United States v. Iaad Hamad , 809 F.3d 898 ( 2016 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 14-3813
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
IAAD HAMAD,
Defendant-Appellant.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:10-cr-01038-1 — Amy J. St. Eve, Judge.
ARGUED SEPTEMBER 30, 2015 — DECIDED JANUARY 4, 2016
Before BAUER, RIPPLE, and ROVNER, Circuit Judges.
ROVNER, Circuit Judge. Cook County Department of
Revenue agents entered Iaad Hamad’s convenience store
pursuant to an ordinance that allowed them to inspect cigarette
inventory. The agents found cigarettes without the appropriate
tax stamps, and also discovered a handgun and narcotics.
Hamad was convicted of one count of possession of a firearm
by a felon, in violation of 18 U.S.C. § 922(g)(1). He appeals the
district court’s denial of his motion to suppress the firearm and
2 No. 14-3813
the incriminating statement he gave regarding the firearm. We
affirm.
I.
Iaad Hamad owned H & Y Chicago Foods, a small conve-
nience store on the west side of Chicago. Among other items,
the store sold cigarettes. Cook County (which encompasses
Chicago) has an ordinance which taxes and regulates the sale
of cigarettes. See Cook County Code of Ordinances, Title IX,
Section 74–430, et seq. (2009) (hereafter “Cigarette Ordinance”
or “Ordinance”).1 It is unlawful in Cook County, for example,
to sell individual, unpackaged cigarettes or to sell packs of
cigarettes that do not contain the proper tax stamps. The Cook
County Department of Revenue employs inspectors to enforce
the Ordinance. As we will discuss below, the Ordinance allows
representatives of the Department of Revenue to inspect a
retailer’s books and records related to the sale of cigarettes and
to examine the cigarette inventory itself.
The Department of Revenue had a list of prior violators of
the Ordinance, businesses that had sold cigarettes without the
proper tax stamps. Hamad’s store was on the list. On October
15, 2010, two inspectors and an intern with the Department of
Revenue approached H & Y Chicago Foods for an inspection.
The intern, Courtney Marshall, entered the store first, and
made an undercover purchase of a pack of Newport cigarettes
for $6. At the time, the typical price of a properly-taxed pack of
1
The version of the Ordinance in effect at the time of the search may be
found at pages 44-57 of: http://www.cookctyclerk.com/countyboard/
DocumentLibrary/2009ordinances.pdf (last visited January 4, 2016).
No. 14-3813 3
cigarettes in Chicago was $8 or $9. Marshall brought the
suspiciously low-priced pack out to the inspectors, Jessa Srain
and Aaron Glasper, who examined it and determined that it
did not bear the required Cook County tax stamp. The inspec-
tors and the intern then entered the store and identified
themselves as Department of Revenue agents to two employ-
ees behind the counter.
Srain and Marshall then entered the area behind the
counter to examine the cigarette inventory to determine if there
were additional unstamped packs. Glasper went to the back of
the store. Srain found another pack of unstamped cigarettes
next to the cash register, and continued her search. On the floor
behind the counter, she found a plastic grocery bag that
contained two prescription bottles, loose pills, and a large,
clear candy jar full of white pills.2 As Srain continued her
search, she recovered several additional prescription pill
bottles, which she added to the bag. When she looked at the
pills in the large jar, she could not identify all of them but
believed that some were Vicodin, a narcotic pain killer. She
contacted her supervisor and asked for guidance. The supervi-
sor advised her to do what she thought best. She continued to
search the area behind the counter.
In the meantime, Marshall, who was also searching behind
the counter, felt a loose floorboard beneath his foot. He lifted
the board and found a shoe box. Inside the shoe box, he found
2
The store had no pharmacy. The pills in the candy jar were eventually
identified as 1500 hydrocodone pills. Hydrocodone is the active, narcotic
ingredient in Vicodin.
4 No. 14-3813
magazines for a gun.3 Srain then searched a shelf behind the
door leading to the counter area. Under a pile of t-shirts, she
found a velvet bag. When she picked up the bag, she felt an
object that she realized was the handle of a gun. She again
called her supervisor for guidance and this time, the supervisor
directed her to call the police.
Officer Alejandro Gallegos responded to the call. When he
arrived at the store, Srain pointed out the firearm and the large
jar of pills. Someone else pointed out the prescription bottles.
Officer Gallegos entered the area behind the counter and took
custody of the gun, the gun magazines and the pills. The older
of the two women working in the store identified herself to the
officer as Alma Price, the store manager. She told Officer
Gallegos that the other woman was her daughter. She also told
the officer that Hamad owned the store and that she had
already called him and left him a message. Officer Gallegos
then arrested Alma Price for possession of the pills and gun.
