### In the 

# United States Court of Appeals For the Seventh Circuit

____________________ No. 16

- 1015

DCV I MPORTS , LLC
, Petitioner
,

v.

B UREAU OF A LCOHOL , T OBACCO , F IREARMS AND E XPLOSIVES , Respondent

.

____________________ Petition for Review of an Order of the Bureau of Alcohol, Tobacco, Firearms and Explosives

. No. 3

- IL

- 107

- 23

- 3L

- 00682

____________________
A RGUED A UGUST 9, 2016

— D ECIDED O CTOBER 4, 2016

____________________

Before B AUER , P OSNER , and S YKES , Circuit Judges

. S YKES , Circuit Judge

. DCV Imports
, LLC , a family

operated fireworks importer in rural Illinois, petitions for review of an order denying renewal of its import license. An administrative law judge found that DCV Imports wil lfully failed to keep required records of its daily transactions, see 18 U.S.C. § 842(f); 27 C.F.R. § 555.127, and recommended that the company’s license not be renewed. The regional2 No. 16

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office of the Bureau of Alcohol, Tobacco, Firearms and Explosives accepte d that recommendation, and th e decision was upheld by the Deputy Director of ATF. We conclude that substantial evidence supports the Deputy Director’s decision and deny the petition for review.

I. Background

The activities of two closely related, family

- owned fir eworks businesses are relevant to this case, although only the denial of DCV Import ’s license is directly at issue. Mary Vinyard and Stephen Vinyard, Sr., began operating S&N Fireworks in the late 1970s
, and in 1997 they obtained from the ATF a li cense to import high explosives. Their son Darren founded DCV Imports in 2004 with the intention of eventually buying out his parents’ business or running his own fireworks company. DCV (meaning Darren Clifford Vinyard) shared S&N ’ s place of business in Li ncoln, Illinois, and in 2004 obtained its own license to import high expl osives. From 2004 u ntil 2011, S&N Fireworks ordered bulk fire works from DCV Imports , which imported the explosives from China and immediately transferred them to S&N Fireworks . S&N th en packaged and sold the fireworks for individual shows. In addition to the two companies’ shared premises and symbiotic business relatio nship, Darren was employed by S&N Fireworks and was listed as a “responsible person” on S&N’s license. ATF regulations define “responsible person” as one “who has the power to direct the management and policies of the applicant pertaining to explosive materials” and generally “includes partners, sole proprietors, site managers, corporate officers and directors, and majori ty shareholders.” 27 C.F.R. § 555.11. Darren’s duties with S&NNo. 16

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included delivering fireworks for shows and s taging fir eworks shows

. ATF agents periodically conduct compliance inspections of federal explosives licensees. Se e id. § 555.24. Agency regulation s require that licensees maintain for each storage area or “magazine” an accurate “daily summary of mag azine transactions,” including the quantity of explosives received and removed and the total on hand at day’s end. See id. § 555.127. Licensees also have an affirmative duty to notify ATF about discrepancies that “might indicate a theft or loss of explosive materials.” Id. ATF investigators inspec ting DCV Imports in 2004, 2008, and 2010 did not uncover any regulatory violation. DCV was not storing any expl osives during this period, however, because all fireworks it received were immediately transferred to S&N Fireworks

. Following each inspection
, an ATF investigator reviewed with Darren the applicable statutes and regulations, and each time he signed an Ack nowledgement of Federal Expl osives Regulations.

S&N ’s compliance record, on the other hand, was spotty

. ATF investigators cited the company for numerous viol ations during a 2006 inspection, including not maintaining accurate daily summaries and storing fi reworks unsa fely. That inspection led to a “ warning conference ” in 2008 a ttended by Darren and other S&N Fireworks personnel

. Then in 2009 an inspection revealed a multitude of violations, including hundreds of instances where actual counts of stored firew orks contradicted inventory records, multiple
in accurate daily summaries, and the disappearance of roughly 10,000 pounds of shells. Stephen “Vinny” Vinyard, Jr., Darren’s brother, was the S&N employee tasked with4 No. 16

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maintaining the daily summaries throughout the period when these infractions occurred. Darren attended a confe rence in early 2010 to wrap up the 2009 inspection, and after reviewing the violations with an ATF investigator, he signed a report acknowledging the citations. Later that same year the ATF ’s Chicago Field Division, through its Director of Industry Operations, notified S&N Fireworks that its license would not be renewed because of willful violations unco vered during the 2009 inspection. Rather than contest th e decision, S&N voluntarily surrendered its license.

