Wells v. James
Filing
39
MEMORANDUM AND ORDER denying 20 MOTION for Summary Judgment (Signed by Judge Keith P Ellison) Parties notified.(arrivera, 4)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
DENISE WELLS,
§
§
Petitioner,
§
§ CIVIL ACTION NO. 4:14-CV-1239
VS.
§
TANARRA JAMES,
§
DIRECTOR OF INDUSTRY
§
OPERATIONS HOUSTON DIVISION §
BUREAU OF ALCOHOL, TOBACCO,
§
FIREARMS AND EXPLOSIVES
§
§
Respondent.
MEMORANDUM AND ORDER
Respondent has filed before this Court a Motion for Summary Judgment pursuant to
Federal Rule of Civil Procedure 56(c), contending that, as a matter of law, this Court must affirm
Respondent’s revocation of Petitioner’s federal firearms license. After considering the
submissions of the parties and the applicable law, the Court DENIES Respondent’s Motion for
Summary Judgment (Doc. No. 20).
I.
BACKGROUND
Petitioner Denise Wells first applied for a federal firearms license (FFL), on behalf of the
business Armaments International (Texas), in April of 2005. Gov’t Ex. 13. Wells is an attorney
and had never before been involved in a firearms business. Gov’t Ex. 15. She planned to
acquire a weapons inventory from Alfred Johnson, a client of hers, whose own license had been
revoked after he became ineligible to hold an FFL. Pet’r’s Resp. 7 (Doc. No. 34). Wells and
Johnson are also partners in a business called Quantum International. Id. at 5.
1
After ATF Officer Don Hollingsworth interviewed Wells on October 19, 2005, her
application was approved, and the ATF issued an FFL to Wells on January 11, 2006. Resp’t
Mot. Summary J. 8-9 (Doc. No. 20). That FFL expired in 2009, and in 2010, Wells reapplied for
and was issued a new license. Pet’r’s Resp. 8. On June 10, 2013, the ATF issued a Notice of
Revocation of License to Wells, claiming that Wells had “falsified her application”—presumably
the 2010 application, although that is not specified—and that Armaments International was in
fact a hidden partnership with Mr. Johnson. Resp’t Mot. Summary J. 6. Following a hearing in
November of 2013, the ATF revoked Wells’s FFL for willfully violating the Gun Control Act,
18 U.S.C. § 924(a)(1)(A), and 27 C.F.R. § 47.128(a). Id. at 6. In support of its decision,
Respondent, ATF’s Director of Industry Operations for the Houston Division, pointed to changes
Wells made to her first FFL application, including changing the description of Armaments
International from a “joint venture” to a “sole proprietorship.” Id. at 8. Based largely on
information available on the two companies’ websites, Respondent also found that Quantum
International—the business Wells owned in partnership with Johnson—was “not distinguishable
in any practical sense” from Armaments International and concluded that Johnson had “the
power to direct, or at least influence,” the operation of Armaments International. Resp’t Mot.
Summary J. 12.
Wells filed a Petition for De Novo Review of the revocation of her FFL in this Court.
Doc. No. 1. She claims that, in her 2005 interview with Officer Hollingsworth, she informed
Hollingsworth of her connection to Johnson, namely, that she intended to use Johnson as a
consultant for her firearms business. Pet’r’s Resp. 5. According to Wells, the changes to her
FFL application were made at Officer Hollingsworth’s suggestion. Id. Wells denies
Respondent’s contention that Wells willfully attempted to conceal material information in her
2
FFL application, and she denies that Johnson had any control over Armaments International. Id.
at 11-12.
II.
LEGAL STANDARDS
A.
