United States District Court, Eastern District of New York
March 28, 2003
NATIONAL ASSOCIATION FOR THE ADVANCEMENT OF COLORED PEOPLE PLAINTIFF
A.A. ARMS INC., ET AL., DEFENDANTS. NATIONAL ASSOCIATION FOR THE ADVANCEMENT OF COLORED PEOPLE, PLAINTIFF V. ACUSPORT CORP., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Jack B. Weinstein, Senior District Judge
MEMORANDUM AND ORDER
Dispositive motions in this civil action alleging the creation and maintenance of a public nuisance by gun manufacturers and distributors were heard on March 11 and March 17, 2003. Defendants' global motion for summary judgment was denied in an order dated March 12, 2003. See Nat. Ass'n for the Advancement of Colored People v. A.A. Arms, ___ F.R.D. ___, 2003 WL 1089800 (E.D.N.Y. March 12, 2003). Summary decisions on the remaining pending motions — motions to dismiss and for summary judgment by individual defendants and plaintiff's motion to restore three former defendants — were issued on March 18, 2003; this memorandum and order explains the reasons.
II. Facts and Background
In brief, plaintiff National Association for the Advancement of Colored People ("NAACP") claims that defendants, through their marketing practices in the manufacture, distribution, and sale of guns, have contributed to creating and maintaining a public nuisance and have thereby endangered the public health and safety. The NAACP and its New York members are allegedly disproportionately affected by the resulting widespread access to guns and gun violence. Sought is injunctive relief, including requirements that defendants supervise, regulate, and inspect entities to which they transfer or sell firearms; participate in a program of warranty revocation upon individual re-sale of handguns except where a firearm is sold through a bona fide stocking gun retailer; and contribute to funds established to create an industry-wide monitoring agency and educational programs designed to prevent inappropriate gun acquisition and gun violence.
In addition to the global motion for summary judgment already denied, fourteen manufacturer and distributor defendants (identified individually below) move to dismiss or renew their motions to dismiss for lack of personal jurisdiction on the ground that their activities are de minimis. These motions are denied.
Two entities incorporated and with a principal place of business outside of the United States, Carl Walther GmbhH ("Walther") and Fabbrica D'Armi Pietro Beretta S.p.A. ("Pietro Beretta"), move for summary judgment, arguing both that this court lacks personal jurisdiction over them and that plaintiff cannot establish by clear and convincing evidence — the burden in public nuisance cases — that their conduct as foreign corporations makes them liable. Pietro Beretta argues in the alternative that its presence destroys this court's subject matter jurisdiction. These motions are denied.
Plaintiff NAACP moves to reinstate three defendants — Heckler & Koch, Inc.; Heckler & Koch GmbH; and Henry's Tackle — on the basis of newly obtained and analyzed data. Defendants cannot be reinstated to this case less than one week before trial without severe prejudice to all parties and the court. Plaintiff's motion is denied.
The issues raised involve questions of personal jurisdiction — can and should the individual defendants concerned be required to submit to the jurisdiction of this court? Personal jurisdiction is frequently treated as a light switch that is either on or off; it is switched on only when a defendant's "presence" in the forum state reaches some arbitrary pre-determined amplitude. Such a limited conception fails to recognize the broader purpose behind the doctrine, to insure "the fair and orderly administration of [our] laws." Int'l Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 90 L.Ed. 95 (1945).
Strict "territorial jurisdiction," see Pennoyer v. Neff, 95 U.S. 714 (1877), is no longer a strong principle in a world where boundaries are increasingly fluid and borders are determined more through the conduct and agreement of individuals, organizations, and governments than by the lines that are drawn on maps. See Simon v. Phillip Morris, Inc., 86 F. Supp.2d 95, 124 ff., 131 (E.D.N.Y. 2000) (notice and fair warning rather than strict territorial nexus governs); Harold L. Korn, The Development of Judicial Jurisdiction in the United States: Part I, 65 Brook. L. Rev. 935, 937 (1999) (current "challenges . . . to . . . traditional jurisdictional . . . thinking"); Harold L. Korn, Rethinking Personal Jurisdiction and Choice of Law in Multistate Mass. Torts, 97 Colum. L. Rev. 2183, 2184 (1997) ("[T]he Supreme Court must . . . disavow the doctrine that . . . the United States Constitution requires a territorial nexus between forum and defendant . . . for the exercise of in personam jurisdiction."); Harold L. Korn, The Choice of Law Revolution: A Critique, 83 Colum. L. Rev. 772, 782 ff. (1983); Comment, Mass Tort Jurisdiction and Choice of Law in a Multinational World Communicating by Extraterrestrial Satellites, 37 Willamette L. Rev. 145 (2001) ("fair venue controls in personam jurisdiction"). State lines are not meaningless, but they are only one element to be taken into consideration when determining whether exercise of jurisdiction over a particular defendant in particular circumstances is appropriate.
Jurisdictional criteria used to measure a defendant's "presence" are, on the whole, not clear cut, and cannot be enforced in a mechanical fashion. See Int'l Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 90 L.Ed. 95 (1945) ("It is evident that the criteria by which we mark the boundary line between those activities which justify the subjection of a corporation to suit, and those which do not. cannot be simply mechanical or quantitative."). In addition to technical limitations, an exercise of jurisdiction involves discretionary determinations based on practical considerations, burdens, and tactics. The realities of economic relationships and the effect of corporate conduct across state and national lines cannot be ignored. See Bulova Watch Co. v. K. Hattori & Co., 508 F. Supp. 1322 (E.D.N.Y. 1981). This is particularly true in a large, complex, and expensive litigation like the instant one.
An inflexible application of a traditional jurisdictional analysis that fails to take account of these factors and does no more than add up the "number" of a defendant's "contacts" to see if they reach some given sum does not effectively insure the fair and orderly administration of the law. A reality-based jurisdictional analysis may result, appropriately, in the inclusion of defendants for which appearing at trial could present some burdens. As discussed in section V. below, it may be possible to reduce that burden through an agreement to be bound by any judgment.
III. Defendants' Motions to Dismiss and for Summary Judgment
Plaintiff bears the burden of establishing jurisdiction over the defendants. To defeat these jurisdictional motions it must aver credible facts that, if credited at trial, would establish jurisdiction over each moving defendant. See Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566-67 (2d Cir. 1996) ("In the instant case — where the parties have conducted extensive discovery regarding the defendant's contacts with the forum state, but no evidentiary hearing has been held — `the plaintiff's prima facie showing, necessary to defeat a jurisdiction testing motion, must include an averment of facts that, if credited by [the ultimate trier of fact], would suffice to establish jurisdiction over the defendant.'") (quoting Ball v. Metallurgie Hoboken-Overpelt, SA., 902 F.2d 194, 197 (2d Cir. 1990)).
Personal jurisdiction in diversity cases is determined in accordance with the law of the forum state, here New York, subject to federal due process constraints. See, e.g., Savin v. Ranier, 898 F.2d 304, 306 (2d Cir. 1990); Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir. 1963); CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986).
Jurisdiction in this case is appropriately asserted under section 302 of the New York Civil Procedure Law and Rules, the New York long arm statute. Section 302(a)(3) provides:
[A] court may exercise personal jurisdiction over any
non-domiciliary . . . who in person or through an
agent . . . commits a tortious act without the state
causing injury to person or property within the state
. . . if he
(i) regularly does or solicits business, or engages
in any other persistent course of conduct, or derives
substantial revenue from goods used or consumed or
services rendered, in the state, or
(ii) expects or should reasonably expect the act to
have consequences in the state and derives substantial
revenue from interstate or international commerce.
In addition to demonstrating that all requirements for jurisdiction under this subsection are met, plaintiff must establish that an exercise of jurisdiction would comport with federal due process.
Due process requires that: (1) the defendant has sufficient "minimum contacts" with the state of New York to justify the exercise of personal jurisdiction, and (2) the assertion of jurisdiction is reasonable under the circumstances. See Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996); Int'l Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).
The Supreme Court has held that placing a product into the stream of commerce, without more, is insufficient to establish minimum contacts. Asahi Metal Indus. Co. v. Superior Court of California, 480 U.S. 102, 112, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980).
The instant case is not a product liability suit. Plaintiff is not alleging that it has suffered harm in New York because some defective product designed or sold by defendants made its way into New York through the purely fortuitous actions of a consumer. Sought here is injunctive relief to abate an alleged public nuisance in New York. At the heart of the claim are assertions that defendants have done far more to cause harm in New York than simply place their firearms into the stream of commerce. Cf. Asahi, 480 U.S. at 112 ("Additional conduct of the defendant may indicate an intent or purpose to serve the market in the forum State, for example, designing the product for the market in the forum State, advertising in the forum State, establishing channels for providing regular advice to customers in the forum State, or marketing the product through a distributor who has agreed to serve as the sales agent in the forum State."). Plaintiff has averred, and in order to ultimately prevail must establish, that defendants' actions or failure to act appropriately in the manufacture, marketing, and distribution of firearms have interfered with a public right and endangered the New York public's health and safety. See Copart Indus., Inc. v. Consol. Edison Co. of New York, 362 N.E.2d 968 (N.Y. 1977); see also Nat. Ass'n for the Advancement of Colored People v. A.A. Arms, ___ F.R.D. ___, 2003 WL 1089800 (E.D.N.Y. March 12, 2003) (plaintiff has presented sufficient evidence to create a genuine issue of material fact on the challenged elements of its public nuisance claim and therefore survives a motion for summary judgment).
In assessing whether an assertion of jurisdiction is reasonable, five factors must be evaluated: (1) the burden on defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states and the international community in furthering appropriate, adopted substantive social policies. See Asahi Metal Indus. Co. v. Superior Court of California, 480 U.S. 102, 113, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987). The two prongs of a due process analysis are interrelated. Assuming that a constitutional threshold of contacts has been demonstrated, fewer contacts may be necessary where the five "reasonableness" factors weigh heavily in favor of an exercise of jurisdiction. See Metro. Life Ins. Co. v. Robertson-Ceco Corp, 84 F.3d 560, 568 (2d Cir. 1996) ("Thus, in assessing whether it may exercise jurisdiction over a particular defendant, a court must weigh the relative strengths and weaknesses of each requirement — that is, depending upon the strength of the defendant's contacts with the forum state, the reasonableness component of the constitutional test may have a greater or lesser effect on the outcome of the due process inquiry.") (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)).
Under the circumstances of this suit sounding in public nuisance, a determination of whether the requirements of section 302(a)(3) of the New York long arm statute are met with respect to individual defendants is closely tied to the federal due process analysis. Criteria to be considered have been developed, articulated, and employed throughout the history of this case to aid the parties and the court. They include:
1) crimes committed in New York with the defendant's
2) total number of handguns the defendant manufactured
or sold in the United States;
3) number of handguns sold by the defendant in New York;
4) value of gun-related products sold by the defendant
in New York;
5) number of "trace" handguns linked to criminal
investigations in New York that are attributable to
6) sales price of the defendant's handguns (e.g., very
high priced collectors' guns not designed for use);
7) type of gun and its intended use (e.g., very large
handguns used in hunting large game such as heavy
weapons requiring two hands or a stand);
8) connection with the defendant's related companies;
9) distribution methods and their possible effects on
crimes in New York; and
10) the defendant's total revenue from the United
States and New York markets.
Nat. Ass'n for the Advancement of Colored People v. Acusport Corp., 2000 WL 1789094 (E.D.N.Y. Dec. 7, 2000) (citing Simon v. Philip Morris, Inc., 86 F. Supp.2d 95 (E.D.N.Y. 2000); Hamilton v. Accu-Tek, 32 F. Supp.2d 47 (E.D.N.Y. 1998); Bulova Watch Co. v. K. Hattori & Co., 508 F. Supp. 1322 (E.D.N.Y. 1981)); see also Transcript of Hearing June 27, 2002, Nat. Assoc. for the Advancement of Colored People v. A.A. Arms 99 CV 3999 & Nat. Assoc. for the Advancement of Colored People v. Acusport Corp. 99 CV 7037.
These criteria were not designed to provide hard and fast cut-off points, but rather to serve as guideposts in analyzing the appropriateness of the exercise of jurisdiction over individual defendants. They have evolved over the history of this litigation, with certain criteria — particularly total number of handguns manufactured, sold, and "traced" by the Bureau of Alcohol, Tobacco and Firearms ("ATF") (usually at the request of local law enforcement officials) in the United States and New York and distribution practices with a possible effect on crime in New York — emerging as particularly salient. While tracings do not necessarily equate with crime, for purposes of validating jurisdiction they are a fair surrogate. Relevant also are other factors, including a defendant's relationships with other manufacturers, distributors, and dealers.
B. Application — Generally
As found in the order denying defendants' global summary judgment motion, Nat. Ass'n for the Advancement of Colored People v. A.A. Arms, ___ F.R.D. ___, 2003 WL 1089800 (E.D.N.Y. March 12, 2003), plaintiff has presented sufficient evidence to create a genuine issue of material fact on all elements of its tort claim of public nuisance. Sufficient evidence of tortious conduct outside the state and harm in New York has been presented to defeat these jurisdictional motions. Cf. Longines-Wittnauer Watch Co. v. Barnes & Reinecke Inc., 209 N.E.2d 68, 77 (N.Y. 1965) ("[I]t cannot be made too clear that we are concerned solely with the problem of the court's jurisdiction over the person of a nonresident defendant and not with the question of his ultimate liability to a particular plaintiff; that issue is to be considered only after it is decided, on the basis of section 302. that the defendant is subject to the in personam jurisdiction of our courts."); Sybron Corp. v. Wetzel, 385 N.E.2d 1055, 1058 (N.Y. 1978) ("The issue at this juncture is only whether the action should die.").
Assuming that a minimum constitutional threshold of contacts with the state of New York is established for a defendant, the five reasonableness factors must be weighed. If plaintiff proves its claim, an effective and efficient resolution of the controversy would require that the governing practices for gun manufacturers and distributors be as close to uniform as possible. An injunction limiting only defendants' methods of marketing, manufacture, and sale could competitively advantage those manufacturers and distributors outside the case and risk inadvertently distorting the firearm industry.
If a public nuisance and liability are found, the broader the application of any injunction entered the greater the potential effect of that injunction in alleviating future harm.
While there may be some burden on the smaller defendants in litigating in this forum, that burden is outweighed by the other factors. It is possible to assuage or eliminate that burden. See Part V, infra.
Several defendants have argued that nation-wide trace data is now irrelevant in a case focused on harm suffered by the plaintiff in New York. A defendant's participation in the national gun market and the number of handguns traced nationally that are attributable to it remain relevant since to a large extent the national market is closely integrated with the state market. See Simon v. Phillip Morris, Inc., 86 F. Supp.2d 95 (E.D.N.Y. 2000).
C. "Facts" for Purposes of the Motions
Where plaintiff has averred "facts" sufficient to establish personal jurisdiction if ultimately credited at trial, those facts will be accepted as true. "Facts" in the instant case include both raw information and the analyses and conclusions drawn from that information. The court's findings in this memorandum and order are for the purposes of these motions only; the liability of any individual defendant for the alleged public nuisance can and will be determined only on the basis of a full trial record. See Nat. Ass'n for the Advancement of Colored People v. A.A. Arms, ___ F.R.D. ___, 2003 WL 1089800 (E.D.N.Y. March 12, 2003).
Except where indicated, the figures used below are taken from expert reports attached as exhibits to Plaintiff's Opposition to Motions for Summary Judgment by Defendants ("Plaintiff's Opp."). Primarily relied on are: (1) Exhibits 24a (Ratio of Crime Handguns Share to Overall Market Share by Manufacturer for All Guns) and 25a (Ratio of Crime Handguns Share to Overall Market Share by Distributor for All Guns) of Lucy Allen's Expert Report, Ex. A to Plaintiff's Opp.; and (2) Tables 23A (Manufacturers of crime handguns recovered in New York State 1996-2000) and 25A (Distributors of crime handguns recovered in New York State 1996-2000) of Howard Andrews's expert report, Attachment to Ex. B to Plaintiff's Opp. The use of these figures in analyzing the present jurisdictional motions does not preclude defendants from challenging the admissibility of plaintiff's reports or contesting the accuracy or relevancy of the conclusions drawn at trial.
Some familiarity with the history of this litigation is assumed. The following concepts are particularly relevant here. "Handgun"refers to "(a) [a]ny firearm which has a short stock and is designed to be held and fired by the use of a single hand; and (b) [a]ny combination of parts from which a firearm described in paragraph (a) can be assembled." 27 C.F.R. § 478.11 (2003). A "trace" is a process of acquiring records concerning the manufacturer and distributors of a firearm through that firearm's serial number. It is initiated by a "trace request" submitted to the Bureau of Alcohol, Tobacco, and Firearms (now the Bureau of Alcohol, Tobacco, Firearms, and Explosives see 6 U.S.C. § 531 (2003)) ("ATF") by a law enforcement agency. See Report of the Special Master Regarding Certain Data Maintained by the Bureau of Alcohol, Tobacco and Firearms, App. A, Nat. Ass'n for the Advancement of Colored People v. Acusport Corp., 210 F.R.D. 268, 273 (E.D.N.Y. 2002). The figures relied upon refer to the period of time from 1996 until 2000 unless otherwise noted.
D. Application — Motions to Dismiss as De Mimmis
A series of challenges to personal jurisdiction by individual defendants have been heard and decided as additional data and analyses have become progressively available in this case. Where the evidence presented has shown that a defendant's participation in the national and New York gun markets and the impact, if any, on the alleged public nuisance are insufficient to meet the standards set by the New York long arm statute and federal due process, that defendant has been dismissed on de minimis grounds. See, e.g., Nat Ass'n for the Advancement of Colored People v. Acusport Corp., 2000 WL 1789094 (E.D.N.Y. Dec. 7, 2000); Nat. Ass'n Advancement Colored People v. Acusport Corp., 2001 WL 282923 (E.D.N.Y. Mar. 16, 2001); Transcript of Hearing on June 27, 2002. Nat. Ass'n Advancement Colored People v. A.A. Arms 99 CV 3999 & Nat. Ass'n Advancement Colored People v. Acusport Corp. 99 CV 7037.
The following fourteen defendants — Alamo Leather Goods, Inc.; Arms Technology, Inc.; Bill Hicks & Co.; Brazas Sporting Arms, Inc.; Chattanooga Shooting Supplies, Inc.; Euclid Avenue Sales Co.; Excel Industries a/k/a Accu-Tek; Faber Brothers, Inc.; Hicks, Inc.; Interstate Arms; Kiesler's Police Supply; Riley's Inc.; Valor Corporation; and Williams Shooters' Supply — argue that the newly received and analyzed 1996-2000 data from the Bureau of Alcohol, Firearms, and Tobacco ("BATF") shows that they too are de minimis. Each moves for dismissal for lack of personal jurisdiction.
It is worth noting at the outset that all but two of these defendants — Arms Technology, Inc. and Excel Industries a/k/a Accu-Tek — are classed in plaintiff's expert Lucy Allen's report as distributors. See Exhibit 25a. Ms. Allen's report focuses on thirty-one licensed gun distributors who were defendants at the time the report was completed. The majority of these defendants distribute on average less than 40,000 handguns per year. Only one sells in excess of 200,000 handguns annually. While it is estimated that these thirty-one distributors represent only a small percentage of the total number of distributors licensed in this country, over 90% percent of all traces conducted are attributed to them. See Transcript of Hearing March 11, 2003, Nat. Assoc. for the Advancement of Colored People v. A.A. Arms 99 CV 3999 & Nat. Assoc. for the Advancement of Colored People v. Acusport Corp. 99 CV 7037 (David Gross, counsel for eight of the distributor defendants now moving); Exhibit 25a. Although the total percentage market share occupied by these defendants is not known, it can be inferred for the purpose of this motion that they distributed a disproportionate number of traced guns. With the exception of five of these distributors who sell on average close to or greater than 100,000 handguns annually, the percent of total traces attributed to each distributor differs by only a few percentage points (ranging from .4 to 4.4% of total traces). Exhibit 25a.
1. Alamo Leather Goods, Inc.
Alamo Leather Goods, Inc. ("Alamo") is a distributor incorporated and with its principal place of business in Texas. It sold only two guns to New York dealers from 1996-2000, but has average yearly sales of approximately 13,000 guns, Exhibit 25a, and an average yearly revenue of almost four million dollars. It distributes on average 1,270 of the handguns traced per year nationally. Exhibit 25a. Its ratio of percent of guns traced to percent of total United States distributor sales is 2.77, the second highest nationally. Exhibit 25a. 179 traces in New York state during the relevant time period were attributable to Alamo. Table 25A.
Alamo engages in particular marketing conduct that allegedly contributes to the problem of inappropriate gun acquisition. It advertises and sells a number of lower-end firearms costing less than $100. Notice of less than an hour for walk-in pickups is allowed, and no minimum order is required. Trace requests received are not tracked.
Alamo is one of the smaller distributor defendants, and has sold only a few guns in New York. The number of handguns distributed by Alamo that have been subsequently traced, however, is out of proportion to its size. 2.8% of total traces nationally are attributed to it alone. Exhibit 25a. Alamo's annual output and revenue are not insignificant, and it is not a de minimis participant in the public nuisance as alleged by plaintiff.
Were a rigid traditional jurisdictional analysis to be applied, personal jurisdiction over Alamo might be borderline. Given its more than significant presence in the group of distributors responsible for over 90% of traces nationally and the manner in which admittedly it markets and distributes its guns, however, Alamo should reasonably expect its actions to have consequences in New York. An assertion of personal jurisdiction over it is not improper. Alamo's motion to dismiss is denied.
2. Arms Technology, Inc.
Arms Technology, Inc. ("ATI") is a manufacturer located in Utah. It manufactures the .22 caliber Browning Buck Mark pistol for Browning Arms Company ("Browning"), a distributor located in Utah who is also a defendant in this action; currently it does not manufacture, market, or distribute any other firearm. ATI's relationship with Browning is governed by a Supply Agreement, which provides that it may be terminated at any time by either party by giving twelve months advance written notice to the other party. Defs. Ex. 1 of March 17, 2003. ATI itself is a middle to large sized manufacturer, with the capacity to produce more than 40,000 handguns in any given year, and owns its own equipment. Nothing in its agreement with Browning appears on its face to prohibit it from manufacturing firearms of a different type in addition to those it supplies to Browning so long as it otherwise complies with the terms of the agreement and continues to meet Browning's needs.
Plaintiff's tables identifying the number of handguns traced in New York City and New York state by manufacturer, Tables 23 & 23A, and reporting calculations of each manufacturer's ratio of percent of total traces to percent of total United States production, Exhibit 24a, do not include numbers for ATI. However, around 26,500 of the approximately 38,500 guns sold by Browning annually during the relevant time period were manufactured by ATI. On average 1,062 of handguns traced annually are attributable to Browning. Browning's ratio of percent of total traces to percent of total United States production (.45) places it twentieth in comparison to other defendants identified by plaintiff as manufacturers. 107 handguns traced in New York state have been attributed to Browning.
Although ATI itself sells no guns or does other business in New York, guns manufactured by ATI are sold throughout the country, including in New York. It maintains a contractual obligation to sell to a national distributor. It derives considerable revenue, indeed likely virtually all of its revenue, from guns sold in interstate commerce. A meaningful number of guns traced in the state of New York during the relevant time period can logically be inferred to have been manufactured by ATI. ATI can and should expect its actions in manufacturing firearms and in choosing to contract with Browning in so doing to have consequences nationally and in New York. The fact that ATI manufactures firearms solely for Browning does not alone make it de minimis. Its motion to dismiss is denied.
3. Bill Hicks & Co.
Bill Hicks & Co. ("Bill Hicks") is a distributor incorporated and with its principal place of business in Minnesota. It sells on average approximately 22,000 guns per year. Its total revenue in 1999 was just under seventy million dollars. with two million resulting from sales in New York state. On average, 283 of the handguns traced nationally per year are attributable to Bill Hicks. Exhibit 25a. It ranks 29th out of 31 distributor defendants in a comparison of ratio of percent of total traces to percent of United States distributor sales. Id. (.36). Traces for 40 handguns recovered in the state of New York are attributable to Bill Hicks. Table 25A.
Although in drawing comparisons within this group of distributor defendants slightly fewer handguns recovered and traced nationally and in New York are attributable to Bill Hicks, as noted above this group together distributed handguns involved in over 90 percent of total traces. Internal comparisons, then, do little to reveal whether a defendant is or is not a de minimis participant in the danger to the public health and safety as framed by plaintiff. Where Bill Hicks sells handguns in New York and derives significant revenue both from interstate commerce and from goods sold in New York, this factor cannot and does not deprive this court of personal jurisdiction over them. Bill Hicks's motion to dismiss is therefore denied.
4. Brazas Sporting Arms, Inc.
Brazas Sporting Arms, Inc. ("Brazas") is a distributor incorporated and with its principle place of business in Massachusetts. It is a small company and sells on average only approximately 2,000 guns per year. Despite this comparatively low number of sales, however, it receives a yearly average of 168 traces nationally. Exhibit 25a. Its ratio of percent of total traces to percent of total United States distributor sales is 2.30. placing it fifth in plaintiff's ranking of distributor defendants. Id. Close to 75 guns were sold into the state of New York during the relevant time period. 61 of the traces for handguns recovered in New York state were attributable to Brazas. Table 25A.
Brazas is the smallest of these moving defendants, but distributed more handguns recovered and traced in the state of New York than did several defendants selling on average in excess of 10 times more handguns than Brazas yearly. Brazas is not a de minimis participant in the alleged public nuisance — close to eight percent of the handguns sold in a year by Brazas are traced. In combination with the fact that Brazas did business, including selling guns, in New York, personal jurisdiction over them, although possibly borderline, is not improper. Its motion to dismiss is denied.
5. Chattanooga Shooting Supplies, Inc.
Chattanooga Shooting Supplies, Inc. ("Chattanooga") is a distributor incorporated and with its principal place of business in Tennessee. It sells approximately 11,000 guns per year nationally, Exhibit 25a, with overall sales in 2000 totaling approximately 24 million dollars. Approximately 295 handguns recovered and traced annually are attributed to Chattanooga. Exhibit 25a. It ranks 15th out of 31 distributor defendants with a .73 ratio of percent of total traces nationally to percent of distributor sales. Exhibit 25a. In 1999, sales to New York totaled over $600,000. 78 guns recovered and traced in the state of New York during the relevant time period are attributable to Chattanooga. Table 25A.
Chattanooga receives appreciable revenue both from interstate commerce and from goods sold in New York, and sells a not insignificant number of guns annually. In comparison to other distributor defendants, Chattanooga's ratio of percent of total traces to percent of total sales and its number of handguns traced in the state of New York is squarely in the middle. Chattanooga is not a de minimis participant in the national handgun market or in the public nuisance as alleged by plaintiff, and its motion to dismiss is consequently denied.
6. Euclid Avenue Sales Co.
Euclid Avenue Sales Co. ("Euclid") is a distributor incorporated and with its principal place of business in Georgia. It sells on average approximately 7,000 handguns per year, Exhibit 25a, and has an average yearly revenue of over three million dollars. On average 1,688 of the handguns traced nationally per year are distributed by Euclid, a number greater than that attributable to almost any other distributor selling less than 75,000 handguns a year. Exhibit 25a. Not surprisingly, it ranks first in ratio of percent of handguns traced nationally to percent of distributor sales. Id. 13 handguns were sold in New York during the relevant time period, and New York revenue overall was $11,200. 508 traces of handguns recovered in New York state are attributable to Euclid. Table 25A.
Euclid sells over the sales and to pawnshops, marketing practices alleged by plaintiff to increase the risk of inappropriate gun acquisition. Many of the dealers to which Euclid sells are located in the southeastern United States; more than half of guns recovered and traced in New York were last sold at retail in the Southeast. See Exhibit 12 (New York's Top 5 Source States Supply 54 Percent of Crime Handguns Purchased Out of State) of Lucy Allen's Expert Report, Ex. A to Plaintiff's Opp.
While Euclid is one of the relatively smaller distributers, it participates to a meaningful extent in both the national and the New York gun markets. More importantly, according to plaintiff's reports it is, by some measures, the worst contributor to the public nuisance alleged. In effect, twenty-four percent of the handguns sold in a year by Euclid are traced. The only distributor defendants with more handguns recovered and traced in the United States sell on average from double to thirty times the number of handguns sold by Euclid annually. Euclid is simply not de minimis in this case. Its motion to dismiss is denied.
7. Excel Industries a/k/a Accu-Tek
Excel Industries ("Excel") is a California corporation formed in 1997. It is a relatively small corporation, with total annual revenues of around $500,000. The firearms which it manufactures bear the Accu-Tek name, but it has manufactured only 3,000 firearms during its existence to date. It apparently has few connections to the state of New York outside the sale of a single handgun. Neither Excel nor Accu-Tek appears on plaintiff's table reporting calculations of each manufacturer's ratio of percent of total traces to percent of total United States production. Exhibit 24a.
Despite Excel's seemingly small size, 34 Accu-Tek brand-name handguns were recovered and traced in the state of New York between 1996 and 2000. Table 23A. While Excel may initially appear de minimis, it has significant and deep connections to a group of gun manufacturers and distributors located in the suburbs of Los Angeles and often referred to as the "Ring of Fire" companies. These companies specialize in marketing practices alleged by plaintiff to be primary contributing factors to the problem of inappropriate gun acquisition and gun violence, including the mass production of easily concealed, small caliber weapons sold for as little as fifty dollars. Individuals running the companies have suggested that they can and will use bankruptcy to avoid liability.
Excel is currently owned and run by Mr. Larry Gilliam, who also owned the now bankrupt Accu-Tek firearms. Excel purchased the assets of Accu-Tek as part of Accu-Tek's bankruptcy proceedings, including its manufacturing equipment and the Accu-Tek name. Excel manufactured firearms using Accu-Tek designs and sold under the Accu-Tek name from 1997 through 2000. Excel ceased manufacturing firearms as of January 1, 2001, but continued to sell firearms manufactured between 1997 and 2001 through July 2002. Accu-Tek trademarked guns are primarily small, easily concealable, relatively inexpensive firearms. Excel marketed its products directly to the public through print advertisements and through its website, another marketing practice which allegedly increases the risk of inappropriate gun acquisition. Although Excel is not currently manufacturing firearms, it retains the equipment and manufacturing capacity to do so and its intentions for the future are not clear.
While it may currently be only a minor participant in the national and New York gun markets, it has been far from a de minimis contributor to the danger to the public health and safety asserted by plaintiff here. It can and should have expected its actions to have consequences in the state of New York. Whether Excel now engages in marketing practices contributing to an alleged public nuisance, and whether it should be subject to any injunctive relief if ordered are issues for trial. See City of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 289, 102 S.Ct. 1070, 71 L.Ed.2d 152 ("It is well settled that a defendant's voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice. Such abandonment is an important factor bearing on the question whether a court should exercise its power to enjoin the defendant from renewing the practice, but that is a matter relating to the exercise rather than the existence of judicial power."). Excel's motion to dismiss is denied.
8. Faber Brothers, Inc.
Faber Brothers, Inc. ("Faber") is a distributor incorporated and with its principal place of business in Illinois. Its average yearly revenue is more than fifty-two million dollars. Handguns make up a relatively small percentage of its total sales, but it still sells an annual average of close to 15,000 guns nationally. Exhibit 25a. On average, 497 of the handguns traced nationally per year were distributed by Faber. Exhibit 25a. Its ratio of percent of handguns traced nationally to percent of total United States distributor sales is .97, placing it 11th among distributors in plaintiff's analysis. Exhibit 25a. Repeated traces are related to just a few of the dealers to which it sells; copies of trace requests received are kept, but there is otherwise no policy for dealing with them. Faber does business in New York. 63 handguns recovered and traced in the state of New York during the relevant time period are attributable to Faber. Table 25A.
Faber derives substantial revenue from goods sold in interstate commerce and from sales in New York. It distributed a significant number of handguns traced in New York, and engages in marketing practices alleged by plaintiff to increase the risk of inappropriate gun acquisition and violence. By any measure, Faber is not de minimis and personal jurisdiction is appropriate. Its motion to dismiss is consequently denied.
9. Hicks, Inc.
Hicks, Inc. ("Hicks") is a distributor incorporated and with its principal place of business in Alabama. Hicks sells on average 11,623 handguns per year nationally, and sold 59 handguns into New York during the relevant time period Exhibit 25a; Table 25A. Approximately 200 of the handguns traced nationally per year are attributable to Hicks. Id. With a ratio of .51, it ranks twenty-fourth among plaintiffs analysis of ratio of percent of total traces to percent of total United States distributor sales. Id. Hicks's revenue from sales in New York in 2000 was more than $53,000. 59 handguns recovered and traced in the state of New York were distributed by Hicks. Table 25A.
