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CITY OF NEW YORK v. BERETTA U.S.A. CORP.

April 12, 2004.

CITY OF NEW YORK, Plaintiff, -against- BERETTA U.S.A. CORP.; BROWNING ARMS CO.; CHARCO 2000, INC.; COLT'S MANUFACTURING CO., INC.; FORJAS TAURUS, S.A.; GLOCK INC.; GLOCK GmbH; PHOENIX ARMS; SIGARMS, INC.; SIG ARMS SAUER GMBH f/k/a J.P. SAUER & SOHN INC.; SMITH & WESSON CORP.; STURM, RUGER AND CO., INC.; TANFOGLIO FRATELLI S.R.L.; TAURUS INTERNATIONAL MFG, INC.; ACUSPORT CORP; ALAMO LEATHER GOODS, INC.; BANGERS, L.P.; BILL HICK'S AND CO., LTD.; BRAZAS SPORTING ARMS, INC.; CAMFOUR, INC.; CHATTANOOGA SHOOTING SUPPLIES, INC.; DAVIDSON'S SUPPLY CO., INC.; DIXIE SHOOTERS SUPPLY INC.; ELLET BROTHERS, INC.; EUCLID AVENUE SALES CO.; FABER BROTHERS, INC.; GLEN ZANDERS FUR AND SPORTING GOODS, CO.; HICKS, INC.; KIESLER POLICE SUPPLY, INC.; LEW HORTON DISTRIBUTING CO., INC.; LIPSEY'S, INC.; MKS SUPPLY, INC.; RILEY'S, INC.; RON SHIRK'S SHOOTERS SUPPLY, INC.; RSR GROUP, INC.; SCOTT WHOLESALE CO, INC.; SOUTHERN OHIO GUN, INC.; SPORTS SOUTH, INC.; VALOR CORP.; WALTER CRAIG, INC.; and WILLIAMS SHOOTERS SUPPLY, Defendants


The opinion of the court was delivered by: JACK WEINSTEIN, Senior District Judge

MEMORANDUM JUDGMENT & ORDER (Motion to Dismiss)
I. Introduction
The City of New York sues manufacturers, importers and distributors of firearms for common law and statutory public nuisance. It asserts that the imprudent policies and practices of defendants in manufacturing, marketing, distributing, and selling guns substantially increase levels of gun use, crime, deaths, and injuries in New York City.

  Defendants move to dismiss on the grounds that: (1) the City is precluded from bringing suit by the decision of the New York Supreme Court in People v. Sturm, Ruger & Co., Inc., Index No. 402586/00 (Aug. 10, 2001), aff'd, 761 N.Y.S.2d 192 (N.Y. A.D. 2003), leave to appeal denied, 100 N.Y.2d 514 (N.Y. 2003) ("Sturm, Ruger"), a public nuisance suit brought by the State of New York in its par ens patriae capacity; (2) the complaint fails to state a claim for public nuisance; and (3) the injunctive relief demanded by the City places an impermissible burden on interstate commerce in violation of the Commerce Clause and Due Process Clause. For the reasons stated below, the motion to dismiss is denied.

  II. Factual and Procedural History The City of New York brought this action against manufacturers and importers of handguns and other firearms in June 2000 seeking monetary and injunctive relief. An amended complaint was filed in September 2000. Because the terrorist attacks of September 11, 2001 prevented the City from accessing its files, the case was stayed. In January 2004, the stay was lifted and the City was granted leave to amend its complaint a second time. City of New York v. B.L. Jennings, Inc., 219 F.R.D. 255, 256 (E.D.N.Y. 2004). In its second amended complaint, the City dropped causes of action based on negligence and a demand for monetary damages. The suit is now solely an equitable claim seeking an injunction to abate a public nuisance.

