How FFLs Can Limit Straw Purchase Liability Exposure

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The Badger Gun case probably sent shockwaves through the FFL community. While they enjoy liability protection on guns they sell through the Protection of Lawful Commerce in Arms Act, that protection isn’t absolute. Sloppy or negligent practices can open them up to, well, what happened to Badger. The law firm of Williams Mullen has as group the specializes in advising firearms industry clients on how to protect themselves. But no matter the industry . . .

the key in avoiding potential liability when something bad happens is almost always the ability to demonstrate that a business not only had established policies and procedures in place, but trained its employees in how to comply with them.

The following is some of Williams Mullen’s wisdom on the matter (reprinted with permission).

Badger Guns Case Highlights Retailers’ Legal Risk and Need for Compliance and Training 

By: Camden R. Webb & Charles E. “Chuck” James, Jr.

A Wisconsin gun shop, Badger Guns, has been held liable for almost $6 million for injuries to two police officers who were shot with a gun purchased at the shop.  The jury’s verdict in the case, handed down on October 13, 2015, found that a gun shop employee acted negligently—and, consequently, his employer was responsible for the employee’s actions—when he sold a handgun to a person who was actually a straw purchaser for Julius Burton, who was too young to purchase the handgun.  Burton used the same handgun a month after the purchase to shoot the officers.

The plaintiffs in the case—the two police officers—claimed  that a number of red flags were raised by the straw purchaser and by Burton on the day of the sale and that the gun shop employee should have identified the transaction as an illegal straw purchase.  Meanwhile, the gun shop contended that the straw purchaser and Burton went to great lengths to disguise the straw purchase as a legitimate transaction.

This case highlights the serious legal risks if retail firearms sellers do not employ adequate procedures to ensure that sales are lawful.  The case also emphasizes the need for retail FFLs to implement and enforce a compliance program that guards against illegal sales.

Sellers of firearms ordinarily have absolute protection from liability when criminals use firearms in crimes.  A federal law, known as the Protection of Lawful Commerce in Arms Act, or the PLCAA, 15 U.S.C. §§  7901 – 7903, absolutely bars such liability.  This law is founded on the principle that a manufacturer or seller of firearms cannot be the legal cause of injury when a criminal uses a firearm to commit a crime.

PLCAA protection does not apply in two key instances.  First, if a seller “negligently entrusts” a firearm, PLCAA protection is lost.  Negligent entrustment is a legal doctrine that will hold a person liable if he gave (or “entrusted”) an instrument to a person under circumstances where the person entrusting the instrument should have foreseen that the other person would harm others with the instrument.  The other key exception to PLCAA liability protection is when a seller knowingly violates state or federal law in making the sale, such as when a seller knows that he is selling a handgun to a straw purchaser, and the violation of law is the proximate cause of the injury.  Under this PLCAA exception, “knowingly” selling in violation of the law ordinarily means that the seller knew the sale was unlawful or the seller was willfully blind to facts that would lead him to conclude that the sale was unlawful.

As these PLCAA exceptions indicate, retail FFLs are in a unique position regarding potential tort liability for gun sales because they will know more about purchasers of firearms than anyone else who might benefit from PLCAA protection.  For example, many firearms sales are completed after a conversation between the buyer and seller about the buyer’s needs and intended use of the firearm.  A retail FFL also will process the buyer’s ATF Form 4473, and might even assist the buyer with completing the form.  By the time a retail sale is complete, the seller likely knows a great deal about the buyer and how the firearm might be used.

This knowledge carries additional legal risk.  As indicated by the PLCAA exceptions discussed above, the law is structured so that its exceptions chiefly deal with situations in which a seller personally interacted with a buyer.  After all, the manufacturer of a firearm simply could not be in the position of having negligently entrusted the gun, and any violations of law that could be committed by a manufacturer likely would not be the proximate cause of injury.  For retailers, the situation is vastly different due to the personal interaction with the buyer.

Moreover, the law that governs the underlying liability generally places a higher burden on a retail seller.  Under general negligence law principles, a person who has additional skills or information is obligated to use those additional skills or information in order to avoid foreseeable harm.  Therefore, when a retail seller interacts with a consumer, takes background information, and otherwise discusses the purchase with the consumer, it is likely that this additional information imposes a heightened duty to monitor the sales process and prevent sales in violation of law.