Hicks is a smaller distributor, and sold, in comparison to the other distributor defendants, fewer handguns recovered and traced both nationally and in New York. Hicks does, however, derive meaningful revenue from New York sales and sells handguns into the state. As discussed above, the fact that Hicks falls relatively lower on various scales of measurement than do other defendants does not necessarily indicate that it contributes only minimally or not at all to the alleged public nuisance. Plaintiff has offered evidence that Hicks does not feel bound to comply with existing limitations on its distribution of guns, and Hicks is responsible for a consequential number of handguns traced in the state of New York. Personal jurisdiction over Hicks is not improper, and its motion to dismiss is therefore denied.
10. Interstate Arms
Interstate Arms is a distributor incorporated and with its principal place of business in Massachusetts. It distributes on average 34, 934 handguns a year. Exhibit 25a. Gross sales in 1998 were 12 million, and in 1999 17 million. A yearly average of 442 traced handguns nationally are attributable to Interstate Arms. Id. Its ratio of percent of total traces to percent of total United States distributor sales is .36, placing it twenty-eighth in plaintiff's analysis. Id. 108 handguns recovered and traced in the state of New York were distributed by Interstate Arms. Table 25A. Interstate Arms does not investigate or monitor the dealers to which it sells, a practice plaintiff alleges is connected with higher levels of improper gun acquisition.
Interstate Arms is not a small distributor. It derives sizeable revenue from interstate commerce. Its ratio of percent of total traces to percent of total United States distributor scales places it lower on the spectrum of distributor defendants, but it sells a significant number of guns recovered and traced nationally and in New York. It is not a de minimis participant in the gun market generally or in the alleged public nuisance. Interstate Arms's motion to dismiss is denied.
11. Kiesler's Police Supply
Kiesler's Police Supply ("Kiesler's") is a distributor and retail establishment incorporated and with its principal place of business in Indiana. Approximately 27,730 handguns per year are sold by Kiesler's, Exhibit 25a, and its yearly revenue is close to thirty million dollars. It sells nationally, and distributed on average 301 of the handguns traced per year. Id. With a ratio of .31 for percent of total traces to percent of total United States distributor sales, it ranks thirtieth on plaintiff's list. Id. 49 handguns recovered and traced in the state of New York have been attributed to Kiesler's. Table 25A. It has no way of investigating the dealers to which it sells and no policy with respect to trace requests, both practices that plaintiff asserts indicate a likelihood of greater participation in the problem of inappropriate gun acquisition.
Although a large portion of Kiesler's sales are to the law enforcement community, it is nevertheless the distributor of a not inconsequential number of guns traced nationally and in New York. It is a mid-sized distributor, and receives substantial revenue from interstate commerce. Given its presence in the group of distributors responsible for over 90% of traces nationally and the manner in which admittedly it markets and distributes its guns, Kiesler should reasonably expect its actions to have consequences in New York and personal jurisdiction over it is not improper. Its motion to dismiss is denied.
12. Riley's Inc.
Riley's Inc. ("Riley's) is a distributor incorporated and with its principal place of business in Indiana. It sells an average of around 11,000 guns nationally per year, Exhibit 25a, and has an estimated yearly revenue of seven million dollars. As compared to other distributor defendants, Riley's has the third highest ratio of percent of guns traced to percent of distributor sales nationally. Exhibit 25a. Approximately 1,050 handguns traces per year are attributed to Riley's. Id. It sold no firearms or other merchandise in New York during the relevant period, but 23 handguns recovered and traced in all of New York are attributable to Riley's. Table 25A.
Riley's is a smaller defendant, and has only relatively minimal traditional contacts with the state of New York. Its participation in the national gun market is, however, appreciable, and it is far from a de minimis participant in the alleged public nuisance. On average, the number of traced guns attributed to Riley's in a single year amount to more than nine percent of its total production. It can be inferred that Riley's did expect or should have expected its marketing and distribution practices to have consequences in the state of New York. While Riley's may be a marginal defendant, personal jurisdiction over them exists under the circumstances of this case and its motion to dismiss is denied.
13. Valor Corporation of Florida
Valor Corporation ("Valor") is a distributor incorporated and with its principal place of business in Florida. It sells on average 13,857 handguns nationally per year, Exhibit 25a, and has a yearly revenue in the range of fourteen to seventeen million dollars. 1,210 handguns traced nationally per year were distributed by Valor. Id. It ranks fourth among distributors in a comparison of percent of total traces to percent of distributor sales with a ratio of 2.52. Id. It has sold handguns into New York, and 361 handguns recovered and traced in the state of New York are attributable to Valor. Table 25A
Although handguns constitute less than half of Valor's total sales, Valor is nevertheless a mid-sized distributor and participates meaningfully in the national gun market. Importantly for jurisdictional purposes here, its contribution to the alleged public nuisance is out of proportion to its size. With the exception of Euclid, all distributors with more New York traced handguns than Valor sell on average from approximately 5,000 to almost 200,000 more handguns per year. On average, the number of traced guns attributed to Valor in a single year amount to almost nine percent of its total production. In combination with the fact that Valor has done business, including selling guns, in New York, personal jurisdiction over them is proper. Its motion to dismiss is therefore denied.
14. Williams Shooters' Supply
Williams Shooters' Supply ("Williams") is a distributor incorporated and with its principal place of business in Illinois. It distributes an average of 35,934 handguns per year nationally, Exhibit 25a, and has an annual revenue of approximately forty million dollars. 365 handguns traced per year were sold by Williams. Id. Its ratio of percent of total traces to percent of total United States distributor sales is .29, placing it 31st in plaintiff's comparison of distributors. Id. It sells handguns and other products into New York, and 35 handguns recovered and traced in New York state were distributed by Williams. Table 25A.
Williams is one of the larger mid-sized distributors, and receives substantial revenue from goods sold in interstate commerce. Although its ratio of percent of total traces to percent of total United States distributor sales is comparatively low, it is nevertheless the distributor of a not inconsequential number of guns traced nationally and in New York. Given its presence in the group of distributors responsible for over 90% of traces nationally and the fact that it sells guns into New York, it should reasonably expect its actions to have consequences in New York. While likely a lesser participant in the public nuisance alleged by plaintiff, it is not de minimis and personal jurisdiction over it is not improper. Its motion to dismiss is denied.
E. Application — Motions to Dismiss by Non-United States Corporations
Carl Walther GmbhH ("Walther") and Fabbrica D'Armi Pietro Beretta S.p.A. ("Pietro Beretta") ask that their individual motions for summary judgment be granted because: (1) this court lacks personal jurisdiction over them; and (2) plaintiff cannot establish by clear and convincing evidence that their conduct as non-United States corporations caused the alleged public nuisance. Pietro Beretta further argues in the alternative that its presence destroys this court's subject matter jurisdiction.
Walther and Pietro Beretta joined defendants' global motion for summary judgment asserting that the NAACP could not establish by clear and convincing evidence necessary elements of its public nuisance claim, including that defendants' conduct caused the alleged public nuisance. This court has already found that the NAACP has presented sufficient evidence to create a genuine issue of material fact on this element of its claim and to survive summary judgment. See Nat. Ass'n for the Advancement of Colored People v. A.A. Arms, ___ F.R.D. ___, 2003 WL 1089800 (E.D.N.Y. March 12, 2003).
These two corporations in their individual motions for summary judgment further argue that, because they are incorporated and headquartered outside of the United States, their conduct is even more remote from any alleged harm suffered in New York. Foreign corporations, however, are no more or less remote from the alleged public nuisance simply by virtue of their location and citizenship. Firearms no matter where they originate go through several steps in the process of being manufactured, marketed, distributed, and sold; a firearm imported into the United States may change hands a greater or a lesser number of times than a firearm manufactured domestically during its lifespan. The fact that the United States importers as opposed to these foreign corporations receive trace requests and warranty cards does not for the purposes of jurisdictional motions differentiate them from domestic manufacturers and distributors in any meaningful sense. It is the marketing practices, the actions or failure to act of any manufacturer or distributor, during this process and the harm if any that results that are relevant in determining causation and remoteness. The NAACP has presented sufficient evidence to create a genuine issue of material fact on this element of its claim as to all remaining defendants, including Walther and Pietro Beretta. Summary judgment for Walther and Pietro Beretta on this ground is therefore denied.
