EZ Pawn Corp. v. City of New York

MEMORANDUM & ORDER  Plaintiffs EZ Pawn Corp. (“EZ Pawn”) and Aloamaka Onwuakor (collectively, “Plaintiffs”) bring this action against Defendants New York City Police Department (“NYPD”), NYPD Officer Jonathan Bulzomi (“Defendant Bulzomi”), and the City of New York (collectively, “Defendants”), advancing several claims under 42 U.S.C. §1983 and New York law. Defendants move for summary judgment on all of Plaintiffs’ claims. For the following reasons, the Court grants in part and denies in part Defendants’ motion for summary judgment. BACKGROUNDI. State & Local Law Governing Pawnbrokers & Second-hand DealersIn New York City, collateral loan brokers — more commonly referred to as pawnbrokers¹ — and second-hand dealers² operate under a statutory framework that includes provisions of the New York State General Business Law (“GBL”), the New York City Charter, the New York City Code, and the Rules and Regulations of the City of New York. See, e.g., N.Y. Gen. Bus. Law ch. 10, art. 5 (regulating collateral loan brokers). Of relevance here, GBL §43 requires pawnbrokers to keep a book with certain information about loans and collateral. See N.Y. Gen. Bus Law §43. Meanwhile, GBL §45 authorizes warrantless searches of certain records maintained by pawnbrokers and specifically provides that these recordsshall at all reasonable times be open to the inspection of the attorney general, the state comptroller, the mayor or local licensing authority, all judges of the criminal courts, the superintendent of police, police inspectors, captains of police and police justices of such cities, or any or either of them, or of any person who shall be duly authorized in writing for that purpose by any or either of them, and who shall exhibit such written authority to such collateral loan broker. The mayor or the licensing authority of any local governing body, the state comptroller, the attorney general and any person duly authorized by them shall have the power to administer oaths and to examine under oath any such collateral loan broker or any officer, or agent, of such collateral loan broker and any other person having custody or control of such books and records. Such books and records shall be retained in the possession of the collateral loan broker, in good condition and in an orderly fashion for at least a period of six years.N.Y. Gen. Bus. Law §45. Additionally, New York City law empowers the NYPD Police Commissioner to conduct administrative searches³ of certain trades, including pawnbrokers and second-hand dealers:The commissioner shall possess powers of general supervision and inspection over all licensed or unlicensed pawnbrokers, vendors, junkshop keepers, junk boatmen[], cartmen, dealers in second-hand merchandise and auctioneers within the city; and in connection with the performance of any police duties he shall have power to examine such persons, their clerks and employees and their books, business premises, and any articles of merchandise in their possession. A refusal or neglect to comply in any respect with the provisions of this section on the part of any pawnbroker, vendor, junkshop keeper, junk boatman, cartman, dealer in second-hand merchandise or auctioneer, or any clerk or employee of any thereof shall be triable by a judge of the criminal court and punishable by not more than thirty days’ imprisonment, or by a fine of not more than fifty dollars, or both.N.Y. City Charter §436.⁴ Moreover, §20-277 of the New York City Code⁵ imposes reporting requirements on pawnbrokers:The police commissioner, at such times as he or she may prescribe in a written notice served upon any pawnbroker by a member of the police department, may in addition to the electronic record required by subdivision [(a)] of this section⁶ require such pawnbroker to report to such commissioner, upon blank forms to be furnished by the police department, a description of all goods, articles or things, or any part thereof, pawned or pledged in the course of business of such pawnbroker during the days specified in such notice, stating the numbers of the pawn tickets issued therefor, the amounts loaned thereon, and such identifying marks as may be on the goods pawned. If such notice from the police commissioner so prescribes, such pawnbroker, until he or she is notified to discontinue so doing, shall keep and furnish on such forms, 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.N.Y. City