S & S Pawn Shop Inc. v. City of Del City

• Decision Date: 09 October 1991
• Docket Number: No. 90-6101,90-6101
• Citation: 947 F.2d 432
• Parties: S & S PAWN SHOP INCORPORATED; Andrew W. Eckert, doing business as S & S Pawn Shop Incorporated, Plaintiff-Appellant, v. CITY OF DEL CITY; Ennis St. Clair, as Police Chief of Del City; Tom Rogers, as Police Chief of Del City; J. Baranski, as Police Officer for Del City; M.L. Robinson, as Police Officer for Del City; and J. Hughes, as Police Officer for Del City, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 432

947 F.2d 432

S & S PAWN SHOP INCORPORATED; Andrew W. Eckert, doing business as S & S Pawn Shop Incorporated Plaintiff-Appellant, v. CITY OF DEL CITY; Ennis St. Clair, as Police Chief of Del City; Tom Rogers, as Police Chief of Del City; J Baranski, as Police Officer for Del City; M.L. Robinson, as Police Officer for Del City; and J. Hughes, as Police Officer for Del City, Defendants-Appellees.

No. 90-6101.

United States Court of Appeals Tenth Circuit.

Oct. 9, 1991.

Laurence K. Donahoe (J. Greg Davis, with him on the brief), of Davis & Associates, Oklahoma City, Okl., for plaintiff-appellant.

Ted N. Pool (Sherry Blankenship, with him on the brief), of Pool, Thompson, Coldiron, Blankenship & Vincent, Oklahoma City, Okl., for defendants-appellees.

Before McKAY, Chief Judge, HOLLOWAY, Circuit Judge, and WINDER, District Judge. ¹

McKAY, Chief Judge.

Appellant seeks reversal of the district court's determination that Okla.Stat.Ann. tit. 59, § 1508 (West 1989), which authorizes warrantless inspections of pawnshops, does not violate the fourth amendment of the United States Constitution. He also urges that the district court incorrectly abstained from deciding the constitutionality of Okla.Stat.Ann. tit. 21, § 1092 (West 1983).

I.

Appellant Andrew W. Eckert is the owner and operator of S & S Pawnshop, Inc. in Del City, Oklahoma. ² In 1985 and 1986, Del City police officers conducted warrantless searches of the pawn shop and seized property that had been reported as stolen. The items were taken for use as evidence in criminal proceedings. Some of the items were later delivered to individuals who had reported the items stolen. Others were released by the Del City Police Department to other law enforcement agencies.

The police officers conducted the warrantless searches pursuant to section 1508 of the Oklahoma Pawnshop Act, Okla.Stat.Ann. tit. 59, §§ 1501-15 (West 1989). Section 1508 establishes that the books, records, and property of pawnbrokers licensed by the state may be examined without a warrant. The statute specifies that the chief of police or written designee of the law enforcement body in whose jurisdiction the pawnshop is located may perform the examination. Failure to permit an examination of such books, records, or property constitutes grounds for the suspension or revocation of the pawnbroker's license. ³

Though raised nowhere in appellant's complaint or other pleadings in the district court nor in his brief before this court, depositions appended to the parties' memoranda in support of their respective motions for partial summary judgment evidence the procedure used by the Del City policemen when searching appellant's business. Though the record does not indicate whether the process is routine or pursuant to a pre-planned scheme, the police apparently collected pawn tickets from appellant and ran any identification number on the pawned item through the National Crime Information Center. When the identification and description of the pawned item matched the identification number and description of a stolen item on the NCIC or other police report, the police officers traveled to appellant's business and, without a warrant, demanded that they be shown the item. One affidavit indicated that such a search was also pursued when an individual who pawned the item was suspected of trafficking in stolen goods. In particular, eight items listed in appellant's complaint apparently were subjected to such an "inspection" and subsequently confiscated, also without a warrant. In count three of his complaint, appellant alleges that the officers were acting pursuant to the state provision whose constitutionality is under attack here. Appellant never makes clear, however, whether the inspection of the pawn tickets or the later inspection and confiscation of the pawned items are at issue.

Appellant filed this action requesting that the district court order appellees to cease all searches of S & S Pawn Shop, Inc. without a valid search warrant. He also sought an order by the court declaring Okla.Stat.Ann. tit. 59, § 1508 unconstitutional for overbreadth and vagueness. In addition, appellant challenged the constitutionality of Okla.Stat.Ann. tit. 21, § 1092, which establishes that any pawnbroker who refuses to exhibit stolen goods to a peace officer or the owner of the goods is guilty of a felony.

