Motor City Pawn Brokers, Inc. v. City of Warren

MOTOR CITY PAWN BROKERS, INC., Plaintiff-Appellant, v. CITY OF WARREN, Defendant-Appellee.

No. 322459

STATE OF MICHIGAN COURT OF APPEALS

December 17, 2015

UNPUBLISHED

Macomb Circuit Court

LC No. 12-002472-CZ

Before: JANSEN, P.J., and CAVANAGH and GLEICHER, JJ.

PER CURIAM.

Plaintiff, Motor City Pawn Brokers, Inc., brought this action against defendant, city of Warren, to enjoin the city from implementing a local ordinance (the "LeadsOnline ordinance") that would require pawnbrokers to submit electronic transaction reports to a private third-party vendor, LeadsOnline. The trial court rejected plaintiff's arguments that the LeadsOnline ordinance was preempted by, or otherwise violated, various state and federal statutes, and therefore granted defendant's motion for summary disposition. Plaintiff appeals as of right. We affirm.

I. FACTS AND PROCEEDINGS

Plaintiff is a licensed pawnbroker operating in the city of Warren. The Michigan pawnbrokers act, MCL 446.201 et seq., requires licensed pawnbrokers to record all transactions, including customer names, addresses, driver's license or other identification number, and the article sold or pledged to secure a loan. The statute further requires pawnbrokers to submit a copy of the transaction records to the local police agency. MCL 446.205. Since 2008, defendant has required electronic submission of transaction records. In 2012, defendant enacted an ordinance requiring these records to be submitted to LeadsOnline, L.L.C., a private company that operates a database of pawn transactions and transactions in secondhand goods. LeadsOnline acts as an agent for law enforcement agencies by receiving and compiling the transaction reports. The database is accessible only to member law enforcement agencies. The LeadsOnline ordinance was enacted in conjunction with approval of an agency agreement between defendant's police department and LeadsOnline.

Plaintiff brought this action for injunctive and declaratory relief, seeking to enjoin enforcement of the LeadsOnline ordinance on the ground that it violated the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (FSMA), 15 USC 6801 et seq., the federal Fair Credit Reporting Act (FCRA), 15 USC 1681 et seq., the Michigan interstate law enforcement intelligence organizations act (ILEIOA), MCL 752.1 et seq., and the Headlee Amendment, Const 1963, art 9, § 31. The trial court granted defendant's motion for summary disposition, finding that the LeadsOnline ordinance did not violate any state or federal laws.

II. STANDARD OF REVIEW

Defendant moved for summary disposition under both MCR 2116(C)(8) and (10). Although the trial court did not specify under which subrule it granted defendant's motion, a motion under subrule (C)(8) is limited to the pleadings, Maiden v Rozwood, 461 Mich 109, 119-120; 597 NW2d 817 (1999), but the record discloses that defendant submitted documentary evidence in support of its motion and the trial court considered that evidence in deciding that summary disposition was warranted. Accordingly, defendant's motion is appropriately reviewed under subrule (C)(10). "In general, MCR 2.116(C)(10) provides for summary disposition when there is no genuine issue regarding any material fact and the moving party is entitled to judgment or partial judgment as a matter of law." Pioneer State Mut Ins Co v Dells, 301 Mich App 368, 377; 836 NW2d 257 (2013). "A trial court may grant a motion for summary disposition under MCR 2.116(C)(10) if the pleadings, affidavits, and other documentary evidence, when viewed in a light most favorable to the nonmovant, show that there is no genuine issue with respect to any material fact." Id. Questions of statutory interpretation are reviewed de novo. Krusac v Covenant Med Ctr, Inc, 497 Mich 251, 255-256; 865 NW2d 908 (2015).

III. THE FMSA

Plaintiff argues that the trial court erred in concluding that the LeadsOnline ordinance was not preempted by the FSMA, which governs financial institutions' disclosures of nonpublic personal information. We disagree.

" ' "[T]he purpose of Congress is the ultimate touchstone in every pre-emption case." ' " Ter Beek v City of Wyoming, 495 Mich 1, 10; 846 NW2d 531 (2014), quoting Wyeth v Levine, 555 US 555, 565; 129 S Ct 1187; 173 L Ed 2d 51 (2009), in turn quoting Medtronic, Inc v Lohr, 518 US 470, 485; 116 S Ct 2240; 135 L Ed 2d 700 (1996). "In all preemption cases, . . . [a court starts] with the assumption that the historic powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Ter Beek, 495 Mich at 10 (citations omitted).