DCV Imports then bought out S&N ’s inventory, equi pment, customer lists, and show contracts. As part of the transaction, Darren agreed to give Vinny a 50% stake in DCV and to make him vice president, al though Darren retained operati onal control as president of the company. DCV Imports expanded its operations from importing fireworks to running a complete fireworks business, as S&N Fireworks had been . Darren made Vinny responsible for maintaining the required daily summaries (and cons equen tly the magazine inventories) even though maintaining those same records for S&N Fireworks had been Vinny’s job when the lapses leading to the company’s demise had occurred

. Vinny did not receive any formal recordkeeping training and struggled to comp lete the daily summaries; he told Darren that he was uncomfortable performing th is task. In early 2013 Vinny hired a cousin to take over the recordkee ping duties . Vinny himself trained the cousin to maintain the daily summaries and then “stopped paying att ention” to the

rec ords. A team of ATF investigators arrived unannounced in September 2013 to inspect DCV Imports . The investigatorsNo. 16

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began by counting the explosives in DCV’s magazines and comparing those numbers to a computerized inventory, but when it bec ame clear that the quantities did not match, the team asked Darren for the daily summaries. The investig ators found 73 instances in which those records did not match the amount of fireworks added or removed from a mag azine. Those 73 inaccurate daily summar ies totaled 1,897 missing “units” or roughly 870 net pounds of explosives for which DCV Imports could not account. As before, this inspection concluded with a conference during which ATF investigators reviewed regulatory requirements and DCV’s violations w ith Darren and required him to sign an Acknowledgement of Federal Explosives Regulations. Based on these violations, ATF’s Director of Industry Operations in Chicago notified DCV Imports in May 2014 that the agency did not intend to renew DCV’s explosives license. The notice charged DCV Imports with willfully failing to comply with the recordkeeping mandate of
27 C.F.R. § 555.127 . The notice placed special emphasi s on the volume of missing fireworks

. DCV invoked its right to a hearing before an administr at ive law judge

. S ee 18 U.S.C. § 843(e)(2). In a written submi ssion to the assigned judge
, DCV Imports did not dispute the violations but argued instead that its violations should not be deemed willful given its perfect compliance record before 2013. The agency responded that S&N Fireworks and DCV Imports were “essentially the same business operation” and equated the violations of the former with the latter.

The administrative law judge conducted an evidentiary he a ring in December 2014 and afterward issue d a written order agreeing with the agency that DCV Imports had6 No. 16

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committed the recordkeeping violations willfully. The judge reasoned that Darren’s long history of working in the fir eworks industry and extensive interactions with the ATF “demonstrate that h e was sufficiently knowledgeable of the ATF’s federal explosives regulations” yet chose to disregard those requirements. The judge acknowledged that DCV Imports and S&N Fireworks are different entities, and although she did not impute S&N’s violations to D CV, the judge did hold Darren accountable for the knowledge he gained as a responsible person at S&N Fireworks . She also agreed with the agency that Darren’s decision to defer recordkeeping responsibility to Vinny

— knowing that he was “at the center of the faulty recordkeeping that led to S&N’s 2010 denial”

— strongly supported a finding of wil lfulness. The judge recommended that the agency confirm the decision not to renew DCV’s license. That recommendation was accepted. DCV Imports sought review by the Depu ty Director of the ATF, who after briefing and oral argument upheld the denial of DCV’s license renewal

. S ee 27 C.F.R. § 555.79. DCV Imports pet itioned for review by this court

. S ee id. § 555.80.

II. Discussion We will uphold the agency’s conclusion that DCV I mports acted willfully if it is supported by substantial ev idence. See § 843(e) ( 2); 5 U.S.C. § 706(2)(E). Congress has directed the Attorney General (and by delegation the Dire ctor of the ATF) to deny or refuse to renew a license to import or deal in explosive materials if the applicant has willfully violated any pertinent statute or regulation. 18 U.S.C. § 843(a), (b)(2). “Willfully” as used in § 843 is not defined, and only one of our sister circuits has addressed its meaning.No. 16

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In Vineland Fireworks C o. v. Bureau of Alcohol, Tobacco, Fir earms & Explosives , the Third Circuit reasoned that explosives licensing is analogous to firearms licensing “because ATF administers both

... and the statutory provisions governing the revocation of each type of license require that the lice nsee has ‘willfully violated’ a statutory provision or a regul ation.” 544 F.3d 509, 518 (3d Cir. 2008). The court concluded that decisions addressing firearms licensing under the Gun Control Act provide “a useful framework” for explosi ves licensing and observed that the six circuits that have inte rpreted the meaning of “willful” in proceedings to revoke the license of a firearms dealer agree that the term means plain indifference to, or purposeful disregard of, a known legal duty. Id. ; see Shawano Gun & Loan, LLC v. Hughes , 650 F.3d 1070, 1077

– 78 (7th Cir. 2011); RSM, Inc. v. Herbert , 466 F.3d 316, 320

– 23 (4th Cir. 2006); Willingham Sports, Inc. v. Bureau of Alcohol, Tobacco, Firearms & Explosives , 415 F.3d 1274, 1277 (11th Cir. 2005); A ppalachian Res. Dev. Corp. v. McCabe
, 387 F.3d 461, 464 (6th Cir. 2004); Perri v. Dep’t of the Treasury
, 637 F.2d 1332, 1336 (9th Cir. 1981); Lewin v. Blumenthal
, 590 F.2d 268, 269 (8th Cir. 1979). We adopt the Third Circuit’s approach and conclude that

t he interpreta tion of “ willfulness ” applicable to firearms licensing applies as well to r e vocation of explosives licenses

. Accordingly, no showing of bad purpose or evil motive is required to establish willfulness, and no de minimis excep tion is a vailable

. See Article II Gun Shop, Inc. v. Gonzales , 441 F. 3d 492, 497

– 98 (7th Cir. 2006) (interpreting a parallel provision of the Gun Control Act)

. With this definition in mind, we turn to the question whether substantial evidence supports the administrative8 No. 16

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law j udge ’s findin g that DCV Imports acted willfully

. DCV Imports insists that the judge focused “so heavily ” on esta blishing Darren’s knowledge of the explosives regulations that she “failed to address the more important issue of whether DCV intentionally disr egarded or was plainly indifferent to its legal duties.”

DCV essentially takes the position that it lost 870 net pounds of explosives because of negligence or ignorance , not purposeful disregard of its regulatory duties . T he company argues that the administrative law judge was wrong to fault Darren for giving Vinny responsibility for the daily summa ries because Vinny was the “relatively more experienced brother

. ” Darren’s choice to defer to “the most experienced person available” evince s a “conscious effort to fulfill” the regulatory require ment, DCV argues

. But that inference is unreasonable on this record; even if we accept that Vinny was the “more experienced brother,” his recordkeeping history at S&N Fireworks was so poor that it led to the

revoca tion of S&N’s license

. DCV Imports also contends that the agency was wrong to impute to Darren knowledge gained from hi s time at S&N Fireworks because he did not hold an ownership interest and was at most a site manager. But Darren’s lack of an ownership i nterest in S&N Fireworks is irrelevant since DCV Imports cannot claim that he was unaware of the recordkeeping requirements.

DCV also argues that the agency was wrong to rely on the acknowledgments Darren signed beca use those forms merely indicate that AT F gave him a general overview of the regulatory require ments and do not establish that Darren actually understood them

. Again, that’s not a reasonable argument on this record

. Substantial evidence supports theNo. 16

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agency’s conclusion that Darren was sufficient ly familiar with the regulatory requirements based on his long history in the fireworks business and numerous prior ATF inspe ctions and warnings.

DCV tries to minimize its culpability by characterizing the many lapses uncovered in the 2013 inspection as a “singl e recordkeeping viola tion

. ” Once again, t hat’s not an accurate characterization of the facts ; hundreds of pounds of explosives were lost on account of 73 inaccurate daily su mmaries . Anyway, one willful violation is enough ; the ATF isn’t required to c ite a licensee repeatedly before revoking an explosives license. Am. Arms Int’l v. Herbert , 563 F.3d 78, 87 (4th Cir. 2009) (“Plain indifference can be found even where nine times out of ten a licensee acts in accordance with the regulations, if he was pla inly indifferent to the one

- in

- ten violation.”); Vineland Fireworks Co. , 544 F.3d at 518

– 19. Darren and Vinny were intimately involved with S&N Fireworks when their parents lost th eir license based largely on the same type of recordkeeping violations, yet neither of the brothers exercised the initiative to ensure that DCV complied. This more than supports a finding of willfulness. Moreover, no principled basis exists on which to disti nguish the facts of this case from Vineland Fireworks Co. , the only feder al appellate decision directly addressing revoc ation of an explosives license. Th ere the Third Circuit upheld a finding that a licensee willfully failed to maintain accurate daily transaction records where th e company’s owner had been the responsible perso n of a predecessor company when its license was revoked for similar recordkeeping violations. 544 F.3d at 521

– 22. The Third Circuit specifically rejected an argument that the company’s principal should be excused10 No. 16

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from compliance because her bookkeeper was undergoing cancer treatment when the violations occurred, finding that the owner’s interactions with ATF during the predecessor company’s revocation demonstrated her knowledge of the regulat ory requirements . DCV’s argument

— that Darren’s lack of experience and Vinny’s apparent incompetence negates a finding of willfulness

— is similarly unpersuasive. Finally, DCV assert s that because it previously asked the ATF for guidance in interpreting a different set of explosives regulation s, the finding of willfulness w as improper

. As far

as we can tell, this contention concerns a sepa rate, unrelated charge that the administrative law judge rejected and thus no longer is at issue. A licensee’s effort to understand one regulation does not inoculate it against a finding that it intentional ly disregard ed an other . DCV also suggests, without citation to evidentiary support, that the ATF inve stigators provided contradictory interpretations of the age ncy’s regulations

. T he administrative law judge pointed out that no evidence in the record supports this conten tion

. In short, s ubstantial evidence supports the agency’s co nclusion that DCV Imports willfully violated explosives regula tions . T he petition for review is , accordingly, D ENIED

.