Estados Unidos Mexicanos v. Smith & Wesson Brands Inc. ( 2024 )

United States Court of Appeals
For the First Circuit
No. 22-1823
ESTADOS UNIDOS MEXICANOS,
Plaintiff, Appellant,
v.
SMITH & WESSON BRANDS, INC.; BARRETT FIREARMS MANUFACTURING,
INC.; BERETTA U.S.A. CORP.; GLOCK, INC.; STURM, RUGER & COMPANY,
INC.; WITMER PUBLIC SAFETY GROUP, INC., d/b/a Interstate Arms;
CENTURY INTERNATIONAL ARMS, INC.; BARETTA HOLDINGS SPA; GLOCK
GES.M.B.H.; COLT'S MANUFACTURING COMPANY, LLC,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. F. Dennis Saylor, IV, U.S. District Judge]
Before
Kayatta, Gelpí, and Montecalvo,
Circuit Judges.
Steve D. Shadowen and Jonathan E. Lowy, with whom Richard M.
Brunell, Nicholas W. Shadowen, Shadowen PLLC, and Global Action on
Gun Violence were on brief, for appellant.
Sameer Advani, James C. Dugan, Gabrielle K. Antonello,
Ferdinand G. Suba, Jr., Willkie Farr & Gallagher LLP, Zainab Ali,
and Benita Yu on brief for Jorge Sánchez Cordero Dávila and Raúl
Contreras Bustamante, amici curiae.
Thomas M. Sobol and Hagens Berman Sobol Shapiro LLP on brief
for Scholars of International Law, amici curiae.
Lawson E. Fite, Michael B. Smith, and Marten Law LLP on brief
for Gun Violence Prevention Groups, amici curiae.
Roberta L. Horton, Lucy S. McMillan, and Arnold & Porter Kaye
Scholer LLP on brief for Mexican Activists, Scholars, and Victims,
amici curiae.
Donna M. Evans, Julie G. Reiser, Molly J. Bowen, Zachary R.
Glubiak, and Cohen Milstein Sellers & Toll PLLC on brief for Law
Enforcement Officers, amici curiae.
Andrea Joy Campbell, Attorney General of Massachusetts,
Elizabeth N. Dewar, State Solicitor, Rob Bonta, Attorney General
of California, William Tong, Attorney General of Connecticut,
Kathleen Jennings, Attorney General of Delaware, Brian L. Schwalb,
Attorney General for the District of Columbia, Anne E. Lopez,
Attorney General of Hawai'i, Kwame Raoul, Attorney General of
Illinois, Anthony G. Brown, Attorney General of Maryland, Dana
Nessel, Attorney General of Michigan, Keith Ellison, Attorney
General of Minnesota, Matthew J. Platkin, Attorney General of New
Jersey, Raúl Torrez, Attorney General of New Mexico, Letitia James,
Attorney General of New York, Ellen F. Rosenblum, Attorney General
of Oregon, Michelle A. Henry, Attorney General of Pennsylvania,
Peter F. Neronha, Attorney General of Rhode Island, and Charity R.
Clark, Attorney General of Vermont, on brief for Massachusetts,
California, Connecticut, Delaware, the District of Columbia,
Hawai'i, Illinois, Maryland, Michigan, Minnesota, New Jersey, New
Mexico, New York, Oregon, Pennsylvania, Rhode Island, and Vermont,
amici curiae.
Roberto J. Gonzalez, Jacob A. Braly, and Paul, Weiss, Rifkind,
Wharton & Garrison LLP on brief for Latin American and Caribbean
Nations and NGO, amici curiae.
Ellen V. Leonida, Matthew Borden, Kory J. DeClark, and
Braunhagey & Borden LLP on brief for District Attorneys, amici
curiae.
Edward V. Colbert III, Scott Harshbarger, and Casner &
Edwards, LLP on brief for Professors of Transnational Litigation,
amici curiae.
Noel J. Francisco, with whom Anthony J. Dick, Harry S. Graver,
Andrew E. Lelling, Jones Day, James M. Campbell, Campbell Conroy
& O'Neil, P.C., James W. Porter, II, Porter & Hassinger, P.C.,
Mark D. Sheridan, Squire Patton Boggs (US) LLP, Patricia A.
Hartnett, Peter M. Durney, Smith Duggan Cornell & Gollub,
Christopher Renzulli, Jeffrey Malsch, Renzulli Law Firm LLC,
Jonathan I. Handler, Day Pitney LLP, James Vogts, Andrew A.
Lothson, Swanson, Martin & Bell LLP, Nora R. Adukonis, S. Jan
Hueber, Litchfield Cavo LLP, Joseph G. Yannetti, Morrison Mahoney
LLP, Anthony M. Pisciotti, Danny C. Lallis, Ryan L. Erdreich,
Pisciotti Lallis Erdreich, John G. O'Neill, Sugarman, Rogers,
Barshak & Cohen, P.C., Michael L. Rice, Katie J. Colopy, and
Harrison Law LLC were on brief, for appellees.
Peter M. Torstensen, Jr., Assistant Solicitor General, Austin
Knudsen, Montana Attorney General, Christian B. Corrigan,
Solicitor General, Brent Mead, Deputy Solicitor General, Tanner
Baird, Solicitor's Fellow, Steve Marshall, Attorney General of
Alabama, Treg Taylor, Attorney General of Alaska, Tim Griffin,
Attorney General of Arkansas, Ashley Moody, Attorney General of
Florida, Christopher M. Carr, Attorney General of Georgia,
Theodore E. Rokita, Attorney General of Indiana, Brenna Bird,
Attorney General of Iowa, Daniel Cameron, Attorney General of
Kentucky, Jeff Landry, Attorney General of Louisiana, Lynn Fitch,
Attorney General of Mississippi, Andrew Bailey, Attorney General
of Missouri, John M. Formella, Attorney General of New Hampshire,
Alan Wilson, Attorney General of South Carolina, Marty J. Jackley,
Attorney General of South Dakota, Ken Paxton, Attorney General of
Texas, Sean D. Reyes, Attorney General of Utah, Jason Miyares,
Attorney General of Virginia, Patrick Morrisey, Attorney General
of West Virginia, and Bridget Hill, Attorney General of Wyoming,
on brief for State of Montana and 19 Other States, amici curiae.
H. Christopher Bartolomucci, Kenneth A. Klukowski, and
Schaerr Jaffe LLP on brief for U.S. Senator Ted Cruz, U.S.
Representative Mike Johnson, and 37 other members of Congress,
amici curiae.
Christopher A. Kenney, Kenney & Sams, P.C., and Paul B.
Stephan on brief for National Shooting Sports Foundation, Inc.,
amicus curiae.
January 22, 2024
KAYATTA, Circuit Judge. The government of Mexico brings
this lawsuit against seven U.S. gun manufacturers and one gun
distributor.1 The district court dismissed Mexico's complaint
because it concluded that Mexico's common law claims were barred
by the Protection of Lawful Commerce in Arms Act (PLCAA). That
act prohibits the bringing of certain types of lawsuits against
manufacturers and sellers of firearms in federal and state courts.
We agree that the PLCAA's limitations on the types of lawsuits
that may be maintained in the United States apply to lawsuits
initiated by foreign governments for harm suffered outside the
United States. However, we also hold that Mexico's complaint
plausibly alleges a type of claim that is statutorily exempt from
the PLCAA's general prohibition. We therefore reverse the district
court's holding that the PLCAA bars Mexico's common law claims,
and we remand for further proceedings. Our reasoning follows.
I.
"Because this appeal flows from the district court's
order granting a motion to dismiss, we draw the relevant facts
from the complaint, accepting all well-pleaded factual allegations
1 Defendants are Smith & Wesson Brands, Inc.; Barrett
Firearms Manufacturing, Inc.; Beretta U.S.A. Corp.; Century
International Arms, Inc.; Colt's Manufacturing Company, LLC;
Glock, Inc.; and Sturm, Ruger & Co., Inc. and Witmer Public Safety
Group, Inc., doing business as Interstate Arms. Mexico also
initially named two foreign holding companies as defendants, but
later voluntarily dismissed its claims against those companies.
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as true." Foisie v. Worcester Polytechnic Inst., 967 F.3d 27, 32
(1st Cir. 2020).
Mexico has strict gun laws that make it "virtually
impossible" for criminals to obtain firearms legally sourced in
the country. It has one gun store in the entire nation and issues
fewer than fifty gun permits a year. Despite these strong domestic
regulations, Mexico has the third-most gun-related deaths in the
world. The number of gun-related homicides in Mexico grew from
fewer than 2,500 in 2003 to approximately 23,000 in 2019. The
percentage of homicides committed with a gun similarly rose from
fifteen percent in 1997 to sixty-nine percent in 2021.
The increase in gun violence in Mexico correlates with
the increase of gun production in the United States, beginning
with the end of the United States' assault-weapon ban in 2004.2
The complaint details a steady and growing stream of illegal gun
trafficking from the United States into Mexico, motivated in large
part by the demand of the Mexican drug cartels for military-style
weapons. For example, Mexico claims that between seventy and
ninety percent of the guns recovered at crime scenes in Mexico
were trafficked into the country from the United States.
Mexico's government has borne a variety of harms as a
result of this gun-violence epidemic, including but not limited
2 Violent Crime Control and Law Enforcement Act of 1994, Pub.
L. No. 103-222, 108 Stat. 1796, 1996-1998(expired 2004).
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to: costs of additional medical, mental-health, and other services
for victims and their families; costs of increased law enforcement,
including specialized training for military and police; costs of
the increased burden on Mexico's judicial system; diminished
property values; and decreased revenues from business investment
and economic activity.
In an attempt to redress these harms, Mexico brought
this lawsuit in federal district court in Massachusetts, seeking
both damages and injunctive relief. Combined, defendants produce
more than sixty-eight percent of the U.S. guns trafficked into
Mexico, which comes out to between 342,000 and 597,000 guns each
year. Mexico alleges that defendants know that their guns are
trafficked into Mexico and make deliberate design, marketing, and
distribution choices to retain and grow that illegal market and
the substantial profits that it produces.
