John Simpson v. Attorney General United States ( 2019 )


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  •                                          PRECEDENTIAL
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    _____________
    No. 17-3718
    _____________
    JOHN F. SIMPSON, t/a Warrior Ridge Trading; t/a LCT Pro Shop
    v.
    ATTORNEY GENERAL UNITED STATES OF AMERICA;
    DIRECTOR, BUREAU OF ALCOHOL, TOBACCO, FIREARMS
    & EXPLOSIVES; DIRECTOR OF INDUSTRY OPERATIONS,
    BUREAU OF ALCOHOL, TOBACCO, FIREARMS &
    EXPLOSIVES; UNITED STATES OF AMERICA
    John F. Simpson,
    Appellant
    _____________
    On Appeal from the United States District Court
    for the Middle District of Pennsylvania
    District Judge: Honorable John E. Jones, III
    (D.C. Civil No. 1-15-mc-00297)
    ______________
    Argued October 30, 2018
    ______________
    Before: CHAGARES, JORDAN, and VANASKIE, Circuit
    Judges
    (Opinion Filed: January 3, 2019)
    Adam J. Kraut
    Joshua Prince       [ARGUED]
    Prince Law Offices
    646 Lenape Road
    Bechtelsville, PA 19505
    Counsel for Appellant
    David J. Freed
    United States Attorney
    Carlo D. Marchioli [ARGUED]
    Kate L. Mershimer
    Office of United States Attorney
    228 Walnut Street, P.O. Box 11754
    220 Federal Building and Courthouse
    Harrisburg, PA 17108
    Jeffrey A. Cohen
    ATF Associate Chief Counsel
    John Kevin White
    ATF Division Counsel
    601 Walnut Street, Suite 1000E
    Philadelphia, PA 19106
    Counsel for Appellees
    
    The Honorable Judge Vanaskie transmitted the opinion to the
    Clerk for filing prior to retiring from the bench on January 1, 2019.
    Due to the intervening holiday, the opinion has been entered on the
    docket by the Clerk this day.
    2
    ________________
    OPINION
    ________________
    VANASKIE, Circuit Judge.
    Appellant John Simpson appeals the District Court’s
    order granting summary judgment for Appellees and affirming
    the Bureau of Alcohol, Tobacco, Firearms & Explosives’
    (“ATF”) revocation of his federal firearms licenses (“FFLs”).
    After an annual compliance investigation, the ATF determined
    that Simpson had committed over 400 willful violations of the
    Gun Control Act of 1968, 18 U.S.C. § 921 et seq. (“GCA”),
    and therefore revoked his FFLs pursuant to 18 U.S.C. § 923(e)
    and 27 C.F.R. § 478.73. After an administrative hearing, the
    ATF affirmed its revocation decision and Simpson filed a
    petition for judicial review under 18 U.S.C. § 923(f)(3). The
    District Court, adopting a Magistrate Judge’s report and
    recommendation, granted summary judgment in favor of the
    ATF. For the following reasons, we will affirm.
    Simpson’s appeal presents us with the question of what
    standard to apply to determine whether a violation of the GCA
    was willful, an issue we have not yet addressed in a
    precedential opinion. In a non-precedential opinion, we found
    persuasive the willfulness standard used by seven other
    circuits: knowledge of a legal obligation and purposeful
    disregard or plain indifference to it. Taylor v. Hughes, 548 F.
    App’x 822, 824 (3d Cir. 2013) (citing Borchardt Rifle Corp. v.
    Cook, 
    684 F.3d 1037
    , 1042 n.9 (10th Cir. 2012) (listing cases)).
    Agreeing with the unanimous view of all the Courts of Appeals
    to have addressed this issue, we now hold in this precedential
    3
    opinion that this willfulness standard applies to violations of
    the GCA. Because it is clear that Simpson knew of and was
    plainly indifferent to his obligations by committing hundreds
    of GCA violations, we will affirm the District Court’s ruling.
    I.
    Simpson applied for a dealer’s FFL in 2010, which
    prompted an ATF interview. During the interview, ATF
    representatives discussed Simpson’s legal responsibilities and
    obligations as a firearms dealer, covering topics such as
    acquisition and disposition (“A&D”) recordkeeping, sales to
    law enforcement, out-of-state gun sales, prohibited sales,
    consignment of firearms, and personal firearms. At the end of
    the meeting, Simpson signed an Acknowledgement of Federal
    Firearms Regulations, certifying that he understood his
    responsibility to learn and follow all laws and regulations
    governing his FFL. Simpson subsequently received an FFL
    and opened a firearms store, Warrior Ridge Trading
    In 2011, Simpson attended a seminar for FFL holders,
    where ATF officials discussed federal firearms regulations and
    showed sample Firearms Transaction Records. In 2012, after
    consulting with the ATF about his desire to assemble AR-15
    rifles, Simpson applied for an additional FFL to manufacture
    firearms. ATF officials met with him and discussed the legal
    responsibilities associated with a manufacturer’s license,
    including the duty to mark all manufactured firearms and to
    keep a separate manufacturing A&D book. Simpson again
    signed an acknowledgement form certifying that he understood
    his legal obligations under his additional FFL.
