Matter of 212 Smoke Shop & Beer Corp. v. City of New York

Matter of 212 Smoke Shop & Beer Corp. v City of New York 2025 NY Slip Op 30193(U) January 7, 2025 Supreme Court, New York County Docket Number: Index No. 159857/2024 Judge: Lynn R. Kotler Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.

FILED: NEW YORK COUNTY CLERK 01/16/2025 12:46 PM INDEX NO. 159857/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 01/16/2025

SUPREME COURT OF THE STATE OF NEW YORK . NEW YORK COUNTY PRESENT: HON. LYNN R. KOTLER PART 08 Justice -------------------X INDEX NO. 159857/2024 IN THE MATTER OF THE APPLICATION OF 212 SMOKE MOTION DATE 10/23/2024 SHOP & BEER CORP., FOR A JUDGMENT PURSUANT TO ARTICLE 78 OF THE CIVIL PRACTICE LAW AND RULES, MOTION SEQ. NO. 001

Petitioner,

• • V- DECISION + ORDER ON CITY OF NEW YORK, PRESTON NIBLACK, ANTHONY MOTION . MIRANDA, ASIM REHMAN

Respondent.

-------------------X The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 14, 15, 16, 17, 18, 19,20,21,22,23,24,25,26,27,28,29,30,31,32,33,34,35,36 were read on this motion to/for ARTICLE 78 (BODY OR OFFICER)

Upon the foregoing documents, this motion is decided as follows. This is a special

proceeding brought pursuant to CPLR Article 78 whereby petitioner 212 SMOKE SHOP &

BEER CORP. ("212") seeks to challenge a sealing order issued by respondents the City of New

York, Preston Niblack, Commissioner of New York City Department of Finance ("DOF"), New

York City Sheriff Anthony Miranda ("Sheriff'), and Asim Rehman, Commissioner of New York

City Office of Administrative Trials and Hearings ("OATH" and collectively "respondents") for

selling cannabis without a license. 212 seeks to stay the Sheriff from enforcing the sealing order

on 212's business and vacating OATH's sealing order. Respondents oppose, arguing that.the

order was rational and supported by evidence. For the reasons that follow, the petition is denied.

The relevant facts, which are based on the petition and the verified answer, are as

follows. On July 18, 2024, the Sheriffs designee and members of the NYPD conducted an

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inspection of 212's business at 212 East 34th Street, New York, NY 10016 (the "Subject

Premises"). The inspection resulted in a violation of Administrative Code of City of NY § 7-

551 ( 1) and the Sheriff issued a sealing order that closed the business on the same day. 212 is not

licensed to sell cannabis and the Sheriff alleges that he observed cannabis and cannabis marketed

products at the Subject Premises. The sealing order was based on three imminent threat factors

set forth in Cannabis Law 138(b)(4), for observation of unlicensed processing of cannabis,

proximity to a public school and daycare center, and for cannabis products not tested or labelled

lawfully seized during the inspection.

The inspection of the Subject Premises allegedly revealed a 0.82 pound bag of unlicensed

cannabis, cannabis product unlawfully labeled with State California cannabis symbol and labeled

"Rikka Bubblegum PopperZ", three digital scales for processing that were not marked for sale, a

glass jar for marketing the cannabis product labeled "WHITE RUNTZ indica and sativa 50/50",

and multiple plastic vials used in packaging cannabis product.

The Sheriffs designee issued Summons No. 215-072-541 (the "Summons") to 212,

providing a hearing date with OATH on July 25, 2024. The back side of the Summons contained

a signed certificate of service indicating it was delivered to Mohammed Al Towayte and noted

that "above employee stated he was authorized to accept summons on behalf of respondent". An

additional copy of the Summons was affixed to the door at the Subject Premises on the day of the

inspection as well as mailed there on July 22, 2024. The Sheriffs designee also issued an

Immediate Order of Closure (the "Sealing Order") and Order to Cease Unlicensed Activity and

Seizure Notice ("Order to Cease") on July 18, 2024 following the inspection.

On July 25, 2024, the OATH hearing was held before Hearing Officer Psaros ("HO

Psaros") and the decision was provided to the court by both petitioner and respondent. Inthe

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hearing, 212 argued that the service of the Summon and Sealing Order was defective. 212 first

argued that two separate establishments existed at the Subject Premises, "212 Smokeshop & B

Corp." and "212 Smokeshop & Beer Corp.", and that the Department of Finance failed to

properly identify which of these entities was in violation. 212 also brought the manager of 212,

Sadam Alselmi, as a witness, who testified that the store had sold cannabis products in the store

several months before but had cleaned out all cannabis products and accessories from the store

and stopped selling them. He also testified that Al Towayte was not an employe and so was not

authorized to accept service. 212' s counsel further argued that the cannabis found was minimal

and that the imminent threat factors were not met.

