PEOPLE OF MI V ADNAN EDDI BEYDOUN
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STATE OF MICHIGAN
COURT OF APPEALS
PEOPLE OF THE STATE OF MICHIGAN,
FOR PUBLICATION
April 14, 2009
9:05 a.m.
Plaintiff-Appellant,
v
No. 280122
Wayne Circuit Court
LC Nos. 07-004092; 07-004130
ADNAN EDDI BEYDOUN,
Defendant-Appellee.
Advance Sheets Version
Before: Borrello, P.J., and Davis and Gleicher, JJ.
GLEICHER, J.
This appeal focuses on the validity of a warrantless administrative search of a business
owned by defendant Adnan Eddi Beydoun. After the administrative search and a subsequent
seizure of tobacco products, a district court bound defendant over for trial on two charges of
violating the Tobacco Products Tax Act (TPTA), specifically MCL 205.428(3) (possessing,
acquiring, transporting, or offering for sale in violation of the act 3,000 or more tobacco products
with an aggregate wholesale price of $250 or more). Defendant moved to suppress evidence of
the seized tobacco and dismiss the charges, arguing that the warrantless searches violated his
Fourth Amendment rights. The circuit court granted defendant’s motions, and the prosecution
now appeals as of right. We reverse and remand.
I
At defendant’s preliminary examination, state police detective Michael Foley testified
that in 2005 he was working as a specialist with the state police’s tobacco tax team. Foley
described the tax team’s responsibilities as including the performance of administrative
inspections to ascertain whether establishments possessed state-mandated licenses to sell
tobacco, pre-licensing activities, and “check[ing] on . . . counterfeit tobacco products and
tobacco products brought into the state legally and illegally.” Foley further explained that “we
would check for tobacco tax stamps [on cigarettes or] an OTP Stamp, which is other tobacco
products stamp on cases,” as mandated by Michigan’s tobacco tax statutes.
Foley recounted that on September 23, 2005, he went to defendant’s Dearborn Heights
business, the Arabian Market at 26018 Ford Road, intending to conduct an administrative
inspection after having received an anonymous tip concerning the presence of illegal tobacco
products at the market. When Foley entered the market, defendant identified himself as the store
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owner, prompting Foley to “explain[] to him who I was and who I was with that we were there to
conduct [an] administrative inspection.” Foley requested “to see four months [sic] worth of
invoices for all tobacco products on the premise[s]. . ., the tax ID of the store and any other
licenses that he possessed.” According to Foley, defendant gave him invoices for the tobacco in
the market and “a sales tax license for the store” and told him that he possessed a federal
tobacco-related license. But Foley recalled that with respect to a Michigan tobacco tax license
necessary for possessing or selling tobacco in Michigan, defendant denied having one, although
he averred that “he had recently applied for one.”
Foley recalled that he reviewed the invoices defendant presented, intending to compare
the listed tobacco products with those inside the Arabian Market. At least one invoice identified
the purchaser of some tobacco “from the Middle East” as Starco Import & Export, L.L.C., which
defendant explained was “a business that he owns . . . that . . . runs out of the same building that
we were at.”1 Foley related that he contacted the Department of Treasury and learned that the
Arabian Market, Starco, and defendant did not hold Michigan tobacco tax licenses. When Foley
inquired concerning the whereabouts of more than “two thousand cases of Molasses Tobacco
that had been shipped to the United States” according to one invoice, defendant took Foley to a
storeroom that contained more than 300 cases of molasses tobacco, which is considered “OTP”
tobacco. Foley recounted defendant’s explanation that he had sold some of the tobacco shown
on the invoice. None of the cases of tobacco stored at the Arabian Market bore Michigan
tobacco tax stamps.
