Elfand v. City of New York

Background

Jonathan C. Elfand and Lenore Elfand, who were representing themselves, are member owners of Elfand Organization LLC, which does business as Empire Cannabis Clubs. The opinion states that Empire is an unlicensed, membership-based cannabis business whose members obtain cannabis at the club’s acquisition cost without a markup.

The Elfands challenged several New York State and New York City laws governing inspections, civil penalties, and sealing orders for unlicensed cannabis businesses. They alleged that state and city officials had repeatedly inspected Empire locations, detained or arrested people, seized cannabis and money, issued sealing orders, padlocked premises, and threatened further enforcement. Their complaint asserted claims under the Fourth Amendment, the Fourteenth Amendment’s Due Process Clause, the Takings Clause, and other theories. They sought damages and emergency injunctive relief preventing officials from entering, searching, sealing, or seizing Empire locations or property under the challenged laws without a judicial warrant.

Legal standard

A temporary restraining order and a preliminary injunction are emergency remedies. To obtain one against government action taken under a regulatory scheme, a plaintiff must show a clear or substantial likelihood of success on the merits, likely irreparable harm without relief, and that the balance of equities and public interest support an injunction.

The court also explained that Article III standing is a constitutional requirement for bringing a case in federal court. A plaintiff must show a personal injury that is fairly connected to the challenged conduct and likely to be fixed by the requested court order. For an injunction, past injury alone is not enough; the plaintiff must show a real and immediate prospective injury.

Standing analysis

The court held that the Elfands lacked standing for the claims supporting their request for emergency relief. Their requested injunction principally sought protection for Empire’s locations and property. The court stated that Fourth Amendment rights are personal and cannot be asserted on behalf of another entity. Even ownership of a business, operational control, or presence during a search does not by itself establish an individual’s Fourth Amendment right in a search of the business premises.

The court reached a similar conclusion concerning due process. To the extent the Elfands argued that the inspections themselves violated due process because they occurred without warrants, the court said that issue was covered by the Fourth Amendment. The court also applied the general rule that a shareholder cannot bring an individual claim for injuries inflicted on the corporation.

The court distinguished the Elfands’ alleged personal injuries from the injuries to Empire. Property destruction, lost goodwill, damaged business relationships, and threats of closure were injuries to Empire. The Elfands’ alleged financial losses were derivative of those business injuries. Their alleged detention and physical restraint were personal injuries, but the court said past detention or arrest could support a damages claim rather than the requested injunction. The court also found that the challenged laws did not provide for detention or physical restraint merely because an individual insisted on a warrant, and that the requested injunction did not seek to prevent the Elfands’ detention.

Disposition

Because the Elfands had not shown that the court likely had subject-matter jurisdiction over the claims underlying their emergency request, they had not shown the required likelihood of success. The court therefore did not reach the defendants’ arguments that the claims were barred by claim preclusion or that the challenged laws were constitutional. It also did not address the remaining preliminary-relief factors.

Judge John P. Cronan denied the Elfands’ motion for a temporary restraining order and preliminary injunction without prejudice. The opinion states that, under earlier court orders, the State and City defendants had thirty days to answer or otherwise respond to the complaint. It also noted that the Elfands had not yet served some defendants who had not been voluntarily dismissed.