Collateral Loanbrokers Ass'n of N.Y., Inc. v. City of N.Y.
| Decision Date | 03 June 2015 |
| Docket Number | No. 303901/14.,303901/14. |
| Citation | 18 N.Y.S.3d 578 (Table) |
| Parties | COLLATERAL LOANBROKERS ASSOCIATION OF NEW YORK, INC., 835 Pawnit Westchester Corp., Charles Lyons, Brian Silverman, Capital Pawn Brokers, Inc., Capital Gold and Estate Buyers, Inc., and David Florez, Plaintiff(s), for a Declaratory Judgment Under CPLR § 3001, v. The CITY OF NEW YORK and Bill Deblasio, as Mayor of the City of New York, Defendant(s). |
| Court | New York Supreme Court |
Kris, Kriss & Brignola, LLP, for Plaintiffs.
New York City Law Department, for Defendants.
In this action for declaratory judgment, plaintiffs move for an order, inter alia, granting them a preliminary injunction enjoining defendants from enforcing, inter alia, General Business Law § 45, New York City Charter § 435 and § 436, Local Law No. 149 and its resulting amendments to New York City Administrative Code § 20–267, § 20–273, 20–277, Rules of the City of New York § 1–16, § 21–03(a) and (b), § 21–04(a) and (c), § 21–07(a)–(f), and § 21–08. Plaintiffs contend that because all the foregoing statutes authorize warrantless searches of plaintiffs' records memorializing customer transactions absent a regulatory scheme sufficient to safeguard plaintiffs' right to privacy, the foregoing statutes are unconstitutional facially and as applied insofar as they, inter alia, violate Article 1 Section 12 of the New York State Constitution. Thus, plaintiffs aver that they establish entitlement to preliminary injunctive relief by demonstrating a likelihood of success on the merits in this action, that the equities tip in their favor, and that irreparable harm absent injunctive relief will result. Defendants oppose plaintiffs' motion averring, inter alia, that insofar as each of the statutes challenged, except Local Law No. 149 and the resulting amendments to New York City Administrative Code § 20–267, § 20–273, 20–277, were enacted more than six years prior to the commencement of this action, the majority of this action is time barred. Moreover, defendants argue that the foregoing statutes are not unconstitutional under the prevailing law because they merely authorize legally cognizable administrative searches of plaintiffs' record for the sole purpose of ensuring compliance with regulatory requirements. Accordingly, defendants contend that plaintiffs are unlikely to succeed on the merits and, thus, the instant motion should be denied. Plaintiffs oppose defendants' motion seeking dismissal of the amended complaint, averring, inter alia, that the six year statute of limitations governing declaratory judgment actions is inapplicable, where, as here, the statutes challenged pose a continuous harm.
For the reasons that follow hereinafter, plaintiffs' motion is granted, in part, and defendants' motion is denied.
The instant a action is for declaratory judgment. The amended complaint, filed November 14, 2014 alleges the following. Pursuant to General Business Law (GBL) § 43, collateral pawnbrokers are required to keep a book memorializing loans issued. GBL § 45 requires that the foregoing book and all other records kept by collateral loan brokers be, at all reasonable times, open to inspection by members of the New York City Police Department (N.Y.PD). In addition, pursuant to Title 20 (Title 20) of the New York City Administrative Code (New York City Administrative Code [NYCAC] 20–264, et seq. ), a dealer in second-hand articles, meaning, one who, inter alia, deals in the purchase or sale of second-hand articles, is required to be licensed by the New York City Department of Consumer Affairs (N.Y.CDCA) and pursuant to Rules of the City of New York (RCNY) § 1–16(a) is required to maintain the records promulgated by Title 20, which records, pursuant to RCNY § 1–16(b) shall be made available to the Commissioner of NYCDCA or its representative for inspection. Prior to the promulgation of Local Law No. 149 in 2013, NYCAC § 20–273 and § 20–277 required that dealers in second-hand articles and pawnbrokers keep written transaction records, including a description of every article sold or purchased and the name address, and description of the person to whom the article was sold or from whom it was purchased. Subsequent to and because of Local Law No. 149, NYCAC § 20–273 and § 20–277 now require that dealers of second-hand articles and pawnbrokers maintain the foregoing records in electronic form and in a manner allowing real-time sharing via a website designated by the police commissioner. Pursuant to NYCAC § 20–273 and § 20–277 the foregoing electronic records shall be open to inspection by any police officer, the commissioner or any departmental inspector, judge of the criminal court, or person duly authorized in writing for such purposes by the commissioner or by any judge of the criminal court, who shall exhibit such written authority to the dealer and such records shall also be open to the inspection of any official or other person identified in, or duly authorized in writing pursuant to, any other applicable state or local law.