Mexico alleges that one way defendants deliberately
facilitate gun trafficking into Mexico is by designing their guns
as military-style weapons, knowing that such weapons are
particularly sought after by the drug cartels in Mexico. For
instance, defendants make assault rifles with high rates of fire,
low recoil, and the capacity to hold large amounts of ammunition.
The guns can be easily converted into fully automatic weapons.
Some of defendants' guns are "weapons of war," such as the "armor-
penetrating" Barrett .50 caliber sniper rifle, which can be (and
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has been) used to take down aircrafts and armored vehicles. Such
weapons are especially attractive to Mexican drug cartels, which
frequently engage in military-style combat against Mexican
military and police personnel. Defendants also choose to forego
safety features (such as allowing only recognized users to fire
the weapon) that might decrease the guns' attractiveness to
wrongdoers without diminishing their utility for law-abiding
citizens. Similarly, Mexico alleges that defendants intentionally
design their guns to have easily removable serial numbers, making
them much more attractive to criminals both in the United States
and abroad.
Mexico alleges that defendants not only design their
guns as military-grade weapons; they also market them as such.
Defendants' marketing materials depict their weapons in use by or
in proximity to military and law enforcement personnel and contain
other references to military and law enforcement. Advertisements
include statements like "authentic Military & Police . . .
design," "battle proven," and "transforms the military platform to
fit civilian precision shooters." Mexico alleges that defendants
engage in these marketing techniques knowing that they are
disproportionately likely to attract groups harboring militaristic
ambitions, like the Mexican cartels.
Mexico also alleges that defendants' distribution system
facilitates illegal trafficking to Mexico. Defendants generally
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use a three-tier distribution system. Manufacturers (most
defendants) sell to distributors; distributors (one defendant)
sell to dealers; and dealers sell to consumers. Guns flow from
this distribution system into Mexico in multiple ways. The most
common method of trafficking is through "straw sales" -- sales
made to a buyer purchasing on behalf of somebody else who is not
lawfully permitted to buy a gun. Often, straw sales occur in
circumstances that clearly indicate to the dealer that the
transaction is a straw sale and could be prevented if defendants
required their dealers to be well-trained and follow the law.
Other types of transactions that pose a particularly
high risk of trafficking include sales of multiple guns to the
same buyer over a limited period of time; sales by "kitchen-table"
dealers who deal online or in locations that make it easy to avoid
regulations; and sales by non-licensed sellers at gun shows without
background checks. In addition, many guns are stolen or simply
"lost" from firearm companies' inventory, and frequently
thereafter end up in Mexico. According to the complaint, some of
these "lost" guns are actually sold off the books, with dealers
choosing not to implement anti-theft measures to allow them to
falsely claim the guns were stolen.
Mexico alleges that defendants are aware of these
practices and the resulting trafficking of guns into Mexico, yet
deliberately maintain a distribution system that facilitates
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illegal sales, resisting calls for reform by the U.S. government
and prominent gun industry insiders, among others. Not only that,
but defendants are aware that specific distributor and dealer
networks are disproportionately associated with gun trafficking
into Mexico. Mexico alleges that defendants are on notice as to
which dealers are responsible for the lion's share of gun
trafficking. Mexico points to data collected by the U.S. Bureau
of Alcohol, Tobacco, Firearms and Explosives (ATF) and a 2010 news
article naming twelve dealers that sold the most guns recovered in
Mexico. Despite having access to this information, defendants
continue supplying guns to those same dealers.
Importantly, according to the complaint, the aspects of
defendants' businesses that facilitate trafficking are not
unfortunate and unintended byproducts of a lawful enterprise.
Rather, they are the result of defendants' affirmative and
deliberate efforts to create and maintain an illegal market for
their weapons in Mexico. Says Mexico, supplying guns to the
illegal market in Mexico is "a feature, not a bug," of defendants'
businesses. And the motivation behind this feature is money.
Mexico estimates that defendants collectively receive over
$170 million a year from sales of guns trafficked into Mexico. As
a result of the profit potential of the Mexican market, gun dealers
along the border have proliferated while elsewhere in the nation
their numbers have decreased. Gun dealers in border states now
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sell twice as many guns as dealers in other parts of the country.
As stated succinctly by Mexico, defendants "are not accidental or
unintentional players in this tragedy; they are deliberate and
willing participants, reaping profits from the criminal market
they knowingly supply -- heedless of the shattering consequences
to [Mexico] and its citizens."
II.
Defendants filed multiple motions to dismiss Mexico's
complaint. All defendants moved to dismiss for lack of Article III
standing under Federal Rule of Civil Procedure 12(b)(1) and for
failure to state a claim under Rule 12(b)(6). Some defendants
also moved to dismiss for lack of personal jurisdiction under
Rule 12(b)(2). The district court held that Mexico had Article III
standing, but it dismissed two counts for failure to state a claim
on which relief could be granted.3 It also found that litigation
of the remaining counts was barred by the PLCAA, which prohibits
the filing of a "qualified civil liability action" -- defined as
"a civil action or proceeding . . . against a manufacturer or
seller of a qualified product . . . for damages . . . resulting
from the criminal or unlawful misuse of a qualified product by the
person or a third party" -- in "any Federal or State court."
3 The two counts were state statutory claims under the
Connecticut Unfair Trade Practices Act and the Massachusetts
Consumer Protection Act, respectively. Mexico does not, on appeal,
challenge the dismissal of those counts.
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15 U.S.C. §§ 7902(a), 7903(5)(A). It therefore dismissed the
complaint without addressing the motions to dismiss for lack of
personal jurisdiction. Mexico timely appealed, raising multiple
challenges to the district court's application of the PLCAA to
this lawsuit.
III.
Mexico first contends that the PLCAA does not apply to
lawsuits brought by foreign governments for harm suffered outside
the United States. It raises three arguments in support of this
contention: first, that applying the PLCAA to such a lawsuit is an
impermissible extraterritorial application of the statute; second,
that the PLCAA's substantive terms must be interpreted to have
only domestic scope; and third, that principles of international
comity support Mexico's reading of the statute. We address these
arguments in turn, finding them ultimately unavailing.
A.
"Courts presume that federal statutes 'apply only within
the territorial jurisdiction of the United States.'" WesternGeco
LLC v. ION Geophysical Corp., 138 S. Ct. 2129, 2136 (2018) (quoting
Foley Bros. v. Filardo, 336 U.S. 281, 285 (1949)). This rule,
commonly called the presumption against extraterritoriality, is a
"canon of construction" that guides our interpretation of federal
statutes. Yegiazaryan v. Smagin, 599 U.S. 533, 541 (2023) (quoting
Morrison v. Nat'l Austl. Bank Ltd., 561 U.S. 247, 255 (2010)).
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Under the presumption, we construe federal laws "to have only
domestic application" unless we find "clearly expressed
congressional intent to the contrary." Id. (quoting RJR Nabisco,
Inc. v. European Cmty., 579 U.S. 325, 335 (2016)). The presumption
"reflects concerns of international comity insofar as it 'serves
to protect against unintended clashes between our laws and those
of other nations which could result in international discord.'"
Id. (quoting Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108,
115 (2013)). And it also embodies "the commonsense notion that
Congress generally legislates with domestic concerns in mind."
Id. (quoting Smith v. United States, 507 U.S. 197, 204 n.5 (1993)).
A two-step framework applies to questions of
extraterritoriality. RJR Nabisco, 579 U.S. at 337. "At the first
step, we ask whether the presumption against extraterritoriality
has been rebutted -- that is, whether the statute gives a clear,
affirmative indication that it applies extraterritorially." Id.
If so, then an extraterritorial application of the statute is
permissible. Id. If not, we proceed to the second step and ask
if the statute's application in the case at hand is truly
extraterritorial or if, instead, "the case involves a domestic
application of the statute." Id.
The district court concluded that the PLCAA's
prohibition of lawsuits by "any governmental entity" and various
references to "foreign commerce" fell short of a clear expression
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of congressional intent that the statute applies
extraterritorially. It therefore held that the presumption
against extraterritoriality had not been overcome at step one.
Defendants do not object to this holding on appeal. Nor do we see
any need to question it, given that we agree with the district
court's conclusion at step two: that the application of the PLCAA
in this case is permissibly domestic, not impermissibly
extraterritorial.
Determining whether an application of a statute is
domestic or extraterritorial requires us to
look[] to the statute's "focus." If the
conduct relevant to the statute's focus
occurred in the United States, then the case
involves a permissible domestic application
even if other conduct occurred abroad; but if
the conduct relevant to the focus occurred in
a foreign country, then the case involves an
impermissible extraterritorial application
regardless of any other conduct that occurred
in U.S. territory.
Id. "The ultimate question regarding permissible domestic
application turns on the location of the conduct relevant to the
focus." Abitron Austria GmbH v. Hetronic Int'l, Inc., 600 U.S.
412, 422 (2023). We therefore first ascertain the focus of the
PLCAA and then determine where the conduct relevant to that focus
occurred.
"The focus of a statute is the object of its solicitude,
which can include the conduct it seeks to regulate, as well as the
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parties and interests it seeks to protect or vindicate." Id. at
418 (internal quotation marks omitted) (quoting WesternGeco, 138
S. Ct. at 2136). The "conduct" that the PLCAA "seeks to regulate"
is the filing and adjudication of certain lawsuits in domestic
courts. See 15 U.S.C. § 7901(b)(1), (4) (stated purposes include
"prohibit[ing] causes of action" and "prevent[ing] the use of such
lawsuits to impose unreasonable burdens on interstate and foreign
commerce"). Its operative provision states that "[a] qualified
civil liability action may not be brought in any Federal or State
court," and that any such pending actions "shall be immediately
dismissed by the court." Id. § 7902. That is the only "conduct"
that the statute "regulate[s]."
