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L.L.C. v. Bureau of Alcohol, Tobacco, Firearms, and Explosives

United States District Court, D. Oregon, Medford Division

November 12, 2014

2nd AMENDMENT GUNS, L.L.C and LYNNE ANN CLOW, Plaintiffs,
v.
BUREAU OF ALCOHOL, TOBACCO, FIREARMS, AND EXPLOSIVES, Defendant

Lynne Ann Clow, Plaintiff, Pro se, Grants Pass, OR.

For Bureau of Alcohol, Tobacco, Firearms and Explosives, Defendant: Timothy W. Simmons, LEAD ATTORNEY, United States Attorney's Office, Eugene, OR.

REPORT & RECOMMENDATION

MARK D. CLARKE, United States Magistrate Judge.

Plaintiffs 2nd Amendment Guns, L.L.C. (" 2nd Amendment Guns") and Lynne Ann Clow (" L. Clow"), (collectively, " Plaintiffs") bring this pro se action against Defendant Bureau of Alcohol, Tobacco, Firearms, and Explosives (" Defendant") alleging it improperly denied renewal of 2nd Amendment Guns' federal firearms license. Currently before the Court is Defendant's motion for summary judgment (#26). The Court advised (#30) the pro se Plaintiffs of the summary judgment rule requirements and afforded Plaintiffs the opportunity to submit a supplemental response and evidence in opposition to Defendant's motion in accordance with Fed.R.Civ.P. 56. Plaintiffs and Defendant submitted supplemental materials (#31, #32) in line with the Court's notice. Having reviewed all submitted materials, the Court concludes Defendant's motion (#26) should be GRANTED for the reasons set forth below.

PRELIMINARY MATTERS

I. Pro Se Representation of 2nd Amendment Guns

L. Clow attempts to proceed pro se on behalf of both herself and 2nd Amendment Guns. However, an artificial entity, like 2nd Amendment Guns, may appear in federal court only through licensed counsel. Rowland v. California Men's Colony, 506 U.S. 194, 202, 113 S.Ct. 716, 121 L.Ed.2d 656 (1993); see also 28 U.S.C. § 1654. Thus, L. Clow's representation of 2nd Amendment Guns in this action is improper. Because the Court finds that summary judgment is appropriate in any event, it will consider all of Plaintiffs' arguments and evidence, including those advanced by L. Clow on 2nd Amendment Guns' behalf, in the following Report & Recommendation.

II. Plaintiffs' Verified Response to Defendant's Summary Judgment Motion

In opposition to Defendant's motion, Plaintiffs filed a responsive brief, an excerpt of one of Defendant's forms, an excerpt of a March 2006 Newsletter for federal firearms licensees, various newspaper articles about other gun shops, and a log created by L. Clow titled " Errors Between Evidence Log And Forfeiture Notice Of Guns Seized Illegally From Us." In an affidavit attached to Plaintiffs' responsive brief, L. Clow certifies that its contents are " based on the truth, and facts supported by all evidence available to [her]." L. Clow Aff, at I. Given this certification and Plaintiffs' pro se status, the Court will treat the responsive brief as testimonial evidence and consider all admissible assertions advanced therein. See Whitman v. Mineta, 107 F.App'x 28, 29 (9th Cir. 2004) (" Indeed, the only evidence in the record that could possibly support Whitman's claims are the contents of his verified briefs filed in the district court, which, if based upon personal knowledge of admissible evidence, may function as affidavits for purposes of summary judgment."); Johnson v. Meltzer, 134 F.3d 1393, 1400 (9th Cir. 1998) (" Like a verified complaint, a verified motion functions as an affidavit.").

FACTUAL BACKGROUND

On October 16, 2006, 2nd Amendment Guns applied for, and was subsequently issued, a federal firearms license to deal firearms. AR 21-24. The application listed L. Clow as " owner operator" and Wilson Clow Jr. (" W. Clow") as " manager." AR 22. On November 22, 2006, Defendant conducted a qualification inspection of 2nd Amendment Guns during which it reviewed federal firearms laws and regulations with L. Clow and W. Clow. AR 31-32. L. Clow and W. Clow signed a form certifying Defendant had given them an overview of the laws and regulations, and acknowledging their responsibility to familiarize themselves with all laws governing their license. AR 32.