So how does a retail FFL ensure that its operations are in compliance with the law and receive the full protection of the PLCAA?  The answer is a formal compliance program combined with robust training of employees.  Retail FFLs should establish written procedures that reflect applicable law and regulation, educate employees on these procedures, and conduct their operations in a way that compliance with the written procedures can be checked and verified.  A number of resources are available, from private consultants, such as Orchid Advisors, to the ATF itself.  Each of these resources offers compliance information, and sound advice is available.

Lawsuits against the industry members are not going away, and indications are that they might increase.  Moreover, the record in certain lawsuits makes clear that some litigation is aimed not at recovering compensation for injury but instead at shutting down or harming the industry.  FFLs therefore must be aware of the potential for overwhelming liability and take action before problems arise.

comments

  1. avatar Tom in Oregon says:

    I picked up a rifle at Cabelas a couple weeks ago. The first question the clerk asked me was in a very cordial almost curious tone. So much so that the joker in me almost gave a sarcastic, joking answer. But that little alarm bell in my head went off. The same one that prevents me from even whispering the word “bomb” in an airport.
    I answered “why, me of course”. She said, good answer and started me on the form 4473.

    1. avatar Geoff PR says:

      “So much so that the joker in me almost gave a sarcastic, joking answer.”

      Years back I bought a G23 from a local pawn shop who’s counter guy was a fishing bud of mine.

      So I yanked his chain while filling out the 4473, reading out loud in an exaggerated ‘psyco’ voice…”…queston (c): Have you ever been CONVICTED in any court for a crime… Well, no, not EXACTLY CONVICTED… (while giggling like a psyco)…”

      “Oh, man! Don’t even do that to me man!!!” he replied.

      For some reason, he almost seemed glad to see me leave…

      Huh. 🙂

      1. avatar Boyd says:

        That reminds me of that scene in Stripes where Bill Murray and his bud were applying and the guy asks if they were convicted felons and they say no and start laughing.

        1. avatar Timmy! says:

          I almost always read aloud the form and emphasize the relevant terms while filling it out. “Have you ever been CONVICTED of…” “Are you an UNLAWFUL user…” etc.

  2. avatar Jeff the Griz says:

    Love the sign out front of the business. “Sorry for the inconvenience”

    1. avatar Jiz says:

      looks like they spelled “inconvenience” wrong tho

  3. avatar Anonymous says:

    Epic juror fail. Prosecution must have hand picked those morons, then the judge told them how to vote.

    1. avatar Jeremy B. says:

      How do you figure?

      1. It WAS actually a straw purchase.
      2. From the description, the employee should have reasonably known this because the purchaser took a very long time on the form and was coached by the other guy (the true purchaser).
      3. Fits the exemption in the federal law from my understanding and above description.

      1. avatar Joe R. says:

        I have read to, and filled out, at least two Forms 4473, for another [they signed]. We gave the form, and the process, its due deference, but the form, read aloud, lends itself greatly, to humor, and the bs of whether the form or process prevents any bs, is sadly also, bs. By the time you are putting ink to the form, you’ve alteady, likely, put your finger prints on a firearm, and everybody’s guilty, until the NICS check does or does not find them guilty.

      2. avatar Anonymous says:

        How do you figure?

        1. It WAS actually a straw purchase.
        2. From the description, the employee should have reasonably known this because the purchaser took a very long time on the form and was coached by the other guy (the true purchaser).
        3. Fits the exemption in the federal law from my understanding and above description.

        1) Straw purchase or not is immaterial. It should not be the FFL’s job to try to determine the buyer’s intent and turn them away because of his opinion and the opinion shared by Clintons and Sanders elsewhere. Falling into this idea falls into their plans. If I was a Juror there I would have at the very least hung the jury.

        2) The first time I bought a gun I took a long time on the form too and was coached by others. It doesn’t guarantee a straw purchase is taking place. Also – straw purchase or not is immaterial – see item 1 above.

        3) See item 1.

        Playing the above game is playing the freedom hating liberals game. Should a retailer ask lots of questions of their customers purchasing kitchen knives, fertilizer, or toxic pesticides? Gun stores shouldn’t have to either.

        1. avatar Jeremy B. says:

          It IS important that it was a straw purchase (that resulted in serious bodily harm to 2 people). If it wasn’t a straw purchase then there would be no law suit. If you can’t recognize that this is important to the case, then I don’t think there is a point in discussing further.

        2. avatar Anonymous says:

          I “recognize” it’s important to the case. Are you recognizing that it is important to the case because of the success of freedom hating liberals offsetting responsibility from the criminal to the store clerk?

