Remington Outdoor Co., the owner of the century-old Remington gun company and other firearms manufacturers, made crystal clear that financial strains were behind its bankruptcy filing Monday.
The company said that it had ramped up production and borrowing in 2016 based on expectations that a Democratic administration in the White House hostile to gun rights would drive sales through the roof in 2017 and beyond. Instead, Donald Trump won the presidency, and expectations of higher sales evaporated.
But factors related to firearms liability law suggest that more than economics may be at work. Specifically, Remington — indeed, the entire firearms industry — is on tenterhooks waiting for a potential landmark ruling from the Connecticut Supreme Court.
There are a lot of ways organizations can use bankruptcy to maneuver around the tort system.
The court has been expected to rule any moment on assertions that Remington’s reckless sales policies outweigh its protection from lawsuits under federal law. That’s the position taken by parents of children killed by a Remington-made Bushmaster AR-15 rifle wielded by Adam Lanza at Sandy Hook Elementary School in Newtown, Conn., on Dec. 14, 2012.
The court’s ruling, however, is likely to be stayed during the bankruptcy, which could last for months. That could give the company some breathing room to try reaching a negotiated settlement with the parents that removes the threat to federal immunity. That’s the view of Heidi Li Feldman, a tort law expert and legal theorist at Georgetown Law School.
“There are a lot of ways organizations can use bankruptcy to maneuver around the tort system,” Feldman told me. Typically, the goal is to force a financial settlement on plaintiffs at pennies on the dollar in a settlement. “This doesn’t look like that,” she says. Instead, she speculates, Remington may fear that “the plaintiffs’ case has legs, and it’s very bad for Remington.”
PLCAA doesn’t absolve gunmakers of liability in all circumstances. There are carve-outs for “negligent entrustment” and for violations of “predicate statutes.” The first covers cases in which the gunmaker sold a weapon when it knew or should have known that the sale “involves unreasonable risk of serious injury.”
The parents contend that the Connecticut Unfair Trade Practices Act, which forbids improper marketing, is a predicate statute that was violated when Remington “marketed a military weapon designed to inflict mass casualties to an untrained civil population, specifically targeting violence-prone young men.”
A lower state court threw out the parents’ lawsuit in 2016, citing PLCAA. But they appealed to the state Supreme Court, which held oral arguments at the end of last year. The parents’ position, Feldman says, “is not a slam-dunk winner by any means; but neither is it crazy.”
Such a ruling also would allow the parents to start discovery. That process could unearth reams of internal communications that could be embarrassing if they indicated, say, that Remington deliberately structured its marketing to feed a market of young adults harboring fantasies of mass mayhem.
Remington Chief Financial Officer Stephen P. Jackson Jr. made a strong case in the bankruptcy filing that the company was driven to its knees by the economics of gun sales in 2017. Remington not only found itself with millions of dollars in excess inventory last year, but stiff competition from other gunmakers that also had ramped up manufacturing in anticipation of a sales boom under a continued Democratic regime. Discounting and costly promotional marketing swept through the entire industry. Following the shooting in Parkland, Fla., once-reliable retailers, including Dick’s Sporting Goods and Walmart, either placed new restrictions on gun sales or abandoned them entirely.
Still, the timing of the bankruptcy filing lends credence to Feldman’s theory. Remington originally announced its plans to file for bankruptcy on Feb. 12. But it delayed the filing after the killing of 17 students and teachers at Marjory Stoneman Douglas High School in Parkland on Feb. 14, apparently reasoning that the optics of seeking court protection days after a mass shooting would look just too putrid.
But delaying the filing any further now would increase the risk that the Connecticut Supreme Court would rule before the bankruptcy law’s automatic stay of civil court proceedings could be imposed.
Lawyers for the parents expressed confidence Monday that their lawsuit will eventually proceed: “We do not expect this filing to affect the families’ case in any material way.” In its bankruptcy filing, Remington acknowledged that the parents’ case remains alive.
It’s possible that the company may try to settle the case by committing to future marketing and manufacturing restrictions that would satisfy the plaintiff families and remove the threat of a widened PLCAA loophole. But sources say there have been no discussions between the parents and the company in that vein thus far.