KS&E Sports and Edward J. Ellis v. Dwayne H. Runnels

Citations: 72 N.E.3d 892; 2017 Ind. LEXIS 308; 2017 WL 1435907Docket: 49S02-1606-CT-349

Court: Indiana Supreme Court; April 24, 2017; Indiana; State Supreme Court

Original Court Document: View Document

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Under Indiana law, a firearms seller is immune from lawsuits for damages resulting from the criminal misuse of a firearm by a third party. This ruling is based on an unambiguous statute that protects sellers regardless of the legality of the sale. In this case, the Indiana Supreme Court reviewed an interlocutory appeal wherein Dwayne Runnels, a police officer, sought damages after being shot by Demetrious Martin, a prohibited person who acquired a firearm through a straw purchase by Tarus Blackburn. Blackburn purchased the Smith & Wesson handgun from KS&E Sports, where Martin had previously expressed interest. Following the purchase, Blackburn transferred the firearm to Martin, who later used it to shoot Runnels during a traffic stop.

Runnels filed a complaint against KS&E, Blackburn, and Edward J. Ellis, asserting claims of negligence, conspiracy, and public nuisance, alleging that KS&E's actions directly contributed to the harm he suffered. The court determined that while Runnels's claims for damages must be dismissed due to the statutory immunity for firearms sellers, his claim for a non-damages remedy can proceed. The ruling affirms part of the lower court's decision while reversing another aspect.

Runnels aims to hold Ellis personally accountable for KS&E's alleged misconduct by piercing the corporate veil. KS&E and Ellis filed a motion for judgment on the pleadings under Indiana Trial Rule 12(C), citing Indiana Code section 34-12-3-3(2) as granting them immunity and necessitating immediate dismissal. The statute prohibits lawsuits against firearms manufacturers, sellers, or trade associations for damages related to lawful activities or for third-party criminal misuse of firearms.

The trial court denied the motion but allowed KS&E and Ellis to amend their answer. They later requested the court to certify the denial for interlocutory appeal, which was accepted by the Court of Appeals. In a split decision, the Court affirmed the trial court's ruling, with the majority opinion stating that Runnels's claims were valid and KS&E failed to demonstrate that Runnels could not succeed. The majority interpreted Section 34-12-3-3(2) as limiting liability for damages stemming from third-party misuse.

Judge Brown supported the majority's decision but highlighted that the statute does not shield sellers from liability for their own unlawful actions. Conversely, Judge Altice dissented, arguing that the majority's interpretation mischaracterized the statute as an immunity provision that should bar any action against KS&E, even in cases of fault. He asserted that the statute’s plain language protects sellers from liability.

The dissent also addressed Runnels's concerns regarding public policy and straw sales, stating such arguments should be directed to the legislature rather than the courts. KS&E and Ellis subsequently sought transfer, which was granted, vacating the Court of Appeals' opinion. The key issue for determination is whether Section 34-12-3-3(2) provides civil immunity to firearms sellers like KS&E for damages caused by third-party misuse, with the conclusion affirming that it does, irrespective of the seller's culpability. The case is remanded for further proceedings, emphasizing that a judgment on the pleadings is only appropriate when relief is clearly unattainable based on the complaint's face.

Material facts alleged in the complaint are accepted as true, and a motion under Rule 12(C) asserting that the complaint fails to state a claim is treated similarly to a Rule 12(B)(6) motion. Rulings under both rules are reviewed de novo. The court also reviews statutory interpretation issues de novo, starting with whether the legislature's intent is clear and unambiguous. If a statute is unambiguous, it is interpreted according to its plain meaning without applying traditional interpretative canons.

In this case, the parties agree that Section 34-12-3-3(2) is unambiguous but disagree on its interpretation. The court finds that this statute grants immunity to KS&E concerning claims for damages arising from Martin’s misuse of a firearm. Runnels's claims of negligence, piercing-the-corporate-veil, and civil conspiracy fail under Rule 12(C) as they seek only monetary damages, while Runnels's public nuisance claim may proceed if it seeks equitable relief. Additionally, the court holds that federal law does not preempt this statute, dismissing Runnels's constitutional claims.

The statute provides limited immunity for firearms sellers against damages caused by third-party misuse, regardless of the seller's culpability, even in cases of unlawful sales. The statute explicitly bars actions for damages resulting from third-party misuse without restricting it to lawful sales, indicating the legislature's intent to impose no such limitation. Thus, the court concludes that the immunity provision applies even when the firearm was sold unlawfully.