The PLCAA is also explicit about "the parties and
interests it seeks to protect." Its stated "purposes" are, among
other things, "[t]o prohibit causes of action against
manufacturers, distributors, dealers, and importers of
firearms . . . for the harm solely caused by the criminal or
unlawful misuse of firearm products," and "[t]o preserve a
citizen's access to a supply of firearms and ammunition for all
lawful purposes." Id. § 7901(b)(1), (2); see also id.
§ 7901(a)(5)–(8) (finding that the firearm industry should not be
liable for third parties' unlawful acts and that lawsuits seeking
to impose such liability abuse the legal system); id.
§ 7901(a)(1)-(2) (invoking the Second Amendment). In short, it
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seeks to protect (1) U.S. firearm companies and their interests in
manufacturing, marketing, and selling guns to the public; and
(2) U.S. citizens and their interests in having access to guns.
We therefore agree with the district court's conclusion
that the PLCAA's focus is "regulat[ing] the types of claims that
can be asserted against firearm manufacturers and sellers . . . to
protect the interests of the United States firearms industry and
the rights of gun owners." Estados Unidos Mexicanos v. Smith &
Wesson Brands, Inc., 633 F. Supp. 3d 425, 444 (D. Mass. 2022).
Mexico resists this conclusion by proposing a different
focus of the PLCAA: "gun misuse and the resulting injury." It
argues that the district court erred by looking only at the PLCAA's
operative provision -- which prohibits "qualified civil liability
action[s]," 15 U.S.C. § 7902 -- and not its definitions
section -- which defines such actions as "civil action[s] or
proceeding[s] or . . . administrative proceeding[s]" for harm
"resulting from the criminal or unlawful misuse of a qualified
product by the person or a third party," id. § 7903(5)(A).
We agree that statutory provisions do not exist "in a
vacuum" and "must be assessed in concert with . . . other
provisions." WesternGeco, 138 S. Ct. at 2137. In WesternGeco,
for example, the Supreme Court determined that the focus of a
statute providing a remedy for patent infringement was "the
infringement." Id. (quoting 35 U.S.C. § 284). But because the
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statute identified several types of infringement, the Court looked
to a separate provision to determine what "the infringement" was
in the case at hand. Id. That provision "provide[d] that a
company 'shall be liable as an infringer' if it 'supplies' certain
components of a patented invention 'in or from the United States'
with the intent that they 'will be combined outside of the United
States in a manner that would infringe the patent if such
combination occurred within the United States.'" Id. at 2137–38
(quoting 35 U.S.C. § 271(f)(2)). From this definition, the Court
gleaned that the regulated conduct -- that is, "the
infringement" -- was "the domestic act of 'suppl[ying] in or from
the United States.'" Id. at 2138 (alteration in original) (quoting
35 U.S.C. § 271(f)(2)). So, because it was that domestic act "that
infringed [the] patents," the "conduct . . . relevant to [the]
focus clearly occurred in the United States." Id.Mexico contends that we should follow what it sees as a
similar approach: treat the command of section 7902(a) (precluding
"qualified civil liability action[s]" in any U.S. court) as
insufficient to determine the focus; look at the definition of
"qualified civil liability action" in section 7903(5)(A) (as
meaning suits against defendants for damages resulting from
unlawful use of certain firearms); and then declare that the
statute's focus is actually on certain elements of that definition
(damages and misuse).
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But while WesternGeco makes clear that it is sometimes
necessary to turn to a secondary provision to help give meaning to
the statute's focus, it does not stand for the proposition that
whenever a term is defined in a separate provision, all parts of
that definition become the focus of the statute. In WesternGeco,
the portion of the secondary provision on which the Court
concentrated was the very "infringement" that was the focus of the
primary provision. Other parts of the definition -- such as the
requirement that the components be "especially made or especially
adapted for use in the invention," id. at 2135 (quoting 35 U.S.C.
§ 271(f)(2)) -- were not the statute's focus because they did not
constitute the act of infringement, which was the focus of the
primary provision. Here, "qualified civil liability action[s]"
are the focus and we look to section 7903(5)(A) simply to define
the scope of that term, not to find in the elements of that
definition some other focus.
To drive this point home, imagine a law stating that "a
qualified shirt may not be worn in any Federal or State court" and
defining "qualified shirt" as "a collarless shirt made from
cotton." Under Mexico's logic, a focus of that statute would be
the cotton industry. And therefore the law would not prohibit the
wearing of collarless shirts made from cotton grown outside the
United States. But no reasonable person would think that the
statute would not apply with equal force regardless of the origin
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of the cotton in a court attendee's shirt. So too, here; Mexico
cannot shift the focus of the PLCAA from "qualified civil liability
action[s]" to something else merely because that term -- which
Mexico concedes is the focus of the PLCAA's operative
provision -- is defined in a separate provision.
At a more fundamental level, Mexico's argument that the
statute's focus is "gun misuse and the resulting injury" has too
little connection to the PLCAA's purpose or effect. While
curtailing gun misuse is a laudable goal (and one that may be the
focus of other statutes), it is not the goal of the PLCAA. That
statute's purpose, and effect, is to insulate U.S. gun industry
actors from certain types of lawsuits in domestic courts. And
that conduct is inherently domestic.
Mexico also argues that to say that the focus of the
PLCAA is on regulating the types of claims that can be brought
against U.S. gun industry actors "is so broad as to be
tautological" because "[a]ll statutes 'regulate the type' of
activity to which they are directed, and all such 'regulat[ion]'
by definition occurs in the United States -- in the U.S. Courts
that apply the statutes." But this argument confuses the effect
of a regulation with its focus; not all statutes are directed
toward regulating lawsuits in the way the PLCAA is. For example,
the statute in WesternGeco in some sense "regulated" the conduct
of U.S. courts by creating a cause of action that those courts can
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adjudicate. But the focus of that statute was clearly on
regulating patent infringement, e.g., infringement said to occur
by shipping components overseas for assembly. 138 S. Ct. at 2137–
38. Here, by contrast, the PLCAA seeks to regulate the lawsuits
themselves.
Having thus determined the PLCAA's focus, we find it
evident that the conduct relevant to that focus occurs
domestically. Both the conduct that the statute seeks to
regulate -- the filing and adjudication of lawsuits -- as well as
the conduct that it seeks to protect -- defendants' manufacturing,
marketing, and selling of guns -- take place entirely within the
United States.
Mexico argues finally, and mostly in passing, that
defendants "engage in conduct in Mexico when they aid and abet
trafficking guns into Mexico." The Supreme Court has held that
"suppl[ying] in or from the United States" components of a patented
invention with the intent that they be assembled abroad is a
"domestic act." Id. (alteration in original). Mexico develops no
reason why selling guns in the United States with the intent that
they be resold to persons in Mexico should not similarly be
considered a domestic act.
For all these reasons, the presumption against
extraterritoriality does not bar application of the PLCAA to this
case.
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B.
We now turn to Mexico's argument that the PLCAA
nonetheless by its terms does not apply to a lawsuit brought by a
foreign government based on damages occurring outside the United
States caused by misuse outside the United States. Recall that
the PLCAA prohibits lawsuits "brought by any person" (including
"any governmental entity") "against a manufacturer or seller of a
[firearm] . . . for damages . . . or other relief, resulting from
the criminal or unlawful misuse of a [firearm] by the person or a
third party." 15 U.S.C. § 7903(3), (5)(A). Mexico argues that
(1) "criminal or unlawful misuse" means only misuse that occurs in
the United States and is unlawful under U.S. law;
(2) "damages . . . or other relief" covers only injury incurred in
the United States; and (3) "any governmental entity" encompasses
only domestic governmental entities.
The Supreme Court recently rejected a similar contention
in Turkiye Halk Bankasi A.S. v. United States, which involved a
section of the U.S. Criminal Code granting federal district courts
exclusive jurisdiction over "all offenses against the laws of the
United States." 598 U.S. 264, 268-69 (2023) (quoting 18 U.S.C.
§ 3231). The defendant, a bank owned by the Turkish government,
argued that because the statute "refers generically to 'all'
federal criminal offenses without specifically mentioning foreign
states or their instrumentalities, . . . foreign states and their
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instrumentalities do not fall within [the statute's] scope." Id.
at 269. The Court observed that the "text as written" "plainly
encompasses" the defendant's offenses. Id. It therefore
"decline[d] to graft an atextual limitation onto [the statute's]
broad jurisdictional grant over 'all offenses,'" or to "create a
new clear-statement rule requiring Congress to 'clearly indicat[e]
its intent' to include foreign states and their
instrumentalities." Id.
Similarly, in Pfizer, Inc. v. Government of India, the
Supreme Court considered a provision of the Clayton Act allowing
"any person" injured by a violation of U.S. antitrust laws to sue
in U.S. district court. 434 U.S. 308, 311-12 (1978) (quoting 15
U.S.C. § 15(a)). The Court held that "any person" includes foreign
governments, in part because that interpretation furthered the
"two purposes" of the provision: "to deter violators and deprive
them of 'the fruits of their illegality,' and 'to compensate
victims of antitrust violations for their injuries.'" Id. at 314
(quoting Ill. Brick Co. v. Illinois, 431 U.S. 720, 746 (1977)).
The Court reasoned that "[t]o deny a foreign plaintiff injured by
an antitrust violation the right to sue would defeat these
purposes" because "[i]t would permit a price fixer or a monopolist
to escape full liability for his illegal actions and would deny
compensation to certain of his victims, merely because he happens
to deal with foreign customers." Id. at 314–15.
- 21 -
Taken together, Turkiye and Pfizer guide our approach to
interpreting the PLCAA. Here, as in Turkiye, the "text as written"
does not contain the exceptions Mexico proposes. Nothing in the
text of the PLCAA limits its scope to misuse or injury that occurs
in the United States, or to U.S. plaintiffs. And, as in Pfizer,
the context and purpose of the PLCAA weigh against such a
limitation. Congress quite clearly enacted the PLCAA to insulate
the U.S. gun industry from certain lawsuits. See 15 U.S.C.
