August 23, 2021

Mexico v. Smith & Wesson: Does U.S. Immunity for Gun Manufacturers Apply Extraterritorially?

[Cross posted from Just Security]

By William S. Dodge and Ingrid Wuerth

Earlier this month, Mexico sued six U.S. gun manufacturers, one foreign manufacturer, and a Boston-area wholesaler in federal court in Massachusetts. According to the complaint, the defendants design, market, and sell guns in ways they know will arm Mexican drug cartels. Although Mexico has strict gun laws and prohibits the importation of guns without a permit, it is estimated that more than half a million guns flow from the United States into Mexico each year. During the first five months of 2020, statistics show that nearly half the guns recovered from crime scenes in Mexico were made by the defendant manufacturers. Most of Mexico’s claims are tort claims, including negligence, public nuisance, and defective design, but Mexico also alleges that the defendants have been unjustly enriched and have violated unfair business practices statutes in Connecticut and Massachusetts.

In 2005, Congress acted to immunize gun manufacturers and dealers from liability based on the criminal use of guns. The Protection of Lawful Commerce in Arms Act (PLCAA), 15 U.S.C. §§ 7901-7903, prohibits bringing in state or federal court any “qualified civil liability action.” That term is defined as a civil action by any person 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 or a third party,” but Congress also created several exceptions including certain actions based on violations of federal or state law. The complaint asserts that PLCAA does not apply “because it bars certain claims against gun manufacturers and distributors only when the injury occurred in the U.S. and the criminal’s misuse of the gun was unlawful under U.S. domestic law” (¶23). Although other experts have suggested that the suit is almost certainly barred by PLCAA, we disagree. The plaintiffs have a strong argument that PLCAA does not prohibit some of their claims, including those brought under Mexican law.

The Presumption Against Extraterritoriality

To determine the geographic scope of federal statutes, courts apply a rule of statutory interpretation known as the presumption against extraterritoriality. The current version of the presumption proceeds in two steps: (1) a “clear indication” step and (2) a “focus” step. At step one, the court looks for a “clear indication” of the provision’s geographic scope. If Congress has clearly indicated when it wants a provision to apply, the court will, sensibly, follow Congress’s direction. But if there is no clear indication of the provision’s geographic scope, the court moves to step two and determines the “focus” of the provision. The focus might be conduct Congress wishes to prohibit, effects it wishes to prevent, or transactions it wishes to protect. If the focus of the provision occurs in the United States and (as the Supreme Court recently held) if conduct relevant to the provision’s focus occurs in the United States, then applying the provision is considered “domestic” and permissible. Otherwise, applying the statute is considered “extraterritorial” and impermissible.

An example not involving PLCAA shows how the presumption works at both steps. In RJR Nabisco, Inc. v. European Community, the European Community sued U.S. cigarette manufacturers under the Racketeer Influenced and Corrupt Organizations Act (RICO), alleging that RJR had engaged in money laundering for organized crime groups in Europe. RICO criminalizes patterns of racketeering activity in connection with an enterprise. Racketeering activity includes certain offenses under federal and state law that are known as predicate acts. Although RICO itself says nothing about its geographic scope, several of RICO’s predicate acts (including money laundering) apply extraterritorially. At step one of the presumption analysis, the Supreme Court found that RICO’s reference to these other statutes was a clear indication that its criminal provisions apply extraterritorially to the same extent as the predicate acts alleged in the particular case. The Court said that “an express statement of extraterritoriality is not essential” and that a clear indication of geographic scope could be found in the “context” of the provision. Because the Court found a clear indication of geographic scope at step one, it refused to proceed to step two. RJR argued that RICO’s focus was on the enterprise affected by the racketeering activity, so that RICO only applied to U.S. enterprises, but the Court found that argument irrelevant. Because “there is a clear indication at step one that RICO applies extraterritorially,” the Court said, “we . . . do not proceed to the ‘focus’ step.”

In addition to criminalizing patterns of racketeering activity, RICO provides a private right of action for “[a]ny person injured in his business or property.” Applying the presumption against extraterritoriality separately to this provision, the Supreme Court found no clear indication of geographic scope at step one. Proceeding to step two, the Court concluded that the focus of the private right of action was on injuries to business or property and, because the European Community had not alleged any such injuries in the United States, RICO’s private right of action did not apply.

The Presumption and PLCAA

PLCAA, like RICO, has no express statement about its geographic scope. But it does refer to other laws. Specifically, PLCAA bars civil actions 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” (emphasis added).

Looking at the “context” of PLCAA, as the Supreme Court has instructed, it seems clear that “criminal or unlawful” refers to U.S. federal and state law and not to foreign law. First, in Congress’s definition of the civil actions that are prohibited, one finds a series of exceptions, two of which refer explicitly to federal and state law. Section 7903(5)(A)(i) permits actions against persons convicted of transferring guns knowing that they will be used in violent crimes or drug crimes in violation of the federal statute “or a comparable or identical State felony law,” whereas Section 7903(5)(A)(iii) permits actions against manufacturers or sellers of guns who “knowingly violated a State or Federal statute applicable to the sale or marketing of the product.” If Congress intended PLCAA to apply to the misuse of guns that is criminal or unlawful under foreign law, it seems likely that Congress would have drafted these exceptions to refer to foreign law as well.

