Firestorm Pyrotechnics v. Dettelbach

Appellate Case: 21-9572 Document: 010110819629 Date Filed: 03/01/2023 Page: 1
FILED
United States Court of Appeals
Tenth Circuit
PUBLISH
March 1, 2023
UNITED STATES COURT OF APPEALS
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
FIRESTORM PYROTECHNICS,
INC.,
Petitioner,
v. No. 21-9572
STEVEN M. DETTELBACH, in his
official capacity as Director, Bureau
of Alcohol, Tobacco, Firearms and
Explosives and BUREAU OF
ALCOHOL, TOBACCO, FIREARMS
AND EXPLOSIVES,
Respondents.
_________________________________
On Petition for Review of an
Order from the Bureau of Alcohol, Tobacco, Firearms and Explosives
Docket No. BATF-1:9-UT-027-51-9G-00440
_________________________________
Dillon P. Olson of James Dodge Russell & Stephens, P.C., Salt Lake City,
Utah, for Petitioner.
Steven H. Hazel, Attorney (Brian M. Boynton, Principal Deputy Assistant
Attorney General; Abby C. Wright, Attorney; United States Department of
Justice; Pamela Hicks, Chief Counsel; Melissa Anderson, Associate Chief
Counsel; Bureau of Alcohol, Tobacco, Firearms and Explosives, with him on
the brief), Washington, District of Columbia, for Respondents.

Pursuant to Fed. R. App. P. 43(c)(2), Marvin G. Richardson is
replaced by Steven M. Dettelbach as Director of the Bureau of Alcohol,
Tobacco, Firearms and Explosives, effective July 13, 2022.
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_________________________________
Before CARSON, LUCERO, and ROSSMAN, Circuit Judges.
_________________________________
ROSSMAN, Circuit Judge.
_________________________________
Petitioner Firestorm Pyrotechnics, Inc. (“Firestorm”) seeks review of a
decision by the Acting Director (“Director”) of the Bureau of Alcohol, Tobacco,
Firearms and Explosives (“ATF” or “Bureau”) revoking Firestorm’s license to
import and sell fireworks. See 18 U.S.C. § 843(d). Firestorm challenges the
revocation decision, maintaining the Director misapplied the willfulness
standard in 27 C.F.R. § 771.42 and 27 C.F.R. § 771.5 and contending further
the Director’s decision is unsupported by substantial evidence. Exercising
jurisdiction under 18 U.S.C. § 843(e)(2), we deny the petition for review.
BACKGROUND1
Firestorm is a fireworks distribution and display company in Springville,
Utah. The company was founded in 2006 by Steven Shriber, who serves as
Firestorm’s President. A small, successful enterprise, Firestorm grew from a
company grossing about $70,000 a year to one conducting approximately
$1,000,000 in business annually. It has put on fireworks displays across Utah
1We draw the facts from the administrative record (“AR”), unless
otherwise noted.
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and neighboring states. Firestorm has four employees, including Mr. Shriber
and his son Scott Shriber.
Because Firestorm handles commercial-grade fireworks, federal law
requires the company to maintain an explosives license. 27 C.F.R.
§ 555.41(a)(1) (2023). As part of the licensure process, the ATF conducted an
initial qualification inspection of Firestorm on May 27, 2010. That same day,
Mr. Shriber signed an Acknowledgment of Federal Explosives Regulations
(“Acknowledgment”). The explosives regulatory regime is comprehensive, and
the Acknowledgment provided an index of federal regulations governing
licensure, including all of those at issue in this case. The Acknowledgment
stated the ATF investigator had “explained [the regulatory and compliance]
information to [Mr. Shriber].” AR at 476. Firestorm received its explosives
license in June 2010. AR at 4; 208.
In 2012, after an ATF license renewal inspection,2 Firestorm was cited
for failing to maintain accurate magazine inventories, in violation of
27 C.F.R. § 555.127. The ATF also identified a violation of 27 C.F.R.
§ 555.45(c)(1)(iv), requiring licensees to submit Employee Possessor
Questionnaires for all employees who will handle explosives. After the 2012
2 Federal law provides the ATF authority to conduct renewal and
compliance inspections of licensees. See 18 U.S.C. §§ 843(b)(4), (f).
