex. KK, Docket Entry No. 87-40; Ragoo Dep. 26:24-27:5; Khariton Popilevsky Dep. ("Popilevsky Dep.") 30:19-25, annexed to Pl. Mot. as Ex. GG, Docket Entry No. 87-36.)
Defendant contends that officers had probable cause to believe the seized items were stolen, except for one pledged item for which it could not verify NYPD involvement. (Def. 56.1 ¶¶ 31-45; Def. Mem. 8 n.5.) The NYPD acknowledges that where an item is not in plain view, and they do not obtain consent to search, the premises must be secured and a warrant obtained before any search and seizure beyond that of an ordinary administrative inspection can be effectuated. (Joseph J. Esposito Dep. ("Esposito Dep.") 34:5-13, annexed to Pl. Mot. as Ex. O, Docket Entry No. 87-16.) Similarly, holds of collateral are to be temporary in nature, designed to "freeze the location" so that a search warrant may be obtained. (Patrick Timlin Dep. ("Timlin Dep.") 65:2-7 (describing an order requiring a store owner to hold collateral "indefinitely" as "inappropriate"), annexed to Pl. Mot. as Ex. P, Docket Entry No. 87-19;
Defendant contends that Dambrot, as Gem's authorized employee, consented to every hold and seizure. (Def. Mem. 3.) Dambrot testified that he never voluntarily consented to any seizure or hold request, only relenting after being given "the typical warning [that he could] be arrested for possession of stolen property, or interference with governmental administration." (Dambrot Aff. ¶ 7.) Dambrot explained that he consistently requested a warrant when the NYPD sought to seize collateral, and generally requested a warrant or further information when the NYPD sought to place holds on property.
b. The regulatory scheme governing warrantless searches
i. The statutory framework
Collateral loan brokers and second-hand dealers in New York City operate under a regulatory framework that includes several provisions of the New York State General Business Law, the New York City Charter, the New York City Administrative Code, and the Rules of the City of New York ("RCNY"). At the state level, Chapter 20, Article 5 of the General Business Law regulates collateral loan brokers. See N.Y. Gen. Bus. Law Ch. 20, Art. 5. Section 43 of the General Business Law requires collateral loan brokers to keep a book with specific information concerning loans and collateral. N.Y. Gen. Bus. Law Ch. 20, Art. 5 § 43. Section 45 of the same law discusses inspection of such records and states in pertinent part:
The said book and any and all other books and records regularly kept by such collateral loan broker shall at all reasonable times be open to the inspection of the attorney general, the state comptroller, the mayor or local licensing authority, all judges of the criminal courts, the superintendent of police, police inspectors, captains of police and police justices of such cities, or any or either of them, or of any person who shall be duly authorized in writing for that purpose by any or either of them, and who shall exhibit such written authority to such collateral loan broker.
N.Y. Gen. Bus. Law Ch. 20, Art. 5 § 45.
New York City law also affords the NYPD Police Commissioner (the "Commissioner") the authority to conduct administrative searches of certain trades, including pawnbrokers and second-hand dealers. Section 436 of the New York City Charter discusses the Commissioner's searсh power and states in pertinent part:
The commissioner shall possess powers of general supervision and inspection over all licensed or unlicensed pawnbrokers ... dealers in second-hand merchandise ... and in connection with the performance of any police duties he shall have power to examine such persons, their clerks and employees and their books, business premises, and any articles of merchandise in their possession. A refusal or neglect to comply in any respect with the provisions of this section on the part of any pawnbroker ... dealer in second-hand merchandise ... or any clerk or employee of any thereof shall be triable by a judge of the criminal court and punishable by not more than thirty days' imprisonment, or by a fine of not more than fifty dollars, or both.
The police commissioner, at such times as he or she may prescribe in a written notice served upon any pawnbroker by a member of the police department, may require such pawnbroker to report to such commissioner, upon blank forms to be furnished by the police department, a description of all goods, articles or things, or any part thereof, pawned or pledged in the course of business of such pawnbroker during the days specified in such notice, stating the numbers of the pawn tickets issued therefor, the amounts loaned thereon, and such identifying marks as may be on the goods pawned. If such notice from the police commissioner so prescribes, such pawnbroker, until he or she is notified to discontinue so doing, shall keep and furnish on such forms, a general description as to sex, color and apparent age of every person depositing such pledges.
Every dealer in second-hand articles who shall have or receive any goods, or articles lost or stolen, or alleged or supposed to have been lost or stolen, shall exhibit the same, on demand, to the commissioner or departmental inspector ... to any police officer, or to any person, duly authorized in writing by the commissioner ... who shall exhibit such written authority to the dealer.
Such book, at all reasonable times, shall be open to the inspection of any police officer, to the commissioner or departmental inspector ... or any person duly authorized in writing for such purposes by the commissioner ... who shall exhibit such written authority to the dealer.