Defendant inspected 2nd Amendment Guns again in 2008, 2009, and 2011. In its 2008 inspection, Defendant identified 25 instances in which 2nd Amendment Guns failed to properly record the acquisition and disposition of firearms, one occasion in which 2nd Amendment Guns transferred a firearm to a transferee who indicated she was not the actual buyer, and 10 incomplete transferee records. AR 51-53, 200-02. Defendant issued a warning letter to 2nd Amendment Guns that stated: " [R]elention of your Federal firearms license is conditioned upon your compliance with Federal laws and regulations. Any future violations, either repeat or otherwise, could be viewed as willful and may result in the revocation of your license." AR 56-57.

Defendant's 2009 inspection revealed three instances in which 2nd Amendment Guns manufactured AR-15 rifles without the appropriate licensure, three times the business transferred a firearm to a person who was not the actual buyer, one instance in which 2nd Amendment Guns sold a firearm to a " prohibited person, " and 135 instances where it failed to properly complete acquisition and disposition entries. AR 60-63. Again, Defendant warned 2nd Amendment Guns that any future willful violations could be used as a basis to revoke its license. AR 66-70. No violations were identified during the 2011 inspection. AR 220.

In 2012, Defendant commenced an undercover operation involving 2nd Amendment Guns. On April 5, 2012, one of Defendant's confidential informants purchased a pistol from 2nd Amendment Guns without filling out any paperwork and despite informing W. Clow that he was a convicted felon. AR 90-93. On April 26, 2012, an informant visited the business, disclosed that he was a convicted felon, and asked W. Clow if his " nephew" (in actuality, an undercover agent for Defendant) could sign for the purchase of a revolver on his behalf. AR 100-06. Later that day, the informant and his " nephew" met W. Clow at 2nd Amendment Guns' storefront and the " nephew" signed for the gun in order to allow the informant to purchase it. AR 100-06. W. Clow instructed the " nephew" to indicate in the background paperwork that he was buying the gun for himself. AR 102. On August 2, 2012, the informant met with W. Clow and asked whether he could purchase a weapon without doing any paperwork since he was a convicted felon. AR 116-19. W. Clow agreed and showed the informant a number of firearms in his residence that were for sale off the books. AR 116. The informant purchased a pistol. AR 117.

On August 22, 2012, Defendant executed a search warrant at the residence of W. and L. Clow and 2nd Amendment Guns' business address. AR 2. Defendant seized a form purporting to document the transfer of the pistol sold to the informant on April 5 in which L. Clow represented that she was the actual purchaser. AR 94-97. Defendant also seized a form purporting to document the April 26 transaction. AR 107-11. The form was completed by " Craig Daniels" (an alias used by the undercover agent posing as the informant's nephew) and indicated that he purchased the firearm for himself. AR 107. W. Clow had signed the form, certifying that its contents were true and correct. AR 109. Defendant seized 2nd Amendment Guns' acquisition and disposition records which reflected the same falsified information for the April 5th and 26th sales. AR 112-15. During the execution of the warrant, W. Clow admitted to illegal sales and false records. AR 120-22.

On October 6, 2012, W. Clow resigned as manager of 2nd Amendment Guns. AR 123. In his resignation letter, he noted that he " willingly remain[ed] to ease the transition as advisor/consultant to the corporation with regard to firearm matters, assist customers that I have established a rapport with, run errands and ship guns, banking, etc." AR 123. In a notice removing W. Clow as manager of 2nd Amendment Guns, L. Clow said that he could continue to assist the company " on a voluntary basis" but no longer had decision-making authority. AR 124.

On December 10, 2012, 2nd Amendment Guns tiled a federal firearms renewal application. AR 79-81. L. Clow completed the application. AR 79-81. On April 4, 2013, Defendant issued a notice to the company denying its renewal application in light of evidence 2nd Amendment Guns willfully violated laws and regulations governing firearms sales. AR 1-3. 2nd Amendment Guns requested a hearing on the denial which was held on July 10, 2013. AR 7, 9-11, 293-305. The Hearing Officer found the company, by and through the actions of W. and L. Clow, willfully transferred firearms to prohibited individuals and falsified records in an attempt to make the transactions appear legitimate. AR 305. On September 10, 2013, Defendant issued a final notice of denial. AR 306-11.