§ 7901(a)(5)–(8); id. § 7901(b)(1), (4). Limiting that protection
to lawsuits brought for harm occurring in the United States,
thereby exposing the U.S. gun industry to identical lawsuits for
harm suffered abroad, would run directly contrary to that purpose.
We also think it unlikely that Congress intended to allow recovery
for victims of gun violence occurring abroad but preclude that
same recovery for victims of gun violence occurring within U.S.
borders.
Nevertheless, Mexico urges us to read into the PLCAA an
implicit domestic restriction on the statute's scope. It likens
this case to Small v. United States, which involved a statute
criminalizing possession of a firearm by "any person . . . who has
been convicted in any court of, a crime punishable by imprisonment
for a term exceeding one year." 544 U.S. 385, 387 (2005) (quoting
18 U.S.C. § 922(g)(1)). There the Supreme Court held that the
phrase "convicted in any court" encompasses only domestic, not
- 22 -
foreign, convictions. Id. But at the same time the Court made
clear that its conclusion would be different "should statutory
language, context, history, or purpose show the contrary." Id. at
391. Finding "no convincing indication to the contrary" in the
statute, the Court applied an assumption "similar" to the
presumption against extraterritoriality because "Congress
generally legislates with domestic concerns in mind." Id. at 388,
391 (quoting Smith v. United States, 507 U.S. 197, 204 n.5 (1993)).
The holding in Small provides no succor to Mexico. As
we have explained, the PLCAA was also undoubtedly enacted with
domestic concerns in mind; i.e., the impact of certain types of
lawsuits filed in domestic courts against domestic firearm
companies. So prohibiting all such lawsuits regardless of who
brings them perfectly aligns with that domestic concern. The fact
that a statute is focused on domestic concerns (here, lawsuits in
U.S. courts) does not mean that every term in the statute need be
read as somehow domestically limited. See, e.g., Turkiye, 598
U.S. at 269; Pfizer, 434 U.S. at 314–15. And that is especially
so where, as here, limiting the statute in this way would run
directly contrary to its stated purposes.
Mexico begs to differ. It points to four "clues" that
the PLCAA does not apply to lawsuits arising out of the use of
guns in violation of foreign laws. We address each in turn.
- 23 -
First, Mexico points out that the definition of the term
"seller" in the PLCAA explicitly includes "importer[s]" but does
not explicitly mention "exporters." 15 U.S.C. § 7903(6)(A).
Similarly, "importers," but not "exporters," are specifically
identified as a category of business that the PLCAA seeks to
protect. Id. § 7901(b)(1). Mexico argues that this "confirms"
that Congress only intended the PLCAA to be domestic in scope.
But this is too slender a reed on which to support the
interpretation Mexico seeks to advance. Even assuming Congress
intended to exclude from the PLCAA's coverage the export of guns
(an issue we do not decide here), that does not alter our
conclusion that Congress certainly intended to include all lawful
domestic sales of guns -- even when those domestically sold guns
end up causing harm abroad. There are plausible reasons why
Congress might have wanted to protect domestic sellers more than
exporters, including Congress's stated purpose of "preserv[ing] a
citizen's access to a supply of firearms and ammunition for all
lawful purposes." 15 U.S.C. § 7901(b)(2) (emphasis added). If a
domestic seller goes out of business, that hampers U.S. citizens'
access to guns more than if an exporter goes out of business.
Thus, the lack of any express mention of "exporters" does not mean
that the PLCAA does not apply to actions against domestic
manufacturers and sellers for harm suffered in another country.
- 24 -
Second, Mexico points out that the PLCAA applies only to
actions "resulting from the criminal or unlawful misuse" of a
firearm, and excludes any action in which the manufacturer or
seller knowingly violated a "State or Federal statute" applicable
to gun sales or marketing. Mexico argues that "criminal or
unlawful misuse" should be read as referring only to violations of
domestic laws, just as "convicted in any court" was read to
encompass only domestic convictions in Small. Otherwise, Mexico
says, the exception for knowing violations of law would presumably
not be limited to state and federal statutes. We disagree. Given
the basic concern motivating Congress, it makes perfect sense to
read "criminal or unlawful misuse" broadly as including the
violation of any law. Otherwise, Congress would have favored
foreign plaintiffs over domestic plaintiffs and left a gaping hole
in the shield that was the object of the legislation.
Mexico replies that Congress would not have required
U.S. courts to interpret foreign criminal law in determining
whether the use of a gun was "criminal or unlawful." Again, we
disagree. Courts in the United States are capable of interpreting
foreign law, and commonly do so. See, e.g., Piper Aircraft Co. v.
Reyno, 454 U.S. 235, 245 (1981) ("[T]he mere fact that the court
is called upon to determine and apply foreign law does not present
a legal problem of the sort which would justify the dismissal of
a case otherwise properly before the court." (internal quotations
- 25 -
omitted)). Indeed, Mexico asks the court to interpret foreign law
in this very case by arguing that Mexican law applies. To the
extent Mexico is concerned that incorporating foreign law into the
meaning of "criminal or unlawful use" will introduce "extreme"
variations, the phrase already reflects the varied laws of fifty
different states. See, e.g., Cynthia V. Ward, "Stand Your Ground"
and Self-Defense, 42 Am. J. Crim. L. 89, 90 (2015) (describing
contrasting state approaches to "stand your ground" laws). The
PLCAA precludes certain lawsuits against firearm companies
premised only on others' unlawful use of firearms -- regardless of
which jurisdiction's law determines that the use was unlawful.
It also makes perfect sense that in crafting a specific
and defined exception for knowing violations of law by a defendant,
Congress would limit the exception to instances in which the
defendant knowingly violated a "State or Federal statute." To do
otherwise and except from the limitations of the PLCAA cases in
which a manufacturer violated a law of a foreign country would
grant foreign governments the ability to define the scope of that
exception. See Small, 544 U.S. at 389–90 (finding Congress not to
have granted foreign governments the ability to determine who could
not own a gun in the United States). The PLCAA is designed to
protect domestic firearm companies that operate lawfully in the
United States under the numerous federal and state laws regulating
their operations. See, e.g., 15 U.S.C. § 7901(a)(4) (finding that
- 26 -
the U.S. gun industry is "heavily regulated by Federal, State, and
local laws"). That goal would be hampered if the PLCAA's
protections fell away whenever a plaintiff alleged a violation of
only foreign laws -- which may be significantly more restrictive
than domestic regulations.
Third, Mexico argues that RJR Nabisco supports its claim
that "damages . . . or other relief" covers only injury in the
United States. RJR Nabisco involved the private right of action
for "[a]ny person injured . . . by reason of a violation of" the
Racketeer Influenced and Corrupt Organizations Act (RICO). 579
U.S. at 346 (quoting 18 U.S.C. § 1964(c)). The Supreme Court held
that the presumption against extraterritoriality precluded RICO's
private right of action from applying to injuries suffered abroad.
Id. But here, as discussed above, the focus of the PLCAA is not
on redressing injury but rather on preventing certain lawsuits
against U.S. firearm companies. So it is not an extraterritorial
application of the PLCAA to bar a lawsuit in a U.S. court against
a U.S. company for harm suffered abroad. See also WesternGeco,
138 S. Ct. at 2138 (distinguishing "injury," a "substantive
element of a cause of action" in RJR Nabisco, from "damages -- a
separate legal concept").
Finally, Mexico argues that the term "any governmental
entity" excludes foreign governmental entities because the PLCAA's
factual findings refer to actions "commenced or contemplated by
- 27 -
the Federal Government, States, municipalities, private interest
groups and others," and do not expressly mention foreign
governments. 15 U.S.C. § 7901(a)(8); id. § 7901(a)(7). This
argument stumbles at the starting line. The statements in the
findings of fact merely reflect that Congress enacted the PLCAA in
response to actions that had been "commenced or contemplated" by
the listed entities. They do not suggest that Congress did not
intend for the PLCAA to apply to identical lawsuits by others that
would have the same impact on the U.S. firearm industry.
In sum, the text, context, and purpose of the PLCAA all
point toward a conclusion that "[q]ualified civil liability
action[s]" include those filed in United States' federal and state
courts by foreign governments for injury incurred abroad.
C.
The foregoing brings us to Mexico's last
extraterritoriality argument: Its contention that our reading of
the statute should give way to Mexico's invocation of international
comity. Mexico argues that it is for Congress, not the courts, to
decide whether to preclude a foreign-law claim for injuries
incurred abroad -- especially when the plaintiff is a foreign
sovereign. It therefore urges application of a clear-statement
rule before reading a statute like the PLCAA to bar such lawsuits.
In making its comity argument, Mexico turns again to RJR
Nabisco and its holding that RICO did not create a private cause
- 28 -
of action for injuries suffered abroad. 579 U.S. at 346. In so
holding, the Supreme Court reasoned that "providing a private civil
remedy for foreign conduct creates a potential for international
friction" because it risks "upsetting a balance of competing
considerations that [foreign countries'] own . . . laws embody."
Id. at 346–47 (quoting F. Hoffmann-La Roche Ltd. v. Empagran S.A.,
542 U.S. 155, 167 (2004)). Mexico contends that this case is the
"mirror image" of RJR Nabisco: "[P]recluding a claim under
[foreign] law for injury incurred [abroad]" interferes with
foreign sovereigns' application of their laws just as much as
"granting a claim under U.S. law for injury incurred abroad." Cf.
Nestlé USA, Inc. v. Doe, 141 S. Ct. 1931, 1948 (2021)
(Sotomayor, J., concurring in part and concurring in the judgment)
("Closing the courthouse doors . . . gives rise to foreign-policy
concerns just as invariably as leaving them open." (cleaned up)).
Therefore, Mexico argues, absent a clear statement from Congress,
courts should not apply the PLCAA to claims arising under foreign
law for conduct that occurs in the United States but causes
injuries abroad.
