Major Gun Maker May Have Declared Bankruptcy to Avoid Real Change

A Remington 700 hunting rifle, a Remington 1100 shotgun and a Remington R1 Enhanced model 1911 pistol are seen for sale at Atlantic Outdoors gun shop on March 26, 2018, in Stokesdale, North Carolina. Remington has now filed for Chapter 11 bankruptcy protection partially due to an estimated $950 million in debt. (Photo: Brian Blanco / Getty Images)

Remington, the weapons giant that produced the semi-automatic rifle used in the 2012 Sandy Hook massacre, declared bankruptcy in a Delaware court filing Sunday. Across social media, people applauded the company’s demise following a very good run, if more than 200 years of profiteering off products with no explicit purpose other than murder can be summed up as good. Like so many gun manufacturers, Remington seems to have succumbed to a sales drop brought on by the election of the gun industry’s self-declared “true friend in the White House,” thus ending the panic-driven gun rush of the Obama era. Just days after the March for Our lives, Remington’s fall appeared as a hopeful sign that the gun industry has real weak spots. That, or an industry titan is just putting on a different shell game this time around.

On Twitter, Georgetown University law professor Heidi Li Feldman pointed out an issue largely uncommented on in other reports about Remington’s Chapter 11 filing. In 2015, one living survivor and the families of nine Sandy Hook victims filed suit against Remington, accusing the gun maker of marketing a war weapon to civilians. A Connecticut court dismissed the case in 2016, but the state’s Supreme Court is currently weighing whether to reverse that decision and allow the case to proceed. The Remington bankruptcy filing stalls the process, halting the case for a period.

“The people who own gun companies really, really do not want to see a precedent established which permits the sort of suit the Sandy Hook plaintiffs are bringing to go forward on the merits,” Feldman told me. “When you file for Chapter 11, you stay any pending litigation. That means the Connecticut Supreme Court isn’t going to hand down their decision while Remington is in Chapter 11. This gives the people who will be running the company while it’s in Chapter 11 a chance to try to negotiate a settlement with the Sandy Hook families.”

Feldman suspects that Remington, in an effort to get the Sandy Hook plaintiffs to drop the suit, might come to an agreement on any number of settlement terms. And while “Remington isn’t going to give away the store, so to speak,” Feldman notes the company may agree to some plaintiff demands as a way of effectively getting ahead of more broad-based regulation in the future. That is, Remington would likely be willing to make a deal as long as it views that agreement as low-risk for its long-term bottom line, and most importantly, a stopgap against more broad-based industry reform.

“If there’s a rising tide of hostility towards the availability of a product, and you want to minimize the chance you’ll be regulated legislatively, one thing that companies do is take the pressure off politicians to enact regulations by making various commitments,” Feldman said. “It’s a shrewd move. Just as an example, gun companies might be willing to commit to, say, age-based restrictions on who retailers can sell guns to in order to take the edge off of social pressure, and therefore political pressure, to regulate the age at which people can buy guns. They preserve more of their market by giving up a little bit of it. If you are a business operating against the background of potential regulation, you may want to avert the pressure for there to be formal legal regulations because that may be more draconian than what you would want. That way, you don’t have to be forced into a more comprehensive oversight regime. That’s what’s really going on here.”

If Remington is able to arrive at a settlement plan that ends the lawsuit brought by the Sandy Hook plaintiffs — who are likely more motivated by mission than money — there are multiple benefits for the gun maker.

“There’s a tremendous value to Remington to having the plaintiffs withdraw the suit. Which means that the issue of whether or not people can generally bring causes of action like the one the Sandy Hook plaintiffs are trying to bring would be put to one side. That’s quite valuable to Remington. It’s worth enough for them to think creatively, especially in light of the galvanization of public opinion against the manufacture and sale of assault weapons, to think about doing some self-regulation that they wouldn’t have thought about even six months ago,” Feldman says.

If the case were to move forward, so would the discovery process. And as Los Angeles Times writer Michael Hiltzik notes, “That process could unearth reams of internal communications that could be embarrassing if they indicated, say, that Remington deliberately structured its marketing to feed a market of young adults harboring fantasies of mass mayhem.”

In the meantime, as Feldman notes, Remington has plans to keep right on manufacturing and selling guns from the soft perch of Chapter 11 protection. While what precisely the company’s future holds is unclear, the example of Colt Holdings Co. might offer some insights. In June 2015, Colt filed for bankruptcy protection. Six months later, in January 2016, it emerged from Chapter 11 with a new government contract to produce M4 and M4A1 rifles for the military and a focus on expanding business and selling more guns than ever.

According to Remington’s court filings, its bankruptcy claim absolves the company of $775 million in debt. The gun manufacturer predicts it will emerge from Chapter 11 by May. Lawyers for the Sandy Hook families have said they do not anticipate Remington’s bankruptcy filing will “affect the families’ case in any material way.” Remington is also involved in another ongoing lawsuit, which charges its Model 700 rifle has a trigger defect that causes accidental shots to be fired. That class action suit is also likely to be affected by the bankruptcy filing, though how is still unclear.

Remington first announced its plans to seek Chapter 11 in February. It delayed its filing after the Parkland shooting, likely reasoning that making the move on the heels of a mass shooting would be a massive PR disaster. But with growing momentum and the impending Connecticut Supreme Court decision, the gun maker needed to make a move sooner than later.

“There’s been a cumulative sense that we may be at a turning point in terms of regulating the gun industry,” Feldman told me. “And it was in Remington’s interest to seek bankruptcy protection and do their reorganization before anything like that happened.”