Foley testified that he and other agents seized the 300 plus cases of tobacco, valued at
$84 a case, because defendant unlawfully possessed the tobacco without a Michigan tobacco tax
license and the required state tobacco tax stamps. Foley averred that he gave defendant “a notice
of seizure and an inventory of everything that was seized,” then placed the tobacco in police
storage. Foley added that on October 20, 2005, a civil hearing occurred to examine the
lawfulness of the Arabian Market tobacco seizure, that defendant disclosed at the hearing that the
remaining number of about 2000 cases of tobacco listed on the molasses tobacco invoice “were
at . . . a building that he owns” next door to the Arabian Market, and that defendant and his
counsel “agreed to turn it over to us at that time.” Around noon on October 21, 2005, after
defendant’s counsel apprised Foley that the remaining tobacco was located at defendant’s
Dearborn Heights residence, Foley went there to retrieve the remaining cases of tobacco. Foley
recounted that defendant “invited us in, . . . took us to his basement and showed us where the
remainder of the product was,” and “also showed us around the whole house to show that there
was no other product anywhere else in the garage or any other bedrooms” and that the police
“took out one thousand seven hundred and seventeen cases of Molasses Tobacco from his
residence,” also worth $84 a case. The district court bound defendant over on the two charged
counts, reasoning that “[MCL] 205.428 seems pretty clear, he’s got to have a license.”
1
Foley’s subsequent investigation revealed that Starco Import & Export, L.L.C., held a current
federal license permitting it “to import tobacco.” Starco had also filed an application, signed by
defendant on September 6, 2005, with the Michigan Department of Treasury to obtain “a
Tobacco Products Tax License.”
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In the circuit court, defendant moved to quash the charges.2 Defendant additionally
moved for an evidentiary hearing on the constitutionality of the September 23, 2005, warrantless
seizure of tobacco from the Arabian Market. Defendant argued that “the search of [his] premises
was not for administrative purposes but actually was intended for criminal purposes and the
administrative subterfuge used by the Michigan State Police was a violation of the Fourth
Amendment.” The prosecution responded that (1) “the TPTA and the product it seeks to regulate
are part of a pervasively regulated industry,” rendering valid the warrantless “administrative
search of the Arabian Market,” (2) the state police had probable cause supporting the search of
the Arabian Market in light of the anonymous tip they received about a large quantity of “illegal
contraband OTP,” together with defendant’s admissions at the market that strengthened the
reliability of the anonymous tip, and (3) the state police lawfully seized the tobacco products
from defendant’s house on October 21, 2005, because (a) they had probable cause to believe they
would find the tobacco products there after defendant admitted possessing additional cartons and
(b) defendant consented to the police search of his home and the seizure of the additional
“unstamped OTP cartons.”
At a hearing in July 2007, Detective Foley and Sergeant Angela Fleming, another trooper
who participated in the inspection of the Arabian Market on September 23, 2005, offered
testimony largely mirroring Foley’s description of events at defendant’s preliminary examination
while clarifying several points: no one obtained an administrative warrant or a search warrant
supporting the administrative search, which occurred during the store’s business hours, despite
the lack of exigent circumstances; no one explained to defendant before questioning him at the
Arabian Market the criminal consequences that potentially could arise from the search; and the
troopers did not place defendant in custody but permitted him to conduct store business during
the inspection, which took about three hours. Foley and Fleming did not believe that they
needed any kind of warrant to conduct the inspection.
The circuit court issued a bench ruling, explaining that it would grant defendant’s
motions to suppress all the seized tobacco:
Now, in these situations with an anonymous tip—I mean, [defense
counsel] has indicated that this appears to be a pretext. And I think that when you
look at all the facts and circumstances here, the administrative inspection was
clearly a pretext for a criminal case. There was an anonymous tip. This gave rise
to probable cause for a warrant. No warrant was issued. Quite a few people
arrived. They arrived after their usual business hours but during the business
hours of the store. Again, that’s part of the pretext. They began the search before
2
In this motion, defendant theorized that because he undisputedly possessed a federal license
authorizing him to import and export tobacco products, and because Michigan’s tobacco
licensing statutes directly conflicted with the federal licensing scheme, “pursuant to the
Supremacy Clause of the United States Constitution the Federal Licensing statute should apply
based on the Interstate Commerce Clause which grants Congress exclusive power to regulate the
channels of interstate commerce.” Defendant has not raised this issue on appeal.
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all of the invoices were provided and all of the investigation was conducted in
terms of questions of Mr. Beydoun.
Mr. Beydoun was never advised that there could be any criminal
consequences here. And, clearly, from the licenses that he held and had applied
for, Mr. Beydoun obviously had an intent to comply with the law, and may have
made a mistake, and the price of that mistake has been that civil forfeiture.
