Arwady Hand Trucks Sales, Inc. v. Vander Werf

• Decision Date: 07 August 2007
• Docket Number: Civil Action No. H-06-4036.
• Parties: ARWADY HAND TRUCKS SALES, INC. d/b/a Arwady Sales Company, Petitioner, v. Russell M. VANDER WERF, Director of Industry Operations, Houston Field Division, Bureau of Alcohol, Tobacco, Firearms, and Explosives, Respondent.
• Court: U.S. District Court — Southern District of Texas

Page 754

507 F.Supp.2d 754

ARWADY HAND TRUCKS SALES, INC. d/b/a Arwady Sales Company, Petitioner, v. Russell M. VANDER WERF, Director of Industry Operations, Houston Field Division, Bureau of Alcohol, Tobacco, Firearms, and Explosives, Respondent.

Civil Action No. H-06-4036.

United States District Court, S.D. Texas, Houston Division.

August 7, 2007.

J. Allen Halbrook, Jr., Sneed Vine, et al, Austin, TX, for Plaintiff, Arwady Hand Truck Sales, Inc.

Samuel G. Longoria, U.S. Attorneys Office, Houston, TX, for Defendant, Russell M. Vander Werf.

ORDER

DAVID HITTNER, District Judge.

Pending before the Court is Respondent's Motion for Summary Judgment (Instrument No. 22) and Petitioner's Cross-Motion for Summary Judgment (Instrument No. 24). Having considered the motions, submissions, and applicable law, the Court determines that Respondent's motion should be granted and Petitioner's cross-motion should be denied.

BACKGROUND

Petitioner Arwady Hand Trucks Sales, Inc., d/b/a Arwady Sales Company ("Arwady") brings this cause of action against Russell M. Vander Werf, Director of Industry Operations for the Houston Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives ("ATF").¹ Arwady, a Texas corporation with its principal place of business in Houston, Texas, filed a petition seeking de novo judicial review of the ATF's denial of its renewal application for a federal firearms license. Specifically, Arwady claims the ATF improperly denied its renewal application because the ATF did not conduct Arwady's denial hearing pursuant to the Administrative Procedures Act ("APA"), the ATF considered inappropriate evidence in its denial determination, and Arwady did not willfully violate the Gun Control Act's ("GCA") requirements.

Arwady has held a federal firearms license and has operated as a dealer in firearms since 1989. The GCA, 18 U.S.C. §§ 921-931, which governs the licensing of firearms importers, manufacturers, and dealers, authorizes the ATF to inspect licensed firearm businesses in order to ensure the business complies with federal firearms license regulations. See 18 U.S.C. § 923(g). The ATF inspected Arwady in 1991, 1996, 1999, and 2004 and discovered record-keeping violations in all four investigations.

Specifically, as a result of the 1991 investigation, the ATF cited Arwady for violating 27 C.F.R. § 178.124 and 27 C.F.R. § 178.125(e) because Arwady failed to properly complete Firearm Transaction Records, ATF Forms 4473 ("4473s"), and Acquisition and Disposition Records.² Following the 1991 investigation, the ATF verbally explained to Arwady's owner, Robert Arwady, the regulations that were violated and instructed Mr. Arwady on methods to correct past violations and prevent future ones. Additionally, Mr. Arwady signed the violation report indicating that he understood the violations and that each had been explained to him.³

After the 1996 inspection, the ATF cited Arwady for continued record-keeping errors. As in 1991, the ATF discovered inaccurate and incomplete Acquisition and Disposition Records and 4473s. The 1996 investigation found Arwady failed to record the disposition of hundreds of firearms. Furthermore, the inspection uncovered criminal violations of the GCA that resulted in the indictment of Mr. Arwady and Jeff Lewis, an Arwady employee. Mr. Arwady was later acquitted of the firearm charges; however, Mr. Lewis was convicted.

As a result of the June 1999 inspection, the ATF again cited Arwady for incomplete and inaccurate record-keeping. Specifically, Arwady improperly executed 4473s and failed to record the disposition of firearms in the Acquisition and Disposition Records. On September 2, 2004, the ATF again inspected Arwady, and discovered thirteen classes of violations comprised of: (1) failure to complete or properly execute 4473s; (2) failure to account for numerous missing firearms; (3) failure to timely record various other records; and (4) failure to adhere to required procedures prior to the transfer of firearms.

In 2005, Arwady filed an application to renew its federal firearms license. On April 24, 2006, the ATF notified Arwady of the denial of its license. Mr. Arwady timely requested a hearing to review the Notice of Denial pursuant to 18 U.S.C. § 923(f)(2) and 27 C.F.R. § 478.72. Accordingly, on July 26, 2006, the ATF held a hearing in Houston, Texas at the ATF Houston Field Division Office ("ATF hearing"). Arwady, represented by counsel called witnesses and presented evidence. On November 1, 2006, the ATF issued Final Notice denying Arwady's renewal application. Arwady timely petitioned this Court for judicial review of the ATF's final denial on December 21, 2006. The ATF and Arwady both move for summary judgment.