The district court granted summary judgment in favor of appellees on the ground that the warrantless searches made pursuant to section 1508 fall within the exception to the warrant requirement for inspections of "closely regulated" businesses. See New York v. Burger, 482 U.S. 691, 107 S.Ct. 2636, 96 L.Ed.2d 601 (1987). In reaching its conclusion, the district court appears to have treated appellant's challenge to the Oklahoma provision as a facial challenge and did not review the statute as it was applied to him. The court abstained from deciding the constitutionality of Okla.Stat.Ann. tit. 21, § 1092 because the statute was subject to an interpretation that would avoid a constitutional question. See Babbitt v. United Farm Workers Nat'l Union, 442 U.S. 289, 306, 99 S.Ct. 2301, 2313, 60 L.Ed.2d 895 (1979). We review the district court's conclusions of law de novo. In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266 (10th Cir.1988).

II.

The fourth amendment prohibits unreasonable searches and seizures. As a general rule, warrantless searches are unreasonable, and this rule applies to both commercial premises as well as homes. Marshall v. Barlow's, Inc., 436 U.S. 307, 312, 98 S.Ct. 1816, 1820, 56 L.Ed.2d 305 (1978). The Supreme Court has recognized an exception to the warrant requirement whereby warrantless administrative searches may be reasonable within the meaning of the fourth amendment when the premises are used in a closely regulated business or industry. See, e.g., New York v. Burger, 482 U.S. at 691, 107 S.Ct. at 2636 (automobile junkyards); Donovan v. Dewey, 452 U.S. 594, 101 S.Ct. 2534, 69 L.Ed.2d 262 (1981) (mines); United States v. Biswell, 406 U.S. 311, 92 S.Ct. 1593, 32 L.Ed.2d 87 (1972) (firearms); Colonnade Catering Corp. v. United States, 397 U.S. 72, 90 S.Ct. 774, 25 L.Ed.2d 60 (1970) (alcoholic beverages). Warrantless inspections of commercial enterprises in a closely regulated industry are reasonable if the inspection satisfies three criteria:

First, there must be a "substantial" government interest that informs the regulatory scheme pursuant to which the inspection is made....

Second, the warrantless inspections must be "necessary to further [the] regulatory scheme." ...

Finally, "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." ... In other words, the regulatory statute must perform the two basic functions of a warrant: it must advise the owner of the commercial premises that the search is being made pursuant to the law and has a properly defined scope, and it must limit the discretion of the inspecting officers.

Burger, 482 U.S. at 702-703, 107 S.Ct. at 2644 (citations omitted).

When the regulatory scheme is sufficiently comprehensive and defined, "the owner of commercial property cannot help but be aware that his property will be subject to periodic inspections undertaken for specific purposes." Donovan, 452 U.S. at 600, 101 S.Ct. at 2538. The scheme guarantees that the individual's privacy interest and the state's interest in law enforcement are properly balanced. See Barlow's, Inc., 436 U.S. at 321, 98 S.Ct. at 1825 ("The reasonableness of a warrantless search ... will depend upon the specific enforcement needs and privacy guarantees of each statute.")

Pawnbrokers must obtain a license from the State. Okla.Stat.Ann. tit. 59, § 1503 (West 1989). The Administrator of Consumer Affairs reviews the criminal record and net worth of license applicants, Okla.Stat.Ann. tit. 59, § 1503A, and conducts an investigation into an applicant's experience, character, and financial responsibility. Okla.Stat.Ann. tit. 59, § 1505(A). Every applicant must file a $5000.00 bond with the Administrator. Okla.Stat.Ann. tit. 59, § 1504(B).

After a license is issued, the method of operation of pawnshops is monitored closely. The maximum allowable pawn finance charges are set by statute. Id., § 1510. Pawnbrokers are required to make extensive disclosures to their customers concerning the specifics of pawn transactions. Id., § 1509. Advertising must conform to certain requirements to avoid misleading customers. Id. Further, under the Act's reporting requirements, pawnbrokers must make available to the local law enforcement agency a report of each pawn transaction within three days of the transaction. Id., § 1515. Pawnbrokers are also required to maintain books and records so that the Administrator can determine whether the licensee is complying with the statutory requirements. Id., § 1508(C).

In light of this broad range of requirements, we conclude that pawn transactions are a closely regulated business in Oklahoma. Oklahoma's inspection scheme nevertheless must also satisfy the three criteria necessary for constitutionally reasonable, albeit warrantless, searches.

A.

Appellees argue that the pawn shop industry is closely connected to a flow of goods that contains stolen property and that the statute therefore advances the government's substantial interest in controlling property theft. Appellant counters this position by emphasizing that of all pawn transactions in 1986 and 1987, only one-tenth of one percent were confiscated from pawnbrokers by law enforcement officials. ⁴ Given this small percentage, appellants maintain that Oklahoma does not have a substantial government interest in regulating pawnbrokers.

We decline to adopt the position urged by appellant. First, appellant would have us discount the government interest in any regulatory scheme that has successfully furthered its...