We decline to adopt this clear-statement rule for the
PLCAA. As should be abundantly clear by now, the PLCAA's focus is
on protecting U.S. firearm companies from certain costly lawsuits,
thereby also preserving U.S. citizens' access to firearms.
Creating an atextual exception for lawsuits by foreign governments
- 29 -
would expose U.S. firearm companies to the very type of lawsuit
the PLCAA seeks to prohibit, thereby running contrary to its stated
goals. In at least this respect, this case is different from RJR
Nabisco, in which limiting RICO's private cause of action to
exclude injuries suffered abroad did not undermine any stated
purposes of the statute.
The practical consequence of applying the PLCAA to this
case is not lost on us. It may be that Mexico, as it claims, would
be unable to pursue its lawsuit in the only forum that could
provide effective injunctive relief. But that is a necessary
consequence of Congress's decision to protect the U.S. firearm
industry by regulating the types of lawsuits that can be
adjudicated by U.S. courts. And the prohibition applies to
lawsuits filed by domestic entities and individuals on an equal
basis. Cf. Pfizer, 434 U.S. at 318–19 ("[A] foreign nation is
generally entitled to prosecute any civil claim in the courts of
the United States upon the same basis as a domestic corporation or
individual might do.").
In sum, we hold that the PLCAA applies to lawsuits by
foreign governmental entities for harm suffered outside this
country, just as it applies to lawsuits by domestic governmental
entities for harm suffered in this country. We turn next to
Mexico's contention that, even if the PLCAA applies generally to
- 30 -
suits by foreign governments for foreign harms, it also excepts
from its ban claims of the type presented in Mexico's complaint.
IV.
As the title of the Protection of Lawful Commerce in
Arms Act suggests, the statute is designed to protect only "lawful"
commerce in arms. It contains various exceptions to ensure that
it does not insulate firearm companies against lawsuits resulting
from their unlawful behavior. One of those exceptions, known as
the predicate exception, exempts from the PLCAA's clutches "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." 15 U.S.C.
§ 7903(5)(A)(iii). Mexico contends that its lawsuit meets this
description.
Defendants advance three arguments for rejecting
Mexico's contention: first, defendants say that Mexico's claims
are not for violations of "statute[s]"; second, they contend that
Mexico's complaint does not adequately plead violations of
predicate statutes; and third, they assert that Mexico has not
adequately alleged proximate cause. We conclude that Mexico
survives each of these threshold challenges at this stage of the
litigation. We therefore hold that the PLCAA does not prevent
this case from moving forward. Our reasoning follows.
- 31 -
A.
The district court held that Mexico's common law claims
did not qualify for the predicate exception because, it thought,
the exception applies only to "statutory claims," not "common-law
causes of action." Estados Unidos Mexicanos, 633 F. Supp. 3d at
446. Said differently, the district court thought that the "State
or Federal statute" that the defendant violated, rather than the
common law, must also provide the private right of action under
which the plaintiff sues.
Mexico tells us that no other court has construed the
PLCAA this way, and points to a variety of decisions applying the
predicate exception to common law claims alleging knowing
violations of statutes.4 Defendants do not contest this assertion,
nor do they cite any cases construing the PLCAA as the district
court did in this case.
4See, e.g., Brady v. Walmart Inc., No. 8:21-cv-1412-AAQ,
2022 WL 2987078, at *6–10 (D. Md. July 28, 2022); Prescott v. Slide
Fire Sols., LP, 410 F. Supp. 3d 1123, 1139–40 & 1139 n.9 (D. Nev.
2019); Corporan v. Wal-Mart Stores E., LP, No. 16-2305-JWL, 2016
WL 3881341, at *3–4 & *4 n.4 (D. Kan. July 18, 2016); City of New
York v. A-1 Jewelry & Pawn, Inc., 247 F.R.D. 296, 353 (E.D.N.Y.
2007); King v. Klocek, 187 A.D.3d 1614, 1616 (N.Y. App. Div. 2020);
Englund v. World Pawn Exch., LLC, No. 16CV00598, 2017 WL 7518923,
at *4 (Or. Cir. Ct. June 30, 2017); Chiapperini v. Gander Mountain
Co., 13 N.Y.S.3d 777, 787 (N.Y. Sup. Ct. 2014); Williams v.
Beemiller, Inc., 100 A.D.3d 143, 150–51 (N.Y. App. Div. 2012),
amended by 103 A.D.3d 1191 (N.Y. App. Div. 2013); Smith & Wesson
Corp. v. City of Gary, 875 N.E.2d 422, 434–35 (Ind. Ct. App. 2007).
- 32 -
We, too, conclude that the predicate exception
encompasses common law claims in addition to statutory claims, as
long as there is a predicate statutory violation that proximately
causes the harm. The text of the PLCAA compels this conclusion.
While other PLCAA exceptions exempt suits "for" specific causes of
action, 15 U.S.C. § 7903(5)(A)(ii), (iv), (v) ("an action . . .
for negligent entrustment or negligence per se"; "an action for
breach of contract or warranty"; "an action for [harm arising from
a product defect]"), the predicate exception more broadly exempts
actions "in which" the manufacturer or seller violated a statute,
id. § 7903(5)(A)(iii). If Congress had wanted to limit the
predicate exception to claims for violating a predicate statute,
it could have simply phrased this exception the same as the others.
See Keene Corp. v. United States, 508 U.S. 200, 208 (1993)
("[W]here Congress includes particular language in one section of
a statute but omits it in another . . ., it is generally presumed
that Congress acts intentionally and purposely in the disparate
inclusion or exclusion." (omission in original) (quoting Russello
v. United States, 464 U.S. 16, 23 (1983))).
Defendants reply that "in which" means that the
statutory violation must be contained "in" the cause of action,
such that it must be an element of the claim. Certainly to prevail
Mexico would need to prove a manufacturer or seller liable for the
knowing violation of a statute applicable to the sale or marketing
- 33 -
of a qualified product. So proof of a statutory violation is a
condition to prevailing on, for example, a cause of action for
negligence. But that does not mean that a lawsuit for negligence
cannot be "an action in which . . . a seller . . . knowingly
violated" a requisite statute.
The predicate exception's proximate cause requirement
harmonizes well with this understanding. The requisite proximate
cause serves as a nexus between the predicate statutory violation
and common law claims that otherwise might bear no relation to a
seller's transgression of firearm statutes. This ensures
that -- contrary to defendants' protestations -- our reading of
the predicate exception does not allow any claim at all to proceed
merely because it is alleged in the same case as an unrelated
statutory violation.
The proximate cause requirement makes less sense under
the district court's reading. Courts "generally presume that a
statutory cause of action is limited to plaintiffs whose injuries
are proximately caused by violations of the statute." Lexmark
Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 132
(2014). And for any statutory cause of action containing a
proximate cause requirement (as most do), the district court's
reading would render the identical requirement of the predicate
exception entirely superfluous. See Consumer Data Indus. Ass'n v.
Frey, 26 F.4th 1, 7 (1st Cir. 2022) ("A statute . . . ought to be
- 34 -
construed in a way that 'no clause, sentence, or word shall be
superfluous, void, or insignificant.'" (quoting Duncan v. Walker,
533 U.S. 167, 174 (2001))). Of course, as defendants point out,
not all statutory causes of action have a built-in proximate cause
requirement. But even with this caveat, proximate cause makes far
more sense as a nexus between a predicate statutory violation and
other causes of action than as a catchall designed to graft a
proximate cause requirement onto rare statutory causes of action
with alternative causation frameworks.
The examples Congress provided of lawsuits that fit
within the exception dispel any doubt that the exception allows
for more than purely statutory causes of action. The predicate
exception expressly encompasses, as an example of allowed
lawsuits, "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 subsection (g) or (n) of section 922 of title 18, United
States Code" -- conduct made unlawful by the Gun Control Act, 18
U.S.C. § 922(d). 15 U.S.C. § 7903(5)(A)(iii)(II). Yet, nothing
in section 922 seems to create any private right of action. Nor
does any party suggest that it does. To the contrary, Mexico cites
various cases holding that the Gun Control Act contains no
- 35 -
statutory private right of action, and defendants do not dispute
this characterization.5 And given that agreed-upon reading, it
would make no sense for Congress to have listed such a case as an
example if only statutory actions could survive under the predicate
exception.
Defendants argue that, read to include non-statutory
causes of action, the predicate exception would "wholly subsume"
a different exception in the PLCAA for "action[s] brought against
a seller for . . . negligence per se." 15 U.S.C. § 7903(5)(A)(ii).
Generally speaking, negligence per se requires violation of "a
statute that is designed to protect against the type of
accident the actor's conduct causes" and that the "victim is within
the class of persons the statute is designed to protect."
Restatement (Third) of Torts § 14. Defendants complain that our
reading of the predicate exception would allow plaintiffs to bring
any common law claim based on any statutory violation, thereby
rendering these restrictions superfluous.
5 The cases that Mexico cites are not from this circuit. See
Bannerman v. Mountain State Pawn, Inc., No. 3:10-CV-46, 2010 WL
9103469 (N.D. W. Va. Nov. 5, 2010), aff'd, 436 F. App'x 151 (4th
Cir. 2011); Est. of Pemberton v. John's Sports Ctr., Inc., 135
P.3d 174 (Kan. Ct. App. 2006); T & M Jewelry, Inc. v. Hicks ex
rel. Hicks, 189 S.W.3d 526 (Ky. 2006). We do not decide here
whether the Gun Control Act provides a private right of action.
For purposes of the present case, we merely accept the parties'
apparent agreement that it does not.
- 36 -
Defendants' argument glosses over the heightened mens
rea requirement in the predicate exception, which applies only
when the defendant "knowingly" violates a statute. So there are
statutory violations -- i.e., those that are not "knowing" -- that
may be actionable under the doctrine of negligence per se but do
not serve as predicate violations. So, there is no superfluousness
in our reading of the statute. And it is perfectly sensible for
Congress to allow claims satisfying the negligence per se standard
to proceed, while at the same time creating a separate exception
for knowing violations of statutes regulating the sale or marketing
of firearms.6
For these reasons, we conclude that the predicate
exception allows common law claims for injury proximately caused
by a defendant's knowing violation of a predicate statute. We
turn next to defendants' contention that Mexico has not adequately
alleged such a violation.
B.
Mexico alleges that defendants knowingly violated
predicate statutes in two ways: by aiding and abetting illegal
downstream sales, and by selling unlawful "machineguns."
6 In fact, the district court in this very case found the
negligence per se exception inapplicable because Massachusetts
does not recognize the negligence per se doctrine. See Estados
Unidos Mexicanos, F. Supp. 3d at 449.
- 37 -
1.
First, Mexico reasons that by deliberately facilitating
the unlawful trafficking of their guns into Mexico, defendants aid
and abet violations of various federal statutes that prohibit
selling guns without a license, exporting guns without a license,
and selling to straw purchasers. Resting on their position that
the predicate exception is limited to statutory causes of action
(which we have rejected), defendants do not contend that the
complaint fails to allege widespread sales of firearms by dealers
in knowing violation of several state and federal statutes. Nor
do defendants dispute that the predicate exception of
section 7903(5)(A)(iii) would apply if Mexico were to prove that
a defendant aided and abetted any such violation. Instead,
defendants contend that even for pleading purposes the complaint
fails to allege facts plausibly supporting the theory that
defendants have aided and abetted such unlawful sales.
We disagree, finding instead that Mexico's complaint
adequately alleges that defendants have been aiding and abetting
the sale of firearms by dealers in knowing violation of relevant
state and federal laws. "[T]he essence of aiding and abetting" is
"participation in another's wrongdoing that is both significant
and culpable enough to justify attributing the principal
wrongdoing to the aider and abettor." Twitter, Inc. v. Taamneh,
598 U.S. 471, 504 (2023).
- 38 -
Reduced to its essence, aiding-and-abetting liability
rests on "twin requirements" that the assistance provided to the
principal wrong-doer be both (1) "knowing" and (2) "substantial."
Id. at 491-92. These requirements "work[] in tandem, with a lesser
showing of one demanding a greater showing of the other." Id.
They "'should be considered relative to one another' as part of a
single inquiry designed to capture conscious and culpable
conduct." Id. at 504 (quoting Camp v. Dema, 948 F.2d 455, 459
(8th Cir. 1991)).
Defendants argue that Mexico has at best alleged
defendants' knowing indifference to the downstream illegal
trafficking of their guns into Mexico. They argue that "because
Defendants themselves are not alleged to 'participate' in this
wrongful conduct at all, much less with any plausible intent of
facilitating it, they cannot be deemed accomplices."
This argument reflects a fundamental misunderstanding of
the complaint. Fairly read, the complaint alleges that defendants
are aware of the significant demand for their guns among the
Mexican drug cartels, that they can identify which of their dealers
are responsible for the illegal sales that give the cartels the
guns, and that they know the unlawful sales practices those dealers
engage in to get the guns to the cartels. The complaint further
alleges that even with all this knowledge, and even after warnings
from the U.S. government, defendants continue to supply the very
- 39 -
dealers that they know engage in straw sales and large-volume sales
to traffic guns into Mexico, that they design military-style
weapons and market them as such knowing that this makes them more
desirable to the cartels, and that they place serial numbers on
their weapons in a manner that facilitates their removal, as is
preferred by cartels. And the complaint alleges that as a result
of this conduct, defendants collectively reap $170 million per
year in revenue from this illegal market. It is therefore not
implausible that, as the complaint alleges, defendants engage in
all this conduct in order to maintain the unlawful market in
Mexico, and not merely in spite of it.
Notionally, imagine a dealer, a distributor, and a
manufacturer standing abreast of one another at the border. The
manufacturer hands the distributor ten guns, the distributor hands
them to the dealer, and the dealer then hands them to a group of
ten customers, among whom there are eight well-known agents of the
cartel acting as straw purchasers. Rather than refusing to fill
an order for ten more guns by that dealer, the manufacturer tweaks
its advertisements to better appeal to the cartel, supplies them
more guns, and so on over and over again. We think it clear that
by passing along guns knowing that the purchasers include unlawful
buyers, and making design and marketing decisions targeted towards
those exact individuals, the manufacturer is aiding and abetting
- 40 -
illegal sales. And this scenario, in substance, is fairly
analogous to what Mexico alleges.
The allegations here are also remarkably analogous to
the facts in Direct Sales Co. v. United States, 319 U.S. 703(1943). In that case, the defendant company conducted from New
York a business providing mail-order prescription drugs to doctors
around the country. Id. at 704–06. One customer was a doctor in
South Carolina who was illegally reselling morphine sulfate
supplied to him by the defendant. Id. at 704. The defendant was
convicted of criminally conspiring with the doctor. Id. at 704-05.
In affirming the conviction, the Supreme Court pointed to evidence
that the doctor was ordering the product in large volumes
incompatible with lawful use by legitimate patients, that the
defendant facilitated this behavior through mass advertising and
offering bulk sales at steep discounts (even after the U.S.
government warned it that it was a source of supply for an illegal
market), and that the company had a "stake in the venture" in the
form of profits from the illegally sold drugs. Id. at 706–07,
712–13. From this evidence, the Court concluded, the jury could
have found beyond a reasonable doubt that the defendant supplier
"not only kn[ew] and acquiesce[d]" in the illegal enterprise, but
also "join[ed] both mind and hand . . . to make its accomplishment
possible." Id. at 713.
- 41 -
Here, similarly, the complaint alleges that defendants
have resisted taking measures that would make it more difficult
for their firearms to fall into the cartels' hands (despite
warnings from the U.S. government), that they design and market
their guns in such a way as to make them attractive to the illegal
market, and that they benefit financially as a result. And unlike
in Direct Sales, the defendants here are alleged to know that they
supply dealers who sell illegally, making the inference that they
are working in concert with these unlawful actors even stronger.
Neither must we determine whether there is evidence of these facts
sufficient to support a criminal conviction as in Direct Sales; we
ask only whether the facts alleged in the complaint plausibly
support an aiding-and-abetting theory of liability in this civil
case. Direct Sales strongly supports our conclusion that they do.
Defendants attempt to distinguish Direct Sales by
relying on the Court's observation that given the quantities sold
the drugs could not have all been used for any lawful purpose.
Id. at 710–12. In contrast, they assert, the "vast majority of
retailers" are law-abiding and "only 2%" of U.S. firearms end up
in Mexico. But in Direct Sales the Court distinguished
morphine -- a product "incapable of further legal use except by
compliance with rigid regulations" -- from other commodities "not
restricted as to sale by order form, registration, or other
requirements." Id. at 710. The defendant's sales methods and
- 42 -
volumes, which might be perfectly innocuous for everyday items,
were evidence of illicit intent when employed to sell a dangerous
item whose legitimate market is highly restricted. Id. at 711-12.
"The difference," the Court said, "is like that between toy pistols
or hunting rifles and machine guns." Id. at 710.
And so in Direct Sales the defendant must have known
that the sales volume meant there were likely illegal sales, and
by encouraging volume sales, the defendant could have been found
to have intended to supply the products for the illegal sales.
Here we also have a highly regulated product7 allegedly being sold
in an illegal manner, and an allegation that defendants know what
is going on and take steps to facilitate it. In this important
respect, Direct Sales again provides a close and instructive
analogy.
Defendants also point out that Direct Sales rejected the
proposition that a seller could be held liable for a buyer's
illegal acts based merely on their knowledge or lack of concern as
to the buyer's unlawful plans. But for all the reasons described
above, the complaint adequately alleges that defendants make
deliberate design and distribution choices to facilitate the
illegal trafficking of their guns to Mexico. Thus they are not
7 As Congress observed in enacting the PLCAA, "[t]he
manufacture, importation, possession, sale, and use of firearms
and ammunition in the United States are heavily regulated." 15
U.S.C. § 7901(a)(4).
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mere passive observers of the buyer's illegal activity, but more
akin to a calculated and willing participant in the supply chain
that ends with a profitable illegal firearm market in Mexico.
Defendants argue that the Supreme Court's recent opinion
in Twitter calls for a different result. We disagree. In Twitter,
the Supreme Court held that major social media platforms used by
ISIS to enlist recruits and raise funds were not liable under the
Justice Against Sponsors of Terrorism Act for aiding and abetting
an ISIS terrorist attack on a nightclub in Turkey. 598 U.S. at
505-07. The defendants in Twitter had no meaningful stake in
ISIS's use of their platforms and had an undisputed lack of intent
to support ISIS. Id. The only affirmative conduct that the
defendants engaged in was creating their platforms and making them
available to the public, which was not alleged to have been done
with ISIS in mind or to support terrorism. Id. at 498. There was
also no allegation that ISIS even used the platforms to plan or
coordinate the attack. Id.
Here, by contrast, Mexico alleges that defendants engage
in conduct -- design decisions, marketing tactics, and repeated
supplying of dealers known to sell guns that cross the
border -- with the intent of growing and maintaining an illegal
market in Mexico from which they receive substantial revenues.
And for Rule 12(b)(6) purposes we assume that defendants' conduct
in fact helped incite the unlawful sales. See, e.g., SBT Holdings,
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LLC v. Town of Westminster, 547 F.3d 28, 35 (1st Cir. 2008) ("[W]e
draw all rational inferences from the facts alleged in favor of
the plaintiffs."). Defendants are therefore alleged to be much
more active participants in the alleged activity than were the
Twitter defendants, and the holding in that case does not compel
a different result in this one.
