June 13, 2024 – As RLF previously reported, on April 19, 2024, the ATF published a Final Rule regarding the definition of “engaged in the business” as a firearms dealer. The Final Rule, which went into effect on May 20, 2024, significantly expands the definition of who is required to have a federal firearms license and who is considered to be engaged in the business as a firearms dealer. The penalty for dealing in firearms without a license is up to five years in prison, a fine up to $250,000, or both, and the firearms involved or used are subject to seizure and forfeiture. Thus, the stakes are high if a person or entity violates the Final Rule. The ATF recently published a Guideon this issue, which states, “even if a person sold only a few firearms, or only a single firearm transaction was completed, if the person also represented to others a willingness and ability to purchase more firearms for resale, they would likely be engaged in the business.”

Three separate lawsuits were filed in different federal courts challenging the constitutionality of the Final Rule. This week, the United States District Court for the Northern District of Texas granted the Plaintiffs’ Motion for a Preliminary Injunction (expanding upon a previously issued Temporary Restraining Order), which, effective immediately, prohibits the ATF from enforcing the Final Rule against members of Gun Owners of America, Inc., Gun Owners Foundation, Tennessee Firearms Association, Virginia Citizens Defense League, and residents of Texas, Utah, Louisiana, and Mississippi. The ATF, however, can still enforce the Final Rule against any other individuals or entities that are not included in this list. 

The court reasoned that the Plaintiffs would suffer irreparable injury absent an injunction, particularly due to economic costs that would inevitably occur, as well as the civil and criminal enforcement actions that would ensue for engaging in conduct that the Bipartisan Safer Communities Act (“BSCA”) permits, but the Final Rule “impermissibly forbids.” For example, the Final Rule asserts that there is no minimum number of firearms an individual or entity must sell in order to be considered engaged in the business. However, the BSCA contains its own definition of being engaged in the business, which significantly differs from the definition in the Final Rule. In addition, the Final Rule suggests that profit has no bearing upon whether one is “engaged in the business.” The BSCA, conversely, differentiates an attempt to obtain pecuniary gain, from improving or liquidating a personal firearms collection. The court’s decision memorialized every contradiction and inconsistency between the Final Rule and the BSCA.  The next step in this litigation is likely an appeal to the U.S. Court of Appeals for the Fifth Circuit, which has been notably averse to the ATF’s overreach in the area of firearms regulation.

The Northern District of Texas also issued a decision this week against the ATF in a case challenging the ATF’s “Pistol Brace” Rule, which, among other things, sets forth “when a device marketed as a stabilizing brace turns a pistol or handgun into a rifle.” Plaintiffs challenged this Final Rule on statutory and constitutional grounds. Initially, Plaintiffs’ motion for a preliminary injunction was denied on the basis that they failed to demonstrate a likelihood of success on the merits, but the case was appealed, and the United States Court of Appeals for the Fifth Circuit reversed the decision. The Fifth Circuit reasoned that the Final Rule was not a logical outgrowth of the Proposed Rule and deemed this a monumental and prejudicial error. The Fifth Circuit remanded the case back to the Northern District with specific instruction to assess certain factors of Plaintiffs’ Preliminary Injunction. The Northern District held that the Final Rule violated the Administrative Procedure Act, substantively and procedurally. The Court ruled that the proper remedy was to vacate the Final Rule in its entirety. In fact, the Court deemed the illegitimate agency action void ab initio (from the beginning).

Renzulli Law Firm, LLP will continue to monitor the three cases challenging the ATF’s Final Rule and other challenges to firearm related statutes and regulations around the country. If you have any questions about the ATF’s Final Rule or these legal challenges, please contact John F. Renzulli or Christopher Renzulli.