10 Ring Precision, Inc. v. Jones

• Decision Date: 11 July 2013
• Docket Number: No. 12–50742.,12–50742.
• Citation: 722 F.3d 711
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: 10 RING PRECISION, INC., Plaintiff–Appellant Robby Betts, doing business as Golden States Tactical, Intervenor–Appellant v. B. Todd JONES, Acting Director, Bureau of Alcohol, Tobacco, Firearms & Explosives, in his official capacity, Defendant–Intervenor–Appellee.

722 F.3d 711

10 RING PRECISION, INC., Plaintiff–AppellantRobby Betts, doing business as Golden States Tactical, Intervenor–Appellant

v.B. Todd JONES, Acting Director, Bureau of Alcohol, Tobacco, Firearms & Explosives, in his official capacity, Defendant–Intervenor–Appellee.

No. 12–50742.

United States Court of Appeals,Fifth Circuit.

July 11, 2013.

Richard E. Gardiner, Attorney, Law Office of Richard Gardiner, Fairfax, VA, Joseph Allen Halbrook, Jr., Sneed, Vine & Perry, P.C., Austin, TX, Stephen Porter Halbrook, Esq., Fairfax, VA, for 10 Ring Precision, Incorporated Plaintiff–Appellant.

Andre M. Landry, III, Esq., Looper Reed & McGraw, P.C., Houston, TX, Andrew Arthur Lothson, Swanson, Martin & Bell, L.L.P., Chicago, IL, James Brian Vogts, Swanson, Martin & Bell, L.L.P., Chicago, IL, for Robby Betts, doing business as Golden States Tactical Intervenor Plaintiff–Appellant.

Michael S. Raab, Anisha Sasheen Dasgupta, Daniel M. Riess, [NTC Government], U.S. Department of Justice, Civil Division, Appellate Staff, Washington, DC, for B. Todd Jones, Acting Director, Bureau of Alcohol, Tobacco, Firearms & Explosives, in his official capacity Intervenor Defendant–Appellee.

Appeals from the United States District Court for the Western District of Texas.

Before KING, HIGGINBOTHAM, and CLEMENT, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge.

In July 2011, as part of an effort to combat the illegal trafficking of firearms from the United States to Mexico, the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) issued a demand letter to each federal firearms licensee classified as a “dealer” or “pawnbroker” located in Arizona, California, New Mexico, and Texas.¹ The July 2011 demand letter required its recipients to report to ATF whenever “at one time or during any five consecutive business days, [they] sell or otherwise dispose of two or more semi-automatic rifles capable of accepting a detachable magazine and with a caliber greater than .22 (including .223/5.56 caliber) to an unlicensed person.” Appellants argue that ATF lacked statutory authority to issue the July 2011 demand letter, and, even if it possessed statutory authority, that its decision to issue the demand letter to the chosen licensees was arbitrary and capricious. We disagree.

I.

The Gun Control Act of 1968 (“GCA”) requires anyone who wishes to “engage in the business of ... dealing in firearms” to obtain a license.² All federal firearms licensees (“FFLs”) must create and maintain records of all firearms transactions, including the name, age, and residence of each individual who purchases a firearm.³ In 1986, Congress amended the GCA with the passage of the Firearms Owners' Protection Act of 1986 (“FOPA”). ⁴ As part of FOPA, Congress enacted 18 U.S.C. § 923(g)(5)(A), which permits ATF to issue demand letters to FFLs to obtain “all record information required to be kept [by the GCA] or such lesser record information.” ⁵ Relying on that authority, ATF issued the July 2011 demand letter in response to its documented investigation of escalating drug violence in Mexico.

A brief background of that investigation, as well as it findings, is helpful in understanding ATF's decision to issue the July 2011 demand letter. In 2007, ATF began investigating the illegal flow of guns from the United States to Mexico.⁶ William Hoover, Assistant Director of Field Operations for ATF, testified before a subcommittee of the United States House of Representatives in June 2008 that “trace data over the past three years shows that Texas, Arizona and California are the three most prolific states, respectively, for firearms illegally trafficked to Mexico.” He noted that “[although] the [drug trafficking organizations'] ‘weapons of choice’ had been .38 caliber handguns ... cartel members and enforcers have now developed a preference for higher quality, more powerful weapons,” such as assault rifles. He also explained that “tracing” of firearms seized in the United States and Mexico plays “an essential part in ATF's firearms trafficking investigations.”

