United States District Court, N.D. Illinois
March 17, 2004.
BREIT & JOHNSON SPORTING GOODS, INC., an Illinois Corporation, Plaintiff;
JOHN ASHCROFT, Attorney General, Defendant
The opinion of the court was delivered by: JOAN H. LEFKOW, District Judge
MEMORANDUM OPINION AND ORDER
This is an action brought under the Gun Control Act, 18 U.S.C. § 923(f)(3),
to review the decision of the Bureau of Alcohol, Tobacco, and
Firearms ("ATF") to revoke the federal license to sell firearms of
plaintiff, Breit & Johnson Sporting Goods, Inc. ("Breit &
Johnson"). Before the court is defendant's motion for summary judgment.
For the reasons stated below, the court grants the motion.
Standard of Review
Section 923(f)(3) of the Gun Control Act permits a party whose license
to sell firearms has been revoked by ATF to obtain "de novo judicial
review" of the revocation and, "[i]f the court decides that the Attorney
General was not authorized to . . . revoke the license, the court
shall order the Attorney General to take such action as may be necessary
to comply with the judgment of the court." 18 U.S.C. § 923(f)(3).
Under § 923(f)(3), the district court may only determine whether the
Attorney General's decision was "authorized;" the selection of the
penalty is a matter within the discretion of the Attorney General.
Stein's Inc. v. Blumenthal, 649 F.2d 463, 464 n.2 (7th Cir.
1980). The Attorney General's decision may be upheld if the court
concludes, in its own judgment, that the evidence supporting the
Attorney General's decision is "substantial." Id.
"De novo review" may be confined to the administrative record or may be
supplemented by the admission of additional evidence.*fn1 In either
event, although the district court need not accord any particular weight
to the Attorney General's findings and decision, it may, in the exercise
of its discretion, accord them such weight as it believes they deserve.
Stein's, 649 F.2d at 467. Absent genuine issues of material
fact, a court may properly grant summary judgment without an evidentiary
hearing. Cucchiara v. Secretary of the Treasury, 652 F.2d 28, 30
n. 1 (9th Cir. 1981).
Summary judgment obviates the need for a trial where there is no
genuine issue as to any material fact and the moving party is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(c). The party seeking
summary judgment bears the initial burden of proving there is no genuine
issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986). In response, the non moving party cannot rest on bare
pleadings alone but must use the evidentiary tools listed above to
designate specific material facts showing that there is a genuine issue
for trial. Id, at 324; Insolia v. Philip Morris Inc.,
216 F.3d 596, 598 (7th Cir. 2000). A material fact must be outcome
determinative under the governing law. Insolia, 216 F.3d at
598-99. Although a bare contention that an issue of fact exists is
insufficient to create a factual dispute, Bellaver v.
Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the court
must construe all facts in a light most favorable to the non
moving party as well as view all reasonable inferences in that parry's
favor. Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 255 (1986).
Breit & Johnson Sporting Goods Company, Inc. ("Breit &
Johnson") has been in business as a sporting goods store since
approximately 1945. (Def. L.R. 56.1 ¶ 1.) The store sells a variety
of sporting goods, including baseball, football, and hockey equipment,
and it outfits teams with uniforms for these sports. (Id. ¶
2.) It also sells firearms. (Id. 13.)
Breit & Johnson is organized as a corporation. (Id. ¶
4.) Sid Breit is the corporate president and store owner. (Id.
¶ 5.) His son, Mark Breit, is the corporate vice president and has
been working at the store fall time since 1973. (Id. ¶ 6.)
Breit & Johnson has been licensed to sell firearms since at least
1972. (Id. ¶ 7.) Mark Breit has been selling guns at Breit
& Johnson since the mid to late 1970s, and he is the
person who runs the store today. (Id. U 8-9.)
ATF has inspected Breit & Johnson on numerous occasions since 1977.
(Id. ¶ 10.) Full compliance inspections of Breit &
Johnson in 1977, 1978, 1994, and 1998 revealed numerous violations of the
Gun Control Act and the regulations promulgated under it. (Id.
