Sixth Circuit: State Cannot Inspect Ohioans’ Business Records without Warrant

Fourth Amendment prohibits state’s mandate making all business records “available at all times” to state agents

January 22, 2018: Columbus, OH – A federal circuit court late yesterday ruled that Ohio’s policies demanding private business records – – without a warrant or any evidence of wrongdoing – – violate the Fourth Amendment’s protection from unreasonable searches and seizures.

The ruling, made by a unanimous panel of the Sixth Circuit and authored by Judge David McKeague, addresses regulations governing those purchasing gold, silver, and other precious metals under the Precious Metals Dealers Act (“PMDA”).

However, its impact is likely to far exceed just the PMDA. Many Ohio businesses, particularly those requiring government licensing, face materially identical mandates. Accordingly, the ruling paves the way for Ohio businesses, even if heavily licensed and regulated, to protect their privacy and property, especially when such demands are made on-the-spot and without a warrant.

In a 23 page decision, the three-judge panel struck down a statute declaring “all books, forms, and records, and all other sources of information with regard to the business shall at all times be available for inspection,” and another demanding “free access to the books and papers and other sources of information with regard to the business.”

The Court explained as follows:

• “Business owners cannot be forced to choose between being arrested on the spot and standing on their Fourth Amendment rights.”
• “[The challenged statutes] are both unnecessary to furthering Ohio’s state interest and too broad in scope to withstand facial Fourth
• Amendment scrutiny . . . both statutes effectively allow searches of dealers’ entire businesses . . . They therefore do not provide any standards to guide inspectors in the exercise of their authority to search.”
• “The provisions’ seemingly unlimited scope, along with the grant of free access to such information at all times, does not sufficiently constrain the discretion of the inspectors.”

“This ruling essentially affirms that while government may request some basic record-keeping, reporting, and inspection of inventory purchased from the public that has been reported stolen, state officials cannot walk into a business without a warrant or evidence of wrong-doing and demand to review our papers, cell phones, laptops, or other business records,” said Maurice Thompson, Executive Director of the 1851 Center. “No entrepreneur deserves to be arrested for questioning the authority of a state agent to show up at his business unannounced, without any evidence of wrongdoing, and confiscate or filter through these records.”

Thompson added “this precedent will guard warrantless searches of business records in all industries, since the Court of Appeals decision acknowledged that even ‘closely regulated’ industries are entitled to greater protection. Ohioans should feel free to decline invasive and costly government searches without fear of retaliation.”

The 1851 Center for Constitutional Law took up the case in 2012 on behalf of Liberty Coins, a coin dealer of Delaware, Ohio, and Worthington Jewelers, a retail jeweler in Worthington, Ohio. Each balked at the prospect of losing their business licenses and being fined and prosecuted for refusing to turn over cell phones, laptops, and paper records simply “upon demand” of state enforcement agents.

Read the Court’s Order HERE.

Listen to the Oral Argument HERE.

Read the Brief HERE.

Watch our video describing the impact of this case:

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The 1851 Center for Constitutional Law is a non-profit, non-partisan legal center dedicated to protecting the constitutional rights of Ohioans from government abuse. The 1851 Center litigates constitutional issues related to property rights, voting rights, regulation, taxation, and search and seizures.