Document Sample
CASE 13 Powered By Docstoc
On December 7, 1999, the Clinton administration announced its intention to join settlement negotiations
between the gun industry and local cities and counties. The aim was to limit the flow of handguns to youths
and criminals. In addition, the Clinton administration announced that if no visible progress was observed in
the negotiations, it would file a nationwide class action lawsuit against the industry on behalf of the
Department of Housing and Urban Development seeking compensation for lack of security and other costs
associated with gun violence. How did the gun industry arrive at this predicament? Founded on the U.S.
Constitution’s Second Amendment right to bear arms, the gun industry has long served the public in
supplying firearms. Now, the same industry is defending itself against criticism from some of its past
   Colt has a long history as one of the largest and most innovative suppliers of firearms. Its varying
success as well as longevity continue to be intertwined with the social and political life of the nation and
the world. Both Colt’s and the gun industry’s survival and future success hinge, at least in part, on the
resolution of the social and political controversy regarding gun control.

Colt’s Evolution as a Major Player in the Gun Industry In 1836, Sam Colt received a U.S.
patent for a firearm equipped with a revolving cylinder containing five or six bullets. Prior to Sam Colt’s
invention, only one- and two-barrel flintlock pistols were available. Colt’s invention, which applied to both
long arms and side arms, was remarkably simple. However, the idea was not an instant success because
many people still preferred the traditional flintlock musket or pistol. Sam Colt built his first plant, the
Patent Arms Manufacturing Co., in Patterson, New Jersey. He soon developed new products based on the
basic principle of loading gunpowder and bullets into a revolving cylinder. The products generally
performed very well, but sales were disappointing despite the fact that the U.S. government purchased
small quantities of the Colt ring lever rifle and Colt 1839 carbine. In 1842, because of the sluggish sales,
the Patterson, New Jersey, plant was closed, much of its equipment was auctioned, and bankruptcy
proceedings were initiated.
    Meanwhile, units in the U.S. Dragoon force and Texas Rangers ―credited their use of Colt firearms for
their great success in defeating Indian forces.‖ At the outbreak of the Mexican War in 1846, U.S. Army Captain
Samuel Walker collaborated with Sam Colt on the design of a new, more powerful revolver. This proved to be
a critical rejuvenation point for Sam Colt’s gun manufacturing business. Subsequently in 1855, with an initial
issuance of 10,000 shares of stock, the firm was incorporated in Connecticut as the Colt’s Patent Fire Arms Mfg.
Co. The company produced 150 weapons a day and gained a reputation for exceptional quality, workmanship, and
design. The company continued supplying arms to the military as well as to private citizens, and soon opened a
plant England to penetrate the international arms market.
    Before the official declaration of the U.S. Civil War, Colt supplied arms to both the North and the
South. After war was declared, Colt supplied only Union forces. Colt was a major producer and supplier of
firearms during both World Wars and in subsequent U.S. military actions. After World War II, Colt was
almost entirely dependent on government orders; as a result, sales fluctuated greatly. The Korean War
temporarily boosted its earnings until 1952, but after the United States withdrew, Colt was in financial
    In 1955, Leopold Silberstein, head of Penn-Texas Corporation, purchased the Colt Firearms Company
and organized it as a wholly owned subsidiary. Four years later a group of investors took control of the
company away from the Silberstein family and changed the company’s name to Fairbanks Whitney. In
1964, the parent company decided to reorganize under the name of Colt Industries and changed the
firearms subsidiary’s name to Colt’s Inc., Firearms Division. Through the 1970s and 1980s, Colt continued
to expand its product line. However, Colt received a major setback when the U.S. government decided to
replace the Colt .45 as the official sidearm of the armed forces. In 1990, the company was sold again to a
coalition of private investors, the state of Connecticut, and union employees. The company was renamed
Colt Manufacturing Company, and it brought some new products to market. Colt was forced to enter into
Chapter 11 bankruptcy in 1992, and in 1994 it emerged from bankruptcy under the ownership of still
another group of investors.
   In the mid-1990s, Colt embarked on a joint research and development program with the National Institute of
Justice that thrust it into the limelight of the gun control controversy as much as any other arms manufacturer.
Indeed, Colt may have started a new era of weapons technology when it began work with the National Institute of
Justice on the ―Smart Gun.‖ This is a significant advancement in light of all the controversy surrounding recent
gun violence, especially in high schools.
   In the late 1990s, the market prospects of the Colt Manufacturing Company looked promising. The
company introduced several new commercial products, as well as winning back its contract with the
government to provide more than 32,000 M-16 rifles and to update 88,000 M16A1 rifles for the U.S. Air
Force. Colt also acquired Saco Defense, which specialized in automatic weapons for the military.
In addition, the company had orders extending through 2010 for exclusive production of the M-4 carbine
for the U.S. military.