At the very minimum, an administrative warrant could have been received
based upon reasonable cause based upon the anonymous tip. But we cannot
bootstrap the requirement under the Fourth Amendment for a search warrant
based upon the consent to the civil inspection, or the hearing; nor can we
bootstrap the requirements for a search warrant or an administrative warrant based
upon Mr. Beydoun’s compliance with the so-called administrative inspection
which took place.
But I think that when you look at all of the facts and circumstances here—
and I’m not by any means suggesting that the officers here had any kind of
malicious intent. They may be mistaken. But the role of government is to
remember, in part, that defendants are also people of the State of Michigan, and
we all are entitled to the protections. At a very minimum, Mr. Beydoun should
have been advised that there could be criminal consequences to this inspection.
But the inspection, even in the testimony today, the officers were assuming, in
their minds, that they were just doing civil inspections. And I frankly don’t think
they thought there would ever be criminal charges here. But now that there are,
we have to look back on what they did, what they knew, and what they should
have done.
They knew, because of the anonymous tip, that they had enough for a
warrant. And they certainly knew when they got there and did their quote,
administrative inspection, that the product was there, and could have gotten a
warrant at that point. There was absolutely no risk of flight, no risk of destruction
of product. They had the ability to guard it and to get it. And they didn’t. So the
motion is granted.
In each circuit court file, the circuit court that same day entered form orders granting defendant’s
motion for “suppression of evidence” and separate orders dismissing the charges against him.
II
A. Standard of Review
The prosecution maintains that the circuit court erred by granting defendant’s motions to
suppress the seized tobacco and dismiss the charges against him because the searches that
occurred had justification in exceptions to the general search warrant requirement. When
reviewing a bindover decision, the following standards apply:
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A magistrate’s ruling that alleged conduct falls within the scope of a
criminal statute is a question of law reviewed [de novo] for error, and a decision
to bind over a defendant is reviewed for abuse of discretion. In reviewing the
district court’s decision to bind over a defendant for trial, a circuit court must
consider the entire record of the preliminary examination, and it may not
substitute its judgment for that of the magistrate. Reversal is appropriate only if it
appears on the record that the district court abused its discretion. . . . Similarly,
this Court reviews the circuit court’s decision de novo to determine whether the
district court abused its discretion. [People v Orzame, 224 Mich App 551, 557;
570 NW2d 118 (1997) (citations omitted).]
This Court also considers de novo questions of constitutional law. People v Aceval, 282 Mich
App 379, 389; 764 NW2d 285 (2009).
B. Governing Legal Principles
“It is well settled that both the United States Constitution and the Michigan Constitution
‘guarantee the right of persons to be secure against unreasonable searches and seizures.’” People
v Hellstrom, 264 Mich App 187, 192; 690 NW2d 293 (2004) (citation omitted). “A search
without a warrant is unreasonable per se and violates both the Michigan Constitution and the
United States Constitution unless the search is shown to be within an exception to the general
rule.” People v Barnes, 146 Mich App 37, 40-41; 379 NW2d 464 (1985). “While it is well
established that the Fourth Amendment’s prohibition of unreasonable searches and seizures
applies to administrative inspections of private commercial property, an exemption from the
search warrant requirement exists for administrative inspections of closely regulated industries.”
Gora v City of Ferndale, 456 Mich 704, 715; 576 NW2d 141 (1998). Whether the exemption
applies is primarily determined by the pervasiveness and regularity of the regulation and the
effect of such regulation upon an owner’s expectation of privacy. Id. at 715-716.
Our Supreme Court delineated the contours of the “pervasively regulated industry”
doctrine in Michigan in Tallman v Dep’t of Natural Resources, 421 Mich 585; 365 NW2d 724
(1984). After carefully surveying federal and sister state caselaw analyzing the pervasively
regulated industry doctrine elsewhere, which our Supreme Court viewed as “persuasive,” the
Court summarized as follows the features of Michigan’s pervasively regulated industry doctrine:
We conclude that conflicts arising under art 1, § 11 of the Michigan
Constitution between the enforcement needs of governmental agencies and the
privacy interests of regulated commercial actors should be resolved by balancing
the following factors:
(1) the existence of express statutory authorization for search or seizure;
(2) the importance of the governmental interest at stake;
(3) the pervasiveness and longevity of industry regulation;
(4) the inclusion of reasonable limitations on searches in statutes and
regulations;
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(5) the government’s need for flexibility in the time, scope, and frequency
of inspections in order to achieve reasonable levels of compliance;
(6) the degree of intrusion occasioned by a particular regulatory search;
and
(7) the degree to which a business person may be said to have impliedly
consented to warrantless searches as a condition of doing business, so that the
search does not infringe upon reasonable expectations of privacy. [Id. at 617618.]