    2. avatar Hannibal says:

      you think they’re morons, eh? Did you bother actually reading through the evidence and watching the damming footage or are you just assuming because you don’t want a gun store to face consequences, despite them making every other gun business look bad?

      Like all people and businesses you will eventually find a bad apple. The actions here seem to indicate this was one of those.

      1. avatar Anonymous says:

        Holding an FFL responsible for something someone else does a month later after they purchase a firearm is ludicrous to me. Holding an FFL responsible and burdened to identify straw purchasers is also equally ludicrous. All these concepts are textbook democrat/marxist nonsense and so is the 4473 itself. Limiting privacy and offsetting responsibility to those who shouldn’t be held responsible for the actions of others is always the marxist goal. It is in their best interests to blur the lines between straw purchasers and private sales. Private sales are legal, but straw purchasers are not. What really is the difference?

    3. avatar John L. says:

      Well, the prosecution (and defense) do have a say in jury selection in just about if not every case, and the judge does in fact instruct the jury on how they can find in many if not most cases. That’s just SOP for the courts these days.

      1. avatar Anonymous says:

        I agree and it’s regrettable that Jurors don’t understand the power they hold. If only the juror’s had read a copy of “jury nullification” by Conrad. It doesn’t matter what the judge or the prosecution instructs them. They were the founders intention for a last check on the governing powers – a check by the people themselves.

        1. avatar racer88 says:

          Yep. A couple of years ago, I was called up for jury duty and got to the point of “voire dire” in the courtroom. During one of my answers to one of the attorneys, the judge interrupted me and said, “… as a juror, you must abide by the law as I explain it. You may not like the law, but you must abide be it. If you want to change the law, you can address that through your representative legislators.”

          I prefaced my opposition to her proclamation, “with all due respect…” and then proceeded to explain that I am well-aware of my Rights as a juror and Jury Nullification. She retorted, “So you’re saying you would not abide by the law?” I replied, “Not if I believe the law to be unjust or unconstitutional.”

          The judge left it at that and said nothing further. I was not selected for the jury and was dismissed. Imagine that!

        2. avatar Anonymous says:

          Yea, if you want to get out of jury duty you need only mention something similar to what you have said. Judges absolutely do not want you excercsing that power and over the last century they have filtered out jurors based on their knowledge of that power.

          During prohibition, the people didn’t like and didn’t feel the alcohol ban was just and acquitted as many as 60% of the cases just on principle. That’s some jury nullification right there.

  4. avatar Philboyd Studge says:

    Three of my friends own gun stores. All three of them run legal,aboveboard shops. The biggest concern for them is what happens with you turn someone away for suspicion of a straw purchase and then get legal papers served to you for one of the million types of discrimination lawsuits so popular today. I have known all these men for years, and I have seen each of them tell people to get to stepping when something seemed wrong or suspicious. Sometimes the person just leaves, sometimes they curse and argue, and sometimes they are ejected from the premises with a little help. Nothing has come of this as yet except for some threats from the occasional tough guy as he is peeling away in his car. But what is an ffl to do if they get sued?

    1. avatar Cliff H says:

      Technically, the burden of proof is on the accuser. They can claim any sort of discrimination they want, but the defendant is innocent until they prove that he is guilty. I suspect most FFLs will have lots of video evidence of the incident should it become necessary to prove the guy a liar in court.

      1. avatar JeffR says:

        But they have to incur defense costs, which can easily reach into the six figures. Discrimination cases also rarely get dismissed prior to going through the formal discovery process – depositions, production of documents, etc. – which can be the most costly part of the legal process. And while videos can serve as useful evidence in such a case, they are not dispositive. If you refuse service to an individual because of their race, that is discrimination. It is in essence a thought crime – what was motivating your decision to deny service – which can make the cases difficult for plaintiffs to prove but can also make the cases difficult for defendants to defend.

    2. avatar Mad Max says:

      Maybe the PLCAA needs to be amended to protect FFLs from discrimination lawsuits for refusing to sell when they suspect a straw purchase.

      Maybe, for a discrimination lawsuit to go forward, the ATF would have to investigate the incident first and determine that the FFL didn’t have any grounds to suspect a straw purchase.

      Maybe not. This assumes that the ATF would perform an honest investigation.

  5. avatar outwardhound says:

    “…many firearms sales are completed after a conversation between the buyer and seller about the buyer’s needs and intended use of the firearm. . . By the time a retail sale is complete, the seller likely knows a great deal about the buyer and how the firearm might be used.”