Code §20-277(3)(b). These records “shall be open to the inspection of any police officer, the commissioner or any departmental inspector, judge of the criminal court, or person duly authorized in writing for such purposes by the commissioner by any judge of the criminal court, who shall exhibit such written authority to the dealer.” Id. §20-273(2)(e).Finally, a non-binding memorandum authored by George A. Grasso, Former Deputy Commissioner of Legal Matters at the NYPD (the “Grasso Memo”), sets forth the following guidelines:Although the Administrative Code and the Rules of the City of New York give this Department the authority to perform administrative searches of the books and records of pawnbrokers and second-hand dealers, such authority must not be used to circumvent the warrant requirements of the United States and New York State Constitutions. The New York State Court of Appeals reviewed the [c]onstitutional implications of administrative searches in the landmark decision People v. Keta,⁷ [which] held that in order to survive a constitutional challenge, an administrative inspection program…must be conducted pursuant to a comprehensive, systematic regulatory scheme. In addition, the type of business being inspected must [be] one that is closely regulated by the government, the government must have a substantial government interest in enforcing the administrative regulations, and, most importantly, any warrantless inspections must be necessary to further the objectives of the inspection program. The Keta court further stated that, administrative inspections should be designed to uncover administrative violations, not criminal activity….Thus, in order to [e]nsure that administrative searches of pawnbroker and second-hand dealer businesses conducted by this Department survive constitutional challenge, Department guidelines must [e]nsure that such searches are necessary to further the objective of enforcing the rules and regulations pertaining to such businesses. Members of the service may inspect the books and records of pawnbroker and second-hand dealer businesses, request to see required licenses, [and] demand to examine and seize stolen property. Such inspections should be conducted on a regular basis as part of an ongoing program to enforce licensing and record[-]keeping requirements….Inspections or searches, conducted for the purpose of finding evidence of criminal activity must be conducted pursuant to a search warrant or exception to the search warrant requirement, i.e.[,] consent or plain view. In addition, when an administrative search of a pawnbroker or second-hand dealer’s book or records indicates the presence [of] criminal activity, the premises should be secured and a search warrant obtained.(Grasso Memo, Dkt. 45-2, at ECF⁸ 230 (emphasis omitted); see also id. at ECF 233-34 (enumerating eleven guidelines for police officers assigned to inspect pawnbroker and second-hand dealer businesses).)II. Facts⁹A. NYPD’s Use of LeadsOnlineFrom 2010 to 2013, the NYPD provided pawnbrokers and second-hand dealers with two options as to the manner in which they could record and maintain required transactional information: (1) record the required information in log books provided by the NYPD; or (2) report and maintain the information electronically on LeadsOnline, the web-based electronic data transfer service engaged by the NYPD to serve as the repository of electronic records. (Defendants’ 56.1 Statement (“Defs.’ 56.1″), Dkt. 44,19; Defs.’ Aff. & Decl., Dkt. 45-2, at ECF 245-46; Defs.’ Aff. & Decl., Dkt. 45-3, at ECF 319.) As the NYPD’s “Patrol Guide,”¹⁰ promulgated on August 1, 2013 explains:All pawnbrokers and second-hand dealers are required to report on specified Department forms all articles pawned, purchased, or sold. Pawnbrokers and second-hand dealers participating in, and actively uploading transactions to, [LeadsOnline] are exempt from the requirement of manually filling out and preserving logs for inspection. By actively uploading their transactions on a daily basis, participating stores are allowing their records to be inspected via [LeadsOnline]. Stores are requested to upload the day’s transactions by the close of business each day.(Patrol Guide, Dkt. 45-2, at ECF 241.)¹¹ With the passage of Local Law 149 in 2013, use of LeadsOnline became required for pawnbrokers and second-hand dealers. (Cf. Defs.’ Aff. & Decl., Dkt. 45-4, at ECF 351.) However, on October 10, 2014, the requirements established by Local Law 149 were temporarily suspended pending the outcome of litigation.¹² (Id.) On June 15, 2017, after the litigation had terminated, enforcement of Local Law 149 resumed. (Id. at ECF 321.)When a pawnbroker or second-hand dealer uses LeadsOnline, the NYPD is able to review the required records and check recent items electronically without visiting the stores, and is also able to request “holds”¹³ electronically. (Defs.’ 56.1,21.) On the other hand, when a pawnbroker or second-hand dealer records the required information in log books instead of LeadsOnline, it is the NYPD’s practice to periodically visit the premises to review the required records. (Id.22.) The NYPD also visits the premises of pawnbrokers and second-hand dealers not using LeadsOnline to investigate reported stolen property and, where necessary, request a hold on that property. (Id.)Regardless of whether a pawnshop or second-hand dealer uses LeadsOnline, it is the NYPD’s practice to make unannounced visits to the premises of pawnbrokers and second-hand dealers at random times.¹⁴ When asked at deposition what NYPD officers do in the course of these inspections, Sergeant Cecchini answered:It depends, I would be given a list of tasks, you know, to see if [the pawnshops or second-hand dealers were] in accordance with the Leads[]Online books, if they, you know, mostly it’s, you know, if they have the proper signage, if they are putting proper descriptions of items, serial numbers of phones, descriptive markings, if they’re properly marking things, if they’re taking pictures of the items and things of that nature are things we would inspect for… .I, again, we had to look through an X amount of tickets per inspection and, again, we just tried to make sure that they were in accordance with the basic thing that would help us in solving crimes. We didn’t really venture too far off into the, you know, obviously the admin guide from New York State and New York City for pawnbrokers is extensive, so we would try to keep our scope narrowly related to things that are, you know, applicable to, you know, crime victims and things of that nature… .[W]e announced ourselves when we entered, there would be no, you know, we wouldn’t give a phone call. We would announce when we walked in, you know, good afternoon, my name is Sergeant Cecchini, New York Police Department, I’m conducting a random inspection of your book, or whatever the case might be, which they were, most people were familiar with.(Cecchini Dep., Dkt. 47-4, at ECF 589, 591-93.) These visits were ostensibly executed pursuant provisions in the NYPD’s Patrol Guide, which provides:When designated to perform inspections of pawnbrokers/second-hand dealers by a competent authority, [the NYPD shall]:1. Designate [a] special operations lieutenant as the primary coordinator of the command’s pawnbroker/second-hand dealer inspection program….2. Maintain an updated list of all pawnbrokers and second-hand dealers operating within [the] confines of [a] precinct[:] [a:] Divide [the] list into two separate categories, delineating between the stores which keep records updated using [LeadsOnline], and those stores which maintain manual records[; b:] Provide [a] copy of [the] list to [various NYPD officers][; c:] Revise [the] list quarterly to ensure accuracy.3. Designate appropriate uniformed member(s) of the service as a liaison with pawnbrokers and second-hand dealers.4. Provide each pawnbroker and second-hand dealer with copies of SECOND-HAND ARTICLES STORE LOG (PD530-141), if store does not participate in [LeadsOnline]. [] Provide second-hand dealers with copy of INSTRUCTIONS TO DEALERS IN SECOND[-]HAND ARTICLES (PD634-153), in all cases.5. Visit each store maintaining manual records at least once every ten days, and document visit by signing next unused transaction receipt in the SECOND-HAND ARTICLES STORE LOG.6. Remove precinct detective squad (pink) copy of completed transactions from the SECOND-HAND ARTICLES STORE LOG, if applicable, and immediately deliver to precinct detective squad commander, or in his/her absence, another precinct detective squad supervisor.7. When applicable, designate a member of the precinct detective squad to perform required computer checks of individuals identified as recidivists, parolees, probationers, or known burglary perpetrators who are selling or pawning items.8. Ensure