The other arguments — personal jurisdiction and subject matter jurisdiction — raised in Walther's and Pietro Beretta's motions will be discussed individually. Walther did not specifically challenge this court's personal jurisdiction over it, but "adopts and incorporates" Pietro Beretta's motion for summary judgment. The question therefore will be briefly addressed here. It is particularly important in the case of these foreign corporations to keep in mind that applying a rigid jurisdictional analysis without taking into account the realities of the business practices of a foreign-based multinational enterprise is neither possible nor useful given the realities of our world today. See Bulova Watch Co. v. K. Hattori & Co., 508 F. Supp. 1322 (E.D.N.Y. 1981) ("The law ignores the common sense of a situation at the peril of becoming irrelevant as an institution.").
1. Carl Walther GmbH
Walther is a German-based corporation that sells firearms in Germany to United States-based importers. Smith & Wesson is currently the primary United States importer of Walther-trademarked firearms manufactured in Germany. Walther also controls licensing and contracting for the manufacture of Walther-trademarked firearms in the United States. International Armaments Corp. d/b/a Interarms and Smith & Wesson are among these United States manufacturers. An average of 16,996 Walther-trademarked handguns are sold in the United States each year. Exhibit 24a. Approximately 806 handguns recovered and traced nationally, and 125 in the state of New York, are Walther-trademarked firearms. Id.; Table 23A. Walther's ratio of percent of traces to percent of total United States production is .77, placing it thirteenth in comparison to manufacturer and importer defendants. Id.
Walther is a major international corporation and derives substantial revenue from international and interstate commerce. It actively contracts for the manufacture, sale, and distribution of Walther-trademarked firearms in the United States. Dealers authorized to sell Walther trademarked firearms are located throughout the United States, including in New York. Walther further distributed or licensed the manufacture of a significant number of handguns recovered and traced in the state of New York. It is not a de minimis participant in the gun market generally or in the alleged public nuisance. Since personal jurisdiction exists, any remainder of Walther's motion for summary judgment is denied.
2. Fabbrica D'Armi Pietro Beretta S.p.A.
Fabbrica D'Armi Pietro Beretta S.p.A. ("Pietro Beretta") is an Italian company operating in Italy. It manufactures guns sold in Italy to Beretta U.S.A. Corp. ("Beretta USA"), who distributes those guns in addition to guns it has manufactured in the United States. Both Beretta U.S.A. (95.3% interest) and Pietro Beretta (100%) are owned by Beretta Holding S.p.A. ("Beretta Holding"). Beretta Holding was dismissed in the instant case on its motion after a hearing on January 29, 2003 because it is solely a holding company. Beretta U.S.A. has never been a party in the instant case. Pietro Beretta also manufactures guns for Browning Arms Co. ("Browning"), a defendant in this action, that are bought by Browning in Italy and then sold in the United States.
Pietro Beretta argues that this court lacks personal jurisdiction over it because it manufactures and sells firearms only in Italy, and the contacts and activities in the United States of Beretta USA cannot be attributed to it because Beretta USA acts neither as its agent or its alter ego. It further asserts that if Beretta USA's contacts and activities are attributed to it then, alternatively, either Beretta USA's citizenship must also be attributed to it or Beretta USA itself is an indispensable party. Because Beretta USA is incorporated and maintains its business headquarters in Maryland, the location of the headquarters of the NAACP, Pietro Beretta alleges that the result of either alternative would be the destruction of the court's diversity jurisdiction. See 28 U.S.C. § 1332(a)(1), (c)(1) (2003); Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 374, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978).
For the reasons discussed below, I find that Pietro Beretta is being sued in its own right, and that its own activities and contacts are sufficient to confer personal jurisdiction over it in this court. It is therefore not necessary to address the latter arguments. I note, however, that Beretta USA is not an indispensable party, and plaintiff has not acted to improperly manufacture diversity jurisdiction. See Fed.R.Civ.P. 19 (2003); 28 U.S.C. § 1359 (2003). So long as federal law and rules are complied with, strategic choices regarding parties and venue are within a plaintiff's control and decisions based on tactical considerations are not improper. Cf. 14 Charles Alan Wright, Arthur R. Miller, and Edward H. Cooper, Federal Practice & Procedure § 3637 ("Wright & Miller") ("When there is a choice between a state and a federal forum for a particular action, an attorney who has the decision to make on behalf of a client quite properly will weigh what he or she conceives to be the tactical advantages and disadvantages of taking the case to one court or to the other.").
Annual averages of 95,283 handguns sold and a total of 3,430 handguns traced are attributed to Pietro Beretta and Beretta Holding, placing them eighteenth in plaintiff's comparison of manufacturer defendants' ratio of percent of total traces to percent of total United States production. Exhibit 24a. These handguns include only those bearing the Pietro Beretta name and manufactured in Italy. 3167 guns with the Pietro Beretta name were recovered and traced in the state of New York. Table 23A. In addition, Pietro Beretta manufactures handguns not bearing the Beretta name for Browning, a domestic corporation also a defendant in this action.
Pietro Beretta admittedly receives substantial revenue from good sold in international commerce and makes no argument that it is de minimis. It actively contracts for the distribution and sale of its firearms in the United States. Given the extent of Pietro Beretta's personal participation in the international and national gun markets and potential role in the alleged public nuisance, independent from any participation of Beretta USA or other unrelated corporation, Pietro Beretta can and should have expected its actions to have consequences in New York. Personal jurisdiction exists over Pietro Beretta itself, without resorting to any relationship with Beretta USA. The remainder of Pietro Beretta's motion for summary judgment is therefore dismissed.
IV. Plaintiff's Motion to Restore
The NAACP moves to reinstate three former defendants, Heckler & Koch Inc., Heckler & Koch GmbH, and Henry's Tackle, L.L.C ("Henry's Tackle"). All three were previously dismissed pursuant to stipulations of discontinuance — Heckler & Koch Inc. and Heckler & Koch GmbH (together "Heckler & Koch") in September 2002 and Henry's Tackle in August 2002.
Plaintiff argues that this court has personal jurisdiction over these three defendants, and that new evidence establishes they are not de minimis and should be rejoined because they participated in industry-wide concerted activity that contributed to the creation and maintenance of the alleged public nuisance. Jurisdictional motions in the instant case have been decided on the basis of the contemporaneously available information. The criteria employed as an aid were developed in the interest of promoting consistency and fairness in jurisdictional determinations in this complex case involving large numbers of defendants. Given the increase in the data and analyses available now as compared to that available at prior stages in this case, this process has necessarily not operated perfectly. Jurisdiction over those defendants remaining in this action satisfies both the New York long arm statute and federal due process concerns. However, some defendants previously dismissed, given the information now available, are not de minimis and would likely be properly within the jurisdiction of this court.
The connections with the state of New York; presence in the international, national, and state gun markets; and possible contribution to the alleged public nuisance of Heckler & Koch Inc., Heckler & Koch GmbH, and Henry's Tackle are comparable to those of defendants whose motions to dismiss are now denied and other defendants remaining in this action. For example, an annual average of 37,611 handguns sold nationally are attributed to the two Heckler and Koch entities and 10,326 to Henry's Tackle. 49 handguns recovered in the state of New York were traced to Heckler & Koch, and 91 to Henry's Tackle. The question now before this court is not, however, whether it is proper to continue to exercise personal jurisdiction over these corporations in light of the new data received from BATF and the allegations of concerted industry activity made by Robert Ricker made in an affidavit in People v. Arcadia Machine & Tool (Superior Court of California, County of San Diego JCCP 4095). It is rather whether these defendants, dismissed from this action months ago pursuant to stipulations of dismissal signed by plaintiff's counsel, should now be re-joined after a motion argued just one week before jury selection was set to begin.