HO Psaros found that only one smoke shop was operating at the location and that the

Summons named the proper commercial establishment at that location, so the Summons was

properly served. HO Psaros found that affidavit of service indicated that Al Towatye held

himself out as someone authorized to accept service and that the rules of both he CPLR and

OATH were complied with by serving the designated agent of a corporation.

HO Psaros found the Sealing Order was properly served as the affidavits and affirmations

of service provided evidence that proper service was upon 212.

Additionally, claims that the store were no longer selling cannabis and cleaned out were

disputed by the presence of the 0.82 pounds of cannabis flower seized along with the other

paraphernalia. HO Psaros specifically credited photos submitted into evidence that show the

unlicensed processing on cannabis product which show scales used in the process and packaging

of cannabis, a photo of the raw cannabis flower, a photo of bags for packaging, and the empty

jars with the "WHITE RUNTZ indica and sativa 50/50" label. HO Psaros found the claim by

Alselmi that the store had been cleaned out and no longer sold cannabis and the claim that

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insufficient evidence of cannabis products was found to not be credible based on the raw

cannabis flower and processing materials found at the Subject Premises.

HO Psaros also found that that three imminent threat factors were met. The evidence was

enough to show the unlicensed sale of cannabis and sale of not tested or lawfully labeled

cannabis. The store was also within 1,000 feet of both a public school and day care center.

Based on these findings, HO Psaros recommended the continuation of the Sealing Order

on July 25, 2024. On July 31, 2024, the Office of the New York City Sheriff issued its final

decision adopting the OATH recommendation regarding the Sealing Order, closing the business

at the Subject Premises for a year. This petition was filed on October 23, 2024.

Petitioner claims that HO Psaros's decision was arbitrary and capricious because the

evidence failed to show that 212 was selling or offered the sale of cannabis and because service

upon 212 was defective. Respondents maintain that the final determination was rational and

supported by evidence on the record.

Discussion

In an Article 78 proceeding, the applicable standard of review is whether the

administrative decision: was made in violation of lawful procedure; affected by an error of law;

or arbitrary or capricious or an abuse of discretion, including whether the penalty imposed was

an abuse of discretion (CPLR § 7803 [3]; see also Matter of Pell v Board of Educ. of Union Free

School Dist. No. 1 of Towns ofScarsdale & Mamaroneck. Westchester County, 34 NY2d 222,

231 [1974]). "An action or determination is arbitrary and capricious when 'it is taken without

sound basis in reason or regard to the facts"' (Matter of Ferrelli v State ofNew York, 226 AD3d

504, 504 [1st Dept 2024] quoting Matter of Peckham v Calogero, 12 NY3d 424, 431 [2009]; see

also Matter of Pell, 34 NY2d at 231 ). "It is well settled that a court may not substitute its

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judgment for that of the board or body it reviews unless the decision under review is arbitrary

and unreasonable and constitutes an abuse of discretion" (Matter ofPerez v Rhea, 20 NY3d 399,

405 [2013] quoting Matter of Pell, 34 NY2d at 232).

Administrative Code § 7-551(a) makes punishable any conduct prohibited under

"subdivision one or one-a of section one hundred twenty-five of the cannabis law". NY Cannabis

Law§ 125(a), (a)(l) provides the following:

"l. No person shall cultivate, process, distribute for sale or sell at wholesale or retail or deliver to consumers any c~abis, cannabis product, medical cannabis or cannabinoid hemp or hemp extract product, or any product marketed or labeled as such, within the . state without obtaining the appropriate registration, license, or permit therefor requited by this chapter unless otherwise authorized by law. 1-a. No person shall engage in an indirect retail sale irrespective of whether such person has obtained a registration, license, or permit issued under this chapter."

Cannabis Law§ 138(b)(4) provides the following imminent threat factors:

(a) documented sales to minors; (b) unlicensed processing of cannabis products at the building or premises; (c) orders issued following an inspection wherein the person engaged in the unlicensed activity engaged in violent, tumultuous, or other behaviors indicating expressed intent to not comply with the office's order to cease the unlicensed activity; (d) documented presence of unlawful firearms at the building or premises; (e) proximity of the building or premises to schools, houses of worship, or public youth facilities; (t) presence of products deemed unsafe based on reports of illness or hospitalization; or (g) sales of, or offers to sell, cannabis products not tested or labeled lawfully in accordance with this chapter.