Price told the officer that she thought the jar contained candy
and that Hamad had directed her to sell the “candy” for $5 per
pill. She also told the officer that Hamad owned the gun.
A short time later, when Officer Gallegos was processing
the arrest of Alma Price at the police station, he was notified
that there was a man at the front desk asking for him. He went
out to meet the man, who identified himself as Hamad. Officer
3
In this context, a magazine is “a metal receptacle for a number of
cartridges, inserted into certain types of automatic weapons and when
empty removed and replaced by a full receptacle in order to continue
firing.” Webster’s Unabridged Dictionary of the English Language, RHR
Press, 2001. It is not a periodical publication.
No. 14-3813 5
Gallegos asked Hamad if he was the owner of the store and
Hamad said he was. Hamad provided his identification to
Officer Gallegos, and the officer then took Hamad into custody
for the narcotics and gun recovered from the store. After
Officer Gallegos read Hamad his rights, Hamad made a
number of incriminating statements. Hamad was later charged
under the federal statute prohibiting felons from possessing
firearms. 18 U.S.C. § 922(g)(1).
Prior to trial, his attorney filed a “Motion to Quash Arrest
and Suppress Evidence.” R. 62. Because the government raises
claims of waiver and forfeiture in the appeal, we will discuss
the motion and the briefing in some detail. In the motion,
Hamad identified Jessa Srain as a “police officer” from the
Cook County Department of Revenue who conducted an
inspection and search of the store. Hamad noted that there was
no search warrant authorizing the search of the store, that as
the owner and manager of the store he possessed a reasonable
expectation of privacy in the premises, and that warrantless
searches and seizures of property are presumptively unreason-
able, subject to a few exceptions. He similarly objected to his
warrantless arrest, contending that the presence of a gun was
insufficient to support the arrest because the Taurus .38 caliber
revolver was not, in and of itself, contraband. At the time of the
arrest, Hamad argued, the officer had only the self-serving
statement of Alma Price that the gun belonged to Hamad. The
officer did not know at the time that Hamad lacked a valid
Firearm Owner Identification Card or that he was a felon.
Hamad did not further develop these arguments.
The government characterized Hamad’s argument on the
search of the premises and the seizure of the gun as vague and
6 No. 14-3813
confusing. The government focused instead on whether there
was probable cause for Officer Gallegos to seize the gun and to
arrest Hamad. The government noted that law enforcement
may seize items without a warrant if they have probable cause
to believe that the items are linked to criminal activity. In this
case, the gun was found in close proximity to a large jar of
narcotic pills, and the clerk told the officer that Hamad
directed her to sell the pills for $5 each. In the same general
area were two loaded gun magazines for a different type of
gun. The officer thus knew that someone at the store was
engaged in the unlawful possession and distribution of
controlled substances and reasonably inferred that the gun
hidden nearby was linked to the narcotics. The government
similarly argued that the officer had probable cause to arrest
Hamad as the owner of the store and as the person identified
by Alma Price as owning the gun and directing the sale of the
drugs. The government did not separately address the search
of the premises by Department of Revenue agents, and did not
cite to the Ordinance to justify the search. But attached to the
government’s response were interview reports detailing the
investigation and describing the search as a “routine inspection
conducted by the Cook County Revenue agents” for the
purpose of identifying businesses selling cigarettes without tax
stamps. R. 65, at 9. Also included were Department of Home-
land Security interview reports for Srain and Gallegos, and the
arrest report for Alma Price. R. 65, at 8–19.
In reply, Hamad contended more clearly that the search by
Srain violated the Fourth Amendment because there was no
warrant and no consent to search. He again argued that
seizures of personal property are generally unreasonable in the
No. 14-3813 7
absence of a warrant, and that administrative searches of
commercial property to enforce fire, health or housing regula-
tions also require warrants. After summarizing the report of
the interview of Srain, Hamad concluded, “For the county or
city law enforcement agencies to suggest that the purchase of
a package of cigarettes without a Cook County tax stamp
affixed is their authority to search a place of business is
blatantly sophomoric – and rather bizarre.” R. 66, at 3.
After reviewing Hamad’s reply, the district court issued an
order directing the government to file a sur-reply addressing
“yet another argument” raised in Hamad’s reply, namely that
“Defendant now claims for the first time that Cook County
Department of Revenue Field Inspectors did not have authority
to search HY [sic] Chicago Foods on October 15, 2010.” R. 67.
