Recitation as per CPLR §§ 2219(a) and/or 3212(b) of papers considered on review of this motion:

Upon the foregoing papers and after hearing oral argument on December 18, 2024, the Court addresses Petitioner's application by Order to Show Cause ("OSC") seeking a Temporary Restraining Order ("TRO") and a preliminary injunction pursuant to CPLR § 6301. Petitioner, Fulton St. Gift Shops Inc., requests that the Court enjoin enforcement of the sealing order issued by Respondent New York City Sheriff's Office, thereby permitting Petitioner's business located at 1158 Fulton Street, Brooklyn, to reopen pending a final determination of the instant Article 78 [*2]proceeding. The OSC was signed on November 1, 2024, without granting the requested TRO.^[FN1]

Petitioner commenced this Article 78 proceeding challenging the legality of a sealing order issued on September 12, 2024, and a final determination issued by the Sheriff on September 25, 2024, which resulted in the padlocking of Petitioner's. These administrative actions stemmed from an incident on September 10, 2024, involving an alleged sale of cannabis to a 20-year-old auxiliary officer,^[FN2] purportedly in violation of the New York City Administrative Code ("AC") §§ 7-551 and 7-552 and Cannabis Law § 138-b.^[FN3]

Following a hearing held before the Office of Administrative Trials and Hearings ("OATH") on September 19, 2024, the Hearing Officer dismissed the civil summons ^[FN4] and recommended lifting the sealing order,^[FN5] concluding that the Sheriff's Office failed to establish by a preponderance of the evidence that Petitioner engaged in unlicensed cannabis sales.^[FN6] Video evidence introduced at the hearing showed that the sale was made by an individual unaffiliated with the business,^[FN7] and no cannabis products were found on-site. This finding was based on the summons's affirmed statement, photographic and documentary evidence, video evidence, and testimony from a store worker.^[FN8] Nevertheless, the Sheriff declined to adopt the OATH recommendation and issued a final decision to maintain the closure of the premises for one year.^[FN9]

Petitioner challenges the sealing order ^[FN10] and final decision of the Sheriff's Office,^[FN11] arguing that the Sheriff's rejection of the OATH recommendation is arbitrary and capricious, an [*3]abuse of discretion,^[FN12] and a violation of due process under the Fourteenth Amendment.^[FN13]

• Administrative Code §§ 7-551 and 7-552 govern the City's enforcement authority regarding unlicensed cannabis activity.

• Cannabis Law § 138-b, including subsections (2), (3), (6), and (7), outline the procedure and scope of sealing orders by the Sheriff and mandate proper service.

AC §§ 7-551 and 7-552, along with Cannabis Law § 138-b, grant enforcement authority to the Sheriff to inspect, issue civil summonses, and order the closure of businesses engaged in unlicensed cannabis activity. However, Cannabis Law § 138-b(3) permits a sealing order only upon a finding of an "imminent threat to public health, safety, or welfare," and such orders must satisfy due process protections, including personal service, posting, and notice by mail under § 138-b(2). Factors contributing to an imminent threat include proximity to schools,^[FN14] while de minimis unlicensed activity is evaluated based on signage, advertisements, product volume, and variety.^[FN15] Where the City seeks to issue an immediate sealing order, the unlicensed activity must be more than de minimis.^[FN16] Failure to properly serve the Sealing Order renders enforcement void. See Matter of KSLM-Columbus Apts., Inc. v. New York State Div. of Hous. & Community Renewal, 5 NY3d 303, 312 (2005) (failure to comply with procedural due process requirements invalidates administrative action). Cannabis Law § 138-b(2) requires the sealing order be served on the business owner or other person of suitable age or discretion in actual or apparent control of the premises at the time of the inspection, posted on the sealed building or premises and mailed. The order remains in effect pending a hearing and final determination of the board, or until it is vacated by the office. Sealing orders must also explicitly state the procedure to request a hearing.

Where both a civil summons and sealing order are issued, AC § 7-552(b)(2) mandates that a hearing at OATH within five business days, with a recommendation issued within four days thereafter. Although the Sheriff retains discretion to accept or reject the OATH recommendation, such discretion must not be exercised arbitrarily or capriciously. Matter of Pell v. Board of Educ., 34 NY2d 222, 231 (1974).

Individuals engaging in the unlicensed sale of cannabis in violation of NY Cannabis Law [*4]§125 are subject to a civil penalty under AC §7-551. OATH is responsible for adjudicating civil summonses under Chapter 6 of the Rules of the City of New York. See RCNY §§ 6-08 to 6-18. OATH decisions on civil summonses constitute judgments under AC § 7-551. See AC § 7-551(c). Under Cannabis Law § 138-b, the Sheriff's office holds authority to inspect businesses selling cannabis products and to seal businesses engaged in unlicensed activity. AC § 7-552(b)(2).

Judicial review under CPLR Article 78 is limited to whether the administrative decision lacked a rational basis, was arbitrary and capricious, or was made in violation of lawful procedure. An action is arbitrary and capricious when it is taken without sound basis in reason or regard to the facts.^[FN17] In reviewing an administrative agency's determination, courts must ascertain whether there is a rational basis for the agency's action or whether it is arbitrary and capricious.^[FN18] Where the agency's determination is based on detailed methods derived from legislation, is within an area of the agency's expertise and is amply supported by the record, judicial deference and substantial weight must be accorded to the determination.^[FN19] The Court may not substitute its judgment for that of the decision-making agency, as it must only ascertain whether the agency's determination was rationally based.^[FN20] Additionally, an agency is to be afforded wide deference in the interpretation of its regulation and, to a lesser extent, in its construction of the governing statutory law.^[FN21] However, an agency cannot engraft additional requirements or assume additional powers not contained in the enabling legislation.^[FN22]

Here, the Sheriff's final determination failed to rationally justify rejecting the detailed findings of the OATH Hearing Officer.^[FN23] The decision was unsupported by substantial evidence and relied solely on conduct by a third-party unaffiliated with Petitioner. Courts have held that administrative determinations lacking evidentiary support must be annulled. Costco Wholesale Corp. v. New York State Liq. Auth., 125 AD3d 775, 777 (2d Dep't 2015) ("A determination is [*5]arbitrary and capricious when it is made without sound basis in reason or regard to the facts."). Because the OATH hearing found that no cannabis products were located at the premises, and the alleged sale was conducted by a third-party,^[FN24] the Sheriff's continued closure of Petitioner's business lacks a rational foundation and must be annulled.

Petitioner also challenges the constitutionality of the Administrative Code provisions under the Due Process Clause of the Fourteenth Amendment giving the resulting deprivation of a substantial private interest in Petitioner's property.^[FN25] The Fifth Amendment Due Process Clause applies only to federal action and is therefore inapplicable here. See Panchishak v. County of Rockland, No. 20-CV-2631, 2021 WL 4429840 (S.D.NY Sept. 27, 2021). The Due Process Clause of the Fourteenth Amendment prohibits the government from depriving a person of life, liberty, or property without due process of law. Schearer v. Fitzgerald, 2177 AD3d 980 (2d Dept. 2023). "The requirements of procedural due process apply only to the deprivation of interests encompassed by the Fourteenth Amendment's protection of liberty and property." Santomero v. Town of Bedford, 204 AD3d 925 (2d Dept. 2022).

The Court evaluates procedural due process under the balancing test outlined in Mathews v. Eldridge, 424 U.S. 319 (1976), which considers:

1. The private interest affected,

2. The risk of erroneous deprivation and value of additional safeguards,

3. The government's interest, including administrative burdens.

Applying these factors, the Court finds Petitioner's private property interest in operating a lawful business is significant. However, the risk of erroneous deprivation is mitigated by the statutorily mandated procedures under AC § 7-552, including the prompt OATH hearing and availability of Article 78 review. Moon Rocket Inc. v. City of NY, 2025 U.S. Dist. LEXIS 52883, at *13 (S.D.NY Mar. 21, 2025) (availability of Article 78 review contributes to adequate due process protections). While the private interest here is substantial, so too is the City's interest in regulating unlicensed cannabis activity.^[FN26]

Accordingly, the applicable procedures, including timely administrative hearings and judicial review, satisfy due process requirements under the Fourteenth Amendment.^[FN27]

For the reasons set forth above, Petitioner's application is granted to the extent that the September 12, 2024 Immediate Order of Closure and the September 25, 2024 Final Decision and Sealing Order, issued by the Office of the City Sheriff are vacated and the Sheriff shall remove the seal and open the premises forthwith. With the Court's Decision, Petitioner's request for a preliminary injunction pursuant to CPLR § 6301 is hereby deemed moot in light of the relief granted.

This constitutes the Decision and Order of the Court.