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Collateral Loanbrokers Association of New York, Inc. v. City of New York

Supreme Court of New York, First Department

February 7, 2017

Collateral Loanbrokers Association of New York, Inc., et al., Plaintiffs-Respondents,
v.
The City of New York, et al., Defendants-Appellants. CTIA-The Wireless Association, Amicus Curiae.

         Defendants appeal from an order of the Supreme Court, Bronx County (Mitchell J. Danziger, J.), entered June 8, 2015, which, insofar as appealed from as limited by the briefs, granted plaintiffs' motion for a preliminary injunction enjoining defendants from enforcing General Business Law § 45, New York City Charter §§ 435 and 436, Local Law No. 149 of 2013 and its amendments to Administrative Code §§ 20-267, 20-273, and 20-277, Rules of City of New York Department of Consumer Affairs (6 RCNY) § 1-16 and Police Department (38 RCNY) §§ 21-03(a) and (b), 21-04(a) and (c), 21-07(a)-(f), and 21-08, and the procedures outlined in a 1998 memorandum by then NYPD Deputy Commissioner of Legal Matters George A. Grasso, and in NYPD Patrol Guide Procedure No. 214-38.

          Zachary W. Carter, Corporation Counsel, New York (Max O. McCann, Richard Dearing and Susan Greenberg of counsel), for appellants.

          Kriss, Kriss & Brignola, LLP, Albany (Mark C. Kriss of counsel), for respondents.

          Schlam Stone & Dolan LLP, New York (Richard H. Dolan of counsel), for amicus curiae.

          Richard T. Andrias, J.P., David B. Saxe, Paul G. Feinman, Judith J. Gische, Marcy L. Kahn, JJ.

          SAXE, J.

         This appeal concerns a statutory and regulatory scheme comprised of provisions of the General Business Law, the New York City Charter, the Administrative Code of the City of New York, the Rules of the City of New York, and New York Police Department (NYPD) procedures, which together form a framework of reporting and inspection requirements applicable to pawnbrokers and other secondhand dealers. Plaintiffs, a statewide association of pawnbrokers, along with various individual pawnbrokers, secondhand dealers, and customers of pawnbrokers and/or secondhand dealers, brought this declaratory judgment action challenging the constitutionality of that statutory and regulatory framework. Relying substantially on People v Keta (sub nom. People v Scott) [1] (79 N.Y.2d 474');">79 N.Y.2d 474 [1992]), they contend that the entire statutory and regulatory scheme violates the unreasonable search and seizure prohibition under New York Constitution article I, § 12. The motion court agreed, and granted plaintiffs' motion for preliminary injunctive relief prohibiting enforcement of the statutes, regulations and procedures. Defendants appeal, arguing that the challenged reporting requirements and inspection programs satisfy the constitutional requirements applicable to closely regulated industries and do not implicate constitutional prohibitions against unreasonable searches and seizures. We now reverse the motion court's order, and conclude that the challenged statutory and regulatory scheme does not violate the New York State Constitution's proscription against unreasonable searches and seizures. While plaintiffs are correct that article I, § 12 of the New York Constitution affords greater protection than the corresponding provision in the Fourth Amendment to the U.S. Constitution (see People v Keta, 79 N.Y.2d 474');">79 N.Y.2d 474, 497-498), those greater protections do not implicate the statutes, regulations and procedures at issue here.

         To obtain a preliminary injunction prohibiting enforcement of these laws, regulations and procedures, plaintiffs were required to demonstrate a likelihood of success on the merits, irreparable injury, and a balancing of the equities in their favor (see CPLR 6301; Nobu Next Door, LLC v Fine Arts Hous., Inc., 4 N.Y.3d 839, 840 [2005]).

         To establish a likelihood of success, plaintiffs rely primarily on People v Keta. Keta held that former Vehicle and Traffic Law § 415-a(5)(a), which authorized police to conduct random warrantless administrative searches of vehicle dismantling businesses, violated the New York State Constitution's proscription against unreasonable searches and seizures (79 N.Y.2d at 497). Although the United States Supreme Court had previously reversed the New York Court of Appeals in order to hold that section 415-a(5) did not violate the Fourth Amendment's proscription against unreasonable searches and seizures (see New York v Burger, 482 U.S. 691');">482 U.S. 691 [1987], revg People v Burger, 67 N.Y.2d 338');">67 N.Y.2d 338 [1986]), the Court of Appeals in Keta held that our State Constitution's proscription against unreasonable searches and seizures affords greater protection than the corresponding provision in the United States Constitution. In reliance on those greater protections, the Keta Court concluded that the statute violated the privacy rights encompassed within article I, § 12 of the New York State Constitution (see People v Keta, 79 N.Y.2d at 497).

         However, People v Keta does not justify invalidating the challenged statutory and regulatory framework at issue here.

         That framework begins with the relevant provisions of General Business Law article 5, now entitled "Collateral Loan Brokers." The antecedents of that article were first enacted in 1909 (see L 1909, ch 25, as amended), and some were derived from laws going back to 1883 (see L 1883, ch 339, § 1). General Business Law section 40 requires pawnbrokers in New York City to be licensed by the City's Commissioner of Consumer Affairs. Section 43 requires pawnbrokers to maintain a book containing a "description of the goods... pawned or pledged, the amount of money loaned thereon, ... the rate of interest to be paid..., the name and residence of the person pawning... said goods." Section 45 requires that the books kept by collateral loan brokers "at all reasonable times be open to the inspection of... the mayor or local licensing authority, ... [and] police inspectors" (emphasis added).

         Prior to the 2013 enactment of Local Law 149, Administrative Code § 20-273 required dealers in secondhand goods to keep a book in which they recorded information such as a description of every article purchased or sold and the name, address, and a general description of the person buying or selling the item. It is uncontested that pawnbrokers and secondhand dealers have historically reported transactions on a Second-Hand Article Store Log provided by the NYPD, which requires the store owner to provide the date and time of the transaction, a description of the article, and the name, address, gender, date of birth, and race of the seller. Administrative Code § 20-267 provides that all dealers in secondhand articles, "upon being served with a written notice to do so by a member of the police department, shall report to the police commissioner..., a copy of any of the records required to be kept under section 20-273."

         In 2013 New York City adopted Local Law 149, which amended several provisions of the Administrative Code so as to require certain dealers to also create records and make them available in electronic form. Local Law 149 amended Administrative Code § 20-273 by adding an electronic record requirement for transactions involving articles comprised of gold, silver, platinum, or other precious metals, electrical appliances, excluding kitchen equipment, and electrical equipment, computer, or component parts of electrical equipment or computers (Administrative Code § 20-273[b], [c][2]). The provisions state that such electronic records "may include real-time sharing or accessing of such records in an electronic format and/or through use of an internet website designated by the police commissioner" (id.). Depending on the type of dealer, the electronic record shall or "may include... digital photographs... in accordance with specifications as provided by rule of the police commissioner" (id.).

         Prior to the enactment of Local Law 149, Administrative Code § 20-277 authorized the police commissioner to require pawnbrokers "to report to such commissioner, upon blank forms to be furnished by the police department, a description of all goods, articles or things... pawned or pledged, " as well as "a general description as to sex, color and apparent age of every person depositing such pledges." Local Law 149 amended Administrative Code § 20-277 so as to add an electronic record component. As amended, the provision now permits the use of an Internet website designated by the police commissioner, and allows the police commissioner to require that the forms recording the transactions include "identifying information regarding any pledgors or persons redeeming any articles pledged or pawned, including name, address, phone number, date of birth, sex and race or ethnicity" (Administrative Code § 20-277[a], [b]). The amended § 20-277 further provides that "[r]ecords required to be ...


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