SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter comes before the Administrative Law Court (ALC or Court) pursuant to S.C. Code Ann. § 37-6-414 (Supp. 2007) and S.C. Code Ann. § 1-23-600(B) (Supp. 2007) for a contested case hearing. Petitioners challenge the denial by the South Carolina Department of Consumer Affairs (Department) of Petitioners’ application for a Certificate of Authority to engage in the business of a pawnbroker. A hearing was held before me on November 27, 2007 at the offices of the ALC.

Findings of Fact

Having observed the witnesses and exhibits presented at the hearing and taking into consideration the burden of persuasion and the credibility of the witnesses, I make the following findings of fact by a preponderance of evidence:

1. On April 26, 2007, David Ferrara and Martine Friedman, as owners of Purveyor Goods LLC d/b/a Patriot Pawn, applied to the Department for a Certificate of Authority to operate as a pawnbroker at 6842 Rivers Avenue in North Charleston, South Carolina (the Location).

2. Pursuant to S.C. Code Ann. § 40-39-20 (2001), the North Charleston Police Department (NCPD) issued a recommendation to the Department that a Certificate of Authority be denied to Petitioners. Afterwards, on May 24, 2007, the Department issued a letter to Petitioners informing them of its decision to deny their application for a Certificate of Authority to operate as a pawnbroker. The Department’s letter stated that Mr. Ferrara was under indictment for a violation of the precious metal statute, S.C. Code Ann. § 40-54-10 et seq., and that there had been “numerous” incidents of stolen items that had been recovered from the Location. The letter also stated that Eugene Jones, III, was a known felon and had been charged with operating a chop shop at the Location.

3. Neither Mr. Ferrara nor Ms. Friedman has been convicted of felonies in the past. Moreover, the charges against Mr. Ferrara relating to the precious metal statute have been dropped. However, neither Mr. Ferrara nor Ms. Friedman has experience operating a pawnshop. Petitioners’ supervision of this business will also be quite limited. Although Mr. Ferrara will check on the business from time to time, he does not plan to work at the Location on a regular basis. Similarly, though Ms. Friedman does plan to occasionally work at the Location, her duties will be limited to bookkeeping and assisting with eBay sales.

In the event that a Certificate of Authority is issued to the Petitioners, they plan to operate both a retail store and a pawnshop at the Location. The retail store and the proposed pawnshop will use the same computer to track transactions. However, the computer will have a “Buy” button for retail transactions and a “Pawn” button for pawn transactions. According to Petitioners, Eric Mead will operate the pawnshop and Eugene Jones, III, will operate the retail store separately.

The Location is currently being operated as a retail store known as “Patriot Sales.” Mr. Jones has run the retail store at the Location since February, 2006. If a Certificate of Authority is issued, Eric Mead would begin operating the pawnshop. Mr. Mead certainly appears qualified to carry on that function. He has over four years of experience working at pawnshops and has never been convicted of a felony. The concern in this case rather arises from the fact the pawn business will operate within the walls of the Location where Mr. Jones runs the retail store.

In 1993, Mr. Jones pled guilty to conspiracy to distribute cocaine, and was sentenced to prison. He was released from prison in May, 2003. Additionally, stolen goods, including several stolen trailers, have been recovered at the Location by the NCPD a dozen or more times. Mr. Jones was arrested as a result of one of the incidents and charged with unlawfully operating a chop shop. The charges are currently pending. More importantly, the day to day operation of the business appears to be controlled by Mr. Jones. In fact, the very inspiration for the pawn business appears to have emanated from Mr. Jones, who owned and operated a pawnshop prior to his felony conviction. That control is further exemplified by the fact that Mr. Jones currently acts as Mr. Mead’s supervisor. Petitioner Friedman also occasionally “dates” Mr. Jones. Furthermore, there is currently no wall separating the retail store space from the space that Petitioners propose to use for the pawnshop.^[1]

4. Brian Gibbs, who works for the NCPD, attempted to enter into a pawn transaction with Mr. Jones on October 17, 2007, but was not able to do so.

Conclusions of law

Based upon the above Findings of Fact, I conclude the following as a matter of law:

1. The ALC has jurisdiction over this case pursuant to S.C. Code Ann. § 37-6-414 (Supp. 2007) and S.C. Code Ann. § 1-23-600(B) (Supp. 2007). Those statutes provide that this case is heard as a contested case under the Administrative Procedures Act. Therefore, the ALC serves as the finder of fact and makes a de novo determination regarding the issues in this case. See Marlboro Park Hosp. v. S.C. Dept. of Health & Envtl. Control, 358 S.C. 573, 577-79, 595 S.E.2d 851, 853-54 (Ct. App. 2004); Brown v. S.C. Dept. of Health & Envtl. Control, 348 S.C. 507, 512, 560 S.E.2d 410, 413 (2002).

