In a recent decision, Sunrise Check Cashing and Payroll Services, Inc. v. Town of Hempstead, 91 A.D.3d 126, 933 N.Y.S.2d 388 (2d Dept. 2011), the Appellate Division, Second Department, invalidated Section 302(K) of the Town of Hempstead Building Zone Ordinance (“BZO”) based on the doctrine of conflict preemption.
Section 302(K) of the BZO was adopted by the Town of Hempstead on January 10, 2006. That section restricted the location of check cashing establishments to only industrial and light manufacturing (“LM”) zoning districts. Additionally, the code contained an amortization provision, which made all existing check cashing establishments located in any other district within the Town a non-conforming use, which status would terminate no later than five years immediately following the effective date of the law. The Plaintiffs in the case operated a check cashing establishment in the Town’s business district.
Among the Plaintiffs’ arguments in their motion for summary judgment were two claims that the New York State Banking Law preempted Section 302(K) of the BZO. The Plaintiffs claimed that both conflict preemption and field preemption applied, and that Section 302(K) was invalid. “Conflict preemption” occurs when a local law prohibits what a state law explicitly allows, or when a state law prohibits what a local law explicitly allows. “Field preemption,” on the other hand, occurs when a local law regulating the same subject matter as a state law is deemed inconsistent with the state’s transcendent interest, whether or not the terms of the local law actually conflict with a state-wide statute.
The Court determined that because the Banking Law vests the Superintendent of Banks with the duty to determine whether an applicant for a check-cashing license proposes to perform that function in an appropriate location, whether there is a community need for a new licensee in that location, and whether the granting of such an application will be advantageous to the public, and because the Plaintiff’s check-cashing establishment were located within the Town’s business district and had received a license to operate at its location from the Superintendent of Banking, the Town’s attempt to control the control the locations of these establishments by enactment of Section 302(K) was in conflict with existing State law. The matter was remitted to the Nassau County, Supreme Court for the entry of a judgment declaring that Section 302(K) of the Building Zone Ordinance of the Town of Hempstead was void and of no effect. The Town of Hempstead has appealed the decision to the New York State Court of Appeals. The appeal was taken by the Court as of right, since the case involved constitutional questions.
Other Long Island municipalities should be forewarned. Based on the Court’s holding in Sunrise Check Cashing and pending the determination of the Court of Appeals, towns and villages may ultimately be prohibited from using zoning regulations to keep check cashing businesses out of their general retail districts and downtowns.