The opinion of the court was delivered by: Cheryl L. Pollaká, United States Magistrate Judge.
REPORT AND RECOMMENDATION
On May 15, 2006, plaintiff City of New York (the "City") filed a complaint in the á above-captioned case against fifteen (15) out-of-state firearms dealers, seeking damages, abatement costs, and injunctive relief stemming from, inter alia, the alleged creation by the dealers of a public nuisance in New York City, in violation of New York Penal Law §§ 400.05(1) and 240.45. (Compl. *fn1 PP 1, 271-87). In its Complaint, plaintiff asserted that the defendant dealers, including defendant Adventure Outdoors, Inc. ("Adventure Outdoors" or "defendant"), engaged in certain sales practices that facilitated the acquisition of firearms by individuals prohibited by law from possessing those firearms. (Id. PP 6, 90-101, 273-74). These firearms were then recovered from these individuals and/or used in violent crimes in New York City within a relatively short time after their sale by defendants. (See id.).
On August 8, 2006, Adventure Outdoors, along with certain other defendant dealers, filed a motion to dismiss the Complaint for lack of personal jurisdiction. Following limited jurisdictional discovery, including the disclosure of certain information relating to defendant's sales of firearms, including trace requests received from law enforcement agencies (see Order of February 6, 2007 (Doc. No. 144)), the district court denied the moving defendants' motion to dismiss, finding that defendants' conduct was "sufficient to provide the minimum contacts necessary for an exercise of personal jurisdiction by the State of New York." City of New York v. A-1 Jewelry & Pawn, Inc., 501 F. Supp. 2d 369, 428 (E.D.N.Y. 2007) (Doc. No. 217).
On August 29, 2007, the City filed an Amended Complaint, seeking only injunctive relief, and limiting its allegations to the creation and maintenance of a public nuisance pursuant to New York Penal Law §§ 400.05(1) and 240.45. Among other things, the City sought an Order requiring the defendants to submit to the supervision of a court-appointed Special Master. (Am. Compl. PP 1, 274-86, p. 74). On September 21, 2007, defendant Adventure Outdoors filed a second motion, seeking to dismiss the Amended Complaint, again asserting lack of personal jurisdiction (Doc. No. 259). That motion was also denied by the district court on December 18, 2007 (Doc. No. 402).
The parties then engaged in substantive discovery and began preparations for trial as to defendant Adventure Outdoors. *fn2 On April 30, 2008, defendant brought a motion for summary judgment (Doc. No. 665); the district court denied the motion by Memorandum and Order dated May 21, 2008 (Doc. No. 750).
On June 2, 2008, after jury selection had begun, defendant's attorneys moved to withdraw as counsel, explaining that Adventure Outdoors had decided not to defend itself at trial. (Withdr. Mot. *fn3 at 1; Tr. *fn4 at 2, June 2, 2008). In an Order dated June 30, 2008 (Doc. No. 790), the district court noted a default by defendant, and on September 24, 2008, the Clerk of the Court entered a default. On September 30, 2008, plaintiff filed its motion for a default judgment, a redacted version of which was filed electronically on October 3, 2008 (Doc. No. 814). By Order dated October 2, 2008 (Doc. No. 822), the district court referred the motion to the undersigned for a Report and Recommendation, including findings of fact and law, if any, and the form of a decree to be issued by the district court. For the reasons set forth below, the Court respectfully recommends that the district court adopt the plaintiff's proposed findings of fact and conclusions of law as to Adventure Outdoors in their entirety and issue a decree as set forth below.
In addition, as explained below, the Court has reconsidered its September 3, 2008 Report and Recommendation regarding the City's motion for a default judgment against defendant Mickalis Pawn Shop, LLC ("Mickalis") and now respectfully recommends that an injunction issue regarding Mickalis containing the same terms as the Court recommends below as to Adventure Outdoors.
I. Factual and Procedural Background
Plaintiff, in its Amended Complaint, alleges that "thousands of handguns" have made their way to New York City and into the possession of individuals who are prohibited by law from owning firearms. (Am. Compl. P 2). These individuals often obtain handguns "directly or indirectly" from licensed firearms dealers who engage in illegal firearms sales practices, namely, so-called "straw purchases," in which a legal purchaser of a firearm immediately transfers possession of the firearm to an individual prohibited by law from possessing firearms. (Id. PP 2, 22, 58-63). Plaintiff notes that the New York State legislature has declared that illegally possessed handguns are a public nuisance and asserts that the criminal proclivity of individuals barred from possessing handguns creates a "common law public nuisance -- a condition that is injurious to the property, health, safety and comfort of a considerable number of persons." (Id. P 3). Indeed, plaintiff cites numerous incidents in which individuals in New York City have been injured or killed by illegally possessed handguns, including handguns sold by defendant Adventure Outdoors. (Id. PP 4, 6, 98-103).