Explosives licenses are valid for three-year periods. 27 C.F.R. § 555.51(b)
(2023).
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inspection, Firestorm signed another Acknowledgment certifying it would
“be responsible for familiarizing [it]self with all of the laws and regulations
governing [its] licensed/permitted business.” AR at 480.
A few years later, in 2016, the ATF conducted another renewal
inspection of Firestorm and again discovered compliance problems.
Firestorm was cited for violating the same magazine inventory regulation
as in 2012, 27 C.F.R. § 555.127. The ATF also determined Firestorm failed
to adhere to storage requirements for thousands of pounds of explosives,
violating 27 C.F.R. § 555.29; transferred explosives to unpermitted and
unlicensed entities in violation of 27 C.F.R. § 555.106(a); failed to file a
report for the theft or loss of explosive materials within 24 hours as required
by 27 C.F.R. § 555.30(a); and failed to maintain accurate acquisition records
of imported or acquired explosives, violating 27 C.F.R. § 555.122(b). After
the 2016 inspection, Firestorm signed a third Acknowledgement.
But this time, the ATF also warned Firestorm its explosives license
might be revoked. The ATF gave Firestorm a Notice of Contemplated Denial
of Renewal or Revocation of License or Permit (“Notice”), which formally
advised the company that license revocation was a possibility because the
Bureau had “reason to believe that Firestorm . . . willfully violated the
provisions of Chapter 40, Title 18, United States Code, and the regulations
issued thereunder, 27 C.F.R. Part 555.” AR at 496. The Notice provided
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summary details of the 2012 and 2016 inspections and the violations
identified by the ATF each time. The Notice further explained Firestorm
would have an opportunity to respond but that, even “after such response,”
the Bureau still had the authority to rescind Firestorm’s license. AR at 495.
After receiving the Notice, Firestorm “acknowledge[d] that certain
discrepancies and issues have been identified” and “recognize[d] its
obligation to fully comply with the regulations.” AR at 512. Firestorm
proposed measures to observe federal regulations going forward and
explained how its planned efforts were intended to ensure future
compliance. On June 15, 2017, after conferring with Steven and Scott
Shriber and Firestorm’s counsel about the violations and discussing
Firestorm’s proposed compliance efforts, the ATF chose not to pursue
license revocation. During that meeting, the ATF’s Denver Field Division
Director of Industry Operations “advised [Firestorm] that violations cited
during [the 2016] inspection were grounds for denial of the renewal
application.” AR at 526. The ATF warned Firestorm that, given its past
compliance problems, “future violations, repeat or otherwise, could be
viewed as willful [under 27 C.F.R. § 771.42] and may result in the denial of
the renewal application.” Firestorm was advised to “anticipate further
inspections to ensure [its] compliance.” AR at 529. Firestorm again signed—
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as it had in 2010, 2012, and 2016—an Acknowledgment of Federal
Explosives Regulations.
The ATF’s inspectors returned to conduct a compliance inspection in
June 2018.3 A three-day physical inventory at Firestorm’s facility in Delta,
Utah was followed by several months of follow-up investigation by ATF:
interviews with persons to whom Firestorm had distributed explosives;
assessments of storage practices at the Delta and Springville locations;
inventory recounts; and meetings with Steven and Scott Shriber. The ATF
found dozens of violations, including Firestorm’s failure to comply with the
same inventory, storage, and transfer requirements cited during past
inspections of its facility.
The Bureau issued Firestorm a Notice of Revocation on March 27,
2019. The Notice of Revocation said Firestorm “willfully violated” the law
and collected the alleged violations into fifteen Grounds for Revocation.
AR at 267-73. The ATF determined all fifteen violations were “willful”
3Before the ALJ and on appeal, Firestorm expressed frustration with
the timing of the 2018 inspection, which occurred in mid-June, weeks before
Independence Day, during “the busiest time of the year for Firestorm.”