¶ 11.) At each full compliance inspection, ATF noted the same types
of violations. (Id. ¶ 12.) Most commonly, ATF noted that
Breit & Johnson (1) failed to ensure proper completion of Firearms
Transaction Records, Forms 4473*fn2, as required by
27 C.F.R. § 178.124, and (2) failed to accurately maintain
a bound book recording the acquisition and disposition of firearms
in and out of its inventory*fn3, as required by
27 C.F.R. § 178.125(e).
In 1977, an ATF inspector found numerous omissions and incomplete
answers on the Forms 4473 he reviewed at Breit & Johnson. In some
cases Breit & Johnson's forms failed to identify the purchaser's date
of birth, place or birth, address and other identifying information. In
other cases, Breit & Johnson failed to obtain sufficient answers to
the certification section of the form to determine if the purchaser was
permitted to purchase a firearm. (Def. L.R. 56.1 ¶ 17.) The 1977
inspection also revealed that Breit & Johnson was not properly
recording in its bound book the acquisition and disposition of firearms
purchased by Breit & Johnson. (Id. ¶ 18.) The ATF
inspection report noted that Breit & Johnson had begun to address
this problem by conducting a physical inventory, closing out entries,
reconciling double entries and beginning new records utilizing a proper
accounting system. (PL Stat. of Add'l Facts ¶ 13.) However, the
inspection report stated,
Although the dealer has corrected the majority of
the violations listed above and has nearly
completed the reconciliation of his bound book
records, I find these discrepancies are serious and
future compliance is vital to the accuracy of the
recordkeeping system. Those violations pertaining
to the bound book records
have been noted previously but the licensee, prior
to this inspection, has failed to take corrective
action. Therefore, I recommend that an admonitory
letter, strongly outlining possible consequences of
future noncompliance, be sent to this licensee to
further emphasize the importance of accurate
(Scouffas Decl., Ex. 1, at 65.) The ATF inspector certified that he
explained all of the violations to Breit & Johnson and left the
original notice of the violations with the store. (Def. L.R. 56.1 ¶
19.) Following the 1977 inspection, ATF held a warning conference with
Breit & Johnson to discuss the violations found at the inspection.
ATF explained the necessity that Breit & Johnson adhere to ATF's
record keeping requirements. (Id. ¶ 20.)
At a 1978 inspection, ATF found some of the same types of violations it
had found the year before. (Id. ¶ 21.) The 1978 inspection
revealed four occasions when Breit & Johnson had transferred guns
despite the fact that purchasers had not fully completed the
certification questions on Form 4473. In one case, the form indicated
that Breit & Johnson transferred a gun to someone who had answered
one of the certification questions affirmatively, indicating that the
person was not entitled to possess a firearm. (Id, ¶ 22.)
ATF also found violations concerning the acquisition and disposition
record keeping requirements. Notably, Breit & Johnson had
failed to record the fact that two firearms had been stolen. It was also
not recording firearms brought in for repairs. (Id. ¶ 23.)
At the time, ATF did not find these violations to be significant enough
to recommend revocation of Breit & Johnson's license. The inspection
report noted that
the incidence of error on Forms 4473 in comparison
to the total number of forms completed by Mr. Breit
during the period of investigation is
insignificant. The licensee was cited to remind him
that incomplete Forms 4473 are a violation of
federal law and that he should strive for as near
perfection as possible. He was then asked to
contact the individuals and have the forms
completed. Forms 4473 on a whole were found to be
complete and in order. The incomplete entries (such
as p/o/b, d/o/b, and address) for which Mr. Breit
was cited last year did not reappear.
(PI. Stat. of Add'l Facts ¶ 16; Scouffas Decl., Ex. 3, at 109.)
The report also noted that "on the whole, the licensee is properly
recording the acquisition and disposition of all firearms." The report
stated that "the percentage of error in comparison to the total volume of
sales, however, is minimal." Finally, the report found that "on the
whole, the licensee's records were found to be complete and in order" and
recommended renewal of Breit & Johnson's firearms license. (Pl. Stat.
of Add'l Facts ¶ 16.) Sid Breit signed the notice of violations
indicating that he had received a copy and that the inspector had
explained; the violations to him. (Def. L.R. 56.1 ¶ 25.)
ATF inspected Breit & Johnson in 1989 and found no violations.
(Def. Resp. to Pl. Stat. of Add'l Facts ¶ 21.)