In 2013, after the commencement of this action, the New York City Council enacted Local Law 149, requiring pawnbrokers and second-hand dealers to report transactions electronically, amending sections 20-267, 20-273, and 20-277. (See Local Law No. 149, annexed to Def. Reply in Supp. of Def. Mot. ("Def. Reply"), Docket Entry No. 88,
ii. NYPD guidance
In 1998, George A. Grasso, then-Deputy Commissioner of Legal Matters of the NYPD, promulgated a memorandum entitled "Guidelines for the Inspection of Pawnbroker and Second-hand Dealers Businesses," ("Grasso Memo," annexed to Pl. Mot. as Ex. C, Docket Entry No. 87-6). The Grasso Memo, addressed to "Chief of Detectives," discusses the various laws governing pawnbrokers and second-hand dealers and establishes guidelines "in order to insure that the administrative searches ... conducted by this Department survive constitutional challenge ...." (Id. at 2.) The Grasso Memo advises officers, inter alia, to visit stores during regular business hours and request to inspect required books and records. (Id. at 5.) The Grasso Memo further advises that if an officer develops probable cause to believe that criminal activity is afoot during an inspection, the premises "should be secured and a search warrant obtained before a search of the premises is commenced." (Id. ) Finally, the Grasso Memo reiterates that an officer may seize property only if "its evidentiary or contraband nature" is apparent and the property is in plain view. (Id. )
More recently, on August 1, 2013, the NYPD promulgated Patrol Guide Procedure No. 214-38, ("Patrol Guide," annexed to Pl. Mot. as Ex. D, Docket Entry No. 87-7). The Patrol Guide's purpose is "[t]o establish a systemic inspection of pawnbrokers and second-hand dealers by patrol precincts." (Id. ) The Patrol Guide reiterates aspects of the Grasso Memo concerning the warrantless inspection of pawnbrokers and second-hand dealers. (Id. ) In addition, the Patrol Guide provides guidelines to officers on the retention and review of electronic records uploaded by pawnbrokers and second-hand dealers to an online database. (Id. ) Pursuant to the Patrol Guide, officers are directed to inspect on-site records at least once every ten days if those records are not maintained electronically. (Id. ) Electronic records, however, are to be reviewed weekly. (Id. )
On August 5, 2016, certain aspects of the Grasso Memo and the Patrol Guide werе codified in 38 RCNY § 21-11. Under 38 RCNY § 21-11(a), officers are to examine the "last twenty articles purchased or received in pledge ... that are still in inventory," "[c]ompare the articles to the description ... listed in the" store records, and review the entries for "completeness, accuracy, and legibility." These inspections "must occur regularly, and in no event less often than once per quarter during the calendar year." 38 RCNY § 21-11(a).
c. Procedural background
Gem and former Plaintiff Mitchell Kaminsky filed the original Complaint on
Defendants moved to dismiss the Complaint on July 12, 2013. At oral argument on March 6, 2014, the Court dismissed Kaminsky from the action and dismissed all claims against the NYPD. (Minute Entry dated March 6, 2014.) By Memorandum and Order dated March 17, 2014 (the "March 17, 2014 Decision"), the Court granted in part and denied in part Defendants' motion to dismiss. Gem Fin. Serv., Inc. v. City of New York , No. 13-CV-1686,
Gem filed an Amended Complaint on May 2, 2014, adding Keith Watts
Defendants moved for reconsideration of the March 17, 2014 Decision as to the Fourth Amendment and state malicious prosecution claims and moved to dismiss the selective treatment Equal Protection claim. (Def. Mot. for Reconsideration and to Dismiss ("Def. Reconsideration") 1, Docket Entry 37.) By Memorandum and Order date March 31, 2015 ("March 31, 2015 Decision"), the Court denied Defendants' motions in their entirety. Gem Fin. Serv., Inc. v. City of New York , No. 13-CV-1686,
II. Discussion
a. Standard of review
Summary judgment is proper only when, construing the evidence in the light most favorable to the non-movant, "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; Wandering Dago, Inc. v. Destito ,
b. Section 1983 claims
Plaintiff asserts the following claims against Defendant under section 1983: (1) as-administered and facial challenges under the Fourth Amendment for unlawful searches and seizures, (2) selective enforcement action under the Equal Protection Clause, and (3) municipal liability. Defendant moves for summary judgment as to all claims.
