Licensing Process for Ohio Gold Dealers Pass Muster

CINCINNATI (CN) - Extensive recordkeeping requirements that sellers of precious metals face in Ohio to prevent the sale of stolen goods are constitutional, the 6th Circuit ruled.

The ruling Tuesday overturns a preliminary injunction that U.S. District Judge Michael Watson had granted to the Delaware, Ohio-based shop Liberty Coins LLC and its owner, John Tomaso, against Ohio's Precious Metals Dealership Act (PMDA).

The PMDA requires that any business wishing to sell precious metals obtain a license and keep track of the name, age, address, driver's license number and a brief physical description of anyone who sells goods to the store.

It also says shop owners must keep purchased goods for at least five days, thereby giving police an opportunity to determine if the precious metals are stolen.

Judge Watson in Columbus had said Liberty Coins was likely succeed on its argument that the PMDA is unconstitutional because it applies only to those engaged in commercial speech.

The reversal finds, however, that the PMDA is a valid regulation of business.

In constructing the PMDA, "the Ohio General Assembly sought to distinguish between the typical person who casually stops at a garage sale 'to engage in the business of purchasing' non-exempt articles and businesses with storefronts that have a presence in the community and formally announce to the public that they are open for business," Judge Eric Clay wrote for a three-member panel. "The state of Ohio used its police power to regulate those individuals and entities by requiring that they obtain a license and comply with the requirements placed on all licensed precious metals dealers. Plaintiffs missed the point of the statute when they argued before the district court that 'the drafters could have easily dispensed with the promotional speech requirements altogether and written the PMDA to regulate 'any person who actually purchases metals.'' Had the drafters employed such language, the statute would have applied far too broadly, to those who make infrequent purchases in casual environments and do not hold themselves out to the public as willing to make such purchases."

Ohio supported its position that the PMDA intends "to protect consumers and the public from theft, fraud, money laundering, fencing, to restrict the flow of stolen goods, and to prevent terrorism," according to the ruling, which says the PMDA serves a legitimate government interest.

"It was reasonable for the legislature to have believed that a licensing requirement and the close monitoring of those who are licensed would curtail the amount of stolen goods in the marketplace and aid the police in their attempt to recover stolen goods in a timely manner," Clay wrote. "Plaintiffs have not offered evidence to demonstrate that the PMDA is not a rational method for achieving the government's legitimate interest in protecting the public from theft or fraud. Therefore, under rational basis review, plaintiffs are unlikely to prevail on the merits, and they are not entitled to a preliminary injunction in their favor."

The defendants in the action are David Goodman, director of the Ohio Department of Commerce, and Amanda McCartney, a consumer finance attorney for the state.

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