INDUSTRY NEWS: MARCH 2004

by Robert M. Hausman

There is a perception on the part of some retailers of stepped up Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF) regulatory inspections of their business premises and in ATF enforcement policies in general. However, an ATF spokesman denies the claim.

“We are most concerned by a recently adopted position of ATF that they will allow only two errors by a retailer on a Form 4473,” asserts Bill Carter, president of the Texas Gun Dealers Association (TGDA) and operator of the five-outlet Carter’s Country stores in the Houston, Texas area. Carter says he holds the distinction of having the largest volume single dealer Federal Firearms License in the country, which approaches an annual turnover of 50,000 firearms.

“I was notified of this new policy by ATF field personnel during a recent compliance inspection. Upon finding the first error on a Form 4473, the ATF inspector said a warning conference would be held. Upon finding a second subsequent error on a Form 4473, ATF will move to revoke the dealer’s license without consideration of how much volume the retailer is doing. The inspector said this new “get tough” rule by ATF is due to concerns with homeland security and that the decision to adopt this policy came down from “on high” in the agency.”

In an attempt to verify this new rule, Larry White, industry liaison and analyst for the Firearms Programs Division at ATF was contacted and he denied Carter’s assertion that the agency will automatically move to revoke the FFL of any retailer with errors on two Form 4473’s.

ATF Response

“We at ATF are not so concerned with the number of violations disclosed during an inspection as we are with the nature of and circumstances surrounding the violations disclosed,” White said. “However, if the violations disclosed are deemed to be willful, ATF is compelled to take action against the license, which could be in the form of a warning letter, warning conference, action to revoke or deny the license, or criminal prosecution. But this policy is nothing new,” White concluded.

Maryland Retailer’s Perspective

However, Carter’s statement regarding ATF’s position on errors found on completed Form 4473’s was echoed by Sanford Abrams, vice president of the Maryland Licensed Firearms Dealers Association and operator of Valley Gun, in the Baltimore, Maryland area. “My inspector told me that when the first error is found on a Form 4473, the retailer would receive a warning letter from ATF. The second and third errors found on Form 4473’s will each result in a warning conference. Any Form 4473 errors found thereafter will result in license suspension proceedings,” Abrams insisted.

Abrams also complained about excessive zealousness on the part of ATF field personnel in looking for instances of violations under every nook and cranny in a dealer’s operations.

“ATF is trying to earn themselves a niche by doing audits and setting out to deliberately look for something wrong,” Abrams said. “They are uncovering things from 10-year-old retailer records that past inspectors have ignored and writing these things up and calling the retailer a repeat violator. I have heard that ATF inspectors are now spending three to four weeks at a time at some retailers to conduct audits.”

Inconsistent Statements

“I get audited every year,” Abrams admits. “As such, I have been having a continual problem with ATF field personnel regarding my black powder storage magazine. One year the ATF inspector will tell me I must have a lock on it, so I put on a lock. The next inspector that comes in tells me I am not permitted to keep the black powder magazine locked, so I take the lock off. The inspector after that will come in and ask, “Why is there no lock on the black powder magazine?” At each of these instances, the inspector will write me up as being in violation.

“Why we are getting stricter regulatory control at a time when both the Congress and the President are supposedly pro-gun, than we did during the Clinton Administration years, I cannot understand. I just think ATF is going out there in the field to see how many retailers they can shut down,” Abrams declared.

Virginia Confirmation

The sentiments of Abrams were confirmed by Robert Marcus, president of the Virginia Firearms Dealers Association (VFDA).

“I have heard from my membership, which is composed of retailers from around the state, that ATF field personnel have been spending an inordinate amount of time in their dealerships looking for uncrossed Ts and un-dotted Is. The reason for this, we believe, stems from the Washington D.C. Beltway area sniper shootings. That involved a dealer in the state of Washington who was not in compliance with ATF record-keeping requirements, and ATF was aware of this, and yet did nothing about that dealer. Legitimate retailers who are strictly following all the rules are now being punished for ATF’s own mistake. I have heard that those retailers who do a large volume of sales are constantly being audited. This is a topic we will bring up with our congressmen and senators,” Marcus said.

Legal Beagles Dig Up Can of Worms

Virginia’s retailers are also losing sales due to the sudden enforcement of an old state law that restricts dealers to making sales only to Virginia residents and residents of contiguous states.

“Wal-Mart’s attorneys found this old law on the books and advised all their stores that they must be in compliance. Then the state police heard what Wal-Mart was doing and began to enforce this law for the first time. The VFDA will make repeal of this law a priority in our lobbying efforts during the next state general assembly,” Marcus says.

Suit Against ATF

At press time, Marcus was looking forward to the start of oral argument in his appeal of the dismissal of his suit against ATF in U.S. District Court involving the agency’s demand for Marcus’ records of used gun sales made at his store, Bob’s Guns & Tackle Shop in Norfolk, VA. Marcus says the agency is trying to use the records to compile a database of gun owners in violation of federal law.

The case centers around a letter Marcus received from the ATF National Tracing Center in February 2000 demanding he turn over the records of the make, model, caliber and serial number of each used firearm bought and sold at the store the year before. Marcus’ shop was one of reported 430 firearms dealers across the country to receive the letter. His shop and the other retailers were singled out because they had sold ten or more guns that had been used in a crime within three years of purchase, according to ATF. The average “time-to-crime” from when a firearm leaves a retailer is about six years, according to ATF.