Under section 1983, individuals may bring a private cause of action against persons "acting under color of state law" to recover money damages for deprivations of their federal or constitutional rights. Matusick v. Erie Cty. Water Auth. ,
i. As-administered Fourth Amendment claim
Plaintiff brings an as-administered claim under the Fourth Amendment for unlawful
1. Reasonable expectation of privacy
Defendant argues that Plaintiff does not have a reasonable expectation of privacy in the records or the pledged items because they are subject to inspection under the administrative scheme applicable to pawnbrokers and second-hand dealers. (Def. Mem. 7; Def. Reply 25-26.) With respect to the content of the records, Defendant argues that Plaintiff has no reasonable expectation of privacy because the information therein is provided by customers, and is required and subject to review by statute. (Def. Mem. 7.) While unclear, Plaintiff appears to assume a reasonable expectation of privacy in the records, the information therein, and the pledged items based on language from New York v. Burger ,
The Fourth Amendment protects "[t]he right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures." U.S. Const. amend. IV. "A search occurs when the Government acquires information by either 'physically intruding on persons, houses, papers, or effects,' or otherwise invading an area in which the individual has a reasonable expectation of privacy." United States v. Ganias ,
Generally, as a threshold matter, there must be a reasonable expectation of
"One who owns or lawfully possesses or controls property will in all likelihood have a legitimate expectation of privacy by virtue of th[e] right to exclude." Rakas v. Illinois ,
Despite the expectation of privacy in certain private, commercially sensitive business records, the Second Circuit has held that "records required to be kept pursuant to valid regulatory programs have a 'public aspect' for purposes of constitutional analysis, and thus are not private papers entitled to the protection of the [F]ourth or [F]ifth amendments." Donovan v. Mehlenbacher ,
Furthermore, the United States Supreme Court has held that the recordkeeping and reporting of certain transactional information do not implicate the Fourth Amendment. See California Bankers Ass'n v. Shultz ,
A. Plaintiff has a reasonable expectation of privacy in the pledged items and the physical records
Applying the above principles, Plaintiff has a reasonable expectation of privacy in the pledged items, and its own physical records. Plaintiff has a possessory and an ownership interest in the pledged items and also the physical records, providing it with the right to exclude others. See Sanders v. City of San Diego ,
B. Plaintiff has no reasonable expectation of privacy in the information in the required records
Plaintiff does not have any reasonable expectation of privacy in the information in the records pursuant to the required records doctrine.
(1) The "essentially regulatory" test
The first prong of the required records doctrine "asks whether the record requirement is 'essentially regulatory.' " In re Grand Jury Subpoena ,
The Court finds that the recordkeeping and reporting requirements of pawnshop transactional information are essentially regulatory. The statutes and ordinances, including the sections concerning the recording requirements-the portions of the statutes at issue-"target[ ] those engaged in the lawful activity of [entering into transactions at a pawnshop.]"
(2) The "customarily kept" requirement
The second prong "requires that the regulated 'information is to be obtained by
The records required are "very basic" and of the type that Plaintiff has likеly customarily kept. Id. at 350. By the very nature of their business, pawnshops and other second-hand dealers need to keep a record of the transactions they enter. Accordingly, the required information only concerns basic details about the consumer, including their name, residence, the nature of the transaction including date, time, location, and descriptions, including a photograph, of the item involved. Cf. id. at 350 (holding it to be "common sense" that a bank account's beneficiary would customarily keep "essential information as the bank's name, the maximum amount held in the account each year, and the account number"). Indeed, Plaintiff's own "pawn ticket," provided to customers, requires and records the customer's name, address, the time, date, location of the transaction, and a short description of the pledged item. (See Pawn Ticket, annexed to Def. Mot. as Ex. F, Docket Entry No. 86-5.) The pawn ticket also states that "proper id[entification] is required for all transactions." (Id. ) Because of the unique nature of each item involved in every transaction, Plaintiff would not be able to function without such detailed records. "[A]s a party to the transaction, [much of the information required are of a kind that Plaintiff] already possesses or would acquire in its own interest." California Bankers ,
(3) The "public aspects" prong
The third prong asks whether the required records "have assumed public aspects which render them at least analogous to public documents." In re Grand Jury Subpoena ,
The records at issue are created under a valid regulatory regime and Plaintiff also does not challenge the aspect of the regulatory scheme requiring that records be kept. Instead, Plaintiff challenges the manner in which its premises and records may be inspected and obtained by law enforcement, including the new electronic requirements. (See generally Pl. Mem.; Pl. Reply.) Under Second Circuit precedent, the records and the information therein have "public aspects" for purposes of the required records exception. Thus, the information in the records meet all three prongs of the required records doctrine. Accordingly, the information in the records is not protected by the Fourth Amendment.
C. Consistent with the reasoning in Burger
The above reasoning is also consistent with Burger . As the Court explained in its March 17, 2014 Decision:
It is well-accepted that although the owner or operator of a business has a reasonable expectation of privacy in commercial property , this expectation is different from, and less than, a similar expectation in an individual's home. "This expectation is particularly attenuatedin commercial property employed in 'closely regulated' industries."
Gem I ,
Because Plaintiff does not have a reasonable expectation of privacy in the recorded information, there can be no Fourth Amendment violation for review or collection of such information. Accordingly, Plaintiff may challenge the search and seizure of the pledged items, and the physical records maintained on-site but not the information required to be kept by statute.
