The Constitutional requirement for a search warrant assures that an independent judiciary verifies the scope and justification for a search to be conducted. While warrantless searches are highly disfavored, the protections provided by the Fourth Amendment against warrantless searches and seizures, including placing an item on hold, are not absolute. As the United States District Court for the Southern District of New York held in 5 Borough Pawn, LLC v. City of New York:
“Certain industries have such a history of government oversight that no reasonable expectation of privacy could exist for a proprietor over the stock of such an enterprise. Thus, under certain circumstances, a legislative scheme that authorizes a warrantless administrative search or seizure of a business is not considered constitutionally objectionable.”
1. The Government’s Right to Inspect
Often, the appropriate regulation of a business justifies regular inspections. Agencies of the United States Government and agencies of virtually every State inspect the records of a wide variety of businesses. Among such regularly inspected businesses are financial institutions. These inspections can be both scheduled and unscheduled. The Courts have consistently found that:
“Where the privacy interests of the owner are weakened and the government interests in regulating particular businesses are concomitantly heightened, a warrantless inspection of commercial premises may well be reasonable within the meaning of the Fourth Amendment.”
Nevertheless, not all businesses are regulated and inspected the same. Furthermore, the extent of a permissible warrantless intrusion increases as the nature of the business justifies. Thus, warrantless inspections of gun shops can be far more intrusive than an inspection of a greeting card store. In United States v. Biswell, the United States Supreme Court explained that:
Warrantless administrative searches may be reasonable within the meaning of the Fourth Amendment when the premises are used in a closely or pervasively regulated business or industry.
However, no matter how regulated the business, the intrusion is not limitless. As the Courts have explained, for a warrantless search to be permissible, the regulator:
“Must advise the owner of the commercial premises that the search is being made pursuant to the law and has a properly defined scope, and it must limit the discretion of the inspecting officers.”
To assure that “the law has a properly defined scope, and limits the discretion of the inspecting officer,” the regulatory scheme must be sufficiently comprehensive and clearly delineated. A failure to do so invalidates the underlying statute.
Further, the statute, procedures, and inspection must be so defined that the owner of commercial property cannot help but be aware that his property will be subject to periodic inspections undertaken for specific purposes. The statute must also provide notice to the particular business owner that his or her property will be subject to warrantless inspections. As the Tenth Circuit held in V-1 Oil Co. v. Wyo. Dep’t of Envtl. Quality:
“The only warrantless administrative searches which have been upheld are those conducted pursuant to narrow statutes which regulate particular industries.”
In defining how a statute limits the discretion of inspectors, the statutorily authorized search must be “carefully limited in time, place, and scope, and the legality of the search depends not on consent but on the authority of a valid statute.” Thus, even though a warrantless inspection may be allowed if it falls within the “highly regulated business exception,” the time, manner, and scope of these inspections are extremely limited.
To comply with the criteria necessary to justify a warrantless inspection, both the regulatory scheme and the required governmental interest cannot simply provide a justification for an unwarranted, general search of a business. Rather, the system for inspection must be based upon a specific and justifiable purpose. Where such a specific and limited basis does not exist, “administrative searches … of general applicability require search warrants.”
Citing the United States Supreme Court’s decision in New York v. Burger, the 10th Circuit Court of Appeals in Winters noted that in order for a warrantless inspection of a business to be reasonable: