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Russell Raymond Nickel v. Kenneth E. Melson

November 18, 2011

RUSSELL RAYMOND NICKEL PLAINTIFF,
v.
KENNETH E. MELSON, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge

MEMORANDUM OPINION

Plaintiff Russell Raymond Nickel challenges the denial of his Application for Restoration of Explosives Privileges by the Bureau of Alcohol, Tobacco, Firearms, and Explosives ("ATF"). Because the Court concludes that the ATF's decision was not arbitrary or capricious, the government's Motion for Summary Judgment will be granted.

STATUTORY AND REGULATORY BACKGROUND

Federal law provides that anyone convicted of "a crime punishable by imprisonment for a term exceeding one year" may not "receive or possess" explosives that have trafficked in interstate or foreign commerce. 18 U.S.C. § 842(i); see id. § 843(b)(1) (specifying that licenses to deal in explosive materials may not be granted to applicants described in § 842(i)). However, the law authorizes the Attorney General to grant an applicant relief from this prohibition if the Attorney General determines that the circumstances regarding the applicability of [§] 842(i), and the applicant's record and reputation, are such that the applicant will not be likely to act in a manner dangerous to public safety and that the granting of such relief is not contrary to the public interest.

Id. § 845(b)(2). Pursuant to the Attorney General's authority to promulgate rules and regulations "reasonably necessary to carry out" the federal explosives laws, id. § 847, the Attorney General has delegated the authority to grant relief under § 845(b)(2) to the Director of the ATF. 27 C.F.R. § 555.142(b) ("application[s] for relief from disabilities must be filed with the Director"). The regulation describing and constraining the Director's authority to grant applications for relief from disabilities repeats the statutory standard and emphasizes the Director's discretion:

The Director may grant relief to an applicant if it is established to the satisfaction of the Director that the circumstances regarding the disability and the applicant's record and reputation are such that the applicant will not be likely to act in a manner dangerous to public safety and that the granting of such relief is not contrary to the public interest.

Id. § 555.142(c)(1). The Director has delegated this authority to the Chief of the Arson and Explosives Program Division. (See Defs.' Mot. at 6 (citing ATF O 100.168).)

FACTUAL BACKGROUND

On August 7, 2003, Nickel was indicted as a result of an ATF investigation of Next F/X, a pyrotechnics manufacturer. (See Defendants' Motion for Summary Judgment, Sept. 1, 2011 [Dkt. No. 10] ("Defs.' Mot."), Ex. B.) In 2001, Nickel had joined with Ron and Kim Walker to form Next F/X, which operated on the premises of the Walkers' other pyrotechnics business, Pyro Products, Inc., in Missouri. (Plaintiff's Papers in Opposition to Defs.' Mot. for Summary Judgment, Sept. 30, 2011 [Dkt. No. 11] ("Pl.'s Opp'n") at 1--2.) The government alleges that explosions at Pyro Products in 1999 and 2000 resulted in the deaths of two employees. (Defs.' Mot. at 2 n.1.) When a June 6, 2001 explosion on the premises shared with Next F/X injured three employees, the Occupational Safety and Health Administration ("OSHA") initiated an investigation. (Id. at 2; Pl.'s Opp'n at 1--2.) OSHA found that Nickel and the Walkers, on multiple occasions, had manufactured explosives for Next F/X without proper authorization; manufactured explosives for Next F/X that were different in composition than those authorized to be shipped by Pyro Products; mislabeled numbers for proper shipping of explosives; shipped explosives for Next F/X improperly using Pyro Products numbers; knowingly used Pyro Product's product sheets for shipment of Next F/X explosives; and directed employees to mislabel Next F/X explosives. (Defs.' Mot., Ex. B at 15--18.) OSHA also found that after the June 2001 explosion but before calling for help, Nickel dismantled an unauthorized and unreported laboratory, removed the unauthorized lab contents, and concealed the contents in an unapproved storage container. (Id. at 18.) Nickel then directed employees to move explosives and equipment out of the Pyro Products facility, allegedly in an attempt to prevent inspectors from discovering regulatory violations. (Id. at 18--19.) OSHA concluded that Nickel and the Walkers continued to manufacture explosives for Next F/X, without authorization, after the explosion.

The parties differ somewhat as to Nickel's status at Next F/X at the time of the explosion and the OSHA investigation. Nickel maintains that he relinquished the titles of officer and director of Next F/X "shortly []after" June 2001. (Pl.'s Opp'n at 2.) Defendants maintain that Nickel remained in those roles, notwithstanding that he told the opposite to OSHA. (Defs.' Mot. at 2). The dispute is immaterial, however, because on May 17, 2004, Nickel pleaded guilty to making false statements to OSHA, a crime which is punishable by not more than five years' imprisonment under 18 U.S.C. § 1001(a). (Defs.' Mot., Ex. A; see Pl.'s Opp'n at 2 ("The precise nature of the allegation is that . . . Nickel denied being an officer or director of [Next F/X] when OSHA made inquiry of him, and he ultimately agreed to plea[d] guilty to only this charge.").) Nickel was sentenced on August 20, 2004. (Defs.' Mot., Ex. A.)

After he was indicted but prior to pleading guilty, Nickel submitted an Application for Restoration of Explosives Privileges to the ATF. (See Defs.' Mot., Ex. C.) On November 2, 2005, ATF Special Agent Joseph Cludy interviewed Nickel, who admitted that he was continuing to work as a pyrochemist with Stage F/X, a fireworks company owned by his father and located in Columbus, Montana. (Defs.' Mot., Ex. D at 1.) In his report, Special Agent Cludy stated that, while Nickel's felony conviction would normally bar him from handling explosives, Nickel had received a "variance" because he had "file[d] . . . an application for restoration of explosives privileges." (Id.) Indeed, federal law provides that a licensee or permittee who files for relief within 30 days of indictment or conviction may continue operations while his application is pending. See 18 U.S.C. § 845(b)(3); 27 C.F.R. § 555.142(e)(1). Nickel's application was timely in this regard, as he filed it within 30 days of his felony conviction. However, the government initially alleged that Special Agent Cludy made a mistake, and that Nickel did not have a license or permit in his own name prior to his conviction. (See Defs.' Mot. at 3 n.2.) Nickel disputed this charge, and with citation to Special Agent Cludy's report, alleged that he "had valid and lawful privileges to possess explosives when he was interviewed . . . on November 2, 2005." (Pl.'s Opp'n at 3 (citing Defs.' Mot., Ex. D at 1).) The government now concedes that Nickel "did possess an explosives license in his name which expired December 1, 2005 and did have a license at the time he filed for relief from his disability on September 6, 2003." (Defs.' Reply in Support of Their Motion for Summary Judgment, Oct. 25, 2011 [Dkt. No. 16] ("Defs.' Reply") at 7.) Regardless, on the recommendation of ATF Special Agents and the Chief of the Arson and Explosives Program Division, Nickel's application was denied, and he was informed of the ATF's decision by letter dated August 4, 2006. (See Defs.' Mot., Ex. F.) Nickel petitioned for reconsideration (see Defs.' Mot., Ex. G), but the ATF affirmed its denial by letter dated April 23, 2007. (See Defs.' Mot., Ex. H.).

Nickel submitted a second application for relief from disabilities on February 4, 2010. (See Defs.' Mot., Ex. I.) Nickel listed his 2004 felony conviction on his application. (Id.) He also indicated that he had performed "research" for Next F/X from December 2001 until February 15, 2010 (id.), but when interviewed by Special Agent Carl Anuszczyk, Nickel asserted, contrary to his prior interview with Special Agent Cludy, that he had not handled explosives since his conviction. (Defs.' Mot., Ex. J at 1.) Special Agent Anuszczyk interviewed the Assistant United States Attorney ("AUSA") who had handled the prosecution of Nickel and the Walkers, and when asked whether he would recommend restoring Nickel's explosives privileges, the AUSA indicated that there was nothing in Nickel's background to suggest that he would change his behavior. (Id. at 3.) Once again, ATF Special Agents and the Chief of the Arson and Explosives Program Division agreed that Nickel's application should be denied. (See Defs.' Mot., Ex. K.) ATF informed Nickel of its decision by letter dated September 28, 2010. (Defs.' Mot., Ex. L.) That letter, which is the subject of Nickel's APA challenge, informed him that his application for relief from disabilities was denied because "[i]t ha[d] been determined that granting relief would not be consistent with the public interest." (Id.) The letter listed two "of the more important factors that" the ATF considered-Nickel's "2004 conviction for making false statements in Federal District court," and his possession of "explosives while prohibited." (Id.)

Nickel sued, naming as defendants Kenneth E. Melson, in his official capacity as Deputy Director of the ATF; Joseph M. Riehl, in his official capacity as Chief of the ATF's Arson and Explosives Program Division; and the ATF itself. (Complaint, Feb. 24, 2011 [Dkt. No. 1] ("Compl.") at 1; id. ΒΆ 5.) Nickel alleges that the ATF's denial of his application was arbitrary and capricious, in part because the ATF did not "supply a copy of the ...


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