2. Consent and plain view doctrine as to the seized items
Regardless of whether the Plaintiff retained a reasonable expectation of privacy in the pledged items, Defendant argues that all seizures or holds were pursuant to consent or the plain view doctrine because Dambrot, as Plaintiff's representative, consented to all the expressly identified seizures and holds, except one.
A. Both the "actual" seizures and police holds are seizures within the meaning of the Fourth Amendment
As discussed supra , "[a] seizure occurs when the Government interferes in some meaningful way with the individual's possession of property." Ganias ,
Both the "actual seizures" and the police holds are seizures within the meaning of the Fourth Amendment. Plaintiff has possessory and ownership interests in all the pledged items. (See supra pp. 481-83.) By taking pledged items away, the NYPD eliminated actual possession-a complete interference with its "possessory interests." United States v. Jacobsen ,
B. Plaintiff did not voluntarily consent
Officers may effectuate a search and seizure of property "without violating the Fourth Amendment if the owner or lawful custodian voluntarily gives consent."
"In examining all the surrounding circumstances ..., account must be taken of subtly coercive police questions, as well as the possibly vulnerable subjective state of the person who consents." Corbett v. City of New York , No. 15-CV-09214,
In section 1983 actions, the Second Circuit has generally imposed "only a burden of production, i.e. , 'the duty of producing evidence of consent' " on the defendant. Tirreno v. Mott ,
Under the circumstances of this case, a reasonable juror could conclude that the consent provided on a number of occasions was involuntary. Dambrot testified that he was threatened with arrest if he did not automatically comply with police officers' seizure or hold requests.
The evidence that there was probable cause to seize the items does not mitigate the threat of arrests and the involuntariness of the consent. Indeed, Defendant provides no evidence that the officers had any probable cause to arrest Dambrot and the other employees for knowing possession of stolen property and interference with government administration-the crimes for which they were threatened. See
In addition to the threats of arrest, Dambrot also testified that officers threatened to "tear [stores] apart," harass customers, and otherwise disrupt business if he did not comply with their requests to seize collateral. (Dambrot Dep. 126:13-20.) While officers are certainly allowed to inform the public of lawful consequences of a refusal to consent, including the obtainment and execution of a search warrant, the manner in which the message is conveyed is relevant to a determination of voluntariness. Under the circumstances, a jury could find that the officers were attempting to coerce Dambrot through thinly veiled-threats. We Buy, Inc. v. Town of Clarkstown State of New York , No. 06-CV-1794,
Based on the totality of the circumstances, the Court finds that a reasonable jury could find a lack of consent for many of the seizures and holds at issue. Indeed, as explained infra , there is evidence to suggest that a threat of arrest or business disruption preceded every request to seize an item. (See infra pp. 490-93.) Plaintiff cannot be said to have consented merely because the police successfully acquired acquiescence by intimidation and harassment. See Bostick ,
C. Plain view doctrine does not apply
" 'Under the plain-view exception' to the Fourth Amendment's requirement of a warrant for search and seizure, 'if police are lawfully in a position from which they view an object, if its incriminating character is immediately apparent, and if the officers have a lawful right of access to the object, they may seize it without a warrant.' " United States v. Delva ,
The record does not support Defendant's contention that all the seizures and holds came within the purview of the plain view exception. Defendant does not dispute that many, if not all, of the collateral items at issue were stored in a vault.
To the extent officers did not have lawful access to be in a position to view the seized or held pledges, the plain view doctrine does not apply. By the very definition of the doctrine, the plain view exception cannot apply to items that are not visible to officers. Officers cannot overcome this basic requirement by unlawfully requiring items to be presented before them, even if there was probable cause to believe the collateral were stolen. See Payton v. New York ,
Under the factual circumstances of this case, a reasonable jury could conclude that the plain view doctrine does not apply to many, if not all, of the collateral items that were seized and held in violation of the Fourth Amendment.
3. Plaintiff has provided sufficient evidence of a widespread policy to satisfy Monell
In order to sustain a claim for relief pursuant to section 1983 against a municipal defendant, a plaintiff must show the existence of an official policy or custom that caused injury, and a direct causal connection between that policy or custom and the deprivation of a constitutional right. Monell v. Dep't of Soc. Servs. of City of N.Y. ,
A plaintiff can establish an official policy or custom by showing any of the following: (1) a formal policy officially endorsed by the municipality; (2) actions or decisions made by municipal officials with decision-making authority; (3) a practice so persistent and widespread that it constitutes a custom of which policymakers must have been aware; or (4) a failure by policymakers to properly train or supervise their subordinates, such that the policymakers exercised "deliberate indifference" to the rights of the plaintiff and others encountering those subordinates. See Iacovangelo v. Corr. Med. Care, Inc. ,
As noted above, a plaintiff "need not identify an express rule or regulation," to impose municipal liability, but can show that the practice "of municipal officials was so persistent or widespread as to constitute a custom or usage with the force of law." Littlejohn v. City of New York ,
There is no set number of incidents that make a practice "widespread," and courts have found a wide range of instances insufficient to plausibly allege a municipal custom. See Jones ,
As to the Fourth Amendment claim for seizure of collateral, a reasonable juror could find that there was a widespread practice of unlawful seizures and holds, constituting the standard operating procedure.
