Vineland Fireworks v. Bur Alcohol Tobacco

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
10-10-2008
Vineland Fireworks v. Bur Alcohol Tobacco
Precedential or Non-Precedential: Precedential
Docket No. 07-2381
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-2381
VINELAND FIREWORKS CO., INC.,
Petitioner
v.
BUREAU OF ALCOHOL, TOBACCO,
FIREARMS & EXPLOSIVES
On Petition for Review from an
Order of the United States Department of Justice
Bureau of Alcohol, Tobacco, Firearms and Explosives
(Nos. 8-NJ-011-50-6D-00010 and 8-NJ-011-24-4F-00196)
Argued June 3, 2008
Before: FISHER and JORDAN, Circuit Judges,
and YOHN,* District Judge.
*
The Honorable William H. Yohn Jr., United States
District Judge for the Eastern District of Pennsylvania, sitting by
designation.
(Filed: October 10, 2008)
Don P. Foster (Argued)
Klehr, Harrison, Harvey, Branzburg & Ellers
260 South Broad Street, Suite 400
Philadelphia, PA 19102
Attorney for Petitioner
Kelsi B. Corkran (Argued)
United States Department of Justice
Appellate Section
950 Pennsylvania Avenue, N.W.
Washington, DC 20530
Mark B. Stern
United States Department of Justice
Civil Division, Appellate Staff
601 D Street, N.W.
Washington, DC 20530
Attorneys for Respondent
OPINION OF THE COURT
FISHER, Circuit Judge.
Vineland Fireworks Co., Inc. (“Vineland”) appeals the
decision of the Acting Director (“Director”) of the Bureau of
Alcohol, Tobacco, Firearms & Explosives (“ATF”) to revoke its
2
license to manufacture fireworks and to deny its application for
the renewal of its license to import fireworks. The Director
found that Vineland’s failure to keep records of its daily
summary of magazine transactions on thirty-six occasions over
the course of many months constituted a willful violation of 18
U.S.C. § 842(f) and 27 C.F.R. § 555.127. We hold that the
Director’s interpretation of “willful” is reasonable, and
substantial evidence supports its finding that Vineland “willfully
violated” the above provisions. For the reasons that follow, we
will deny the petition for review of the Director’s order.
I.
Vineland is a fireworks manufacturer and distributor
owned and operated by Rose Pacitto with locations in Vineland,
New Jersey and Coamo, Puerto Rico. Vineland applied for and
became licensed by ATF in March 2000. For approximately
eleven years prior to her application, Pacitto worked at
Fireworks by Girone, a fireworks manufacturer and distributor
owned and operated by Felix Girone, Pacitto’s former husband.
Fireworks by Girone operated out of the same site that later
became Vineland.
In 1999, the United States Attorney for the District of
New Jersey indicted Fireworks by Girone for knowingly and
willfully manufacturing explosive materials without keeping
proper records, in violation of 18 U.S.C. §§ 2, 842(f), and
844(a). The indictment stemmed from ATF inspections in 1995
and 1996, in which inspectors found that Fireworks by Girone
had manufactured thousands of explosive devices without
record and had improperly stored the devices. The investigators
3
discussed the violations with Pacitto at that time because the
company’s federal explosives license listed her as a “responsible
person.” 1 Fireworks by Girone pleaded guilty to the charge, and
Pacitto (then as Rose Girone) signed the plea agreement.
Subsequently, ATF revoked Fireworks by Girone’s license.
In November 2000, after Fireworks by Girone’s license
was revoked and Pacitto had begun operating on the site under
the new license for Vineland, ATF contacted Pacitto and
informed her of its earlier inspection of Fireworks by Girone in
July 1999 and the violations it found. In particular, these
violations included “failure to maintain records of the daily
magazine transactions for explosives” for approximately a two-
week period in violation of 27 C.F.R. § 555.127. On
December 20, 2000, ATF and Pacitto met to discuss these
violations, and ATF instructed Pacitto on the requirements for
compliance with federal explosives law.2
1
A “responsible person” is “[a]n individual who has the
power to direct the management and policies of the applicant
pertaining to explosive materials.” 27 C.F.R. § 555.11.
2
Neither the Administrative Law Judge, nor the Director,
attributed the July 1999 violations to Vineland.
4
On July 2, 2003,3 ATF conducted a safety walk-through
inspection of Vineland, and it cited Vineland for two violations:
(1) pre-loading trucks with explosives without a pre-loading
variance; and (2) improperly storing fireworks. On July 2, 2004,
ATF again conducted a safety walk-through inspection of
Vineland, and it cited Vineland for three violations: (1) pre-
loading trucks with explosives without a pre-loading variance;
(2) improperly storing fireworks and high explosive bulk
salutes; and (3) failing to keep proper records of fireworks and
salutes. Pacitto signed the violations report, and on August 4,
2004, she met with ATF to discuss the violations in a “warning
conference.” Subsequently, ATF sent Pacitto a letter, stating:
“You are reminded that future violations, repeat or otherwise,
could be viewed as willful and may result in the revocation of
your license.”
On October 13, 2004, ATF again conducted a safety
walk-through inspection of Vineland. The ATF inspectors
found a number of violations, and on August 22, 2005, the
Director of Industry Operations (“DIO”) for the Philadelphia
Field Division of ATF issued a notice of revocation of
Vineland’s license to manufacture explosives pursuant to 18
U.S.C. § 843(d). The DIO also issued a notice denying
3
ATF inspectors visited Vineland in October 2001 and
December 2002, but did not issue citations. ATF and Vineland
argue as to whether these inspections were full inspections of
Vineland’s premises, but this dispute is irrelevant to our
resolution of this appeal.