  Defendants are manufacturers, importers and distributors of firearms that have allegedly been possessed or used illegally in New York City. The City asserts that, as a result of defendants' failure to institute appropriate marketing and distribution practices, defendants' guns are diverted into an illegal market catering to juveniles, criminals and other persons prohibited from owning guns. It alleges that defendants know or should know that a substantial number of their guns are diverted into the hands of criminals and that defendants could, but do not, take steps to reduce the harm occasioned by the use of these guns in New York to kill, maim, rob, and conduct other illegal activity, all to the great harm of the City.

  The firearms market consists of primary and secondary tiers. The primary market is composed of transactions through which new firearms move from manufacturers and importers through wholesale distributers and retail dealers to a first retail purchaser. The secondary segment is characterized by the illegal sale and purchase of guns by non-federally licensed individuals. The City asserts that firearms move quickly from the legal primary market to the illegal secondary market, which is a significant source of firearms for criminals. It alleges that diversion from the primary, legal market to the secondary, illegal market is caused in large part by defendants' marketing and distribution practices. Defendants have allegedly failed to prevent diversion to the illegal market by, inter alia, failing to (1) monitor corrupt retailers; (2) require retail sales only through storefront establishments; (3) limit sales made at gun shows; (4) prohibit straw sales by retailers; (5) limit sales of multiple guns to the same person; and (6) limit sales to dealers in states with lax gun laws. Defendants' inadequate oversight and supervision of the sale of their guns, it is claimed, results in many guns being transported into New York City where they are used criminally.

  A unique serial number is stamped into every gun sold by a licensed manufacturer, which may not be obliterated. Each manufacturer, wholesaler and retailer keeps a record by serial number of every gun it sells and to whom it is sold. The Bureau of Alcohol, Tobacco, Firearms and Explosives ("ATF") has the ability to trace a gun's chain of sale using its serial number. Traces are initiated by requests from law enforcement agencies to ATF to determine the chain of sale of a firearm, usually one recovered in connection with a criminal investigation. Upon receipt of a trace request, ATF contacts the manufacturer identified by the gun's serial number. Firearms distributors and retailers down the line in the primary market in turn receive requests for gun traces from ATF until the consumer to whom the gun was sold by the retailer is identified. The enquiring law enforcement agency is informed of the results of the trace. Trace results are also recorded and retained by ATF in databases in the Federal Firearms Tracing System. See generally Report of the Special Master Regarding Certain Data Maintained by the Bureau of Alcohol, Tobacco. and Firearms, NAACP v. Acusport Corp., 210 F.R.D. 268 app. A(E.D.N.Y. 2002). The City cites data indicating that, in the period from August 1, 1997 to July 31, 1998, ATF traced 8,437 guns used in crimes in New York City. These guns were used in the commission of 433 robberies, 309 assaults, 278 homicides, 143 narcotics crimes, 101 burglaries, thefts or frauds, and 7,123 other firearms-related offenses. The complaint asserts that, when receiving ATF trace requests, defendants learn that guns sold by them have probably been involved in criminal activity, information they could use to support more prudent marketing practices, such as closing off the flow of guns to specific retailers or first purchasers connected to a disproportionate number of traces. ATF trace data, the City contends, can be used by defendants to reduce the illegal flow of weapons into New York City without interfering with ongoing criminal investigations.

  The City alleges that, by acting to create, supply and maintain the illegal market for guns, defendants have created a public nuisance in New York City. Defendants' conduct, it is claimed, has caused loss to the City itself as a municipal entity; deprived its residents of the peaceful use of public streets, sidewalks and parks; interfered with commerce and travel in New York City; and endangered the property, health and safety of New Yorkers.

  The City requests an injunction enjoining the public nuisance by requiring defendants to adopt a variety of prudent marketing practices including the monitoring and supervision of distributors and retailers with whom defendants do business.