Based on the evidence, the Court denies summary judgment as to the Monell claim based on as-administered violations of the Fourth Amendment.
ii. Facial challenge under the Fourth Amendment
In its moving papers, Plaintiff requests a declaratory judgment holding section 436
"A facial challenge is an attack on a statute itself as opposed to a particular application." Patel , 576 U.S. at ----,
Courts have "repeatedly held that searches conducted outside the judicial process, without prior approval by [a] judge or [a] magistrate [judge], are per se unreasonable ... subject only to a few specifically established and well-delineated exceptions."
Under the closely regulated industries exception, the challenged statute needs to satisfy "three ... criteria" to be reasonable under the Fourth Amendment:
(1) [T]here must be a substantial government interest that informs the regulatory scheme pursuant to which the inspection is made; (2) the warrantless inspections must be necessary to further [the] regulatory scheme; and (3) the statute's inspection program, in terms of the certainty and regularity of its application, [must] provid[e] a constitutionally adequate substitute for a warrant.
Both parties agree that pawnbrokers and second-hand dealers are closely or pervasively regulated in New York. (Pl. 56.1 Statement of Material Facts Pursuant to Local R. 56.1 ("Pl. 56.1") ¶ 1, Docket Entry No. 87-1);
1. Section 436 fails to provide an adequate substitute for a warrant
"[A] statute's inspection program must ..., 'in terms of the certainty and regularity of its application,' serve as a 'constitutionally adequate substitute for a warrant.' " Liberty Coins, LLC v. Goodman ,
For the foregoing reasons, the Court finds unconstitutional the portion of section 436 that authorizes the warrantless inspection scheme. Ayotte v. Planned Parenthood of N. New England ,
2. Local Law 149 authorizes a valid reporting scheme
Local Law 149, and its accompanying amendments to the New York City Administrative Code, do not violate the Fourth Amendment because they authorize
c. Equal Protection claim based on selective enforcement
Plaintiff asserts an Equal Protection selective enforcement claim based on retaliatory actions taken by Defendant for failing to register on LeadsOnline. (Pl. Mem. 16.) Plaintiff contends that it was subject to unlawful threats of arrest and business disruption in violation of the Fourth Amendment because of its choice not to register. (Id. ) Accordingly, Plaintiff argues that its Fourth Amendment rights were violated and that Defendant acted with malice or bad faith. (Id. ) Defendant asserts that the claim fails as a matter of law because there was no underlying Fourth Amendment violation or evidence of intent to punish. (Def. Mem. 2.) Defendant also argues that Plaintiff's decision not to use LeadsOnline provided a legitimate rational basis for differential treatment as compared to those registered for the service. (Id. )
To prevail on a claim for selective enforcement of the law in violation of the Equal Protection Clause, a plaintiff must prove that (1) "compared with others similarly situated, [plaintiff] was selectively treated, and (2) the selective treatment was motivated by an intention to discriminate on the basis of impermissible considerations, such as race or religion, to punish or inhibit the exercise of constitutional rights, or by a malicious or bad faith intent to injure [the plaintiff]." Martine's Serv. Ctr., Inc. v. Town of Wallkill ,
In analyzing the second prong, the Second Circuit explained that "the branch of equal protection law that protects individuals from unequal treatment motivated by 'malicious or bad faith intent to injure' provides protection from adverse governmental action that is not motivated by 'legitimate governmental objectives.' "
Plaintiff's selective enforcement claim fails as a matter of law because the NYPD desired to implement LeadsOnline, as both parties agree, in order promote law enforcement purposes-a legitimate government objective. (See Pl. Mem. 2 (describing the NYPD's desire to use LeadsOnline to recover stolen property and identify perpetrators).) As an initial matter, the selective enforcement was not for the purpose of inhibiting the exercise of Fourth Amendment rights. As discussed earlier, Plaintiff has no reasonable expectation of privacy in the information contained in the records it is required to keep. Therefore, Plaintiff has no Fourth Amendment claim for being required to upload its records on LeadsOnline. See California Bankers,
d. State law malicious prosecution claim
Plaintiff asserts a malicious prosecution claim under New York law based on a criminal summons issued on September 19, 2012. Defendant argues that Plaintiff fails to satisfy three separate elements of a malicious prosecution claim: (1) the summons was dismissed prior to trial and was not dismissed on the merits; (2) the evidence "does not establish the absence of probable cause"; and (3) there is no evidence that the summons "was issued with 'actual malice.' "
Under New York law, the elements of a malicious prosecution claim are "(1) commencement of a criminal proceeding, (2) favorable termination of the proceeding, (3) lack of probable cause, and (4) institution of the proceedings with actual malice." Swartz,
"[A]ctual malice" for malicious prosecution claims only requires "that the defendant ... have commenced the prior criminal proceeding due to a wrong or improper motive, something other than a desire to see the ends of justice served." Rounseville v. Zahl ,
The September 19, 2012 summons was terminated on the merits. This Court has twice addressed this issue after review of the December 21, 2012 proceedings for the September 19, 2012 summons. See Gem I ,
Plaintiff has also provided sufficient evidence of lack of probable cause and actual malice. As to lack of probable cause, the December 21, 2012 trial transcript again suggests that Judge Raciti reviewed the records submitted by Plaintiff and found them to support its assertions. (See December 21, 2012 Hr'g Tr. 5:18-22.) Furthermore, as to actual malice, Plaintiff's employees have testified consistently about the threats of arrest and business disruption they endured because of the refusal to register with LeadsOnline. The Court thereforе denies Defendant's motion for summary judgment as to the New York State malicious prosecution claim.