Plaintiff asserts that between 1994 and 2001, 21 firearms sold by Adventure Outdoors, many of which were seized from illegal possessors and/or had been used in connection with crimes, were recovered in New York City, notwithstanding the fact that Adventure Outdoors is located approximately 800 miles from New York. (Id. 1199). *fn5 The specific crimes in New York City involving handguns from Adventure Outdoors include: (1) a 1996 Manhattan shooting of a man in the face by another man with a handgun; (2) a 1996 robbery of a Manhattan store by two men, one of whom used a gun to threaten and pistol-whip a store clerk; (3) a 1998 incident in the Bronx in which a man threatened another man with a gun; (4) a 2001 incident in Queens in which a man was arrested for firing a handgun into the air; and (5) a 2001 Queens incident in which, following reports of at least four gun shots fired, police arrested a man for possession of a loaded handgun. (Id. P 100). Plaintiff asserts that in each of these instances, the firearm used originated from Adventure Outdoors. Plaintiff also notes that the average "time to crime" -- that is, the "interval between the retail sale of a gun and its recovery in a crime" (id. P 57) -- of the firearms sold by Adventure Outdoors and recovered in New York City is 3.5 years, compared to a time to crime average of 6 years for all guns recovered in New York City in connection with crimes. (Id. P 102). In addition, plaintiff alleges that many of the handguns sold by Adventure Outdoors and recovered in New York City were "Saturday night specials" -- i.e., "cheap, poorly made handguns favored by criminals." (Id. P 103). The district court, in its August 15, 2007 Order denying the moving defendants' motion to dismiss, described Adventure Outdoors as "a preferred destination for straw purchasers." City of New York v. A-1 Jewelry & Pawn, Inc., 501 F. Supp. 2d at 398.
Prior to the filing of plaintiff's Complaint, the City retained investigators to test defendant's willingness to participate in straw purchases. As set forth in plaintiff's Amended Complaint, these investigators successfully simulated a straw purchase at the Adventure Outdoors store in Smyrna, Georgia, on or about April 8, 2006. (Am. Compl. PP 93-94). The City indicates that when these and other investigators attempted to simulate a straw purchase at other firearms dealers' places of business, many of these dealers "unequivocally identified the . . . scenario . . . as an attempted straw purchase" and some refused to complete the sale. (Id. P 95). The City has also identified 15 prosecutions of individuals who engaged in actual straw purchases of handguns sold by Adventure Outdoors and suggests that "it can reasonably be inferred" that defendant engaged in numerous other straw sales for which the City did not find related prosecutions. (Pl.'s Prop. Find. P 14; Proshansky Aff. P 21).
The City asserts that Adventure Outdoors has received information about straw purchases from the Bureau of Alcohol, Tobacco, Firearms and Explosives ("ATF") and thus should have recognized the simulated straw purchase as illegal. (See Am. Compl. PP 271-73). In addition, a former employee of Adventure Outdoors testified in depositions that defendant did not train her in how to recognize straw purchases and that, "based on her training, if she was suspicious of a gun purchaser but the purchaser passed a background check, she made the sale anyway." (Pl.'s Prop. Find. P 7; Proshansky Aff. Ex. 2).
The City also alleges that defendant should have been on notice that handguns it sold had been recovered in crimes, since ATF often contacts firearms dealers for á details concerning the sale of a recovered handgun. (Id. P 270). Indeed, discovery in this case revealed that between 2000 and 2006, ATF traced at least 183 firearms sold by Adventure Outdoors. (Pl.'s Prop. Find. P 27). Furthermore, ATF sent Adventure Outdoors a "demand letter," which is "a letter issued to firearms dealers who have ten (now 15) or more crime guns traced annually with times-to-crime of three years or less." (Id. P 30; Proshansky Aff. Ex. 9).
Following denial of defendant's motions to dismiss, trial preparations proceeded through May 2008, including the filing of numerous motions in limine by both parties and an exchange of exhibit lists. On May 27, 2008, jury selection began. Prospective jurors were given questionnaires, and the completed questionnaires were to be examined by the parties over the following three days and a group of prospective jurors instructed to return on June 2, 2008. (See Tr. at 9-11, May 27, 2008). On that date, the parties appeared before the district court, and defendant's attorneys moved to withdraw as counsel. (Withdr. Mot.; Tr. at 2, June 2, 2008). Counsel explained that defendant had "decided that it does not intend to defend itself at a bench trial." (Withdr. Mot. at 1). Adventure Outdoors had objected to several of the district court's rulings, including the court's conclusion that it was sitting as a court of equity and thus was only permitted to employ an advisory jury, not a constitutional jury. (See Tr. at 54-56, May 21, 2008 (citing Fed. R. Civ. P. 39(c))). According to counsel's motion, Adventure Outdoors felt that defending itself at trial would be a "futile exercise" and preferred instead "to appeal from any default judgment that may be entered against it." (Withdr. Mot. at 1).
The court noted that defendant's refusal to proceed would constitute a default (Tr. at 7, June 2, 2008), and the City requested that a default judgment be entered. (Id. at 18). The court provisionally denied the motion to withdraw, but allowed the parties an opportunity to submit briefs on the issues. (Id. at 6, 10, 13-15). Defendant's counsel filed a brief on June 16, 2008, and reiterated that defendant had "made the difficult decision not to defend itself" at trial. (Withdr. Mem. *fn6 at 1). In an affidavit attached to counsel's brief, the president of Adventure Outdoors stated that he had "discharged Renzulli Law Firm as trial counsel for Adventure Outdoors based on my decision not to participate in a bench trial," and that "I do not want Renzulli Law Firm to further represent the interests of Adventure Outdoors before this court." (Aff. of Jay Wallace, dated June 16, 2008 ("Wallace Aff.")).