The Supreme Court described the seven-factor balancing test as “a rational approach” in
attempting to address the “meaningful distinction between regulatory or administrative searches
and those conducted for the purpose of discovering the fruits or instrumentalities of crime.” Id.
at 618. The Supreme Court then summarized some of the meaningful distinctions:
The administrative inspector must be equipped with investigatory
techniques which differ from those available to peace officers because regulatory
misconduct differs from criminal misconduct. Most administrative code
violations occur in areas not readily subject to public oversight, and hence go
unreported and must be sought out. Criminal acts, on the other hand, are often
committed in public places or directly involve a victim with a high incentive to
report a loss or injury. Code enforcement generally involves repeated detections
of numerous minor violations; enforcement of criminal statutes often requires
extensive investigation of a single flagrantly illegal act. [Id. at 618-619.]
C. Analysis of Search and Seizure at Arabian Market
1. Factor One
Applying the seven Tallman factors to the tobacco tax team’s search and seizure at the
Arabian Market on September 23, 2005, we observe with respect to the first factor that the TPTA
contains several provisions expressly authorizing both the search and the seizure. In MCL
205.426, the Legislature imposed voluminous recordkeeping requirements on multiple tobaccorelated actors and included the following provision authorizing inspection of records:
(5) All statements and other records required by this section shall be in a
form prescribed by the department and shall be preserved for a period of 4 years
and offered for inspection at any time upon oral or written demand by the
department or its authorized agent by every wholesaler, secondary wholesaler,
vending machine operator, unclassified acquirer, and retailer.
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The TPTA section governing tobacco tax stamps and stamping requirements, MCL 205.426a,
contains several relevant legislative grants of authority to the department or its agents:3
(5) The department or its authorized agents may inspect or conduct an
inventory of a wholesaler’s or unclassified acquirer’s stock of cigarettes, tobacco
products other than cigarettes, and stamps during regular business hours and
inspect the related statements and other records required in [MCL 205.426].
(6) The department or its authorized agents may inspect the operations of
a secondary wholesaler, vending machine operator, or retailer, or the contents of a
specific vending machine, during regular business hours. This inspection shall
include inspection of all statements and other records required by [MCL 205.426],
of packages of cigarettes and tobacco products other than cigarettes, and of the
contents of cartons and shipping or storage containers to ascertain that all
individual packages of cigarettes have an affixed stamp of proper denomination as
required by this act. This inspection may also verify that all the stamps were
produced under the authority of the department.
(7) A person shall not prevent or hinder the department or its authorized
agents from making a full inspection of any place or vending machine where
cigarettes or tobacco products other than cigarettes subject to the tax under this
act are sold or stored, or prevent or hinder the full inspection of invoices, books,
records, or other papers required to be kept by this act.
The TPTA additionally contemplates seizure, in relevant part in MCL 205.429(1):
A tobacco product held, owned, possessed, transported, or in control of a
person in violation of this act, and a vending machine, vehicle, and other tangible
personal property containing a tobacco product in violation of this act and any
related books and records are contraband and may be seized and confiscated by
the department as provided in this section.
These provisions expressly and plainly show the Legislature’s intent to invest the department and
its agents, including state and local police, with search and seizure authority under the TPTA.
2. Factor Two
With respect to the second Tallman factor, “the importance of the governmental interest
at stake,” Tallman, 421 Mich at 617, this Court has observed that the TPTA “is at its heart a
revenue statute, designed to assure that tobacco taxes levied in support of Michigan schools are
not evaded.” People v Nasir, 255 Mich App 38, 42; 662 NW2d 29 (2003). Michigan courts
have long and consistently recognized the strong or significant governmental interest in revenue
3
Pursuant to MCL 205.428(9), “[a]t the request of the department or its duly authorized agent,
the state police and all local police authorities shall enforce the provisions of this act.”
