Glenwood TV, Inc. v. Ratner

• Decision Date: 17 September 1984
• Docket Number: No. 1,No. 2,1,2
• Parties: In the Matter of GLENWOOD TV, INC., Respondent, v. Bruce C. RATNER, as Commissioner of the Department of Consumer Affairs of the City of New York, Appellant. (Action) In the Matter of CHARLES TV, INC., Respondent, v. Bruce C. RATNER, as Commissioner of the Department of Consumer Affairs of the City of New York, Appellant. (Action)
• Court: New York Supreme Court — Appellate Division

Page 98

480 N.Y.S.2d 98

103 A.D.2d 322

In the Matter of GLENWOOD TV, INC., Respondent, v. Bruce C. RATNER, as Commissioner of the Department of

Consumer Affairs of the City of New York,

Appellant. (Action No. 1)

In the Matter of CHARLES TV, INC., Respondent, v. Bruce C. RATNER, as Commissioner of the Department of

Consumer Affairs of the City of New York,

Appellant. (Action No. 2)

Supreme Court, Appellate Division Second Department.

Sept. 17, 1984.

Frederick A.O. Schwarz, Jr., Corp. Counsel, New York City (Leonard Koerner and David Drueding, New York City, of counsel), for appellant.

Meissner, Tisch & Kleinberg, New York City (Ronald M. Kleinberg, Laurel J. Weinberg and Gino Josh Singer, New York City, of counsel), for respondents.

Before TITONE, J.P., and GIBBONS, THOMPSON, BRACKEN and RUBIN, JJ.

TITONE, Justice Presiding.

The Commissioner of the New York City Department of Consumer Affairs appeals from two judgments of the Supreme Court, Kings County, which declared sections B32-472.0 (subd. 5) and 773-13.0 of the Administrative Code of the City of New York unconstitutional insofar as they purport to authorize nonconsensual periodic inspections of the records of licensed television and radio repair businesses without a search warrant, and annulled determinations suspending the petitioners' licenses and imposing fines for a willful refusal to permit such inspections. ¹ A majority of this court finds the legislation to be constitutional and, therefore, reverses the two judgments.

I

In 1973, the New York City Council enacted New York City Local Law No. 74 of 1973 (New York City Administrative Code, ch. 32, tit. B, art. 44, § B32-465.0, et seq. ), which provides for the licensing and regulation of individuals and entities engaged in servicing or repairing television, radio or audio equipment. The City Council, which had studied the matter for several years (see Metropolitan Electronic Tel. Serv. Dealers Assn. v. Guggenheimer, NYLJ, July 2, 1975, p. 12, col. 5, affd. 51 A.D.2d 922, 381 N.Y.S.2d 87, mot. for lv. to app. den. 39 N.Y.2d 709, 386 N.Y.S.2d 1026, 352 N.E.2d 596), concluded that the business had "become the subject of great abuse. The public has been and is unprotected from unethical and financially unstable service dealers. The necessity for legislative intervention to protect the public and legitimate service dealers * * * declared as a matter of legislative determination" (Administrative Code, § B32-465.0).

The statutory scheme and the implementing regulations promulgated by the Commissioner of Consumer Affairs provide for the licensing of such repair and service dealers and comprehensive disclosure rules designed to insure that the consumer is sufficiently apprised of the anticipated costs and of the obligations undertaken by repairmen. ² A licensee is thus required to conspicuously post its license and a sign advising consumers of their rights (Administrative Code, § 773-13.0; Department of Consumer Affairs Rules and Regulations Relating to Television, Radio and Audio Equipment, Phonograph Service and Repairs, City Record, January 23, 1975, pp. 264-266). In addition, all work performed by the licensee is to be recorded on an invoice containing the license number and other details and a copy delivered to the customer and a copy retained by the licensee for a period of three years (Administrative Code, § B32-472.0, subd. 1). Such invoices and other records required by regulation "shall be open and available for reasonable inspection by the commissioner or other law enforcement officials, and shall be kept for a period of three years" (Administrative Code, § B32-472.0, subd. 5).

The legislation also directs the Commissioner of Consumer Affairs to conduct periodic inspections to insure that licensees comply with the terms of their license and governing regulatory provisions (Administrative Code, § 773-13.0). To that end, the commissioner has instituted a random computer selection method whereby licenses are regularly inspected about once a year and, to limit the scope of the inspection, inspectors are provided with a form which they are to follow.

II

We turn, then, to a review of the factual background of the case now before us.

