Mew Sporting Goods, LLC. v. Johansen

Decision Date21 January 2014
Docket NumberCivil Action No. 1:13CV10.
CourtU.S. District Court — Northern District of West Virginia
PartiesMEW SPORTING GOODS, LLC., Petitioner, v. David D. JOHANSEN, Director of Industry Operating Louisville Field Division Bureau of Alcohol, Tobacco, Firearms & Explosives, Respondent.

OPINION TEXT STARTS HERE

Dan M. Peterson, Dan M. Peterson PLLC, Fairfax, VA, James B. Zimarowski, Morgantown, WV, for Petitioner.

Alan G. McGonigal, U.S. Attorney's Office, Wheeling, WV, for Respondent.

MEMORANDUM OPINION AND ORDER GRANTING RESPONDENT'S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 16], DENYING PETITIONER'S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 11], AND DISMISSING THE PETITION WITH PREJUDICE

IRENE M. KEELEY, District Judge.

Before the Court is the motion for summary judgment (dkt. no. 11) filed by the petitioner, MEW Sporting Goods, LLC (MEW), and the motion to dismiss or, in the alternative, for summary judgment (dkt. no. 16) filed by the respondent, David D. Johansen (Johansen). For the reasons that follow, the Court GRANTS Johansen's motion, DENIES MEW's motion, and DISMISSES the petition WITH PREJUDICE.

I. BACKGROUND

On December 5, 2012, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) sent MEW a final notice of denial regarding its application for a federal firearms license (“FFL”). See Final Notice of Denial 4, July 1, 2013, Dkt. No. 15–3. The events leading up to that denial are discussed below and provide critical context.

Teresa Walsh (formerly, Teresa Snyder) (“Mrs. Walsh”) operated a gun sales business, TGS Sporting Goods (“TGS”), until the revocation of her FFL on April 3, 2006.1See Notice of Denial 3, July 1, 2013, Dkt. No. 15–7. Mrs. Walsh subsequently married Mark Walsh (“Mr. Walsh”), and, in March 2008, the couple formed three businesses, including Mountaineer Country Ice Cream, LLC, Mountaineer Country Rentals, LLC, and Mountaineer Gun Sales, LLC (“Mountaineer”). See id. Although both Mr. and Mrs. Walsh were listed as members and organizers of the ice cream and rental companies, Mr. Walsh was the sole member of the gun sales business. See id. After forming Mountaineer, Mr. Walsh applied and was approved for an FFL, which he used to purchase and sell guns through Mountaineer for approximately two and a half years. See Final Notice of Denial 13, July 1, 2013, Dkt. No. 15–7.

In 2011, the ATF received a telephone call from a Mountaineer employee regarding certain bookkeeping improprieties. See Resp.'s Mem. in Supp. 2, July 1, 2013, Dkt. No. 17. In response, the agency conducted an on-site investigation that lasted from March 22, 2011 through April 5, 2011. See id. As a result of that investigation, the ATF issued a Notice of Revocation on June 16, 2011. See id. at 4. In accordance with 18 U.S.C. § 923(f)(2), Mr. Walsh promptly requested an administrative hearing, which the ATF scheduled for September 27, 2011. See id. However, on September 23, 2011, Mr. Walsh withdrew his request for the hearing. See id. Accordingly, the ATF canceled the hearing and issued a Final Notice of Revocation on November 3, 2011, for the following reasons:

The inspection disclosed that Teresa Walsh (formerly Teresa Snyder) is an owner and responsible person of Mountaineer Gun, yet was intentionally not listed as such by Mountaineer Gun on its application, ATF Form 7, as is required. By intentionally failing to list Teresa Walsh as an owner and responsible person on ATF Form 7, Mountaineer Gun willfully failed to disclose material information on the application.... Mark Walsh, her husband, applied for the Mountaineer Gun license at her urging in 2008. At the time he was aware she had a Federal firearms license revoked.

See Final Notice at 13–15, Dkt. No. 15–7. According to the ATF, Mr. Walsh's failure to list Mrs. Walsh on Mountaineer's FFL application provided a sufficient basis to revoke the application under 27 C.F.R. § 478.47(b)(4), 18 U.S.C. § 923(d)(1)(C), and (d)(1)(D). See id. at 14.

On December 14, 2011, Mountaineer petitioned this Court to review the ATF's revocation. See Mountaineer Gun Sales, LLC v. Bureau of Alcohol, Tobacco, Firearms & Explosives, No. 1:11CV200, 2012 WL 194079, at *1 (N.D.W.Va., Jan. 23, 2012). It also filed a motion to stay the revocation of its license or, in the alternative, for a preliminary injunction. See id. at *4. For its part, the ATF filed a motion to dismiss the petition for lack of subject-matter jurisdiction. See id. On January 23, 2012, the Court entered a memorandum opinion and order granting the ATF's motion to dismiss and denying Mountaineer's motion for a stay or preliminary injunction. See id. Although the Court based its dismissal on Mountaineer's failure to exhaust its administrative remedies, for purposes of the motion for preliminary injunction, the Court also addressed whether Mountaineer would have been likely to succeed on the merits. See id. at *4. It agreed with the ATF's findings that “Mountaineer was using Mark Walsh as a strawman applicant, and that Teresa Walsh played a significant role in the business.” Id. at *6. The Court further explained that the “ATF likely did not err in concluding that Mountaineer's failure to disclose Teresa Walsh as a ‘responsible person’ was a willful violation of § 923(d)(1)(D).” Id.