Plaintiff contends that FSMA preempts the LeadsOnline ordinance. In resolving questions of statutory interpretation, this Court's goal is "to give effect to the Legislature's intent, focusing first on the statute's plain language." Krusac, 497 Mich at 256. "When the language of a statute is unambiguous, the Legislature must have intended the meaning clearly expressed, and the statute must be enforced as written." Id.

15 USC 6802 provides, in pertinent part:

(a) Notice requirements

Except as otherwise provided in this subchapter, a financial institution may not, directly or through any affiliate, disclose to a nonaffiliated third partyany nonpublic personal information, unless such financial institution provides or has provided to the consumer a notice that complies with section 6803 of this title.

(b) Opt out

(1) In general

A financial institution may not disclose nonpublic personal information to a nonaffiliated third party unless-

(A) such financial institution clearly and conspicuously discloses to the consumer . . . that such information may be disclosed to such third party;

(B) the consumer is given the opportunity, before the time that such information is initially disclosed, to direct that such information not be disclosed to such third party; and

(C) the consumer is given an explanation of how the consumer can exercise that nondisclosure option.

(2) Exception

This subsection shall not prevent a financial institution from providing nonpublic personal information to a nonaffiliated third party to perform services for or functions on behalf of the financial institution, including marketing of the financial institution's own products or services, or financial products or services offered pursuant to joint agreements between two or more financial institutions that comply with the requirements imposed by the regulations prescribed under section 6804 of this title, if the financial institution fully discloses the providing of such information and enters into a contractual agreement with the third party that requires the third party to maintain the confidentiality of such information.

* * *

(e) Subsections (a) and (b) of this section shall not prohibit the disclosure of nonpublic information—

(1) as necessary to effect, administer, or enforce a transaction requested or authorized by the consumer, or in connection with—

(A) servicing or processing a financial product or service requested or authorized by the consumer;

* * *

(5) to the extent specifically permitted or required under other provisions of law and in accordance with the Right to Financial Privacy Act of 1978 [12 USCA 3401 et seq.], to law enforcement agencies (including the Bureau ofConsumer Financial Protection a Federal functional regulator, the Secretary of the Treasury with respect to subchapter II of chapter 53 of Title 31, and chapter 2 of Title I of Public Law 91-508 (12 USC 1951-1959), a State insurance authority or the Federal Trade Commission), self-regulatory organizations, or for an investigation on a matter related to public safety;

* * *

(8) to comply with Federal, State, or local laws, rules, and other applicable legal requirements; to comply with a properly authorized civil, criminal, or regulatory investigation or subpoena or summons by Federal, State, or local authorities; or to respond to judicial process or government regulatory authorities having jurisdiction over the financial institution for examination, compliance, or other purposes as authorized by law.

15 USC 6807 provides:

(a) In general

This subchapter and the amendments made to this subchapter shall not be construed as superseding, altering, or affecting any statute, regulation, order, or interpretation in effect in any State, except to the extent that such statute, regulation, order, or interpretation is inconsistent with the provisions of this subchapter, and then only to the extent of the inconsistency.

(b) Greater protection under State law

For purposes of this section, a State statute, regulation, order, or interpretation is not inconsistent with the provisions of this subchapter if the protection such statute, regulation, order, or interpretation affords any person is greater than the protection provided under this subchapter and the amendments made by this subchapter, as determined by the Bureau of Consumer Financial Protection, after consultation with the agency or authority with jurisdiction under section 6805(a) of this title of either the person that initiated the complaint or that is the subject of the complaint, on its own motion or upon the petition of any interested party.

In assessing whether the LeadsOnline ordinance is preempted by the FSMA, we must determine whether there is a conflict between the two acts such that they cannot consistently stand together. See Ter Beek, 495 Mich at 11. In the context of this case, the relevant inquiry is whether the LeadsOnline ordinance impermissibly lowers the protection granted to consumers.

The first issue to be addressed is whether a pawnbroker is a financial institution within the meaning of the FSMA. 15 USC 6809(3)(A) defines "financial institution" to mean "any institution the business of which is engaging in financial activities as described in section 1843(k) of Title 12." 12 USC 1843(k)(4)(A) includes "[l]ending, exchanging, transferring, investing for others, or safeguarding money or...