Other jurisdictions explicitly deny immunity to firearms sellers who violate laws, as seen in 15 U.S.C. 7903(5)(A)(iii), which removes immunity if a seller knowingly violates a statute and that violation causes harm, and Colo. Rev. Stat. 13-21-504.5(4), allowing tort claims against firearms dealers for violations leading to damages. In contrast, Indiana's statute functions as an immunity provision, specifically I.C. 34-12-3-3(2), which not only protects firearms sellers from liability but also prevents plaintiffs from pursuing groundless actions. If a plaintiff files such an action, the statute mandates dismissal and requires the plaintiff to pay the defendant's attorney fees and costs. This framework resembles immunity as it restricts legal recourse for aggrieved individuals under certain conditions. The lack of the term "immunity" in the statute does not detract from its function, as similar laws in Indiana have been interpreted as immunity statutes despite not using the term. For instance, the Indiana Tort Claims Act and the Equine Activity Statute have been construed as granting immunity, indicating that legislative intent can be inferred from the statutory language rather than its specific terminology. However, the immunity conferred by I.C. 34-12-3-3(2) is limited and not absolute, countering claims for broader immunity.

The statute in question provides limited immunity to firearms sellers, protecting them only from claims seeking damages, as specified in I.C. 34-12-3-3(2). Sellers remain vulnerable to non-damages claims, including those for equitable relief, as highlighted in subsection 3(1), which explicitly exempts sellers from claims for both damages and injunctive relief. The legislature's choice not to extend similar immunity under subsection 3(2) for claims arising from third-party misuse implies a deliberate limitation. Consequently, Runnels's various damages claims are dismissed, while his public-nuisance claim, which seeks equitable relief, survives.

The immunity statute is deemed a threshold legal issue suitable for Rule 12(C) review. Indiana's notice-pleading standard requires a claim to include a concise statement showing entitlement to relief. In this context, Runnels's claims for negligence—namely, negligence, negligent entrustment, negligence per se, and negligent hiring—do not survive because they seek only damages resulting from the unlawful actions of a third party, Martin, who shot Runnels with a firearm unlawfully obtained. Runnels cannot circumvent KS&E's immunity by asserting that his claims arise solely from KS&E's conduct, as his injuries stem from Martin's criminal misuse of the firearm. Thus, under I.C. 34-12-3-3(2), these claims are barred, and Runnels’s general request for additional relief does not adequately inform KS&E of potential equity liability.

Allegations in a complaint cannot be altered by the prayer for relief, as established in Indiana law. Runnels claims damages for negligence, detailing lost wages, medical expenses, and pain and suffering, but does not seek equitable relief despite the possibility of obtaining it if money damages are inadequate. His negligence claims are dismissed. 

The civil-conspiracy claim is also dismissed for three reasons: Martin is not identified as part of the conspiracy, the alleged conspiracy pertains only to unlawful firearm sales and not their misuse, and Runnels seeks only damages, not equitable relief. Under Indiana law, all participants in a conspiracy are considered first parties, but since Martin is not alleged to be part of the conspiracy with KS&E, he remains a third party. 

Runnels's public-nuisance claim is viable regarding the request for injunctive relief. He alleges that KS&E has created significant interference with public safety and requests an injunction to modify its sales policies and training to prevent firearms from reaching prohibited individuals.

Runnels' claim for public nuisance is valid as he adequately pleads facts supporting a public nuisance and seeks equitable relief under Indiana law. Indiana defines a nuisance as anything that is injurious to health, indecent, offensive to the senses, or obstructive to property use, disrupting the comfortable enjoyment of life or property (I.C. 32-30-6-6). Plaintiffs can initiate actions to abate or enjoin nuisances if their property is harmed or enjoyment reduced (I.C. 32-30-6-7(a)), with remedies including injunctions and damages (I.C. 32-30-6-8). The court previously accepted similar claims in City of Gary against firearms manufacturers due to illegal straw sales, which created public safety hazards. Runnels claims KS&E engaged in negligent and illegal practices, including straw purchases, contributing to a high volume of crime-related guns. Specifically, KS&E sold at least 529 guns linked to crimes, ranking among the top crime-gun sellers in the nation from 1996 to 2000, thus supporting his public nuisance claim.

The court rejects KS&E's argument that Runnels' claim is barred under Section 34-12-3-5(3), which allows for injunctive relief against firearms sellers. KS&E contends that Runnels' claim falls under Section 34-12-3-3, which it interprets as prohibiting such actions, but the court disagrees, noting that Runnels’ allegations of unlawful sales do not conflict with these statutes, allowing his equitable relief claim to proceed.

In contrast, Runnels' attempt to pierce KS&E's corporate veil to hold Ellis personally liable fails. Under Indiana law, corporate liability must exist for liability to extend to shareholders (Aronson v. Price). Since KS&E cannot be held liable for damages under subsection 3(2), there is no basis for personal liability against Ellis, and this claim does not survive Rule 12(C) review.

Lastly, Runnels' arguments regarding the preemption and constitutionality of Section 34-12-3-3 are unnecessary, as the court does not interpret the statute as granting immunity to firearms sellers.

The statute grants limited immunity for damages claims but does not extend this immunity to claims for other types of relief. Although Runnels's arguments regarding these additional claims are deemed inapplicable, they are still considered and found to lack merit. 

