MURPHY, District Judge.
Shawano Gun & Loan, LLC (Shawano) sells fishing equipment and firearms from its sporting goods store and pawnshop in northern Wisconsin. The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) revoked Shawano's federal license to sell firearms in December 2008 after it rejected Shawano's administrative appeal from a hearing officer's finding that Shawano willfully violated record keeping requirements of the Gun Control Act and pertinent regulations. Shawano filed suit in the district court against Mary Jo Hughes, ATF Director of Industry Operations, under 18 U.S.C. § 923(f)(3) for de novo judicial review of the administrative decision and requested an evidentiary hearing. The district court thought there was ample uncontroverted evidence that Shawano had willfully failed to comply with the record keeping requirements and granted summary judgment against Shawano without conducting an evidentiary hearing. The district court stayed enforcement of the revocation pending appeal. The question for the district court and the issue here is whether Shawano's violations are willful for purposes of the Gun Control Act. For the reasons that follow, the district court's judgment is affirmed.
In 1998, Timothy Backes obtained a federal firearms license for his sole proprietorship, now known as Shawano and reorganized as a limited liability company
A federal firearms dealer also must maintain separate records in bound form for the acquisition and disposition of firearms. This acquisition and disposition book identifies each firearm that a dealer takes into its inventory and that leaves the dealer's inventory and the person from whom it was acquired or to whom it was transferred. A dealer's acquisition and disposition records must be readily available for inspection. See 27 C.F.R. § 478.125(e). In January 2002, ATF granted Shawano a variance, allowing it to use a specialized computer software program called Pawnmaster to input and maintain acquisitions and dispositions of firearms, provided that Shawano printed the records at least semiannually or when requested by an ATF officer, when the system memory was purged, and upon discontinuation of the business.
In December 1999, ATF Special Operations Inspector John Moore conducted the first compliance inspection of Shawano and noted nine violations: (1) failure to ensure accurate completion of ATF Forms 4473; (2) failure to properly maintain completed ATF Forms 4473; (3) inconsistent dispositions of two firearms; (4) failure to properly maintain the acquisition and disposition book from August to December 1999, in that Shawano kept computerized records without first obtaining a computer variance; (5) failure to timely record disposition entries in at least 145 instances; (6) failure to timely record acquisition entries in at least three instances; (7) making a disposition entry when firearm was not transferred; (8) failure to record acquisition and disposition information of a Browning pistol; and (9) failure to properly record firearm model and serial numbers into the acquisition and disposition book in at least twenty-three instances.
In June 2004, ATF Inspector Casimir Mleczko conducted a second compliance inspection, which uncovered six violations: (1) improper transfer of eleven firearms at a tavern as part of a raffle; (2) failure to provide written notification to non-licensees and to display a sign required by the Youth Handgun Safety Act; (3) seven instances of improper transfer of firearms to persons who indicated on ATF Forms 4473 that they were prohibited; (4) failure to ensure proper execution and completion of ATF Form 4473; (5) failure to maintain an accurate record of receipt and disposition; and (6) failure to make a semi-annual hard copy printout of the computerized acquisition and disposition record as required by the ATF computer variance. Inspection findings were reviewed in July 2004, and the federal firearms regulations were reviewed. Inspector Mleczko cautioned Mr. Backes, Shawano manager Scott Backes, and another employee about straw purchasers, incomplete ATF Forms 4473, and prohibited purchasers. Mr. Backes signed a second ATF Report of Violations, which noted the violations and the corrective action to be taken.
After this second compliance inspection revealed that Mr. Backes was operating his business as an LLC rather than a sole proprietorship, Mr. Backes submitted a new license application disclosing his business entity status as an LLC. In September 2005, Shawano Gun & Loan, LLC, was licensed as a dealer, including pawnbroker, in firearms other than destructive devices. Mr. Backes remains its owner.
In March 2005, ATF Director of Industry Operations John Jarowski sent Mr. Backes a letter to schedule a meeting to discuss the violations found during the second compliance inspection. The letter included a warning that any willful violation of federal firearms laws and regulations might result in revocation of the federal firearms license and that any violations, either repeat or otherwise, could be viewed as willful. Mr. Backes responded to the letter with intended corrective action, and a warning conference was held in April 2005 to discuss the violations and necessary corrective action. A follow-up letter from Director Jarowski summarized the corrective action proposed by Mr. Backes, including having a second person check each ATF Form 4473 before every transfer and having manager Scott Backes oversee and maintain the acquisition and disposition records, and again warned Mr. Backes of the possible consequence of future violations.