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collection. The Michigan Supreme Court restated the important nature of revenue collection in
Wikman v City of Novi, 413 Mich 617; 322 NW2d 103 (1982), explaining that the
“object of that law, as it is of this, is to enable the government to collect its
revenues without delay. The obligations of the government must be met
promptly, and it is better that the citizen should resort to his common-law
remedies to secure his rights, so far as a mere payment of what he claims may be
an illegal tax is concerned, than the government should be embarrassed in the
collection of revenues necessary to defray its expenditures.
“‘Courts have frequently remarked upon the impossibility of the
government calculating with any certainty upon its revenues, if the collection of
taxes was subject to be arrested in every instance in which a tax-payer or tax
collector could make out prima facie a technical case for arresting such collection,
and it is justly said to be much better to let the individual pay to the government
the demands it makes upon him, and, if he considers them in whole or in part
illegal, apply for the refunding of the money, with interest afterwards.’ Cooley,
Taxation (2d ed), p 762.”
***
The significant public interest underlying the collection of revenues by the
government resulted in limitations upon a taxpayer’s ability to contest tax
assessments and obtain refunds of general revenue taxes. [Id. at 626-627, quoting
Eddy v Lee Twp, 73 Mich 123, 129-130; 40 NW 792 (1888).]
See also Detroit v Nat’l Exposition Co, 142 Mich App 539, 547; 370 NW2d 397 (1985) (holding
that MCL 213.291 serves the “important governmental interest of revenue collection at a fairly
insignificant risk to the private property owner”). The state thus undisputedly has a substantial
and important interest in collecting the tax revenues generated under the TPTA.
3. Factor Three
Regarding Tallman factor three, “the pervasiveness and longevity of industry regulation,”
Tallman, 421 Mich at 617, the TPTA can aptly be described as a pervasive group of tobacco
product regulations. The TPTA, which is codified at MCL 205.421 through MCL 205.436,
contains detailed definitions, licensing and stamping requirements, recordkeeping and document
maintenance obligations, schedules of tax rates, civil and criminal penalties for violations of the
TPTA, procedures governing seized property, and a delineation of tobacco tax disbursements for
various purposes. Several administrative rules further govern tobacco products. Mich Admin
Code, R 205.451 et seq. And statutory tobacco product regulation and taxation in Michigan
constitutes a tradition extending back more than half a century. In 1947, our Legislature enacted
a comprehensive and detailed act imposing regulations and levying taxes on cigarettes, 1947 PA
265, which became 1948 CL 205.501 et seq. Similar detailed cigarette tax acts remained in
effect through subsequent compilations, 1970 CL 205.501 et seq. and 1979 CL 205.501 et seq.,
until the Legislature repealed the cigarette tax act in favor of the TPTA. 1993 PA 327, effective
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March 15, 1994. In summary, detailed and pervasive tobacco regulation and taxation have had a
long history in our state.
4. Factors Four and Six
Considering Tallman factor four, “the inclusion of reasonable limitations on searches in
statutes and regulations,” Tallman, 421 Mich at 618, we note that the TPTA contains several
relevant sections addressing the department’s and its agents’ authority to inspect and search.
Pursuant to MCL 205.426(5),
[a]ll statements and other records required by this section shall be in a form
prescribed by the department and shall be preserved for a period of 4 years and
offered for inspection at any time upon oral or written demand by the department
or its authorized agent by every wholesaler, secondary wholesaler, vending
machine operator, unclassified acquirer, and retailer. [Emphasis added.]
Although this subsection contemplates that various participants in cigarette distribution in
Michigan must supply records “for inspection at any time upon oral or written demand by the
department or its authorized agent,” the records subject to inspection are limited to the records
required under MCL 205.426.
The provisions that the prosecution relies on for justifying the search of the Arabian
Market in this case include the following relevant subsections of MCL 205.426a:
(5) The department or its authorized agents may inspect or conduct an
inventory of a wholesaler’s or unclassified acquirer’s stock of cigarettes, tobacco
products other than cigarettes, and stamps during regular business hours and
inspect the related statements and other records required in [MCL 205.426].