LEGAL STANDARD

Summary judgment is appropriate if " the movant shows 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). Summary judgment is not proper if material factual' issues exist for trial. Warren v. City of Carlsbad. 58 F.3d 439, 441 (9th Cir. 1995).

The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett. 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001). An issue of fact is genuine " if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the moving party fulfills its burden, the burden shifts to the non-moving party who must go beyond the pleadings to identify genuine issues of fact. Celotex Corp., 477 U.S. at 324. Conclusory allegations, unsupported by factual material, are insufficient to defeat a motion for summary judgment. Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposing party must, by affidavit or as otherwise provided by Fed.R.Civ.P. 56, designate specific facts that show there is a genuine issue for trial. Devereaux, 263 F.3d at 1076.

The court must view the evidence in the light most favorable to the nonmoving party. Szajer v. City of Los Angeles, 632 F.3d 607, 610 (9th Cir. 2011). All reasonable doubt as to the existence of a genuine dispute of material fact should be resolved against the moving party. Hector v. Wiens. 533 F.2d 429, 432 (9th Cir. 1976). Where different ultimate inferences may be drawn, summary judgment is inappropriate. Sankovich v. Life Ins. Co. of North America, 638 F.2d 136, 140 (9th Cir. 1981). However, facts must be " viewed in the light most favorable to the nonmoving party only if there is a 'genuine' dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). " Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

DISCUSSION

The Gun Control Act (the " Act") requires all persons selling firearms to be federally licensed. 18 U.S.C. § 922(a)(1). Section 923(d)(1) of the Act sets forth criteria for determining an applicant's eligibility. One such requirement is that the applicant cannot have " willfully violated any of the provisions of the federal firearms laws or regulations. 18 U.S.C. § 923(d)(1)(C). Where an applicant for a federal firearms license fails to satisfy these qualifications, Defendant may, after notice and a hearing, deny its application. 18 U.S.C. § 923(f).

Pursuant to these provisions, Defendant denied Plaintiffs' license renewal application, finding 2nd Amendment Guns willfully violated multiple provisions of the Act. Specifically, Defendant asserted that, on three occasions, the company transferred firearms to individuals it had reasonable cause to believe were convicted felons in violation of 18 U.S.C. § 922(d)(1) and, on four occasions, it falsified records related to the illegal sales in violation of 18 U.S.C. § 922(b)(5). AR 308. Plaintiffs timely filed a petition for " de novo judicial review" in district court to assess whether Defendant was " authorized to deny the application." 18 U.S.C. § 923(f)(3). Defendant now moves for summary judgment on Plaintiffs' petition, asserting the record clearly establishes Defendant acted within its authority. Because there is no dispute that 2nd Amendment Guns, by and through the actions of its members, willfully violated the Act and, thus, that Defendant was expressly authorized by the Act to deny Plaintiffs' renewal application, summary judgment is appropriate.

I. Plaintiffs Willfully Violated the Gun Control Act.

Defendant may deny a license if the applicant has willfully violated any provision of the Act or related regulations. 18 U.S.C. § 923(d)(1)(C). A single willful violation is grounds for upholding Defendant's revocation of Plaintiffs' license. Gen. Store, Inc. v. Van Loan, 560 F.3d 920. 924 (9th Cir. 2008). The Ninth Circuit considers a violation to be " willful" if it is committed with deliberate disregard of or plain indifference to, a known legal obligation. Id. at 923-24. Under this definition, a firearms dealer willfully violates the Act if it " understands the requirements of the law, but knowingly fails to follow them or [is] indifferent to them." Id. at 923 (quoting Perri v. Dep't of Treasury: Bureau of Alcohol. Tobacco & Firearms, 637 F.2d 1332, 1336 (9th Cir. 1981)). " Since there is rarely direct evidence of willfulness, the government often shows willfulness by showing that a licensee repeatedly violated regulations despite knowledge of them and repeated warnings. However, a showing of repealed violations is not required if the government otherwise can show willfulness." Barany v. Van Haelst, No. CV- 09-253-RMP, 2010 WL 5071053, at *6 (E.D. Wash. Dec. 6, 2010) (citing American Arms Intern, v. Herbert, 563 F.3d 78, 87 (4th Cir. 2009) (" Plain indifference can be found even where nine times out often a licensee acts in accordance with the regulations, if he was plainly indifferent to the one-in-len violation")), aff'd, 459 F.App'x 587 (9th Cir. 2011).

