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Gilbert v. United States Bureau of Alcohol Tobacco, Firearms And Explosives

United States District Court, D. Maryland

January 23, 2018




         The Gun Control Act of 1968 (“GCA”), Pub. L. No. 90-618, 82 Stat. 1213 (1968), requires any individual seeking to engage in the business of selling firearms to first obtain a Federal Firearms License (“FFL”) from the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”). 18 U.S.C. § 923(a) (2012). Plaintiffs Charles Gilbert and Bryon Gossard, along with limited liability corporations established to operate their various businesses, have filed suit seeking damages for and injunctive relief relating to the ATF's denial of Gossard's FFL application. Plaintiffs assert a violation of the Due Process Clause of the Fifth Amendment to the United States Constitution and multiple state law tort claims. Pending before the Court are two Motions to Dismiss, one by Defendants the United States of America, the ATF, and Gretchen Arlington, an ATF investigator (the “Federal Defendants”), and one by Defendants Engage Armament and Andrew Raymond (the “Private Defendants”). Having reviewed the pleadings, briefs, and other submitted materials, the Court finds that no hearing is necessary. See D. Md. Local R. 105.6. For the reasons set forth below, Defendants' Motions are GRANTED.


         Gilbert is the owner of the Gilbert Indoor Range (the “Range”), a members-only shooting range located in Rockville, Maryland. Gilbert is also a former FFL holder whose many GCA violations cost him the ability to sell firearms. His decade-long attempt to regain an FFL, either for himself or for a proxy, is recounted in detail in Gossard v. Fronczak, 206 F.Supp.3d 1053, 1055-56 (D. Md. 2016). This case is one of a long line of legal challenges brought by Gilbert in an effort to resuscitate his former firearms dealing business.

         In 2008, in an attempt to maneuver around firearms regulations and the ATF's rescission of his businesses' FFLs, Gilbert entered into an agreement with Defendants Raymond and Theodore Sabate, who together owned Engage Armament LLC (“Engage”), a business that customized and sold firearms. Through this agreement, Gilbert would finance the purchase of a firearm for a Range member, then Engage would use its FFL to receive the firearm from the manufacturer or dealer and to host the actual sale of the firearm on its premises. For its participation, Engage would receive a $30.00 transfer fee. Gilbert would receive the rest of the profits. Gilbert also offered a free, week-long membership to the Range to any person who purchased a firearm from Engage.

         Meanwhile, also in 2008, Gilbert applied for an FFL in his own name. The ATF denied the application, finding that his businesses' GCA violations should be imputed to him and that Gilbert himself had violated the GCA by selling firearms after his businesses' FFLs had been revoked. Gossard, 206 F.Supp.3d at 1056. On June 6, 2012, the United States Court of Appeals for the Fourth Circuit affirmed ATF's decision. Gilbert v. Bangs, 481 F. App'x 52, 55 (4th Cir. 2012).

         In April 2012, Plaintiff Gossard purchased one of Gilbert's business entities, Gilbert Indoor Range, LLC (“GIR”), for one dollar. Gossard, 206 F.Supp.3d at 1056. Gossard, who had been a Range employee since 2009, also entered into a lease so that GIR could sell firearms at the Range. Two days after the Fourth Circuit affirmed ATF's denial of Gilbert's FFL application, Gossard applied for an FFL on behalf of GIR.

         FFL applicants must list on their application all “responsible persons” in their business. Specifically, they must notify the ATF of “any individual possessing, directly or indirectly, the power to direct or cause the direction of the management, policies, and practices of the corporation, partnership, or association, insofar as they pertain to firearms.” Gossard, 206 F.Supp.3d at 1061 (quoting FFL Application Instructions). Willful failure to list a responsible person is grounds for the application's denial. 18 U.S.C. § 923(d)(1)(D); 27 C.F.R. § 478.47(b)(4) (2016); see Mew Sporting Goods, LLC v. Johansen, 992 F.Supp.2d 665, 678 (N.D. W.Va. 2014). Gossard's FFL application did not name Gilbert as a responsible person for GIR.

         Defendant Arlington was the ATF Industry Operations Investigator charged with investigating Gossard's application. On November 16, 2012, she gave what Gossard thought was verbal approval of the application. Gossard immediately alerted the Range's customers that he was now able to sell firearms. He also told Raymond about the FFL approval. Plaintiffs have not alleged that they expended any money or entered into any transactions based on Arlington's statement.

         The anticipated FFL approval was not forthcoming. The same day that Arlington spoke with Gossard, Raymond contacted ATF to accuse Gossard of being a straw applicant for Gilbert and a marijuana user. Ultimately, on August 26, 2013, ATF denied Gossard's application on the grounds that he had not disclosed Gilbert as a responsible person and had engaged in unlawful drug use. Gossard, 206 F.Supp.3d at 1058. “Immediately after” Gossard received the denial, Raymond contacted Gilbert, informed him of Gossard's alleged drug use, and admitted that it was he who had spoken to ATF about Gossard's application. Am. Compl. ¶ 78, ECF No. 56-1. “It was at this time” that Gilbert “realized” that Raymond, Sabate, Engage, and ATF were conspiring against him. Id. ¶ 79.

