Sued Shut - local government lawsuits force firearms companies into bankruptcy - Brief Article

Reason, Dec, 1999 by Ryan H. Sager

Though they've barely started, local-government lawsuits against gun manufacturers can already claim their first uncontested victories. Two small California gun makers have decided to close shop or seek bankruptcy protection rather than face the oncoming barrage of municipal lawsuits.

Davis Industries Inc. and Sundance Industries make so-called Saturday night specials, cheap guns that critics often associate with crime. Along with larger companies, they have been targeted by local governments under the theory that gun manufacturers should be held liable for crimes that may or may not have been committed with their products.

In September, a lawyer for Valencia-based Sundance Industries told The Wall Street Journal that the company filed for Chapter 7 bankruptcy because it "didn't have even the beginning of the resources to pay the legal fees" associated with the lawsuits. Chino-based Davis Industries specifically cited the costs of litigation in its filing for Chapter 11 bankruptcy - a move that has enraged some municipalities looking to squeeze money out of the gun industry. (A third California gun maker, Lorcin Engineering, has also filed for bankruptcy, citing liability worries as "secondary" to internal management disputes.)

According to Randy Michelson, an attorney for the city and county of San Francisco, plaintiffs plan to argue that the legal protections bankruptcy traditionally guarantees are void in this case. Gun makers, says Michelson, should not be able to shield themselves from government lawsuits brought to protect the public welfare.