In March 2007, Industry Operations Inspector Mary Jo Holpit conducted a third compliance inspection. This inspection revealed seven violations, including repeat violations found during the earlier inspections: (1) unapproved use of the Pawnmaster computer program since moving the location of the business and changing its license from a sole proprietorship to an LLC; (2) inaccurate reflection of inventory in the acquisition and disposition records and failure to print the acquisition and disposition records for over nine months; (3) failure to provide the required Youth Handgun Safety Notice to purchasers; (4) Shawano's new location was less than 1000 feet from a school and within a school zone; (5) failure to obtain valid identification in at least four instances; (6) failure to properly execute and review ATF Forms 4473; and (7) knowingly assisting straw purchases by altering and reprinting pawn tickets. Mr. Backes signed a third ATF Report of Violations, which set forth the violations and the corrective action to be taken.
On November 5, 2007, Shawano was served with a Notice of Revocation issued on October 20, 2007, by Mary Jo Hughes, ATF Director of Industry Operations, stating that its federal firearms license was being revoked. The Notice of Revocation lays out five counts of willful violations of the GCA and applicable regulations. Count 1 charges that in 2006 and 2007, Shawano failed to properly record the disposition of at least fifty-four firearms in the acquisition and disposition book. This is a repeat violation from the 1999 and 2004 compliance inspections and the 2005 warning conference. Count 2 charges Shawano with failure to obtain complete and correct responses to questions on ATF Forms 4473 on thirteen occasions in 2006 and 2007. This also is a repeat violation from the 1999 and 2004 compliance inspections and the 2005 warning conference. Count 3 charges Shawano with willfully making false record entries and aiding and abetting the making of false record entries by another on five occasions by allowing firearm transfers through straw purchases. Count 4 charges Shawano with selling or otherwise transferring firearms to prohibited persons. This is a repeat violation from the 2004 compliance inspection and the 2005 warning conference. Count 5 charges Shawano with willfully selling or otherwise disposing of firearms where the transferee indicated that he/she was not the actual purchaser. Shawano timely filed a request for an administrative hearing to review the revocation decision under 18 U.S.C. § 923(f)(2) and 27 C.F.R. § 478.73 and was granted a stay of revocation pending ATF's administrative review hearing and decision.
On August 7, 2008, ATF Hearing Officer Michael R. Price conducted an evidentiary hearing at ATF's field office in Milwaukee. Hearing Officer Price issued a Report and Recommendation on August 15, 2008, concluding that ATF established (1) a willful failure to properly record the disposition of at least fifty-four firearms into the acquisition and disposition record; (2) a willful failure to obtain complete and correct ATF Forms 4473 on thirteen occasions; (3) willful making of false record entries and aiding and abetting the making of false record entries on five occasions by allowing straw transfers; (4) willful transfer of firearms to three individuals who indicated on ATF Forms 4473 that they were prohibited from possessing firearms; and (5) willful transfer of firearms on three occasions to persons who indicated on ATF Forms 4473 that they were not the actual buyer of the firearms. The willfulness finding was based on Mr. Backes's awareness of his legal obligations and indifference to becoming personally involved to ensure corrective action. Hearing Officer Price recommended that the license be revoked. ATF rejected the administrative appeal and served Final Notice of Revocation on Shawano in December 2008.
In February 2009, Shawano filed suit in the district court under 18 U.S.C. § 923(f)(3) for judicial review of the administrative decision to revoke its federal firearms license and requested an evidentiary hearing as part of the de novo judicial review. In its decision granting summary judgment without an evidentiary hearing, the district court accepted affidavits from Mr. Backes, Shawano's counsel, and the individuals who bought the firearms that are charged in Count 3 as straw purchases. The district court described the five counts set forth in the Notice of Revocation
The Attorney General of the United States may, after notice and opportunity for hearing, revoke a dealer's federal firearms license if the dealer has willfully violated any provision of the GCA or any rule or regulation prescribed by the Attorney General thereunder. 18 U.S.C. § 923(e).
Id. at 467.
In this case, Shawano does not dispute the violations charged in Counts 2, 4, and 5. With respect to Count 1, the district court accepted Shawano's explanation that the fifty-four transactions did not appear on the acquisition and disposition record because of a computer software error. Nonetheless, the district court found, and it is undisputed, that Shawano failed to print the acquisition and disposition record
A violation is willful under 18 U.S.C. § 923(e) if ATF shows that the firearms dealer "`knew of [its] legal obligation and purposefully disregarded or was plainly indifferent to the recordkeeping requirements.'" Article II Gun Shop, Inc. v. Gonzales, 441 F.3d 492, 497 (7th Cir.2006), quoting Stein's, 649 F.2d at 467. To act willfully, a firearms dealer is not required to act "with a `bad purpose or evil motive.'" Article II, 441 F.3d at 497, quoting Stein's, 649 F.2d at 467. This is the standard applied by the district court; nonetheless, Shawano disputes the district court's interpretation of willful.
