Sig Sauer, Inc. v. Brandon

• Decision Date: 21 June 2016
• Docket Number: No. 15–2230,15–2230
• Citation: 826 F.3d 598
• Parties: Sig Sauer, Inc., Plaintiff, Appellant, v. Thomas E. Brandon, Acting Director, United States Bureau of Alcohol, Tobacco, Firearms, and Explosives, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

826 F.3d 598

Sig Sauer, Inc., Plaintiff, Appellant

v.Thomas E. Brandon, Acting Director, United States Bureau of Alcohol, Tobacco, Firearms, and Explosives, Defendant, Appellee.

No. 15–2230

United States Court of Appeals, First Circuit.

June 21, 2016

Stephen P. Halbrook, Fairfax, VA, with whom Mark C. Rouvalis and Kenton J. Villano, Manchester, NH, were on brief, for Appellant.

Abby C. Wright, Attorney, Appellate Staff, Civil Division, U.S. Department of Justice, with whom Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Donald Feith, United States Attorney, and Michael S. Raab, Attorney, Appellate Staff, Civil Division, U.S. Department of Justice, were on brief, for Appellee.

Before Lynch, Thompson, and Barron, Circuit Judges.

BARRON

, Circuit Judge.

Sig Sauer, Inc., is a gun manufacturer headquartered in New Hampshire. In this appeal, Sig Sauer challenges the District Court's decision to uphold a ruling by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) that a gun Sig Sauer seeks to market includes a “silencer” under the National Firearms Act (the “NFA”). 26 U.S.C. §§ 5801 et seq .

We affirm.

I.

The NFA subjects “firearms” to various taxes and regulatory requirements, including that the firearm be registered with ATF. Id. §§ 5811, 5821, 5822, 5841, 5842. The NFA defines a “firearm” to include certain guns and gun parts, including “silencers.” 18 U.S.C. § 921

. And the NFA defines a “silencer,” to include not only “any device for silencing, muffling, or diminishing the report of a portable firearm,” but also, and of particular relevance here, “any part intended only for use in ” “assembling or fabricating a firearm silencer or firearm muffler.” Id. § 921(a)(24) ; 26 U.S.C. § 5845(a)(7) (emphasis added). Failure to comply with the NFA's regulatory requirements can result in serious criminal penalties. 26 U.S.C. § 5871.

ATF permits—but does not require—gun makers to seek classification letters from ATF prior to manufacturing a gun. See Bureau of Alcohol, Tobacco, Firearms and Explosives, National Firearms Act Handbook § 7.2.4 (2009), available at: https://www.atf.gov/firearms/docs/atf- national-firearms-act-handbook-atf-p-53208/download; see also Innovator Enters., Inc. v. Jones , 28 F.Supp.3d 14, 18–19, 19 n. 2 (D.D.C. 2014)

. A classification letter sets forth “the agency's official position concerning the status of the firearms under Federal firearms laws.” Id. § 7.2.4.1.

In this case, Sig Sauer sought a classification letter from ATF regarding a part of a gun that it planned to manufacture. Sig Sauer noted that ATF might deem the part at issue to be a silencer under the NFA on the ground that it was “intended only for use” in assembling or fabricating a silencer. Sig Sauer contended, however, that the part was not intended only for such a use as it was also intended for use as a muzzle brake. A muzzle brake is a device that is added to a gun to reduce recoil (the backwards force that results from firing the gun) and rise (the tendency of the barrel to move upwards when the gun is fired). See Vais Arms, Inc. v. Vais , 383 F.3d 287, 288 n. 1 (5th Cir. 2004)

. On the basis of its argument that the part was intended for use as a muzzle brake, Sig Sauer argued to ATF that the part did not qualify as a silencer under the “intended only for use” prong of the NFA's definition of a silencer.

ATF disagreed and issued a classification letter that designated the part to be “intended only for use” in assembling or fabricating a silencer. Sig Sauer then asked ATF to reconsider its classification. ATF again determined, however, that the part was a silencer under the “intended only for use” prong of the NFA's definition of a silencer.

At that point, Sig Sauer challenged ATF's classification of the part as a silencer by filing suit in the District of New Hampshire under the Administrative Procedure Act (the “APA”). 5 U.S.C. §§ 701 et seq .¹

The parties then jointly moved to stay the proceedings so that ATF could reconsider the part's classification. ATF agreed to accept “additional documents or information” in reconsidering its prior ruling. ATF also agreed that, in the event that it affirmed its prior ruling on remand, it would consider “additional information and documentation” if Sig Sauer chose to make such a submission before the case returned to the District Court.