Summary Judgment
Under Federal Rule of Civil Procedure 56, summary judgment is warranted if no genuine
issue of material fact exists and the moving party is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). Importantly, “the
mere existence of some factual dispute will not defeat a motion for summary judgment; Rule 56
requires that the fact dispute be genuine and material.” Willis v. Roche Biomed. Lab., 61 F.3d
313, 315 (5th Cir.1995). Material facts are those whose resolution “might affect the outcome of
the suit under the governing law.” Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). A dispute is genuine “if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Id. (citing Anderson, 477 U.S. at 248). A court may consider
any evidence in the record, “including depositions, documents, electronically stored information,
affidavits or declarations, stipulations (including those made for purposes of the motion only),
admissions, interrogatory answers, or other materials.” Fed.R.Civ.P. 56(c)(1)(A). However,
hearsay, unsubstantiated assertions, and unsupported speculation will not suffice to create or
negate a genuine issue of fact. McIntosh v. Partridge, 540 F.3d 315, 322 (5th Cir.2008); Eason
v. Thaler, 73 F.3d 1322, 1325 (5th Cir.1996); Reese v. Anderson, 926 F.2d 494, 498 (5th
Cir.1991); Shafer v. Williams, 794 F.2d 1030, 1033 (5th Cir.1986); see Fed.R.Civ.P. 56(c)(4).
B.
Standard of Review
An administrative revocation or denial of a federal firearms license by the ATF is subject
to de novo judicial review in federal district court pursuant to 18 U.S.C. § 923(f)(3). The ATF’s
3
determination is not entitled to any presumption of correctness. Weaver v. Harris, 856 F. Supp.
2d 854, 857 (S.D. Miss. 2012), aff'd, 486 F. App'x 503 (5th Cir. 2012).
C.
Revocation of a Federal Firearms License
The Gun Control Act allows for the revocation of any FFL “if the holder of such license
has willfully violated any provision of this chapter or any rule or regulation prescribed by the
Attorney General under this chapter . . . .” 18 U.S.C. § 923(e). The criteria for revoking a license
under § 923(e) is equivalent to the relevant criteria for denying a license under § 923(d)(1)(C):
the applicant must have willfully violated a provision of the chapter or a regulation prescribed
under the chapter. That is significant because almost all of the case law on this point involves
denials of licenses, rather than revocations.
Although there is no Fifth Circuit precedent to direct this Court, other courts have held,
and this Court agrees, that willfully failing to disclose material information in an application for
an FFL—including the fact that an individually legally ineligible to hold a license would serve as
a responsible person in the firearms business—is sufficient grounds for the denial of a license
under 18 U.S.C. § 923(d)(1)(C). See, e.g., XVP Sports, LLC v. Bangs, 2012 WL 4329263, at *1,
*10 (E.D. Va. Mar. 21, 2012) report and recommendation adopted, 2012 WL 4329258 (E.D. Va.
Sept. 17, 2012) (holding that plaintiff’s failure to list someone as a responsible person on the
application for an FFL, with the intention of preventing the ATF from examining that person’s
history of GCA violations, was itself a willful violation of the GCA).
It therefore follows that
willfully failing to disclose a responsible person on an application for an FFL is sufficient
grounds for the revocation of that license. It is uncontested that the term “responsible person”
was defined on Wells’ application for a federal firearms license as “[a]ny person possessing
directly or indirectly the power to direct or cause the direction of the management, policies, and
4
buying and selling practices of the business insofar as such management, policies, and buying
and selling practices pertain to firearms.” Resp’t Mot. Summary J.
In order for the ATF to revoke a license under § 923(e), the license holder’s alleged
violation of the Gun Control Act must be willful. “A license holder commits a willful
violation . . . when, with knowledge of what the law requires, it intentionally or knowingly
violates the GCA's requirements or acts with plain indifference to them (i.e., recklessly violates
them). A dealer's repeated violations after it has been informed of the regulations and warned of
violations does show purposeful disregard or plain indifference. There is no requirement that the
violations occurred with any bad purpose.” Weaver, 856 F. Supp. 2d at 857 (internal quotations
and citations omitted).
III.
ANALYSIS
The record before this Court does not show, as a matter of law, that Alfred Johnson was a
responsible person in Armaments International. Although the ATF produced circumstantial
evidence linking Johnson and Armaments International, which led Respondent reasonably to
conclude that Johnson was a responsible person, such evidence does not entitle Respondent to a
judgment when the Court is tasked with de novo review.
