Liberty Coins, LLC; John Michael Tomaso; Worthington Jewelers, LTD.; Robert Capace, Plaintiffs-Appellees,
David Goodman, et al., Defendants, Jacqueline T. Williams, in her official capacity as Director, Ohio Department of Commerce; Amanda McCartney, in her official capacity as Consumer Finance Attorney of Division of Financial Institutions, Ohio Department of Commerce, Defendants-Appellants.
Argued: June 22, 2017
from the United States District Court for the Southern
District of Ohio at Columbus. No. 2:12-cv-00998-Michael H.
Watson, District Judge.
Jennifer S. M. Croskey, for Appellants.
Maurice A. Thompson, for Appellees.
Jennifer S. M. Croskey, Keith O'Korn, for Appellants.
Maurice A. Thompson, Curt C. Hartman for Appellees.
Before: SILER, McKEAGUE, WHITE, Circuit Judges.
McKEAGUE, CIRCUIT JUDGE.
Liberty Coins, LLC, and Worthington Jewelers, Ltd., bring
facial and as-applied Fourth Amendment challenges to four
warrantless search provisions in Ohio's Precious Metals
Dealers Act and the accompanying regulations: O.R.C.
§§ 4728.05(A), 4728.06, 4728.07, and Ohio Admin.
Code § 1301:8-6-03(D). These laws equip state agents and
local law enforcement with the authority to inspect certain
records, articles, and information kept by precious metals
dealers without first obtaining a warrant. The district court
held that these warrantless search provisions were
unreasonable and unconstitutional on their face, and
therefore did not address plaintiffs' as-applied claims.
reasons set forth below, we affirm in part and reverse in
part. We agree with the district court that the warrantless
searches authorized by O.R.C. § 4728.05(A) and Ohio
Admin. Code § 1301:8-6-03(D) are facially
unconstitutional. These search provisions are not necessary
to furthering the state's interest in recovering stolen
jewelry and coins nor do they serve as adequate warrant
substitutes because they are overly broad in scope. However,
we reverse the district court's ruling as to §§
4728.06 and 4728.07 because we conclude that the warrantless
searches provided for in these subsections are facially
constitutional. Further, we dismiss plaintiffs'
as-applied challenges to §§ 4728.06 and 4728.07 as
first provide a brief overview of the Precious Metals Dealers
Act before turning to the facts of this appeal.
Precious Metals Dealers Act
over a century, Ohio indirectly regulated precious metals
dealers through statutes governing pawnbrokers and secondhand
dealers. See generally R. 14-1 (compiling the
legislative history of these various laws). As prices for
gold and silver increased, the state found that such dealers
provided easy avenues for thieves to re-sell and profit from
stolen jewelry and coins. See Appellant Br. at 31;
R. 23-3, Exh. DXD at 4, PID 369. Therefore, in 1987, the Ohio
General Assembly sought to impose stricter standards on them
through the passage of the Precious Metals Dealers Act
(PMDA). The Act defines a "precious metals dealer"
as any person who "holds himself, herself, or itself out
to the public" as being "engaged in the business of
purchasing articles made of or containing gold, silver,
platinum, or other precious metals or jewels . . . ."
O.R.C. § 4728.01(A). The Act tasks the Division of
Financial Institutions within Ohio's Department of
Commerce with general enforcement responsibility. §
PMDA requires every dealer in precious metals to first apply
for and obtain a license. § 4728.02(A). The state
conducts investigations of all applicants and has the power
to issue licenses "to any person of good character,
having experience and fitness in the capacity involved, who
demonstrates a net worth of at least ten thousand dollars and
the ability to maintain that net worth during the licensure
period." § 4728.03(B)(1). Prospective licensees
must pay a $200 investigation fee and, upon being licensed,
an annual renewal fee as well. § 4728.03(C)-(D).