5
Vineland’s application for a renewal of its license to import
fireworks pursuant to 18 U.S.C. § 843(b).
On July 25, 2005, ATF inspectors conducted a safety
walk-through inspection of Vineland’s facility in Puerto Rico
and found a number of additional violations. On December 2,
2005, the DIO amended the notices to include these additional
violations. The amended notices set forth thirteen violations,
each of which charged that Vineland had “willfully failed” to
comply with federal laws and ATF regulations. We summarize
the charged violations as follows:
(1) Willful failure to properly store
explosive materials in violation of 18 U.S.C.
§ 842(j) and 27 C.F.R. §§ 555.29, 555.201,
555.203(d), 555.210, and 555.215. Vineland
stored twenty-five pounds of deteriorated stars in
a trailer that also contained deteriorated
chemicals, and the trailer was not an approved
type 4 magazine.
(2) Willful failure to properly store
explosive materials in violation of 18 U.S.C.
§ 842(j) and 27 C.F.R. §§ 555.29 and 555.224.
Vineland had three magazines within 200 feet of
the trailer in count (1) and less than 300 feet from
a road.
(3) Willful failure to properly store
explosive materials in violation of 18 U.S.C.
§ 842(j) and 27 C.F.R. §§ 555.29, 555.210, and
6
555.215. On October 13, 2004, Vineland did not
have “adequate locks, hoods[,] and hinges” on its
storage containers.
(4) Willful failure to properly maintain
records in violation of 18 U.S.C. § 842(f) and 27
C.F.R. § 555.127. Between July 2, 2003 and
October 13, 2004, Vineland did not state the
method it used to count explosive materials on ten
occasions in its daily summary of magazine
transactions.
(5) Willful failure to properly maintain
records in violation of 18 U.S.C. § 842(f) and 27
C.F.R. § 555.127. On six occasions between
July 1, 2004 and October 13, 2004, Vineland
failed to enter the manufacturer’s name or brand
name of explosive materials, the total quantity of
materials received in and removed from each
magazine during the day, and the total remaining
quantity at the end of the day in its daily summary
of magazine transactions.
(6) Willful failure to properly maintain
records in violation of 18 U.S.C. § 842(f) and 27
C.F.R. § 555.127. On thirty occasions between
January and August 2004, Vineland committed
the same violation as in count (5).
(7) Willful failure to properly maintain
records in violation of 18 U.S.C. § 842(f) and 27
7
C.F.R. § 555.109(a). Between July 2, 2003 and
October 13, 2004, Vineland did not properly mark
12 cannon shots with the correct name and
location of the manufacturer.
(8) Willful failure to properly maintain
records in violation of 18 U.S.C. § 842(f) and 27
C.F.R. § 555.123(b). Between July 2, 2003 and
October 13, 2004, Vineland did not enter the
proper records regarding the cannon shots
mentioned in count (7).
(9) Willful failure to properly store
explosive materials in violation of 18 U.S.C.
§ 842(j) and 27 C.F.R. §§ 555.201(f). Between
July 9, 2004 and July 25, 2005, Vineland did not
notify the local fire safety officials of the location
and other information of the explosive materials
at its facility in Puerto Rico.4
(11) Willful failure to properly maintain
records in violation of 18 U.S.C. § 842(f) and 27
C.F.R. § 555.127. Between January 13, 2005 and
January 17, 2005, Vineland did not enter a
separate record stating the dates of distribution of
explosive materials on two occasions at its facility
in Puerto Rico.
4
ATF dismissed Violation 10.
8
(12) Willful failure to properly store
explosive materials in violation of 18 U.S.C.
§ 842(j) and 27 C.F.R. § 555.215. Between
July 9, 2004 and July 25, 2005, Vineland did not
keep the area surrounding a magazine clear of
brush and grass at its facility in Puerto Rico.
(13) Willful failure to post license in
violation of 18 U.S.C. § 843(g) and 27 C.F.R.
§ 555.101. On July 26, 2005, Vineland did not
have its license posted at its facility in Puerto
Rico.
Vineland requested a hearing before an Administrative
Law Judge (“ALJ”). The central question of the hearing was
whether Vineland’s violations were willful. For an entity to
import, manufacture, or deal in explosive materials, it must have
a license. See 18 U.S.C. § 843. However, an entity that has
“willfully violated any of the provisions of this chapter [18
U.S.C. §§ 841 et seq.] or regulations issued hereunder” cannot
obtain a license. Id. § 843(b)(2). If a licensee has violated any
provision, including those provisions governing the way in
which a licensee obtains its original license, ATF may revoke its
license or deny the renewal application for its license. See id.
§ 843(a) (“Each license or permit shall be renewable upon the
same conditions and subject to the same restrictions as the
original license or permit[.]”); id. § 843(d) (“The Attorney
General may revoke any license or permit issued under this
section if in the opinion of the Attorney General the holder
thereof has violated any provision of this chapter or any rule or
regulation prescribed by the Attorney General under this
9
chapter[.]”). Thus, ATF may deny the renewal of a license or
revoke a license if the licensee has “willfully violated” the
statutory provisions or ATF regulations. See id. § 843(a), (b)(2),
(d).
On February 23, 24, and 27, 2006, an ALJ of the United
States Environmental Protection Agency presided over the
hearing on these violations. On June 2, 2006, the ALJ issued a
Recommended Decision, in which he recommended reversing
the revocation of the license and the denial of the renewal
application for the license, finding that the violations were not
willful.