In June 2009, the Government Accountability Office (“GAO”) released a report entitled Firearms Trafficking: U.S. Efforts to Combat Arms Trafficking to Mexico Face Planning and Coordination Challenges (“the Report”).⁷ According to the Report, “about 27 percent of firearms recovered in Mexico and traced from fiscal year 2004 to fiscal year 2008 were long guns.” ⁸ Moreover, “[f]rom fiscal year 2004 to fiscal year 2008, most of the firearms seized in Mexico and traced came from U.S. Southwest border states. In particular, about 70 percent of those firearms came from Texas, California, and Arizona.” ⁹ The Report explained that the absence of a multiple sales reporting requirement for long guns poses a challenge for ATF's efforts. “[T]he federal multiple sales reporting requirement helps expedite the time required by ATF to complete a gun trace.” ¹⁰ Because ATF “does not have information in its multiple sales database on any long guns recovered in crime in Mexico that may have been purchased through a multiple sale,” ¹¹ it usually cannot use its own records to trace those guns. The Report also made clear that “ATF has identified multiple sales or purchases of firearms by a nonlicensee as a ‘significant indicator’ of firearms trafficking.” ¹² The Report's recommendations included a suggestion that ATF investigate potential approaches “to address the challenges ... regarding the constraints on the collection of data that inhibit the ability of law enforcement to conduct timely investigations.” ¹³

In May 2010, the Office of the Inspector General (“OIG”) issued a review of ATF's efforts to combat firearms trafficking, which noted that “the lack of a reporting requirement for multiple sales of long guns ... hinders ATF's ability to disrupt the flow of illegal weapons into Mexico.” ¹⁴ It also identified data showing that, of the illegally trafficked guns recovered in Mexico, the percentage of those that were long guns increased steadily from 20 percent in 2004 to 40 percent in 2008.¹⁵ In addition, the review noted that, since long guns generally have a shorter “time-to-crime” ¹⁶ than handguns, long guns generate more valuable leads for law enforcement officials,¹⁷ and that “Mexican cartels are obtaining long guns in multiple sales.” ¹⁸ These and other findings led OIG to conclude that “the mandatory reporting of long gun multiple sales could help ATF identify, investigate, and refer for prosecution individuals who illegally traffic long guns into Mexico.” ¹⁹ Accordingly, OIG recommended that ATF “explore options for seeking a requirement for reporting multiple sales of long guns.” ²⁰ ATF responded that it would “explore the full range of options to seek information regarding multiple sales of long guns,” but noted that some options could “require a change to the [GCA] which is beyond ATF's ... authority.” ²¹

On December 17, 2010, ATF responded to these reports and recommendations by announcing a proposal that would require FFLs in Arizona, California, New Mexico, and Texas “to report multiple sales or other dispositions whenever the licensee sells or otherwise disposes of two or more rifles within any five business consecutive days with the following characteristics: (a) [s]emi-automatic; (b) a caliber greater than .22; and (c) the ability to accept a detachable magazine.” ²² After the initial sixty-day comment period, during which ATF received 12,680 comments (8,928 in support and 3,752 in opposition), ATF extended the comment period for an additional thirty days, clarifying that the requirement would only apply to FFLs “who are dealers and/or pawnbrokers in Arizona, California, New Mexico and Texas.” ²³

ATF issued the challenged demand letter in July 2011 to FFLs who were dealers and/or pawnbrokers in Arizona, California, New Mexico, and Texas. 10 Ring Precision, Inc., located in Texas, received the demand letter and filed suit against Kenneth Melson, Acting Director of ATF,²⁴ arguing that ATF exceeded its authority in issuing the July 2011 demand letter and seeking declaratory as well as injunctive relief under the Administrative Procedure Act. Golden State Tactical, located in California, also received the demand letter and moved to intervene as a plaintiff in the case. The district court granted Golden State's motion over ATF's opposition. In response, ATF filed the administrative record and moved for summary judgment. 10 Ring filed a motion to exclude portions of the administrative record referencing trace results originating from Mexico, and, along with Golden State, also moved for summary judgment. The district court denied 10 Ring's motion to exclude portions of the record, denied the Plaintiffs' cross-motion for summary judgment, and granted summary judgment in favor of ATF. 10 Ring and Golden State (collectively “Appellants”) timely appealed.

During the pendency of this appeal, the D.C. Circuit issued its opinion in National Shooting Sports Foundation, Inc. v. Jones, which upheld the validity of the July 2011 demand letter against challenges virtually identical to those presented by Appellants.²⁵ As we explain below, we agree with that decision and join the D.C. Circuit in upholding the validity of the July 2011 demand letter.

II.

“We review a district court's grant of summary judgment de novo, applying the same standard as the district court.” ²⁶ Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” ²⁷

III.

Appellants first argue, based on various provisions of 18 U.S.C. § 923(g), as well as the Consolidated and Continuing Appropriations Act of 2010, that ATF lacked statutory authority to issue the July 2011 demand letter. “We review ATF's interpretation of the GCA under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc.” ²⁸ Under Chevron, we first ask “whether Congress has directly...