Of course, the complaint does not allege defendants'
awareness of any particular unlawful sale. But neither did the
convicted mail-order company in Direct Sales have such specific
knowledge. The Supreme Court clarified in Twitter that such a
"strict nexus" is not always required. 598 U.S. at 497. "[I]n
appropriate circumstances, a secondary defendant's role in an
illicit enterprise can be so systemic that the secondary defendant
is aiding and abetting every wrongful act committed by that
enterprise." Id. at 496. Here, defendants operate at a systemic
level, allegedly designing, marketing, and distributing their guns
so that demand by the cartels continues to boost sales. In these
circumstances, defendants need not know about any particular
unlawful sale that funnels their guns into Mexico.
In sum, we conclude that the complaint adequately
alleges that defendants aided and abetted the knowingly unlawful
downstream trafficking of their guns into Mexico. Defendants'
arguments to the contrary are premised either on an inaccurate
reading of the complaint or on a misapplication of the standard of
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review on a motion to dismiss under Rule 12(b)(6). Whether
plaintiffs will be able to support those allegations with evidence
at summary judgment or at trial remains to be seen. At this stage,
though, we must "accept all well-pleaded allegations of [Mexico]
as true and afford all inferences in [Mexico's] favor." Vázquez-
Ramos v. Triple-S Salud, Inc., 55 F.4th 286, 291 (1st Cir. 2022)
(cleaned up) (quoting Arroyo-Melecio v. P.R. Am. Ins. Co., 398
F.3d 56, 65 (1st Cir. 2005)).
2.
Mexico's argument that defendants unlawfully sold
"machineguns" fares less well. The Gun Control Act prohibits
selling a "machinegun" without specific authorization. 18 U.S.C.
§ 922(b)(4). "Machinegun" is defined as follows:
The term "machinegun" means any weapon which
shoots, is designed to shoot, or can be
readily restored to shoot, automatically more
than one shot, without manual reloading, by a
single function of the trigger. The term
shall also include the frame or receiver of
any such weapon, any part designed and
intended solely and exclusively, or
combination of parts designed and intended,
for use in converting a weapon into a
machinegun, and any combination of parts from
which a machinegun can be assembled if such
parts are in the possession or under the
control of a person.
26 U.S.C. § 5845(b).
Mexico claims that defendants' semiautomatic weapons
meet this definition because they can easily be modified to fire
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automatically. It cites a 1982 ATF administrative ruling stating
that this definition "includes those weapons which have not
previously functioned as machineguns but possess design features
which facilitate full automatic fire by a simple modification or
elimination of existing component parts." ATF Rul. 82-8, 1982-2
A.T.F.Q.B. 49 (1982).
Binding precedent from the Supreme Court and this court
forecloses Mexico's interpretation. In Staples v. United States,
the Supreme Court held that the National Firearms Act -- which
prohibits possession of an unregistered "machinegun" (as defined
above) -- requires that the defendant knew that the possessed
weapon "had the characteristics that brought it within the
statutory definition of a machinegun." 511 U.S. 600, 602 (1994).
The defendant in that case possessed an AR-15 rifle, in which
certain components had been swapped out or filed down to enable
automatic firing. Id. at 603. The Supreme Court held that to be
properly convicted the defendant must have known that his rifle
had been so modified. Id. at 619. It rejected a reading of the
statute under which "any person who has purchased what he believes
to be a semiautomatic rifle or handgun . . . can be subject to
imprisonment, despite absolute ignorance of the gun's firing
capabilities, if the gun turns out to be an automatic." Id.
at 615. And the majority also rejected the dissent's argument
based on a class of "readily convertible semiautomatics" because
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"that class bears no relation to the definitions in the Act." Id.
at 612 n.6.
Similarly, in United States v. Nieves-Castaño, we
reversed the conviction of a defendant who knew that she possessed
an AK-47 but did not know that it had been modified to allow
automatic firing. 480 F.3d 597, 602 (1st Cir. 2007). We stated
that "[w]hile an automatic weapon meets the definition of a machine
gun, a semi-automatic weapon does not." Id. at 600 (citing
Staples, 511 U.S. at 602 & n.1).
Mexico argues that Staples and Nieves-Castaño are
inapposite because those cases were about the mens rea requirement
for a possession crime, not the definition of "machinegun." It
cites a district court case from Nevada distinguishing Staples on
this basis. See Parsons v. Colt's Mfg. Co., No. 19-cv-01189, 2020
WL 1821306, at *5 (D. Nev. Apr. 10, 2020), modified on
reconsideration, No. 19-cv-01189, 2020 WL 2309259 (D. Nev. May 8,
2020). But critical to the holdings of both Staples and Nieves-
Castaño was that knowing possession of a readily convertible
semiautomatic weapon does not constitute de facto knowing
possession of a "machinegun." In other words, a readily
convertible semiautomatic weapon is not, without more, the same as
an automatic weapon. Mexico's reading would erase this
distinction -- creating an equivalency that the holdings of Staples
and Nieves-Castaño do not allow. It would also effectively outlaw
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the knowing possession of any semiautomatic weapon, since
"virtually any semiautomatic weapon may be converted . . . into a
machinegun within the meaning of the Act." See Staples, 511 U.S.
at 615. Whether convertible semiautomatic weapons are to be
prohibited in their entirety is not an issue presented by this
appeal.
C.
The final hurdle that Mexico must clear is the predicate
exception's proximate cause requirement. A violation of a
predicate statute allows a lawsuit to proceed only if "the
violation was a proximate cause of the harm for which relief is
sought." 15 U.S.C. § 7903(5)(A)(iii).
Proximate cause "demand[s] 'some direct relation between
the injury asserted and the injurious conduct alleged.'" United
States v. Kilmartin, 944 F.3d 315, 330 (1st Cir. 2019) (quoting
Paroline v. United States, 572 U.S. 434, 444 (2014)). "Proximate
cause is commonly understood as a function of the foreseeability
of the harm," id. at 331, although in certain contexts
foreseeability alone may be insufficient, see, e.g., Bank of Am.
Corp. v. City of Miami, 581 U.S. 189, 202 (2017) (Fair Housing
Act).8
8 Neither party proposes a definition of proximate cause
specific to the predicate exception of the PLCAA. In the absence
of any such suggestions, we apply traditional understandings of
proximate cause.
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Mexico's claim of proximate cause is straightforward:
defendants aid and abet the trafficking of guns to the Mexican
drug cartels, and this trafficking has foreseeably required the
Mexican government to incur significant costs in response to the
increased threats and violence accompanying drug cartels armed
with an arsenal of military-grade weapons.
Defendants attempt to complicate this causal theory.
They maintain that the chain of causation actually has eight steps:
(1) manufacturers sell guns to distributors; (2) distributors sell
the guns to dealers; (3) dealers sell the guns to buyers with
illegal intentions; (4) those buyers sell the guns to smugglers or
smuggle them into Mexico themselves; (5) the cartels buy the guns;
(6) the cartels use the guns; (7) the cartels' use of the guns
injures people and property in Mexico; and (8) the Mexican
government suffers derivative financial harm from those injuries.
There are at least two fatal flaws in this argument.
First, the starting point for the predicate exception's
causation analysis is the "violation" of "a State or Federal
statute applicable to the sale or marketing" of firearms. We ask
whether "the violation" proximately caused the plaintiff's harm.
15 U.S.C. § 7903(5)(A)(iii). Here, the violation that defendants
allegedly aid and abet occurs when a dealer knowingly violates the
law in selling guns intended for cartels. Viewed in this light,
the relevant chain of causation starts at step 3 of the defendants'
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list. And from that point, the Mexican government's expenditure
of funds to parry the cartels is a foreseeable and direct
consequence.
Second, the fact that one can fashion a multi-step
description of the causal chain does not mean that the injurious
conduct and the injury alleged are insufficiently connected.
Consider a defendant who falls asleep at the helm of a large ship,
leaning on the helm, so as to move the tiller, which turns the
rudder, which then turns the ship off course, hitting and weakening
a dike, and thereby causing a reasonably cautious downstream farmer
to build a levee. Surely the ability to describe this causation
in multiple steps would not mean that, as a matter of law, the
negligent helmsperson did not foreseeably cause the farmer
compensable harm. Rather, one would more reasonably say that
negligently steering the ship foreseeably caused the need to shore-
up flood defenses. So, too, here, the complaint plausibly alleges
that aiding and abetting the illegal sale of a large volume of
assault weapons to the cartels foreseeably caused the Mexican
government to shore-up its defenses.
Defendants nevertheless claim that the Third Circuit
adopted their view of proximate cause in City of Philadelphia v.
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Beretta U.S.A. Corp., 277 F.3d 415, 423–24 (3d Cir. 2002).9 In
that case, though, Philadelphia alleged "[a]t most . . . awareness
of the means by which prohibited purchasers end up possessing
handguns." Id. at 424 & n.14. The "trace request information"
available at that time "d[id] not put a gun manufacturer on notice
that a specific distributor or dealer [wa]s engaged in unlawful
firearm trafficking." Id. at 424 n.14. Thus all gun manufacturers
knew was that "some handguns reach prohibited purchasers." Id.And without more, the plaintiffs could not show "intent on the
part of the gun manufacturers." Id. Here, by contrast, Mexico
expressly alleges that the defendants did know which dealers were
making illegal sales.
Defendants further contend that there is no proximate
cause because the causal chain contains multiple criminal acts by
third parties. They argue that "an 'intervening criminal act of
a third party' is the textbook intervening act," Copithorne v.
Framingham Union Hosp., 520 N.E.2d 139, 141 (Mass. 1988). But the
complete sentence in Copithorne from which defendants' brief
cherry-picks actually states: "The intervening criminal act of a
third party is a superseding cause which breaks the chain of
proximate causation only where the original wrongdoer reasonably
9 The Third Circuit decided City of Philadelphia before
Congress enacted the PLCAA, so it analyzed proximate cause under
negligence law, not the PLCAA. 277 F.3d at 422–26.