  III. Preclusion

  Contrary to defendants' contention, the City's claim is not barred as a matter of res judicata by the decision of the New York Supreme Court in Sturm, Ruger, Index No. 402586/00, or by the affirmation of that decision by the Appellate Division, 761 N.Y.S.2d 192. Brought by the Attorney General of the State of New York on behalf of the people of New York in his parens patriae capacity, Sturm, Ruger was dismissed for failure to state a cause of action for public nuisance. Index No. 402586/00 at 1-2. Because it was dismissed before answers were filed or discovery was taken, and the trial court specifically noted facts, which, if alleged, might be sufficient to state a cause of action, see id. at 26-27, the decision does not constitute a final judgment on the merits of a similar claim.

  There is an additional independent reason for denying preclusion in the instant case. The substantial degree of autonomy historically enjoyed by New York City to act on matters of local concern, as well as the proper delineation of authority between the Corporation Counsel of the City of New York and the Attorney General of the State of New York, require that the City not be characterized as a privy of the State for res judicata purposes.

  Federal courts are mandated to give preclusive effect to a state court decision where such an effect would be given by the courts of that state. Alien v. McCurry, 449 U.S. 90, 96 (1980) (citing 28 U.S.C. § 1738). New York law determines the effect of the state court's decision in Sturm, Ruger. In New York the doctrine of res judicata requires that once a final decision on the merits is issued on a claim, all other claims among the parties or their privies arising out of the same transaction or series of transactions are barred. Green v. Santa Fe Indus., Inc., 514 N.E.2d 105, 108 (N.Y. 1987); In re Shea's Will, 132 N.E.2d 864, 868 (N.Y. 1956).

 A. Effect of Motion to Dismiss

  "A judgment dismissing a cause of action before the close of the proponent's evidence is not a dismissal on the merits unless it specifies otherwise, but a judgment dismissing a cause of action after the close of the proponent's evidence is a dismissal on the merits unless it specifies otherwise." N.Y. CPLR 5013. The disposition need not contain the words "on the merits" if it appears from the judgment that the dismissal was on the merits. Strange v. Montefiore Hospital and Medical Ctr., 450 N.E.2d 235, 236 (N.Y. 1983).

  A granted motion to dismiss is generally not resjudicata of the entire merits of a case, but only of the point actually decided. Plattsburgh Quarries, Inc. v. Palcon Indus., Inc., 513 N.Y.S.2d 861 (N.Y. App. Div. 1987); DeRonda v. Greater Amsterdam School District, 458 N.Y.S.2d 310, 312 (N.Y. App. Div. 1983). If the dismissal was based on insufficiency of the pleadings pursuant to New York CPLR 3211(a)(7), a new action that remedies the deficiency will not be precluded. See 175 East 74th Corp. v. Hartford Acc. & Ind. Co., 416 N.E.2d 584, 586 n.1 (N.Y. 1980); cf. Lampert v. Ambassador Factors Corp., 698 N.Y.S.2d 234, 235 (N.Y. App. Div. 1999) (dismissing second suit on resjudicata grounds but noting that result might have been different if plaintiff had supplied the omission determined to have existed in the prior complaint). Given the limited scope of a Rule 3211(a)(7) determination, courts are reluctant to find the dismissal of a prior complaint on the pleadings sufficient to preclude a second action. See, e.g., Hodge v. Hotel Employees and Rest. Employees Union Local 100 of the AFL-CIO, 703 N.Y.S.2d 184, 185 (N.Y. App. Div. 2000); Amsterdam Savings Bankv. Marine Midland Bank, 528 N.Y.S.2d 184, 185 (N.Y. App. Div. 1988); Plattsburgh Quarries, Inc. v. Palcon Indus., Inc., 513 N.Y.S.2d 861 (N.Y. A.D. 1987).

