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L.A.M. RECOVERY INC. v. DEPARTMENT OF CONSUMER AFFAIRS

November 22, 2004.

L.A.M. RECOVERY INC., Plaintiff,
v.
THE DEPARTMENT OF CONSUMER AFFAIRS, et al., Defendants.



The opinion of the court was delivered by: LEWIS KAPLAN, District Judge

MEMORANDUM OPINION

Plaintiff, who operates an automobile repossession business, has been locked in combat with the City of New York for almost four years. The City contends that he engaged in "towing" with "tow trucks" and therefore required a license from the Department of Consumer Affairs ("DCA"). Plaintiff disputes this and, in the alternative, argues that the relevant legislation legislation is unconstitutional. Defendants move for judgment on the pleadings dismissing the complaint on principles of former adjudication.

Facts

  The Initial Confrontation

  On February 8, 2001, plaintiff was observed by a police officer in the process of repossessing an automobile in Brooklyn. The officer issued a DCA Notice of Violation charging plaintiff with unlicensed towing activity in violation of Section 20-496(a) of the Administrative Code.*fn1 At hearing on February 15, 2001, an administrative law judge ("ALJ"), after taking testimony from plaintiff's principal and the officer, found that plaintiff was operating a "tow truck" within the meaning of Section 20-495(d), that there was no applicable exemption, and that plaintiff's vehicle was used "in connection with engaging in an activity for which a license is required pursuant to Administrative Code § 20-496(a)" without a license. Plaintiff was fined $1,000 and directed to cease its unlicensed activity. The ALJ further directed the padlocking of plaintiff's premises if used primarily for unlicensed towing activity and the removal of trucks or vehicles used therein.

  The First State Court Litigation

  Plaintiff then commenced an action seeking a judgment vacating the ALJ's determination, declaring that plaintiff was engaged in lawful activity, and granting other relief.*fn2 It appears that a Kings County Supreme Court Justice temporarily stayed enforcement of the judgment, thus presumably protecting plaintiff for some period against the "padlocking" aspects of the DCA determination. Although the outcome of this proceeding is not material here, the defendants represent — and plaintiff does not deny — that plaintiff's motion for a preliminary injunction was denied and that the temporary restraining order previously entered was modified to allow plaintiff to pursue administrative remedies at DCA provided it applied for licenses for its business and drivers. On December 12, 2001, DCA's director of adjudication denied plaintiff's appeal.

  The Second State Court Litigation

  In April 2002, plaintiff commenced an Article 78 proceeding in New York Supreme Court, Kings County, against the City, the DCA, and the DCA commissioner. The supporting affirmation*fn3 asserted that (1) the DCA's February 2001 decision was arbitrary and capricious,*fn4 (2) DCA licensing would impose such an undue financial burden on plaintiff as to force it out of business,*fn5 (3) the DCA is preempted from regulating repossessors by 49 U.S.C. § 14501(c),*fn6 and (4) the City's towing regulations are unconstitutional as applied to plaintiff at least in part because they deprive it of equal protection of the laws.*fn7 Its memorandum of law asserted also that the application of the City regulations to plaintiff deprived it of due process of law and constituted a regulatory taking.*fn8

  The state court denied the petition. Insofar as is relevant here, it explicitly and flatly rejected plaintiff's

  • statutory argument, holding that
"a straight forward reading of the above-cited provisions of the Administrative Code makes clear that tow trucks must be licensed unless specifically exempted, and that repossessors are not included in any of the enumerated exemptions."*fn9
• regulatory taking claim, stating that:
"Although the petitioner claims that compliance with the licensing laws would cause it to sustain severe hardship, the licensing process is not onerous, and the petitioner has failed to demonstrate that it could not comply with the statute and maintain its respossession business."*fn10
  • preemption argument, stating "Nor has the petitioner demonstrated that the regulations are preempted by Federal law".*fn11 It held also that "petitioner's remaining contentions are without merit as well."*fn12

  No appeal was taken from the state court decision.

  This Action

  Plaintiff then brought this action. The complaint contains four counts:
• Count one challenges the City's regulations under the Commerce Clause.
• Count two makes precisely the preemption argument previously rejected by the state court.
• Count three makes the regulatory taking argument previously rejected by the state court.
• Count four seeks damages, presumably on the legal theories set out in the first three counts.
  Defendants moved for judgment on the pleadings on the grounds of res judicata (claim preclusion) and collateral estoppel (issue preclusion). As plaintiff objected to consideration of materials outside the complaint, the Court notified the parties that it would convert the motion into one for summary judgment dismissing ...

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