    Really? I think in many cases, it’s just the opposite. I, for one, go in knowing what I want, having had researched it before hand and don’t need or want any questions about me or my intended purposes for my choice of a firearm. In fact, of late, most of my purchases have been online and shipped to a local pawn shop to do the 4473 – and I sure don’t entertain any questioning from the clerk. And, I don’t think it’s the job of some clerk in a big box store to “interview” customers. But, yeah, I get that sometimes there’s obvious red flags to be aware of.

    1. avatar Jeremy B. says:

      What you say is true, however, you are not the typical customer. Most people who walk into a gun store don’t know what they want to buy yet, although they may have an idea.

      My most often asked question is if the product in question is for conceal carry, home defense, range time, or some combination. If it’s a range gun, I’m probably not going to reach for a S&W Shield, etc, etc. But the fact that I have these conversations makes it obvious that it isn’t a straw purchase.

      The most common straw purchase request is the accidental one. A person says to their spouse, “Oh, I forgot my concealed pistol license today, why don’t you do the paperwork.” This is a straw purchase because the person ABOUT to do the paperwork isn’t the true purchaser. Do I care? Nope, but I’m still not doing the paperwork.

      Then you have the straw purchase like the one in question from Badger. The dead give away? The dirt bag had to coach the straw purchaser through the 4473, a document that must ONLY be completed by the true purchaser and with no coaching. If I see that, I’m going to be asking some questions and probably not going forward with paperwork.

      1. avatar ButtHurtz says:

        FLAME DELETED

        1. avatar Joe R. says:

          I don’t think of it as ‘deleted’, I think of it as “battling evil in another dimension”.

      2. avatar Joe R. says:

        The form must only be executed (signed) by the purchaser whose use the firearm is also intended. Form 4473 can be filled out and signed electronically, it can thus, also be completed verbally and the form can be substituted with a substantially identical form that is not prrepared or provided by the Government Printing Office (gov’t can’t prevent transfers of firearms by simply refusing to sh_t you a blank form to use). AND YES, you can fill out a form for a handicapped person who verbally volunteers their answers to the questions, and satisfactorily executes the form. It won’t look kosher to you (as a third party) to watch that happen, but you can circumcise yourself again later when you get home.

        1. avatar Geoff PR says:

          “…but you can circumcise yourself again later when you get home.”

          I’d much rather not, that just sounds… *painful*…

          *gulp*

        2. avatar Joe R. says:

          ? heard that line a month or so back, and couldn’t resist.

        3. avatar Jeremy B. says:

          This is an exemption to the rule and requires a witnesses. The preparer may not COACH the purchaser. The only thing they may do is read the informational paragraphs contained in the document.

          Under no circumstance (not circumcision) is a “friend” allowed to coach you through filling out the form, especially not after telling you which gun you’re going to buy for him.

    2. avatar Bob in MI says:

      I understand what you say, but as someone who sold guns for a big box store for three years I can tell you this. The FFL that allows my store to sell 4.5 million dollars worth of guns a year is worth more to me than the customers “feelings” about what questions I should be asking before allowing the sale.

      1. avatar Joe R. says:

        Yes.
        Absolutely.

  6. avatar Chris says:

    I dunno TTAG. I don’t think Badger is the case to hold up as an example of litigious persecution against FFLs. If you read the case the clerk was a complete dumbass and basically instructed the buyer to lie on the 4473. He was asking for a civil suit, and as we all know civil suits are more about feels and setting examples than anything. Granted the penalty was overly harsh, but these guys do not have clean hands and their history shows that they’ve been pulling the kind of crap that makes honest FFLs look bad for a while.

    We can’t let the antis rope us into their game. We need to stay honest and not defend the idiots who make the rest of us look bad.

    1. avatar Joe R. says:

      Form 4473 is just one example of “honor system required” for the ATF’s system of regulation, and the ATF’s ‘protection’ of us. It is insanely fragile, it ONLY works at all (only has slightly meaningful stats whatsoever) becase THE REST OF US GOOD CITIZENS SUBJECT OURSELVES TO IT, and we wear our bones of it. The only people who thinks this system works, are our enemies, and the enemies of our Constitution and our country. They couldn’t ask for a much better ally.

  7. avatar Joe R. says:

    All other illegal use of guns, you sue trial attorneys, judges individually, and anyone who’s received notice of jury duty, because our system is based on the “deeper pockets” theory of law.