  The New York Supreme Court's dismissal of the complaint in Sturm, Ruger does not constitute a judgment on the merits which would bar the City's public nuisance claim. The allegations in the instant suit are not identical to those in the state case. Rather, the City's complaint corrects the defects and omissions in pleading identified by the court in Sturm, Ruger. See Part IV.C, infra. B. Privity of a Non-Parry

  A judgment on the merits in a prior action is binding not only on the parties to that action, but on those in privity with them. Green v. Santa Fe Indus., Inc., 514 N.E.2d 105, 108 (N.Y. 1987). "The term privity does not have a technical and well-defined meaning. Rather it is an amorphous concept not easy of application." Juan C. v. Cortines, 679 N.E.2d 1061, 1065 (N.Y. 1997) (internal quotations and citations omitted). It must be determined on a case-by-case basis. See Watts v. Swiss Bank Corp., 265 N.E.2d 739, 743 (N.Y. 1970).

  To establish privity of a nonparty with a party to an earlier litigation, "the connection between the parties must be such that the interests of the nonparty can be said to have been represented in the prior proceeding." Green, 514 N.E.2d at 108. Privity is determined by considering whether the circumstances "of the actual relationship, their mutuality of interests and the manner in which the nonparty's interests were represented in the earlier litigation establishes a functional representation such that the nonparty may be thought to have had a vicarious day in court." Slocum on Behalf of Nathan A. v. Joseph B., 588 N.Y.S.2d 930, 931 (N.Y. App. Div. 1992) (internal quotation and citation omitted). Privity may also be found where the party to be barred controlled the conduct of the prior litigation to further its own interests. Green, 514 N.E.2d at 108.

  1. Privity with State under Parens Patriae Doctrine

  The doctrine of parens patriae grants standing to a state to sue on behalf of its citizens. See Alfred L. Snapp & Son, Inc. v. Puerto Rico, 458 U.S. 592, 607 (1982). "The doctrine is not limited to suits between [s]tates, but also applies to suits in which the defendant is not a [s]tate." Connecticut v. Cahill, 217 F.3d 93, 97 (2d Cir. 2000). To maintain such an action, the state must assert a sovereign interest apart from the interests of particular private parties, such as a general interest in the health and well-being of its residents. Alfred L. Snapp & Son, 458 U.S. at 607.

  It is presumed that a state suing in its parens patriae capacity will adequately represent the position of its citizens. Alaska Sport Fishing Ass'n v. Exxon Corp., 34 F.3d 769, 773 (9th Cir. 1994). Thus courts have held that when parens patriae authority is asserted, it can bind the citizens of a state as privies for resjudicata purposes. See, e.g., City of Tacoma v. Taxpayers of Tacoma, 357 U.S. 320, 340-41 (1958) (taxpayers of Tacoma, as citizens of State of Washington, were represented by State in prior proceedings and were thus bound by the judgment); Washington v. Washington State Comm'l Passenger Fishing Vessel Ass'n, 443 U.S. 658, 692 n.32 (1979) (commercial fishing associations and their members, as citizens of State of Washington, were bound by injunction in prior case to which State was a party); Alaska Sport Fishing Ass'n v. Exxon Corp., 34 F.3d 769, 774 (9th Cir. 1994) (sports fishermen were privies of government under parens patriae doctrine, subject to resjudicata bar from asserting lost recreational use claims from Exxon Valdez oil spill); Badgley v. City of New York, 606 F.2d 358, 364 (2d Cir. 1979) (terms of consent decree entered into in prior suit in which State of Pennsylvania acted as parens patriae were conclusive upon all Pennsylvania citizens and binding upon their rights); United States v. Olin Corp., 606 F. Supp. 1301, 1308 (N.D. Ala. 1985) (prior suit by State of Alabama, in its parens patriae capacity, to abate public nuisance created by presence of contaminants barred residents of that state from seeking injunctive relief to require corporations to remove same contaminants); cf. Lucas v. Planning Bd. of the Town of LaGrange, 1 F. Supp.2d 310, 328 (S.D.N.Y. 1998) (town "adequately represented" its citizens so that they were bound by terms of consent decree in prior litigation). Such cases generally focus on the distinction between public and private rights, permitting citizens to bring suit, notwithstanding a prior action by the state, where they allege violations of purely private interests that have caused particular damage to the individual. See Richards v. Jefferson County, Ala., 517 U.S. 793, 803-04 (1996); Stasky v. Paramount Communications, Inc., 1 F.3d 1464, 1470 (10th Cir. 1993); Lucas, 1 F. Supp.2d at 327-28.