The conclusion that “criminal or unlawful” refers only to federal and state law finds confirmation in Congress’s codified findings and purposes. Congress’s findings begin by referring twice to the Second Amendment right to bear arms. 15 U.S.C. § 7901(a)(1) & (2). Congress also notes that guns “are heavily regulated by Federal, State, and local laws,” id. § 7301(a)(4), with no mention of foreign laws. Congress specifically identifies the civil actions with which it is concerned as those “commenced or contemplated by the Federal Government, States, municipalities, and private interest groups and others are based on theories without foundation in hundreds of years of the common law and jurisprudence of the United States.” Id. § 7901(a)(7). There is no mention of suits by foreign governments or theories of liability based on foreign law.

Lest there be any doubt about Congress’s purposes, PLCAA expressly provides that it is intended “[t]o preserve a citizen’s access to a supply of firearms and ammunition for all lawful purposes, including hunting, self-defense, collecting, and competitive or recreational shooting.” 15 U.S.C. § 7901(b)(2) (emphasis added). The statute’s goal of ensuring that U.S. citizens have adequate access to firearms clarifies the references to “foreign commerce” in the findings and purposes. Section 7901(a)(5) refers, for example to businesses “in the United States” that are engaged in “foreign commerce” through the “importation” of firearms. Indeed, the findings and purposes explicitly refer five times to importers or the importation of guns, but never once to exporters or exportation. The failure to refer to “exportation” might seem like mere oversight, but it is entirely in keeping with Congress’s focus on the Second Amendment rights of U.S. citizens—Congress was simply not concerned with keeping guns in the hands of Mexican citizens in Mexico.

The Supreme Court faced a similar interpretive question in Small v. United States. A federal statute made it unlawful for a person “who has been convicted in any court of, a crime punishable by imprisonment for a term exceeding one year” to possess a firearm. 18 U.S.C. § 922(g)(1). The Court held that “any court” referred only to courts in the United States. It began with the “commonsense notion that Congress generally legislates with domestic concerns in mind,” an understanding the Supreme Court has repeatedly relied on in determining the geographic scope of federal statutes. The Court found confirmation in the statute’s exceptions and other references to federal and state laws, similar to the references in PLCAA discussed above. In fact, the argument for applying PLCAA only domestically seems stronger than the argument in Small because the statute at issue in that case did not contain the extensive findings and purposes that confirm PLCAA’s concern with domestic conditions.

As in RJR Nabisco, PLCAA’s context provides a clear indication of its scope, specifically that PLCAA applies only to actions based on the misuse of a gun that is criminal or illegal under federal or state law. Under the Supreme Court’s two-step framework for the presumption against extraterritoriality discussed above, if there is a clear indication of a statute’s scope at step one, then a court must apply the statute as Congress has indicated without going on to step two.

PLCAA’s clear indication of scope distinguishes PLCAA from Section 230 of the Communications Decency Act, which has been held by some courts to provide immunity from certain extraterritorial claims. Section 230 provides that interactive computer service providers, like Facebook and Google, shall not be treated as the publisher of information provided by someone else. The Second and Ninth Circuits have held that Section 230 immunizes such providers against liability for claims under the federal Anti-Terrorism Act arising outside the United States. Gonzalez v. Google LLC, 2 F.4th 871, 888 (9th Cir. 2021); Force v. Facebook, Inc., 934 F.3d 53, 72-74 (2d Cir. 2019). In both cases, the court reasoned that the “focus” of Section 230 was on limiting liability, which necessarily occurred in the United States. The gun manufacturers and other defendants in Mexico’s suit may be expected to make a similar argument. But in the Section 230 cases, the courts examined the focus of that provision only because there was no clear indication of scope at step one of the analysis. With PLCAA, by contrast, the court should never reach the second, “focus” step because there is a clear indication of PLCAA’s scope—PLCAA applies only to actions based on the misuse of guns that is criminal or unlawful under federal or state law.

What Claims Can Mexico Bring?

PLCAA would appear to be no bar to tort or restitution claims under Mexican law. Most of Mexico’s claims based on U.S. law, by contrast, would appear to be foreclosed by PLCAA. Most, but not all.

It is possible that some of Mexico’s claims under U.S. state law might fit within the one of PLCAA’s exceptions. Mexico has brought a claim for defective design (¶¶ 520-22), and PLCAA has an exception for defects in design or manufacture, 15 U.S.C. § 7903(5)(A)(v), although it is not clear that Mexico’s allegations fit the contours of the exception. Mexico has also brought a claim for negligence per se (¶¶ 523-526), and PLCAA has an exception for such claims, although the exception is limited to actions against sellers. 15 U.S.C. § 7903(5)(A)(ii). And Mexico has brought claims for violations of the unfair business practices statutes in Connecticut and Massachusetts (¶¶ 542-556), which might fit within PLCAA’s exception for actions against gun manufacturers or sellers who “knowingly violated a State or Federal statute applicable to the sale or marketing of the product.” 15 U.S.C. § 7903(5)(A)(iii).