2. In order to operate a pawnshop in South Carolina, an individual must obtain a Certificate of Authority to carry on the business pursuant to S.C. Code Ann. § 40-39-20 (2001). The Department argues that no certificate should be granted in this case because Mr. Jones, who is a convicted felon, will be working in the pawnshop. According to the Department, Section 40-39-20 prohibits a pawnbroker business from employing a convicted felon in the pawnshop in any capacity. Section 40-39-20 provides, in relevant part, that:

A person convicted of a felony may not be issued a Certificate of Authority to carry on the business of a pawnbroker or in any manner engage in the business of a pawnbroker . . . .

Therefore, Section 40-39-20 sets forth two limitations relating to persons engaged in the business of pawnbrokering. First, “[a] person convicted of a felony may not be issued a Certificate of Authority to carry on the business of a pawnbroker.” Second, no person may “in any manner engage in the business of a pawnbroker” if they have been convicted of a felony. In other words, a convicted felon cannot assist or advise by word or deed in any aspect of the business of a pawnbroker.

“The primary rule of statutory construction is that the Court must ascertain the intention of the legislature.” Cooper v. Moore, 351 S.C. 207, 212, 569 S.E.2d 330, 332 (2002). “Moreover, where the terms of the statute are clear, the court must apply those terms according to their literal meaning, without resort to subtle or forced construction to limit or expand the statute’s operation. Thus, the court will reject the agency’s interpretation where it is specifically contrary to the statute or regulation.” Comm’rs of Pub. Works v. S.C. Dep’t of Health and Envtl. Control, 372 S.C. 351, 359, 641 S.E.2d 763, 767 (Ct. App. 2007) (citations omitted). Here, the plain language of Section 40-39-20 does not prohibit convicted felons from being employed at a pawn shop, but merely from carrying on or engaging in the business of a pawnbroker.

In this case, although there is reasonable suspicion, there is no evidence that Mr. Jones will carry on the business of a pawnbroker or engage in pawnbroking in any manner. Rather, the only direct evidence regarding Jones was that he would participate only in retail sales/“buy” transactions at the Location. On the other hand, Petitioners are not just knowingly employing at the Location an individual convicted of a felony, that individual appears to have originated the idea for both of the Petitioners to enter into the pawnbroking business. Moreover, neither of the Petitioners will be personally engaged in running the business. Petitioners nevertheless assert that they are employing an experienced pawnbroker, Mr. Mead, who will operate the pawnbroking business totally autonomous from Mr. Jones. The complete autonomy of Mr. Mead from Mr. Jones is certainly questionable in light of the fact that Mr. Jones currently acts as Mr. Mead’s supervisor and that the business, itself, appears to be the “brainchild” of Mr. Jones.

Though I have grave concerns regarding whether their pawnbroker business will operate without any assistance or advice by word or deed from Mr. Jones, I find that Petitioners themselves meet the statutory requirement to receive a Certificate of Authority to carry on the business of a pawnbroker.^[2] Nonetheless, the Petitioners clearly have knowingly and purposively created the potential that Mr. Jones will engage in their pawnbroker business in some manner. In that regard, Petitioners should be warned that S.C. Code Ann. § 40-39-150(B) (Supp. 2007) provides the following regarding violations of the provisions of Chapter 39 of title 40:

The administrative law judge also may impose administrative fines of up to seven hundred fifty dollars for each offense upon persons violating any of the provisions of this chapter up to a maximum of fifteen thousand dollars for the same set of transactions or occurrences. Each violation constitutes a separate offense. In addition, a person violating the provisions of Sections 40-39-20 and 40-39-30 is guilty of a misdemeanor and, upon conviction, must be punished by a fine not exceeding one thousand dollars or by imprisonment for a term not exceeding sixty days, or both. The administrative law judge may revoke or suspend a pawnbroker’s certificate of authority in addition to the penalties provided in this section.

3. The Department also presented evidence that in operating the retail aspect of Petitioners’ business, Mr. Jones has been involved in significantly higher instances of receiving stolen goods. This fact raises further concerns about his nexus to the pawnbroker business. However, although some laws governing the granting of business permits contain a general requirement that all employees of the applicant working on the licensed premises be of good moral character,^[3] the laws discussed above governing the granting of pawnbroker licenses do not contain such a requirement.

ORDER

IT IS HEREBY ORDERED that the Petitioners’ application for a Certificate of Authority to engage in the business of a pawnbroker is GRANTED.

AND IT IS SO ORDERED.

______________________________________

Ralph King Anderson, III

Administrative Law Judge

January 11, 2008

Columbia, South Carolina