In an Order dated June 30, 2008 (Doc. No. 790), the district court noted a default by Adventure Outdoors, and on September 22, 2008, plaintiff filed a written motion for entry of default (Doc. No. 805). On September 24, 2008, the Clerk of the Court entered a default. On September 30, 2008, plaintiff filed its motion for a default judgment, a redacted version of which was filed electronically on October 3, 2008 (Doc. No. 814). Along with its motion, plaintiff filed its Proposed Findings of Fact and Conclusions of Law, a Proposed Order Granting Injunctive Relief ("Pl.'s Prop. Order"), and a Memorandum of Law in Support of Plaintiff the City of New York's Motion for Entry of a Default Judgment ("Pl.'s Mem."). Plaintiff's Proposed Findings of Fact include information relating to, among other things, straw purchases and other violations of federal firearms laws occurring at Adventure Outdoors, trace requests received from ATF, firearms sold by defendant and recovered in New York City, and crimes involving those firearms. (Pl.'s Prop. Find. PP 1-41). The Proposed Conclusions of Law include: (1) a public nuisance in the form of a large number of illegally possessed firearms exists in New York City; (2) Adventure Outdoors has contributed to the existence and maintenance of this nuisance by engaging in straw purchases; (3) Adventure Outdoors has violated or aided and abetted violations of federal firearms laws; (4) defendant does not adequately train employees to recognize straw purchases; (5) Adventure Outdoors "de facto serves a New York market" because the guns it sells to straw purchasers "are repeatedly, and quickly, trafficked to New York City"; and (5) defendant's "indifference to established indicators of straw purchasing" demonstrates that defendant will continue to engage in this conduct unless a permanent injunction issues requiring defendant "to engage in certain remedial measures." (Pl.'s Prop. Conc. PP 1-6).
By Order dated October 2, 2008 (Doc. No. 822), the district court referred the motion to the undersigned for a Report and Recommendation, including findings of fact and law, if any, and the form of a decree to be issued by the district court. By Order dated September 25, 2008, this Court directed defendant to submit any papers in opposition to plaintiff's motion by October 24, 2008, and on October 23, 2008, the Court extended this deadline at defendant's request by two weeks. On November 8, 2008, defendant submitted a Memorandum of Law in Opposition to the City's Motion for the Entry of Default Judgment ("Def.'s Mem."), Proposed Findings of Fact and Conclusions of Law ("Def.'s Prop. Find." and "Def.'s Prop. Conc."), and the Declaration of Scott C. Allan in Support of Adventure Outdoors, Inc.'s Proposed Findings of Fact and Conclusions of Law ("Allan Decl."). *fn7 Defendant argues that "the City is not entitled to the entry of default judgment against Adventure Outdoors simply because it chose not to defend itself at a bench trial." (Def.'s Mem. at 3). Rather, defendant contends, because Adventure Outdoors filed an Answer to plaintiff's Amended Complaint and participated fully in discovery, the City is obligated to prove its claims by clear and convincing evidence at a trial, whether the defendant participates or not. (Id. at 3, 7).
Defendant's proposed findings of fact state, among other things, that: defendant sells handguns only to Georgia residents (Def.'s Prop. Find. P 4); only a small percentage of guns sold by Adventure Outdoors are Saturday night specials (id. P 7-8); defendant has sales procedures in place and trains its employees to prevent straw purchases (id. P 9-12); defendant has never knowingly sold a firearm to a straw purchaser or an individual prohibited by law from owning a firearm, except as part of an ATF sting operation (id. P 15); and the ATF considered defendant an exemplary dealer (id. 1116). Defendant's proposed findings also suggest that the trace requests and straw-purchase prosecutions identified by plaintiff do not suggest wrongdoing by Adventure Outdoors. Defendant's lengthy proposed conclusions of law include, among other things, that: this Court does not have personal jurisdiction over defendant (Def.'s Prop. Conc. PP 8-31); plaintiff's Amended Complaint has failed to state a cause of action on which relief may be granted (id. PP 32-49); plaintiff's claims are barred by the PLCAA (id. PP 50-66); defendant's failure to defend itself at trial does not entitle plaintiff to a default judgment (id. 112); and plaintiff must prove its claims by clear and convincing evidence and using only evidence which would be admissible at trial. (Id. P 3, 6).
On November 24, 2008, with the permission of the Court, the City submitted a Reply Memorandum in Support of Entry of Default Judgment ("Pl.'s Rep."). The City attacks defendant's arguments as advancing "the radical and completely unsupported proposition that a defendant may successfully defend against liability by simply walking away from legal proceedings whenever it wishes." (Pl.'s Rep. at 2). Plaintiff contends that a default judgment is appropriate in this case because Adventure Outdoors ...