City of Gary v. Smith & Wesson Corp.

• Decision Date: 23 May 2019
• Docket Number: Court of Appeals Case No. 18A-CT-181
• Citation: 126 N.E.3d 813
• Parties: CITY OF GARY, Appellant-Plaintiff/Cross-Appellee, v. SMITH & WESSON CORP., Sturm, Ruger & Company, Inc., Colt's Manufacturing Company, LLC, Beretta U.S.A. Corp., Phoenix Arms, Glock, Inc., Beemiller, Inc. d/b/a High-Point Firearms, Browning Arms, and Taurus International Manufacturing, Inc., Appellees-Defendants/Cross-Appellants
• Court: Indiana Appellate Court

126 N.E.3d 813

CITY OF GARY, Appellant-Plaintiff/Cross-Appellee,

v.SMITH & WESSON CORP., Sturm, Ruger & Company, Inc., Colt's Manufacturing Company, LLC, Beretta U.S.A. Corp., Phoenix Arms, Glock, Inc., Beemiller, Inc. d/b/a High-Point Firearms, Browning Arms, and Taurus International Manufacturing, Inc., Appellees-Defendants/Cross-Appellants

Court of Appeals Case No. 18A-CT-181

Court of Appeals of Indiana.

Filed May 23, 2019

Attorneys for Appellant: Michael E. Tolbert, Tolbert & Tolbert, LLC, Gary, Indiana, Jonathan E. Lowy, Brady Center to Prevent Gun Violence, Washington, DC

Attorneys for Appellees/Cross-Appellants Sturm Ruger & Company, Inc. & Colt's Manufacturing Company LLC: Terence M. Austgen, Elizabeth M. Bezak, Burke Costanza & Carberry LLP, Merrillville, Indiana

Attorney for Appellee/Cross-Appellant Sturm Ruger & Company, Inc.: James B. Vogts, Swanson, Martin & Bell, LLP, Chicago, Illinois

Attorneys For Intervenor The State of Indiana: Curtis T. Hill, Jr., Attorney General of Indiana, Thomas M. Fisher, Solicitor General, Kian Hudson, Julia C. Payne, Deputy Attorneys General, Indianapolis, Indiana

Attorneys for Amici Curiae Senators Jim Tomes, Mark Messmer, and Dennis Kruse, and Representatives Ben Smaltz, Jerry Torr, and Greg Steuerwald, Members of the Indiana General Assembly: James Bopp, Jr., Corrine L. Youngs, The Bopp Law Firm, PC, Terre Haute, Indiana

Crone, Judge.

Case Summary

[1] The City of Gary ("the City") appeals the trial court's grant of judgment on the pleadings on its amended complaint against various handgun manufacturers ("the Manufacturers"),¹ which includes claims for public nuisance, negligent distribution and marketing, and negligent design. The trial court ruled that the City's claims are barred by a 2015 amendment ("the Amendment") to Indiana Code Section 34-12-3-3 ("the Immunity Statute"), which made the statute retroactive to four days before the City filed its original complaint in 1999. The court also ruled that the Manufacturers are not entitled to attorney's fees and costs under Indiana Code Section 34-12-3-4. The court further ruled that, contrary to an earlier opinion from this Court in this case, the City's claims are also barred by the federal Protection of Lawful Commerce in Arms Act ("the PLCAA").

[2] On appeal, the City argues that the Amendment is unconstitutional and that its claims are not barred by either the Immunity Statute or the PLCAA. The State of Indiana has intervened to defend the Amendment's constitutionality. The Manufacturers argue that the City's lawsuit is an unlawful attempt to regulate firearms and that the trial court erred in denying them attorney's fees and costs under Indiana Code Section 34-12-3-4. We conclude as follows: (1) the City's lawsuit is not an unlawful attempt to regulate firearms; (2) the City has failed to establish that the Amendment is unconstitutional; (3) the Immunity Statute does not bar all of the City's claims; (4) the Manufacturers are not entitled to attorney's fees and costs; and (5) pursuant to the law of the case doctrine, we reaffirm our prior holding that the PLCAA does not bar the City's claims. Accordingly, we affirm in part, reverse in part, and remand for further proceedings.

Facts and Procedural History

[3] In August 1999, the City lodged a complaint for damages and injunctive relief against the Manufacturers and various handgun distributors and retail dealers. The complaint was dated August 27 and was file-stamped by the trial court clerk on August 30. The defendants filed a motion to dismiss for failure to state a claim pursuant to Indiana Trial Rule 12(B)(6), which the trial court granted.

[4] In January 2001, the City filed an amended complaint. In the first appeal in this case, the Indiana Supreme Court described the amended complaint as follows:

The complaint alleges that manufacturers of handguns typically sell to "distributors" who resell at wholesale to "dealers" who in turn sell at retail to the general public. Some categories of persons are prohibited by law from purchasing guns, and all dealer-defendants are alleged to have knowingly sold to illegal buyers through intermediaries in "straw purchases"....^{[2 ]} Some other practices of dealers are also alleged to generate illegal purchases. These include failure by some dealers to obtain the required information for background checks required by federal law, sales of a number of guns to the same person, and intentional "diversion" of guns by some dealers to illegal purchasers.

The City alleges that the manufacturers know of these illegal retail sales of handguns, and know that a small percentage of dealers, including the dealer-defendants here, account for a large portion of illegally obtained handguns. The City alleges the manufacturers and distributors have the ability to change the distribution system to prevent these unlawful sales but have intentionally failed to do so.

The City alleges that these and other practices generate substantial additional cost to the public in general and the City in particular. Possession of unlawfully purchased guns is claimed to contribute to crime that requires expenditure of public resources in addition to the obvious harm to the victims. The complaint alleges that seventy murders with handguns took place in Gary in 1997, and another fifty-four in 1998. From 1997 through 2000, 2,136 handguns used in crimes were recovered. Of these, 764 were sold through dealers who are defendants in this suit. The City also asserts that harm is suffered by the City at the time of the sale of an illegal handgun because these unlawful sales generate additional requirements to investigate and prosecute the violations of law.

In addition to challenging the distribution practice of the defendants, the City also alleges negligent design of the handguns by the manufacturers that contributes to these injuries. Finally, the City alleges that the manufacturers engage in deceptive advertising of their product by asserting that a gun in the home offers additional safety for the occupants when in fact the contrary is the case.

Count I of the complaint alleges that these facts support a claim for public nuisance.^[3] Count II asserts a claim for negligence in distribution of guns and Count III presents a claim for their negligent design. All Counts request compensatory and punitive damages and injunctive relief.

City of Gary v. Smith & Wesson Corp. , 801 N.E.2d 1222, 1227-29 (Ind. 2003) (" Gary 1 ").

[5] The defendants filed a motion to dismiss the City's amended complaint for failure to state a claim, which the trial court granted. On appeal, another panel of this Court affirmed in part and reversed in part. Our supreme court granted transfer, reversed the trial court's dismissal, and remanded for further proceedings on all three counts. Id. at 1249.

[6] In the meantime, the Indiana General Assembly had enacted the Immunity Statute, which became effective April 18, 2001. The statute states in pertinent part that, with certain exceptions not relevant here,

a person^{[4 ]} may not bring or maintain an action against a firearms or ammunition manufacturer, trade association, or seller for:

(1) recovery of damages resulting from, or injunctive relief or abatement of a nuisance relating to, the lawful:

(A) design;

(B) manufacture;

(C) marketing; or

(D) sale;

of a firearm or ammunition for a firearm; or

(2) recovery of damages resulting from the criminal or unlawful misuse of a firearm or ammunition for a firearm by a third party.

Ind. Code § 34-12-3-3.

[7] In 2005, the United States Congress enacted the PLCAA, which provides that "[a] qualified civil liability action may not be brought in any Federal or State court" and that "[a] qualified civil liability action that is pending on October 26, 2005, shall be immediately dismissed by the court in which the action was brought or is currently pending." 15 U.S.C. § 7902(a), - (b). A qualified civil liability action is

a civil action or proceeding or an administrative proceeding brought by any person against a manufacturer or seller of a qualified product [e.g., a firearm], or a trade association, for damages, punitive damages, injunctive or declaratory relief, abatement, restitution, fines, or penalties, or other relief, resulting from the criminal or unlawful misuse of a qualified product by the person or a third party ....

15 U.S.C. § 7903(5)(A). A qualified civil liability action does not include

(iii) an action in which a manufacturer or seller of a qualified product knowingly violated a State or Federal statute applicable to the sale or marketing of the product , and the violation was a proximate cause of the harm for which relief is sought, including--

(I) any case in which the manufacturer or seller knowingly made any false entry in, or failed to make appropriate entry in, any record required to be kept under Federal or State law with respect to the qualified product, or aided, abetted, or conspired with any person in making any false or fictitious oral or written statement with respect to any fact material to the lawfulness of the sale or other disposition of a qualified product; or

(II) any case in which the manufacturer or seller aided, abetted, or conspired with any other person to sell or otherwise dispose of a qualified product, knowing, or having reasonable cause to believe, that the actual buyer of the qualified product was prohibited from possessing or receiving a firearm or ammunition under [federal law].

Id. (emphasis added). "This exception has been referred to as the ‘predicate exception’ because its operation requires an underlying or predicate statutory violation." Smith & Wesson Corp. v. City of Gary , 875 N.E.2d 422, 429-30 (Ind. Ct. App. 2007) (" Gary 2 "), trans. denied (2009).

[8] In November 2005, the Manufacturers filed a motion to dismiss, asserting that the PLCAA barred the City's claims. The trial court denied the motion on the basis that PLCAA was unconstitutional. On appeal, another panel of this Court...