Second Circuit Decision as to Default Judgment and Injunction Obtained by New York City Against Out-of-State Gun Sellers

The case is City of New York v. Mickalis Pawn Shop, LLC (2d Cir., decided today). The court’s summary:

The defendants-appellants, Mickalis Pawn Shop, LLC, and Adventure Outdoors, Inc., are retail firearms dealers located in South Carolina and Georgia, respectively. The City of New York brought suit against them and other firearms dealers for public nuisance on the theory that they intentionally or negligently sell firearms in a manner susceptible to illegal trafficking to New York City.

After engaging in litigation with the City for several years, each defendant-appellant defaulted. Upon entry of default judgment, the district court issued permanent injunctions prohibiting the defendants-appellants from further violations of the law and requiring them to undergo supervision by a court-appointed special master. They appealed, asserting that a default judgment should not have been entered; that the default judgment is, in any event, void for lack of personal jurisdiction over each defendant; and, in the alternative, that the injunctions violate Federal Rule of Civil Procedure 65(d) or are unconstitutional.

We conclude that the defendants-appellants’ withdrawal from the district court proceedings justified the entry of default, followed by default judgment; that the defendants forfeited their defense of lack of personal jurisdiction; and that the default judgment is not void. [Text moved:-EV] The district court may have erred in its determination that the City had made a prima facie showing of personal jurisdiction over each of the defendants, for the reasons discussed in Judge Wesley’s concurring opinion [which strongly criticized District Judge Jack Weinstein’s jurisdictional analysis -EV]. But we have already concluded that by appearing, litigating, and then intentionally withdrawing from the proceedings, the defendants forfeited their jurisdictional defense. [End moved text.]

We agree with the defendants-appellants, however, that the injunctions issued by the district court violate Rule 65(d). We therefore vacate the injunctions and remand for further proceedings….

First, the injunctions impose on defendants an obligation to act “in full conformity with applicable laws pertaining to firearms,” and to “adopt[] appropriate prophylactic measures to prevent violation” of those laws, without specifying which laws are “applicable” or identifying the ways in which the defendants must alter their behavior to comply with those laws. Mickalis Pawn Inj., 2009 WL 792042, ¶ 3; see also id. ¶ 17 (requiring “full compliance” with “applicable firearms laws and regulations”). A directive to undertake “appropriate” measures does not “describe in reasonable detail … the act or acts restrained or required,” nor does it provide “explicit notice of precisely what conduct is outlawed.” Indeed, we have said that to comply Rule 65(d), “an injunction must be more specific than a simple command that the defendant obey the law.”

Second, it appears that the injunctions, fairly read, prohibit not only “straw purchases” — the sole kind of illegal practice identified in the City’s amended complaint — but other, unidentified types of sales practices as well. An injunction is overbroad when it seeks to restrain the defendants from engaging in legal conduct, or from engaging in illegal conduct that was not fairly the subject of litigation.

The injunctions are also problematic because of the extent to which they vest the Special Master with discretion to determine the terms of the injunctions themselves. Paragraph 7 of each injunction requires the defendants to “adopt those practices that in the opinion of the Special Master serve to prevent in whole or in part the illegal sale of firearms” and “adopt those prophylactic practices that in the opinion of the Special Master will serve to prevent the movement of guns into the illegal market.” Mickalis Pawn Inj., 2009 WL 792042, ¶ 7 (emphases added). A defendant’s “failure to cooperate with the Special Master” constitutes a violation. Id. ¶ 8. Moreover, the injunctions provide that any dispute as to whether a violation has occurred, or any disagreements concerning decisions made by the Special Master, are to be resolved by the Special Master himself in the first instance. Id. ¶ 9. Although a party may appeal “any decision or practice of the Special Master” to the district court, the Special Master’s decisions are made subject only to “arbitrary and capricious” review. Id. The injunctions further specify that if a defendant is unsuccessful in challenging the Special Master’s decision, the defendant “shall pay the Special Master’s costs and attorneys’ fees.” Id. ¶ 10.

“The power of the federal courts to appoint special masters to monitor compliance with their remedial orders is well established,” and a special master possesses some power to “determine the scope of his own authority.” But the Supreme Court has also warned that “[t]he use of masters is to aid judges in the performance of specific judicial duties, as they may arise in the progress of a cause, and not to displace the court.” Serious constitutional questions arise when a master is delegated broad power to determine the content of an injunction as well as effectively wield the court’s powers of contempt. “If the master makes significant decisions without careful review by the trial judge, judicial authority is effectively delegated to an official who has not been appointed pursuant to article III of the Constitution.”

Constitutional questions aside, we conclude that, at the very least, the injunctions’ sweeping delegations of power to the Special Master violate Rule 65(d). “A court is required to frame its orders so that those who must obey them will know what the court intends to forbid.”

[Footnote: We reject, however, the defendants’ argument that the injunctions violate principles of state sovereignty, comity, and federalism. To be sure, “[t]he court’s discretion to frame equitable relief is limited by considerations of federalism,” and “[a] State cannot punish a defendant for conduct that may have been lawful where it occurred,” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 421 (2003). However, it is also true that “[t]he federal court sitting as a court of equity having personal jurisdiction over a party has power to enjoin him from committing acts elsewhere.” Here, the defendants have identified no authority for the proposition that a court in New York may not restrain a defendant in Georgia or South Carolina from violating U.S. federal firearms laws, which are of course binding in both jurisdictions. Nor have the defendants demonstrated that Georgia and South Carolina law is materially different than New York law in relevant respects.]

The court declined to discuss any defenses under the Protection of Lawful Commerce in Arms Act, even though “there is some uncertainty whether the City’s claims were legally sufficient, in light of their possible preemption by the PLCAA,” because “the defendants have forfeited this defense on appeal.” “Mickalis Pawn did not address the PLCAA in its opening brief, and Adventure Outdoors raised it only by way of footnote,” and that’s not enough to preserve a legal claim.

Josh Blackman also has a post about this.