Kannon Shanmugam: Welcome to “Court Briefs,” a podcast from Paul, Weiss. I'm your host, Kannon Shanmugam, the chair of the firm's Supreme Court and Appellate Litigation Practice and co-chair of our Litigation Department. In this podcast, we analyze Supreme Court decisions of interest to the business community.
Today, we’re going to talk about the Supreme Court’s recent decision in Smith & Wesson Brands v. Estados Unidos Mexicanos. And joining me to talk about the Court's decision in that case is my colleague, Abby Vice. So, Abby, let's start with the legal background to this case. What was the statute at issue here?
Abigail Frisch Vice: The statute at issue here was the PLCAA, which stands for the Protection of Lawful Commerce in Arms Act, which Congress passed in reaction to cases against firearm manufacturers and sellers that claimed wrongdoing by third parties using those firearms. For the most part, the PLCAA bars those claims. But there is an exception called the “predicate exception,” which permits claims on those theories when they involve an underlying, or predicate, violation.
The second piece of legal background for this case is the general principle of aiding and abetting in criminal law, which provides that you violate a law if you help somebody else break it, even if you personally did not carry out the unlawful conduct.
Kannon Shanmugam: So who are the parties to this case?
Abigail Frisch Vice: The parties in this case are the Mexican government, which sued Smith & Wesson, among a number of other firearms manufacturers and dealers, claiming harms from gun violence on the theory that those defendants knew their firearms would go to retail dealers that supply Mexican gun traffickers. The complaint alleged that the defendants did nothing to stop that and, in fact, continued to produce firearms attractive to Mexican cartel members, such as assault weapons, weapons whose serial numbers are easily defaced, and weapons with Spanish-language names and graphics. The district court dismissed the complaint on the ground of the PLCAA, but the First Circuit reversed, finding that the Mexican government had plausibly alleged that the defendants aided and abetted illegal sales by firearms dealers.
The Supreme Court granted certiorari to review the judgment, which is rare without seeing a circuit decision that comes out the other way. And that's likely in large part because of the significant potential foreign affairs and trade implications of a foreign government holding American entities civilly liable for crimes committed in that foreign country.
Kannon Shanmugam: Now, usually when the Supreme Court takes a case without a so-called circuit conflict, it does so because it wants to reverse the lower court's decision. Is that what happened here?
Abigail Frisch Vice: That is exactly what happened here. In a unanimous opinion by Justice Kagan, the Supreme Court reversed the First Circuit and concluded that the manufacturers were entitled to PLCAA protections against civil liability. The Court had two options in this case: It could have evaluated the scope of proximate causation or evaluated the scope of aiding and abetting liability. It chose the latter of those two paths, which was aiding and abetting liability. And the Court primarily relied on its recent case, Twitter vs. Taamneh, which held that Twitter was not liable for terrorist attacks that ISIS planned using the Twitter platform.
And the Court drew three important principles from that case. First, that aiding and abetting liability requires identifying a specific instance of conduct or a pervasive and systematic category of misconduct. The second is that failure to act, even if that could be morally blameworthy, usually does not support aiding and abetting liability. And then third, incidental wrongdoing by third parties using goods obtained through the same kinds of arm's-length, passive transactions that anybody else could enter with the manufacturer, will not support aiding and embedding liability. So, as the Court explained, the complaint did not make the cut in this case. One of the big problems with it was that the complaint had identified a three-tier distribution system for firearms sales by which manufacturers will sell to wholesalers, the wholesalers then sell to dealers and then the dealers allegedly sell to gun traffickers. And the complaint said almost nothing about the wholesale tier, which left a big gap between the manufacturers and the dealers that ultimately allegedly did business with the gun traffickers.
Kannon Shanmugam: So, Abby, tell us a little bit about both the outcome in this case itself and the potential implications for the business community.
Abigail Frisch Vice: I would say the outcome itself is not terribly shocking in light of the Court's decision to take this case, as you observed. But at the same time, aiding and abetting liability could be really broad, and the Court kept this particular decision narrow, both by avoiding the proximate cause question and taking a complaint-specific approach.
I found it noteworthy that the Court also took a close look at the structure of the firearms industry and the relevant transactions. It's easy to wonder how tuned in to business realities the Court is, given that fewer and fewer cases settle questions that are of great practical importance to the business community. But I found in this a glimmer of hope that the Court will continue to require plaintiffs to dot their I's and cross their T's, particularly in matters like this that have foreign affairs and foreign trade implications – the latter of which is an important factor for many businesses.
Kannon Shanmugam: Well, the good news is that the Court is taking barely enough business cases to keep this podcast in business. So, thank you, Abby, for summarizing the Court's decision in Smith & Wesson, and if you have any questions about the Court's decision, please feel free to reach out to either Abby or me. We hope you enjoyed today's episode.
For more information about Paul, Weiss's Supreme Court and Appellate Litigation Practice, please visit us at our website, paulweiss.com. And please subscribe to “Court Briefs” wherever you listen to your podcasts. We'll be back again soon with another episode. But until then, thank you for joining us, and take care.
