Gem Fin. Serv., Inc. v. City of N.Y.

• Citation: 298 F.Supp.3d 464
• Decision Date: 29 March 2018
• Docket Number: 13–CV–01686 (MKB)
• Parties: GEM FINANCIAL SERVICE, INC. d/b/a Gem Pawnbrokers, Plaintiff, v. CITY OF NEW YORK, and Police Officers John Doe # 1–10, Defendants.
• Court: U.S. District Court — Eastern District of New York

298 F.Supp.3d 464

GEM FINANCIAL SERVICE, INC. d/b/a Gem Pawnbrokers, Plaintiff,

v.CITY OF NEW YORK, and Police Officers John Doe # 1–10, Defendants.

13–CV–01686 (MKB)

United States District Court, E.D. New York.

Signed March 29, 2018

As Amended June 27, 2018

Paul J. Solda, Law Office Paul J. Solda, New York, NY, for Plaintiff.

Diana M. Murray, Louise A Moed, Jasmine M. Georges, The City of New York Law Department, Office of Corporation Counsel, New York, NY, for Defendants.

MEMORANDUM & ORDER

MARGO K. BRODIE, United States District Judge:

Plaintiff Gem Financial Service, Inc. ("Gem"), doing business as Gem Pawnbrokers, commenced the above-captioned action on March 28, 2013 against, among others, Defendants City of New York (the "City" or "Defendant") and Police Officers John Doe # 1–10, (Compl., Docket Entry No. 1), and filed an Amended Complaint on May 2, 2014, alleging, inter alia , unlawful searches and seizures in violation of the Fourth Amendment, selective enforcement under the Equal Protection Clause of the Fourteenth Amendment, and malicious prosecution under New York state law, (Am. Compl., Docket Entry No. 25). Currently before the Court are the parties' cross-motions for summary judgment.¹ Defendant moves for summary judgment as to Plaintiff's (1) Fourth Amendment as-administered² claim for searches and seizures of collateral property, (2) Equal Protection claim for selective enforcement, (3) municipal liability claim,³ and (4) state malicious prosecution claim. (Def. Mot. for Summ. J. ("Def. Mot."), Docket Entry No. 86; Def. Mem. in Supp. of Def. Mot. ("Def. Mem."), Docket Entry No. 86–9.) Plaintiff cross-moves for declaratory relief holding New York City Charter § 436 ("section 436") and New York City Local Law No. 149 ("Local Law 149") facially unconstitutional under both the United States and New York State Constitutions. (Pl. Mot. for Summ. J. ("Pl. Mot."), Docket Entry No. 87; Pl. Mem. in Supp. of Pl. Mot. ("Pl. Mem."), Docket Entry No. 87–2.) For the reasons discussed below, the Court grants in part and denies in part both motions for summary judgment.

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 "web-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 about the potential use of LeadsOnline as "an effort to extend an olive branch and [desire to] develop a mutually beneficial relationship." (Affidavit of Harold Dambrot in Supp. of Pl. Mot. ("Dambrot Aff.") ¶ 2, annexed to Pl. Mot. as Ex. A, Docket Entry No. 87–4.) Accordingly, Gem used LeadsOnline in 2010. (Def. 56.1 ¶ 26.) However, Gem discontinued its use in February of 2011. (Id. ¶ 27.) Harold Dambrot, Gem's Senior Vice President for Legal Matters, explained that Gem discontinued the use of LeadsOnline because of the "constant" police holds, i.e., requests to hold onto property, and requests for photographs of collateral. (Id. ¶¶ 15, 29–30.)

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.⁴ (See, e.g. , Karan Ragoo Dep. in Supp. of Pl. Mot. ("Ragoo Dep.") 53:14–19, annexed to Pl. Mot. as Ex. JJ, Docket Entry No. 87–39 ("The nature of the threat was as soon as he came in he says you are not using LeadsOnline and he could shut me down.").) The NYPD also issued Gem seven criminal summonses for various violations during this time. (Gem Summons, annexed to Def. Mot. as Ex. S, Docket Entry No. 86–7.) One summons, issued on September 19, 2012, was dismissed on December 21, 2012 after Gem appeared in court before Judge Raciti at the Criminal Court of the City of New York in Kew Gardens, New York. (See December 21, 2012 Hr'g Tr. 5:18–22, annexed to Def. Mot. as Ex. GG, Docket Entry No. 86–8.)

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.

(Id. ) Likewise, David Kaminsky, the president of EZ Pawn Corp., a pawnbroker chain with fourteen different stores in New York City, explained their stores were subject to an increased police presence, threats, harassment, and bullying, upon cancellation of their service with LeadsOnline on two separate occasions, in 2012 and May of 2015. (David Kaminsky Aff. in Supp. of Pl. Mot. ("Kaminsky Aff.") ¶¶ 2, 5, annexed to Pl. Mot. as Ex. I, Docket Entry No. 87–12.)

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 seizures 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;⁵ Esposito Dep. 34:14–21 ("[I]f we feel that we want to apply for a search warrant to seize that property, part of the process would be to freeze the location so that the property could not be disposed of while we were applying for a warrant.").) The NYPD concedes that it has never secured a warrant to seize any item from Gem between 2010 and June 21, 2016, and has never obtained a warrant to search Gem's premises. (June 21, 2016 Letter re: Supplemental Demands ("Supplemental Demands") 2, 4, annexed to Pl. Mot. as Ex. W, Docket Entry No. 87–26.) The NYPD also does not maintain records of hold requests for collateral in the possession of pawnbrokers. (Def. Resp. to Pl. First Set of Interrogs. ("Def. Resp. to Interrogs.") 5, annexed to Pl. Mot. as Ex. V, Docket Entry...