On June 15, 2006, the DIO filed a petition for review
with the Director. On April 17, 2007, the Director issued his
Order, affirming in part and reversing in part the ALJ’s
Recommended Decision. The Director affirmed the ALJ’s
decision as to Violations 3, 4, 9, and 13, finding that Vineland
did not willfully commit these violations.5 However, the
Director reversed the ALJ’s decision as to the remaining
violations, finding that those violations were willful. As a
result, he directed that Vineland’s licenses be immediately
revoked.6 This timely appeal followed.
5
ATF does not appeal the Director’s decision with respect
to those violations.
6
On June 22, 2007, this Court granted an emergency
motion staying the revocation of Vineland’s license pending
review of the Director’s order.
10
II.
We have jurisdiction to review the Director’s decision to
revoke an explosives license and deny a renewal application
pursuant to 18 U.S.C. § 843(e)(2) and 5 U.S.C. § 704. We
review the Director’s decision, which is the final order revoking
Vineland’s license and denying its renewal application. See 18
U.S.C. § 843(e)(2).7 We review the decision using the judicial
standards of review set forth in 5 U.S.C. § 706. See 18 U.S.C.
§ 843(e)(2). To the extent that this appeal challenges the
Director’s interpretation of the statutory provisions ATF
administers, we utilize principles of Chevron deference. See
Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S.
837 (1984).
A.
Vineland argues that the Director did not limit his review
of the ALJ’s decision to a determination of whether it was
“arbitrary and capricious,” and he should have so limited his
standard of review pursuant to 27 C.F.R. § 555.79. We review
an agency’s decision to apply a particular standard of review to
determine if it was “arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A);
see also Chen v. Gen. Accounting Office, 821 F.2d 732, 734
(D.C. Cir. 1987) (“[A] board decision that applied the wrong
7
The ALJ’s decision is the final decision only if the
Director affirms the decision. See 27 C.F.R. § 555.79.
11
standard of review to the decision of its hearing examiner would
. . . be arbitrary and capricious and contrary to law.”).
The Administrative Procedure Act (“APA”), 5 U.S.C.
§§ 500-596, governs the way in which administrative agencies
function. It provides that, where an agency reviews an ALJ’s
decision, “the agency has all the powers which it would have in
making the initial decision except as it may limit the issues on
notice or by rule.” 5 U.S.C. § 557(b). Thus, Congress permits
the agency to limit its review using its regulation-promulgating
powers, but if it chooses not to do so, it exercises de novo
review over the ALJ’s decision. See id.8
We must determine whether ATF issued a regulation that
limited the Director’s review of an ALJ’s decision because if it
did not, the Director exercises de novo review over the ALJ’s
decision as provided in § 557(b). ATF has promulgated a
regulation governing appeals involving the revocation of an
8
In pertinent part, the statute provides:
When the presiding employee makes an initial
decision, that decision then becomes the decision
of the agency without further proceedings unless
there is an appeal to, or review on motion of, the
agency within time provided by rule. On appeal
from or review of the initial decision, the agency
has all the powers which it would have in making
the initial decision except as it may limit the
issues on notice or by rule.
5 U.S.C. § 557(b).
12
explosives license. See 27 C.F.R. § 555.79.9 Section 555.79
provides that, following the ALJ’s initial decision, either party
may appeal to the Director by filing a petition for review. It
further states: “The petition will set forth facts tending to show
(a) action of an arbitrary nature, (b) action without reasonable
warrant in fact, or (c) action contrary to law and regulations.”
Id.
We cannot conclude that this regulation limits the
Director’s standard of review because the regulation instructs
the petitioner, not the Director. See id. (informing the petitioner
that “[t]he petition will set forth” facts showing these types of
actions). The text of the regulation does not limit the Director’s
review to the three listed types of errors. See id. Moreover,
even assuming that it did, it does not include particular standards
of review for each error. For example, an “action contrary to
law and regulations” does not provide a standard of review, but
is simply a type of error.10 Therefore, we cannot conclude that
9
Both parties cite to 27 C.F.R. § 71.116 for various
propositions, but this section governs the Director’s review of
permit proceedings of the Tobacco Tax and Trade Bureau of
ATF. While this section is similar to § 555.79, we will limit our
discussion to § 555.79 as that is the applicable section.
10
As a result, we reject Vineland’s argument that the
Director should have reviewed the ALJ’s conclusions for
whether the ALJ was arbitrary and capricious. The text of the
regulation invites petitions that seek review not only of an action
that is arbitrary, but also of an action that is without reasonable
13
ATF expressly limited the Director’s standard of review of the
ALJ’s decision pursuant to 5 U.S.C. § 557(b).11
Vineland argues, however, that we should conclude that
ATF implicitly limited the Director’s review to an “arbitrary and
capricious” standard because “the regulation is so similar” to the
warrant in fact, or is contrary to law. See 27 C.F.R. § 555.79.
Thus, it clearly does not limit the Director’s review to an
“arbitrary and capricious” standard. See id.
11
To the extent that Vineland argues that our decision in
Kowalchick v. Director, Office of Workers’ Compensation
Programs, 893 F.2d 615, 619-20 (3d Cir. 1990), compels a
different conclusion, its argument is unavailing. In Kowalchick,
we stated that the Benefits Review Board for the Office of
Workers’ Compensation reviews an ALJ’s determination for
substantial evidence. However, we made that determination
because Congress expressly declared that, under the Longshore
and Harbor Workers’ Compensation Act, the Benefits Review
Board must review the hearing record for substantial evidence.
See 33 U.S.C. § 921(b)(3); see also 20 C.F.R. § 802.301 (stating
that the Benefits Review Board “is not empowered to engage in
a de novo proceeding” but must instead conduct a review for
substantial evidence). In the present case, Congress has not
imposed any similar standard of review on the Director of ATF,
nor has ATF expressly declared its standard of review. Thus,
Kowalchick is clearly distinguishable from the present case and
does not require a different result.