Defendant presents uncontroverted evidence that it repeatedly advised 2nd Amendment Guns of its legal obligations as a federal firearms licensee. AR 310. Specifically, regarding recordkeeping, Defendant instructed W. and L. Clow on the requirements for transaction, acquisition, and disposition records when it first issued the company's license in 2006 and again after the 2008 and 2009 inspections revealed non-compliance. AR 31-32, 54-57, 64-70. Plaintiffs assert the recordkeeping errors identified by Defendant in the 2008 and 2009 audits were " simple clerical errors of things [Defendant] did not make known until the audit." Pis.' Supplemental Resp., at 1. However, even if 2nd Amendment Guns was unclear on its recordkeeping duties at the time of the audits. Defendant's identification of the violations and directive to follow and learn applicable laws and regulations removed any ambiguity. The record establishes Plaintiffs were on notice of their recordkeeping responsibilities when the misconduct leading to the revocation of their license occurred. As for the prohibition against selling firearms to felons, the company's officers certified that Defendant instructed them on prohibited sales and deliveries in 2006, 2008, and 2009. AR 31-32, 54, 64. Furthermore, statements made by W. Clow during the illegal sales suggest he was fully aware the transactions were illegal. For instance, at the close of the April 5th sale, W. Clow stated, among other things, " I don't like these [expletive] rules, we didn't use to have them, now we do[, ]" " I'm a burn all my books anyway, what the [expletive] are they going to do to me at that point[, ]" and " come and try and get my guns, better bring a lot of body bags." AR 93.

The record shows 2nd Amendment Guns repeatedly violated the Act and its regulations. Defendant cited three illegal sales and four falsified records as the grounds for its denial of Plaintiffs' license renewal. AR 308. Plaintiffs do not deny that the three sales occurred. Nor do they dispute that company officers completed and certified the related records. Rather, Plaintiffs offer explanations for each occurrence and characterize Defendant's case against them as a " personal vendetta." Pis.' Supplemental Resp., at 7. Plaintiffs assert W. Clow sold the pistol to the informant on April 5th in his personal capacity, not as a licensed firearm dealer, and thus refrained from performing a background check in order to comply with an uncited state law that prohibits private background checks. Pls.'s Supplemental Resp., at 3. Regarding the April 26th sale, Plaintiffs maintain W. Clow knew the informant was not, in fact, a felon and that W. Clow was merely " play[ing] along to see what would develop." Pls.'s Supplemental Resp., at 3-4. Plaintiffs argue the Act did not apply to the " off the books" gun sale in the Clow's home on August 2nd because the gun was privately owned. Pis.' Supplemental Resp. at 4. As for the records. Plaintiffs insist the forms listing L. Clow as the purchaser are accurate. According to L. Clow, W. Clow instructed her to buy the gun for him as a gift, she did so the records genuinely reflect this transaction, and she was unaware that W. Clow then sold the weapon to a convicted felon. Supplemental Resp., at 3. Plaintiffs assert the undercover agent posing as the felon's nephew " committed a felony" by filling out a form to indicate he was buying the gun for himself when he was actually purchasing it as a gift for his uncle. Pls.'s Supplemental Resp., at 4. They maintain Defendant is " mixed up" to charge W. Clow with falsifying a document completed by an undercover agent. Pis.' Supplemental Resp., at 4.

Plaintiffs' explanations for the violations do not change the fact that 2nd Amendment Guns committed them. Undisputed evidence shows the company transferred guns without first completing background checks, without obtaining full identification, and despite the purchasers' disclosures that they were ineligible. The sales violated the Act regardless ol' W. Clow's underlying motives. It is irrelevant whether W. Clow engaged in the transactions in order to " play along" with Defendant's investigation, to deliberately circumvent the law, or because he thought the purchasers were not actually felons. As a federal firearms licensee, 2nd Amendment Guns had a strict duty to follow the Act. Furthermore, it is uncontroverted that four company records conceal the true identity of firearms purchasers. Regardless of whether this misinformation was caused by manipulation, misconduct, or W. Clow's failure to realize that, by signing a form, he was certifying it was true; the fact remains that the records violate the Act.