The undisputed evidence showed that the website for Armaments International was
designed by “Al Johnson © 2008 at Homestead TM,” and that “the website stated that the
company had acquired the business of ‘Al Johnson International’ and its ‘key personnel’ in
1993.” Resp’t Mot. Summary J. 10. Additionally, on Quantum International’s website,
Quantum International was described as “a holding company for various business entities,
including Armaments International,” and Quantum International’s website provided a link to the
website of Armaments International. Id. It is undisputed that the two websites listed the same
5
physical address and telephone numbers; however, neither the address nor the telephone number
belonged to Johnson. Id. Moreover, there is no direct evidence indicating that Johnson made
any decisions for, or directed in any way, the firearms business of Armaments International.
Respondent does not claim that Johnson physically handled any of the firearms, and Respondent
does not point to a single decision that Johnson made regarding the business.
In the cases relied on by Respondent, where courts concluded that challenged conduct
was sufficient to rise to that of “responsible persons,” much more involvement with the business
was shown. That is, a showing was made that a person had the power to direct the management,
policies, and buying and selling practices of firearms businesses. Unlike in National Lending
Group, LLC v. Holder, Respondent has not presented evidence establishing that Johnson
“participated in the daily activities of the business, . . . handl[ed] firearms, . . . [or] had a direct
ownership interest” in Armaments International. 365 F. App'x 747, 749 (9th Cir. 2010). Unlike
in XVP Sports, LLC v. Bangs, Johnson is not the sole owner of Armaments International, with
the uncontested ability to fire Wells or to exert control over her decisions by threatening to fire
her. 2012 WL 4329258, at *1 (E.D. Va. Sept. 17, 2012). See also Mew Sporting Goods, LLC v.
Johansen, 992 F. Supp. 2d 665, 680 (N.D.W. Va. 2014) aff'd, 594 F. App'x 143 (4th Cir. 2015)
(holding that applicant’s wife was a responsible person because, among other things, she “placed
the orders for inventory with wholesalers, helped tag and log the firearms, showed guns to
customers, called in sales to the FBI, filled out the firearm transaction forms, completed the
acquisition and disposition recordbook, had authority to draw on the business's checking
account, including drafting payroll checks, and acted as the human resources department”). In
fact, courts have held that individuals with significantly more direct control over firearms,
compared to Johnson, were nevertheless not responsible persons in the firearms business. See,
6
e.g., United States v. 1,922 Assorted Firearms & 229,553 Rounds of Assorted Ammunition, 330
F. Supp. 635, 638 (E.D. Mo. 1971) (finding that a store clerk who had a key to the store
premises, was in charge of the store in the owner’s absence, and was authorized to sell firearms
was not a responsible person as defined in the license application).
Even if this Court were to assume that Johnson were a responsible person, moreover,
there would still be a material dispute regarding Wells’s willfulness in violating the GCA. The
record simply does not establish that Wells had knowledge of what the law required and that she
acted intentionally or recklessly in violating those requirements when she filled out her FFL
application. Both must be established for the violation to be willful. It is undisputed that Officer
Hollingsworth interviewed Wells on October 19, 2005, and that they discussed Alfred Johnson’s
role in Armaments International at that interview. But, while Respondent cites the changes made
to Wells’s original application as proof of willfulness, Wells claims that Hollingsworth told her
to make those changes, and indeed, the Firearms Qualification Report signed by Officer
Hollingsworth noted that the changes “were made to the original application in order to
accurately reflect the new business structure.” Gov’t Ex. 15 at 4. Again, Respondent may have
acted reasonably in determining that Wells willfully violated the GCA—but this Court cannot
hold so as a matter of law.
IV.
CONCLUSION
For the foregoing reasons, Respondent’s Motion for Summary Judgment is DENIED.
IT IS SO ORDERED.
SIGNED on this the 2nd day of September, 2015.
KEITH P. ELLISON
UNITED STATES DISTRICT JUDGE
7
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?