AR at 441, 443; Appellant’s Br. at 12, 24. We can appreciate Firestorm’s
position. The ATF inspector “did not factor the impact of the inspection on
[Firestorm]’s business operations into her decision” to inspect at that time,
and the ATF did not prevent Firestorm from moving items from magazine
to magazine. AR at 433. We would be unsurprised to find these
circumstances complicating for both the company and the inspectors, but,
as we will explain, we do not pass on the inventory violations.
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under 27 CFR §§ 771.42 and 771.5. And nine of the fifteen grounds were
classified as repeat violations.4
4 The Grounds for Revocation, numbered I-XV, included:
I. Violations of 18 U.S.C. § 842(k) and 27 C.F.R. § 555.30(a)
(failure to report missing explosives);
II. Violations of 18 U.S.C. § 842(f) and 27 C.F.R. § 555.127 (failure
to maintain an accurate daily summary of magazine
transactions);
III. Violations of 18 U.S.C. § 842(f) and 27 C.F.R. § 555.122(b)(2)
(failure to record manufacturer name into acquisition records);
IV. Violations of 18 U.S.C. § 842(f) and 27 C.F.R. § 555.122(b)(3)
(failure to record manufacturer’s marks into acquisition
records);
V. Violations of 18 U.S.C. § 842(f) and 27 C.F.R. § 555.122(b)(4)
(failure to record correct quantity of explosives into acquisition
records);
VI. Violations of 18 U.S.C. § 842(f) and 27 C.F.R. § 555.122(b)(5)
(failure to record the description and size of acquired
explosives);
VII. Violations of 18 U.S.C. § 842(j) and 27 C.F.R. §§ 555.22(b)(3),
555.29 (failure to notify the ATF of emergency variances from
the requirements and temporary overnight storage);
VIII. Violations of 18 U.S.C. § 842(j) and 27 C.F.R. § 555.29 (failure
to properly store explosives);
IX. Violations of 18 U.S.C. § 842(f) and 27 C.F.R. § 555.122(b)(1)
(failure to record dates of explosives acquisitions);
X. Violations of 18 U.S.C. § 842(f) and 27 C.F.R. § 555.122(c)(1)
(failure to record dates of explosives dispositions);
XI. Violations of 18 U.S.C. § 842(f) and 27 C.F.R. § 555.122(c)(2)
(failure to record manufacturer’s brand name and country of
origin);
XII. Violations of 18 U.S.C. § 842(f) and 27 C.F.R. § 555.122(c)(3)
(failure to record manufacturer’s marks of transferred
explosives);
XIII. Violations of 18 U.S.C. § 842(f) and 27 C.F.R. § 555.122(c)(4)
(failure to record quantity of transferred explosives);
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Firestorm requested a hearing to contest the Notice of Revocation.
27 C.F.R. § 555.71 (2023); AR at 175. A three-day hearing was conducted by
an Administrative Law Judge (“ALJ”) in mid-September 2020. Ten
witnesses testified—seven for the Bureau, three for Firestorm. The burden
was on the ATF to prove, by a preponderance of the evidence, that Firestorm
was no longer entitled to an explosives license. See 27 C.F.R. § 771.80 (2023)
(“In hearings on the revocation . . . of a license or permit, the burden of proof
is on the Government to show that the Director of Industry Operations had
reason to believe that the licensee or permittee is not entitled to a permit
or license . . . . The Government must meet this proof by a preponderance
of the evidence.”); AR at 224.
Here, the grounds for the revocation were Firestorm’s alleged
“willful[] violation[s] [of] . . . 27 C.F.R. part 555,” the regulatory scheme
governing commerce in explosives. 27 C.F.R. § 771.42 (2023). The ATF
XIV. Violations of 18 U.S.C. § 842(f) and 27 C.F.R. § 555.122(c)(5)
(failure to record description and size of transferred explosives);
and
XV. Violations of 18 U.S.C. § 842(b) and 27 C.F.R. 555.106(a) (failure
to ensure explosives were transferred only to authorized
persons).
Grounds I, II, III, IV, V, VI, VIII, IX, and XV were identified as repeat
violations for which Firestorm had previously been cited after the 2016
inspection (and the 2012 inspection, in the case of Ground II). AR at 267-73.
