Court Orders Halt To New York Law Demanding Online Access To Pawn Shop Acquisition Records

from the best-I-can-do-is-a-couple-of-lawsuits-for-your-heavily-used-general-warrant dept

Pawn shops — like scrap metal dealers and junkyards — are “closely regulated” businesses. What this means is they are compelled to track acquisition information and make it available for law enforcement to view without a warrant. The nexus of these businesses to criminal activity is undeniable. But that doesn’t necessarily mean everything law enforcement demands, it gets. Some demands exceed the diminished Fourth Amendment protections afforded to these businesses.

The “closely regulated” language comes from the US Supreme Court. In a decision affecting a New York junkyard owner, the Supreme Court found that:

A business owner’s expectation of privacy in commercial property is attenuated with respect to commercial property employed in a “closely regulated” industry. Where the owner’s privacy interests are weakened and the government interests in regulating particular businesses are concomitantly heightened, a warrantless inspection of commercial premises, if it meets certain criteria, is reasonable within the meaning of the Fourth Amendment.

A decision in the New York Supreme Court (People v. Keta) seemingly went against the US Supreme Court’s precedent. It narrowed the broad exceptions to the Fourth Amendment somewhat, with the presiding judge (Vito J. Titone) noting:

“Our responsibility in the judicial branch is not to respond to these temporary crises or to shape the law so as to advance the goals of law enforcement, but rather to stand as a fixed citadel for Constitutional rights.”

But “advancing the goals of law enforcement” still seems to be the goal. Officers are free to inspect acquisition records without a warrant, as well as seize stolen goods in plain sight, but most other actions (including searches of safes, etc.) still require additional paperwork.

In order to expedite police inspections of pawnbrokers, New York legislators passed a law making it even easier for law enforcement check in on “closely regulated” businesses.

RCNY §21-03(a) and (b), §21-04(a) and (c), §21-07(a)-(f), and § 21-08, promulgated as a result of Local Law No. 149 require pawnbrokers and dealers in second-hand merchandise to create electronic transaction records and upload the same to a web-based electronic transfer service designated by the NYPD known as Leads Online, who then makes those records available to the NYPD.

Because this law compels (sort of…) the upload of information to a database that can be accessed at will by law enforcement and other entities, it does not conform to the standards set by the NY Supreme Court’s Keta decision.

[T]he foregoing statutes fail to prescribe limits for the review of the records required to be disclosed and, in fact, in requiring the daily disclosure of those records seem to vest with the NYPD the unbridled discretion which even the court in Glenwood TV, Inc., would invalidate a statute authorizing warrantless searches (103 AD2d, 322, 330).


Specifically, at this stage, it is hard to fathom how the foregoing statutes – bereft of any standards on the frequency of searches, setting virtually no limit on how said searches will be conducted and thus, conferring unfettered discretion upon the defendants suffer from the very afflictions the court in Keta held afflicted VTL § 415-a(5) – can, in light of their facial unconstitutionality born by this record, be constitutionally applied.

The court mentions the “means to an end” approach the NYPD is rather fond of. Simply having on-demand, warrantless access to on-site inspection of “closely regulated” businesses’ records wasn’t enough. It wanted to enjoy the same privileges without leaving the office. Now, these “inspections” — along with others permitted under the same set of statutes — have been halted until further notice.

This compelled database of acquisition information is the centerpiece of another lawsuit against the city and the NYPD. It appears from the allegations made in this suit that the NYPD expresses a certain irritation with those that don’t opt-in to the online database. (The law requires creation and storage of electronic records, but does not actually mandate the use of Leads Online by affected businesses, stating only that “such electronic record 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.”)

Plaintiff here alleges that Defendants have “effectively singled out Gem from other pawnbrokers and secondhand dealers and have done so with malice and bad faith.” (Am. Compl. ¶ 152.) Plaintiff further alleges that pawn brokers who choose not to use Leads Online are subject to additional onsite inspections for “administrative purposes,” and that Plaintiff has experienced continual visits to its stores, warrantless searches, holds on jewelry, criminal summonses and over all harassment. (Id. ¶¶ 36–133.) Defendants raise no argument as to this element of Plaintiff’s selective enforcement equal protection claim, instead relying on the fact that the NYPD is permitted to perform administrative inspections. The Court finds that Plaintiff’s detailed description in its Amended Complaint of the actions taken beyond mere administrative inspections, including various in-store visits from the NYPD, statements made to Gem employees, subsequent requests for jewelry holds, and the seven misdemeanor summons received, (see id.), are adequate to demonstrate at the pleadings stage a malicious or bad faith intent to injure Plaintiff. The Court therefore finds that Plaintiff has stated a plausible claim for violation of the Equal Protection Clause and Defendants’ motion to dismiss is, therefore, denied.