Arwady, in its cross-motion for summary judgment, asserts the APA requires the ATF hearing to be conducted in accordance with the APA adjudication procedures and that the ATF's failure to comply with the APA resulted in a violation of Arwady's constitutional due process rights. Moreover, Arwady claims that it did not willfully violate the GCA and regulations governing its license. Thus, the ATF improperly denied its firearms license renewal application.

In its motion for summary judgment, the ATF first argues the adjudication procedures required by the APA are not applicable to ATF administrative hearings held in conjunction with the revocation or denial of a firearms license. Additionally, the ATF asserts Arwady willfully violated the GCA by failing to engage in proper record-keeping which authorizes the ATF's denial of Arwady's license renewal application.⁴

STANDARD OF REVIEW

Summary judgment is proper when "there is no genuine issue as to any material fact and [] the moving party is entitled to a judgment as a matter of law." FED. R.Civ.P. 56(c); The court must view the evidence in a light most favorable to the non-movant. Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528, 533 (5th Cir.1997). Initially, the movant bears the burden of presenting the basis for the motion and the elements of the causes of action upon which the non-movant will be unable to establish 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). The burden then shifts to the non-movant to come "forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting FED. R.CIV.P. 56(e)). "A dispute about a material fact is `genuine' if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Bodenheimer v. PPG Indus., Inc., 5 F.3d 955, 956 (5th Cir.1993) (citation omitted). The non-movant's bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Conclusory allegations unsupported by specific facts will not prevent an award of summary judgment; the plaintiff cannot rest on his allegations to get to a jury without any significant probative evidence tending to support the complaint. Nat'l Ass'n of Gov't Employees v. City Pub. Serv. Bd. of San Antonio, 40 F.3d 698, 713 (5th Cir.1994). Thus, the non-movant's burden cannot be satisfied by conclusory allegations, unsubstantiated assertions, metaphysical doubt as to the facts, or a scintilla of evidence. Doe v. Dallas Indep. Sch. Dist., 153 F.3d 211, 215 (5th Cir.1998). It is not the function of the court to search the record on the non-movant's behalf for evidence which may raise a fact issue. Topalian v. Ehrman, 954 F.2d 1125, 1137 n. 30 (5th Cir.1992).

LAW & ANALYSIS

Both parties agree that an administrative revocation or denial of a federal firearms license by the ATF is subject to de novo judicial review in district court pursuant to 18 U.S.C. § 923(f) ("§ 923").⁵ A district court employing a de novo standard of review should not attach any presumption of correctness to the ATF's decision; however, a court may give the ATF's determination as much weight as the court deems appropriate. Willingham Sports, Inc., 348 F.Supp.2d at 1306 (citing Stein's, Inc. v. Blumenthal 649 F.2d 463, 467 (7th Cir.1980); 3 Bridges, Inc. v. United States, 216 F.Supp.2d 655, 657 (E.D.Ky.2002)). Although a court must conduct a de novo review, courts are not required to hold an evidentiary hearing and may enter judgment solely based upon the administrative record. Stein's, Inc., 649 F.2d at 467 (holding that a court's de novo review of a denial of a firearms license "may be confined to the administrative record or may be supplemented by the admission of additional evidence").

A district court may grant summary judgment in an appeal from an ATF administrative decision when there are no issues of material fact in dispute. Willingham Sports, Inc., 348 F.Supp.2d at 1307 (citing DiMartino v. Buckley, 19 Fed. Appx. 114, 2001 WL 1127288, at *1 (4th Cir.2001); Sturdy v. Bensten, 129 F.3d 122, 1997 WL 611765, at *1 (8th Cir.1997)). Moreover, it is unnecessary for a court to hold an evidentiary hearing prior to ruling on a summary judgment motion. Id. (citing Breit & Johnson Sporting Goods, Inc. v. Ashcroft, 320 F.Supp.2d 671, 673 (N.D.Ill.2004); DiMartino v. Buckles, 129 F.Supp.2d 824, 827 (D.Md.2001); T.T. Salvage Auction Co. v. Sec'y, U.S. Dep't of Treasury, 859 F.Supp. 977, 979 (E.D.N.C. 1994)). A court is entitled to consider any evidence submitted by the parties regardless of whether such evidence was presented at the underlying hearing; however, it is a court's own decision whether to receive evidence in addition to the administrative record. Strong v. United States, 422 F.Supp.2d 712, 719-20 n. 12 (N.D.Tex. 2006). A court may uphold the ATF's decision if the court determines the evidence supporting the decision is substantial. Stein's, Inc., 649 F.2d at 467.

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