On January 31, 2012, eight days after the Court's decision, Mr. Walsh formed MEW, identifying himself as the sole member. See Pet. 1–2, Jan. 23, 2013, Dkt. No. 1. Like Mountaineer, MEW is in the business of purchasing and selling firearms and requires an FFL in order to operate. On February 13, 2012, Mr. Walsh submitted an FFL application on behalf of MEW. See App. 7, July 1, 2013, Dkt. No. 15–7. On June 8, 2012, the ATF denied the application on the basis of Mr. Walsh's alleged “prior willful violation of the Gun Control Act.” See Notice of Denial 1–2, July 1, 2013, Dkt. No. 15–7; see also18 U.S.C. § 923(e). Several days after receiving the notice of denial, Mr. Walsh requested an administrative hearing in accordancewith 18 U.S.C. § 923(e)(2). See Letter 6, July 1, 2013, Dkt. No. 15–7. A hearing occurred on October 18, 2012, in Bridgeport, West Virginia, during which interviews with ATF Inspector Gary Malaskovitz (“Inspector Malaskovitz”), the lead investigator of Mountaineer, and Mr. Walsh were taken. See Hrg. Tr., July 1, 2013, Dkt. Nos. 15–4, 15–5.

On December 5, 2012, the ATF issued a Final Notice of Denial to MEW, which included five pages of findings of fact and conclusions of law. See Final Notice at 4–9, Dkt. No. 22–1. In that Final Notice, the ATF concluded that Mr. Walsh had willfully failed to disclose material information on the Mountaineer FFL application, that MEW is a successor-in-interest to Mountaineer, and therefore Mountaineer's willful violation was attributable to MEW. See id. at 5. The ATF's decision also restated the evidence purporting to demonstrate that Mrs. Walsh was a responsible person at Mountaineer. See id. at 6–7.

On behalf of MEW, on January 23, 2013, Mr. Walsh petitioned for review of the ATF's denial of MEW's FFL application. Thereafter, on June 19, 2013, MEW filed a motion for summary judgment, in which it argued that (1) there is no statutory basis for denial of an FFL application based on failure to disclose a responsible person, and (2) that, in any event, the evidence is undisputed that Mrs. Walsh was not a responsible person at Mountaineer. See Pet.'s Mem. in Supp. 2–12, June 19, 2013, Dkt. No. 11–1. On August 15, 2013, Johansen filed a response brief, countering that (1) collateral estoppel precludes judicial review, (2) the ATF's decisions in Mountaineer and in this case were proper, and (3) Mr. Walsh's newly formed entity, MEW, did not sever his prior liability at Mountaineer. See Respondent's Mem. at 1–13, Dkt. No. 24. MEW filed a reply on September 3, 2013, restating its original arguments and countering those of Johansen. See Pet.'s Reply Br. 2–3, Sept. 3, 2013, Dkt. No. 26.

On July 1, 2013, Johansen filed a motion to dismiss or, in the alternative, for summary judgment, in which he argues that (1) the ATF has the statutory authority to deny an FFL application for an applicant's past willful failure to disclose material information, (2) Casanova Guns, Inc. v. Connally, 454 F.2d 1320 (7th Cir.1972) imputes a willful violation of the Gun Control Act (“GCA”) from a corporate entity to its successor-in-interest, and (3) collateral estoppel bars relitigation concerning Mrs. Walsh's status as a responsible person. See Resp.'s Mem. in Supp. at 9–14, Dkt. No. 17.

In its response, MEW contends (1) the ATF lacks the statutory authority to request information about responsible persons on the FFL application; (2) the undisputed facts establish that Mrs. Walsh was not a responsible person for Mountaineer; (3) Casanova Guns is distinguishable from this case; and (4) collateral estoppel cannot be applied. See Pet.'s Resp. Br. 1–22, Aug. 15, 2013, Dkt. No. 23. In his reply brief, Johansen argued for the first time that, because the ATF's decision with respect to MEW was based on its previous final decision with respect to Mountaineer, MEW is not entitled to judicial review. See Resp.'s Reply Br. 6–7, Sept. 3, 2013, Dkt. No. 25.

On November 21, 2013, the Court held a hearing on the parties' motions, at which counsel for Johansen withdrew his collateral estoppel argument. The Court therefore determined that the remaining issues pending for review included (1) whether the ATF has the statutory authority to request information regarding responsible persons on an FFL application, (2) the precedential effect, if any, of the decision in Casanova Guns on this case, (3) whether the ATF's prior decision with respect to Mountaineer precludes judicial review in this case,2 and (4) whether the material facts in the case are undisputed. At the behest of counsel for MEW, the Court also permitted supplemental briefing by both parties on the interplay between Casanova Guns and the relevant statutes of the GCA. The parties completed...

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