    In February 2014, Simpson applied to relocate his FFLs
    because he planned to move his firearms store to another
    4
    location. An ATF Industry Operations Inspector (“IOI”) met
    with him and discussed his application. Simpson once again
    signed a form acknowledging that he understood his
    responsibilities and obligations under the GCA.
    In April 2014, ATF conducted a compliance inspection
    of Simpson’s FFLs pursuant to 18 U.S.C. § 923(g)(1)(C). ]
    According to IOI Susan Whitman, this inspection “was the
    worst [she] ever conducted,” and, based upon her report, the
    ATF decided to revoke Simpson’s FFLs. (App. I 7). Simpson
    requested a review of the revocation decision pursuant to 18
    U.S.C. § 923(f)(2) and 27 C.F.R. § 478.74. After a hearing,
    ATF Director of Industry Operations (“DIO”) Juan Orellana
    found that Simpson had committed over 400 willful violations
    of the GCA. As summarized by the Magistrate Judge, these
    violations include:
    [S]elling or delivering multiple
    firearms without having completed
    Firearm Transaction Records,
    ATF Forms 4473, and without
    Simpson making the required
    entries in his [A&D] Book;
    transferring firearms without
    conducting background checks;
    dealing firearms at the Alexandria
    Sportsman’s Club and in West
    Virginia without obtaining a
    license to do so; selling or
    delivering     firearms,    firearm
    frames, or firearm receivers in
    seven instances to individuals who
    did not live in Pennsylvania;
    incorrectly identifying in multiple
    5
    instances the firearms that had
    been transferred; failing to identify
    and mark 14 firearms that he
    manufactured, and failing to make
    the required records for those
    manufactured firearms; failing to
    record the disposition of five
    firearms to other licensees; failing
    to record the record of disposition
    of 30 firearms to non-licensees;
    failing on over 70 occasions to
    record required information in his
    A&D        Book;       failing     in
    approximately 200 instances to
    record information on ATF Forms
    4473; failing to appropriately sign
    and date ATF Form 4473 in dozens
    of cases to indicate that he did not
    have reasonable cause to believe
    that a transferee was disqualified
    from receiving a firearm; and
    failing to submit an Annual
    Firearms Manufacturing and
    Exportation Report (ATF Form
    5300.11) in 2012 and 2013.
    (App. I 7-8; see also App. II 137-98). As such, the ATF issued
    final revocation notices to Simpson.
    Simpson then filed a petition for judicial review and
    moved for an emergency stay of the revocation of his FFLs.
    The District Court denied his motion, finding that Simpson was
    unlikely to “succe[ed] on the merits, given the numerosity and
    types of violations,” and because the court was not “persuaded
    6
    by [Simpson’s] contention that he was inadequately trained by
    [the ATF].” (App. 9). The case was then referred to a
    Magistrate Judge for pretrial management. Upon completion
    of discovery, the parties filed cross-motions for summary
    judgment.
    Addressing the cross-motions in a Report and
    Recommendation, the Magistrate Judge concluded that the
    ATF was authorized to revoke Simpson’s FFLs because he had
    willfully committed over 400 violations of the GCA. (App. I
    33-34).     The District Court adopted the report and
    recommendation in its entirety, and thus granted summary
    judgment for the ATF and affirmed its revocation of Simpson’s
    FFLs. Simpson’s timely appeal followed.
    II.
    The District Court had jurisdiction to review the ATF’s
    revocation decision under 18 U.S.C. § 923(f), 5 U.S.C. § 702,
    and 28 U.S.C. § 1331. We have appellate jurisdiction pursuant
    to 28 U.S.C. § 1291. We exercise de novo review over the
    District Court’s grant of summary judgment. See, e.g., Kelly
    v. Borough of Carlisle, 
    622 F.3d 248
    , 253 (3d Cir. 2010). A
    grant of summary judgment is warranted “if the movant shows
    that there is no genuine dispute as to any material fact and the
    movant is entitled to judgment as a matter of law.” Fed. R.
    Civ. P. 56(a). Further, an administrative record “enjoys a
    presumption of veracity” at summary judgment. Am. Arms
    Int’l v. Herbert, 
    563 F.3d 78
    , 86 n.12 (4th Cir. 2009) (citation
    omitted).
