Hollis v. Lynch

121 F.Supp.3d 617

Jay Aubrey Isaac HOLLIS, individually and as Trustee of the Jay Aubrey Isaac Hollis Revocable Living Trust, Plaintiff,

v.Loretta E. LYNCH, Attorney General of the United States, and Thomas E. Brandon, Director, Bureau of Alcohol, Tobacco, Firearms & Explosives, Defendants.

Case No. 3:14–cv–03872–M.

United States District Court, N.D. Texas, Dallas Division.

Signed Aug. 7, 2015.

Stephen Dean Stamboulieh, Stamboulieh Law PLLC, Madison, MS, Alan Alexander Beck, Law Office of Alan Beck, San Diego, CA, Elisha Michael Hollis, Law Offices of Elisha M. Hollis PLLC, Greenville, TX, for Plaintiff.

Daniel M. Riess, Eric J. Soskin, U.S. Department of Justice, Civil Division, Washington, DC, for Defendants.

MEMORANDUM OPINION AND ORDER

BARBARA M.G. LYNN, District Judge.

Before the Court is Defendants' Motion to Dismiss, or in the Alternative, for Summary Judgment [Dkt. No. 13]. For the reasons stated herein, Defendants' 12(b)(1) Motion to Dismiss Plaintiff's Second Amendment and Commerce Clause claims for lack of standing is GRANTED, and Defendants' 12(b)(6) Motion to Dismiss Plaintiff's due process, equal protection, and Plaintiff's alternative request for declaratory relief that § 922(o ) does not apply to Plaintiff or the Hollis Trust is GRANTED.

BACKGROUND

Plaintiff Jay Aubrey Hollis brings this action in his individual capacity and as Trustee of the Jay Aubrey Isaac Hollis Revocable Living Trust ("the Hollis Trust") to invalidate the federal ban on the transfer and possession of machine guns, imposed by the Gun Control Act ("GCA"), 18 U.S.C. § 922(o ), and the National Firearms Act ("NFA"), 26 U.S.C. § 5801 et seq., and their implementing regulations, 27 C.F.R. § 479.105(a).

In a March 17, 2014 letter, the Bureau of Alcohol Tobacco and Firearms ("ATF") advised a federal firearms licensee, Brandon Maddox, that, while the GCA contains an exception that permits a licensee to forego a National Instant Criminal Background Check on a previously-approved NFA transfer, that exception does not apply when the transferee is an unincorporated trust. Dkt. No. 1 ¶ 25; Dkt. No. 1–1 (Pl.'s Ex. A) ("Dakota Silencer Letter"). The relevant part of the letter stated:

Federal firearms law at 18 U.S.C. § 922(t)(1) requires federal firearms licensees (FFLs) to run a NICS check "before completion of the transfer," and verify the identity of the transferee. There is an exception under section 922(t)(3)(B) and 27 CFR 478.102(d)(2), if the Attorney General "has approved the transfer under section 5812 of the Internal Revenue Code of 1986." Subject to limited exceptions, the Gun Control Act (GCA) at section 922(b)(3) also makes it unlawful for an FFL to sell or deliver a firearm "to any person who the licensee knows or has reasonable cause to believe does not reside in (or if the person is a corporation or other business entity, does not maintain a place of business in) the State in which the licensee's place of business is located." The term "person" is defined by the GCA at 18 U.S.C. § 921(a)(1), to include "any individual, corporation, company, association, firm, partnership, society, or joint stock company."

ATF has interpreted the GCA exception in sections 922(t)(3)(B) and 478.102(d)(2) to mean that firearms transfers are exempt from a NICS check when they have been approved under the NFA to the person receiving the firearm. Unlike individuals, corporations, partnerships, and associations; unincorporated trusts do not fall within the definition of "person" in the GCA.

Because unincorporated trusts are not "persons" under the GCA, a Federal firearms licensee (FFL) cannot transfer firearms to [an unincorporated trust] without complying with the GCA. Thus, when an FFL transfers an NFA firearm to a trustee or other person acting on behalf of a trust, the transfer is made to this person as an individual (i.e., not as a trust ). As the trustee or other person acting on behalf of the trust is not the approved transferee under the NFA, [26] U.S.C. § 5812, the trustee or other person acting on behalf of a trust must undergo a NICS check. The individual must also be a resident of the same State as the FFL when receiving the firearm.

Id. (emphasis in original). Apparently encouraged by the ATF's construction of the GCA's definition of "person" in the Dakota Silencer Letter, on May 14, 2014, Plaintiff, on behalf of the Hollis Trust, applied to manufacture a machine gun by submitting ATF Form 5320.1 ("Form 1"), paid the $200 tax required by the NFA, and attached the Dakota Silencer Letter as support for approval. Dkt. No. 1 ¶ 37. On September 8, 2014, ATF returned Plaintiff's Form 1 with a stamp of approval. Dkt. No. 1 ¶ 38; Dkt. No. 1–3 (Pl. Ex. C).