  Analysis of public versus private rights in the context of parens patriae litigation has largely been limited to the federal courts and confined to consideration of successive government and citizen actions. Courts have engaged in a different analysis when considering successive governmental litigation:
[S]uccessive governmental litigation is most likely to require determination of the relative authority of different government agencies . . . Successive government and citizen actions, on the other hand, ordinarily focus on distinctions between public and private rights and potential conflicts of interest; the relative authority of different government agencies is not often a problem.
18A C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure: Jurisdiction § 4458 at 552 (2d ed. 2002).

  The issue of whether a prior case brought by New York State in its parens patriae capacity will bar the City of New York or other sub-state entities from subsequently bringing suit on the same cause of action has apparently never been decided by New York state courts. Defendants argue that the City of New York should be precluded from bringing this action because it seeks to vindicate the same interest on behalf of the same citizens bound by the decision of the New York Supreme Court in Sturm, Ruger. The City is not precluded under the doctrine of res judicata, however, simply because its residents, if suing as private plaintiffs, might be barred from bringing suit. The City's interest cannot be characterized as coterminous with that of its inhabitants'; it has a municipal interest that is separate and distinct from, and not duplicative of, the interests of individual New Yorkers. Given that the instant case involves a subsequent suit by a sub-state governmental body, not a private citizen, it is appropriate to examine New York law governing the relative authority of governmental entities, particularly the relationship between the State and City of New York. See Parts III.B.2 & 3, infra.

  2. Privity between Governmental Entities Generally

  Under some circumstances, a final decision on the merits that is binding on one governmental agency or official may not be binding on another agency or official. See Juan C. v. Cortines, 679 N.E.2d 1061, 1066 (N.Y. 1997).

 
If the second action involves an agency or official whose functions and responsibilities are so distinct from those of the agency or official in the first action that applying preclusion would interfere with the proper allocation of authority between them, the earlier judgment should not be given preclusive effect in the second action.
Id. (quoting Restatement (Second) of Judgments, § 36, cmt. f). The source of authority of the governmental units is not dispositive of whether they are in privity for preclusion purposes. More compelling is their actual and statutory relationship and functions, which may be indicative of their relative independence. See id. (citations omitted).
  In Juan C. v. Cortines, the New York Court of Appeals considered whether the doctrine of collateral estoppel applied to preclude education officials from separately determining the suspension and reassignment of a student found with a gun at school after the Family Court, in a juvenile delinquency proceeding, had suppressed the gun and dismissed the delinquency petition. In determining whether the education officials and the family court prosecutor could be considered in privity for purposes of preclusion, the court looked to the "nature, particular function, and purpose" of the two governmental entities. Id. at 1066. Despite the fact that Corporation Counsel had acted as prosecutor in the family court proceeding and subsequently represented the education officials, the court found his roles in the two procedures to be "functionally discrete and traced to very different source lines of authority." Id. The court looked to the actual relationship between the two agencies and the statutory framework delineating the role and scope of authority of the Corporation Counsel in juvenile delinquency proceedings. Id. at 1066-68. It concluded that:
In law, purpose and actual practice, the [educational official's] procedures and wider educational community concerns are functionally and fundamentally discrete and independent from the [Corporation Counsel's] uniquely delegated and described responsibility in a juvenile delinquency proceeding in Family Court.
Id. at 1068.

