Court restricts government's ability to review private business records

A recent federal circuit court decision clarifies that Ohio business owners have the right to protect their private business records from state inspection in the absence of a search warrant. That's despite statutory provisions purporting to allow warrantless searches.

Liberty Coins LLC, et al., v. David Goodman et. al. (6th Cir. 2018) involved a constitutional challenge to four provisions of the Ohio Precious Metals Dealers Act. The act authorizes warrantless administrative searches of certain records and information kept by precious metals dealers (both licensed and unlicensed). Two precious metal dealers challenged the act on the grounds that it violated their right to be secure from unreasonable searches and seizures as protected by the Fourth Amendment.

The U.S. Court of Appeals for the Sixth Circuit reviewed the act and concluded that the portions of the act that were necessary to deterring criminal activity in the precious metals industry, and which were part of a predictable and guided regulatory presence, were constitutional. However, those provisions that broadly authorized the government to "investigate the businesses" of precious metals dealers violated the Fourth Amendment of the U.S. Constitution and were therefore unconstitutional.

Liberty Coins is instructive to local and state governments as well as private business owners and entities operating in any "closely regulated" industry. Laws authorizing warrantless searches in these industries must meet a three-part test in order to comply with the Fourth Amendment: (1) there must be a substantial government interest that informs the law; (2) inspections must be necessary to further the law; and (3) the law, in terms of certainty and regularity of its application, must provide a constitutionally adequate substitute for a warrant. Laws that fail to meet any part of this test will be subject to constitutional challenge under the Fourth Amendment.

If the government is looking to review your business records without a warrant, or you are a government entity seeking to enhance its regulatory efforts in a particular industry, it is wise to consult with legal counsel to ensure compliance with the Fourth Amendment. If you have any questions about Liberty Coins or any other administrative or regulatory regimes, the public law attorneys at Walter | Haverfield are available to assist you.

Ben Chojnacki is an attorney at Walter | Haverfield who focuses his practice on public law, litigation and sports law. He can be reached at bchojnacki@walterhav.com or at 216-619-7850.