Firstly, the statute is not preempted by federal law, specifically the Protection of Lawful Commerce in Arms Act (PLCAA). Runnels contends that the PLCAA, which limits civil actions against firearms manufacturers and sellers due to third-party misuse, preempts Indiana's Section 34-12-3-3(2). Unlike Indiana's statute, the PLCAA allows lawsuits against firearms sellers for their own negligence. Runnels references statements from Senators Craig and Hatch to assert that Congress intended for the PLCAA to preempt state laws. However, it is concluded that the PLCAA does not preempt subsection 3(2). 

The analysis begins with a presumption against preemption, requiring Runnels to demonstrate a clear and manifest congressional intent to preempt state law, which he fails to do. He argues for implied preemption under field and conflict doctrines. Field preemption applies when federal law is so comprehensive that it intends to occupy the entire legislative field, which is not the case here, as the PLCAA does not imply an intention to prevent states from providing additional protections. Conflict preemption occurs when compliance with both state and federal laws is impossible or when state law significantly undermines federal objectives, but neither condition is satisfied in this instance. The PLCAA’s purpose of protecting sellers from liability due to third-party misuse does not conflict with Indiana’s statute, which allows state immunity under non-prohibited circumstances.

Finally, Runnels's constitutional arguments, specifically regarding a violation of the Indiana Constitution's Open Courts Clause, also lack merit, as the statute does not infringe on the right to remedy for injuries.

The Open Courts clause allows for conditions on access to the courts but prohibits arbitrary or unreasonable restrictions. Runnels contends that subsection 3(2) denies him court access and constitutes an irrational law with an illegitimate purpose, thus violating constitutional standards. However, the presumption of constitutionality applies to statutes, placing the burden of proof on Runnels, who fails to demonstrate that the statute is unconstitutional. Access to courts is contingent upon having an underlying cause of action, and the legislature possesses broad authority to define such actions and remedies. The court reaffirmed that if no remedy exists, none is required by law. Although the legislature limited damages recovery against firearm sellers in certain circumstances, Runnels retains the ability to seek equitable relief for his claims against KS&E regarding firearm sales to illegal markets. 

Additionally, Runnels argues that subsection 3(2) violates the equal privileges and immunities clause of the Indiana Constitution by unjustly providing immunity to certain gun sellers, thereby creating a class of second-class citizens without civil redress. To assess this claim, a two-part standard is employed, examining whether the disparate treatment is reasonably related to distinguishing characteristics and whether the treatment is uniformly applicable. The legislature is afforded significant deference in classifying groups, and Runnels has not disproven any reasonable basis for the distinction between gun sellers and sellers of other weapons.

The legislature's motivation for enacting subsection 3(2) may stem from a desire to protect the firearms industry from lawsuits that could threaten its stability and the availability of firearms to law-abiding citizens, similar to the rationale behind the PLCAA enacted by Congress. This rationale justifies differentiating between firearms sellers, who face litigation risks, and sellers of other items like knives, which do not. The statute does not violate Article 1, Section 23, nor does it infringe upon due process rights as claimed by Runnels. While Runnels argues that the statute's interpretation immunizes gun sellers from all claims, including those involving illegal conduct, the statute does allow for certain claims, such as public nuisance, to be pursued. 

Furthermore, the concept of a "protectable interest" is critical in determining due process violations. Runnels contends he has a vested interest in a common-law cause of action that the statute removes, but legal precedent indicates that no individual holds a vested interest in common law rules. As the statute predates Runnels's claim, he could not have acquired a property interest in a cause of action that was subsequently removed. Thus, the court finds no protectable interest and no due process violation.

The court's role is limited to interpreting the statute according to its clear language, recognizing that it offers a limited immunity to firearms sellers, specifically against damages claims arising from a third party's misuse of firearms. The court emphasizes that the legislature's policy choices are constitutional and beyond judicial critique. The interpretation concludes that Indiana Code section 34-12-3-3(2) provides immunity to KS&E for claims seeking damages due to third-party firearm misuse, leading to the dismissal of Runnels's claims for negligence, piercing the corporate veil, and civil conspiracy.

KS&E is not immune from Runnels's public nuisance claim seeking equitable relief, which may proceed. The court concludes that the statute is not preempted by federal law and adheres to both state and federal constitutional standards. The decision affirms in part, reverses in part, and remands to the trial court for further proceedings. Judge Rucker concurs in part and dissents in part, agreeing that the trial court wrongly denied KS&E Sports' motion for judgment on the pleadings, as the complaint lacks evidence that KS&E knew or should have known that Martin was a convicted felon barred from firearm possession. Rucker disagrees with the majority's interpretation of the statute, arguing that it should not provide immunity to gun sellers in cases of known illegal activity, emphasizing that the statute is likely intended to protect innocent sellers rather than those engaging in unlawful conduct. Chief Justice Rush concurs with Rucker's dissent.