(6) The department or its authorized agents may inspect the operations of
a secondary wholesaler, vending machine operator, or retailer, or the contents of a
specific vending machine, during regular business hours. This inspection shall
include inspection of all statements and other records required by [MCL
205.426], of packages of cigarettes and tobacco products other than cigarettes,
and of the contents of cartons and shipping or storage containers to ascertain that
all individual packages of cigarettes have an affixed stamp of proper
denomination as required by this act. This inspection may also verify that all the
stamps were produced under the authority of the department. [Emphasis added.]
As reflected in the clear and unambiguous language of MCL 205.426a(5) and (6), the Legislature
inserted the significant limitation that searches of the various named tobacco dealers may occur
only in the course of regular business hours. And MCL 205.426a(5) and (6) further limit
potential inspections to the records mandated under MCL 205.426, cigarettes and other tobacco
products, and tobacco stamps and, under subsection 6, inspections to determine whether “all
individual packages of cigarettes have an affixed stamp of proper denomination as required by
this act.”
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One more noteworthy section of the TPTA concerning searches and seizure is MCL
205.429(2):
If an authorized inspector of the department or a police officer has
reasonable cause to believe and does believe that a tobacco product is being
acquired, possessed, transported, kept, sold, or offered for sale in violation of this
act for which the penalty is a felony, the inspector or police officer may
investigate or search the vehicle of transportation in which the tobacco product is
believed to be located. If a tobacco product is found in a vehicle searched under
this subsection or in a place of business inspected under this act, the tobacco
product, vending machine, vehicle, other than a vehicle owned or operated by a
transportation company otherwise transporting tobacco products in compliance
with this act, or other tangible personal property containing those tobacco
products and any books and records in possession of the person in control or
possession of the tobacco product may be seized by the inspector or police officer
and are subject to forfeiture as contraband as provided in this section. [Emphasis
added.]
MCL 205.429(2) conditions a search on reasonable cause that a felony violation of the TPTA has
occurred.
In summary, the TPTA imposes substantial limitations on searches performed by the
department and its agents, primarily that the searches take place in the course of normal business
hours and that the searches remain focused on TPTA-mandated records and various tobacco
products to ascertain whether they comply with the TPTA.
Regarding related Tallman factor six, the available evidence in this case reflects that “the
degree of intrusion occasioned by [the] particular regulatory search” did not qualify as excessive
or unnecessary. Tallman, 421 Mich at 618. Several tax team members accompanied Detective
Foley to the Arabian Market in the midafternoon of September 23, 2005, during the market’s
regular business hours. Shortly thereafter, defendant supplied Foley with his identification,
tobacco license information, and other tobacco-related documentation, including invoices. Foley
ascertained from the state of the documentation that neither defendant nor his corporate entity
that purchased some molasses tobacco possessed a Michigan tobacco license, which he then
confirmed by calling the Department of Treasury. He also confirmed that the company that sold
Starco the tobacco did not have a Michigan tobacco license. With defendant’s guidance, Foley
and other agents entered a storeroom and observed that multiple cartons of molasses tobacco did
not bear the Michigan tobacco tax stamp mandated by the TPTA, prompting them to seize
approximately 300 cartons of tobacco. Foley estimated that the search and seizure took
approximately three hours, during which defendant and an assistant continued operating the
market. No indication exists that the September 23, 2005, inspection or search exceeded the
reasonably circumscribed search authority granted the tax team members by the TPTA.
5. Factor Five
Turning to Tallman factor five, “the government’s need for flexibility in the time, scope,
and frequency of inspections in order to achieve reasonable compliance,” Tallman, 421 Mich at
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618, we note that two prior decisions of this Court offer helpful guidance. In Barnes, this Court
considered the propriety of a warrantless search and seizure that took place at the defendant’s
automobile salvage yard, which was subject to statutory regulation. Barnes, 146 Mich App at
39-40. The Court carefully applied the Tallman factors to reach its determination concerning the
validity of the search, noting with regard to factor five that the
government’s need for flexibility in conducting searches without warrants is
apparent. A person who knowingly buys or sells stolen automobile parts is not
likely to complain to the police. A person who innocently buys stolen automobile
parts would have no occasion to do so. Trafficking in stolen automobile parts is,
to that extent, a victimless crime, the only victim being the owner of the property
that was originally stolen. Stolen automobile parts are much less readily
identifiable than the stolen automobiles themselves. . . . Further, we suspect that
even the vast majority of automobile parts dealers who are not knowingly dealing
in stolen parts might nevertheless become somewhat casual in their record
keeping and purchasing practices if they are not exposed to the potential of a
search without a warrant. [Id. at 46-47.]