In sum, there is no genuine dispute that 2nd Amendment Guns committed the multiple violations cited in Defendant's revocation of their license despite knowing the Act prohibited such conduct. 2nd Amendment Guns, acting through it two officers, conducted the transactions with, at least, " plain indifference" to -- if not willful disregard of -- the laws and regulations governing firearms sales. Gen. Store. Inc., 560 F.3d at 923-24. Defendant's authority to deny Plaintiffs' application on the basis of these willful violations is not a triable issue of fact.

II. The Violations are Appropriately Attributed to Plaintiffs.

Plaintiffs attempt to distance themselves from the violations. They argue " [n]o evidence has ever been presented that [2nd Amendment Guns] or [L. Clow] knowingly, willfully violated any regulations, rules, or laws of the [Act]" and that they are not accountable for W. Clow's " deception" because L. Clow " never knew, or consented to [his] actions." Pis.' Supplemental Resp., at 6-7. Because W. Clow is no longer an officer of the business, Plaintiffs argue his actions should not be held against 2nd Amendment Guns or L. Clow.

First, it is beyond dispute that actions taken by the officer of a gun dealer pursuant to the dealer's federal firearms license are attributable to the dealer. See Gen. Store. Inc., 560 F.3d at 923, 926 (upholding Defendant's revocation of the General Store's license based on employees' recordkeeping errors); Perri, 637 F.2d at 1334 (upholding Defendant's revocation of Perri Jewelers' firearms license based on Perri's sale of a firearm to a felon and falsification of records). Defendant properly imputed W. and L. Clow's actions as company officers to 2nd Amendment Guns.

Second, the plaintiff in Barany, 2010 WL 5071053, at *5, advanced an argument similar to L. Clow's contention that she is not personally accountable for 2nd Amendment Guns' violations. Barany had been the corporate officer and responsible person directly involved in the day-to-day operations of The General Store, a gun store whose federal firearms license was revoked. Id. at *6. More than five years after the willful violations leading to the revocation took place, Barany applied for a new license. Id. at *3, *5. Defendant denied the application on the basis that Barany was responsible for the willful violations that supported revocation of The General Store's license, Id. at *4. Barany appealed the denial to the Washington district court, arguing The General Store was a separate entity from himself and its misconduct was not properly attributed to him. Id. at *6. The court disagreed, finding that, as a listed officer of The General Store, the Store's violations were attributable to Barany personally, Id. Furthermore, the court noted that the applicant firearms business was substantially indistinguishable from the revoked licensee, proposing to share the same location, corporate officer, employees, and suppliers, Id. " The many continuities from The General Store to Mr. Barany's proposed successor firearms retail business, also identified as " General Store" on his application, support the conclusion that The General Store's actions, including willful violations of the Gun Control Act, are attributable to Mr. Barany." Id. at *7. The Ninth Circuit affirmed. Barany, 459 F.App'x at 588.

Like Barany, L. Clow was listed as a " responsible person" on 2nd Amendment Guns' license at the time of the cited violations. By that designation, the company's actions; including those of L. Clow's sole co-member, W. Clow; are property attributed to L. Clow, Id. L. Clow was responsible for all activities occurring under the license. Moreover, apart from removal of W. Clow as a member of the company, 2nd Amendment Guns' renewal application is materially identical to its original application. It proposes to continue operations at the same location with the same owner and operator. While no longer an identified officer, W. Clow has represented that he would continue to work under the renewed federal license. AR 123-24.

There is no reasonable question that 2nd Amendment Guns' acts are reasonably imputed to its officers and vice versa . The company, acting through its officers, willfully violated the Act and all " responsible persons" named on 2nd Amendment Guns' license are personally accountable for those violations. Thus, there is no genuine issue of material fact regarding Plaintiffs' accountability for the willful violations identified by Defendant or Defendant's authority to deny Plaintiffs' renewal application on that basis.

RECOMMENDATION

For the aforementioned reasons, Defendant's summary judgment motion (#26) should be GRANTED.

This Report and Recommendation will be referred to a district judge. Objections, if any, are due no later than fourteen (14) days after the date this recommendation is filed. If objections are filed, any response is due within fourteen (14) days after the date the objections are filed. See Fed.R.Civ.P. 72, 6.

Parties are advised that the failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153(9th Cir. 1991).


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