United States District Court, W.D. New York
DECISION AND ORDER
HONORABLE RICHARD J. ARCARA UNITED STATES DISTRICT JUDGE.
case is before the Court on several motions filed by the
Defendant, Brenda Mansour. The Defendant first moves to
suppress evidence recovered from a warrantless administrative
search of the convenience store at which she worked. That
search was conducted by investigators from the New York State
Department of Taxation and Finance (DTF) with the purpose of
ensuring that the deli was in compliance with New York State
laws related to the State's excise tax on cigarettes.
During their search, the DTF investigators found, as they had
during recent searches of other delis, packets of synthetic
marijuana. The investigators gave the synthetic marijuana to
agents from Homeland Security Investigations (HSI), who had
accompanied the DTF investigators. The Defendant was then
interviewed by the HSI agents.
Defendant now moves to suppress the synthetic marijuana found
during the search. She also moves to suppress the statements
she made to the HSI agents. Magistrate Judge Scott, to whom
the Court referred this case for all pretrial proceedings,
recommends denying both motions. For the reasons stated
below, the Defendant's objections are overruled, and the
Court adopts Judge Scott's recommendations.
Court briefly recites only those facts necessary to resolve
the Defendant's objections.
approximately 7:00 p.m. on May 27, 2015, investigators from
the New York State Department of Taxation and Finance
conducted a regulatory inspection of Mario's Deli in
Niagara Falls, New York. The Defendant, whose parents own the
deli, was working as the manager that evening. According to
the DTF investigators, the purpose of their inspection was to
ensure that the deli was in compliance with laws related to
New York State's excise tax on cigarettes. Specifically,
the investigators testified that they were looking for
invoices to “match . . . what [the deli] ha[d] on the
shelves, ” cigarettes with “discrepancies”
in their New York State tax stamp, and cigarettes that were
“possibly shipped in from out of state” and which
did not “have . . . stamp[s] on [them].” Tr.
6:11-15; 67:23 - 68:4.
search was conducted by three investigators from the DTF. The
investigators were accompanied, however, by several local
police officers. According to one DTF investigator, the
police officers accompanied the investigators because the
officers “know the area a lot better than [the DTF
investigators] do so if we're walking into a place that .
. . wasn't as nice as some of the other ones . . . they
would be there for support.” Tr. 7:14-18. One of the
officers was a Niagara County Sheriff's Deputy, who
locked-and then blocked-the deli's front entrance. Tr.
15:19-21; 73:1-3; 138:8-9. A DTF investigator described this
as a “common practice.” Tr. 19:24.
addition, and as is particularly relevant in this case, the
DTF investigators were accompanied by two agents from
Homeland Security Investigations (HSI), a component of U.S.
Immigration and Customs Enforcement. During recent
inspections of other cigarette retailers, DTF
investigators had “been finding a lot of synthetic
marijuana.” Tr. 8:1-2; 51:2-5; 69:4-8. When they did,
the DTF investigators called agents from HSI to take custody
of the synthetic marijuana. Tr. 8:1-5; 60:17-20. In the case
of Mario's Deli, however, HSI agents accompanied the DTF
investigators to allow the investigators to be “more
productive”-that is, rather than “slowing down
[the DTF investigators'] productivity [by] waiting for
another agency to respond, ” HSI agents would be able
to immediately take custody of any synthetic marijuana that
the DTF investigators might discover during their search. Tr.
69:9-19. This was the first time the DTF investigators had
brought an HSI agent with them (Tr.17:25; 60:21-23), but
neither the DTF investigators nor their supervisors chose to
bring HSI agents to Mario's for any particular reason.
Indeed, each of the three DTF investigators who conducted the
search of Mario's testified that they had no reason to
believe that synthetic marijuana would be found there. Tr.
19:10-16; 69:22-24; 81:12-14.
the DTF investigators quickly found synthetic marijuana in
two locations at Mario's. Several DTF investigators
recalled seeing the Defendant throw something as the
investigators entered the deli. Tr. 9:14-15; 36:15-18. One
DTF investigator then walked behind the counter and found a
box. Inside that box was a cigar box, and inside the cigar
box were packets of synthetic marijuana. The DTF investigator
then told HSI Special Agent Edward Williams about what she
had found.Tr. 113:2. After notifying Agent Williams
of the synthetic marijuana, the DTF investigator found more
synthetic marijuana in an open bag behind the sales counter.