14
APA provision governing judicial review of an agency’s
decision. The APA provides:
The reviewing court shall . . . hold unlawful and
set aside agency action, findings, and conclusions
found to be--
(A) arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with
law;
(B) contrary to constitutional right, power,
privilege, or immunity;
(C) in excess of statutory jurisdiction,
authority, or limitations . . . ;
(D) without observance of procedure
required by law;
(E) unsupported by substantial evidence .
. . ; or
(F) unwarranted by the facts to the extent
that the facts are subject to trial de novo by the
reviewing court.
5 U.S.C. § 706(2).
In comparing the ATF regulation with the judicial review
standards set forth in § 706(2), we cannot conclude that the ATF
15
regulation so closely parallels the judicial review standards that
we can infer that ATF intended to adopt those standards. First,
while § 706(2) expressly provides that a court must use the
listed standards of review in reaching its decision, the ATF
regulation does not instruct the Director to consider these three
listed types of actions as its standards of review. See 27 C.F.R.
§ 555.79. Second, the ATF regulation does not mirror the
language of § 706(2). Although both the ATF regulation and
§ 706(2) contemplate challenges for actions that are arbitrary,
unwarranted by the facts, or contrary to law, § 706(2) expressly
provides standards of review for each type of action while 27
C.F.R. § 555.79 does not, particularly for “actions contrary to
law.”
Had ATF intended to limit its standard of review in a
way similar to the APA, we believe it would have more closely
mirrored the statute in its regulation. For example, in Chen, the
Court of Appeals for the District of Columbia held that the
General Accounting Office Personnel Appeals Board (“Board”)
limited its standard of review of a decision by a single member
of the Board. 821 F.2d at 737-38. It found that the applicable
standards under the Board’s regulation “mirror[ed]” the judicial
review standards under both the APA and the Board’s organic
statute, both of which limited judicial review to a substantial
evidence standard. Id. at 735-36. It further found that, in
promulgating the regulation, the Board stated that it intended for
its standard of review to mirror the judicial review standards of
§ 706(2). Id. As a result, the court concluded: “It seems clear
that the [Board]’s new regulations give it only ‘appellate review’
powers and not de novo review authority to reopen and review
[an] individual member’s decisions.” Id.; see also id. at 737-38.
16
The ATF regulation at issue in the present case is not
similar to the one in Chen, 821 F.2d at 734-38. As noted above,
the ATF regulation, 27 C.F.R. 555.79, does not require the
Director to conduct its analysis using those particular standards
of review. Additionally, it does not “mirror” the APA standards
by stating that the Director should review the ALJ’s conclusions
for substantial evidence. See id. Finally, and most importantly,
unlike in Chen, 821 F.2d at 737-38, ATF did not state that it
intended for the Director’s standards of review to be the same as
the judicial standards of review. For all of these reasons, we
conclude that the D.C. Circuit’s decision in Chen supports our
conclusion that, had ATF intended to limit its standard of
review, it would have used more particular language to do so.
Based on the foregoing, we cannot conclude that ATF
has limited the Director’s standard of review of the ALJ’s
decision pursuant to 5 U.S.C. § 557(b). As a result, § 557(b)’s
mandate that “the agency has all the powers which it would have
in making the initial decision” remains intact. Therefore, to the
extent that the Director exercised de novo review over the ALJ’s
decision, it was not an abuse of discretion for him to do so.
B.
Vineland argues that the Director erred in his
interpretation of “willful” under 18 U.S.C. § 843(b)(2). Where,
as here, Congress has implicitly delegated powers to an agency,
we must give the agency’s interpretation deference so long as it
17
is reasonable. See Chevron, 467 U.S. at 844.12 For the
12
While the APA, 5 U.S.C. § 706, generally governs our
review, we utilize Chevron deference principles for questions of
law “where Congress delegated authority to the agency generally
to make rules carrying the force of law, and . . . the agency
interpretation claiming deference was promulgated in the
exercise of that authority.” United States v. Mead Corp., 533
U.S. 218, 226-27 (2001). In the present case, ATF’s authority
is derived from Congress’s delegation of the licensing of
explosives manufacturers, distributors, and importers to the
Attorney General. See 18 U.S.C. § 843. ATF exercises the
authority to revoke a license or deny the renewal of a license
pursuant to § 843(e)(2).
Under Chevron, we must first ask “whether Congress has
directly spoken to the precise question at issue” because if it has,
we “must give effect to the unambiguously expressed intent of
Congress.” See Chevron U.S.A. Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837, 842-43 (1984). Here, Congress has
not provided any definition for the term “willful” within this
statutory scheme. See 18 U.S.C. § 843. Moreover, the word
“willful” has many meanings, and its meaning usually depends
on the circumstances of its use, including whether it applies in
the civil or criminal context. See Bryan v. United States, 524
U.S. 184, 191 (1998). Thus, we conclude that Congress has not
provided an “unambiguously expressed intent” as to the
meaning of “willful.” See Chevron, 467 U.S. at 842-43.
Therefore, Chevron deference applies, and we must give the
agency’s interpretation deference so long as it is a reasonable
construction of the statute. See id. at 844.
18
following reasons, we conclude that the Director’s interpretation
of “willful” under § 843(b)(2) is reasonable.13
1.