Ground VII was withdrawn by the ATF during the agency proceedings. AR
at 15.
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emphasized “[o]ne willful violation is sufficient to justify” revocation under
27 C.F.R. § 771.42 and that willfulness does “not require a finding of bad
faith or motive.” AR at 177. According to the Bureau, it could satisfy its
burden of proof by showing Firestorm knew of, but was indifferent to, the
applicable law. Firestorm claimed there was no evidence to show any
violations resulted from its “purposeful disregard of known legal duties.”
AR at 196. According to Firestorm, it was “a small business . . . doing [its]
best to comply with the regulations.” AR at 196.
A few months later, in a written decision, the ALJ determined
Firestorm’s license should be revoked. Based on the evidence developed at
the hearing, the ALJ concluded Firestorm committed willful violations of
federal explosives regulations. According to the ALJ, Firestorm had
acknowledged its understanding of the law yet repeatedly violated its
known legal duties:
[S]ubstantial evidence has been developed in the hearing record
that establishes that the President and responsible person for
Firestorm was aware of the legal obligations, and purposely
disregarded them or was plainly indifferent to the
requirements. Moreover, the record has established a pattern of
repeated violations with knowledge of the law’s requirements.
Accordingly, it has been established that Firestorm willfully
violated provisions of Chapter 40 of the United States Code.
AR at 157.
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The Director, Industry Operations (“DIO”) then entered an order confirming
the revocation, see 27 C.F.R. § 555.76(b) (2023), and Firestorm timely
appealed to the Director of the ATF, see 27 C.F.R. § 555.79 (2023).5
In its appeal to the Director, Firestorm challenged the ALJ’s finding
of willfulness and claimed the government had denied the company an
opportunity to comply with the regulatory regime.
In August 2021, the Director affirmed the Bureau’s decision to revoke
Firestorm’s explosives license. Rejecting Firestorm’s contrary argument,
the Director concluded the ALJ “used the correct willfulness standard in
determining that Firestorm willfully” committed the violations. AR at 23.
The Director pointed to the applicable regulations’ “Meaning of terms”
provision, 27 C.F.R. § 771.5, which defined “willfulness” as “[t]he plain
indifference to, or purposeful disregard of, a known legal duty” which “may
be demonstrated by, but does not require, repeat violations involving a
known legal duty.” AR at 20.
5The federal explosives laws provide the Attorney General of the
United States the authority to revoke an explosives license if they believe
the licensee has violated any statute or regulation relating to the
importation, manufacture, distribution, and storage of explosives. 18 U.S.C.
§ 843(d). The Attorney General’s authority under this section has been
delegated to the Director of the ATF, 28 C.F.R. § 0.130(a)(1) (2023), who, in
turn, has delegated revocation authority to the DIO, 27 C.F.R. §§ 555.71-
555.83 (2023).
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The Director referenced, too, well-developed explosives and firearms
caselaw invoking this same willfulness standard. Here, the Director
observed “Firestorm knew of its recordkeeping and storage obligations;
Steven Shriber, on behalf of Firestorm, acknowledged he understood the
Federal explosives laws and regulations on four separate occasions, in 2010,
2012, 2016 and 2017.” AR at 23. The record showed, despite the many
instances where Firestorm acknowledged its awareness and understanding
of the governing federal explosives regulations, the company violated the
law, including repeatedly violating many of the same regulations. Firestorm
asserted its “ongoing, reasonable, and good-faith efforts to comply” should
be factored into, and negate, the willfulness determination. The Director
acknowledged Firestorm’s compliance efforts but concluded they were
“wholly irrelevant” to whether Firestorm’s violations of federal explosives
regulations demonstrated “willfulness” under the regulatory regime. AR at
22, 25-27. The Director upheld the revocation.
Firestorm timely petitioned for review in this court.