In reply, the government, for the first time justified the search
as authorized by the Cook County Cigarette Ordinance as a
warrantless administrative inspection of commercial property.
Acknowledging that searches of commercial property gener-
ally require warrants, the government relied on New York v.
Burger, 482 U.S. 691 (1987), for its claim that the Cigarette
Ordinance nevertheless authorized this warrantless adminis-
trative search of commercial property. In the alternative, the
government also asserted that the firearms and other items
need not be suppressed because the items inevitably would
have been discovered by lawful means. That is, the undercover
purchase of a pack of cigarettes lacking the required tax stamps
provided probable cause to obtain a warrant to search for other
unlawful cigarettes. And the execution of that warrant would
have led to the discovery of the gun, the pills and the gun
magazines.
8 No. 14-3813
The district court denied the motion to quash the arrest and
suppress the evidence. The court concluded that the warrant-
less search of the area behind the counter was a reasonable
administrative search conducted pursuant to a regulatory
scheme or statute under Burger. In Burger, the Court noted that
the expectation of privacy in commercial premises is different
from and less than a similar expectation in a person’s home.
Moreover, that expectation of privacy is even more attenuated
in commercial property employed in closely regulated indus-
tries. The district court noted that a warrantless search pursu-
ant to a regulatory scheme is reasonable if (1) there is a
substantial government interest that informs the regulatory
scheme; (2) the warrantless inspection is necessary to further
the scheme; and (3) the statute’s inspection program provides
a constitutionally adequate substitute for a warrant. Applying
these factors to the Cigarette Ordinance, the court concluded
that each factor was met for the closely regulated tobacco
business. And once the inspectors found the gun and pills, the
court determined that Officer Gallegos had probable cause to
seize them because the pills were a controlled substance being
unlawfully distributed from the store, and the gun was found
in close proximity to the pills. The court further found that
Officer Gallegos had probable cause to arrest Hamad based on
(1) the items found in his store; (2) the statements of Alma Price
that Hamad told her to sell the pills for $5 each and that
Hamad owned the gun; and (3) Hamad’s own statements to
the officer that he owned the store and the gun. The court
therefore denied the motion. Following a jury trial, Hamad was
convicted of being a felon in possession of a firearm, and was
sentenced to twenty-seven months’ imprisonment. He appeals.
No. 14-3813 9
II.
On appeal, Hamad contends that the district court erred
when it applied the Burger standards to a convenience store,
which is not a closely regulated industry. He also contends that
the Cigarette Ordinance violates the Fourth Amendment
because it allows for administrative searches of businesses
without defining the scope of the inspection and without
limiting the discretion of the inspectors conducting the search.
The government counters that Hamad forfeited these argu-
ments by failing to raise them below. We agree that, in the
district court, Hamad argued only that the search violated the
Fourth Amendment because it was conducted without a
warrant, and that the sale of an unstamped pack of cigarettes
was insufficient justification for the warrantless search.
As our discussion of the motion to suppress reveals,
Hamad did not argue in the district court that convenience
stores are not closely regulated industries or that the Cigarette
Ordinance is itself constitutionally deficient either on its face or
as applied to him. Hamad therefore forfeited these issues and
we review the district court’s denial of his motion to suppress
for plain error. United States v. Olano, 507 U.S. 725, 731 (1993);
United States v. Raney, 797 F.3d 454, 462 (7th Cir. 2015); Fed.
Rule Crim. P. 52(b). In order to reverse for plain error, we must
find (1) error (2) that is plain, and (3) that affects the defen-
dant's substantial rights. Olano, 507 U.S. at 732; Raney, 797 F.3d
at 462. An error is plain if it is clear or obvious. Olano, 507 U.S.
at 734; Raney, 797 F.3d at 462. An error affects the defendant's
substantial rights when it is prejudicial, that is, when it has
10 No. 14-3813
affected the outcome of the district court proceedings. Olano,
507 U.S. at 734.
“[W]arrantless searches are generally unreasonable, and …
this rule applies to commercial premises as well as homes.”