The Director interpreted “willfulness” under § 843(b)(2)
as “plain indifference to, or intentional disregard of, a known
legal duty.” He further stated that a licensee has willfully
violated the regulations “if, with knowledge of what the
regulations require, the dealer repeatedly violates those
regulations.” However, he rejected the ALJ’s interpretation of
willfulness to the extent that the ALJ stated that it required a
“bad purpose” and permitted a “justifiable excuse” defense. The
Director stated: “Willfulness does not require proof that
Vineland acted with the specific purpose to disobey the law.” 14
13
At oral argument, ATF agreed that it should have cited
Chevron initially, explaining that at the time it submitted its
brief, it did not realize Vineland was arguing for anything less
than Chevron deference, and asked us to employ such a standard
in reviewing the agency’s interpretation of the statute.
14
To the extent that Vineland suggests that the ALJ did
not require a bad purpose, we reject its assertion. The ALJ
adopted the language in Vineland’s reply brief requiring an
“act[] in defiance of the law with no justification.” Moreover,
he then found that Vineland had not “acted with the purpose to
disobey the law” and that “it was not [Pacitto’s] intention to
willfully ignore the record keeping requirements.” Thus, the
ALJ’s rule of law and subsequent findings demonstrate that he
19
We must determine whether the Director’s interpretation
of what constitutes a “willful” violation pursuant to § 843(b)(2)
is reasonable, and we conclude that it is. First, the Director’s
interpretation is in accord with the legal definition of “willful,”
which is “[v]oluntary and intentional, but not necessarily
malicious.” Black’s Law Dictionary 1630 (8th ed. 2004).
Black’s Law Dictionary further defines “willfulness” as “[t]he
voluntary, intentional violation or disregard of a known legal
duty.” Id. Like the Director’s interpretation of “willful” and
“willfulness,” these definitions require knowledge of the
conduct, but they do not require a bad purpose or allow for a
justifiable excuse.15
Furthermore, the Director’s definition is in accord with
Courts of Appeals addressing what constitutes a “willful”
did, in fact, require a showing that Vineland had acted with a
bad purpose in violating the ATF regulations.
15
Vineland points to notes in the fourth edition of Black’s
Law Dictionary; Vineland claims these notes state that a willful
act must be done “without justifiable excuse.” However, the
current edition of Black’s Law Dictionary does not allow for a
justifiable excuse. To the extent that the current edition
discusses the requirement of a “bad purpose,” it is limited to a
discussion in the notes of what are “willful” actions in the
context of a criminal statute.
20
violation in a similar context – firearms licensing.16 Firearms
licensing is similar to explosives licensing because ATF
administers both firearms licensing and explosives licensing,
and the statutory provisions governing the revocation of each
type of license require that the licensee has “willfully violated”
a statutory provision or a regulation. Compare 18 U.S.C.
§ 923(e), with id. § 843(b)(2). Thus, firearms licensing is
analogous to explosives licensing, and it is a useful framework
for interpreting the term “willful.”
The six Courts of Appeals addressing what constitutes a
“willful” violation of the firearms licensing provisions have
agreed on an interpretation, holding that a firearms dealer’s
violation is willful where he “knew of his legal obligation and
purposefully disregarded or was plainly indifferent to the . . .
16
While no other Court of Appeals has addressed the
interpretation of “willful” in the context of explosives licensing,
several Courts of Appeals have done so in the context of
firearms licensing. See RSM, Inc. v. Herbert, 466 F.3d 316 (4th
Cir. 2006); Willingham Sports, Inc. v. Bureau of Alcohol,
Tobacco, Firearms & Explosives, 415 F.3d 1274 (11th Cir.
2005); Appalachian Res. Dev. Corp. v. McCabe, 387 F.3d 461
(6th Cir. 2004); Perri v. Dep’t of the Treasury, 637 F.2d 1332
(9th Cir. 1980); Stein’s Inc. v. Blumenthal, 649 F.2d 463 (7th
Cir. 1980); Lewin v. Blumenthal, 590 F.2d 268, 269 (8th Cir.
1979).
21
requirements.” 17 Lewin v. Blumenthal, 590 F.2d 268, 269 (8th
Cir. 1979); see also RSM, Inc. v. Herbert, 466 F.3d 316, 322
(4th Cir. 2006) (requiring either “deliberate disregard” or “plain
indifference”); Willingham Sports, Inc. v. Bureau of Alcohol,
Tobacco, Firearms & Explosives, 415 F.3d 1274, 1276 (11th
Cir. 2005) (same); Appalachian Res. Dev. Corp. v. McCabe, 387
F.3d 461, 464 (6th Cir. 2004) (same); Perri v. Dep’t of the
Treasury, 637 F.2d 1332, 1336 (9th Cir. 1980) (same); Stein’s
Inc. v. Blumenthal, 649 F.2d 463, 467 (7th Cir. 1980) (same).
A number of these Courts of Appeals have expressly stated that,
in finding willfulness, there is no requirement of bad purpose.
See Willingham, 415 F.3d at 1276; Appalachian Res. Dev., 387
F.3d at 465; Cucchiara v. Sec’y of the Treasury, 652 F.2d 28, 30
(9th Cir. 1981); Stein’s, 649 F.2d at 467; Lewin, 590 F.2d at
269. Instead, these Courts merely require violation of the
regulations with knowledge of their requirements. See RSM,
466 F.3d at 321-22; Willingham, 415 F.3d at 1276; Appalachian
Res. Dev., 387 F.3d at 464; Cucchiara, 652 F.2d at 30; Stein’s,
649 F.2d at 469; Lewin, 590 F.2d at 269. Finally, they have
17
We note that, for firearms licensing, District Courts
must conduct a de novo review of the denial or revocation of a
license. See id. § 923(f)(3). Thus, a Court of Appeals review of
the District Court’s decision is also de novo. See, e.g.,
Willingham Sports, Inc. v. Bureau of Alcohol, Tobacco,
Firearms & Explosives, 415 F.3d 1274, 1275-76 (11th Cir.
