Falsely advertising "ghost guns" as legal in NY is actionable

State of N.Y. v. Arm or Ally, LLC, 2024 WL 756474, No. 22-CV-6124 (JMF) (S.D.N.Y. Feb. 23, 2024)

The AG sued sellers of “unfinished frames and receivers” — also known as “80% lowers” or “receiver blanks” —designed to evade restrictions on gun sales. The court explains the allegations:

A “frame” is the core part of a handgun or pistol, and a “receiver” is the core part of a rifle, shotgun, or other long gun. An “unfinished” frame or receiver requires an extra step to be rendered usable: usually the drilling of a few required holes or the filing of excess plastic.

This step is, according to one of the defendants, “ridiculously easy” and can be done by an amateur in under an hour with only basic tools. Some of the defendants make it even easier by shipping their products in a “jig,” a plastic setting that enables a customer to easily convert an unfinished frame or receiver into a firearm. As one defendant said to customers when linking to an instructional video: “There’s no complicated setup because the jig that came with your slide keeps everything properly aligned as you make simple cuts with the included drill bits. Wait, it can’t be that simple? Yes, it is.”

The completed products are allegedly functionally and visually indistinguishable from frames or receivers one could buy at a gun store, but they are effectively untraceable because manufacturers, distributers, and purchasers generally do not comply with the registration and serialization requirements applicable to “firearms,” making them “ghost guns.” Lawmakers in New York City and New York State banned the sale of unfinished frames and receivers in 2020 and 2022, respectively.

During the relevant time period, defendants allegedly marketed and sold unfinished frames and receivers “directly to consumers without following any of the federal or state laws and regulations that apply to the sale of guns, and in particular without conducting a background check, placing a serial number on the gun, or entering it into a federal database so that it can be traced back to its source if used in a crime.” Defendants made at least 100,000 shipments to consumers in New York not registered as federal firearms licensees (FFL), including undercover agents employed by the State. Defendants who had federal firearms licenses had access to, but did not use, the National Instant Criminal Background Check System before selling unfinished frames and receivers to New York consumers, while some defendants weren’t licensed to sell firearms at all.

The advertising bit: Defendants allegedly misled New York customers into “believing that unfinished frames and receivers are legal workarounds to New York’s gun control laws, as well as federal law.” Defendants’ websites claimed, among other things, that unfinished frames and receivers could be sold and purchased with “No FFL Required,” could “be shipped straight to a customer’s home without an FFL,” were “not subject to the same regulations as any other complete firearm[s],” were “completely unregistered and legal,” allowed consumers to “build a completely legal handgun without any ‘government oversight’ ” and to “legally own a firearm that does not have to be ‘registered,’ ” were “[a]pproved” by the ATF, and were considered by the government to be mere “pieces of metal and/or plastic and not guns.”

Among other claims, the AG brought NYGBL Sections 349 and 350 claims against them. Defendants contended that marketing unfinished frames and receivers as “legal” was protected by the First Amendment. It was not.

First, the marketing was commercial speech: “NO FFL Required!” came in the midst of other advertising language, such as “Various colors available,” and “no RED TAPE ... NO Registering ... No Transfer fees ... Ships right to your door.” Labeling unfinished frames and receivers as “ATF Approved” on sales websites or touting “Ban Reversed on All of Our Products!” next to pictures of unfinished frames and receivers constituted proposing a commercial transaction.

I assume because Sections 349 and 350 don’t themselves make the sales illegal, the court didn’t point to the part of Central Hudson that makes clear that ads for unlawful products can simply be banned. But that part also says that false or misleading ads can simply be banned.

And that was sufficiently alleged: Defendants allegedly continued to market unfinished frames and receivers as “legal” to New York consumers even after the State and New York City banned the sale or possession of ghost guns. The complaint plausibly alleged that at least some defendants knowingly evaded federal and state laws. On Halloween Day in 2022, one defendant posted a facetious photo of one of its products dressed as a “ghost gun,” showing that it understood that “its unfinished frame and receiver products have only one use — to make untraceable ghost guns.” Various other defendants allegedly touted the “untraceable” and “unregistered” nature of ghost guns as a major selling point.

a ghost gun--get it?

The defendants mostly argued that their statements were merely “expressions of legal opinion.” The question is whether the customer “understood [the statement] merely as an expression of opinion.” Nat’l Conversion Corp. v. Cedar Bldg. Corp., 23 N.Y.2d 621, 628 (1969) (finding it important that the “tenant’s lawyer was persuaded not to verify” the truth of the landlords’ statements about the law on account of the landlords’ authority and the certainty with which they spoke); see also Lukowsky v. Shalit, 110 A.D.2d 563, 567-68 (1st Dep’t 1985) (“[A] misrepresentation of law is actionable if the representation is made by an individual possessing superior knowledge.”). Defendants marketed their unfinished frames and receivers as “completely” legal “from a position of superior knowledge as established merchants in the gun industry.”