United States District Court, District of Columbia
GREGORY L. REYES Plaintiff,
JEFF SESSIONS, in his official capacity as Attorney General of the United States, et al., Defendants.
D. BATES UNITED STATES DISTRICT JUDGE.
the Court is  the government's motion to dismiss the
as-applied statutory and constitutional challenges brought by
plaintiff Gregory Reyes to certain provisions of the federal
criminal prohibition on possession of firearms by felons.
Eight years ago, Reyes was convicted of violations of the
Securities Exchange Act of 1934 (the “Exchange
Act”) and sentenced to eighteen months in prison. He
now wishes to obtain a firearm but has been prevented from
doing so by 18 U.S.C. § 922(d)(1) and (g)(1), which
prohibit the transfer of firearms to and possession of
firearms by individuals convicted of a “crime
punishable by imprisonment for a term exceeding one
year.” This category of crimes, however, is statutorily
defined to exclude “offenses pertaining to antitrust
violations, unfair trade practices, restraints of trade, or
other similar offenses relating to the regulation of business
practices.” 18 U.S.C. § 921(a)(20)(A). Because the
Court finds that Reyes's convictions fall within this
exception, the Court will deny the government's motion to
in 1938, the first federal firearm disqualification statute
initially prohibited the sale of firearms to and possession
of firearms by felons and misdemeanants convicted of a
“crime of violence, ” which was statutorily
defined to include offenses such as murder, rape, mayhem, and
burglary. See Federal Firearms Act, Pub. L. No.
75-785, §§ 1(6), 2(d), (f), 52 Stat. 1250, 1250- 51
(1938). In 1961, Congress expanded the scope of these
prohibitions to sweep in non-violent criminals, amending the
prohibited class to include any person convicted of a
“crime punishable by imprisonment for a term exceeding
one year.” See An Act to Strengthen the
Federal Firearms Act, Pub. L. No. 87-342, 75 Stat. 757, 757
years later, Congress passed the Gun Control Act and again
redefined the class of individuals disqualified from
possessing firearms. See Pub. L. No. 90-618, 82
Stat. 1213 (1968). The Act, as amended and codified in part
at 18 U.S.C. § 922(g)(1), prohibits any individual who
has been convicted of “a crime punishable by
imprisonment for a term exceeding one year” from
transporting or receiving “any firearm or ammunition
which has been shipped or transported in interstate or
foreign commerce.” A corollary provision, 18 U.S.C.
§ 922(d)(1), makes it unlawful “to sell or
otherwise dispose of any firearm or ammunition to any
person” who “has been convicted in any court of
a crime punishable by imprisonment for a term exceeding one
the Gun Control Act, however, not all individuals convicted
of a felony are disqualified from acquiring or possessing
firearms. The term “crime punishable by imprisonment
for a term exceeding one year” is defined statutorily
by 18 U.S.C. § 921(a)(20)(A) to exclude “certain
commercial-type crimes, ” S. Rep. No. 90-1097, at
112-13 (1968), reprinted in 1968 U.S.C.C.A.N. 2112,
2202. Specifically, the Gun Control Act provided that the
term did not include “Federal or State offenses
pertaining to antitrust violations, unfair trade practices,
restraints of trade, or other similar offenses relating to
the regulation of business practices as the Secretary [of the
Treasury] may by regulation designate.” Pub. L. No.
90-618, § 921(a)(20)(A), 82 Stat. 1213, 1216 (1968).
Ultimately, the Secretary never designated any “similar
offenses” as excluded, and in 1986 Congress eliminated
from the definition the phrase, “as the Secretary may
by regulation designate.” See Firearms
Owners' Protection Act, Pub. L. No. 99-308, 100 Stat.
449, 449 (1986). All “other similar offenses relating
to the regulation of business practices” were thus
excluded from the definition of a “crime punishable by
imprisonment for a term exceeding one year, ” and it
was left to the courts to identify which offenses fell within
this “business practices” exception. See
S. Rep. No. 98-583, at 7 (1984) (noting that the Firearm
Owners' Protection Act “makes the court, rather
than the Secretary, the final arbiter as to what constitutes
a ‘similar offense relating to the regulation of
years ago, Reyes came within the potential ambit of the
felon-in-possession statute when he was convicted of certain
offenses punishable by more than one year of imprisonment.
From 1998 to 2005, Reyes was the Chief Executive Officer of
Brocade Communications Systems, Inc. (“Brocade”),
a publicly traded company. United States v. Reyes,
660 F.3d 454, 459-60 (9th Cir. 2011). The company offered
stock options to new and existing employees that gave them
the right to purchase Brocade stock at a fixed (strike) price
on or after a particular date. Id. at 459. Brocade
backdated these options, recording the grant date
retroactively so that the strike price was below the
stock's then-current market value and thus was instantly
profitable to the option-holder. Id. Although this
practice was not illegal in and of itself, the company was
required to record these employment benefits as non-cash
compensation expenses in the company's financial records.
Id. But Brocade failed to account for these
expenses, and Reyes was subsequently charged with various
violations of the Exchange Act. Id.
2010, Reyes was convicted of (1) securities fraud and making
false filings with the Securities and Exchange Commission
(“SEC”) in violation of 15 U.S.C. §§
78j(b) and 78(ff), and 17 C.F.R. § 240.10b-5; (2)
falsifying corporate books and records in violation of 15
U.S.C. §§ 78m(b)(2)(A) and 78ff, and 17 C.F.R.
§ 240.13b2-1; and (3) making false statements to
auditors in violation of 15 U.S.C. § 78ff and 17 C.F.R.
§ 240.13b2-2. Id. Each of these crimes carries
a maximum prison sentence of twenty years. 15 U.S.C. §
78ff. Reyes ultimately was sentenced to eighteen months in
prison, two years of supervised release, and was fined $15
million. Reyes, 660 F.3d at 460.
now wishes “to acquire and possess . . . firearms for
defense of himself and his family and for hunting.”
Compl. [ECF No. 1] ¶ 28. Although his right to possess a
firearm has been restored under the laws of his home state of
Montana, he alleges that the government's interpretation
and application of the federal felon-in-possession statute
effectively prevents him from purchasing a firearm.
Id. ¶¶ 27, 29-34. Because the government
instructs firearms dealers not to sell to anyone who has
“been convicted in any court of a felony, or any other
crime for which the judge could have imprisoned [him] for
more than one year, ” Reyes asserts that sellers are
unable to provide him with a firearm. Compl. ¶¶
25-26, 31 (quoting U.S. Dep't of Justice, Bureau of
Alcohol, Tobacco, Firearms & Explosives
(“ATF”), Firearms Transaction Record: ATF E-Form
4473 (Oct. 2016)). Indeed, Reyes alleges that two merchants
specifically informed him that they would be unwilling to
make such a sale to him due to his felony convictions.
Id. ¶¶ 31- 32. Moreover, even if Reyes
could obtain a firearm from a licensed federal firearms
dealer or a private party, he asserts that he has refrained
from attempting to do so because he believes the government
would subject him to criminal penalties under 18 U.S.C.
§ 922(g)(1). Id ¶¶ 30, 32-34. Reyes
thus claims he is effectively barred from acquiring a
August 2017, Reyes filed the instant action bringing
as-applied statutory and constitutional challenges to 18
U.S.C. § 922(d)(1) and (g)(1). He first claims that he
is statutorily exempted from § 922(d)(1) and (g)(1)
because his convictions constitute business practices
offenses excluded under § 921(a)(2)(A) (Count I). Compl.
¶¶ 4, 36-37. In the alternative, he asserts two
claims under the Equal Protection Clause of the Fifth
Amendment, alleging that the statute creates two
impermissible distinctions: first, between federal offenders
convicted, like him, of securities and accounting offenses
who are barred from possessing firearms and federal offenders
convicted of “business practices” offenses who
are excepted from the felon-in-possession statute (Count II),
id ¶¶ 5, 39-41; and second, between
citizens convicted of nonviolent crimes who do not
“pose any greater risk to public safety than a
typical law-abiding citizen” but are disqualified from
firearm possession and other citizens not subject to §
922(d)(1) and (g)(1) (Count III), id ¶¶ 6,
43-45. Reyes also claims in the alternative that the firearms
disability fails heightened judicial scrutiny under the
Second Amendment because he was convicted of non-violent
offenses (Count IV). Id ¶¶ 7, 47-49. For
all counts, he seeks declaratory and injunctive relief
barring the government from enforcing § 922(d)(1) and
(g)(1) against him based on his 2010 convictions. Id
government now moves to dismiss Reyes's claims.
See Defs.' Mot. to Dismiss
(“Gov't's Mot.”) [ECF No. 10]. It argues
that: (1) Reyes does not have Article III standing to
challenge § 922(d)(1), see Id. at 9-10; (2) his
predicate convictions do not fall within the statutory
exception to the firearms disability, see Id. at
10-16; (3) Reyes is not within the scope of the Second
Amendment's protections because he was convicted of
serious crimes and, even if the Second Amendment does apply,
the statutory restrictions satisfy intermediate scrutiny, see
Id. at 16-26; and (4) his Equal Protection claims
fail because the felony classification, including its
exception for certain business practices offenses, satisfies
both rational basis and heightened scrutiny, see Id.
at 26-28. Also pending before the Court is Reyes's motion
for leave to file a surreply addressing one of the
government's Equal Protection arguments. See
Pl's Mot. to File a Surreply in Opp'n to Defs.'
Mot. to Dismiss [ECF No. 16]. The government's motion to
dismiss and Reyes's related motion for leave to file a
surreply are now fully briefed and ripe for decision.
have moved to dismiss this case for failure to state a claim
under Rule 12(b)(6) and, in part, for lack of subject-matter
jurisdiction under Federal Rule of Civil Procedure 12(b)(1).
To survive a motion to dismiss under Rule 12(b)(6), a
complaint must “contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). To survive
a motion to dismiss for lack of standing under Rule 12(b)(1),
a plaintiff must demonstrate that he has standing by pleading
facts that, taken as true, render it plausible that the Court
has subject-matter jurisdiction. See Humane Soc'y of
the U.S. v. Vilsack, 797 F.3d 4, 8 (D.C. Cir. 2015). For
motions brought under both Rules, the Court must accept as
true all facts stated in the complaint, but it is not bound
to “legal conclusions] couched as . . . factual
allegation[s].” Iqbal 556 U.S. at 678.
Reyes Has Standing to Challenge § 922(d)(1)
preliminary matter, the Court addresses the government's
assertion that Reyes does not have standing to challenge 18
U.S.C. § 922(d)(1). To establish standing, a plaintiff
must allege three elements: (1) an “injury in fact,
” which is “concrete and particularized”
and “actual or imminent”; (2) that the injury is
fairly traceable to the challenged provision and (3) that the
injury is likely to be redressable by the court. Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560 (1992).
alleges that § 922(g)(1), which prohibits firearm
possession by certain felons, and § 922(d)(1), which
prohibits the sale and transfer of firearms to certain
felons, together prevent him from acquiring a firearm. The
government disputes only whether Reyes has suffered a
cognizable injury from the application of § 922(d)(1),
arguing that only an individual transferring or selling a
firearm-not a would-be purchaser or recipient-suffers a
potential injury in fact from the application of the seller
provision. See Gov't's Mot. at 9-10. Because
Reyes does not allege that he wishes to transfer or sell a
firearm, the government contends that he cannot satisfy the
first element of standing-an injury in fact-to assert his
§ 922(d)(1) claims.
government's position is inconsistent with both common
sense and longstanding precedent. Even if Reyes successfully
challenged § 922(g)(1) and was deemed able lawfully to
possess a firearm, it would be a hollow victory if others
were legally prohibited from providing him with one. As
courts have long recognized, restrictions on providers can
cause cognizable injuries to would-be recipients who are
prevented from accessing goods and services in which they
have a legally protected interest. See, e.g., Va. State
Bd. of Pharm. v. Va. Citizens Consumer Council Inc., 425
U.S. 748, 757 (1976) (finding prospective consumers had
standing to bring constitutional challenge to restrictions on
drug advertisers); Roe v. Wade, 410 U.S. 113, 124-25
(1973) (holding pregnant woman had standing to challenge
statute prohibiting the administration of ...