2005). Congress has not provided us with de novo review of the
denial or revocation of an explosives license, see 18 U.S.C.
§ 823(e)(2), and for the reasons described above, Chevron
deference applies.
22
never permitted a “justifiable excuse” defense. See, e.g., RSM,
466 F.3d at 321 (rejecting the licensee’s arguments that the
violations were not willful, but instead were inadvertent errors
due to a high volume of sales). Here, the Director’s
interpretation of what constitutes a “willful violation” under
§ 843(b)(2) follows the Courts of Appeals’ interpretations of
what constitutes a “willful violation” under § 923(e), and we
conclude that it is reasonable.18
18
Vineland argues that we should reject the Director’s
interpretation because we have required a bad purpose for a
finding of willfulness in the context of OSHA. Vineland relies
on the following statement: “Willfulness connotes defiance or
such reckless disregard of consequences as to be equivalent to
a knowing, conscious, and deliberate flaunting of the Act.
Willful means more than [a] merely voluntary action or
omission[;] it involves an element of obstinate refusal to
comply.” Babcock & Wilcox Co. v. Occupational Safety &
Health Rev. Comm’n, 622 F.2d 1160, 1165 (3d Cir. 1980)
(internal quotation marks and citation omitted).
In Babcock, we noted that our language had created a
“supposed conflict” with other Courts of Appeals, which
believed that we required a “bad purpose” for a finding of
willfulness. Id. at 1167. Those courts disagreed with a “bad
purpose” requirement, holding that “willful” meant an
“intentional disregard of, or plain indifference to” the
requirements. Id. We rejected the view that any conflict
existed, stating that we did not have a different standard, only
different verbiage. Id. Furthermore, our subsequent decisions
have endorsed the verbiage of the other Courts of Appeals. See,
23
Vineland suggests that we should require the following
circumstantial evidence to support a finding of willfulness: (1) a
pattern of repeated violations, which includes (a) more than one
violation of the same kind and (b) temporal proximity between
the two violations; and (2) specific, ongoing warnings by ATF
to correct the violation. Vineland admits that it does not have
case law to support this “intuitive definition.” However, we
must review the Director’s interpretation to determine if it is
reasonable, not to determine if a better definition exists. Thus,
we cannot adopt Vineland’s definition.
Based on the foregoing, the Director’s interpretation of
what constitutes a “willful violation” of § 843(b)(2) is
reasonable.
2.
The Director concluded that a licensee’s corrective
actions “have no bearing” on a determination of whether the
licensee has “willfully violated” federal explosives laws or
e.g., Bianchi Trison Corp. v. Chao, 409 F.3d 196, 208 (3d Cir.
2005) (“Although the [OSH] Act does not define the term
willful, courts have unanimously held that a willful violation of
the [OSH] Act constitutes ‘an act done voluntarily with either an
intentional disregard of, or plain indifference to, the [OSH]
Act’s requirements.’” (internal citation omitted)). Thus,
Vineland’s argument that we should reject the Director’s
interpretation because of our previous statement in Babcock is
unavailing.
24
regulations. Vineland argues that its future compliance is
relevant to the willfulness determination. We hold that the
Director’s conclusion is reasonable.
The statutory provision requires a determination of
whether the licensee “willfully violated” federal explosives laws
or regulations. See 18 U.S.C. §§ 843(b)(2), (d). This
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. See id. Based on this
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.
Additionally, the Director’s conclusion is reasonable
because it is again in agreement with other federal courts
addressing this argument in the context of firearms licensing.
For example, the Court of Appeals for the Ninth Circuit has
stated that events occurring after the regulations have been
violated are not relevant to a determination of whether the
violations were willful at the time they occurred. Cucchiara,
652 F.2d at 30 (stating that the licensee’s correction of its
recordkeeping system subsequent to the license revocation “is
immaterial to the question of willfulness at the time the
violations occurred”); see also T.T. Salvage Auction Co. v.
Sec’y, U.S. Dep’t of Treasury, 859 F. Supp. 977, 979 (E.D.N.C.
25
1994) (holding that evidence of corrective actions is “irrelevant
under the statute because the statute focuses on the willfulness
of the violations and the compliance of the firearms dealer
before the license was revoked”).
Vineland’s arguments do not persuade us that the
Director’s conclusion was unreasonable. Vineland first argues
that 27 C.F.R. § 555.71 requires a finding of the likelihood of
future compliance prior to revocation of the license. Section
555.71 discusses the “opportunity for compliance” that ATF
must afford its licensees. It provides: “[N]o license or permit
will be revoked or renewal application denied without first
calling to the attention of the licensee or permittee the reasons
for the contemplated action and affording him an opportunity to
demonstrate or achieve compliance with all lawful
requirements.” 27 C.F.R. § 555.71. However, this regulation
expressly excludes “cases of willfulness” as long as the regional
director alleges willfulness in his “notice of denial of an
application or revocation of a license or permit.” Id. Therefore,
where, as here, the notice the licensee received from the DIO
alleged willfulness, the licensee need not be afforded an
opportunity to comply prior to revocation or denial of renewal
of a license.
Vineland next argues that the Director’s interpretation
conflicts with his prior opinion in In the Matter of Luna Tech,
Inc. d/b/a Pyropak, Order of the Director, June 13, 2005 (“Luna
Tech”), in which he considered the licensee’s future compliance.
However, to the extent that the Director considered the
licensee’s future compliance in Luna Tech, he did so in
analyzing whether the licensee should be permitted an
26
opportunity to comply pursuant to § 555.71. As noted, § 555.71
does not apply here, and thus, we are not persuaded that the
Director’s conclusion was unreasonable in this case.