On September 10, 2014, ATF contacted Plaintiff and informed him that his Form 1 had been approved by mistake, and Plaintiff later received another copy of his Form 1, this time with a stamp of disapproval. Dkt. No. 1 ¶¶ 39–40; Dkt. No. 1–4 (Pl. Ex. D). A few days later, Special Agent Aaron R. Wheeler met Plaintiff and delivered a letter from ATF's Chief of the National Firearms Act Branch, which asked Plaintiff to surrender any machine gun that might have been manufactured by Plaintiff based on the mistakenly approved Form 1. Dkt. No. 1 ¶ 42; Dkt. No. 1–5 (Pl. Ex. E). The letter explained that the exclusion of an unincorporated trust from the definition of "person" in 18 U.S.C. § 921(a)(1) does not permit an individual to avoid liability under § 922(o ) by placing a machine gun "in trust":

Pursuant to 26 U.S.C. §§ 5812 and 5822, an application to make a firearm shall be disapproved if the making would place the possessor in violation of the law. The GCA, 18 U.S.C. § 922(o ) prohibits the possession of machineguns except in limited circumstances. Specifically, pursuant to the statute and implementing regulations, 27 C.F.R. § 479.105(a), ATF may not approve any private person's application to make and register a machinegun after May 19, 1986.

The sole exception to this exists under section 479.105(e) and allows ATF to approve such application "provided it is established by specific information" that the making of the weapon is at the request and on behalf of a Federal, State or local government entity. Please be aware that no such information has been provided, and therefore, pursuant to the disapproved application, the firearm is not registered to you or the Jay Aubrey Isaac Hollis Revocable Living Trust in the National Firearms Registry and Transfer Record. Your continued possession of such a firearm without a valid registration violates the NFA. (26 U.S.C. § 5861(d) ).

....

Also please note that the GCA defines the term "person" to "include any individual, corporation, company, association, firm, partnership, society, or joint stock company." See 18 U.S.C. § 921(a)(1). The fact that an unincorporated trust is not included in the definition of "person" under the GCA does not mean that an individual may avoid liability under section 922(o ) by placing a machinegun "in trust." Where a trust is not an entity recognized as a "person" under the applicable law, it cannot make or hold property and is disregarded. Consequently, in terms of an unincorporated trust, ATF must disregard such a non-entity under the GCA and consider the individual acting on behalf of the trust to be the proposed maker/possessor of the machinegun.

Dkt. No. 1–5 (Pl. Ex. E).

Plaintiff argues that ATF unlawfully revoked his Form 1 approval, and contends that ATF's interpretation of the GCA is contrary to the plain language of the statute. Dkt. No. 1 ¶¶ 47–48. On October 30, 2014, Plaintiff filed his Complaint for Declaratory and Injunctive Relief, individually and on behalf of the Hollis Trust, against the Attorney General and the Director of ATF in their official capacities ("Defendants"). Plaintiff requests declaratory and injunctive relief for protection from the application of 18 U.S.C. § 922(o ), 26 U.S.C. § 5801 et seq., and the associated implementing regulations, 27 C.F.R. § 479.105(a), on the alleged basis that they "act as an unlawful de facto ban on the transfer or possession of a machine gun manufactured after May 19, 1986." Id. ¶ 1. Plaintiff alleges that the foregoing statutes and regulations violate Plaintiff's rights under the Second Amendment, and the Due Process Clause of the Fifth Amendment, including its equal protection component. Id. Plaintiff also requests that the GCA be held unconstitutional as an impermissible exercise of congressional power under the Commerce Clause.¹ Id. Alternatively, Plaintiff seeks declaratory and injunctive relief that § 922(o ) does not prohibit the Hollis Trust from manufacturing or possessing a machine gun manufactured after May 19, 1986, and/or that Defendants lacked authority to revoke or deny the validity of Plaintiff's approved Form 1. Id. ¶ 3.

Defendants move to dismiss Plaintiff's claims under Fed.R.Civ.P. 12(b)(1) and 12(b)(6), and alternatively move for summary judgment. Dkt. No. 13.

DISCUSSION

I. Background on the National Firearms Act and Gun Control Act

The National Firearms Act of 1934, 26 U.S.C. Chapter 53, and the Gun Control Act of 1968, 18 U.S.C. Chapter 44, comprise the federal framework governing the firearm market. The GCA generally makes it unlawful for a person to transfer or possess a machine gun. 18 U.S.C. § 922(o ). The NFA makes it unlawful to manufacture a machine gun in violation of its provisions. 26 U.S.C. § 5861(f). The NFA defines a "machinegun" as "any weapon which shoots, is designed to shoot, or can be readily restored to shoot, automatically more than one shot, without manual reloading, by a single function of the trigger," or "any combination of parts from which a machine gun can be assembled." 26 U.S.C. § 5845(b). The GCA incorporates the NFA's definition of machinegun. 18 U.S.C. § 922(a)(4). ATF is charged with administering and enforcing both the NFA and GCA, and Defendants oversee ATF. 28 C.F.R. § 0.130(a)(1)–(2).

As initially enacted in 1934, the NFA...