Another Victory for Mexico in Guns Litigation
April 2, 2024
Still flush with success from its win at the First Circuit against U.S. gun manufacturers, Mexico has scored a new victory in federal court—this time, against U.S. gun dealers. In Estados Unidos Mexicanos v. Diamondback Shooting Sports, Inc., the U.S. District Court for the District of Arizona (Judge Rosemary Márquez) ruled that Mexico could move forward on claims of negligence, negligent entrustment, and unjust enrichment under Arizona law. Like the First Circuit, Judge Márquez held that Mexico’s claims are not barred by the Protection of Lawful Commerce in Arms Act (PLCAA) because they fall within PLCAA’s “predicate” exception for actions in which a manufacturer or seller knowingly violated a state or federal law governing the sale or marketing of firearms.
Mexico’s Claims
In this case, Mexico sued five Arizona firearm dealers for various torts, violation of Arizona’s Consumer Fraud Act, and violations of the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Mexico alleged that the defendants knowingly participate in trafficking military-style weapons to drug cartels in Mexico. Although Mexico has just one gun store and strict laws on gun ownership, its homicide rate is 4.5 times the world average. In 2019 alone, violence in Mexico caused an estimated $238 billion in economic loss. According to the complaint, the five defendants were among the ten dealers in Arizona with the most guns recovered at crime scenes in Mexico.
Standing
The district court first held that Mexico has standing to bring these claims. Under Article III, a plaintiff must show (1) injury in fact that is (2) fairly traceable to the defendant’s actions and (3) likely to be redressed by a favorable decision. Defendants did not contest that Mexico had suffered injury in fact.
Defendants did argue that Mexico’s injury was not traceable to their actions because the injuries were caused by the independent actions of third parties who criminally misused the firearms. But the court held that indirect injury could be sufficient when third parties act in predictable ways. Here, the complaint plausibly alleged that the defendants knew or should have known that the guns they sold would end up with cartel members in Mexico who would use them unlawfully.
Defendants also argued that winning this case could not redress Mexico’s injuries because no award of damages against the defendants could compensate for economic losses on the scale alleged in the complaint and because even putting the defendants out of business would not appreciably reduce the number of guns flowing to Mexico. As the district court noted, however, a plaintiff need not show that a favorable decision will relieve all its injury. Mexico adequately alleged that success in this case “would reduce the alleged harm to some extent.”
Finally, defendants argued that Mexico lacked standing to bring claims on behalf of its citizens because the parens patriae doctrine does not extend to foreign countries. The district court disagreed, noting allegations that gun violence affects a large part of Mexico’s population, that Mexico has an interest apart from that of its citizens, and that Mexico asserted a quasi-sovereign interest. Relying on the Supreme Court’s decision in Alfred L. Snapp & Son, Inc. v. Puerto Rico (1982), the court held that the required quasi-sovereign interest did not have to arise from participation in the U.S. federal system and that Mexico’s quasi-sovereign interest in the well-being of its residents sufficed.
PLCAA
Congress enacted PLCAA in 2005 to protect gun manufacturers and sellers from certain lawsuits. PLCAA prohibits plaintiffs from bringing a “qualified civil liability action” in any federal or state court. Congress defined“qualified civil liability action” to mean a civil action against a gun manufacturer or seller for damages or other relief “resulting from the criminal or unlawful misuse of a qualified product by the person [bringing the action] or a third party.”
Mexico argued that PLCAA does not apply extraterritorially to suits based on injuries outside the United States. But the district court held that applying PLCAA in this case would be a domestic application of the statute. The court agreed with the First Circuit that PLCAA’s focus is regulating the kinds of suits that can be brought in U.S. courts and protecting the interests of the U.S. firearms industry. “Defendants’ alleged conduct relevant to the PLCAA’s focus—the sale of firearms—occurred exclusively within the United States,” the court wrote, so the presumption against extraterritoriality did not bar PLCCA’s application.
