Sunrise Check Cashing & Payroll Servs., Inc. v. Town of Hempstead, 22 N.Y.3d 481 (2013)

A zoning ordinance that prohibits a specific type of business based on disapproval of the business’s clientele or services, rather than the use of the land itself, is an invalid exercise of zoning power.

Summary

The Town of Hempstead enacted a zoning ordinance prohibiting check-cashing establishments in most business districts, citing concerns that these businesses exploit young and low-income individuals. Several check-cashing businesses challenged the ordinance. The New York Court of Appeals found that the ordinance was an improper use of zoning power. Zoning regulations must focus on land use, not on the identity or nature of the business occupying the land. The court rejected the Town’s attempt to reframe the ordinance as a public safety measure, finding no evidence that the Town Board had considered this rationale when enacting the law. The Court of Appeals affirmed the Appellate Division’s decision invalidating the ordinance.

Facts

The Town of Hempstead adopted section 302(K) of its Building Zone Ordinance, which prohibited check-cashing establishments in all but industrial zones. A memorandum from a deputy town attorney explained the ordinance’s purpose: to discourage young and low-income individuals from using check-cashing services, encouraging them to use traditional banking institutions instead. The memorandum criticized check-cashing businesses, characterizing them as exploitative and detrimental to the community.

Procedural History

Several check-cashing establishments sued the Town of Hempstead, seeking a declaratory judgment that section 302(K) was invalid and an injunction against its enforcement. The Supreme Court initially granted summary judgment dismissing the complaint. The Appellate Division reversed, holding that the ordinance was preempted by state banking law. The Town appealed to the New York Court of Appeals.

Issue(s)

Whether a zoning ordinance that prohibits check-cashing establishments in most business districts, based on disapproval of the services offered and the clientele served, is a valid exercise of the town’s zoning power.

Holding

No, because the zoning power is a power to regulate land use, not to regulate the identity or nature of the business occupying the land. The ordinance was impermissibly based on the perceived social impact of check-cashing businesses, rather than legitimate land-use concerns.

Court’s Reasoning

The Court of Appeals relied on the principle that zoning regulations must focus on land use, not on the identity of the user. The Court quoted Matter of Dexter v. Town Bd. of Town of Gates, stating that “it is a fundamental principle of zoning that a zoning board is charged with the regulation of land use and not with the person who owns or occupies it.” The Court found that the Town’s ordinance was directed at the perceived social evils of check-cashing services, rather than legitimate land-use concerns. The court distinguished the case from situations where the nature of the business leads to “negative secondary effects,” such as adult entertainment establishments. The Town attempted to argue that the ordinance was a public safety measure aimed at preventing armed robberies, citing American Broadcasting Cos. v. Siebert. However, the Court rejected this argument, stating that “[d]eference to legislative enactments, at least where the issue is abuse of the zoning power, does not go as far as the Town would have us go.” The Court found no evidence that the Town Board had considered public safety when enacting the ordinance, emphasizing that the record “clearly refutes the idea that section 302(K) was a public safety measure.” The Court emphasized that the explicit rationale offered by the Town’s attorney focused on the *identity* of the users (young and low-income people) and the Town’s policy preference that they use traditional banks, which is impermissible. The ruling highlights the limits of zoning power, preventing municipalities from using zoning to achieve social or economic engineering goals unrelated to land use.