Plaintiff claims that these three defendants were dismissed without prejudice with the stipulation that they would be reinstated to the case if plaintiff's expert analysis based on the firearms trace data received from BATF concluded that they were responsible for a disproportionate number of traced handguns and suggested that they were participating in the "crime gun" market. Heckler & Koch GmbH does not appear to have entered into any agreement related to continuing or future participation in this case. See Affidavit of Leslie Ruff in Opposition to Plaintiff's Motion to Restore Heckler & Koch GmbH (March 11, 2003). Heckler & Koch Inc. agreed to allow its counsel to accept service of a nonparty deposition subpoena and a Summons and Complaint if Plaintiff later decided to pursue an action against it. See Declaration of James V. Marks in Opposition to Plaintiff's Motion to Restore [Heckler & Koch Inc.] ¶ 3 (March 11, 2003). Henry's Tackle agreed not to oppose a motion to rejoin if plaintiff advised it that such a motion would be filed within two weeks of receipt of trace data from the BATF. See Ex. 1 Letter from Charles E. Bachman to Elisa Barnes of August 28, 2002, Declaration of Jonathan J. Kim [in Opposition to Plaintiff's Motion to Restore Henry's Tackle] (March 11, 2003).
Plaintiff's Motion to Restore was made on February 24th, more than a month past the deadline for the submission of plaintiff's expert reports relying on BATF data. At that time, over two months had elapsed from the time that the BATF data was produced in a complete and accessible form. No matter how construed, the parties' "agreements" can provide no basis for this motion to restore.
Relief from the prior orders of the stipulations of dismissal could be sought under Federal Rule of Civil Procedure 60(b)(1) (court may relieve a party from an order for mistake) or Rule 60(b)(2) (same for newly discovered evidence). See, e.g., Walker v. Dep't of Veterans Affairs, 1995 WL 625689, at *1 (S.D.N.Y. Oct. 25. 1995). Alternatively, re-joinder could be requested pursuant to Federal Rule of Civil Procedure 21. ("Parties may be . . . added by order of the court on motion of any party . . . at any stage of the action and on such terms as are just.").
Motions brought under Rule 60(b) must be brought within a reasonable time; to determine whether a motion has been brought within a reasonable amount of time, the court looks to the length and circumstances of the delay and the possibility of prejudice to the nonmovant. See, e.g., In re Emergency Beacon Corp., 666 F.2d 754, 760 (2d Cir. 1981). Joinder under Rule 21 is similarly inappropriate when it would prejudice the present and proposed defendants. See, e.g., Fair Hous. Dev. Fund Corp. v. Burke, 55 F.R.D. 414. 419-21 (E.D.N.Y. 1972). Severe prejudice would result if defendants who were dismissed months ago and have not participated in expert discovery, depositions, motions for summary judgment, or any other aspect of trial preparation were now forced to participate in a trial in which jury selection has now been completed. Regardless of the merits of plaintiff's claim to reinstate these parties otherwise, this prejudice alone warrants denial of plaintiff's motion.
V. Reducing the Burden on Smaller Defendants
As noted above, some of the defendants remaining in this case are relatively small corporations, whose resources might be strained by appearing and defending at this trial. Interest has been expressed in exploring options to limit this burden through some agreement or obligation to be bound by the outcome of the litigation without resorting to a default, which might support a claim for costs. See Fed.R.Civ.P. 55 (2003). Parties who wish to take this question up with the court may do so during the time set aside for in limine and Daubert motions in these proceedings on Friday, March 28, 2003.
As a general rule, a nonparty is not bound by judgments entered in an action in which it did not intervene; it cannot be precluded from relitigating issues decided in its absence. See, e.g., Chase National Bank v. City of Norwalk, 291 U.S. 431, 441, 54 S.Ct. 475, 78 L.Ed. 894 (1934). There are several procedural devices applicable in complex or multi-party litigations, however, through which an individual or corporation can, to varying extents, be bound by a judgment issued as the result of proceedings in which it did not fully participate. These devices, outlined below, include: (1) vouching-in, (2) mandatory preclusion, and (3) preclusion by consent. The discussion in this memorandum focuses on those manufacturers and distributors properly subject to this court's personal jurisdiction and currently defendants in this action, and is not meant to address entities not parties. of the above three options preclusion by consent is the most appropriate under the current circumstances, but an agreement to comply with an injunction if entered extends beyond the meaning of preclusion.
Any defendant is of course free to enter into a stipulation of dismissal with plaintiff in which it agrees to be bound by the judgment in this case but will not be liable for any costs.
"Vouching-in" is a common law procedural device through which a third party may be bound by the court's decision. Black's Law Dictionary (7th ed. 1999) ("At common law, a procedural device by which a defendant may give notice of suit to a third party who is liable over to the defendant on the subject-matter of the suit, so that the third party will be bound by the court's decision."). There are at least two theories of vouching-in, both stemming from the basic premise that a nonparty "should have" participated in an action. See 18A Wright & Miller § 4452 (discussing both theories in detail). To induce such a nonparty to participate (or to preserve the finality, fairness, and efficiency interests that vouching-in is intended to protect if it fails to participate), it will be precluded from relitigating some or all of the issues decided in that action.
The first and more established theory of vouching-in applies when an indemnification relationship exists. To trigger its application, a defending party must notify an indemnitor of the action and give it the opportunity to control the defense. If the indemnitor does take control of the defense, it is precluded from relitigating matters determined in the action and the preclusion can be asserted by both the indemnitee and the party who brought the suit. If the indemnitor does not take control of the defense, the indemnitee must bring a separate action against the indemnitor to enforce indemnification. The indemnitor is free to contest the existence and scope of the indemnity obligation in this second action, but is precluded from contesting the issues already determined against the indemnitee. See, e.g., SCAC Transport (USA) Inc. v. S.S. Danaos, 845 F.2d 1157, 1161-62 (2d Cir. 1988) But cf. Restatement (Second) of Judgments §§ 57, 58 (1981) (substantially reformulating the application of this theory of vouching-in based on the specific relationship between the indemnitor and the indemnitee).
The second theory of vouching-in is more nebulous and less well-established than the first. It has developed as a narrow exception to the rule that a nonparty cannot be bound by a judgment entered in its absence to resolve tension between this rule and the need to provide workably final dispositions in some cases involving pervasive societal problems. 18A Wright & Miller § 4452. In some limited instances, then, circumstances may give rise to a duty to intervene enforced by giving a judgment preclusive effect. This second theory has been "approached" in several situations, 18A Wright & Miller § 4452, at 413-17, but it remains difficult to draw general principals from those applications. See, e.g., Provident Tradesmens Bank & Trust Co., 390 U.S. 102, 114, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968) ("At that point it might be argued that Dutcher should be bound by the previous decision because, although technically a nonparty, he had purposely bypassed an adequate opportunity to intervene. We do not now decide whether such an argument would be correct under the circumstances of this case."); National Wildlife Fed'n v. Gorsuch, 744 F.2d 963, 971-72 (3rd Cir. 1984) ("Preclusion of a third person from collateral attack on a consent decree to which he was not a party is a step to be taken cautiously and only in unusual circumstances. . . . Although plaintiffs may not have had their day in court as litigants, they had the opportunity and for reasons of their own adopted a different approach."); Lynch v. Merrell-National Labs, 646 F. Supp. 856, 859-62 (D.C. Mass. 1986).
It has been relied on, without much discussion or analysis, in the Second Circuit to support holding the Department of Housing and Urban Development ("HUD") bound by an arbitration award where HUD was the alter ego of the corporation against which the arbitration award was entered and was aware of the arbitration, repeatedly given notice of it, and invited to participate. C.H. Sanders Co. v. BHAP Housing Development Fund Co., 903 F.2d 114, 121 (2d Cir. 1990). However, vouching-in appears to be disfavored in the Second Circuit when other alternatives are available. See SCAC Transport (USA) Inc. v. S.S. Danaos, 845 F.2d 1157, 1162 (2d Cir. 1988) ("Common-law vouching is a superfluous procedure where impleader is available."). In the New York state courts, common law vouching-in historically has been confined to claims of pure indemnification. See Hartford Accident & Indemnity Co. v. First Nat. Bank, 22 N.E.2d 324 (N.Y. 1939); James M. Wicks & Marie Zweig, Impleader Practice in New York: Does it Really Discourage Piecemeal Litigation?, N.Y. State Bar J., Feb. 1999, at 44, 44-45.