STANDARD OF REVIEW
We review the Director’s revocation under the Administrative
Procedure Act (“APA”). See 18 U.S.C. § 843(e)(2) (providing for “judicial
review of [the ATF’s] denial or revocation, pursuant to sections 701-706 of
title 5, United States Code”). “The APA requires courts to consider agency
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action in conformity with the agency’s statutory grant of power, and agency
action is unlawful if it is ‘in excess of statutory jurisdiction, authority, or
limitations, or short of statutory right.’” Sinclair Wyo. Refin. Co. v. EPA,
887 F.3d 986, 990 (10th Cir. 2017) (quoting 5 U.S.C. § 706(2)(C)); cf.
Vineland Fireworks Co. v. Bureau of Alcohol, Tobacco, Firearms &
Explosives, 544 F.3d 509, 514 (3d Cir. 2008) (“We review the decision using
the judicial standards of review set forth in 5 U.S.C. § 706.”).
Review under the APA requires a “searching but careful” inquiry into
the basis for the agency’s action, but our review is “ultimately a narrow
one.” Maier v. EPA, 114 F.3d 1032, 1039 (10th Cir. 1997). We will not
displace an agency action “unless it is procedurally defective, arbitrary or
capricious in substance, or manifestly contrary to the statute.” U.S.
Magnesium, LLC v. EPA, 690 F.3d 1157, 1164 (10th Cir. 2012) (internal
quotation marks and citations omitted).
DISCUSSION
Firestorm advances two appellate challenges to the Director’s decision
to revoke its explosives license. First, Firestorm argues the Director
misapplied the willfulness standard in 27 C.F.R. § 771.42. Second,
Firestorm contends the Director’s revocation order is not supported by
substantial evidence. We reject both arguments.
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I
The Director Did Not Misapply The Willfulness Standard
In 27 C.F.R. § 771.42.
Federal law provides anyone who seeks to import, manufacture, or
deal in explosives must maintain a license. 18 U.S.C. § 843(a), (b). As a
condition of licensure, each explosives dealer must follow ATF regulations.
Id. § 843(d). If a licensee “willfully violate[s]” any federal explosives
regulation, the ATF may revoke its license. 27 C.F.R. § 771.42 (2023); see
18 U.S.C. § 843(d).
Firestorm contends the Director’s application of the willfulness
standard was erroneous, so our review must begin with the meaning of
“willful” used in 27 C.F.R. § 771.42 and defined in 27 C.F.R. § 771.5. Where,
as here, we review an agency’s interpretation of its own regulation, we apply
the framework described in Kisor v. Wilkie, 139 S. Ct. 2400 (2019). Under
Kisor, we ask first whether the regulations involved are “genuinely
ambiguous”; if so, we will defer to an agency’s reasonable interpretation.
139 S. Ct. at 2415. If we discern no genuine ambiguity, we go no further,
and the “regulation then just means what it means—and the court must
give it effect, as the court would any law.” Id.
Here, the regulations provide the ATF may revoke the explosives
license or permit of any holder that the agency has “reason to believe . . .
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has willfully violated any provision of 18 U.S.C. chapter 40 or 27 C.F.R. part
555.” 27 C.F.R. § 771.42 (2023). “Willfulness” is defined as “[t]he plain
indifference to, or purposeful disregard of, a known legal duty. Willfulness
may be demonstrated by, but does not require, repeat violations involving
a known legal duty.” 27 C.F.R. § 771.5 (2023).
Applying Kisor, we first ask if there is any “genuine ambiguity” in the
definition of “willfulness” in 27 C.F.R. § 771.5. Neither party contends there
is any genuine ambiguity.6 And we likewise see nothing ambiguous about
the definition of willfulness in § 771.5. The agency specifically defined
willfulness in its regulations and did so in a manner consistent with
accepted common meaning. See Willfulness, Black’s Law Dictionary
(11th ed. 2019) (“1. The quality, state, or condition of acting purposely or by
design; deliberateness; intention. Willfulness does not necessarily imply
malice, but it involves more than just knowledge. 2. The voluntary,
intentional violation or disregard of a known legal duty.”). Accordingly,
“willful,” as defined in 27 C.F.R. § 771.5 and used in 27 C.F.R. § 771.42, is
unambiguous—it “just means what it means.” Kisor, 139 S. Ct. at 2415.
