UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
August 8, 2007
STADIUM MOTORS, INC., D/B/A POPULAR KIA; EURASIAN MOTORS, INC., D/B/A AUTO CENTRAL; OMNI AUTO GROUP, INC., D/B/A BROOKLYN DODGE; VANGUARD AUTO GROUP, INC., D/B/A POPULAR FORD; BARON AUTO MALL, INC., D/B/A DRIVEWORLD, F/D/B/A BARON KIA; TRI-COUNTY MOTORS, INC. D/B/A DRIVEWORLD; LESTER WU, INDIVIDUALLY AND AS PRINCIPAL OF STADIUM MOTORS, EURASIAN MOTORS, OMNI AUTO GROUP, VANGUARD AUTO GROUP, AND BARON AUTO MALL; VLADIMIR ZANAN, INDIVIDUALLY AND AS PRINCIPAL OF STADIUM MOTORS, EURASIAN MOTORS, OMNI AUTO GROUP, VANGUARD AUTO GROUP, BARON AUTO MALL, AND TRI-COUNTY MOTORS; AND RAYMOND LAHEY, INDIVIDUALLY AND AS PRINCIPAL OF TRI-COUNTY MOTORS AND BARON AUTO CITY, D/B/A BARON AUTO MALL, PLAINTIFFS,
NEW YORK CITY DEPARTMENT OF CONSUMER AFFAIRS, AND JONATHAN MINTZ, COMMISSIONER OF THE NEW YORK CITY DEPARTMENT OF CONSUMER AFFAIRS, DEFENDANTS.
The opinion of the court was delivered by: Sifton, Senior Judge.
MEMORANDUM OPINION AND ORDER
Plaintiffs Stadium Motors, Inc., d/b/a Popular Kia; Eurasian Motors, Inc., d/b/a Auto Central; Omni Auto Group, Inc., d/b/a Brooklyn Dodge; Vanguard Auto Group, Inc., d/b/a Popular Ford; Baron Auto Mall, Inc., d/b/a Driveworld, f/d/b/a Baron Kia; Tri-County Motors, Inc. d/b/a Driveworld; Lester Wu, individually and as principal of Stadium Motors, Eurasian Motors, Omni Auto Group, Vanguard Auto Group, and Baron Auto Mall; Vladimir Zanan, individually and as principal of Stadium Motors, Eurasian Motors, Omni Auto Group, Vanguard Auto Group, Baron Auto Mall, and Tri-County Motors; and Raymond Lahey, individually and as principal of Tri-County Motors and Baron Auto City, d/b/a Baron Auto Mall commenced this action against defendants New York City Department of Consumer Affairs ("the Department") and Jonathan Mintz, Commissioner of the New York City Department of Consumer Affairs, on July 27, 2007. Plaintiffs allege that defendants, who have scheduled a hearing to determine whether plaintiffs have violated New York City law, are seeking to fine and/or suspend or revoke their licenses in violation of their due process rights to a fair trial under the Fifth and Fourteenth Amendments of the Constitution of the United States. Plaintiffs seek a declaratory judgment, pursuant to 28 U.S.C. § 2201, to the effect that defendants have violated plaintiffs' due process rights, and preliminary and permanent injunctions enjoining defendants from pursuing their claims against plaintiffs and taking any steps to suspend, revoke or otherwise interfere with plaintiffs' licenses.*fn1 Now before this Court is plaintiffs' motion for a preliminary injunction to enjoin the pending hearing before the Department of Consumer Affairs, scheduled to take place on or around September 7, 2007. For the reasons set forth below, plaintiffs' motion is denied.
What follows sets forth the findings of fact and conclusions of law on the basis of which this motion is denied, as required by Fed. R. Civ. P. 65.*fn2
The plaintiff corporations in this action are organized under the laws of the state of New York and are licensed by the Department of Consumer Affairs as second-hand automobile dealers. Individual plaintiffs are residents of the state of New York and are principals in the plaintiff corporations.
The Department began an investigation of plaintiffs in mid-2006, and between the initiation of the investigation and November 2006, plaintiffs cooperated in this investigation.*fn3 On November 22, 2006, The Department's Assistant Commissioner for Litigation and Mediation, Susan Kassapian, Esq., who is responsible for the Department's investigation of plaintiffs, entered plaintiff Tri-County's dealership posing as a customer and negotiated the purchase of a used car.*fn4 According to plaintiffs, in an effort to "entrap" Tri-County, Kassapian then stated that she was in a hurry and requested that the finance manager of Tri-County allow her to execute a partially blank contract of sale before he had the chance to fill in all the numbers.*fn5 The finance manager refused this request and, according to plaintiffs, Kassapian was unable to discover any "direct wrongdoing."*fn6
On November 29, 2006, plaintiffs' attorneys sent a letter to the Department requesting that Kassapian be removed from all matters involving their clients, due to her allegedly unprofessional actions.*fn7 This request was denied, though the Department did assign another attorney to be present along with Kassapian during discussions and proceedings related to the matter under investigation.
