PW Arms, Inc. v. United States, CASE NO. C15-1990-JCC

• Decision Date: 12 May 2016
• Docket Number: CASE NO. C15-1990-JCC
• Citation: 186 F.Supp.3d 1137
• Parties: PW Arms, Inc., Plaintiff, v. United States of America and The Bureau of Alcohol, Tobacco, Firearms, and Explosives, Defendants.
• Court: U.S. District Court — Western District of Washington

186 F.Supp.3d 1137

PW Arms, Inc., Plaintiff,

v.United States of America and The Bureau of Alcohol, Tobacco, Firearms, and Explosives, Defendants.

CASE NO. C15-1990-JCC

United States District Court, W.D. Washington, at Seattle.

Signed May 12, 2016

Robert G. Chadwell, Thomas Matthew Brennan, Patrick Joseph Preston, McKay Chadwell, Seattle, WA, for Plaintiff.

Jessica M. Andrade, US Attorney's Office, Seattle, WA, for Defendants.

ORDER GRANTING DEFENDANTS' PARTIAL MOTION TO DISMISS

John C. Coughenour, UNITED STATES DISTRICT JUDGE

This matter comes before the Court on Defendants' Partial Motion to Dismiss (Dkt. No. 10), Plaintiff's Opposition (Dkt. No. 15), Defendants' Reply (Dkt. No. 19), and Plaintiff's Surreply (Dkt. No. 21). Having thoroughly considered the parties' briefing and the relevant record, the Court finds oral argument unnecessary and hereby GRANTS the motion for the reasons explained herein.

I. BACKGROUND

Plaintiff, a Washington corporation that distributes ammunition and firearms wholesale, brings suit against the United States and the Bureau of Alcohol, Tobacco, Firearms, and Explosives ("ATF"). (Dkt. No. 1.) Plaintiff's suit arises out of its having sought and received permits to import 50 million rounds of banned, "armor piercing" ammunition from Germany. (Id. at 9.) The ammunition in question, 7N6 5.45x39 mm, was designed and introduced by the Soviet Union in the 1970s for military use in the AK-74 assault rifle. (Id. at 8.) Upon discovery that the bullets contain a steel core and could be used in a commercially-available handgun, the ATF classified them as "armor piercing" and therefore banned under the Gun Control Act, 18 U.S.C. § 921(a)(17)(B)(i). (Id. at 11.)

Under permits issued between February 2013 and February 2014, Nos. 13–00760, 13–01216, and 14–00996, Plaintiff imported over 37 million rounds of such ammunition for resale in the United States. (Id. at 9–10.) In this process, from May 2013 to early 2014, Plaintiff incurred numerous associated costs, including packaging, shipping, marine loading and sea freight, and customs broker expenses. (Id. at 10.) On February 17, 2014, two containers of the ammunition arrived in Norfolk, Virginia and were stopped by Customs and Border Protection agents. (Id. at 11.) Permit No. 14–00996, authorizing the importation of an additional 50 million rounds of the 7N6 5.45x39 mm ammunition, was approved on February 21, 2014. (Id. ) On March 11, 2014, ATF notified Plaintiff that the ammunition was classified as armor piercing and could not be imported. (Id. ) Plaintiff then put a hold on the remaining importation of its order and has since incurred additional expenses storing remaining ammunition in Hamburg, Germany and in a Free Trade Zone facility in Reno, Nevada. (Id. ) On April 7, 2014, the ATF issued a special advisory "reclassifying 7N6 5.45x39 mm ammunition as armor piercing and illegal..." (Id. at 12–13.)

Plaintiff sues, alleging that the ATF's "reclassification" of the 5.45x39 mm ammunition was "arbitrary and capricious" under the Administrative Procedure Act, 5 U.S.C. § 701 et seq. (Dkt. No. 1 at 17–19.) Additionally, Plaintiff brings a claim under the Federal Tort Claims Act, ("FTCA"), alleging that the United States failed to exercise ordinary care in reviewing and approving Plaintiff's ammunition import permits. (Id. at 19.) Plaintiff alleges that the United States already knew that the ammunition in question was "armor piercing" but instead "rubber stamped" Plaintiff's permit applications and "neglected to ask if the ammunition was lead core or steel core." (Id. at 20.) Plaintiff also brings a FOIA claim against the ATF, though the ATF asserts it is in the process of producing documents in response. (Id. at 21–22; Dkt. No. 10 at 2.)

Defendants move to dismiss Plaintiff's FTCA claim only, arguing that this Court lacks jurisdiction over the claim because (1) there is no private analogue for the tort alleged and so the FTCA does not waive sovereign immunity in such circumstances, (2) the "discretionary function" exception to the FTCA applies, (3) the claim relates to the "detention of goods" and is thus not covered by the FTCA, and/or (4) the claim arises out of the interference with contractual rights and is thus exempt from the FTCA. (Dkt. No. 10; see also 28 U.S.C. § 2680(a), (c), and (h).)