6 At oral argument, Petitioner confirmed Firestorm was not
contending any ambiguity exists in the meaning of willfulness as defined in
27 C.F.R. § 771.5.
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We next examine whether the Director’s understanding of willful, as
applied here, correctly adhered to the unambiguous definition provided by
law. Reviewing the ALJ’s decision, the Director determined, “the record
establishes a pattern of repeated violations with knowledge of the law’s
requirements. As such, I find [the ALJ] properly concluded that those
violations were willful.” AR at 25.
We conclude the Director used the correct willfulness standard from
27 C.F.R. § 771.5 in applying 27 C.F.R. § 771.42. The Director explained the
willfulness standard required “plain indifference to, or intentional
disregard of, a known legal duty.” AR at 19-20. This tracks nearly verbatim
the language in 27 C.F.R. § 771.5, which defines willfulness as “[t]he plain
indifference to, or purposeful disregard of, a known legal duty.” The
Director correctly understood and faithfully applied the definition provided
by the appropriate regulations; therefore, we cannot describe the Director’s
application of the regulation as “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A).
The Director’s understanding of willfulness in the context of federal
explosives law also comports with our analogous firearms caselaw
addressing similar regulations promulgated by the ATF. For example, in
CEW Properties v. U.S. Department of Justice, 979 F.3d 1271, 1279 (10th
Cir. 2020), which involved a challenge to the ATF’s revocation of a firearms
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dealer’s license, we explained, “[f]or a violation to be willful, [the licensee]
must have (1) known and (2) been plainly indifferent to its legal
obligations.” And in Borchardt Rifle Corp. v. Cook, 684 F.3d 1037, 1042
(10th Cir. 2012), which involved the Bureau’s interpretation of the Gun
Control Act, we held “the willfulness requirement [of the similar Gun
Control Act] is met by plain indifference toward known legal obligations.”
Our sister circuits have endorsed an analogous understanding of willfulness
in the explosives and firearms-licensing context. Vineland, 544 F.3d at 518(applying the same “willfulness” standard in firearms and explosives
regulations); DCV Imps. v. Bureau of Alcohol, Tobacco, Firearms &
Explosives, 838 F.3d 914, 917 (7th Cir. 2016) (same).
We thus discern no error in the Director’s understanding and
application of the willfulness standard. Firestorm makes several contrary
arguments, but none is persuasive.
First, Firestorm contends the company’s compliance efforts refute a
finding of willfulness as a matter of law. This argument is unavailing.
The agency record confirms the Director acknowledged Firestorm
attempted to comply with federal explosives regulations but concluded, in
this case, compliance efforts were “irrelevant” to determining willfulness
under 18 U.S.C. § 843(b)(2) and (d) and 27 C.F.R. § 771.42. AR at 22 (citing
Vineland, 544 F.3d at 519). The Director did not err.
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What Firestorm appears to read into the regulation is a rule obliging
the Director to perform a balancing test where proof of compliance efforts
necessarily “negates” a finding of willfulness. Appellant Br. at 20-23.
Firestorm has cited no authority to support its position. And nothing in 27
C.F.R. § 771.42 aligns with Firestorm’s interpretation. It is true a different
regulation, 27 C.F.R. § 555.71, guarantees licensees “an opportunity to
demonstrate or achieve compliance with all lawful requirements.” But that
regulation, as the Director and the Bureau observed, begins with the
carveout, “[e]xcept in cases of willfulness.” 27 C.F.R. § 555.71 (2023); AR
25-28; Appellee Br. at 2. This suggests the compliance inquiry—one focused
on potential future compliance—is distinct from the willfulness
determination—one oriented toward past action.7 In other words, a licensee
7We find persuasive the Third Circuit’s reasoning, cited by the
Director:
[The willfulness] determination is not based on the future
conduct of the licensee, i.e., whether it will ‘willfully violate’ the
laws, and it is not based on a combination of the past, present,
and future conduct of the licensee, i.e., whether the licensee has
‘willfully violated’ the laws, is continuing to ‘willfully violate’
the laws, and will ‘willfully violate’ the laws tomorrow. Instead,
the inquiry turns on the past conduct of the licensee. Based on
[the] statutory language, the Director’s conclusion—that the
likelihood that the licensee will correct the violations is not
relevant to whether the licensee has ‘willfully violated’ the
regulations—is reasonable.
