The New York Court of Appeals reaffirmed the basic principle of zoning, that zoning relates to the use of land "not the identity of the user." In Matter of Sunrise Check Cashing & Payroll Services Inc, v. Town of Hempstead, the Court found that the provisions of the Town's zoning code that prohibited check cashing establishments were invalid.
The Court noted that the basis for the prohibition was a memorandum produced by one of the Town's attorneys who, among other things, concluded the prohibition would be beneficial because it :
"...encourages young and lower income people to open up bank accounts, save their money, and develop a credit rating" and "also removes a seedy type of operation, akin to pawnshops and strip clubs, from the commercial areas of the Town."
In rejecting this analysis as the basis for adoption of zoning regulations the Court held:
"It is clear from the memorandum of the deputy town attorney that section 302 (K) was directed at the perceived social evil of check-cashing services, which were thought to exploit the younger and lower income people who are their main customers. Whatever the merits of this view as a policy matter, it cannot be implemented through zoning."
The Court concluded that, while there may be uses, such as adult entertainment uses, that have negative secondary effects on the surrounding community, "the Town has not tried to show and does not argue that check cashing services are in a similar category."
Instead, the Town argued that the purpose of the law was related to health and safety, specifically by preventing armed robberies. But the court noted that this was not advanced as a basis for adopting the law when it was enacted. Therefore, the Court found, irrespective of whether or not that might be a valid argument for such a prohibition, perceived threats of armed robbery was not the basis for the adoption of this prohibition.