Licensees are required to post, in a "conspicuous
place" at their business location, (1) their license and
(2) a statement that they have no right to retain stolen
goods. § 4728.04(A)-(B). Certain businesses are exempt
from licensure, for example, jewelry stores whose monthly
precious metals purchases represent less than 25% of their
total inventory and shops that buy coins as "numismatic
objects, and not for their content as precious metals."
See, e.g., § 4728.11(E)-(F). However, even
these exempt businesses are subject to certain requirements
under the Act. See § 4728.12.
licensure, the PMDA also imposes recordkeeping requirements
and provides state agents and local police with power to
search the records and businesses of dealers without a
warrant. The four sections of the PMDA that authorize
warrantless searches form the heart of this appeal. The first
challenged provision, § 4728.05(A), provides the state
with the authority to "investigate the business" of
both licensees and non-licensees who deal in precious metals
"and for that purpose" provides it with "free
access to the books and papers thereof and other sources of
information with regard to the[ir] business[es]." Even
though it allows officials to look at this information
without a warrant, § 4728.05 also arms the state with
administrative powers to effectuate compliance, including the
power to compel, issue subpoenas, and apply to the court for
an order, injunction, or temporary restraining order.
See, e.g., § 4728.05(B)(5).
4728.06-the second provision at issue-requires licensees to
maintain books and records in a form approved by the state.
The records must include a detailed description of all
precious metals purchased as well as identifying information
about the seller. This information must be kept at the
licensed location "open to the inspection of the
superintendent or chief of or head of the local police
department . . . ." Section 4728.06 also requires
licensees, "upon demand, " to show authorities any
precious metal within their possession that is listed in
these records. Id.
§ 4728.07-the third provision at issue in this
case-requires licensees to keep separate records for the
benefit of local police departments. Specifically, this
section mandates that licensees keep "on forms furnished
by the police department, a description of all articles
received" and make these forms available to the police
"every business day."
fourth and final challenged provision is a regulation
promulgated pursuant to the PMDA, which elaborates on
licensees' recordkeeping duties and advises them how to
comply with state inspections. This regulation, Ohio
Administrative Code § 1301:8-6-03(D), contemplates that
the state shall have the authority to inspect "at all
times" the "books, forms, and records, and all
other sources of information with regard to the business of
the licensee" in order to ensure "that the business
of the licensee is being transacted in accordance with
law." This regulation also requires licensees to
maintain their records and inventory at the licensed
addition to these four sections authorizing warrantless
searches, several other sections of the PMDA are pertinent to
this appeal. Section 4728.09(A) prohibits licensees from
either reselling or altering the form of any article
purchased for at least five days. This holding period can be
extended to thirty days if the police have "probable
cause" to believe that an article within a
licensee's possession is stolen property. §
4728.09(B). The PMDA also provides for a criminal enforcement
scheme. Section 4728.10 requires state agents to "make
all reasonable efforts to discover alleged violators" of
the Act and to "notify the proper prosecuting
officer." Section 4728.99, in turn, imposes criminal
penalties for violations.
Coins, LLC, is a coin shop, located in Delaware County, Ohio,
that buys and sells various forms of gold and silver. R. 72,
Amended Compl. ¶¶ 5-6, PID 826. It is owned by John
Michael Tomaso. Id. ¶ 6, PID 826. Although it
admits that it "holds itself out to the public" as
a precious metals dealer, Liberty Coins does not have a PMDA
license. R. 26, TRO Tr. at 91, 110, PID 564, 583. In August
2010, the state got wind of that fact and sent out an
inspector to investigate. R. 26, TRO Tr. at 54-55, PID
526-27. The inspector spoke with Tomaso and left forms for
him to complete so that the state could determine whether
Liberty Coins was eligible for an exemption from licensure.
Id. at 71-72, PID 543-45. The inspector did not
request to see any business records during his visit to
Liberty Coins. Id. at 74, PID 547. After Tomaso
failed to complete the necessary forms, the state sent a
letter requiring him to "produce business records to
demonstrate the amount of precious metals [it had] purchased
from the public over the last twelve (12) months." R.