But the court went on to hold that Mexico’s claims fit within PLCAA’s “predicate” exception. This exception permits actions “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.” This exception is commonly known as the “predicate” exception because violation of a state or federal statute is a predicate to liability. The First Circuit held that the exception is not limited to claims for violations of the state and federal sales and marketing statutes themselves. The First Circuit focused on Congress’s use of the phrase “in which” in the predicate exception, which contrasts with its use of the word “for” in other exceptions. Judge Márquez agreed.
Here, the complaint alleges that the defendants violated federal laws on unlicensed firearm dealing, straw sales, and trafficking, and made false entries on ATF Form 4473. Although the laws on straw sales and trafficking were passed only in 2022, the complaint claims that the defendants’ violations of these federal laws are continuing.
Mexico’s Statutory Claims
The district court rejected Mexico’s claims under Arizona’s Consumer Fraud Act. The complaint failed to identify any misrepresentations in the defendants’ advertisements, the court reasoned. Moreover, the complaint failed to allege that Mexico or its citizens relied on those advertisements to their detriment.
The court also rejected Mexico’s RICO claims. Although RICO has a private right of action in 18 U.S.C. § 1964(c), it requires injury to business or property in the United States, which Mexico could not show. Mexico tried to rely instead on RICO’s provision for injunctive relief in § 1964(a), which contains no similar requirement. But the court rejected the suggestion that this provision allows private parties—and not just the Attorney General—to seek injunctions.
Choice of Law
Turning to Mexico’s tort claims, the district court had to decide what law governs. Mexico argued for Mexican law because the injuries occurred in Mexico. Defendants argued for Arizona law because their conduct occurred in Arizona.
Arizona follows the Restatement (Second) of Conflicts with respect to torts. Section 145 of the Restatement (Second) instructs courts to apply the law of the jurisdiction with the “most significant relationship.” This depends on contacts such as the place of the injury, the place of the conduct causing the injury, the domicile of the parties, and the place where their relationship is centered, as well as the factors listed in Section 6.
Although the district court acknowledged that the place of injury usually plays an important role in tort conflicts, the court diminished its significance on grounds of foreseeability and because third parties played a role in causing the injuries. There is some tension between this reasoning and the court’s conclusion in its earlier standing analysis that the defendants knew or should have known that the guns they sold would go to drug cartels.
Instead, the court emphasized the place of conduct and the defendants’ “justified expectations”—one of the Section 6 factors—because “[d]efendants mold their relevant conduct to conform to the laws of Arizona and of the United States, rather than the laws of Mexico.” The court also reasoned that “applying the tort law of Mexico to the claims at issue in this case could raise complex concerns involving international relations and the intersection between the Second Amendment and foreign laws.”
Another of the Section 6 factors is “ease in the determination and application of the law to be applied.” Although the district court did not expressly rely on this factor, it may also have influenced the court’s decision. It is certainly easier for a federal judge in Arizona to determine and apply Arizona common law than Mexican civil law, and Judge Márquez’s decision on choice of law also eliminates the need for expert testimony on foreign law.
The district court went on to hold that Mexico had failed to state a claim for public nuisance under Arizona law, but that Mexico has stated viable claims for negligence, gross negligence, and negligence per se, as well as for negligent entrustment and unjust enrichment.
Conclusion
Mexico has now won two significant victories in its litigation to stop the trafficking of military-style weapons to drug cartels operating there. In the case against gun manufacturers, a cert petition is likely, but I see no circuit split that would warrant Supreme Court review. Assuming that cert is denied, both cases will presumably move to discovery. Indeed, Judge Márquez would be justified in permitting discovery immediately, given the slim grounds for Supreme Court review.
Discovery could be a disaster for the defendants in both cases. The complaints allege that U.S. gun manufacturers and U.S. gun dealers have knowingly participated in scheme to arm drug cartels with military-style weapons causing thousands of deaths and billions of dollars in damages. Discovery will reveal if this is true.