This Court more recently discussed Tallman factor five in the context of the former Michigan
Liquor Control Act, MCL 436.1 et seq.:
The next factor is focused on the government’s need for flexibility in the
time, scope, and frequency of the inspections. This factor is necessarily related to
the nature of the industry and the extent to which the industry is pervasively
regulated. In the case of the liquor industry, the potential for violation is
extremely high and the danger occasioned by certain violations may be severe. In
order to offer incentive to licensed business owners to comply with the provisions
of the Liquor Control Act, it is somewhat necessary to enforce the provisions
under the fear of an unannounced search of the premises. Moreover, the nature of
the violation in the case at hand is such that an announced search would arguably
lead to destruction of the evidence and thereby frustrate the purpose of the
regulatory scheme. [People v Thomas, 201 Mich App 111, 119-120; 505 NW2d
873 (1993).]
With this guidance in mind, we observe that the incentive for a violator of the TPTA, or the
beneficiary of a TPTA violation, to report those violations appears de minimis at best, especially
because only the state falls victim to the lost tobacco tax revenue that TPTA compliance would
have generated. The easy transferability or disposability of cigarettes and other tobacco products
also gives rise to the concern noted in Thomas “that an announced search would arguably lead to
destruction of the evidence and thereby frustrate the purpose of the regulatory scheme.” Id. at
120. And as this Court has also deemed relevant, the potential for an unannounced search or
inspection conceivably would foster greater compliance with the TPTA’s regulations by those
engaged in the tobacco business. Id.; Barnes, 146 Mich App at 47. In conclusion, we find that
the state has a legitimate and strong need for flexibility in the time, scope, and frequency of
inspections in order to achieve reasonable compliance with the TPTA.
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6. Factor Seven
We lastly must address Tallman factor seven, “the degree to which a business person may
be said to have impliedly consented to warrantless searches as a condition of doing business, so
that the search does not infringe upon reasonable expectations of privacy.” Tallman, 421 Mich
at 618. Several details of this case lead us to conclude that defendant impliedly acceded to
warrantless searches as a condition of participating in the tobacco business. As we observed
earlier, comprehensive and pervasive tobacco regulation and taxation have a long statutory
history in Michigan, which would tend to undercut the reasonableness of any notion that
defendant should not have anticipated warrantless inspections of his business premises under the
plain language of the TPTA authorizing such searches. Barnes, 146 Mich App at 47
(emphasizing that “[g]iven the long duration of comprehensive Michigan regulation of [the
automobile salvage yard] business, defendant cannot claim any reasonable expectation of privacy
regarding the search involved here”); see also Thomas, 201 Mich App at 121 (observing that
“[g]iven the extensive regulation of the liquor industry and the decreased expectation of privacy
in certain commercial property, we believe that defendants should have reasonably expected a
search without a warrant to occur on the premises”) (citation omitted). The TPTA additionally
sets forth expressly that, persons who purchase, possess, acquire for resale, or sell tobacco in
Michigan must have a Michigan tobacco license, MCL 205.423(1). People v Motor City Hosp &
Surgical Supply, Inc, 227 Mich App 209, 215; 575 NW2d 95 (1997) (noting “the deeply rooted
rule that ignorance of the law or a mistake of law is no defense to a criminal prosecution”).
Furthermore, at the time of the warrantless search on September 23, 2005, defendant (1) had
engaged in the sale of tobacco and possessed large quantities of molasses tobacco, (2) had
founded Starco to import and export tobacco products, (3) held a federal license authorizing him
to import tobacco, and (4) had submitted an application for a Michigan tobacco tax license. We
conclude that defendant impliedly consented to warrantless searches as a condition of his
participation in the tobacco business because Michigan has comprehensively regulated tobacco
for decades, defendant had substantial familiarity with the tobacco licensing process and other
tobacco regulations, and the plain and unambiguous language of the TPTA authorized the
department and its agents to review tobacco-related documentation and inspect tobacco products.