Tr. 42:18 - 43:6.
the DTF investigators found the synthetic marijuana, the
Defendant was approached by Agent Williams and HSI Task Force
Officer Farkas. According to Agent Williams, he and Task
Force Officer Farkas “[went] over, . . . identif[ied]
oursel[ves] with Government-issued identification verbally
and asked if [the Defendant] would be willing to
discuss” the synthetic marijuana that had been
discovered by the DTF investigators. Tr. 104:15-19. The
Defendant agreed, and the agents asked whether “there
was a spot in the store like an office or something that she
would like to go to talk with [the agents].” Tr.
105:22-24. According to Agent Williams, the Defendant
suggested “go[ing] to the back of the store, ” an
area that was not enclosed and that was “still in the
main part of the store.” Tr. 106:1-12. The
Defendant's description of the interview location was
slightly different, but not inconsistent with Agent
Williams's: according to the Defendant, she and the
agents went into a corner “where it was blocked off, no
one else could see. You could see the front counter . . . .
You could see the doors.” Tr. 154:25 - 155:5.
Williams was armed, but his firearm remained holstered on his
hip during the search and questioning. Tr. 109:13 - 110:1.
Further, Agent Williams did not use handcuffs or any
“physically threatening stance, ” nor did he see
any other investigator or officer do so. Tr. 110:8-14;
176:2-4. As noted, however, during the interview a Niagara
Falls Sheriff's Deputy remained at the deli's door.
According to the Defendant, the door was locked and
“[c]ustomers were trying to get in, they would unlock
it and tell the customers the store is currently
closed.” Tr. 158:21-23.
back of the store, Agent Williams informed the Defendant that
she was not under arrest, that she did not need to speak to
the agents, that she was free to leave the store, and that he
wanted to discuss “some concerns that we had regarding
the suspected synthetic marijuana.” Tr. 106:16-20;
107:10-13. Agent Williams did not read the Defendant her
Miranda rights because, according to Agent Williams,
“[s]he wasn't in custody.” Tr. 106:25. After
the Defendant agreed to speak to the agents, Agent Williams
informed her that selling synthetic marijuana is a violation
of federal law and that she could be prosecuted for doing so,
to which the Defendant responded, “awe, f---me.”
Tr. 107:6-22. See also Tr. 119:10-18. The Defendant
testified that she “was scared for my life, thought I
was going to get arrested because he told me that it was
something serious, it was killing people.” Tr. 155:6-9.
agents then asked the Defendant questions about “how
she obtained the packages.” Tr. 108:1-2. Specifically,
Agent Williams asked the Defendant “if she would be
willing to kind of cooperate with us further to further the
investigation to . . . her supply chain.” Tr. 11:8-10.
Agent Williams testified that he “made no threats,
” but that he did “advise [the Defendant] that
providing information . . . would not be a bad thing.”
Tr. 116:16-20. Indeed, Agent Williams was vehement that he
did not “make promises . . . about what will happen
if” the Defendant cooperated. Tr. 118:18-19. The
Defendant testified that she “thought [she] was getting
arrested” if she did not cooperate. Tr. 158:10. She
then answered Agent Williams's questions with
“general information about the price she paid for each
packet of the suspected synthetic marijuana; how much she
sold it for; a general, vague description of the individual .
. . she obtained it from. Kind of logistics behind it.”
Tr. 124:3-6. The Defendant described Agent Williams as
“civil” and “calm” during the
interview (Tr. 157:16; 173:20), and she testified that she
thought Agent Williams “was trying to help [her]
out.” Tr. 162:6. Ultimately, the Defendant concluded,
although she was not arrested, she “thought [she] was
gonna be under arrest.” Tr. 175:2-11.
end of the interview, Agent Williams gave the Defendant his
business card and asked her to call him the next day. Tr.
111:11-13; 161:25 - 162:2-5. The entire conversation lasted
approximately ten minutes. Tr. 108:5.
Defendant was ultimately charged with two counts of
possessing, with intent to distribute, synthetic marijuana,
in violation of 21 U.S.C. §§ 841(a)(1) and
841(b)(1)(C). See Docket No. 9 (Indictment). In
proceedings before Judge Scott, the Defendant moved to
suppress evidence recovered from the search of Mario's
Deli. She also moved to suppress her statements to Agent
Williams. As to her first motion, the Defendant argues,
generally, that the search was not a true regulatory search,
but that it was instead conducted with the intent of finding
evidence of a crime. As to her second motion, the Defendant
argues that she was in “custody” for purposes of
Miranda v. Arizona, 384 U.S. 436 (1966), and that
her un-Mirandized statements must therefore be
Scott recommends denying both motions. The Defendant objects
to those recommendations. The Court therefore reviews each
recommendation de novo. 28 U.S.C. §
Whether searches conducted pursuant to New York Tax Law
§ 474(4) comply with the Fourth Amendment
search in this case was conducted by investigators from the
criminal division of the New York State DTF. In conducting
their search, the investigators acted pursuant to authority
conferred by New York State Tax Law § 474(4). Section
474(4) provides, in relevant part, as follows:
The commissioner of taxation and finance is hereby authorized
to examine the books, papers, invoices and other records of
any person in possession, control or occupancy of any
premises where cigarettes or tobacco products are placed,
stored, sold or offered for sale, and the equipment of any
such person pertaining to the stamping of cigarettes or the
sale and delivery of cigarettes or tobacco products taxable
under this article, as well as the stock of cigarettes or
tobacco products in any such premises.