Vouching-in, even under the second and expanded theory, is not strictly applicable to the current situation in the guns litigation. It is intended to provide some solution in situations where it is desirable to bind a third party, a person or entity who has not yet been brought in to the action and who it may be difficult or impossible to bring in. Its application generally arises in a subsequent proceeding to preclude parties from relitigating particular issues already raised and decided in a prior proceeding. That is, it is generally invoked to answer the question of whether a person or entity is precluded from asserting a particular right because they had the opportunity to raise that right earlier but chose not to do so. For example, the National Wildlife Federation was precluded from challenging a consent decree relating to EPA regulations on ocean dumping where it had been actively involved in the suit from which the consent decree resulted but had chosen not to intervene. See National Wildlife Federation v. Gorsuch, 744 F.2d 963 (3rd Cir. 1984); see also Lynch v. Merrell-National Labs, 646 F. Supp. 856 (D.C. Mass. 1986) (Bendictin plaintiffs who had participated in consolidated pretrial proceedings but opted to decline an invitation to participate in the subsequent consolidated trial were precluded from relitigating the jury's verdict that Bendictin does not cause birth defects).
It is unclear how or if any theory of vouching-in could be applied (a) by the judge in an original action and (b) to bind nonparties to comply with an injunction. See American Law Institute, Complex Litigation: Statutory Recommendation and Analysis § 5.05 (1994) ("The general notion that the precise binding effect of a judgment cannot be predetermined by the court that enters it, but only can be tested in a subsequent suit, is well established."); James M. Wicks & Marie Zweig, Impleader Practice in New York: Does it Really Discourage Piecemeal Litigation?, N.Y. State Bar J., Feb. 1999, at 44 ("Unless and until the "vouched-in" person becomes a party to the action, the person is not bound by the entry of judgment; only barred from relitigating the issues."). But cf. Treasure Salvors, Inc. v. Unidentified Wrecked and Abandoned Sailing Vessel, 459 F. Supp. 507 (D.C. Fla. 1978) (in effect requiring the state of Florida to comply with a warrant issued to seize treasure taken from a sunken Spanish ship in Florida's possession because Florida cooperated actively with the United States, a party in the action, and chose not to intervene), aff'd on other grounds, 621 F.2d 1340 (5th Cir. 1980), aff'd in part and rev. in part, 458 U.S. 670 (1982) (noting that the court of appeals had not decided the preclusion question and the district court's preclusion analysis played no role in its decision). Whether vouching-in could be applied to a defendant over whom the court cannot obtain person jurisdiction is doubtful. But cf. SCAC Transport (USA) Inc. v. S.S. Danaos, 845 F.2d 1157, 1162 (2d Cir. 1988) (citing 18 Wright & Miller § 4452, at 445-46 (1981) for the proposition that common law vouching is necessary only when lack of personal jurisdiction or other limitations make impleader unavailable).
B. Mandatory Intervention and Preclusion
Section 5.05 of the American Law Institute's ("ALI") Complex Litigation: Statutory Recommendation and Analysis (1994) discusses a procedure analogous in many respects to vouching-in that could be used to bind nonparties in actions consolidated pursuant to their recommendations for complex litigation. The procedure would create a duty to intervene for some nonparties and then preclude those nonparties from relitigating issues decided in the consolidated action if they chose not to participate. Id. Such mandatory intervention would be appropriate only for claims arising out of the same factual core, and where it would "advance the efficient, consistent, and final resolution" of the claims without imposing "undue prejudice, burden, or inconvenience." Id. At the core of such a procedure must be ensuring that the nonparty(ies) have notice of the pending action, providing parties and nonparties the opportunity to contest any imposition of a duty to intervene, and issuing a formal statement of the issues that nonparties who do not intervene will be precluded from contesting. 18A Wright & Miller § 4452, at 418-20.
The procedure as set out by ALI contemplates only issue, not claim, preclusion for nonparties who chose not to intervene. It does, however, contemplate injunctions binding on nonintervening parties:
[I]f at some stage after a notice of intervention and
preclusion is issued, the transferee court determined
that some form of injunctive relief was appropriate
and the possibility of that relief was not clearly
apparent in the notice, then it would not be
appropriate for the court to issue the injunction on
the assumption that it would bind parties and
nonintervening parties alike. . . . Unless the
transferee court sends out a second notice outlining
the relief, they should not be bound.
American Law Institute, Complex Litigation: Statutory Recommendation and Analysis § 5.05 (1994). How a duty to intervene might be established and applied in practice is discussed in several commentaries issued prior to the ALI's Complex Litigation Project. See Note, Preclusion of Absent Disputants to Compel Intervention, 79 Col.L.Rev. 1551 (1971); Comment, Nonparties and Preclusion by Judgment: The Privity Rule Reconsidered, 56 Cal.L.Rev. 1098, 1122-32 (1968). Although raised subsequently, see, e.g., 18A Wright & Miller § 4452, it had not been fully analyzed. At this stage in the instant case it is not necessary to do so.
Whether this technique is available if personal jurisdiction is not obtainable seems questionable.
C. Preclusion by Consent
Binding entities already parties while allowing them to escape the burden of participating in the trial of the case could be accomplished through preclusion by consent. See 18A Wright & Miller § 4453.
Consent to be bound by a judgment to be rendered in pending litigation may be obtained through express stipulations by the parties. Parties may agree to be bound by way of claim preclusion, see, e.g., Westwood Chem., Inc. v. Johns-Manville Fiber Glass, Inc., 477 F.2d 1160 (6th Cir. 1973), or issue preclusion, see, e.g., California v. Texas, 459 U.S. 1096, 103 S.Ct. 714, 74 L.Ed.2d 944 (1983); Sampson v. Sony Corp. of America, 434 F.2d 312 (2d Cir. 1970). Cf. Tourangeau v. Uniroyal, Inc., 101 F.3d 300, 306-307 (2d Cir. 1996) (nonparty buyer of a business bound by a judgment through an agreement entered into at the time of sale). "Bound" in the context of preclusion by consent most frequently refers to an agreement to be bound by the res judicata effects of a judgment concerning a legal right or claim that could otherwise be asserted. But see, e.g., Tourangeau, 434 F.2d at 306-307 (nonparty buyer of a business who agrees to allow the seller, if sued on particular matters, to conduct the defense and settle the action is bound by a consent judgment entered into by the seller barring material reduction in the level of benefits due to retired employees).
Avoiding the cost of pursuing litigation is an appropriate reason to enter into such a stipulation. See Arco Polymers, Inc. v. Studiengesellschaft Kohle, 710 F.2d 798 (Fed. Cir. 1983). Stipulations by manufacturers and distributors to be bound by injunctive relief if ordered by the court in the instant case, however, would not be an entirely straightforward application of preclusion by consent. An agreement to be bound by a particular legal determination in a later action differs in at least several respects, including the fact that it does not generally require a party to take affirmative action to comply with a court order, but rather precludes that party from relitigating particular issues or claims already decided.
Preclusion by consent appears to be a flexible doctrine applied in a wide variety of situations. See 18A Wright & Miller § 4453. There is no need, however, to stretch it beyond its rational meaning here. Because any agreement would be entered into by express consent, there does not seem to be any reason why the parties should not shape that agreement to reflect the needs and realities of the present litigation. Plaintiff and any defendant could enter into a stipulation of dismissal with no costs on the condition that that defendant comply with any judgment entered by the court. Personal jurisdiction could be deemed to have been conceded by use of this device.
For the reasons stated above and on the record at the hearings held on March 11 and March 17, 2003:
1) Alamo Leather Goods, Inc.'s Motion to Dismiss is
2) Arms Technology, Inc.'s Motion to Dismiss is denied.
3) Bill Hicks & Co.'s Motion to Dismiss is denied.
4) Brazas Sporting Arms, Inc.'s Motion to Dismiss is
5) Chattanooga Shooting Supplies, Inc.'s Motion to
Dismiss is denied.
6) Euclid Avenue Sales Co.'s Motion to Dismiss is denied.
7) Excel Industries a/k/a Accu-Tek's Motion to Dismiss
8) Faber Brothers Inc.'s Motion to Dismiss is denied.
9) Hicks, Inc.'s Motion to Dismiss is denied.
10) Interstate Arms's Motion to Dismiss is denied.
11) Kiesler's Police Supply's Motion to Dismiss is denied.
12) Riley's Inc.'s Motion to Dismiss is denied.
13) Valor Corporation's Motion to Dismiss is denied.
14) Williams Shooters' Supply's Motion to Dismiss is
15) Carl Walther GmbH's Motion for Summary Judgment is
16) Fabbrica D'Armi Pietro Beretta S.p.A.'s Motion for
Summary Judgment is denied.
17) Plaintiff's Motion to Reinstate Heckler &
Koch, Inc.; Heckler & Koch GmbH; and Henry's
Tackle is denied.
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