On April 9, 2007, the Department issued a Notice of Hearing ("NOH") which charged plaintiffs with violating the New York City Consumer Protection Law and the Licence Enforcement Law in connection with certain sales promotions conducted by plaintiffs.*fn8 Among other things, the Department alleges that the plaintiffs improperly used scratch-off sweepstakes direct mail promotions which falsely stated that individuals were guaranteed winners of free cars,*fn9 and that plaintiffs also engaged in improper acts involving consumer contracts and financing agreements, such as having consumers sign partially blank agreements which plaintiffs later filled in with higher prices than those agreed to. The Department is seeking fines, revocation of plaintiffs' licenses, and rescission of contracts made with consumers. According to plaintiffs, "numerous" complaints*fn10 which form the basis of this NOH were improperly filed with the Department, depriving the department of jurisdiction, though the Department plans to proceed to try those charges regardless. Further, according to plaintiffs, 70 complaints which the Department intends to use in support of the NOH have been settled, closed or otherwise deemed by the Department to be without merit, while another 10 complaints are barred by the applicable statute of limitations.*fn11
On April 10, 2007, Commissioner Mintz held a press conference during which he identified the corporate plaintiffs by name and stated that the "pattern of abuses we've alleged against this auto group are exactly what consumers fear most when buying a car from a dealer. Such practices are outrageous. If these dealers don't agree to pay back consumers and dramatically overhaul their business practices, we'll move to shut them down." The Commissioner was also quoted in the New York Post as saying "There was a lot of fast talking when they walked into the dealerships" and on the NY1 website as saying "When you fill in a contract after a consumer is [sic] left with additional costly items, you're not doing that by accident. In my opinion, that's illegal and we're going after them with everything we've got."
A hearing pursuant to the NOH was originally scheduled for April 10, 2007.*fn12 That hearing was subsequently rescheduled to July 30, 2007, to be held before Administrative Law Judge ("ALJ")Bruce Dennis.*fn13
Plaintiffs made another motion to disqualify Kassapian on May 3, 2007.*fn14 On June 26, 2007, ALJ Dennis denied the motion for reasons stated on the record.
After plaintiffs filed the present complaint and a motion for a temporary restraining order, defendants agreed to again postpone the hearing date until September 7, 2007.
Plaintiffs now move for a preliminary injunction to enjoin the pending administrative hearing, currently scheduled for September 7, 2007, on the ground that the Department's bias will prevent plaintiffs from receiving a fair hearing and will accordingly deny them a property right without due process of law.*fn15 Specifically, plaintiffs argue that the Commissioner, as evidenced by his public statements, has already prejudged the facts of case and concluded that plaintiffs have violated city ordinances and regulations and that he plans to shut them down, regardless of whatever facts may come out at a hearing, if they do not agree to his terms.*fn16 Plaintiffs further argue that given the fact that Kassapian is a "senior staff member" of the Department and is serving as the investigator and prosecutor, the Commissioner is effectively acting as both judge and prosecutor in this matter.*fn17
Pursuant to Federal Rule of Civil Procedure 65(a), a preliminary injunction is appropriate if the movant shows (a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief. Gold v. Feinberg, 101 F.3d 796, 800 (2d Cir. 1996).
Assuming, as plaintiffs contend, that they would be irreparably harmed by proceeding before a decisionmaker who has prejudged the facts of the case,*fn18 it is not likely that they will be able to establish that that is the situation currently faced by plaintiffs. "The test for disqualification has been succinctly stated as being whether 'a disinterested observer may conclude that [the agency] has in some measure adjudged the facts as well as the law of a particular case in advance of hearing it.'" Cinderella Career & Finishing Schools, Inc. v. F.T.C., 425 F.2d 583, 591 (D.C. Cir. 1970) (quoting Gilligan, Will & Co. v. SEC, 267 F.2d 461, 469 (2d Cir.)). In the present case, it is unlikely that plaintiffs will be able to show that ALJ Dennis is anything other than an impartial arbiter or that the ALJ will be influenced by the Commissioner's comments.*fn19 On the evidence before me, the process of reviewing and approving the ALJ's recommendation within the Department does not involve the Commissioner in the decisionmaking process. According to the affidavit from Nancy Schindler, the Department's Deputy Director of Adjudication,*fn20 she has been appointed by the Commissioner to "review and either approve or reject the recommended decisions of the Hearing Officers." According to Schindler, her decisions are not subject to approval by the Commissioner and are not provided to the Commissioner until after they have issued. In the event a party objects to her decision, the party is able to appeal to the Director of Adjudication, whose decisions are also not subject to the Commissioner's approval and are not provided to the Commissioner until after they have issued. In the fifteen years Schindler has been with the Department, she is unaware of a single case in which an ALJ's recommendation has been submitted to the Commissioner.
Plaintiffs argue that "it is quite naive to think that Commissioner's [sic] Mintz's public statements would not influence his direct subordinates." This conclusory allegation is unsupported by any evidence apart from the Commissioner's statements themselves and two incidents of alleged misconduct by his employees. The Commissioner's statements read from the perspective of a disinterested observer reflect the Commissioner's views as to the appropriate course of action with regards to the charges made in the consumer complaints if they are proved. See Cinderella Career & Finishing Schools, Inc., 425 F.2d at 591. Whether taken alone or in combination with the incidents involving his subordinates,*fn21 the statements are not sufficient to persuade me at this stage of the proceedings that they were either meant or will be interpreted as implicit or explicit instructions to those charged with adjudicating the matter.*fn22 Nor have plaintiffs come forward with other evidence that the ALJ, the Deputy Director of Adjudication or the Director of Adjudication will not in this case follow their long established procedures of deciding the matter before them without reference to the Commissioner himself.*fn23
Accordingly, since there is, on this record, little likelihood that plaintiffs will succeed on their claim that the decisionmaking process will be biased and since the public interest in acting on the numerous consumer complaints which have led to this proceeding clearly outweighs the plaintiffs' interests in avoiding the hearing, plaintiffs motion for a preliminary injunction is denied.*fn24
The Clerk is directed to transmit a copy of the within to all parties and the Magistrate Judge.
Charles P. Sifton (electronically signed) United States District Judge