    7
    III.
    Under the GCA, the ATF may revoke an FFL if the
    license holder willfully violated any provision of the GCA or
    any rule or regulation prescribed under the GCA. 18 U.S.C.
    § 923(e); see also 27 C.F.R. § 478.73. “A single willful
    violation [of the GCA] authorizes the ATF to revoke the
    violator’s FFL, regardless of how severe . . . .” Fairmont Cash
    Mgmt., L.L.C. v. James, 
    858 F.3d 356
    , 362 (5th Cir. 2017).
    Thus, in the GCA context, our review of the District Court’s
    grant of summary judgment requires us to determine whether
    there was no genuine dispute as to any material fact
    establishing even one willful violation of the GCA. See Am.
    
    Arms, 563 F.3d at 86
    (noting that “a single uncontested
    violation suffices to uphold” summary judgment for the ATF
    (citing Armalite, Inc. v. Lambert, 
    544 F.3d 644
    , 649 (6th Cir.
    2008))).
    Eight other Courts of Appeals have held that a violation
    of the GCA is willful where the licensee knew of his legal
    obligation and purposefully disregarded or was plainly
    indifferent to the requirements. See Borchardt 
    Rifle, 684 F.3d at 1042
    ; Fairmont Cash 
    Mgmt., 858 F.3d at 362
    ; 
    Armalite, 544 F.3d at 647
    ; RSM, Inc. v. Herbert, 
    466 F.3d 316
    , 317 (4th Cir.
    2006); Article II Gun Shop, Inc. v. Gonzales, 
    441 F.3d 492
    , 497
    (7th Cir. 2006); Willingham Sports, Inc. v. ATF, 
    415 F.3d 1274
    ,
    1277 (11th Cir. 2005); Perri v. ATF, 
    637 F.2d 1332
    , 1336 (9th
    Cir. 1981); Lewin v. Blumenthal, 
    590 F.2d 268
    , 269 (8th Cir.
    1979). We find this definition of willfulness to be appropriate.
    Indeed, this standard mirrors the willfulness standard we have
    applied in the parallel context of ATF revocations of fireworks
    and explosives licenses for violations of federal explosives
    laws. See Vineland Fireworks Co. v. ATF, 
    544 F.3d 509
    , 517–
    19 (upholding the ATF’s interpretation of willful because it
    8
    was reasonable).1 In Vineland, we upheld that willfulness
    “do[es] not require a bad purpose,” or an intent to disobey the
    law, but rather willfulness can be established by a mere
    “violation of the regulations with knowledge of their
    requirements.” 
    Id. Moreover, both
    parties in this case agree
    with this willfulness standard. Accordingly, we now join our
    sister circuits in holding that a violation of the GCA is willful
    where the licensee: (1) knew of his legal obligation under the
    GCA, and (2) either purposefully disregarded or was plainly
    indifferent to GCA requirements.
    Here, Simpson has been charged with willfully
    violating the GCA over 400 times. He contends that he did not
    fully understand his obligations and that any violations he
    committed were not willful, but due to mistake or ignorance.
    We disagree, as the record indicates that Simpson was well
    apprised of his duties under the GCA but continually violated
    GCA recordkeeping, manufacturing, and sales requirements.
    1
    In Vineland, we deferred to the ATF’s interpretation
    of willfulness under federal explosives law because we found
    it reasonable. See 
    Vineland, 544 F.3d at 518
    n.17. Our review
    of explosives licensing decisions is governed only by 5 U.S.C.
    § 706, so we apply Chevron deference to reasonable agency
    decisions. See 18 U.S.C. § 843(e)(2); see also Chevron,
    U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 
    467 U.S. 837
    (1984). In contrast, the GCA explicitly tasks courts with
    conducting de novo review of ATF licensing denials or
    revocations. See 18 U.S.C. § 923(f)(3). As such, we review
    district court decisions regarding ATF firearms licensing de
    novo. See, e.g., Willingham 
    Sports, 415 F.3d at 1275-76
    .
    9
    A.
    The record shows that Simpson was informed of his
    obligations as an FFL licensee. For example, Simpson met
    with ATF officials three times about his FFLs and, at the
    conclusion of each meeting, he signed a form acknowledging
    that he discussed various regulatory topics with the ATF. In
    addition, Simpson attended an ATF seminar for FFL holders
    where he learned more about his obligations under the GCA.
    The record also demonstrates that Simpson often
    complied with GCA requirements. On numerous occasions,
    Simpson lawfully sold firearms and fully completed the A&D
    recordkeeping required under the GCA. Also, he applied to
    relocate his FFL, demonstrating that he knew that he was only
    allowed to sell firearms from his approved FFL location. His
    full compliance with GCA requirements in some instances
    belies his assertion that he did not understand those
    requirements.