Framing the Gun Control Controversy After World War I, events unfolded that would create a
controversy affecting Colt and the entire gun industry for the rest of the century. The St. Valentine’s Day
massacre of 1929 brought the death toll in Chicago’s underworld turf wars to 135 as gangsters battled over
the profits from bootleg liquor during Prohibition. Realizing just how dangerous firearms could be in the
hands of criminals, Americans started demanding the first national gun-control laws. But Congress moved
cautiously, caught in the crossfire of a Second Amendment argument over the right of gun ownership. It
was the 1933 assassination attempt on President Franklin D. Roosevelt that prompted Washington to
restrict the sale of sawed-off shotguns, machine guns, and automatic weapons. The National Firearms Act
of 1934 aimed to cut down on ownership of machine guns and sawed-off shotguns by slapping a $200 tax
on their purchase.
   Violence from firearms is without question a major problem in United States. ―Guns kill nearly 30,000
people each year in the United States and injure many more. . . . As everyone knows, that has played into
one of the signature controversies of U.S. political life. On the one hand, there are the gun control
advocates—supporters of the Brady Handgun Act of 1993 and of required registration for gun purchases.
On the other hand, there are the supporters of the right to bear arms even when concealed.‖ The proponents
and opponents of gun control are deeply divided. As one observer noted, ―Few issues divide the American
polity as dramatically as gun control. Framed by assassinations, mass shootings, and violent crime, the gun
debate feeds on our deepest national anxieties.‖
    A fundamental question of the gun control controversy is, ―Do guns make society more or less safe?‖
Gun control advocates maintain that ―the ready availability of guns diminishes public safety by facilitating
violent crimes and accidental shootings.‖ They ―emphasize the risk that insufficient regulation will make
citizens vulnerable to deliberate or accidental shootings, while opponents stress the risk that excessive
regulation will leave citizens unable to defend themselves against violent predation.‖ Gun control
opponents believe that the availability of guns ―enhances public safety by enabling potential crime victims
to ward off violent predation.‖
   The mindsets of gun control proponents and opponents differ dramatically. This is perhaps best captured with
the observation that, ―For those who fear guns, the historical reference points are not the American Revolution or
the settling of the frontier, but the post-bellum period, in which the privilege of owning guns in the South was
reserved to whites, and the 1960s, when gun-wielding assassins killed Medgar Evers, John and Robert Kennedy,
and Martin Luther King, Jr.‖ Contrast this with the primary argument of gun control opponents (or the guns
rights advocates), which states, ―The right of self-defense is an important right. A firearms prohibition would be a
significant violation of the right to self-defense. Therefore, a firearms prohibition would be a serious rights
   Perhaps the profound division between gun control opponents and proponents can be better understood
by examining the social and political meanings associated with guns and gun ownership. Guns are not just
weapons or sporting equipment; they are also symbols that are positively or negatively associated with a
variety of political and sociological events. ―[H]ow an individual feels about gun control will depend a lot
on the social meanings that [he or] she thinks guns and gun control express, and not just on the
consequences [he or] she believes they impose.‖ Gun control proponents are egalitarian (i.e., favoring
collective action to equalize power, status, and wealth) in their value orientation, whereas gun control
opponents are individualistic (i.e., favoring individual autonomy and resenting collective interference).