Based on the foregoing, the Director’s conclusion that the
potential for future compliance is not relevant to a determination
of willfulness is reasonable.
3.
The Director concluded that ATF’s failure to cite a
violation did not preclude ATF from citing the licensee in a
subsequent inspection for the same violation unless the licensee
demonstrated that ATF had affirmatively misled the licensee as
to the requirements. Vineland challenges this conclusion,
arguing that “the prior inspection history is relevant to the issue
of willfulness.” We hold that the Director’s conclusion is
reasonable.
The Director’s interpretation of “willfulness” placed the
focus on whether the licensee had the requisite knowledge of the
requirements yet failed to comply with them. If the licensee had
knowledge of the requirements, whether ATF had previously
cited the licensee would be irrelevant to a determination of
“willfulness” unless ATF had affirmatively told the licensee that
it was in compliance. Thus, based on the Director’s
interpretation of “willfulness,” this further interpretation is
reasonable.
Additionally, the Director’s conclusion is reasonable
because it is in accord with a District Court’s interpretation of
27
“willfulness” in the context of firearms licensing. See Breit &
Johnson Sporting Goods, Inc. v. Ashcroft, 320 F. Supp. 2d 671,
680 (N.D. Ill. 2004). In Breit, the licensee argued that ATF
should not be able to revoke its license because ATF had not
cited it for previous violations. Id. at 680. The court rejected
this “equitable estoppel” argument because the licensee had
knowledge of the requirements and could not demonstrate that
ATF had misled it. Id. The Director’s conclusion is in accord
with this decision, and thus, it is reasonable.19
Based on the foregoing, the Director’s conclusion is
reasonable.
C.
Vineland argues that the Director erred in concluding that
Vineland “willfully violated” ATF’s regulations in Violations 1,
2, 5, 6, 7, 8, 11, and 12. We review the Director’s conclusion
that Vineland “willfully violated” the ATF regulations for
19
To the extent that Vineland argues that the holding of
Breit was “completely irrelevant” to the present case, we find its
argument unavailing. Contrary to Vineland’s assertion, the ALJ
categorized Vineland’s argument as an estoppel-based
argument. Moreover, the ALJ concluded that several violations
were not willful because ATF had not previously cited
Vineland, and the ALJ did not require evidence that ATF had
misled Vineland as to the requirements. Thus, Breit was directly
on point with the present case, and the Director’s analogy to it
was reasonable.
28
substantial evidence using the Director’s reasonable
interpretation of what constitutes a willful violation. See 5
U.S.C. § 706(E) (stating that the standard of review for
adjudicatory proceedings is whether the decision is
“unsupported by substantial evidence”); see also 18 U.S.C.
§ 843(e)(2) (stating that the court of appeals will review the
decision pursuant to 5 U.S.C. §§ 701-706). We conclude that
substantial evidence supports the Director’s decision that
Vineland “willfully violated” 18 U.S.C. § 842(f) and 27 C.F.R.
§ 555.127 by failing to keep proper records in its daily summary
of magazine transactions as charged in Violations 5 and 6.
In the ALJ’s Recommended Decision, he found that
while the charged incidents in Violations 5 and 6 had occurred,
Vineland had not “willfully violated” 18 U.S.C. § 842(f) and 27
C.F.R. § 555.127 in failing to keep proper records. The Director
disagreed with the ALJ, finding that Vineland had “willfully
violated” the applicable law and regulation. The Director
acknowledged that Pacitto’s bookkeeper, Adele Huryn, missed
work during the relevant months for cancer treatments.20
However, he found that, while Huryn’s illness was unfortunate,
it could not negate a finding of willfulness as to Pacitto.
20
At the hearing, both Pacitto and her bookkeeper, Adele
Huryn, testified. Huryn stated that she was diagnosed with
cancer in early 2004, and she had to leave work in March 2004.
Pacitto then took over the recordkeeping duties during Huryn’s
absence, and visited Huryn in an attempt to complete the
inventory records. Huryn returned to work on August 2, 2004,
and completed an inventory count at that point.
29
The Director then applied his interpretation of
willfulness, and found that Pacitto was aware of the
recordkeeping requirements because ATF had instructed her as
to the requirements in its December 2000 meeting. He further
stated that, regardless of what Felix Girone had informed her
prior to 1999 about a relaxation of recordkeeping during the
“busy season,” Pacitto knew that was incorrect after December
2000. He also noted that, despite ATF’s failure to cite previous
recordkeeping violations occurring between 2000 and 2003, he
could find that Vineland had been willful in its violations
because Vineland had knowledge of the proper requirements.
He then applied the relevant standard, finding that Vineland
“willfully violated” the recordkeeping requirements because
Pacitto chose to neglect the daily summary of magazine
transactions thirty-six times between January and September
2004 despite having knowledge as to the requirements.
The Director’s reasonable interpretation of “willfulness”
is that a licensee has willfully violated the regulations “if, with
knowledge of what the regulations require, the dealer repeatedly
violates those regulations.” A great deal of evidence supports
the Director’s conclusion that Pacitto had knowledge of the
recordkeeping requirements under 42 U.S.C. § 842(f) and 27
C.F.R. § 555.127. Pacitto does not dispute that she was aware
of the requirements, and as the Director pointed out, Pacitto
spoke with ATF inspectors regarding the requirements of 27
C.F.R. § 555.127 at the December 2000 meeting.21 Thus, there
21
Although Vineland challenged the Director’s
determination that Pacitto had knowledge of the regulations
30
is evidence in the record that Pacitto had knowledge of the
requirement.
Additionally, the evidence supports the conclusion that
Pacitto repeatedly violated the regulation. Her failure to
properly record the transactions was not a “one-off event” as
Vineland claims, but instead occurred on thirty-six occasions.