In 1994, ATF again conducted a full compliance inspection of Breit
& Johnson. The inspector found discrepancies in over ten percent of
the Forms 4473 she reviewed (402 of 3900 forms reviewed). This included
363 instances where Breit & Johnson had not obtained the complete
identifying information from the purchasers and 16 instances where Breit
& Johnson transferred firearms without requiring purchasers to
provide a complete certification that they were not prohibited from
possessing firearms. (Def. L.R. 56.1 ¶ 27.) The 1994 inspection also
revealed that Breit & Johnson had failed to record guns received for
repairs in its acquisition and disposition records and that it had not
consistently recorded the addresses and license numbers for the suppliers
of its guns. (Id. ¶ 28.) The 1994 inspector also cited a
violation relating to the requirement that gun dealers report multiple
handgun sales to both federal and state authorities using ATF
Form 3310.4. Although Breit & Johnson was sending the reports to the
proper authorities, it was doing so prior to, rather than at the time of,
the actual transfer of the guns. (Id.
¶ 29.) Sid Breit's son, Alan Breit, received the 1994 notice of
violations and acknowledged that the violations had been explained to
him. (Id. ¶ 30.)
Because ATF found "three serious recordkeeping violations" and because
"two of the violations were repeats from previous inspections," the
inspector recommended a warning conference. (Scouffas Decl., Ex. 5, at
216.) ATF held the warning conference with Breit & Johnson on
November 9, 1994. Sid Breit and his sons Mark and Alan Breit each attended
the conference. (Def. L.R. 56.1 ¶ 31.) Following the conference, ATF
sent Breit & Johnson a letter stating
A recent inspection of your firearms operations
disclosed some serious recordkeeping and conduct of
business violations. . . . Most notable were
violations pertaining to the completion of Forms
4473 and improper maintenance of your Acquisition
and Disposition records. Area Supervisor Scouffas
emphasized the importance of accurate and complete
records. You stated that corrective actions had
been taken and that you are now in compliance with
Federal laws and regulations.
I appreciate your cooperative attitude.
Accordingly, I have decided to renew your license.
You are encouraged to continue to implement
internal controls to ensure future compliance.
You are warned, however, that should subsequent
inspections disclose similar violations, your
license may be revoked.
(Scouffas Decl., Ex. 7, at 432.)
At the next full compliance inspection in 1998, the ATF inspector again
found numerous violations, including 38 violations of the requirements
pertaining to Form 4473. (Def. L.R. 56.1 ¶ 32-33.) Twenty two
forms that had been personally signed by Mark or Sid Breit lacked
complete certifications from purchasers. On fifteen forms, the dates on
the forms did not indicate that the certification was completed at the
time of the transfer of the firearm or left the date of the actual
transfer ambiguous. Forms signed by Mark Breit indicated that Breit &
Johnson had transferred firearms to three persons whose
certifications indicated that they were prohibited from possessing
firearms, two who indicated that they were illegal aliens and one who
admitted to being subject to a protective order restraining him from
harassing, stalking, or threatening an intimate partner or child of such
partner. (Id. ¶ 34; Scouffas Decl., Ex. 10, at 39-94.) A
review of Breit & Johnson's acquisition and disposition records also
revealed discrepancies regarding approximately 2000 firearms acquired but
for which there was no noted disposition. (Id. ¶ 35.)
Lastly, the 1998 inspection revealed that Breit & Johnson was not
properly reporting the sale of multiple handguns to state of local law
enforcement agencies even though the forms for such reports contain clear
instructions indicating that requirement. (Id. ¶ 36.) The
ATF inspector recommended a warning conference "with the results of the
conference being the basis for future action on the license." (Pl. Stat.
of Add'l Facts ¶ 40; Scouffas Decl, Ex. 8, at 489.)
Mark Breit admits to these violations. (Def. L.R. 56.1 ¶ 37.) He
also admits that he knew, at least as early as 1977, that it was
important for firearms dealers to ensure that Forms 4473 are filled out
completely and accurately, in his words, "to prevent an individual from
purchasing a weapon that shouldn't be purchasing a weapon, he's
implicating himself or perjuring himself if he was to put an answer in
that was false." (Id. ¶ 38.) However, he also claims not to
have known how important it was to ensure that Forms 4473 are fully
completed. (Id. f 39.) Mark Breit indicated to the ATF inspector
that he would insure proper completion of Forms 4473 in the future. (Pl.