Marshall v. Barlow’s, Inc., 436 U.S. 307, 312 (1978). See also
Burger, 482 U.S. at 699. Business owners possess reasonable
expectations of privacy in commercial property with respect to
both traditional police searches as well as administrative
inspections designed to enforce regulatory statutes. Burger,
482 U.S. at 699–700. However, the Supreme Court has recog-
nized exceptions to the warrant requirement for pervasively
regulated businesses such as those dealing in firearms, United
States v. Biswell, 406 U.S. 311, 316 (1972), and for closely
regulated industries long subject to close supervision and
inspection, such as the liquor industry, Colonnade Catering Corp.
v. United States, 397 U.S. 72, 74 (1970). The Court reasoned that
certain industries have such a history of government oversight
that no reasonable expectation of privacy could exist for a
proprietor over the stock of a such a business. Barlow’s, 436U.S.
at 313. See also Burger, 482 U.S. at 700 (an expectation of privacy
in commercial premises is different from, and less than, a
similar expectation in an individual’s home and is particularly
attenuated in commercial properties employed in closely
regulated industries). The business owner in a highly regulated
or licensed industry in effect consents to the restrictions put in
place by the government. Barlow’s, 436 U.S. at 313.
In Burger, the Court set forth the standards for warrantless,
administrative inspections of commercial premises in closely
regulated industries. First, there must be a substantial govern-
No. 14-3813 11
ment interest that informs the regulatory scheme pursuant to
which the inspection is made. Second, the warrantless scheme
must be necessary to further the regulatory scheme. And third,
the statute’s inspection program, in terms of the certainty and
regularity of its application, must provide a constitutionally
adequate substitute for a warrant. Burger, 482 U.S. at 702–03. In
order to meet the third factor, the regulatory statute must
(1) advise the owner of the commercial premises that the
search is being made pursuant to the law and has a properly
defined scope, and (2) it must limit the discretion of the
inspecting officers. Burger, 482 U.S. at 703.
Hamad argues first that convenience stores are not closely
regulated and have not been long subject to close supervision
and inspection, and therefore warrantless inspections of
convenience stores cannot be justified under the administrative
search exception. But Hamad may not simply characterize his
business as a convenience store to avoid the applicability of the
administrative search exception and the Cigarette Ordinance.
The defendant in Biswell owned a pawn shop but the Court
found that his business was subject to warrantless searches
under the Gun Control Act of 1968 because the pawn shop
owner was a federally licensed firearms dealer. Biswell,
406 U.S. at 311–12. Similarly, Colonnade was a catering
company that served alcohol and therefore was subject to
warrantless inspections by the Treasury Department pursuant
to a federal statute regulating sales of alcohol. Colonnade
Catering, 397 U.S. at 72–73. Neither pawn shops nor catering
companies are closely regulated as such, but sellers of alcohol
and firearms are highly regulated and licensed and therefore
subject to the administrative search exception.
12 No. 14-3813
Similarly, it is not because Hamad owns a convenience
store that he is subject to the Cigarette Ordinance but because
his business sells cigarettes. He makes no argument that the
cigarette or tobacco industry is not closely regulated, except to
complain in conclusory fashion that the search here was made
in enforcement of tax collection, not cigarette regulation. In
fact, there is a long history of regulation and licensing of
cigarette sales in Chicago. A Chicago ordinance prohibited the
sale of cigarettes by any person without a license as early as
1900, a mere twenty years after cigarettes began to be pro-
duced commercially in the United States.4 See Gundling v. City
of Chicago, 177 U.S. 183 (1900) (upholding the constitutionality
of the Chicago ordinance requiring a license for cigarette
sellers). The State of Illinois has also long regulated cigarette
sales, enacting a Cigarette Tax Act in 1941 that permitted
warrantless searches of cigarettes in a place of business and
allowed inspectors to seize packages of contraband cigarettes.
See 35 ILCS 130/18. Given that cigarettes have been regulated
in Chicago for at least 115 years, indeed for most of their
existence as a mass produced product, the district court did not
commit plain error in treating retail cigarette sales as closely
regulated.
Hamad next contends that the Cigarette Ordinance does
not meet the third factor of the Burger test, namely that a
statute’s inspection program must provide a constitutionally
4
Cigarettes were not widely consumed in the United States until the first
cigarette rolling machine was patented in 1880, allowing for mass produc-
tion. See http://www.britannica.com/topic/cigarette, last visited January 4,
2016.
No. 14-3813 13
adequate substitute for a warrant.5 Burger, 482 U.S. at 703. As
we noted above, in order to meet the third factor, the regula-
tory statute must (1) advise the owner of the commercial
premises that the search is being made pursuant to the law and
has a properly defined scope, and (2) it must limit the discre-
tion of the inspecting officers. Burger, 482 U.S. at 703. Hamad
argues that the Ordinance fails to limit both the scope of the
inspection and the discretion of the inspectors. In particular, he
asserts that the Ordinance does not limit the time of the
inspection to regular business hours, does not cabin the place
of inspection, and makes the scope of the search limitless.
