Thompson/Center Arms Co. v. Baker, Civ. No. 87-260-D.

• Court: United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of New Hampshire
• Writing for the Court: Gretchen Leah Witt, Asst. U.S. Atty., Concord, N.H., for defendants
• Citation: 686 F. Supp. 38
• Docket Number: Civ. No. 87-260-D.
• Decision Date: 29 April 1988
• Parties: THOMPSON/CENTER ARMS COMPANY, A DIVISION OF THE K.W. THOMPSON TOOL COMPANY, INC. v. James A. BAKER III, Secretary of the Treasury, Stephen E. Higgins, Director, Bureau of Alcohol, Tobacco and Firearms.

686 F. Supp. 38

THOMPSON/CENTER ARMS COMPANY, A DIVISION OF THE K.W. THOMPSON TOOL COMPANY, INC.
v.
James A. BAKER III, Secretary of the Treasury, Stephen E. Higgins, Director, Bureau of Alcohol, Tobacco and Firearms.

Civ. No. 87-260-D.

United States District Court, D. New Hampshire.

April 29, 1988.

686 F. Supp. 39

Steven Gordon, Concord, N.H., Stephen P. Halbrook, Fairfax, Va., for plaintiff.

Gretchen Leah Witt, Asst. U.S. Atty., Concord, N.H., for defendants.

ORDER

DEVINE, Chief Judge.

Plaintiff Thompson/Center Arms Company ("TCA"), a firearms manufacturer, seeks a declaratory judgment that possession of a Contender pistol in conjunction with a Contender Carbine Kit does not constitute possession of a "firearm" under 26 U.S.C. § 5845(a) or a "short-barreled rifle" as defined by 18 U.S.C. § 921(a)(8). Jurisdiction is asserted under Article III, section 2 of the United States Constitution, 28 U.S. C. §§ 1331 and 1337.

Defendants have moved for dismissal pursuant to Rules 12(b)(1) and 12(b)(6), Fed. R.Civ.P. Defendants assert that (1) the United States has not waived its sovereign immunity in this case; (2) this action is essentially a tax matter and is therefore barred by the tax exception to the Declaratory Judgment Act, 28 U.S.C. § 2201, and the Anti-Injunction Act, 26 U.S.C. § 7421(a); and (3) plaintiff lacks standing to bring the action. The Court, having considered the memoranda and exhibits of the parties, finds that the issues are capable of resolution on the documents as filed, Rule 11(g), Rules of the United States District Court for the District of New Hampshire, and therefore denies plaintiff's request for a hearing.

Factual Background

TCA is a sporting arms manufacturer and holds a federal firearms license. Complaint ¶ 2. It manufactures a single-shot pistol, called the "Contender", which is designed for hunting, target shooting, and other sporting purposes. Id. ¶ 6. For a brief period of time in 1985, TCA manufactured and sold a "Contender Carbine Kit" consisting of a 21-inch barrel, a shoulder stock, and a fore-end. The kit was designed and intended to be added to the frame or receiver of a Contender pistol to make a rifle. Id. ¶ 7.

Apparently, in the summer of 1985 plaintiff met with members of the Bureau of Alcohol, Tobacco and Firearms ("ATF") to discuss the legal status of the Contender Carbine Kit. In a September 5, 1985, letter to TCA, defendant Stephen Higgins, Director of ATF, interpreted 26 U.S.C. § 5845(a)(3)-(4)¹ to mean that the Contender pistol and carbine kit possessed together constitute a "firearm" under the National Firearms Act (NFA), 26 U.S.C. § 5801, et seq.

The NFA imposes various requirements on manufacturers and dealers of firearms. These persons must pay a special occupational tax of up to $500. 26 U.S.C. § 5801. They must also pay a $200 tax on the making and a $200 tax on the transfer of a firearm. 26 U.S.C. §§ 5811, 5821; 27 C.F. R. §§ 179.61, 179.82 (1987). In order to make or transfer a firearm, the dealer or manufacturer must file a written application with the Secretary of the Treasury, accompanied by the appropriate tax, and must obtain the Secretary's approval. 26 U.S.C. §§ 5812, 5822; 27 C.F.R. §§ 179.62,

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179.84 (1987). Weapons characterized as firearms under the NFA are also subject to registration requirements. 26 U.S.C. § 5841. A failure to comply with the NFA may subject the dealer to criminal penalties. 26 U.S.C. § 5861