Pursuant to RCNY § 1–16(b), the Commissioner or authorized representatives may enter the business premises of a licensee during business hours for the purposes of inspecting or examining the licensee's place of business to verify compliance with the provisions of Title 20, and can inspect or examine any records or documents the licensee is required to maintain pursuant to said chapters and regulations. Pursuant to RCNY 1–16(c) inspections are conducted at least once in every two-year period, and additional inspections will be conducted if an inspection reveals alleged violations of Title 20 of the NYCAC or whenever the NYCDCA receives information alleging violation of Title 20.
New York City Charter (N.Y.CC) § 435 grants the police the authority to inspect and observe any businesses required to have licenses, which pursuant to NYCC § 436, includes pawn brokers and dealers of second-hand merchandise. NYCC § 436 also grants the police the power to inspect establishments, their clerks, employees, books, premises, and merchandise in their possession.
In 1998, the NYPD—via a memorandum (Grasso memo) from George A. Grasso, Deputy Commissioner of Legal Matters with the NYPD—promulgated guidelines which the NYPD was to employ in performing administrative inspections of pawnbrokers and dealers of second-hand merchandise. The Grasso memo, basing the authority to promulgate such guidelines on the NYCC, RCNY, the NYCAD, and due to the propensity of such businesses to traffic stolen goods, indicated that the NYPD can, inter alia, set up an inspection program of the transaction books maintained by such businesses and/or demand, in writing, that pawnbrokers and dealers in second-hand merchandise provide lists of items pawned or pledged. In 2013, the NYPD also promulgated Patrol Guide Procedure No. 214–38 (PG 214–38), which, because pawn brokers and dealers of second-hand goods can sometimes unknowingly serve as fences for stolen goods, promulgates a comprehensive inspection procedure for the transaction records pawnbrokers and dealers in second-hand goods are required to maintain. In an effort to determine whether individuals identified as recidivists, parolees, probationers, or known burglars, pursuant to PG 214–38, the NYPD should inspect records within for foregoing establishment at least once every 10 days if those records are not maintained electronically. For records, maintained electronically, PG 214–38 requires those records to be reviewed weekly. RCNY § 21–03(a) and (b), § 21–04(a) and (c), § 21–07(a)–(f), and § 21–08, promulgated as a result of Local Law No. 149 require pawnbrokers and dealers in second-hand merchandise to create electronic transaction records and upload the same to a web-based electronic transfer service designated by the NYPD known as Leads Online, who then makes those records available to the NYPD.
Plaintiff COLLATERAL LOANBROKERS ASSOCIATION OF NEW YORK, INC. (CLANY) is a statewide association of pawnbrokers doing business in New York. Plaintiff, 835 PAWNIT WESTCHESTER CORP. (Pawnit) is a licensed pawnbroker and second-hand dealer doing business in New York City. Plaintiffs CHARLES LYONS (Lyons), BRIAN SILVERMAN (Silverman), and DAVID FLOREZ (Florez) are customers of Paradise Pawnbrokers, Modell Financial Inc., and DF Jewelry, Inc., respectively licensed pawnbroker or second-hand dealers. In the course of transacting business with the foregoing entities in New York City, Lyons, Silverman, and Florez were required to disclose personally identifiable information. Plaintiff CAPITAL PAWN BROKERS, INC. (CPB) is a licensed pawnbroker doing business in New York City. Plaintiff CAPITAL GOLD AND ESTATE BUYERS, INC. (CGEB) is a licensed second-hand dealer doing business in New York City. Defendant THE CITY OF NEW YORK (the City) is a municipality having jurisdiction over municipal offices, including the NYPD and the Department of Consumer Affairs (DCA). Defendant BILL DE BLASIO (De Blasio) is the Mayor of and has exclusive authority over the City.
Plaintiffs allege that inasmuch as GBL § 45 authorizes the government to conduct unfettered warrantless administrative inspections of the premises where pawnbrokers and second-hand dealers transact business and the transactional records contained therein, this statute is unconstitutional facially and as applied in violation of Article 1 § 12 of the New York State Constitution (N.Y.SC Article 1 § 12 ) (first cause of action). Similarly, to the extent that NYCC § 435 and § 436 also authorize the unfettered and limitless warrantless searches by the NYPD of the business premises of pawnbrokers and second-hand dealers for purposes of reviewing the transactional records therein, plaintiffs allege the foregoing statutes are unconstitutional facially and as applied in violation of NYSC Article 1 § 12 (). Plaintiffs further allege that insofar as the Grasso memo and PG 214–38 are...
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