AR at 20 (quoting Vineland, 544 F.3d at 519) (internal citations omitted).
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accused of willful violations—like Firestorm—is not guaranteed an
opportunity for compliance under 27 C.F.R. § 555.71.8 We thus cannot find
it was legal error for the Director to determine, notwithstanding its
compliance efforts, Firestorm was indifferent to, or intentionally
disregarded, a known legal duty.
Next, Firestorm continues to emphasize it “has never been accused of
engaging in deliberate wrongdoing, let alone found to have been engaged in
intentional misconduct.” Appellant Br. at 1. We agree with Firestorm: the
record does not support it engaged in intentional wrongdoing. But as the
Director correctly observed, willfulness for license revocation purposes does
not demand bad intent. AR at 20 (quoting DCV Imps., 838 F.3d at 917 (“[N]o
showing of bad purpose or evil motive is required to establish willfulness,
and no de minimis exception is available.”)). What willfulness does require
is indifference to, or disregard of, a known legal duty; and willfulness “may
be demonstrated by, but does not require, repeat violations of a known legal
duty.” 27 C.F.R. § 771.5 (2023). Here, the Director observed Firestorm had
confirmed the existence of its legal duties and understood its obligation to
comply on four separate occasions. The Director also pointed out many of
8Certainly, there are occasions when compliance efforts will be
relevant. See 27 C.F.R. § 555.71. In any case, Firestorm was afforded
opportunities for compliance following the 2012 and 2016 inspections.
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the fifteen Grounds for Revocation identified by the ATF in 2018 involved
repeat violations of the very regulatory provisions for which Firestorm was
cited after previous inspections.
Firestorm is correct “a licensee’s repeated violations . . . do not
necessarily compel a finding of willfulness as a matter of law.” Appellant
Br. at 20-21 (quoting Jim’s Pawn Shop, Inc. v. Bowers, No. 7:05-cv-142, 2008
WL 11380095, at *2 (E.D.N.C. Jan. 2, 2008)). Though repeated violations of
federal explosives regulations do not “compel” a finding of willfulness under
27 C.F.R. § 771.42, the regulatory scheme provides that repeated regulatory
violations may demonstrate willfulness. See 27 C.F.R. § 771.5 (2023).
The Director correctly understood that under 27 C.F.R. § 771.42 and
27 C.F.R. § 771.5 willfulness means disregarding or behaving with
indifference to known legal duties and may be evidenced by repeated
violations of federal explosives regulations. We thus reject Firestorm’s
contention that the Director misapplied the willfulness standard.
II
The Director’s Decision Is Supported By Substantial Evidence.
We next consider Firestorm’s claim that the Director’s revocation
decision is unsupported by substantial evidence. “For the evidence to be
‘substantial,’ the agency’s record must contain enough facts supporting the
decision that a ‘reasonable mind’ could accept it as ‘adequate to support
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[the] conclusion.’” Blanca Tel. Co. v. FCC, 991 F.3d 1097, 1120 (10th Cir.
2021) (alteration in original) (quoting Olenhouse v. Commodity Credit
Corp., 42 F.3d 1560, 1581 (10th Cir. 1994)). Our review for substantial
evidence proceeds under a “highly deferential” standard, Wiransane v.
Ashcroft, 366 F.3d 889, 897 (10th Cir. 2004), and asks only whether the
Bureau’s evidence meets the threshold of “more than a scintilla but less
than a preponderance.” U.S. Cellular Tel. of Greater Tulsa, LLC v. City of
Broken Arrow, 340 F.3d 1122, 1133 (10th Cir. 2003) (internal quotations
omitted). “We will uphold the agency’s conclusion that [the licensee] acted
willfully if it is supported by substantial evidence.” DCV Imps., 838 F.3d
at 917.