“Research has demonstrated that a high volume of gun traces with a short “time-to-crime” may be an indicator of illegal firearms trafficking,” the ATF letter said. While not accusing him of wrongdoing, the letter also indicated Marcus’ shop had “an unusually high number of traces.” ATF personnel have also indicated, during regulatory seminars, at which this author was present, that a high number of traces do not, in and of themselves, indicate retailer wrongdoing. The retailer’s location and other factors have to be considered as well, ATF has said.

Marcus said it’s not unusual for some gun sold at high-volume dealers to turn up at crime scenes. Ten guns, of the 1,986 he sold in 1999, traced to crimes is a small percentage – about one-half of one percent, he said. In the letter, ATF did not say exactly how many guns were traced back to Marcus or say what crimes they had been used in. Records obtained by The Virginian-Pilot newspaper show that ATF traced about 1,900 guns in the five South Hampton Roads cities (the area where Marcus’ shop is situated) in 1995, the last year records were available. Between 1990 and 1995, ATF traced 114 firearms to Marcus’ shop. That’s an average of 19 a year. The records also show that 19 of the 114 guns were tied to violent crimes, including seven homicides. However, the records do not show whether the guns belonged to a victim or a suspect, or whether the trace led to criminal charges.

By collecting data from Marcus and other retailers, ATF said it hopes to speed up trace investigations. The ATF letter to Marcus said the gun shop would face administrative or criminal sanctions, including FFL revocation, if he did not comply. “While no one has accused me of committing a crime, they’re going on a fishing expedition, and I’m not going fishing with them,” Marcus declared. His lawsuit says the ATF demand letter “has no basis in law and demands the reporting of information which has no rational relationship to any bona fide criminal investigation or other legitimate law enforcement objective.”

Marcus notes, “We have nothing to gain by impeding the police and their work. But this goes entirely beyond that. Fortunately, we live in a country where we can question the actions of the government.”

Two Legal Victories

Two important legal victories were achieved by the industry in late October with the dismissal of both the St. Louis City and the New York state lawsuits.

In the first instance, the St. Louis City lawsuit was dismissed on October 15th for failure to state a cause of action. The case, City of St. Louis Missouri v. Cernicek et, al., Circuit Court of the County of St. Louis, Case No. 02CC-1299, was argued February 28, 2003 and decided Oct. 15, 2003.

St. Louis had raised various theories of liability, including claims of negligence, nuisance, unjust enrichment, and product liability. However, the court held, “The attempt here is not only to blur, but obliterate, the line that separates public nuisance claims from those based on product liability law…In addition to the quite reasonable fears of this and other courts which have examined the issue of opening a floodgate to additional litigation, the end of which cannot even be imagined, there are issues of both logic and fairness that weigh heavily in favor of granting the present motion to dismiss.”

The court went on to state that “weighing the various arguments put forth in those cases and the instant case” (meaning the current case), “the court simply finds the arguments in favor of granting the motion under consideration far outweigh the countervailing ones…The harm allegedly suffered by the plaintiff and the action of defendants here that are alleged to have caused that harm are simply too remote to support a claim…based on a theory of either public nuisance or negligence. Because the ‘product’ here in dispute is a ‘non-defective’ one, any possible recovery by plaintiff from defendant under a product liability claim is undercut. Additionally, plaintiff’s claim of unjust enrichment fails because plaintiff cannot and does not allege the elements required for such a claim.”

New York Case

In the second case, the New York State Court of Appeals denied plaintiff New York State Attorney General Eliot Spitzer’s petition for leave to appeal the Intermediate Appellate Court’s June 24, 2003 dismissal of his lawsuit against firearms manufacturers (Eliot Spitzer, Attorney General of the State of New York v. Sturm, Ruger & Co., Inc. et al). No further appeal is possible.

These two cases are the latest in a series of final dismissals of lawsuits by certain municipalities against the industry based upon subsequent criminal misuse of lawfully purchased, non-defective firearms. New York’s was the only such state lawsuit. Other final dismissals include those brought by the cities of New Orleans, Bridgeport, Miami-Dade County, Camden County, Philadelphia, Atlanta, Boston, Wilmington, Cincinnati, Detroit-Wayne County and Camden City. Cases, which have been dismissed and are currently on appeal, include Chicago, Gary, Washington, D.C., and the consolidated California cities cases.

“The trend of both trial and appellate courts to reject such misguided lawsuits seems unmistakable,” said Sturm, Ruger & Co., Inc. president, Stephen L. Sanetti. “We have been singled out for elimination by certain advocacy groups using taxpayers’ money to fund politically driven lawsuits, and we have been fighting back.

“The law and the facts are on our side,” Sanetti continued, “but the only certain remedy for this misuse of the legal system is the prompt passage of Senate bill S. 659, which would pre-empt these cases. Our successful defense of these cases, combined with important federal legislation prohibiting further attempts at such legal extortion, should send a clear message that American industry will resist attempts at unfair and anti-democratic ‘regulation by litigation.’ The very survival of American enterprise requires nothing less.”

Robert M. Hausman is the publisher of the firearms industry’s two most widely read professional trade publications, the bi-weekly The New Firearms Business which covers the domestic U.S. market and the monthly, The International Firearms Trade which covers the world market. For subscription information to either publication, send an email to FirearmsB@aol.com.