Legislative Initiatives Regarding Gun Control The Gun Control Act of 1968 was passed
following the assassinations of Martin Luther King Jr. and Robert Kennedy. Congress rushed to ban the
sale of mail order guns and placed minimum safety standards on imported guns to raise their purchase
price. No standards were adopted for guns manufactured in the United States, however; and the law helped
spawn a huge domestic gun industry that turned out cheap handguns, now known as ―junk guns‖ and
―Saturday night specials.‖ This did not have much impact on Colt as most of its business still came from
government contracts.
   The Brady Handgun Act of 1993 mandated a five-day waiting period and background check for persons
buying handguns from retailers. The law followed the shooting of President Ronald Reagan and Press Secretary
Jim Brady in 1981. Hundreds of thousands of felons, fugitives, and others have been denied handguns since the
law was enacted, but the country also witnessed an exponential growth in gun purchases at gun shows and flea
markets, where background checks are not required.
   Since the 1929 St. Valentine’s Day massacre, it has been estimated that the United States has been
inundated with more than 20,000 gun laws on the state and federal books. The most significant of the
federal laws have always followed in the wake of high-profile shootings. One of the more recent was the
April 1999 high school massacre in Littleton, Colorado, which left 15 people dead. History repeated itself,
and the Senate passed legislation in response to the shootings. However, Paul Blackman, who tracks gun
legislation for the National Rifle Association (NRA), believes that ―as far as crime is concerned, gun-
control laws as a group are a total failure in affecting violence.‖ On the other hand, David Bernstein of the
Center to Prevent Handgun Violence claims, ―We think that the Brady Law was a major factor in reducing
violence.‖ Legislation such as the 1993 Brady Handgun Act prevented 250,000 felons and fugitives from
purchasing handguns over the following five years.

Litigation Regarding Gun Control On October 30, 1998, New Orleans became the first city in
the nation to file suit against the gun industry. Two weeks later, Chicago followed with a second lawsuit
against the industry. The lawsuits claimed the industry failed to incorporate adequate safety systems into
guns that would prevent widespread firearm misuse by unauthorized users. These lawsuits closely resemble
the lawsuits brought against the tobacco industry. At first, the public considered tobacco-related diseases to
be a result of choice made by the smoker. Little responsibility was attributed to the tobacco industry. After
the deluge of state and city lawsuits against the tobacco industry, public views changed. Litigation caused a
shift in public opinion and forced the tobacco industry to the bargaining table, where its executives finally
acknowledged cigarette smoking was dangerous to one’s health. Guns may become society’s next tobacco
   The litigation in the gun control controversy focused on four choices that the firearms industry was alleged to
have consciously made. First, the lawsuits alleged that the industry focused all its design innovation efforts on
making smaller and/or more powerful guns, while it had blocked installation of feasible safety devices that would
prevent thousands of unintentional shootings. Second, the industry’s distribution system was being attacked
because it allegedly had no controls, and the industry may have consciously targeted criminal markets, making it
easy for criminals to obtain guns from the legal marketplace. Third, the suits alleged that some gun manufacturers
made high-firepower assault weapons that had no real sporting or self-defense use but were more suited for
criminals. Finally, the suits claimed that the industry erroneously advertised that guns increased home safety, when
evidence contradicted this message.
    A federal appeals court determined on October 16, 2001, that the Second Amendment gives individual
citizens a right to own firearms. This ruling is expected to be influential in the continuing legal battle over
the issue in the courts. ―Some legal experts who argue that the Second Amendment provides an individual
right to firearms said the ruling was one of the most important ever on the issue. Eugene Volokh, a law
professor at the University of California at Los Angeles, said the opinion would lay the groundwork for
many other decisions that will analyze when gun control is permitted and when it is not.‖

Firearm Companies and Insurers As an increasing number of cities and counties brought
lawsuits against the firearms industry, the gun companies’ own insurers notified their clients that they
would not pay any large legal bills or any judgments associated with the lawsuits. Without the insurers, the
firearms firms would be forced to defend themselves and therefore could be more likely to require
bankruptcy protection or discontinue their business. In response to this threat, many gun companies sued
their insurers. Some of these lawsuits, such as The National Shooting Sports Foundation v. Nationwide
Mutual Insurance in New Orleans, have been successful.
   The consequences of the insurance issue are more expensive insurance for gun companies. Some gun-
control advocates see this as another motivation to encourage companies to avoid litigation and make
positive changes to their industry. According to Josh Horowitz, director of the Firearms Litigation
Clearinghouse, the insurance problem is ―one more thing to bring them to the settlement table.‖

