OSD 128: Nobody needs an assault lawyer
The game theory of gun maker liability lawsuits.
Almost seven years ago, families of nine Sandy Hook massacre victims sued Remington. (The murder weapon was a Bushmaster rifle, and Remington owned Bushmaster at the time.)
This past Wednesday, Remington offered $33 million to settle the case. There are three parts of that story to dive into:
How the lawsuit can happen
Why Remington has to settle
1. How the lawsuit can happen
In 2005, Congress passed the Protection of Lawful Commerce in Arms Act (PLCAA), which specifies that gun makers and dealers can’t be sued over their products being used to commit crimes. (There are some exceptions to this immunity, largely around situations where the maker or dealer should reasonably have known that a specific buyer was intending to commit a crime.)
The redditor u/tablinum explained a little while ago what the pre-PLCAA landscape looked like. Referring to the lawsuit campaign that in the year 2000 forced Smith & Wesson to submit to extra-legislative restrictions on how their guns were designed and sold, u/tablinum wrote (bold emphasis is in tab’s original):
In 1998, Handgun Control Inc. attorney Dennis Henigan approached tobacco plaintiffs’ lawyers about suing the firearms industry. (Handgun Control was formerly known at the National Council to Control Handguns and is now known at the Brady Campaign.) It was a brilliant and audacious move, and nearly brought HCI the victories it had long been denied in the legislatures.
Henigan had left a corporate law partnership to join HCI and pursue his vision of social reform. In my view, he was the most brilliant anti-gun lawyer ever. Inter alia, he created the “narrow individual right” theory of the Second Amendment, which was later popularized by historian Saul Cornell and earned four votes in the Supreme Court case of District of Columbia v. Heller (2008).
Henigan assembled several dozen big-city mayors to file innovative lawsuits against handgun manufacturers. As then-Mayor of Philadelphia Ed Rendell explained, the suits were carefully structured to maximize litigation disadvantages for the manufacturers. The various suits were structured to prevent their consolidation, which could reduce litigation costs. Notably, the plaintiffs targeted only handgun manufacturers — not long-gun or ammunition manufacturers, some of which have considerably deeper pockets for litigation expenses. The particular claims in the suits varied tremendously; product liability was used where still available, but other claims involved some novel theories of negligence or of “ultra-hazardous activity.” Under the latter theory, some activities, such as blasting with dynamite, are so inherently hazardous that absolute liability is imposed; so if you are injured by a dynamite blast, you can sue the blaster even if the blaster exercised every possible precaution. No precedent had allowed for such suits against manufacturers or retailers of dynamite; the “ultra-hazardous activity” was using dynamite, not making or selling it. The HCI lawsuits took the theory further and said that mere manufacture and lawful sale of handguns could be ultra-hazardous.
None of the mayoral lawsuits resulted in a verdict for the plaintiffs, and many were dismissed at early stages. Nevertheless, the multiple lawsuits were quite costly to defend against. President Bill Clinton’s housing and urban development secretary, Andrew Cuomo, arranged for dozens of local housing authorities to bring their own suits.
In 2000, Smith & Wesson capitulated, under pressure from its then-owner, a British conglomerate.
The lasting symbol of that capitulation is the S&W internal lock on their revolvers, but the actual agreement they were strongarmed into was much, much worse than that. There’s a bunch of random petty shit like mandating magazine safeties and a second serial number in a “hidden place,” but S&W also had to agree to “Refrain from selling any modified/sporterized semi-automatic pistol of type that cannot be imported into U.S,” and to develop and implement “smart gun” technology.
But the real meat, and the real purpose of this whole exercise in the first place, was the “dealer code of conduct” they had to agree to implement, in which S&W agreed to pressure gun dealers by refusing to sell S&W products to them unless they did as the antis told them to:
The code of conduct will require authorized dealers and distributors to:
Gun shows: make no gun show sales unless all sales at the gun show are completed only after a background check.
Brady checks: wait as long as necessary for a completed Brady check showing that the purchaser is not a felon or otherwise prohibited before selling a gun to the purchaser.
Safety training for purchasers: transfer firearms only to individuals who have passed certified safety course or exam and demonstrate to purchasers how to use all safety devices and how to load, unload, and safely store the firearm before completing the sale.
Multiple handgun sales: all purchasers of multiple handguns to take only one handgun from the store on the day of sale, at which point a multiple sales report will be filed with ATF. The remainder of the guns can only be collected after 14 days.
Employee training: require all employees to attend ATF-approved training and to pass a [sic] exam on firearms laws, straw purchasers, illegal trafficking indicators, and gun safety.
Insurance: carry liability insurance where available, with a minimum coverage of $1 million for each incident.
Weapons attractive to criminals: not sell large capacity magazines or semiautomatic assault weapons
There were also provisions for retroactively tightening the noose further:
Most favored entity. If other manufacturers enter agreements with more expansive design and distribution reforms, and those manufacturers, along with the manufacturer parties to this Agreement, account for fifty percent or more of United States handgun sales, the manufacturer parties to this Agreement will agree to abide by the same reforms.
The Protection of Lawful Commerce in Arms Act, or PLCAA, was passed specifically in response to this vicious campaign to get gun control through conscious abuse of the court system.
The PLCAA has been effective in stopping the sorts of lawsuits that nearly succeeded in bankrupting Smith & Wesson. Depending on who you ask, that’s either a very good thing or a very bad thing. This Remington lawsuit is a successful adaptation by those in the latter camp.
The lawsuit kicked off in 2014, but the trial hasn’t started yet — since 2014, the parties have been arguing about whether the PLCAA should prevent the trial from starting in the first place. Even by landmark lawsuit standards, that’s a very long (and very expensive) preamble. After nearly seven years of both sides racking up wins and then reversals, a judge made a final ruling that the trial will be allowed to start.
That’s based on the idea that Remington’s advertising for its guns is so inherently dangerous that the company can be held liable for those ads. This is a creative tactic to route around the PLCAA. It uses laws about ads and trade practices, rather than the negligence angle that the PLCAA forecloses. The Connecticut Supreme Court overruled a lower court to hold that the PLCAA doesn’t block this lawsuit from proceeding.
As soon as there was a final word on the case being allowed to go to trial, Remington immediately offered to settle.
2. Why Remington has to settle
“Offered to settle” is a bit of a misnomer. Remington has exactly two options:
Settle the case.
Cease to exist as a company.
Note that the outcome of the lawsuit is irrelevant. Remington can’t afford to lose. But it also can’t afford to win. The company has gone bankrupt twice in the past two years, and is struggling to do its main job of making products that people want. It’s in no condition to take on the second job of winning a make-or-break lawsuit.
Now, yes, Remington is a bit of a special case. We wrote all the way back in OSD 11 about how far they’ve fallen. But gun companies in general are small potatoes. Ruger is the biggest publicly traded gun company in the world, and their market cap is $1.3 billion. For comparison, Google made $18.5 billion in profit last quarter; i.e. Google’s weekly profit exceeds the entire value of Sturm, Ruger & Company, Inc.
Gunmakers are small companies in a low-margin business. It doesn’t take much to bankrupt them.
3. What’s next
People have cottoned onto the fact that this is an asymmetric game. And there are two asymmetries here:
In these lawsuits, it’s 10-100x cheaper to be a plaintiff than a defendant. Since running up costs is the goal, the rational strategy for the plaintiffs is to never not be filing lawsuits.
This is one of those “you have to stop 100% of my attempts, but I only need to sneak one through” games. If the PLCAA stops almost every lawsuit but an occasional court erroneously lets one slide, that’s enough. (See: the cost asymmetry in #1.) So again, the rational strategy for gun control plaintiffs is to spam the lawsuit button.
This strategy is particularly clever when you account for the fact that plaintiffs can iteratively refine their arguments. Launching a raft of lawsuits is a scalable process for discovering vulnerabilities in the PLCAA. File a bunch of lawsuits, then watch some get struck down and some survive. Scrap the arguments that got struck down, and file more lawsuits using variations on the arguments that survived. Rinse and repeat.
For example, New York has used this strategy to land on the public nuisance tort as a way around the PLCAA. Public nuisance law varies from state to state, but it’s generally a catchall covering (to use California’s law an example) “anything which is injurious to health, or is indecent, or offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property by an entire community or neighborhood, or by any considerable number of persons….” Pumping pollutants into the air, for example, could be banned as a public nuisance.
So, New York passed a new law that works like this:
New York is instituting a law designed to get around [the PLCAA] by taking advantage of an exception that holds the industry responsible in some cases for breaking state laws with regards to sales and marketing.
“New York is going to sign a law today that reinstates the public nuisance liability for gun manufacturers,” Cuomo said Tuesday. “This is going to be a very big deal.”
The legislation, which goes into effect immediately, amends the state’s general business law to establish that members of the gun industry can not knowingly or recklessly create a situation that endangers public health.
The idea is that promoting and advertising guns-as-weapons is inherently harmful to the public, and therefore illegal, and therefore not protected by the PLCAA. That tactic might work, or it might not. But the clever thing about it is that it doesn’t matter whether it works. What matters is how much it’ll cost to defend against.
So, what’s next? The game theory here makes it inevitable: more lawsuits. For fragile gun companies, those could be company-ending. For thriving ones, they could become just a cost of doing business. And for consumers, they’re all the more reason to push companies to make great products.
Great products grow into healthy companies. Healthy companies figure out a way to push forward. Pushing forward is how more great products are created. And more great products bring in more users. Focus on keeping that feedback loop going, and the rest will work itself out.
This week’s links
For any person or museum who’s got a spare $2-3 million.
The Charter of Fundamental Rights and Freedoms will now contain a provision stating that “the right to defend one's own life or the life of another person with a weapon is guaranteed under the conditions laid down by law.”
A six-minute video with some highly practical tips. Kita is an expert on movement for competitive shooters.
A look at an apocalypse bunker business that pulled in — or suckered, if you don’t believe the founder’s denials — the novelist Brad Thor to the tune of about $1 million.
An easy solution for you AK enjoyers in California.
In 1901, a doctor and dueling aficionado named Paul Devillers developed an intriguing way to practice one’s dueling skills without committing homicide. He crafted a bullet made from tallow and baryta sulfate and then convinced pistol-making firm Piot-LePage to manufacture a gun that could fire the wax projectile.
This was no simple task. If gunpowder was used, the malleable bullet might disintegrate; Devillers’s ammunition was prone to overheating and was usually kept on ice along with the pistols prior to firing. But with a reduced charge without gunpowder and a special steel adapter in the chamber, the bullet could speed through the air and strike an opponent, who would typically be outfitted in a fencing-style chest protector and mesh mask. Hand guards around the pistol kept fingers from being struck; some participants wore protection around the throat.
The impact was largely for effect. As one reporter put it, “The bullets will be made of soft wax and instead of shrieking through the bodies of the duelists, they will yield up their fair young lives like tomatoes hurled against a barn door.”
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