Administrative Code§ 7-552(b)(2) gives the sheriff authority to issue and execute a seal

order on "a building or premises where any person is engaged in conduct prohibited by section 7-

551 and which either poses an imminent threat as described in subdivision four of section one

hundred thirty-eight-b of the cannabis law or satisfies the conditions set forth in subdivision five

of such section". Administrative Code§ 7-552(b)(2) also requires the sealing order be served in

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the same manner as provided by Cannabis Law § 138(b)(2). The relevant portion of Cannabis

Law§ 138(b)(2) provides:

Any order to seal shall be served by delivery of the order to the owner of the business or other person of suitable age or discretion in actual or apparent control of the premises at the time of the inspection and shall be posted at the building or premises that have been sealed, secured and closed. A copy of the order shall also be mailed to any address for the owner of the business at any address provided by the person to whom such order was delivered pursuant to this subdivision.

212 argues that they did not violate Administrative Code §7-55l(a) because the evidence

filed to establish that 212 sold or offered sale of any cannabis and the determination by HO

Psaros was arbitrary and capricious. NY Cannabis Law§ 125(a) makes the processing of

cannabis a prohibited activity, it does not require proof of sale. However, HO Psaros found there

was sufficient evidence to determine there was both processing and sale of unlicensed cannabis

products on the Subject Premises. In the decision, HO Parsons cited the 0.82 pounds of cannabis

found, the empty bags and scales used to process the cannabis and the empty jars labeled

"WHITE RUNTZ indica and sativa 50/50". Based on the evidence presented, it cannot be said

that the determination that cannabis was being processed and sold on the Subject Premises was

arbitrary and capricious.

Further, HO Psaros found that the store posed an imminentthreat to the public because

three of the imminent threat factors were met. HO Psaros credited the DOF's arguments, based

on the evidence, that 212 was selling cannabis products and that these products were not tested

or labeled lawfully, and that the Subject Premises was within 1,000 feet of both a public school

and a daycare center.

212 next argues that the Summons should have been dismissed as defective because Al

Towayte was not an employee of the store and that under CPLR § 311 the summons must be

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delivered ''to an officer, director, managing or general agent, or cashier or assistant cashier or to

any other agent authorized by appointment or by law to receive service." However, service for

OATH hearings are governed by 48 RCNY § 6-08(b)(l) which permits, inter alia, service upon

"any other person of suitable age and discretion as may be appropriate". Al Towayte held

himself out as an employee of the store who was authorized to receive service and was working

at the store at the time of the inspection by the Sheriffs designee. HO Psaros was not arbitrary

and capricious in determining that this individual who identified himself as authorized to accept

service and in apparent control of the Subject Premises was of suitable age and discretion.

212 argues that Summons was also defective because under CPLR § 2106 the affirmation

of service must be a sworn statement under the penalty of perjury, and the affirmation of service

for the sealing order was not a sworn statement. The service requirements of the Cannabis Law

do not incorporate the CPLR requirements of service, however even if they did, CPLR § 306(d)

states "[p]roof of service shall be in the form of a certificate if the service is made by a sheriff or

other authorized public officer". Therefore, the certificate of service was sufficient and H 0

Psaros was reasonable in finding that service upon 212 was effective. 212 argued on the same

grounds that the Sealing Order was improperly served. The evidence provided in the hearing

showed that each of the requirements of Cannabis Law§ 138(b) were met by (1) delivering the

sealing order to Al Towayte,. (2) posting the order at the Subject Premises, and (3) mailing the

order to 212 via certified mail. HO Psaros rationally determined from the affidavits and

affirmations provided by the Sheriff that the requirements of service for the Sealing Order were

met.

Citing Justice Kerrigan; s decision in In the Matter ofthe Application of3512 Bell Corp. v

City ofNew York et al, 212 argues that the summons was legally invalid and therefore neither the

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OATH hearing office nor the Sheriff can continue the Sealing Order, as without the Summons no

finding of illegal activity exists (Sup Ct, Queens County, August 14, 2024, Kerrigan, J., index

No. 715613/2024). However, this case is distinguishable from Bell, as in Bell the OATH officer

dismissed the summons for improper service in their determination to recommend closure of the

premises, resulting in a due process violation (id). The sealing order and civil summons must be

viewed together, and one cannot stand without the other (id). Once the summons was dismissed,

the hearing officer must find no unlicensed activity on the premises (id.). Here, the OATH

officer confirmed the service of summons as valid rather than finding it improper. Therefore, the

due process issues present in Bell do not apply.

Conclusion

Accordingly, it is hereby

ADWDGED that the petition is denied and this proceeding is dismissed.

Any requested relief not expressly addressed herein has nonetheless been considered and

is hereby denied and this constitutes the decision and order of the court.

1/7/2025 DATE LYNN R. KOTLER, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED 0 DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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