the parties filed their briefing on the Defendant's
objections, the Court directed the parties to file additional
briefs addressing the Supreme Court's recent decision in
City of Los Angeles v. Patel, 135 S.Ct. 2443 (2015).
As relevant here, Patel observed that, “absent
consent, exigent circumstances, or the like, in order for an
administrative search to be constitutional, the subject to
the search must be afforded an opportunity to obtain
precompliance review before a neutral decisionmaker.”
Id. at 2452. Section 474(4), the Court noted, does
not provide such an opportunity. The Court therefore directed
the parties to file briefs addressing whether searches
conducted pursuant to § 474(4) comply with the Fourth
Amendment. And because the Court's order implicated the
constitutionality of a state statute, the Court invited the
New York State Attorney General to file a brief stating his
position on this question. The Attorney General has done so.
parties appear to agree that, to determine the
constitutionality of § 474(4), the Court must first
decide whether cigarette retailers are “pervasively
regulated” or “closely regulated, ” as the
Supreme Court has defined those terms. Over the past
several decades, the Supreme Court has identified a handful
of industries that are subject to pervasive and often
longstanding regulation arising from the industries'
“relatively unique circumstances.” Marshall
v. Barlow's, Inc., 436 U.S. 307, 313 (1978). These
industries “have such a history of government oversight
that no reasonable expectation of privacy could exist for a
proprietor over the stock of such an enterprise.”
Id. In other words, in the case of a
heavily-regulated industry, the question whether a search is
a “reasonable” one under the Fourth Amendment is
answered with a recognition that, “when an entrepreneur
embarks upon such a business, he has voluntarily chosen to
subject himself to a full arsenal of governmental
regulation.” Id. See also New York v. Burger,
482 U.S. 691, 702 (1987) (“[W]here the privacy
interests of the owner are weakened and the government
interests in regulating particular businesses are
concomitantly heightened, a warrantless inspection of
commercial premises may well be reasonable within the meaning
of the Fourth Amendment.”) Closely-regulated
industries, however, are “the exception, ”
Barlow's, 436 U.S. at 313, a point reinforced by
the fact that the Supreme Court has identified only four
industries that are closely regulated: liquor retailers,
Colonnade Catering Corp. v. United States, 397 U.S.
72 (1970); firearms dealers, United States v.
Biswell, 406 U.S. 311 (1972); mining, Donovan v.
Dewey, 452 U.S. 594 (1981); and automobile junkyards,
New York v. Burger, 482 U.S. 691
if the Court concludes that cigarette retailers are
pervasively regulated, Patel's concern about
precompliance review is irrelevant. In that case, §
474(4) would, at least as a general matter, authorize DTF
investigators to conduct warrantless regulatory searches of
cigarette retailers. But that would not end the Court's
Fourth Amendment analysis: Even if the Court concludes that
cigarette retailers are pervasively regulated, to
determine whether the search in this case was constitutional
the Court must also decide whether searches conducted
pursuant to § 474(4) are “reasonable, ” as
the Supreme Court has defined that term.
reasons that follow, the Court concludes that cigarette
retailers are pervasively regulated in New York State and
that searches conducted pursuant to § 474(4) are
“reasonable” under the Fourth Amendment. This is
because warrantless searches under § 474(4)
“further urgent [State] interest[s]”-namely,
enforcement of a regulatory scheme designed to ensure that
all cigarettes sold in New York State are taxed-and because,
given § 474(4)'s limits on the scope of a regulatory
search, as well as the way in which the New York Court of
Appeals has interpreted the statute, “the possibilities
of abuse and the threat to privacy are not of impressive
dimensions.” Biswell, 406 U.S. at 316.
Whether cigarette retailers are pervasively
Court first addresses whether cigarette retailers are
determine whether an industry is pervasively regulated for
Fourth Amendment purposes, the Supreme Court has identified
three factors for courts to consider. A court must consider,
first, whether the degree and scope of regulation is
“extensive” or otherwise pervasive. See
Burger, 482 U.S. at 703-04. Next, the court must
consider the extent to which other states have “imposed
similarly extensive regulations” on the industry in
question. Id. at 705. And finally, the court must
examine the duration of the regulatory scheme at issue.