On remand, ATF affirmed its decision yet again. Sig Sauer then submitted, among other materials, affidavits that stated that it intended the part at issue to lengthen the gun's barrel to 16 inches so that the gun would not be subject to the NFA on the basis of its length, as rifles that are shorter than 16 inches are for that reason alone subject to the NFA. See 26 U.S.C. § 5845(a)(3)

. Sig Sauer thus contended that because it intended the part to make the gun sufficiently long that it would not be subject to the NFA on the basis of its length, the part was, for this reason, too, not “intended only for use” in assembling or fabricating a silencer. ATF declined, however, to change its classification of the part.

Following ATF's decision on remand, the litigation resumed in district court, where the parties cross-moved for summary judgment. After a hearing, the District Court granted ATF's motion for summary judgment and denied Sig Sauer's. Sig Sauer, Inc. v. Jones , 133 F.Supp.3d 364 (D.N.H. 2015)

. Sig Sauer then timely filed this appeal.

II.

“In the administrative law context, where we review directly the decision of the agency, the APA can serve as an overlay to the familiar de novo standard applicable to appeals from a district court's grant of a summary judgment.” Baystate Alt. Staffing, Inc. v. Herman , 163 F.3d 668, 674 (1st Cir. 1998)

. Under the APA, we review ATF's decision to determine if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A) ; see Baystate Alt. Staffing , 163 F.3d at 674. “A decision is arbitrary and capricious ‘if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.’ ” Craker v. DEA , 714 F.3d 17, 26 (1st Cir. 2013) (quoting Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co. , 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) ). And, of course, “[w]e may not substitute our judgment for that of the agency, even if we disagree with its conclusions.” Id.

III.

Sig Sauer first contends that ATF classified the part as a silencer merely because it was “capable of use” in assembling or fabricating a silencer and thus failed to evaluate whether, as the NFA requires, the part was “intended only for use” in assembling or fabricating a silencer. Sig Sauer bases this contention on the fact that ATF examined, among other things, the part's design features and objective capabilities.

But ATF persuasively explained in its classification letter that it examines a part's design features—and thus the uses of which a part is capable—as part of the inquiry into whether a part is intended to be used only in assembling or fabricating a silencer. Such an objective approach to ferreting out a party's intent is a very familiar one in the law. See, e.g., United States v. Siciliano , 578 F.3d 61, 77 (1st Cir. 2009)

(noting that objective evidence is useful to “buttress or rebut direct testimony as to intent”); cf. Washington v. Davis , 426 U.S. 229, 253, 96 S.Ct. 2040, 48 L.Ed.2d 597 (1976) (Stevens, J., concurring) (“Frequently the most probative evidence of intent will be objective evidence of what actually happened rather than evidence describing the subjective state of mind of the actor.”); United States v. Gaw , 817 F.3d 1 (1st Cir. 2016)

(“[T]he law is long since settled that the prosecution may prove its case without direct evidence of a defendant's guilty knowledge so long as the array of circumstantial evidence possesses sufficient persuasive power.” (quoting United States v. O'Brien , 14 F.3d 703, 706 (1st Cir. 1994) )). Nor do we have any reason to suppose it is an approach that the NFA prohibits. In fact, it is hard to believe that Congress intended to invite manufacturers to evade the NFA's carefully constructed regulatory regime simply by asserting an intended use for a part that objective evidence in the record—such as a part's design features—indicates is not actually an intended one. See United States v. Syverson , 90 F.3d 227, 232 (7th Cir. 1996) (holding that a device was “intended only for use” in assembling or fabricating a silencer notwithstanding the designer's stated intention that it be used as a muzzle brake).

Because we find persuasive ATF's contention that it may consider objective evidence in determining whether a part is “intended only for use” in assembling or fabricating a silencer, see Skidmore v. Swift & Co. , 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944)

, ATF committed no legal error of the sort Sig Sauer claims. Accordingly, we need decide only the sole remaining point of dispute between the parties: whether there is a sufficiently reasoned basis in the administrative record for ATF's classification of this part as one that is “intended only for use” in assembling or fabricating a silencer. And so we now turn to that issue.

IV.

ATF concluded that the part at issue is intended for use only in assembling or fabricating a silencer because it was designed with features that are common to all silencers but no muzzle brakes; because the gun that includes the part is not of a type that requires, or is sold with, a muzzle brake; and because Sig Sauer initially submitted a prototype of the gun to ATF that functioned safely only if the part at issue was encased and thus had been made into a completed silencer. Given that the administrative record...