Essentially, Mr. Higgins' letter reflected ATF's concern that the rifle stock could be wrongfully attached to the pistol receiver with the short pistol barrel. However, the letter does not limit the application of the firearms definition to such a constructed weapon, but instead specifically notes that "if the barrel of less than 16 inches in length were not attached to the weapon and shoulder stock, the combination would still be subject to the provision of the NFA if the short barrel, stock and firearms were in the possession of the person." Complaint, Exhibit D. Defendant Higgins' interpretation presumably would also render TCA's Contender a "short-barreled rifle" under 18 U.S.C. § 921(a)(8),² subjecting the plaintiff to possible criminal sanctions under Title 1 of the Gun Control Act, 18 U.S.C. §§ 921, et seq.³

In a September 12, 1985, letter, TCA requested that ATF reconsider its position. Complaint, Exhibit E. In response, the Deputy Assistant Secretary of ATF, Edward Stevenson, reiterated the Bureau's position that the Contender pistol and kit, held together, are subject to the NFA, but that "a complete pistol and complete rifle do not constitute an NFA weapon unless a short-barreled rifle is actually assembled from the parts." Id., Exhibit F (letter of October 9, 1985). Thus, the plaintiff may sell Contender pistols and rifles as completed guns, but may not sell a conversion kit without subjecting the weapon to the NFA.

After receiving ATF's letters, plaintiff stopped manufacturing the Contender Carbine Kit and has not resumed its manufacture. Plaintiff claims that ATF's interpretation not only has made it economically unfeasible for TCA to market and manufacture the Carbine Kit, but also will subject TCA to criminal prosecution if it continues to market the kit without a determination that it is not a firearm. Plaintiff also claims to have suffered past economic harm.

Discussion

The Court initially considers defendants' alleged sovereign immunity. The United States, its agencies, and its officers are immune from suit unless the United States consents to the suit. United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953-54, 47 L.Ed.2d 114 (1976). A plaintiff has the burden to establish that such a waiver of sovereign immunity exists. Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir.1983), cert. denied sub nom. Holloman v. Clark, 466 U.S. 958, 104 S.Ct. 2168, 80 L.Ed.2d 552 (1984). The Court finds that TCA has met its burden to show that the United States has waived its sovereign immunity under 28 U.S.C. § 1331 by way of 5 U.S.C. § 702.

In a case directly on point, the Sixth Circuit Court of Appeals held that 5 U.S.C. § 702 waives the sovereign immunity defense in actions for nonmonetary relief brought under 28 U.S.C. § 1331. Warin v. Director, Dept. of Treasury, 672 F.2d 590 (6th Cir.1982). The plaintiff in Warin sought a declaratory judgment that a spring-driven device he had designed was not a firearm. In rejecting defendant's claim of sovereign immunity, the court found the legislative history of section 702 to be "unambiguous".⁴ Id. at 592. The

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First Circuit has also adopted the position that 5 U.S.C. § 702 operates as a waiver of sovereign immunity in nonmonetary actions brought under 28 U.S.C. § 1331. See Massachusetts v. Departmental Grant Appeals Bd., 815 F.2d 778, 781 (1st Cir. 1987)

In the instant case, plaintiff seeks a declaratory judgment and no monetary damages. Therefore, 5 U.S.C. § 702 waives the Government's sovereign immunity under 28 U.S.C. § 1331, and the Court has jurisdiction.

The Court next considers whether the suit is barred by the declaratory judgment or anti-injunction statutes. Under the Declaratory Judgment Act, this Court may grant relief "in a case of actual controversy within its jurisdiction, except with respect to Federal taxes...." 28 U.S.C. § 2201. This section neither provides nor denies a basis for federal court jurisdiction, but instead defines the scope of available declaratory relief. McCarthy v. Marshall, 723 F.2d 1034, 1037 (1st Cir. 1983). However, the Court's jurisdiction may be limited by the Anti-Injunction Act, 26 U.S.C. § 7421, which provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is a person against whom such tax is assessed." The tax exception to the Declaratory Judgment Act is construed at least as broadly as the Anti-Injunction Act. Id. (citing Bob Jones Univ. v. Simon, 416 U.S. 725, 732 n. 7, 94 S.Ct. 2038, 2044 n. 7, 40 L.Ed.2d 496 (1974)). Thus, a finding that the plaintiff's claim is barred by the Anti-Injunction Act necessitates a finding that the claim is similarly barred by the Declaratory Judgment Act.

The primary purpose of the Anti-Injunction Act is to protect the "Government's need to assess and collect taxes as expeditiously as possible with a minimum of preenforcement judicial interference `and to require that the legal right to the disputed sum be determined in a suit for refund.'" Bob Jones, supra, 416 U.S. at 736-37, 94 S.Ct. at 2046 (quoting Enochs v. Williams Packing & Navigation Co, 370 U.S. 1, 7, 82 S.Ct. 1125...