23-1, Exh. JXI at 1, PID 339.
never responded to the state's inquiries, and Liberty
Coins never applied for a PMDA license. Instead, they filed a
42 U.S.C. § 1983 action against various Ohio Department
of Commerce officials. R. 1, Verified Compl. ¶¶
11-12, PID 4-5. They sought declaratory and injunctive
relief, arguing that the PMDA was facially invalid under the
First, Fourth, and Fourteenth Amendments. Id. ¶
1, PID 2. The district court granted a preliminary injunction
to Tomaso and Liberty Coins on their First Amendment claim,
prohibiting the state from enforcing the PMDA because it
placed an impermissible burden on commercial speech, i.e.,
the ability to advertise one's willingness to buy
precious metals. Liberty Coins, LLC v. Goodman, 977
F.Supp.2d 783, 792 (S.D. Ohio 2012). A panel of this court
reversed. 748 F.3d 682 (6th Cir. 2014).
remand, Liberty Coins and Tomaso added Worthington Jewelers,
an "upscale jewelry store and bridal boutique"
located in Worthington, Ohio, and its owner, Robert Capace,
as plaintiffs. R. 72, Amended Compl. ¶¶ 8-11, PID
826; Appellee Br. at 7. Unlike Liberty Coins, Worthington
Jewelers was licensed under the PMDA at the time this amended
complaint was filed. R. 72, Amended Compl. ¶ 54, PID
833. That license has since lapsed, and Worthington Jewelers
spent several years operating without a license before
obtaining another one on October 26, 2015. R. 98-1, Capace
Decl. ¶ 2, PID 1141. Under the Act, that license expired
on June 30, 2017, see § 4728.03(D), and it is
unclear whether Worthington Jewelers sought renewal.
their amended complaint, Tomaso, Liberty Coin, Worthington
Jewelers, and Capace again sought various forms of
constitutional relief, but their Fourth Amendment claim is
the only one pertinent to this appeal. Specifically, they
alleged that four sections of the PMDA-O.R.C. §§
4728.05(A), 4728.06, and 4728.07 and Ohio Administrative Code
§ 1301:8-6-03-authorized warrantless searches that were
unconstitutional under the Fourth Amendment "[e]ither
facial[ly] or as-applied." R. 72, Amended Compl. ¶
160, PID 846; see generally id. ¶¶ 139-60,
PID 844- 46. Several dispositive motions were then filed with
regards to this claim: The state filed a motion to dismiss
the amended complaint, R. 77, Mot. to Dismiss at 1, PID 859,
and both the plaintiffs and the state filed motions for
summary judgment, see R. 98, Plaintiff Mot. for SJ
at 22, PID 1124; R. 103, State Mot. for SJ at 3, PID 1151.
district court granted summary judgment to plaintiffs and
denied both of the state's motions. It agreed that the
warrantless searches authorized by the PMDA were facially
unconstitutional and enjoined their enforcement. R. 113, Op.
and Order at 35, PID 1433. The district court based its
ruling primarily on the Supreme Court's recent decision
in City of Los Angeles v. Patel, 135 S.Ct. 2443
(2015). See id. at 1, 21-32, PID 1399, 1419-30.
First, it concluded that the PMDA search provisions
"suffer[ed] from the same constitutional deficiencies
as" the Los Angeles ordinance that the Supreme Court
struck down in Patel: they offered no opportunity
for dealers to seek "neutral, precompliance review"
before being faced with either refusing to submit to a search
or being charged with a crime. Id. at 26, PID 1424.
Moreover, the district court held that even if these
businesses were entitled to a reduced expectation of privacy
because they were "closely regulated, " the
statutory provisions were still unconstitutional under the
three-part test governing warrantless searches of those
industries. Id. at 28-32, PID 1426-30. The district