On June 6, 1979 and June 22, 1979, respectively, Inspector Joseph Laura of the Department of Consumer Affairs arrived at the store fronts of Glenwood TV, Inc. and Charles TV, Inc., both of which were licensed pursuant to the Administrative Code. Upon entering the area open to the public at each location, he first checked to see that the required signs informing consumers of their general legal rights were conspicuously posted. Finding that they were, he then asked each proprietor for a sampling of the estimates, work orders and final bills that they were required to keep. On both occasions this request was refused. There is no indication or claim that the inspector attempted to enter any area of the business not otherwise accessible to the general public. Nor does either party contend that the statutes in question purport to authorize such entry or that inspectors make such entries without the consent of the proprietor.

Consequently, administrative charges were filed against both licensees, and, on consent, the actions were consolidated for the purpose of a hearing, which was held on November 13, 1979. At the hearing, both licensees admitted their refusal to supply the requested documentation, stating that their refusal was prompted by instructions from the Metropolitan Electronic Television Service Dealers Association's counsel to supply this documentation only when inspections are conducted in response to specific consumer complaints and to refuse when subjected to periodic inspection. It was the association's position adopted by both licensees at the hearing, that these periodic inspections were too frequent, as they took between an hour and two hours to complete, and were therefore unreasonably disruptive of small business operations. ³

The Department of Consumer Affairs produced Principal Inspector Christopher Bossis and Inspector Joseph Laura to testify to the standard inspection procedures and those specifically employed with respect to these licensees. Principal Inspector Bossis stated that routine periodic inspections of dealers were randomly scheduled by computer about once a year and that it would be virtually impossible for a single licensee to be scheduled for regular inspection four to six times in one year. Both inspectors stated that the procedure employed should take a maximum of one half hour to complete and routinely last as little as 15 minutes. The presence of an inspector for more than a half hour would only result if the inspection was interrupted by the entrance of customers during the inspection, as it is the department's practice to accommodate dealers by allowing them to interrupt the inspection and tend to customers. Indeed, one of the petitioners admitted that this was routinely done but claimed that inspections were nonetheless disruptive of customer relations because "shops are generally small, and the inspector can overhear anything that goes on, pertaining to your dealings with your consumers".

A written decision was rendered fining each licensee $300 and ordering them to "make available for inspection all required records requested by this Department" within five days of notice of the decision. The hearing officer found that the inspections were lawfully authorized by the City Council, that the inspections were reasonable in both frequency and duration, and that both licensees willfully refused to submit to them. The licensees were notified of the decision by a letter dated January 15, 1980, and, when they failed to comply with its terms, they were informed that their licenses would be suspended effective March 5, 1980. When the licensees further refused to surrender their licenses and cease operation pursuant to the notice of suspension, the department revoked their licenses.

The licensees did file administrative appeals, raising their constitutional claims for the first time; however, the appeals were denied as untimely as both licensees had been granted an extension of time until February 8, 1980 to file an appeal, but had not done so until February 15, 1980.

Subsequently, petitioners commenced these proceedings to review the administrative determinations upon the ground that Local Law No. 74 of 1973 is, among other things, violative of their Fourth Amendment protections against warrantless searches and seizures (U.S. Const., 4th Amdt.). Special Term treated these proceedings as "hybrid proceedings for both Article 78 and declaratory relief", ⁴ and, in a far-ranging opinion, agreed with petitioners, and set forth elaborate notice and warrant requirements. We reverse.

III

At the outset, a matter of procedure must be addressed. While the petitioners' failure to exhaust administrative remedies does not bar a challenge to administrative action as either unconstitutional or beyond the agency's statutory power (Watergate II Apts. v. Buffalo Sewer Auth., 46 N.Y.2d 52, 57, 412 N.Y.S.2d 821, 385 N.E.2d 560; cf. Matter of Celestial Food Corp. of Coram v. New York State Liq. Auth., 99 A.D.2d 25, 27, 471 N.Y.S.2d 654), it does limit the scope of judicial review to the face of the statute itself (Young Men's Christian Assn. v. Rochester Pure Waters Dist., 37 N.Y.2d 371, 375-378, 372 N.Y.S.2d 633, 334 N.E.2d 586; cf. Skylab Realty Corp. v. New York Prop. Ins. Underwriting Assn., 96 A.D.2d 939, 466 N.Y.S.2d 387). Accordingly, we must presume that the inspections were conducted in a reasonable fashion and accept the findings of the hearing officer (see Young Men's Christian Assn. v. Rochester Pure Waters Dist., supra ).

While, as petitioners urge, the city cannot require them to submit to blanket warrantless searches as a condition of licensing (see, e.g., Matter of Finn's Liq. Shop v. State Liq. Auth., 24 N.Y.2d 647, 658, 301...