    Further, some of Simpson’s actions illustrate that he
    understood the GCA regulatory scheme quite well. For
    example, he sometimes transferred firearms from his FFL
    inventory to his personal collection, thereby taking advantage
    of a statutory loophole that allowed him to later sell the
    firearms at gun shows without conducting background checks.
    Such action is inconsistent with that of a person who does not
    understand the GCA regulatory scheme. Accordingly, we find
    that no reasonable fact-finder could disagree that Simpson
    knew and understood his GCA obligations as an FFL licensee.
    10
    B.
    In this case, the ATF has alleged that Simpson was
    plainly indifferent to the GCA’s requirements. We must
    therefore determine what constitutes plain indifference under
    the willfulness standard we have adopted.
    Plain indifference is demonstrated by “a lack of concern
    for [GCA] regulations. . . .” Am. Arms 
    Int’l, 563 F.3d at 87
    . A
    lack of concern may be shown by circumstantial evidence—
    such as repeated violations or a large quantity of violations.
    See, e.g., Borchardt 
    Rifle, 684 F.3d at 1043
    –44; Am. Arms
    
    Int’l, 563 F.3d at 87
    ; On Target Sporting Goods, Inc. v. Att’y
    Gen., 
    472 F.3d 572
    , 575 (8th Cir. 2007); RSM, 
    Inc., 466 F.3d at 322
    ; Willingham 
    Sports, 415 F.3d at 1277
    .
    The ATF charged Simpson with willfully violating a
    long list of separate provisions of the GCA under his
    manufacturer’s FFL, including, inter alia:
    (a) selling firearms without completing Form 4473s;
    (b) selling or delivering firearms without recording the
    disposition in his A&D book;
    (c) transferring      firearms   without     conducting
    background checks;
    (d) dealing firearms outside of his FFL premises;
    (e) selling or delivering firearms to non-Pennsylvania
    residents;
    (f) transferring      firearms    and    misidentifying
    corresponding A&D entries;
    (g) failing to identify and mark manufactured firearms;
    (h) failing to record the manufacture of firearms in his
    A&D book;
    11
    (i) failing to record dispositions of firearms to FFL
    holders and non-licensees;
    (j) failing to complete all fields of Form 4473s; and
    (k) failing to sign and date Form 4473s.
    (See App. I 8). Additionally, the ATF charged Simpson with
    willfully violating another series of provisions of the GCA
    under his dealer’s FFL. These include, inter alia:
    (a) selling firearms without completing Form 4473s;
    (b) selling or delivering firearms without recording the
    disposition in his A&D book;
    (c) transferring     firearms      without    conducting
    background checks;
    (d) selling firearms in West Virginia;
    (e) selling or delivering firearms to non-Pennsylvania
    residents
    (f) purchasing firearms without recording the purchases
    in his A&D book;
    (g) failing to complete all fields of Form 4473s; and
    (h) failing to sign and date Form 4473s.
    
    Id. Simpson contends
    that all of these violations either were
    mere mistakes or were due to his “fundamental
    misunderstanding as to the importance” of GCA recordkeeping
    requirements. (Appellant’s Br. 35). However, in view of the
    fact that Simpson received training on his obligations and
    explicitly acknowledged that he understood his GCA
    obligations, the sheer number and continuing nature of the
    violations clearly demonstrate Simpson’s plain indifference to
    the GCA’s requirements.
    12
    While there is no dispute that Simpson violated the
    GCA on numerous occasions, there is also evidence of other
    firearms transactions in which Simpson fully complied with
    GCA requirements by completing, signing, and dating Form
    4473s, recording the dispositions in his A&D book, and
    conducting background checks. This inconsistent conduct
    suggests both that Simpson knew of his obligations and was
    indifferent to complying with them. Moreover, there is
    evidence of blatant GCA violations. For example, Simpson
    routinely transferred receivers to out-of-state residents—in
    clear violation of the GCA—but falsely recorded the transfers
    as rifle sales in his A&D book, making these transactions
    appear lawful. Such behavior is indicative of Simpson’s lack
    of concern for his GCA obligations as an FFL holder.
    In sum, the record sufficiently shows that Simpson had
    knowledge of his FFL obligations, yet acted plainly
    indifferently to them, thus willfully violating the GCA.
    Accordingly, we find that the ATF was authorized to revoke
    Simpson’s FFLs.
    IV.
    For the foregoing reasons we will affirm the District
    Court’s grant of summary judgment in favor of the ATF,
    affirming its revocation of Simpson’s FFLs.
    13