Jeweler Sues City Over Gold Buying Law

San Diego-based Leo Hamel Fine Jewelers has filed suit against National City, Calif., claiming the town’s two-year moratorium on new gold buying establishments has cost the store millions.

According to legal papers filed Oct. 1 in San Diego Superior Court, Leo Hamel, a well-established local jeweler that owns eight estate buying locations, executed a three-year lease for a new location in National City in May 2011. The company applied to the city for the appropriate license, and two months later, completed all the paperwork, the suit says.

However, in July 2011, National City instituted a one-month moratorium on new gold-buying businesses. The moratorium was then extended for another 10 months, and then another year, to July 2013.

City officials claimed public safety spurred the bans, and that it hoped to study the issue and devise new regulations. “[When] people out of their beauty salon or whatever else buy gold, it just becomes this huge deal,” said the city’s mayor, as quoted by a local TV station.

But the suit claims that Leo Hamel already agreed to pay rent, deposits, and other expenses for the new location, totaling $50,000. The jeweler is also losing the “substantial profit” it expected to realize from the new business, estimated to be $2 million, the papers argue.

The suit stipulates that National City’s ban should be ruled null and void, since it contradicts the constitution of the state of California, which has a provision that allows gold buying.

“A local ordinance can explain and modify or regulate activity within the city so long as it does not prohibit it altogether,” Hamel’s lawyer Michael T. McColloch tells JCK.

The suit seeks a judgment declaring the moratorium unconstitutional, as well as damages and attorney fees.

National City’s mayor Ron Morrison tells JCK he can’t comment on ongoing litigation but noted lifting the moratorium is on the City Council’s agenda.

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