Attached to their motion, Defendants include the Declaration of William E. Majors, the Chief of the ATF's Firearms & Explosives Import Branch. (Dkt. No. 11.) In it, Mr. Majors explains the ATF procedures for reviewing and issuing importation permits, which begins by submitting what is known as a "Form 6" application. (Id. at 2; see also 27 C.F.R. § 447.41(a).) Among other things, the Form 6 requires applicants to give a description of the item to be imported including whether it is "AP" or "armor piercing." (Dkt. No. 11 at 3, 12.) Plaintiff's application did not disclose that the 5.45x39 mm ammunition was armor piercing. (See Dkt. No. 1.) Mr. Majors describes the process by which Form 6 applications are received and reviewed. First, the form is reviewed by a Deputy Project Manager and checked for completeness and accuracy. (Dkt. No. 11 at 34.) If necessary information has been omitted, or it is otherwise deemed appropriate, an application may be referred to an ATF Specialist. (Id. at 35.) Depending on the nature of Specialist review, if any, the form is then referred to an Examiner for review and to make a determination whether to grant or deny the application. (Id. at 4, 36–37.) "There are no set rules in the Procedures for the Examiner's review and decision on whether to grant or deny the application. In general, however, examiners review the form 6 applications in order to determine if the requested items are importable...[they] review the information provided, research the items to be imported, and review applicable laws and regulations in order to determine whether the items are importable." (Id. at 4.) Once conditionally approved, permits may be revoked at any time. 27 C.F.R. § 447.44 ;

The Court finds that Plaintiff may not proceed under the FTCA because there is both no private analogue for the importation of goods into the United States, and because the ATF's permit review process constitutes a "discretionary function" of the Government. In other words, both facial and factual challenges to Plaintiff's standing to bring a claim under the FTCA have merit. Accordingly, Defendants' Partial Motion to Dismiss (Dkt. No. 10) is GRANTED.

II. DISCUSSION

A. Standard of Review

Under Fed. R. Civ. P. 12(b)(1), a complaint must be dismissed if the court lacks subject matter jurisdiction. Jurisdiction is a threshold separation of powers issue, and may not be deferred until trial. Steel Co. v. Citizens for a Better Env't , 523 U.S. 83, 94–95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998).

A motion to dismiss under Rule 12(b)(1) for lack of jurisdiction may be facial or factual; Defendants bring both. See White v. Lee , 227 F.3d 1214, 1242 (9th Cir.2000). In facially attacking a complaint for lack of subject matter jurisdiction, the defendant asserts that the allegations are insufficient on their face to confer federal jurisdiction. In reviewing a facial attack, the court assumes all materials allegations in the complaint are true. Thornhill Publ'g Co. v. General Tel. & Elec . Corp . , 594 F.2d 730, 733 (9th Cir.1979). Defendants also bring a factual challenge to subject matter jurisdiction in arguing that the government action challenged here constitutes a discretionary function of the ATF immune from FTCA liability. In reviewing a factual challenge, the Court may consider materials beyond the complaint. Savage v. Glendale Union High Sch. , 343 F.3d 1036, 1039 n. 2 (9th Cir.2003).

Plaintiff argues, both in response and surreply, that the Declaration of William E. Majors may not be considered based on relevance and a separation of powers issue. (Dkt. No. 15 at 11; Dkt. No. 21 at 2.) The Court is not persuaded by Plaintiff's assertion. Upon consideration of Defendants' factual challenges based on the applicability of the "discretionary function" exception to the FTCA, the Court reviews the evidence provided. Plaintiff's weak separation of powers argument essentially goes to the question of whether the ATF had discretion to authorize import permits for the ammunition in question, not to whether the Court may consider the statements in the Majors declaration. (Dkt. No. 15 at 11.) The Court considers the contents of the Majors declaration in assessing the factual question of standing under Rule 12(b)(1).

B. Relevant Administrative and Statutory Framework

The amended Gun Control Act prohibits the importation, manufacture, or distribution of "armor piercing ammunition." 18 U.S.C. § 921(a)(17)(B). The Law Enforcement Officers Protection Act of 1986 ("LEOPA") originally defined armor piercing definition, and was intended to ban "bullets capable of penetrating body armor and designed to be fired from a handgun." Armor-Piercing Ammunition: Hearings Before the Subcommittee on Criminal Law, Senate Judiciary Committee, 98th Cong., 2nd Sess., 8 (1985). Armor piercing ammunition is defined as:

(i) a projectile or projectile core which may be used in a handgun and which is constructed entirely (excluding the presence of traces of other substances) from one or a combination of tungsten alloys, steel, iron, brass, bronze, beryllium copper

, or depleted uranium; or

(ii) a full jacketed projectile larger than .22 caliber designed and intended for use in a handgun and whose jacket has a weight of more than 25 percent of the total weight of the projectile.

18 U.S.C. § 921(a)(17)(B).

The Gun Control Act imposes licensing requirements on all persons or entities that manufacture, import, or sell firearms and ammunition. 18 U.S.C. § 923. The ATF has rule-making authority, under the Attorney General, with respect to the classification of ammunition. 18 U.S.C. § 926 ; 28 C.F.R. § 0.130(a)(1).

C. The...