Stat. of Add'l Facts ¶ 45.)
On February 23, 1999, ATF Area Supervisor Michael Fitzgerald
recommended that the ATF begin proceedings to revoke the Federal
Firearms license of Breit & Johnson. Fitzgerald noted,
Utilizing Crime Gun Analysis in support of illegal
gun trafficking prevention, [Breit & Johnson]
is identified, with one exception, as having more
recovered guns by law enforcement agencies traced
back to it than any other dealer in the State of
Illinois. . . . The licensee has a history of
serious repetitive violations of the GCA. Previous
admonitory warning conferences with [Breit &
Johnson] reinforcing the need for better adherence
to firearms laws and regulation have been held.
Another warning conference to review the numerous
violations found during the latest inspection would
be just that . . . a review.
(Id. ¶ 48; Scouffas Decl., Ex. 8, at 490-91.) On July
8, 1999, ATF issued Breit & Johnson a Notice of Revocation of
License. (Id. ¶ 40.) The notice stated,
On numerous occasions between January 3, 1998 and
October 31, 1998 you sold and transferred a firearm
to an unlicenced person without requiring such
person to fully complete and/or properly execute a
firearms transaction record (ATF Form 4473). On
each of these occasions, you willfully violated
18 U.S.C. § 922(m), 923(g), and
27 C.F.R. § 178.124(a), 178.124(c).
On numerous occasions between January 3, 1998 and
October 31, 1990, you sold and transferred two or
more handguns within a five day period to an
unlicensed person, and failed to submit a copy of
ATF Form 3310.4 report of multiple sale, to the
Illinois State Police or to thr appropriate law
enforcement agency. On each of these occasions, you
willfully violated 18 U.S.C. § 922(m),
923(g)(3)A, and 27 C.F.R. § 178.126a.
(PL Stat. of Add'l Facts ¶ 48.) Breit & Johnson requested a
hearing. (Id. ¶ 41.) ATF appointed a hearing officer and
provided Breit & Johnson with a hearing. (Id. ¶ 42.)
After the hearing, ATF Hearing Officer Joseph McGurk noted,
During the hearing Atty. Landes and Mark Breit
referred to records he had brought from the
business showing corrections have been made. The
bound book has been streamlined and updated with
all firearms reportedly accounted for. Multiple
sales forms have been prepared for all of the
transactions not properly distributed in the past.
I had S/A Bennett do a cursory examination of the
multiple sales forms. His examination disclosed
that Mark Breit is forwarding the wrong copy of the
multiple sales form to Local Law Enforcement but
more importantly, the forms are being forwarded.
The bound book record was not examined. As I stated
in my summary, I believe ATF has been fair in
trying to gain the licensee's compliance, with
little luck. However, a concern of mine is the
amount of time elapsed since the licensee was first
notified that their FFL was being revoked. If ATF
can establish that the licensee has been truly in
compliance with federal laws and regulations since
January 1999, then ATF has been successful in
getting the licensee into compliance and may want
to consider another course of action.
(Scouffas Decl., Ex. 10, at 36.)
Nevertheless, Hearing Officer McGurk recommended that Breit &
Johnson's Federal Firearms License be revoked "[d]ue to the licensee's
history of continued non compliance with federal laws and
regulations." (Def. L.R. 56.1 ¶ 43.) The hearing officer noted that
the 1998 inspection revealed "that the licensee continues to repeat the
same violations, . . . [that][t]he violations continue to be of a
serious nature and too numerous to expect future compliance . . . [and
that][t]he licensee has been afforded the opportunity to appear at two
warning conferences to discuss their violations, neither of which appears
to have been sufficient to gain their compliance." (Id. ¶
44.) Nicholas Scouffas, the Chicago Area Supervisor for ATF, testified
that ATF rarely allows a licensee two warning conferences before
proceeding to revoke the licensee's license. (Id. ¶ 45.)
On October 17, 2001, ATF's Director of Industry Operations issued his
Final Notice of Revocation. (Id. ¶ 46.) Breit & Johnson
filed a timely complaint with this court seeking to reverse ATF's
decision. (Id. ¶ 47.)