7. Conclusion Concerning Constitutional Validity of Arabian Market Search
Our examination of the Tallman factors, all of which weigh in favor of the state’s need to
enforce the TPTA, leads us to conclude that the state’s interest in performing warrantless
inspections and searches in the limited manners set forth in the TPTA outweighs the privacy
expectations of those who engage in tobacco transactions in Michigan and that Michigan’s
tobacco businesses thus “fall[] within the parameters of the pervasively regulated industry
exception to the warrant requirement.” Tallman, 421 Mich at 630-631. Consequently, Detective
Foley and his colleagues need not have secured any form of warrant before inspecting the
Arabian Market on September 23, 2005, and seizing the unstamped tobacco found there in
violation of the TPTA. The search and seizure at the Arabian Market thus did not violate either
the Fourth Amendment or 1963 Const, art 1, § 11. The circuit court incorrectly applied the law
in finding the search invalid.
Defendant offers no authority specifically supporting his assertion “that the search of the
premises was not for administrative purposes but actually was intended for criminal purposes
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and the administrative subterfuge used by the Michigan State Police [thus] was a violation of the
Fourth Amendment.” Furthermore, defendant either miscomprehends or misrepresents the
nature of the appeals in Barnes and Thomas. In both Barnes and Thomas, just as in this case, the
defendants faced felony charges stemming from warrantless searches of places of business.
Barnes, 146 Mich App at 39-40 (three counts of receiving and concealing stolen property worth
more than $100, former MCL 750.535, which carried possible sentences of up to five years’
imprisonment and a $2,500 fine);4 Thomas, 201 Mich App at 114-115 (counts of possessing
between 50 and 225 grams of cocaine with intent to deliver it, MCL 333.7401(2)(a)(iii), which at
that time required imprisonment of 10 and 20 years). This Court in both Barnes and Thomas
held the warrantless searches constitutionally valid under the principles set forth in Tallman and
upheld or reinstated the felony charges against the defendants. Barnes, 146 Mich App at 40-47;
Thomas, 201 Mich App at 117-122. With respect to defendant’s related suggestion that the
administrative inspection was invalid because it amounted to a pretext for finding a criminal
violation, we observe that the record contains no evidence giving rise to a reasonable inference
that Foley and his colleagues searched the Arabian Market while in reality entertaining the
subjective intent to establish defendant’s commission of a felony. The record simply reveals
nothing to support that Foley and the other search participants arrived to inspect the Arabian
Market with the “primary purpose . . . to detect evidence of ordinary criminal wrongdoing.”
Indianapolis v Edmond, 531 US 32, 38; 121 S Ct 447; 148 L Ed 2d 333 (2000).
In summary, the circuit court misapplied the law in reversing the district court’s bindover
determinations.
III. Validity of Later Search of Defendant’s Residence
The subsequent warrantless search of defendant’s home and the seizure of tobacco from
the home were valid because defendant gave his consent. “A consent to search permits a search
and seizure without a warrant when the consent is unequivocal, specific, and freely and
intelligently given.” People v Galloway, 259 Mich App 634, 648; 675 NW2d 883 (2003). At
the civil administrative hearing, defendant, who was represented by counsel, revealed that he had
possession of many additional cases of molasses tobacco. Defendant and his counsel agreed to
turn the tobacco over to the department and made arrangements for the pickup of the tobacco to
take place at defendant’s home on October 21, 2005. No evidence suggests that the department
or its agents coerced defendant at his home to admit having additional tobacco, to allow officers
to search his home for the tobacco, or to surrender the tobacco. To the contrary, the available
record establishes that defendant fully cooperated with Detective Foley and his colleagues when
they arrived at his house, freely showed them around, and voluntarily gave them the nearly 2,000
cases of tobacco he had placed in his basement. We conclude that defendant freely, intelligently,
unequivocally, and specifically consented to the search and seizure that occurred at his home,
which therefore did not violate either his Fourth Amendment rights or his rights under Const
1963, art 1, § 11.
4
These charges constituted felonies under MCL 750.35(1) before the Legislature’s 1998
amendment of MCL 750.535 by 1998 PA 311.
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Reversed and remanded for reinstatement of the charges and further proceedings
consistent with this opinion. We do not retain jurisdiction.
/s/ Elizabeth L. Gleicher
/s/ Stephen L. Borrello
/s/ Alton T. Davis
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