The relevant part of the Ordinance in place at the time of
the inspection stated:
Inspections. Books and records kept in com-
pliance with Sec. 439 of this Ordinance shall
be made available to the Department upon
request for inspection and/or copying during
regular business hours. Representatives of
the Department shall be permitted to inspect
or audit cigarette inventory in or upon any
premises. An audit or inspection may include
the physical examination of the cigarettes,
packaging or the cigarette tax stamps. It shall
be unlawful for any person to prevent or
hinder a duly authorized Department repre-
5
Hamad did not challenge the district court’s conclusions on the first two
factors of the Burger test as applied to the Cigarette Ordinance, and so we
will not address them.
14 No. 14-3813
sentative from performing the enforcement
duties provided in this article.
Cook County Code of Ordinances, Title IX, Section 74–440
(2009). Section 74–431 provided that “[p]remises means, but is
not limited to, buildings, vehicles or any place where cigarette
inventory is possessed, stored or sold.”
The court did not plainly err in concluding that the Ordi-
nance adequately advised owners of commercial premises
selling cigarettes that the search is being made pursuant to the
law. The plain language of the Ordinance informs cigarette
sellers that they must allow inspections of their books and
inventory related to cigarette sales. See Burger, 482 U.S. at 711
(concluding that a statute allowing inspections of vehicle
dismantling businesses on a regular basis is an adequate
substitute for a warrant because it alerts business owners that
inspections are not discretionary acts by a government official
but are conducted pursuant to statute). As for the scope of the
inspection, the Ordinance limits the time of inspection for
books and records to regular business hours but arguably
imposes no similar limit on the time to inspect and audit
cigarette inventory. This omission is not fatal, however,
because the court reasonably read the “regular business hours”
limit to cover both the inspection of books and the auditing of
inventory. More importantly, the search here did occur during
regular business hours: Marshall purchased a pack of
unstamped cigarettes immediately before the inspection took
place. See Burger, 482 U.S. at 711. In Burger, the Court found
that a statute allowing inspection of vehicle dismantling
businesses was adequately limited in time where it allowed
inspections during regular and usual business hours. 482 U.S.
No. 14-3813 15
at 711–12. The Cook County Ordinance is therefore adequately
limited in time.
Hamad also argues that the use of the words “may include”
in the language defining the scope of the search improperly
allows inspectors to look anywhere because the language is
permissive. But read in context, the Ordinance very clearly
limits the scope of the inspection. The Burger Court found an
inspection statute adequately limited in scope where it allowed
inspectors to examine records as well as “any vehicles or parts
of vehicles which are subject to the record keeping require-
ments of this section and which are on the premises.” 482 U.S.
at 711–12. The Cigarette Ordinance similarly limits the inspec-
tions to the cigarettes themselves, their packaging and the tax
stamps, and defines the premises as buildings, vehicles and
“any place where cigarette inventory is possessed, stored or
sold.” Contrary to Hamad’s claims, the Ordinance is limited to
places where the shop keeper actually stores the inventory. The
Department of Revenue representatives in this case went
behind the counter where the store kept its cigarette inventory
in order to conduct the inspection. The Ordinance clearly
allowed the inspectors to be in that area of the store and to
search for cigarettes that violated the Ordinance, including
single, unpackaged cigarettes and unstamped packs of ciga-
rettes. The areas they searched were places where cigarettes
could be found and in fact were found. Hamad did not argue
that the inspectors exceeded the scope of their authority when
they pulled up the floor board, looked into the large jar of pills
or picked up the velvet bag hidden beneath a pile of t-shirts.
We therefore have no occasion to decide whether those actions
exceeded the scope of the inspectors’ authority under the
16 No. 14-3813
Ordinance or contravened the Fourth Amendment. On appeal,
Hamad challenged only whether the Ordinance itself met the
requirements of the Fourth Amendment, not whether the
inspectors followed the Ordinance punctiliously. The district
court did not plainly err in concluding that the Ordinance met
the requirements set forth in Burger.
Hamad’s contention that the court should have also
suppressed the incriminating statements he later made to the
police was entirely dependent on his claim that the Ordinance
was not an adequate substitute for a search warrant. Because
we have determined that the district court did not plainly err
in finding the Ordinance adequate, we must also conclude that
the court did not err in allowing Hamad’s incriminating
statements into evidence. We need not decide whether, in the
alternative, the evidence could have been admitted under the
inevitable discovery doctrine.
AFFIRMED