  New York courts have largely refused to find two functionally independent governmental entities in privity with each other for purposes of preclusion. See, e.g., Brown v. City of New York, 458 N.E.2d 1250, 1251 (N.Y. 1983) (district attorney and City of New York not in privity); Saccoccio v. Lange, 599 N.Y.S.2d 306 (N.Y. App. Div. 1993) (district attorney and county attorney not in privity); Doe v. City of Mount Vernon, 548 N.Y.S.2d 282 (N.Y. App. Div. 1989) (district attorney and county not in privity); People v. Morgan, 490 N.Y.S.2d 30 (N.Y. App. Div. 1985) (city housing authority and district attorney not in privity); see also 18 A C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure: Jurisdiction § 4458 at 558-59 (2d ed. 2002) ("[S]tate law may recognize substantial autonomy that frees a subdivision from the burdens — and even the benefits — of litigation by a state agency.") (citing Harris County, Texas v. Carmax Auto Superstores, Inc., 177 F.3d 306, 318-19 (5th Cir 1999) (county not in privity with or virtually represented by state attorney general)). But see People ex. rel. Dowdy v. Smith, 399 N.E.2d 894, 896 (N.Y. 1979) (People qua prosecutor stood in "sufficient relationship" with Division of Parole to be considered in privity).

  3. Privity between New York State and New York City

  The law affords New York City a substantial degree of autonomy from the State. To understand why this is the case, it is helpful to examine the historical development of the law of municipal corporations and the struggle for the right to local self-government or "home rule." See Parts III.B.3.a & b, infra. As a result of the home rule movement in New York, the state constitution now contains a bill of rights for local government and grants municipalities a wide latitude to legislate on matters of local concern such as the safety, health and well-being of their residents. See N.Y. Const., art. IX, discussed in greater detail in Part III.B.3.C, infra. One issue of particular local concern to New York City is the problem of gun-related violence. Although deaths and injuries due to firearms occur throughout the State, the prevalence and severity of the problem in the City means that its priorities are functionally and fundamentally discrete from those of the State. See Part III.B.3.d, infra. In light of the respect for local autonomy embodied in New York law, precluding the City from bringing a suit aimed at redressing the problem of gun-related violence would interfere with its authority to promote the safety and well-being of its inhabitants. Barring the City from litigating its public nuisance claim would also interfere with the proper delineation of authority between the Corporation Counsel and the Attorney General. See Part III.B.3.6, infra. a. Development of the Legal Status of Cities

  For most of recorded human history, cities have been a principal factor in the progress of civilization. 1 Eugene McQuillin, The Law of Municipal Corporations & sec; 1.01 at 3 (3d ed. 1999) (hereinafter Mun. Corp.); see also People v. Morris, 13 Wend. 325 (N.Y.Sup.Ct. 1835) ("The forming of cities into communities, corporations, or bodies politic, and granting them the privileges of municipal jurisdiction, contributed more than any other cause to introduce regular government, police and arts, and to diffuse them over Europe."). Because the city is an entity intermediate between the state and the individual, legal theorists have struggled over how to characterize its legal status. Over time, the law governing cities has evolved into a delicate balance between the reality that cities are creations of the state, subject to its power and authority, and the need for substantial local autonomy.

  Originally formed as an economic association of merchants seeking protection from outside control, the medieval town is considered "the ancestor of the modern city." See Gerald E. Frag, The City as a Legal Concept, 93 Harv. L. Rev. 1059, 1081, 1083 (1980). English merchants were able to establish a degree of autonomy from the King and the nobility which, in turn, fostered a strong sense of community within the town. Id. at 1083. Over time, the town began to emerge as a separate entity with rights and duties independent of, and often contrary to, those of its inhabitants. The first city charter was granted by King Henry VI in 1439. Id. at 1087.

  The early English town was characterized by its relationship to the King. The liberty of towns and the protection of freehold interests had been established by the Magna Carta; even so, the King persistently sought control over the merchant class. Id. at 1091. In 1682, Charles II asserted the right to revoke the corporate status of the City of London. In his view, abrogation of a London's charter for wrongdoing was integral to royal power. Id. at 1092-93. City officials, however, contended that its corporate charter was a vested property right which could not be taken away. Id. at 1093. "The King's victory in the London case . . . established the legal tradition of royal control ...


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