         Gossard appealed the denial of his FFL application. After an administrative hearing, ATF issued a Final Notice affirming its decision on January 20, 2015. On March 24, 2015, Gossard filed a petition in this Court to contest that decision. On June 30, 2016, this Court upheld the ATF's denial of the application on the basis that Gossard had willfully omitted material information from his application. Gossard, 206 F.Supp.3d at 1065. Specifically, this Court found that Gossard should have listed Gilbert as a “responsible person” for Gossard's business because “Gilbert could indirectly control the management, policies, and practices of GIR.” Id. at 1063-65. This Court reached this conclusion without considering whether Gossard was a drug user or whether alleged drug use was a proper basis for the FFL's denial. On November 13, 2017, the Fourth Circuit affirmed this Court's decision. Gossard v. Fronczak, 701 F. App'x 266, 266 (4th Cir. 2017).

         On July 21, 2015, while Gossard's challenge was still pending before this Court, Gossard and Gilbert filed this case. The initial Complaint (the “original Complaint”) listed only the United States and the Acting Director of ATF as defendants and asserted two claims: a governmental taking of property in violation of the Fifth Amendment and the tort claim of intentional interference with current and prospective business advantage/contract. The Takings Clause claim was later voluntarily dismissed. On January 18, 2017, Plaintiffs amended their Complaint (the “First Amended Complaint”) to add Arlington, in her official and personal capacities, Engage, Raymond, Sabate, and Greg Miller as defendants.[1] The First Amended Complaint also substituted ATF itself in place of its Acting Director.

         The Complaint was amended yet again on May 3, 2017 (the “Second Amended Complaint”) to add four additional claims: a Fifth Amendment due process violation, brought pursuant to 42 U.S.C. § 1983 (“§ 1983”), and three state law tort claims: unjust enrichment, intentional misrepresentation, and constructive fraud. As relevant here, Plaintiffs allege that Arlington, Raymond, Sabate, and Miller conspired to use Raymond's false testimony to deny an FFL to Gossard so that Raymond and Engage could steal Gilbert's customer base and benefit from the lucrative business of selling firearms without competition from Gossard. Plaintiffs allege that Gossard and Gilbert both lost potential revenue because Gossard never received an FFL and therefore could not sell firearms for profit, and Gilbert was thus deprived of rent that GIR would have paid for leasing space at the Range.


         The Federal Defendants seek dismissal of all counts asserted against them on the grounds that those claims are barred by sovereign immunity or are foreclosed by this Court's ruling in Gossard v. Fronczak, 206 F.Supp.3d at 1063-65. The Private Defendants seek dismissal on the grounds that (1) they are not state actors, such that the Bivens and § 1983 claims against them are improper; and (2) the remaining tort claims are barred by the statute of limitations.

         I. Legal Standard

         Defendants seek dismissal of the tort claims against Arlington under Federal Rule of Civil Procedure 12(b)(1). It is the plaintiff's burden to show that subject matter jurisdiction exists. Evans v. B.F. Perkins Co., Div. of Standex Int'l Corp., 166 F.3d 642, 647 (4th Cir. 1999). Rule 12(b)(1) allows a defendant to move for dismissal when it believes that the plaintiff has failed to make that showing. When a defendant asserts that the plaintiff has failed to allege facts sufficient to establish subject matter jurisdiction, the allegations in the complaint are assumed to be true under the same standard as in a Rule 12(b)(6) motion, and “the motion must be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction.” Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009). When a defendant asserts that facts outside of the complaint deprive the court of jurisdiction, the Court “may consider evidence outside the pleadings without converting the proceeding to one for summary judgment.” Velasco v. Gov't of Indonesia, 370 F.3d 392, 398 (4th Cir. 2004); Kerns, 585 F.3d at 192. The court should grant a Rule 12(b)(1) motion based on a factual challenge to subject matter jurisdiction “only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law.” Evans, 166 F.3d at 647 (quoting Richmond, Fredericksburg & Potomac R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991)).

         Defendants seek dismissal of the remaining claims pursuant to Rule 12(b)(6). To defeat a motion to dismiss under Rule 12(b)(6), the complaint must allege enough facts to state a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is plausible when the facts pleaded allow “the Court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Legal conclusions or conclusory statements do not suffice. Id. The Court must examine the complaint as a whole, consider the factual allegations in the complaint as true, and construe the factual allegations in the light most favorable to the plaintiff. Albright v. Oliver, 510 U.S. 266, 268 (1994); Lambeth v. Bd. of Comm'rs of Davidson Cty., 407 F.3d 266, 268 (4th Cir. 2005). Documents attached to the complaint or motion may be considered if “they are integral to the complaint and authentic.” Sec'y of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007). The court may also take judicial notice of matters of public record. Philips v. Pitt Cty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009). When considering a Rule ...

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