ATF inspector Mary Ann Gude testified that she finds violations in
"about half of the inspections she conducts. (Pl. Stat. of Add'l Facts
¶ 10.) ATF never informed Breit & Johnson
that a single error or omission on a single Form 4473 could
constitute grounds for the revocation of its license. (Id. ¶
ATF is authorized to revoke a gun dealer's license "if the holder of
such license has willfully violated any provision of [the Gun Control
Act]. . . . or any rule or regulation prescribed" under the Act.
18 U.S.C. § 923(e), "Any single violation of the federal statutes or
regulations controlling the firearms industry can be a basis for denying
an application for a new license or revoking an existing license,"
Trader Vic's Ltd. v. O'Neill, 169 F. Supp.2d 957, 963 (N.D. Ind.
2001)(quoting DiMartino v. Buckles, 129 F. Supp.2d 824, 832 (D.
Md. 2001), aff'd, by unpublished order DiMartino v. Buckley, No.
01-1166, 2001 WL 1127288 (4th Cir. Sept. 25, 2001)). Breit & Johnson
admits that it violated ATF's record keeping provisions in 1998.
Thus, the only substantial issue for the court to decide is whether these
violations were "willful."
A violation is "willful" for purposes of section 923(e) if the dealer
"knew of his legal obligation and purposefully disregarded or was plainly
indifferent to the recordkeeping requirements." Stein's, 649
F.2d at 467 (quoting Lewin v. Blumenthal, 590 F.2d 268, 269 (8th
Cir. 1979)). Evidence of repeated violations with knowledge of the law's
requirements has been held sufficient to establish willfulness.
Id. at 468; accord, Trader Vic's, 169 F. Supp.2d at 957,
960 ("a federal firearms licensee . . . [has] a duty to be cognizant
of the rules and regulations issued by the Bureau of Alcohol, Tobacco,
and Firearms and to follow those mandates."); Cisewski v. Dept. of
Treasury, Bureau of Alcohol, Tobacco, and Firearms, 773 F. Supp. 148
(E.D. Wis. 1991)(repeat violations after warnings establishes "willful"
violations). Bad purpose or evil motive is not necessary to establish
willfulness. Stein's, 649 F.2d at 467.
Breit & Johnson admit that ATF compliance inspections in 1977, 1978,
and 1994 revealed violations of the record keeping requirements
promulgated under the Gun Control Act. It admits that many of these were
repeat violation. It admits that after each inspection ATF explained the
violations and stressed the importance of compliance. It admits that ATF
held warning conferences with Breit & Johnson in 1977 and 1994.
Nevertheless, the 1998 ATF inspection revealed more violations. This
history of repeated violations and multiple warnings is sufficient to
establish that Breit & Johnson willfully violated ATF's record
keeping requirements in 1998.
In Stein's, the Seventh Circuit affirmed the district's
court's decision granting summary judgment in favor of ATF on strikingly
similar facts. The plaintiffs corporate officer in Stein's
admitted to repeated record keeping violations. He "attributed
them to employee error, and generally denied that the violations were
willful." Id. at 464. He testified that "most of the violations
were technical requirements and promised that measures had and would
continue to be taken to ensure that the violations would not occur."
Id. Although the hearing officer presiding over the
administrative hearing recommended that the plaintiffs license be
renewed, ATF denied the license. The district court granted summary
judgment in favor of ATF.
Affirming the district court's decision, the Seventh Circuit noted that
ATF had explained the record keeping requirements to the
plaintiffs employees at the time it found prior violations. Id.
at 468, n. 8. ATF had also warned the plaintiff that future violations
could result in the loss of its license. Yet, the "record showed a
persistent pattern of violations even after warnings from the Secretary."
Id. at 468. From this evidence, the court concluded that "the
inference that the
violations were willful is compelling, notwithstanding the
plaintiffs protestations to the contrary." Id. The same is true
in the instant case.
Breit & Johnson argues, however, that the court should not consider
its history of violations and warnings but should instead "confine the
inquiry to the alleged 1998 form 4473 and multiple sales form violations.