Moreover, Pacitto’s failure to comply did not occur during a
brief time period, but extended for months with the end result
being, as the Director noted, “that thousands of pounds of
explosives left Vineland’s facility without any record being
kept.” While we agree with the Director that Huryn’s illness
was clearly unfortunate and requires much sympathy, her illness
did not provide Pacitto carte blanche to stop complying with the
regulation requiring her to keep a record of the daily summary
of magazine transactions.
Based on the foregoing, substantial evidence supports the
Director’s conclusion that Pacitto had knowledge of the
recordkeeping requirements, and yet did not comply with them
based on her involvement in the operations of Fireworks by
Girone, Pacitto acknowledged that she was aware of the
recordkeeping requirements under 27 C.F.R. § 555.127
following her meeting with ATF inspectors in December 2000.
Because we are only reaching a conclusion as to Violations 5
and 6 and Pacitto admitted that she had knowledge of the
requirement involved in these violations, we find it unnecessary
to further address this argument.
31
thirty-six times over a ten-month period.22 Therefore,
substantial evidence supports the Director’s ultimate conclusion
that Vineland “willfully violated” 42 U.S.C. § 842(f) and 27
C.F.R. § 555.127.
At oral argument, Vineland conceded that, were we to
find that substantial evidence supported even one of the
Director’s conclusions that Vineland had “willfully violated”
federal law and ATF regulations, the Director’s decision to
revoke its license and deny its renewal would be proper.
Therefore, because we conclude that there was substantial
evidence to support the Director’s conclusion as to Violations 5
and 6, we find it unnecessary to reach a conclusion as to the
remaining violations.
III.
For the foregoing reasons, we will deny the petition for
review of the Director’s order.
22
To the extent that Vineland argues that the Director
should have considered its exemplary records prior to 2004, we
find its argument unavailing because prior compliance is not the
relevant standard. In addition, to the extent that Vineland argues
that the Director should have considered whether it was likely
to violate 27 C.F.R. § 555.127 in the future, we find its
argument unavailing because future compliance is not the
relevant standard either.
32
JORDAN, Circuit Judge, concurring in the judgment.
_________________________________________________
I agree with the majority that the ATF was not required
to give deference to the ALJ’s factual findings and legal
conclusions. I also agree that substantial evidence supports the
ATF’s finding that Vineland willfully violated certain statutory
and regulatory record-keeping requirements and that its petition
for review should therefore be denied. 23 I take issue, however,
with the majority’s assertion that we owe Chevron deference to
the ATF’s interpretation of the term “willfully” as it appears in
18 U.S.C. § 843(b)(2).
Section 843(b) of Title 18 states that, upon the filing of
an application for a license to manufacture or deal in explosives,
the Attorney General shall issue the appropriate license if,
among other things, “the applicant has not willfully violated any
of the provisions of [18 U.S.C. §§ 841 through 848] or
23
Vineland agreed during oral argument that the ATF’s
order should be upheld if we concluded that any one of the
charged violations was supported by substantial evidence.
33
regulations issued [t]hereunder.” 24 18 U.S.C. § 843(b)(2). As
explained by the majority, the ATF concluded that proof that
Vineland acted with knowledge that its conduct was unlawful –
that it distributed fireworks without maintaining the daily
records that it knew were required by law – was sufficient to
establish willfulness within the meaning of § 843(b)(2). The
majority then holds that the ATF’s interpretation of the term
“willfully” is entitled to deference under Chevron U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
However, I see no need to invoke Chevron on that point. Since
it appears that we would independently arrive at the ATF’s
position on willfulness, there is “no occasion to defer and no
point in asking what kind of deference, or how much.” Edelman
v. Lynchburg Coll., 535 U.S. 106, 114 (2002).
Moreover, Chevron instructs us to give deference to an
agency’s reasonable policy choice when Congress gave the
agency the authority to make such a choice. Here, the ATF did
not even purport to be doing that. There is nothing in the ATF’s
24
Among the provisions referred to by § 843(b)(2) is 18
U.S.C. § 842(f), which makes it a crime for a licensee “willfully
to manufacture, import, purchase, distribute, or receive
explosive materials without making such records as the Attorney
General may by regulation require,” and 27 C.F.R. § 555.127,
which requires licensees to keep daily records of the total
quantity of explosives received in and removed from each
magazine and the total remaining on hand at the end of the day.
34
decision that suggests that its interpretation of “willfully” was
the result of its independent determination that its construction
was desirable to further some policy goal. Instead, the ATF
relied entirely on decisions of the various Courts of Appeals
interpreting that term in the firearms and explosives licensing
contexts, and it concluded from those decisions that the ALJ had
applied the “incorrect standard.” (App. 14.) In other words, the
agency accurately saw itself as applying a general legal
standard, not making a decision within its peculiar
administrative ken. Cf. Colacicco v. Apotex Inc., 521 F.3d 253,
274 (3d Cir. 2008) (Noting that we are “ordinarily ... leery of an
agency’s view of what is essentially a legal issue”); Blackburn
v. Reich, 79 F.3d 1375, 1377 n.3 (4th Cir. 1996) (“Because the
Secretary based his decision in the instant case on judicial
precedent rather than his own interpretation of the statute, we
owe ‘no more deference than we would any lower court’s
analysis of the law.’” (quoting Thomas Hodgson & Sons, Inc. v.
FERC, 49 F.3d 822, 826 (1st Cir. 1995))). Indeed, nowhere in
its briefing did the agency ask for Chevron deference, as one
might have expected it would had it believed it necessary.
For these reasons, I do not believe the majority’s Chevron
analysis is required in this case, and I decline to join it.
35