III. Conclusion
For the reasons discussed, the Court grants Defendant's motion for summary judgment as to the selective enforcement Equal Protection claim but denies the motion as to the Fourth Amendment claim regarding the seizure of collateral and the New York state malicious prosecution claim. The Court grants Plaintiff's request and declares New York City Charter § 436 unconstitutional but only the portion of the statute addressing warrantless inspections. The Court denies Plaintiff's request to declare New York City Local Law No. 149 unconstitutional.
SO ORDERED.
Notes
Neither party has addressed the claims as to the John Does # 1-10. For purposes of this Memorandum and Order, the Court construes the cross-motions as being between the City and Gem.
To avoid any confusion, the Court amends this Memorandum and Order by replacing the use of the term "as-applied" with "as-administered." By using the term "as-applied" in the prior version of this Memorandum and Order, the Court was referencing Plaintiff's Fourth Amendment challenges based on the unconstitutional manner of application or administration of the various inspection schemes authorized by memoranda, ordinances, regulations, and statutes. See Vives v. City of New York ,
Plaintiff's municipal liability claim is based on the alleged violations of the Fourth and Fourteenth Amendments.
Joseph J. Esposito, the former Chief of Departmеnt for the NYPD, acknowledged that even lawful inspections could often be disruptive to businesses. (Joseph J. Esposito Dep. ("Esposito Dep.") 40:7-13 ("[I]t required us to go into the stores, disrupt their business ... So it sort of disrupted their daily operations to some degree."), annexed to Pl. Mot. as Ex. O, Docket Entry No. 87-18).)
Patrick Timlin formerly served as the Deputy Commissioner of Operations for the NYPD from January of 2010 to January of 2012. (Patrick Timlin Dep. ("Timlin Dep.") 5:13-16, annexed to Pl. Mot. Ex. P, Docket Entry No. 87-19.)
Dambrot acknowledged that he would at times "suggest a hold" to officers. (Harold Dambrot Dep. ("Dambrot Dep.") 92:2-3, annexed to Def. Mot. as Ex. D, Docket Entry No. 86-4.) However, Dambrot testified that this was in response to officers who demand to seize collateral and threaten to "arrest everybody." (Id. at 92:1-3.)
The current version now states that the blank forms may be required "in addition to the electronic record" required.
The current version now requires a "written record of transactions" rather than a "book."
The current version has eliminated the "reasonable times" language and now allows for review of electronic records, in addition to traditional records.
In moving for summary judgment, Defendant appears to have misconstrued the Court's prior orders regarding Plaintiff's remaining claim under the Fourth Amendment. In its moving papers, Defendant argues that the only remaining as-administered Fourth Amendment claim relates to the seizures and holds of collateral items. (See Def. Mem. in Supp. of Def. Mot. ("Def. Mem.") 1 n.1, Docket Entry No. 86-9;
Although the Amended Complaint added Keith Watts as a Plaintiff, the Court dismissed all of his claims as withdrawn following his death. Gem Fin. Serv., Inc. v. City of New York , No. 13-CV-1686,
As discussed infra , for purposes of this motion, the Court construes Plaintiff to be asserting two separate, yet connected, Fourth Amendment claims.
As noted infra , the Court only addresses Plaintiff's as-administered Fourth Amendment claim for the seizures and holds of collateral property as Defendant only moved for summary judgment as to this claim. The Court does not address Plaintiff's as-administered warrantless inspections claim.