The events which occurred prior to 1998 . . . should not be part of
the proceedings on behalf of the government." (Pl. Resp. to Def. Mot. for
Summ. J., at 5.) It supports this argument with an appeal to fairness
"It is not fair to dredge up ancient history and expect the
licensee to recall and defend against events which occurred in the
distant past in defense of its license . . ." (Id.)
and by pointing out that the Notice of Revocation only alleged events
that occurred in 1998. (Id. at 9-10.) Breit &
Johnson apparently misunderstands the evidentiary significance of the
prior violations. The violations alleged in the Notice of Revocation
occurred in 1998. These violations are the basis for ATF's revocation
of Breit & Johnson's license. Evidence of the previous violations
establish that Breit & Johnson knew what the law required of it
when it committed the 1998 violations. Thus, these earlier violations
were properly considered by ATF and may be considered by this court.
Breit & Johnson next argues that ATF's Notice of Revocation did not
sufficiently specify the details regarding the 1998 violations.
27 C.F.R. § 178.73 provides that a notice of revocation must "set forth the
matters of fact constituting the violations specified, dates, places and
the section of law and regulations violated." The Notice of Revocation
did not specify the matters of fact constituting each individual
violation. It stated only that violations occurred "on numerous occasions
between January 3, 1998 and October 31, 1998," generally described the
violations, and cited the section of the law and regulations violated.
However, well in advance of the ATF
hearing, ATF gave Breit & Johnson's attorney a copy of all the
allegedly violative ATF forms. Those forms indicated the date, place, and
nature of each of the violations. This was sufficient to put Breit &
Johnson on notice of the charges against it. The Seventh Circuit has held
that ambiguities and generalizations in administrative pleadings "may be
clarified by subsequent pleadings and discussions" between the parties.
Brock v. Dow Chemical U.S.A., 801 F.2d 926, 930 (7th Cir. 1986).
Furthermore, Breit & Johnson has failed to offer any evidence showing
that it was prejudiced by the lack of specificity in the Notice of
Revocation. See id. (Unless the party in an administrative
proceeding alleging lack of notice "demonstrates that the lack of formal
notice was prejudicial, we will not order that the charges be
Breit & Johnson also complain that ATF served the Notice of
Revocation on Breit & Johnson on July 8, 1999, though the Notice
specified that it was effective on July 7, 1999. However, Breit &
Johnson have failed to allege any prejudice as a result of this one
day discrepancy. In fact, it admits that ATF has allowed it to
remain licensed pending the outcome of the administrative and judicial
review of its revocation. Thus, Breit & Johnson cannot prevent
summary judgment with this argument.
Finally, Breit & Johnson contends that ATF "should be estopped"
from revoking its license now because ATF exercised its discretion not to
revoke the gun dealer's license for past violations. Breit & Johnson
claims that it "relied upon the standards of inspection used by ATF in
the past" and that it was led to believe that a certain minimal number of
violations was acceptable. A party asserting estoppel against the
government "must carry a heavy burden to outweigh the strong,
countervailing interest in obedience to the law." US v.
977 F.2d 1067, 1073-74 (7th Cir. 1992). It must show "affirmative
misconduct" by the government, in addition to the traditional elements of
First, the party to be estopped must know the
facts. Second, this party must intend that his
conduct shall be acted upon, or must so act that
the party asserting estoppel must have been
ignorant of the facts. Finally, the party asserting
estoppel must reasonably rely on the other's
conduct to his substantial injury.
Portmann v. United States, 674 F.2d 1155
, 1167 (7th Cir. 1982).
Breit & Johnson cannot satisfy these elements. It has failed to
allege any affirmative misconduct by ATF or its agents. Moreover, ATF
held two warning conferences with Breit & Johnson explaining the
importance of full compliance with ATF's record keeping
requirements. ATF specifically told Breit & Johnson in 1994 that
"should subsequent inspections disclose similar violations, your license
may be revoked." Thus, Breit & Johnson cannot claim that it had come
to rely on ATF's clemency and was ignorant of the possibility that ATF
would revoke its license if it found further violations.
For the foregoing reasons the court finds that the Attorney General's
decision to revoke Breit & Johnson's license to sell firearms was
authorized and therefore grants the Attorney General's motion for summary
judgment (#12). This case is terminated.