- 52 -
could not have foreseen such act." Id.; see also, e.g.,
Restatement (Second) of Torts § 448 (intervening crime is
superseding cause "unless the actor at the time of his negligent
conduct realized or should have realized the likelihood . . . that
a third person might avail himself of the opportunity to commit
such a . . . crime"); id. § 449 ("If the likelihood that a third
person may act in a particular manner is the hazard or one of the
hazards which makes the actor negligent, such an act whether
innocent, negligent, intentionally tortious, or criminal does not
prevent the actor from being liable for harm caused thereby.").
Here, the complaint alleges not only that it was foreseeable that
defendants' guns would end up in the hands of Mexican cartels, but
also that defendants actually intended to bring about that result.
And it is certainly foreseeable that Mexican drug cartels -- armed
with defendants' weapons -- would use those weapons to commit
violent crimes. The acts of these third parties are therefore
properly considered as part of the proximate causation chain.
Defendants' superseding-criminal-act argument is
especially unconvincing in the context of the PLCAA, which
precludes only those claims "resulting from the criminal or
unlawful misuse of a qualified product" by someone other than the
defendant. 15 U.S.C. § 7903(5)(A). If a third party's unlawful
act always undercuts proximate cause, the predicate exception
would be meaningless. See Abramski v. United States, 573 U.S.
- 53 -
169, 183 n.8 (2014) (rejecting an interpretation of a gun-control
statute that "would render the statute all but useless").
Defendants then shift focus from the conduct to the
injury. They argue that the Mexican government's alleged harms
are wholly derivative of injuries suffered by the direct victims
of cartel violence, citing a "general tendency of the law" not to
stretch proximate causation "beyond [its] first step" to reach
indirect victims. Holmes v. Sec. Inv. Prot. Corp., 503 U.S. 258,
271 (1992) (quoting Associated Gen. Contractors v. Cal. State
Council of Carpenters, 459 U.S. 519, 534 (1983)). Under this
principle, "a plaintiff who complained of harm flowing merely from
the misfortunes visited upon a third person by the defendant's
acts was generally said to stand at too remote a distance to
recover." Id. at 268–69; see also Lexmark, 572 U.S. at 133.
Some courts have applied this principle to bar similar
lawsuits by cities against gun manufacturers. For example, the
Third Circuit held that Philadelphia had not alleged proximate
cause because it sought "reimbursement for expenses that arise
only because of the use of firearms to injure or threaten City
residents," even though some of the alleged damages were "different
from the damages suffered by direct victims of gun
violence" -- like costs to "investigate and prosecute gun
trafficking[ and] to patrol gun infested neighborhoods." City of
- 54 -
Philadelphia, 277 F.3d at 425; see also Ganim v. Smith & Wesson
Corp., 780 A.2d 98, 124 (Conn. 2001) (applying similar reasoning).
On the other hand, some courts have recognized that
selling guns into an illegal market may cause direct harm to a
governmental entity that is not derivative of harm to its
residents. A court in Massachusetts allowed the city of Boston to
proceed in its lawsuit against firearm companies where the city
alleged various direct harms resulting from the defendants'
"fueling an illicit market" of guns. City of Boston v. Smith &
Wesson Corp., No. 199902590, 2000 WL 1473568, at *6 (Mass. Super.
July 13, 2000). Such harms included costs of increased security
at public schools, costs of increased law enforcement, lower
property values, and diminished tax revenues. Id. The Supreme
Court of Ohio adopted this reasoning, finding direct injuries in
the form of "significant expenses for police, emergency, health,
prosecution, corrections and other services." Cincinnati v.
Beretta U.S.A. Corp., 768 N.E.2d 1136, 1148 (Ohio 2002).
Similarly, a New Jersey court rejected a remoteness argument with
respect to expenditures associated with "deterrence, investigation
of gun crimes, and other related services." James v. Arms Tech.,
Inc., 820 A.2d 27, 41 (N.J. Super. Ct. App. Div. 2003); see also
In re JUUL Labs, Inc., Mktg., Sales Practices & Prods. Liab.
Litig., 497 F. Supp. 3d 552, 664-65 (N.D. Cal. 2020) (finding
- 55 -
proximate cause where government entities "do not seek to recover
costs expended by . . . any other third party").
We find the reasoning of the latter cases persuasive.
When faced with an epidemic of unlawful gun trafficking into its
country, a government will foreseeably -- indeed
inexorably -- incur costs of its own that are not merely derivative
of those borne by the direct victims of gun violence. One obvious
example is the cost of increased law enforcement personnel and
training to mitigate the flow of illegal weapons and to combat
drug cartels that -- armed with defendants' weapons -- are
essentially hostile military operations. The government directly
and uniquely bears these costs as a direct result of defendants'
alleged facilitation of gun trafficking to the Mexican cartels.
Imagine that a U.S. company sent a mercenary unit of
combat troops to attack people in Mexico City. Such an attack
would directly cause Mexico itself the expense of paying soldiers
to defend the city. Proximate cause would be quite clear. So,
too, here, where the defendants are alleged to have armed the
attackers for their continuing assaults.
Mexico may also be able to show that other of its alleged
harms are proximately caused by defendants' actions, and not merely
derivative of harms to its citizens. For example, if Mexico can
prove that it had to proactively spend more funds to bolster its
healthcare facilities, social services, and judicial system in
- 56 -
response to the cartels' accumulation of defendants' guns, these
expenses might also not be merely derivative of the injuries
suffered by individual victims. On the other hand, other alleged
harms, such as lower economic efficiency due to the decreased size
of the working population, are derivative because the harm to the
government flows only from prior harm inflicted upon its citizens.
The bottom line is that Mexico has plausibly alleged at least some
injuries that it has suffered directly from the illegal trafficking
of guns into Mexico, and that are not merely derivative of the
harm suffered by the victims of gun violence.
This conclusion is consistent with Supreme Court
precedent. In Holmes (a RICO case), the Court held that there was
no proximate cause linking the defendants' manipulation of stock
prices, which caused broker-dealers who purchased the stock to
experience financial distress, to the harm suffered by the broker-
dealers' customers when the broker-dealers could not pay the
customers' claims. 503 U.S. at 271–74. In that case, the only
path from the stock manipulation to the customers' harm was through
the broker-dealers' harm. Id. at 271 ("[T]he conspirators have
allegedly injured these customers only insofar as the stock
manipulation first injured the broker-dealers and left them
without the wherewithal to pay customers' claims.").
Contrast the situation in Holmes from one contemplated
by the Court in Lexmark:
- 57 -
Consider two rival carmakers who purchase
airbags for their cars from different third-
party manufacturers. If the first carmaker,
hoping to divert sales from the second,
falsely proclaims that the airbags used by the
second carmaker are defective, both the second
carmaker and its airbag supplier may suffer
reputational injury, and their sales may
decline as a result. In those circumstances,
there is no reason to regard either party's
injury as derivative of the other's; each is
directly and independently harmed by the
attack on its merchandise.
572 U.S. at 138–39.
This case is more like the airbag example in Lexmark
than the stock manipulation in Holmes. Unlike in Holmes, the
causal path from the gun trafficking to the Mexican government's
expenditures does not flow solely through the harm suffered by
victims of gun violence. Rather, like in the airbag example, the
harm caused by the trafficking goes in multiple directions -- both
directly to the victims of gun violence and directly to the Mexican
government. Admittedly, the government's expenditures are
presumably in large part for the purpose of preventing and
mitigating the harm from gun violence to its citizens. But that
does not make it "purely derivative" in the sense that sometimes
defeats proximate cause. See id. at 133.
Defendants' final attack on proximate cause is a
pragmatic one. Defendants point to two "functional factors" that
courts apply while analyzing proximate cause under RICO: the
feasibility of "ascertain[ing] the amount of a plaintiff's damages
- 58 -
attributable to the violation, as distinct from other,
independent, factors"; and the "administrability" of apportioning
damages without "multiple recoveries." Sterling Suffolk
Racecourse, LLC v. Wynn Resorts, Ltd., 990 F.3d 31, 35-36 (1st
Cir. 2021) (quoting In re Neurontin Mktg. & Sales Pracs. Litig.,
712 F.3d 21, 35–36 (1st Cir. 2013)).
Assuming these considerations apply outside of the RICO
context, they would not require the dismissal of the complaint in
this case. The foregoing discussion concerning Mexico's non-
derivative harm disposes of defendants' concern about multiple
recoveries. We are also not persuaded that determining the damages
attributable to each defendant will be as difficult as defendants
suggest. And in this case any such difficulties are best resolved
once Mexico has had an opportunity to engage in discovery and
submit expert reports bearing on damages. Accord City of Boston,
2000 WL 1473568, at *7 n.33 ("The difficulty in ascertaining
damages in this case is best assessed when the case has gone beyond
the pleading stage."). In any event, Mexico seeks injunctive
relief in addition to damages, and defendants' concerns about
double recoveries and apportioning damages do not apply to
injunctive relief. Cf. Lexmark, 572 U.S. at 135 ("Even when a
plaintiff cannot quantify its losses with sufficient certainty to
recover damages, it may still be entitled to injunctive
relief . . . .").
- 59 -
We conclude that Mexico has adequately alleged proximate
causation, thereby satisfying the final demand of the predicate
exception. Of course, our holding at this stage is based on the
allegations in the complaint, construed favorably to Mexico.
Mexico will have to support its theory of proximate causation with
evidence later in the proceedings.
V.
The parties' briefing touches on certain issues beyond
the PLCAA, including which jurisdiction's law governs Mexico's
tort claims and whether defendants owe a duty to Mexico under
whichever tort law does apply. The district court did not reach
these issues because it found the PLCAA dispositive. Having
concluded that the PLCAA does not bar Mexico's lawsuit at this
stage of the proceedings, we think it prudent to allow the district
court to address the remaining issues in the first instance, rather
than deciding them ourselves without the benefit of the district
court's analysis or focused briefing from the parties.
VI.
For the foregoing reasons, we reverse the district
court's conclusion that the PLCAA bars Mexico's tort claims and
remand to the district court for further proceedings consistent
with this opinion.
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