Shawano argues that under the Firearms Owners' Protection Act (FOPA), Pub.L. No. 99-308, 100 Stat. 449 (1986), which added "willfully" to 18 U.S.C. § 923(e), ATF must show more than that a licensee acted with disregard or indifference to the law and that a licensee's acts were more than inadvertent errors or technical mistakes. Shawano suggests that "willful" requires an intentional act. Shawano relies on the Senate Report relating to the inclusion of "willfully" in § 923(e) and contends that the Senate Report's reference to "current caselaw" means the definition of willfulness set out in Rich v. United States, 383 F.Supp. 797 (S.D.Ohio 1974). See S.Rep. No. 98-583, at 14 (1984). The court in Rich adopted a "purposeful, intentional conduct" definition of willful. Shawano also relies on Bryan v. United States, 524 U.S. 184, 118 S.Ct. 1939, 141 L.Ed.2d 197 (1998), which involved a criminal charge under 18 U.S.C. § 924(a)(1) for dealing in firearms without a federal firearms license. Shawano argues that FOPA's addition of a willfulness element to the criminal penalties provision of the GCA, 18 U.S.C. § 924(a)(1), which according to the Senate Report was added "to avoid prosecutions in cases where, for instance, a licensee carelessly committed a technical recordkeeping violation or other minor, inadvertent infraction," supports a specific intent requirement under § 923(e). See S.Rep. No. 98-583, at 20.
Shawano's argument bucks this Court's holding in Article II that the appropriate
Article II, 441 F.3d at 497-98.
Finally, we reject Shawano's argument that its violations were not willful based upon the infrequency of the errors in comparison to the number of transactions conducted, the fact that a computer glitch prevented it from showing at the time of the compliance inspection the disposition of fifty-four firearms, and the showing that the alleged straw purchases were proper transfers. There is no de minimis exception to § 923(e). See Article II, 441 F.3d at 498 ("The revocation provision applies regardless of whether a firearms dealer's failure to comply with the Act actually results in illegal possession or usage of a firearm or an inability to track a firearm that has been sold."). Moreover, any computer malfunction during the inspection does not explain Shawano's failure to print the acquisition and disposition report every six months as required. Similarly, whether certain purchases were straw purchases is beside the point: Shawano had reason to believe, at the time the
Shawano also points to Inspector Mleczko's testimony at the administrative hearing that he saw no indication of willful or intentional disregard of ATF regulations by Mr. Backes or other employees at Shawano. Mr. Backes disputes that he was given regulatory material when he applied for the license. The record is clear that it was Mr. Backes who applied for the license in 1998, participated in the compliance inspections in 1999, 2004, and 2007, and attended the warning conference in 2005. After each inspection, he acknowledged the corrective action that needed to be taken. Mr. Backes testified at the administrative hearing and submitted an affidavit for the district court's consideration. His affidavit establishes that he hired counsel after receiving the 2007 Notice of Revocation and that, since that time, he has imposed many workplace changes to ensure compliance with federal firearms laws. These measures come too late. Despite being given multiple opportunities to take corrective action, Shawano continued to repeat its violations. The suggestion in its brief and in Mr. Backes's affidavit that, basically, Shawano gets the message loud and clear and will do better if given another chance is not an argument that reaches the merits of the case. ATF has the authority to revoke Shawano's federal firearms license, and its decision to do so in this case is fully supported, as a matter of law, by the record submitted to the district court.
We make one final comment regarding Shawano's evidentiary hearing argument. Shawano submitted materials to the district court that were not submitted to the Hearing Officer, and the district court accepted those materials. Shawano now argues that it was denied requested discovery — specifically, other instances where ATF has revoked firearms dealers' licenses to enable a comparative analysis of the history of violations in each instance — and that, had a hearing been held, it could have asked witnesses about this information. Supporting its comparative analysis argument, Shawano contends that its score for correct completion of ATF Forms 4473 was 99.2 percent and that, comparatively speaking, such a high percentage does not warrant revocation. Shawano further argues that the district court was required to evaluate Mr. Backes's credibility in person before deciding that he purposely disregarded or was plainly indifferent to federal rules and regulations.
The district court entered a scheduling and discovery order on August 7, 2009, setting the discovery deadline for November 6, 2009. Shawano never sought relief in the district court relating to its discovery request for comparable cases that ATF allegedly refused to provide. It cannot now argue that the district court abused its discretion in failing to conduct an evidentiary hearing to consider such evidence when it failed to pursue such evidence during discovery. The district court accepted Mr. Backes's affidavit and did not abuse its discretion by considering the affidavit rather than testimony. See Stein's, 649 F.2d at 466 n. 5.
The district court properly concluded, as a matter of law and without an evidentiary hearing, that Shawano willfully violated the GCA and that ATF was authorized to revoke Shawano's federal firearms license. The district court's judgment affirming ATF's final administrative decision is AFFIRMED.