The Director observed, “it only takes one willful violation to sustain a
revocation.” AR at 11 n.6. Before this court, the ATF invites us to deny
Firestorm’s petition on the storage violations alone. Appellee Br. at 18-19
(citing 27 C.F.R. § 555.29). According to the Bureau, “Firestorm’s leaders
worked at a site ‘littered’ with ‘active explosives’—yet failed to secure them.
It is difficult to imagine a clearer case of ‘plain indifference to . . . a known
legal duty.’” Id. (quoting AR at 172, 1249; 27 C.F.R. § 771.5). Firestorm,
however, contends remand is required unless we affirm the Director on
every violation.
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We agree with the ATF. The plain language of 18 U.S.C. § 843(d)
permits revocation if the agency finds a willful violation of “any rule or
regulation,” (emphasis added), and 27 C.F.R. § 771.42 provides for
revocation “[w]henever the [Director] has reason to believe that any holder
of a license or permit has willfully violated any provision of 18 U.S.C.
chapter 40 or 27 C.F.R. part 555 . . .” (emphasis added). We thus review for
substantial evidence only the Director’s determination that Firestorm
willfully violated the regulatory provision governing storage requirements
in 27 C.F.R. § 555.29, which commands “No person shall store any explosive
materials in a manner not in conformity with this part [555].”9
Under 27 C.F.R. § 771.5, willful violations sufficient to warrant
license revocation may be shown by “repeat violations involving a known
legal duty.” We therefore ask whether substantial evidence supports the
Director’s determination that Firestorm committed “repeat violations” of
27 C.F.R. § 555.29 and whether these repeat violations “involve[d] a known
legal duty.”
9 We thus need not, and do not, pass on the alleged inventory,
acquisition, or transfer violations. Because we affirm on the storage
violations, even if we were to reach and find unlawful the Director’s
decisions on the inventory, acquisition, and transfer violations, we would
still be compelled to deny the petition.
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First, the agency record confirms Firestorm repeatedly stored
explosive material not in conformity with the storage requirements in
27 C.F.R. § 555.29. In 2016 and 2018, the ATF inspected Firestorm and
found unsecured “quick match remnants, igniters, and display shells” and
“strewn about” explosives in the garbage, “under the [loading] dock” and
outside magazines. Both times, Firestorm was cited for violating 27 C.F.R.
§ 555.29. AR at 230, 503, 512, 1244-49. After the 2016 inspection, the
citation identified four instances of § 555.29 violations involving hundreds
of cases of fireworks containing over nine tons of explosives and thousands
of igniters. And in 2018, the citation included eight instances of § 555.29
violations involving at least sixty pounds of explosives and thousands of
igniters.
Second, the agency record further confirms Firestorm knew of its legal
duty to comply with the storage requirements mandated by federal
explosives law. By the time of the 2018 inspection, it had signed four
Acknowledgments of Federal Explosives Regulations. These
Acknowledgments specifically alerted Firestorm to its federally mandated
legal duty concerning storage of explosive material and, in signing these
Acknowledgments, Firestorm certified its “responsib[ility] for familiarizing
[itself] with all of the laws and regulations” governing its business. AR
at 494. After the 2016 inspection, when it was cited for violating 27 C.F.R.
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§ 555.29, Firestorm “acknowledge[d] that certain discrepancies and issues
ha[d] been identified . . . [and] recognize[d] its obligation to fully comply
with the regulations” of which it was indisputably aware. AR at 512.
We thus conclude substantial evidence supports the Director’s
findings that Firestorm knew of its obligation to store explosives in
accordance with 27 C.F.R. § 555.29, that Firestorm repeatedly violated
these regulatory storage requirements, and that these repeated violations
were willful.
CONCLUSION
We are sympathetic to Mr. Shriber, his employees, and the manifold
challenges faced by small businesses like Firestorm. The governing law,
however, confines us to a careful, but narrow, review of the basis for the
agency’s action. Under 5 U.S.C. § 706, we may ask only whether the
Director’s revocation decision was in accordance with law and supported by
substantial evidence. Finding it was, we DENY Firestorm’s petition for
review of the Director’s order.
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