This lawsuit was filed before Local Law 149 was passed and enacted, suggesting there was a pre-legislation push by the NYPD to move these records to an online database. As of this point, the lawsuit is still ongoing, having survived the city’s motion to dismiss.

The codes cited in the lawsuit don’t specify anything more than the sort of records to be maintained. In accordance with the new law, these records are to be maintained electronically, but nothing specifically mandates the use of an online database.

As the court sees it here, this demand to participate in the online collection of these records — which can be perused at the sole discretion of law enforcement officers and others with access to the database — falls dangerously close to being a “general warrant.” Compelled production of records during periodic inspections and/or suspicion of illegal activity is one thing. Providing at-will “inspections” with no corresponding guidelines turns “close regulation” into a prime fishing spot for law enforcement, who will no longer be participating in periodic inspections and searches, but rather trolling databases simply because they have unfettered access to the information.

Obviously, this has its parallel in the recent incident involving Motel 6’s faxing of guest information to local law enforcement nightly. Motels and hotels are businesses that are subject to routine inspection of collected records, but nothing about this sort of regulation demands proactive measures on the part of the businesses involved, other than the collection and maintenance of the required records. The rest is dependent on law enforcement not abusing these privileges, which wander outside the protections of the Fourth Amendment — supposedly in the “public interest,” i.e. fighting crime.

The necessary limitations — and there are only a few — are subverted by instantly-accessed, central collections of this information. The Supreme Court may have lowered the Fourth Amendment standards for these businesses, but New York’s highest court stills sees at least a minimal amount of privacy implications in this sort of regulation. These are in place to help law enforcement combat theft, but these noble ends are not a justification for “by any means necessary” approaches.

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Comments on “Court Orders Halt To New York Law Demanding Online Access To Pawn Shop Acquisition Records”

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toyotabedzrock (profile) says:

Given the hassle of having to drive around I can imagine cops being annoyed.

The obvious answer to this is mandatory disclosure with a selectable delay on certain information, to the shops about when searches are made and if a single item in their shop was looked at.

All searches should have a generic id number for shops who want to raise a grievance. And the police should have to fill out case paperwork online getting a case number that allows for a search. Then all keywords searched and items viewed should be attached to the case automatically if they need to be viewed. You could even attach results, it is not as if harddrive space is expensive anymore.

Anonymous Coward says:

Given the history of crime waves surrounding pawn shops and places that buy and sell jewelry I don’t mind strict laws requiring them to keep detailed records of those they buy anything from including taking photos. From what I hear it has substantially reduced crime and I think this is an example of law enforcement done right. I even talked to one person that told me he has friends that don’t steal anymore exactly because of these laws. Good! However, I agree that a search warrant should be required before law enforcement gets access to any personal information.

Brian The PawnNerd (user link) says:

Not a horrible idea but terrible implementation.

There’s really nothing wrong with there being a digital database of pawn transactions for the police departments involved in the investigations. The problems is LEADS Online’s implementation of the system.

You see, here in Ohio a local police department (which the pawn shop did not do business in) found out that another officer in a neighboring city had used the pawn shop to make a loan and began to harass him about it. Well, since Ohio law requires reporting just to the law enforcement agency in which the pawn shop operates, the officer’s attorney turned around and threatened a lawsuit against the pawn shop for divulging private customer information to an agency that had no business having it, even if it was a police department.

Further more, the information given to LEADS is available on a national level, complicating the problem further. It places the pawn broker in a situation of potentially being liable for these kinds of problems on a national level.

If NY would implement a purely local system for handling that information, I personally would be all for it and I would be willing to bet that a lot of other pawn brokers would be as well. However, demanding the use of LEADS is a real issue.

Kayden (user link) says:

Pawnshop Stolen Item Reporting

Help.. I was looking into buying some kind of precious metal calculating software, but I only found one that looks decent called Goldamite Pro. After some internet researching, it appearently grabs the spot price off the internet every 60 seconds. The store sets the payout behind the scene, and once they enter the different weights of the jewelry or scrap gold, silver, platinum, it instantly gives the payout prices. I believe that you need Microsoft Excel on your computer to run it. My customers can view the monitor while im entering the data, and never realize that I had set the payout at 30-60%. Looks cool, but I’m checking to see if anyone had luck with the goldamite software? I think the site is Well thanks in advance.

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