prompt investigation is conducted to match potentially stolen property against property previously reported stolen in precinct and surrounding areas. [] Assign a member of detective squad to visit store to request a hold on specified property pending completion of investigation, if necessary.9. Monitor [LeadsOnline] on a weekly basis, paying particular attention to repeated transactions by an individual, or other signs indicative of criminal behavior.10. Disseminate to appropriate units information obtained from the “Persons of Interest” list generated by [LeadsOnline].11. Review list and routinely visit all pawnbrokers and second-hand dealers located in confines of precinct[: a] Encourage use of [LeadsOnline] among stores maintaining manual records[; b:] Monitor [LeadsOnline] to ensure that participating stores are uploading data on a daily basis.12. Ensure integrity of entries made by pawnbroker/second-hand dealer into the SECOND-HAND ARTICLES STORE LOG or [LeadsOnline], as applicable[: a:] Request to see last twenty articles purchased or pawned by pawnbroker/second-hand dealer[; b:] Compare the articles to the descriptions as listed in SECOND-HAND ARTICLES STORE LOG or database entry, as applicable… .(Patrol Guide, Dkt. 45-2, at ECF 241-43 (underlines and capitalizations in original).)B. EZ Pawn & the NYPDEZ Pawn is a licensed pawnbroker and second-hand dealer that maintains fifteen locations in New York City. (Defs. 56.1,

10-11; Plaintiffs’ Affidavit & Declaration in Opposition to Motion for Summary Judgment (“Pls.’ Aff. & Decl.”), Dkt. 47-1, at ECF 421.) EZ Pawn began using LeadsOnline in 2009. (Defs.’ 56.1,24.) In 2012, EZ Pawn temporarily discontinued and subsequently resumed use of LeadsOnline. (Id.) EZ Pawn discontinued its use of LeadsOnline for a final time in 2015. (Id.) David Kaminsky, Chief Executive Officer of EZ Pawn, testified at deposition that EZ Pawn resumed use of LeadsOnline in 2012,[b]ecause we were being — my managers were complaining that the police were coming in and saying to them, “If you don’t — we want you to go on LeadsOnline, and if you don’t go on LeadsOnline, we’re going to be here every week. We’re going to stay outside your door. We’re going to check your books and records, and we’re going to want you to do things that you don’t want to do.”(Deposition of David Kaminsky (“Kaminsky Dep.”), Dkt. 45-2, at ECF 217, 219.)¹⁵At deposition, EZ Pawn store manager Linda Cabrera testified that, when EZ Pawn was using LeadsOnline, NYPD officers came to the EZ Pawn store located on Queens Boulevard in Queens, NY (the “Queens location”) roughly twice a week to check the items and transactions, and to ensure that LeadsOnline was being used properly. (Defs.’ 56.1,37; Deposition of Linda Cabrera (“Cabrera Dep.”), Dkt. 45-2, at ECF 262, 265). Ms. Cabrera testified that, during the periods in which EZ Pawn was not using LeadsOnline, the number of NYPD visits to the Queens location increased to three or four per week. (Cabrera Dep., Dkt. 45-2, at ECF 265.) Meanwhile, Robert Santos, EZ Pawn regional manager, testified at deposition that he received calls from EZ Pawn store managers that led him to believe that “as soon as [EZ Pawn] got off [LeadsOnline] it was just like, [the police] would come in more often, they would come in and try to intimidate the managers saying if you don’t get this, if you don’t get back [on] Leads[]Online, we’re going to come back and arrest everyone.” (Deposition of Robert Santos (“Santos Dep.”), Dkt. 45-3, at ECF 305, 307.) When asked about the questions local EZ Pawn managers asked him regarding these interactions with police, Mr. Santos explained:The questions would be more of like a frantic call like, what do I do, this guy, he’s threatening to arrest me if I don’t get back on Leads[]Online or if you don’t show him something. I don’t know if it would be so much of a question, it would be more like worried, what do I do. That’s my take on it.(Id. at ECF 307.) Mr. Santos also testified that local managers contacted him regarding NYPD visits eight to ten times a week during the time periods when EZ Pawn was not using LeadsOnline. (Id. at ECF 308.)C. Plaintiff Onwuakor & Defendant BulzomiIn 2015, Plaintiff Onwuakor received visits from NYPD officers approximately once every three weeks while working as the manager of an EZ Pawn store located on Atlantic Avenue in Brooklyn, NY (the “Brooklyn location”). (Defs.’ 56.1,