Plaintiff relies in part on alleged Fourth Amendment violations of its customers' reasonable expectations of privacy. (See Pl. Mem. 3, 4, 18, 19, 23.) However, "Fourth Amendment rights are personal rights which ... may not be vicariously asserted." Plumhoff v. Rickard , 572 U.S. ----, ----,
The Court is mindful of the concern that a reasonable expectаtion of privacy may be "stripped away merely by the adoption of a regulation authorizing searches of an item or location." Patel v. City of Los Angeles ,
Despite the holding in California Bankers , the opinion seemingly reflected, in part, a concern over a broad application of its reasoning. See, e.g., California Bankers ,
The Court notes that the required records doctrine, as suggested by the elements of the standard, is applied more commonly in the context of the Fifth Amendment. See In re Grand Jury Subpoena ,
Officers could have also written down the information in the records without giving rise to a seizure within the meaning of the Fourth Amendment. Arizona v. Hicks ,
Defendant asserts that the lone exception is for a pledge "where no evidence of NYPD involvement was provided." (Def. Mem. 3.)
In certain situations, warrantless temporary seizures may be reasonable and not violate the Fourth Amendment. See Illinois v. McArthur ,
"The analysis for seizures on consent basically tracks the analysis of the more well-developed area of consent searches." We Buy ,
Plaintiff's other employees also testified that they were often threatened with arrest for legally refusing to do what officers requested, including a general refusal of the stores to use LeadsOnline. (See Somar Dep. 54:1-16; Ragoo Dep. 53:14-22; Lopez Dep. 33:8-15.) One manager testified that officers became specifically upset after being informed that she needed to talk to Dambrot first, prior to acquiescing to their demands. (Lopez Dep. 8-15.)
The vault appears to have been located in Brooklyn, New York. (See Ragoo Dep. 55:7-8.) Defendant has not asserted that it ever seized or held items on public display. (See id. 55:11-12 ("[P]olice officer[s] never took an item for sale.").)
In its Amended Complaint, Plaintiff also asserted Monell claims based on a failure to train. (See Am. Compl. ¶ 168.) Plaintiff did not, however, rely on this theory in its motion papers.
Plaintiff requests that the Court find the policy requirement for Monell to be satisfied because section 436 is facially unconstitutional. See Amnesty Am. v. Town of W. Hartford,
Because Defendant limited its challenge to the Fourth Amendment claim for seizures of collateral property, the Court likewise limits its review of the existence of a policy or custom to this basis. Nevertheless, unlawful searches and seizures serve as evidence in support of Plaintiff's claim for as-administered violations of the inspection scheme of commercial premises.
Plaintiff has provided evidence that would permit a jury to conclude that there was a widespread policy of unlawfully seizing collateral at pawnshops through intimidation and threats of arrest-causing the complained of injury of unlawful seizures of collateral in violation of the Fourth Amendment. See Cash v. Cty. of Erie ,
The Court finds it necessary to determine the constitutionality of section 436 because Defendant appears to argue in part that inspections that go beyond the scope authorized by other statutes, ordinances, agency rules, regulations, and memoranda are valid pursuant to section 436. (See Def. Mem. 3 n.1; Def. Reply 12 n.14.); see also 5 Borough Pawn, LLC. v. Marti ,
Because Plaintiff challenges the reporting requirements of Local Law 149 in their entirety as unlawful searches and seizures under the Fourth Amendment, the Court also considers the constitutionality of this statute.
Plaintiff also requests that the Court declare the statutes unconstitutional under Article 1, § 12 of the New York State Constitution. The Second Circuit has held that a declaratory judgment action should be considered "(1) when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, or (2) when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." Cont'l Cas. Co. v. Coastal Sav. Bank ,
Under Local Rule 56.1, Plaintiff's statement of "[n]either [a]dmit or [d]eny" is considered an admission. See Aztar Corp. v. NY Entm't, LLC ,
In its reply, Plaintiff also appears to challenge Defendant's argument that there is a substantial government interest in a regulatory scheme over pawnbrokers-the first prong of the Burger test. (See Pl. Reply 9 ("[Plaintiff] submits the Court should not overlook one very persuasive statistic: in 2013, the NYPD quantified the pеrcentage of items potentially stolen that pass through pawnbrokers-and found the rate only to be [0].0001 of 1 percent!").) As discussed infra , the Court does not find it necessary to discuss the first two prongs of the Burger test because the inspection scheme authorized by section 436 fails to provide an adequate substitute for a warrant. While section 436 fails to provide an adequate substitute for a warrant, Local Law 149 authorizes a reporting scheme for which the Burger test is inapplicable. Burger only addresses the limitations of physical, on-site inspection schemes that are not implicated by the electronic reporting requirements of Local Law 149.