Id. at 705-07.
three factors need not be present in equal measure, however.
See Patel, 135 S.Ct. at 2459 (Scalia, J.,
dissenting) (“These factors are not talismans, but shed
light on the expectation of privacy the owner of a business
may reasonably have, which in turn affects the reasonableness
of a warrantless search.”) The most important factor
is, intuitively, “the pervasiveness and
regularity” of the inspection program. Dewey,
452 U.S. at 606 (noting that this factor “ultimately
determines whether a warrant is necessary to render an
inspection program reasonable under the Fourth
Amendment”). For example, the Supreme Court has
concluded that certain industries are pervasively regulated
where the regulatory scheme at issue was relatively novel.
See Biswell, 406 U.S. at 315 (“Federal
regulation of the interstate traffic in firearms is not as
deeply rooted in history as is governmental control of the
liquor industry, but close scrutiny of this traffic is
undeniably of central importance to federal efforts to
prevent violent crime and to assist the States in regulating
the firearms traffic within their borders.”);
Dewey, 452 U.S. at 606 (“[I]f the length of
regulation were the only criterion, absurd results would
Court will therefore examine each of the Burger
factors to determine whether the cigarette industry in New
York is pervasively regulated. In doing so, however, the
Court is mindful that the most important factor is the degree
and scope of regulation.
The degree or intensity of regulation
to determine whether an industry is closely regulated, the
Supreme Court looks to the degree to which the industry is
regulated. See Burger, 482 U.S. at 704 (“The
provisions regulating the activity of vehicle dismantling are
extensive.”); Dewey, 452 U.S. at 603
(“[T]he regulation of mines [the Mine Safety and Health
Act of 1977] imposes is sufficiently pervasive and defined
that the owner of such a facility cannot help but be aware
that he will be subject to effective inspection.”)
(quotation marks omitted). There can be little question that
New York State regulates the distribution and sale of
cigarettes with an intensity reserved for few other
industries; as the Attorney General observes,
“cigarettes and other tobacco products are among the
most heavily regulated products available in New York.”
Docket No. 51 at 13.
New York's regulatory scheme is the State's $4.35
excise tax on every pack of cigarettes-the highest in the
United States. N.Y. Tax Law § 471(1). See Map of
Excise Tax Rates on Cigarettes, Centers for Disease
Control and Prevention (last visited Apr. 27, 2017),
https://www.cdc.gov/statesystem/excisetax.html. A large
portion of the State's regulatory scheme-and, ultimately,
the warrantless inspection program at issue in this case-is
designed to ensure that that tax is paid on all cigarettes
sold in New York State. As the Second Circuit has summarized
New York's regulatory framework for the distribution and
sale of cigarettes, the DTF “‘precollects'
the tax from a limited number of state-licensed stamping
agents, and mandates that these agents be the only entry
point for cigarettes into New York's stream of commerce.
Stamping agents, often wholesalers themselves, purchase tax
stamps from the State and cigarettes from manufacturers.
Before selling the cigarettes to other wholesalers or
retailers, agents must affix a tax stamp to each pack of
cigarettes to demonstrate the payment of the tax. Agents
incorporate the cost of the stamp into the pack's price
and pass the cost along the distribution chain to the
consumer.” Oneida Nation of New York v. Cuomo,
645 F.3d 154, 158 (2d Cir. 2011) (citations and footnote
omitted). Further, any person transporting unstamped
cigarettes within the State must “have in his actual
possession invoices or delivery tickets for such
cigarettes.” N.Y. Tax Law § 474(1). This
comprehensive framework, which is designed to ensure that all
cigarettes sold in New York bear a tax stamp, is buttressed
by both state and federal criminal penalties. See
N.Y. Tax Law § 1814; 18 U.S.C. § 2342.
York's intense regulation of cigarette sales continues at
the retail level. All cigarette retailers must be licensed
and registered with the DTF, see N.Y. Tax Law §
480-a, and risk suspension or revocation of their license for
possessing or selling unstamped cigarettes. Id. at
§ 480-a(4). A cigarette retailer must open a shipment of
cigarettes within 24 hours of receipt “for the purpose
of ascertaining whether or not the . . . packages have
affixed thereto the proper tax stamp.” Id.
§ 473. A cigarette retailer must retain invoices
containing detailed information about its cigarette purchases
for a period of three years. Id. § 474(4). And
to ensure that the consumer bears the “ultimate
incidence of and liability for” the State's
cigarette tax, id. § 471(2), ...