  8. avatar TwinReverb says:

    Another good way to limit exposure would be that if a transaction even smells 1% fishy, don’t do it. I’d be willing to wager that 99% of FFLs aren’t doing anything wrong, but there are bad apples (as with any industry).

  9. avatar uncommon_sense says:

    I wonder to what extent, if any, this carries over to private sales?

    If I am selling a rifle to someone, am I supposed to ask questions so that I can divine whether or not the buyer is a straw purchaser?

    1. avatar Joe R. says:

      Yes, and if they whistle, walk unsteadily, dance around, tell you they are looking for “the Woodsman”, Lion, Dorothy, and Toto, and sing “if I only had a brain”…

      then, sorry friend, no bueno

  10. avatar onezero says:

    Some days, I’ve stopped more straw purchases than sold guns. Protecting the Company’s FFL is more important than a sale. I was going to give examples, but then remembered confidentiality. I will say we had a new hire in another department who I absolutely do not trust. He was not yet allowed to show guns when I had my first interaction with him. He turned a customer over to me that he had talked to for 20 minutes. I was immediately suspicious and it turned out to be a Straw Purchase. New hire later told me he had quite a bit of experience selling at guns. I’m thinking his experience was, make the sale no mater what.

  11. avatar H says:

    Anyone can sue anyone in this country. Not something to fear. The people who get turned away are not a protected class. People who don’t want their kids immunized are not a protected class. They can sue a school if they are refused admission but the school is not discriminating against them. They can sue but not for discrimination.

    A gun store has the law on their side if they refuse to sell to someone they feel funny about. I doubt it would go to court. The customer would have to endure descriptions of why the store refused him. Most people like this haven’t the will or the way. It would be thrown out because the courts want the gun shop to use discretion. Another barrier would be places where the bringer of the suit would have to pay costs for a frivolous suit.

  12. avatar Joe R. says:

    I don’t believe any FFL/seller here has stopped many (if any) straw purchasers/purchases of the variety that the reg purported to stop, and that is a puchaser who is buying for someone else who cannot pass a NICS check, not for someone who might later sell the firearm to someone else (which is not illegal). We give a lot of fine pointed attention to these regs while our government is killing itself to flood our borders with people who may or may not give a damn anout our laws, and dilute our representational vote. I am not for civil disobedience to modify laws (enforced by the ATF). But, i am not in favor and intolerent of gov’t disobedience to modify laws that’ll take a cr_p load of fitearms to fix.

    1. avatar Jeremy B. says:

      I have. So has OneZero, he posted just above.

      Denying that straw purchases happen and also sometimes get stopped by the FFL, is like denying that guns get used to save lives. It happens many times every day.

      The top 2 methods for prohibited persons to get guns is black market and straw purchases. So lock up your guns and don’t lie for the other guy.

      1. avatar Joe R. says:

        Yes, but there’s glue-huffing going on if you think that nearly all happen with more sophisticated purchasers than actually accompany they straw-purchaser into the store. And again, most are not in avoidance of a purchaser’s NICS check, they are a matter of temporal convenience, or because the un-initiated finds the whole process intrusive. THIS IS HOW PEOPLE BUY CARS / HOMES / REAL ESTATE / PAY FOR ADOPTIONS. . .ETC.

        FUATF, THIS ‘STRAW PURCHASE’ IS JUST ANOTHER CASE WHERE THE ATF IS CLAIMING THEY PROTECTED SOMEONE ‘AFTER-THE-FACT’.

        THE REST OF US ARE SUPPOSED TO SUBJECT OURSELVES TO THIS TO SOLVE AN ATF PROBLEM.
        A N D I T I S N’ T

  13. avatar Anonymous says:

    More the reason to put blame where blame is due – on the perpetrator of criminal action. He is the one responsible for shooting the two cops – not the seller of the object used to harm them. Lets get rid of the bureaucratic BS form 4473 and the guesswork questions and gut feelings of store clerks. Liberal gun haters can grow a set of balls, accept they will die eventually anyways, and embrace something a bit more honorable than their privacy invasive, conniving, deceiving, freedom hating BS.

  14. avatar MaxHedrm says:

    I’m confused, you published a reprint as a “how to” when the original article had only 1 paragraph that was remotely how to like. That was a waste of time to read.

    1. avatar Jeremy B. says:

      And didn’t even include the NSSF as a source of information about preventing straw purchases.

      Hello, they run the “Don’t lie for the other guy” campaign. http://www.dontlie.org

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