Defendant also argues that Plaintiff's request should be denied because "a declaratory judgment is not a claim but rather a remedy" requiring a "substantive claim of a violation" prior to relief. (Def. Reply 12.) Defendant's argument requires the dismissal of Plaintiff's underlying Fourth Amendment claim regarding warrantless inspections. As discussed infra , the Court did not dismiss Plaintiff's Fourth Amendment claim as to warrantless inspections carried out pursuant to section 436.
Courts have been inconsistent in their application of the Burger test. Several courts, including the United States Supreme Court, have found statutes unconstitutional for failing to provide a standard to ascertain the frequency of searches. See City of Los Angeles, Calif. v. Patel , 576 U.S. ----, ----,
In Burger , the United States Supreme Court did not entertain the constitutionality of section 436. See Burger ,
Despite the disputed nature of the law, seesupra p. 496, section 436 is broader in scope than the statutes that the Supreme Court and other courts have already found to be facially unconstitutional, authorizing unfettered discretion in terms of not only the frequency of searches, but also the areas, objects, and people to be examined. Cf. Patel , 576 U.S. at ----,
As discussed supra , aspects of the Grasso Memo and the Patrol Guide have been codified in 38 RCNY § 21-11. In comparison, the Grasso Memo provides more details as to the scope of a permissible inspection than 38 RCNY § 21-11. In addition, the Grasso Memo also provides officers instructions for how to handle situations that require a search or seizure that go beyond that of an administrаtive inspection, including the necessity of securing a warrant under certain circumstances. Moreover, 38 RCNY § 21-11 does not expressly limit the scope of the inspections authorized by section 436.
In contrast to section 436, GBL § 45 and New York City Administrative Code §§ 20-273, 20-277 authorize inspections of a much more limited nature. All three limit inspections (in their current form) to "books and records regularly kept" or "records required by th[e] section." GBL § 45 further limits inspections to "reasonable" times. None of these three legislative acts cross-reference or expressly limit section 436 in any way. Nor do they regulate physical inspections of premises or collateral property. Likewise, the inspection scheme described in 6 RCNY § 1-16 relates back to the requirements in New York City Administrative Code §§ 20-267, 20-273, 20-277, and do not expressly limit the inspections authorized by section 436. Tellingly, despite the promulgation of these and other statutes and ordinances regulating pawnbrokers, Defendant principally relies on the Grasso Memo in asserting that the regulatory scheme provides sufficient limitations on officer discretion for warrantless inspections. (See Def. Reply. 17-19.) Defendant's reliance on a non-binding "guideline" is self-defeating. Indeed, the Grasso Memo is not even binding on the officers themselves, let alone section 436. (Esposito Dep. 24:2-13 (failing to recollect whether the Grasso Memo was ever even considered the "standard guideline for inspections of pawnbrokers"); see also 5 Borough Pawn ,
In People v. Pace ,
"When portions of a New York statute are found unconstitutional, the intent of the state legislature in originally enacting the statute is the touchstone in determining whether the remainder of the statute is severable and may be spared from the unconstitutional taint." Gen. Elec. Co. v. New York State Dep't of Labor ,
The Court does not address whether any of the other existing statutes, ordinances, agency rules, regulations, and policy memoranda are themselves constitutional.
United States v. Snyder ,
Because Plaintiff does not have a reasonable expectation of privacy in the information in the records, the compelled reporting of the information differs from seizures and searches in the computer and internet context. In the latter contexts, the government often seizes information in the first instance so that it may search the information at a latеr time. See United States v. Vilar , No. 05-CR-621,
Defendant's argument for upholding section 436 based on "rational basis review" is inapplicable for facial challenges of statutes pursuant to the Fourth Amendment. (See Def. Reply 28-31.) Rational basis review is the default test for due process or Equal Protection claims under the Fifth or Fourteenth Amendment. See Sensational Smiles, LLC v. Mullen ,
In view of the fact that Plaintiff's claim fails to satisfy the second prong, the Court does not consider the first prong.
In making this argument, Defendant contends that the summons at issue could have only been dismissed pursuant to NY Criminal Procedural Law ("CPL") §§ 170.30 and 170.35. (Def. Mem. 23.) Defendant argues that under these provisions, dismissals prior to trial could only support a malicious prosecution claim if based on a "failure to comply with speedy trial provision," insufficiency of information with formal abandonment by the prosecutor, or "interest of justice with specific findings supporting innocence." (Def. Mem. 23-24.) However, CPL § 170.30(1)(f) allows dismissal for "legal impediment" to convictions, including presumably innocence, and may serve as a basis for a malicious prosecution claim. See Adam v. Metro. Transp. Auth. , No. 07-CV-8807,
Defendant also requests that the Court decline to exercise jurisdiction over this state claim based on the assumption that the Court would have dismissed Plaintiff's federal claims. The Court denies this request because Plaintiff has provided sufficient evidence of a claim under the Fourth Amendment for unlawful search and seizure of collateral.