If both Mexican law and U.S. state law are applicable to the same claim, a federal court in Massachusetts would have to apply Massachusetts choice-of-law rules to decide which law to apply. In tort cases, Massachusetts generally applies the law of the place of the injury, which would be Mexican law. So, it seems that Mexico’s suit, with perhaps a few exceptions, will require the federal court to apply Mexican law.

Why Isn’t This Case in Mexico?

The Mexican government is suing under Mexican law for injury sustained by Mexican citizens in Mexico in a case involving Mexico’s laws governing firearms. Mexico might seem like the best—or perhaps the only—appropriate forum for the litigation. The defendants are U.S. corporations, however, and, as noted above, nothing in U.S. or international law prevents foreign plaintiffs (including foreign governments) from suing U.S. defendants in U.S. courts, even for harm that occurred abroad.

Indeed, the Mexican government may not have been able to sue in Mexico at all—Mexican  courts might lack personal jurisdiction over the defendants. We are not experts on Mexican civil procedure, but most civil law countries rely on domicile as the primary basis for personal jurisdiction. There are, however, additional bases for personal jurisdiction even in civil law countries, sometimes including the place where the injury occurs in a tort action. But our (admittedly cursory) review of an unofficial translation of Código Federal de Procedimientos Civiles [CFPC], art. 24, Diario Oficial de la Federación [DOF] 24-02-1943, últimas reformas DOF 08-06-2021 (Mex.), did not suggest that Mexican law permits jurisdiction on that basis.

Even assuming that the suit could have been brought in Mexico, the government may have chosen to sue in the United States out of a concern that U.S. courts would not recognize a Mexican judgment, perhaps because a U.S. court would not have personal jurisdiction over Mexican defendants under comparable facts. See Restatement (Fourth) of U.S. Foreign Relations Law § 483(b) and Comment e. We both think that there is no constitutional bar to the exercise of jurisdiction over Mexican defendants by U.S. federal courts under comparable facts, but the Fifth Amendment-based due process limitations on personal jurisdiction have not been addressed by the Supreme Court and are somewhat unclear.

Alternatively, the Mexican government may have sued in the United States because the suit is based upon the unlawful use of firearm by criminal gangs, and perhaps Mexican judges would be intimidated or afraid to rule against the gun manufacturers.

Whatever reason the Mexican government had for suing in the United States, the case might still wind up in Mexico if the defendants move to dismiss for forum non conveniens—district courts may dismiss the case if there is an adequate foreign forum and if private and public interest factors favor that forum. Mexico is likely to be deemed an adequate forum, as other cases have held, and the Mexican government would probably not want to argue that its judicial system is so compromised as to be inadequate. Some of the private and public factors would also favor dismissal: the harm occurred in Mexico, Mexican law applies to the claims that survive PLCCA, some witnesses and evidence are located in Mexico, and the general deference afforded to the plaintiff’s choice of forum is reduced for foreign plaintiffs.

Personal jurisdiction turns up here, too, however. Mexico is not a true alternative forum if it lacks personal jurisdiction over the defendants. If defendants move to dismiss for forum non conveniens, a court would likely grant the motion only on the condition that the defendants stipulate to personal jurisdiction in Mexico. Consent is a proper basis for personal jurisdiction in Mexico (and in the United States), so a stipulation would resolve the personal jurisdiction issue in Mexico and probably render the judgment of a Mexican court enforceable in the United States. Texaco famously moved to dismiss an environmental case in favor of Ecuador as an alternative forum, won that motion, and then lost the case in Ecuador and had a $9.5 billion judgment entered against it. The judgment against Chevron (which had purchased Texaco) was not enforced because it was procured by fraud. Still, a forum non conveniens motion carries substantial risks for the defendants, and the stakes are high whether the case ends up in U.S. or Mexican courts.

About the Author(s)

William S. Dodge

William S. Dodge is Martin Luther King, Jr. Professor of Law and John D. Ayer Chair in Business Law at the University of California, Davis, School of Law. He served as Counselor on International Law to the Legal Adviser at the U.S. Department of State from 2011 to 2012 and as Co-Reporter for the American Law Institute’s Restatement (Fourth) of Foreign Relations Law from 2012 to 2018.

Ingrid Wuerth

Ingrid Wuerth (@WuerthIngrid) holds the Helen Strong Curry Chair in International Law at Vanderbilt Law School where she directs the Branstetter Litigation and Dispute Resolution Program. From 2012-2018 she served as Co-Reporter for the American Law Institute’s Restatement (Fourth) of Foreign Relations Law. She is a contributing editor at Lawfare.