The Impact on the Gun Industry and Colt The gun industry has fought back and is not without
its supporters. Industry representatives are claiming the U. S. government has no grounds for an anti-gun
suit. According to industry lawyer James P. Dorr, ―[T]o sue someone they have authorized to sell those
products has no basis in law.‖ Also, the Second Amendment Foundation is accusing the cities and states of
trying to make firearms unavailable or unaffordable and has sued on these grounds. It is their position that
anti-gun litigation is like ―blaming the National Weather Service for storm damage.‖
   Colt has been portrayed by the media as discontinuing the handgun portion of its business in 1999 due to
the financial implications of these and other pending lawsuits. Countering this allegation, William Keys,
CEO of Colt, observed, ―The lawsuits did not force us into this decision.‖ Keys maintained that the reality
was that Colt discontinued seven lines of handguns simply because they had not been selling. However, in
December of 1999, Colt contradicted this assertion in a letter to its shareholders that claimed, ―We have
had to face the harsh reality of the significant impact which our litigation defense costs are having on our
ability to operate competitively in the marketplace.‖
    With all the actual and potential litigation, Colt, as well as the rest of the gun industry, may indeed be in
a fight for survival. Colt does not have pockets as deep as those of the tobacco industry; therefore, it will
need to be creative to forge reasonable settlements. Undoubtedly, some gun manufacturers will be driven out of
business by the gun-control controversy. However, with its history and established reputation for supplying
innovative firearms to the U.S. government, Colt just may have a chance to navigate its way through the
minefield of lawsuits, especially while the Bush administration remains in the White House.
The Gun Control Controversy: Still Unresolved In March 2004, the United States Senate, in a
vote of 90 to 8, rejected a bill highly favored by the NRA; this bill would have given gun manufacturers
protection from lawsuits. ―The NRA wanted the bill because gun manufacturers face some 30 significant
lawsuits. Judges in Washington, Ohio, and California have ruled that gun manufactures can be sued for
civil penalties when criminals use their products.‖ The NRA withdrew its support and lobbied senators to
kill the bill when a bipartisan coalition managed to pass two amendments to the bill. One amendment
would renew a 10-year ban on military-style assault weapons, and the other would require background
checks of prospective gun purchasers at gun shows. The NRA’s vigorous lobbying for the original bill and
against the amendments to it ―demonstrates the NRA’s absolute opposition to sensible gun legislation,‖
observed Senator Dianne Feinstein, the author of the original 1994 legislation banning assault weapons.
Police chiefs from around the nation lobbied senators to pass both amendments.
    The law banning assault weapons expired in September 2004 without much more than token political
opposition expressed at press conferences held by a ―few anti-gun diehards, such as Senators Charles
Schumer and Dianne Feinstein.‖ A quote from former President Bill Clinton’s memoirs, My Life, is
instructive about the social and political volatility of gun control legislation. Clinton writes, ―After the
[1994] election, I had to face the fact that the law-enforcement groups and other supporters of responsible
gun legislation, though they represented the majority of Americans, simply could not protect their friends in
Congress from the NRA. The gun lobby outspent, out-organized, outfought, and out-demagogued them.‖ In
this context, reasonable people can legitimately wonder: ―Will the gun control controversy ever be

Questions for Discussion
   1. What is the controversy regarding gun control in the United States? Are you for or against gun
      control? Explain.
   2. Who is ―winning‖ (stands to gain) and who is ―losing‖ (more likely to suffer) in this
   3. Looking at the evolution of laws and litigation on gun control, what insights do you gain?
   4. Are guns (firearms) a ―dangerous‖ product like cigarettes? Explain.
   5. Explain your position on private citizens being able to buy and use firearms.
This case was developed from material contained in the following sources:
Bloom, D. (December 7, 1999). White House takes aim at gun makers. MSNBC News.
Chatterjee, S. (March 3, 2004). Senate defeats bill to protect gun makers from lawsuits. Knight Ridder Tribune Washington Bureau.
Colt History. Official company Web site,, accessed on March 6, 2005.
Colt refutes Newsweek article. (October 11, 1999).
Crowley, M. (September 27, 2004). Muzzled. New Republic, 231(13), 11–13.
Glaberson, W. (October 17, 2001). Court says individuals have a right to firearms. New York Times, 14.
Huemer, M. (April 2003). Is there a right to own a gun? Social Theory and Practice, 29(2), 297–324.
Kahan, D.M., Braman, D. (April 2003). More statistics, less persuasion: A cultural theory of gun-risk perceptions. University of
   Pennsylvania Law Review, 151(4), 1291–1327.
Kennedy, D. (April 18, 2003). Research fraud and public policy. Science, 300(5618), 393.
Levin, M., Rubin, A. (December 8, 1999). US to join legal fray against gun makers.
   Los Angeles Times.
Phinney, D. (June 11, 1999). When laws take aim at guns. ABC News.
Siebel, B. (1999). City lawsuits against the gun industry: A roadmap for reforming gun industry misconduct. St. Louis University
   Public Law Review 18(1):247–290.
Walsh, S. (November 26, 1999). Insurers are bailing out on the gun industry. Washington Post, A01.

Shared By: