Wall St. Journal on Smith & Wesson

T

TMB2

New member
March 21, 2000
The Following from the WSJ once again proves that Shakespeare was right!


Plaintiffs Lawyers Take Aim at Democracy

By Walter K. Olson. Mr. Olson, a fellow at the Manhattan Institute, edits the Web site Overlawyered.com and is author, most recently, of "The Excuse Factory: How Employment Law Is Paralyzing the American Workplace" (Free Press, 1997).

In a brute triumph for litigation force and a grim setback for democratic governance, the Clinton administration and lawyers for city governments last week bullied the nation's largest gun maker, Smith & Wesson, into
agreeing to a variety of controls on the distribution of its products that the
administration hadn't been able to obtain through the normal workings of legislation. Glock and other gun makers appear likely to follow.

With quaint if unintended humor, reporters describe Smith & Wesson's capitulation as "voluntary." In exchange for knuckling under to a long list of demands, which include the adoption of external trigger locks, the
development of "smart gun" technology within three years, and extensive controls on the marketing of its products, Smith & Wesson was spared the threat of a direct federal lawsuit and promised a settlement of some of the
30-odd suits filed against it by municipalities. The sheer cost of legal
defense against these suits, whatever their outcome, had grown ruinous: a company statement said the deal was aimed at preserving the "viability of Smith & Wesson as an ongoing business entity in the face of the crippling cost of litigation."

Using the deliberate infliction of litigation costs to obtain leverage over an opponent was once considered a breach of legal ethics, but times have changed. Litigators boasted that their attacks would bleed the thinly capitalized gun industry into submission. Housing and Urban Development Secretary Andrew Cuomo warned gun makers that unless they cooperated they'd suffer "death by a thousand cuts." Several makers have in fact gone bankrupt since the courtroom siege began.
Supporters of the new settlement seemed to
treat as a virtue that it doesn't have to be run by Congress for approval. White House
domestic policy adviser Bruce Reed said the agreement showed that "the public good doesn't have to be held hostage to legislative stalemate," while the New York Times reported that the deal has "opened a new avenue for regulating the firearms industry without action from Congress," where
gun-control legislation has fallen victim to "partisan gridlock."

"Legislative stalemate" and "partisan gridlock" are merely pejorative terms
for the normal workings of democracy. When the legislative process is working, measures that are passionately opposed by an important
constituency within the majority legislative party do not tend to hurtle to a speedy enactment.

Advocates of the hire-a-lawyer brand of gun control make a habit of thumbing their noses at the constitutionally specified lawmaking branch ("All legislative Powers herein granted shall be vested in a Congress of the
United States, which shall consist of a Senate and House of Representatives." That's hard to miss, being Article I, Section 1.)

"You don't need a legislative majority to file a lawsuit," proclaims Elisa Barnes, the chief plaintiffs lawyer behind a private federal suit against gun makers that went to trial in Brooklyn, N.Y. Miami-Dade County Mayor Alex Penelas, according to one news report, "said he was using the courts in an attempt to crack down on the gun industry because the Florida legislature refused to do so. 'Every year that I've gone to the legislature we have basically been told to take our case elsewhere,' he said."

Given the ordinary political instinct to protect one's turf, you'd think the Republicans who control Congress would unite in wrath at the Clintonites' invasion of their legislative prerogatives. Moderate and conservative congressmen would rise together, you'd think, to declare that -- whatever
their differing views on the merits of one or another gun-control measure -- the use of litigation to bypass and subvert democracy is unacceptable. Yet they have been nearly silent. Rep. J.C. Watts of Oklahoma did comment, but his remarks were favorable: "We hail Smith & Wesson for taking a proactive approach to the problem of violence."

Likewise absent from the field, with a few honorable exceptions, has been the American business community. It would surely make a symbolic difference if a few CEOs of companies outside the gun industry chipped in
personal checks to start a legal defense fund for small gun makers being bulldozed by the cost of litigation, to give them at least a hope of surviving to fight the suits on the merits. Or if they let it be known that mayors who've signed on to the gun-suit jihad should stop passing themselves off as "pro-business." Not long ago the mayor of Bridgeport, Conn., Joseph Ganim, a gun-suit mastermind who's considered ambitious for statewide office, was feted by a Chamber of Commerce in his local Fairfield County.
Hey -- it's someone else's industry he's working to destroy, right?

Conflict-averse businessmen love to grab at the excuse that, well, guns are different. But tobacco and breast implants were different, too. In the next rounds, lead paint, latex gloves, violent videogames and managed-care insurance policies will be different too. Why, these companies'predicament has nothing to do with the litigation threats my industry faces! Thus do businesses wind up conforming to the First Law of Risk-Averse Public Affairs: Never head out to the rescue of anyone who's less popular at the moment than you are.

How unlike the wisdom of the trial lawyers themselves, who in their attacks on American industry have been keenly aware of the advantages of mutual cooperation. As they know well, each successful new round of assault litigation contributes new precedent, new revenue, new political alliances and newly honed techniques to assist in future rounds.

Thus the gun round built on the tobacco round in its modus operandi: Demonize the opponent from day one. Fly around the country signing up sympathetic plaintiffs, particularly governments. Shop for favorable judges
and juries. File suits rapidly all over the place on different theories, on the assumption that something's bound to stick. Lavish resources on working the press and sympathetic interest groups. Wait for the chance to "turn" one of the defending companies against its competitors.

This is how important public questions get hammered out secretly in the back offices of influential lawyers and presented to the public as a fait accompli. So much for the integrity of democratic process.
 
What was that old saying, something like, "Capitalism will sell the rope to its own hanging"?

------------------
"Those who cannot remember the past are doomed to repeat it."
 
TMB2,

There's a second article in today's WSJ
explaining how the deal came to be.
Clearly, one of the participants talked
and the piece paints an interesting pic-
ture of how these things happen.

It would be well worth posting, but I
haven't a clue how.

If you have the time and resource, I think
a lot of folks here, including me, would
be appreciative.
 
Today's article from the WSJ. I think they are running a series for the week.

Marty

-------------------------
Behind the Gun Pact: Mixing
Hardball With Personal Bonds
By PAUL M. BARRETT, JOE MATHEWS and VANESSA O'CONNELL
Staff Reporters of THE WALL STREET JOURNAL

In late January, two young Clinton administration lawyers flew to the Nashville, Tenn., airport, where they handed Ed Shultz, the chief executive of Smith & Wesson Corp., a list of gun-control demands. Agree to this, the government attorneys said, and the legal assault on the nation's largest handgun manufacturer would be called off.

After perusing the proposed settlement, Mr. Shultz, a gruff 58-year-old with white hair, turned to one of the political operatives and asked sharply, "Max, how old are you?"

"Thirty-four," answered Max Stier.

"If you live a good long life," Mr. Shultz said, "you will not live to see this proposal happen."

Two months later, Mr. Shultz signed an unprecedented settlement based on that very proposal. If rigorously enforced, the deal would significantly restrict the way Smith & Wesson firearms are made and sold. The agreement could force other handgun makers to seek similar terms, potentially effecting a more sweeping round of gun regulation than any single piece of legislation in 30 years.

How did the deal get done?

A big part of the explanation is the unlikely bond that developed between Mr. Shultz, a pragmatist with a history of irritating the National Rifle Association, and Mr. Stier and his administration colleague, Neal Wolin, 38 years old. The pair of rising but little-known Washington politicos, who between them had zero personal experience with firearms, won the executive's trust as they shared barbecue, talked football and assured him that the concessions they sought would buy Smith & Wesson a broad reprieve from antigun attacks.

Mr. Shultz made secrecy a condition of talking, and the Clintonites delivered. Meetings were held in out-of-the way airports and, on several occasions, in a seldom used conference room at the U.S. Mint in Washington. Not many reporters patrol the mint.

Word of the talks did leak -- but from within Smith & Wesson. Rather than causing discord, however, the fear that hardliners on both sides would have a chance to kill the embryonic deal only accelerated the discussions. And last Friday, the White House caught most of its own gun-control allies, as well as the firearm industry, by surprise when it announced its prized defector, Mr. Shultz.

As recently as January, it looked like the Clinton administration's grab for control of gun-settlement discussions had caused negotiations to collapse.

Since mid-1999, some of the 29 cities and counties that had sued the industry to recover the public costs of gun violence -- together with the states of New York and Connecticut, which were threatening to file their own suits -- had held desultory peace talks with firearm executives. In December, President Clinton declared that he was sending in a platoon of his aides to energize the negotiations, or, if that failed, to organize a class-action suit against gun makers on behalf of thousands of federally subsidized housing projects.

The team of top Washington officials, led by Housing Secretary Andrew Cuomo, arranged to include themselves in a previously scheduled meeting Jan. 21 in Las Vegas between industry leaders and state and local representatives. But with their plane tickets already in hand, the federal officials got word that their participation had killed the session; most influential gun executives couldn't stomach the possibility of handing President Clinton a political victory in an election year.

"We thought we were at a dead end," says a Treasury Department official on the gun-policy team.

But Mr. Cuomo pressed on. He was the administration's strongest proponent of seeking a gun-control breakthrough by bargaining in the shadow of the threat of endless litigation. He had read press accounts in which Smith & Wesson's Mr. Shultz distinguished himself from industry rivals who swore to fight until the last. Mr. Cuomo instructed his deputy general counsel, Mr. Stier, to phone the executive. Sure enough, Mr. Shultz agreed to meet at the Nashville airport, where they figured they wouldn't be spotted.

The fact that Mr. Shultz spends a lot of his time in Tennessee, far from Smith & Wesson's factory in Springfield, Mass., helps explain his unusual place in the gun industry. Unlike most senior firearm executives, who are industry lifers, he joined the business only eight years ago, when he was hired by British conglomerate Tomkins PLC to run Smith & Wesson, a Tomkins unit. He also heads another Tomkins unit, Murray Inc., in Nashville, which makes home-maintenance gear.

"I make consumer products," he likes to say, noting that under him, 148-year-old Smith & Wesson is diversifying into such products as specialty auto parts and criminal-tracking software. People in the clannish gun industry mutter that he cares more about producing lawn mowers than pistols.

At the airport rendezvous, Mr. Shultz glumly confessed that while the municipal litigation struck him as wrongheaded -- Smith & Wesson doesn't cause crime; criminals do -- he feared that the lawsuits endangered Smith & Wesson's future.

His mood didn't improve when the two young emissaries outlined the administration's proposal. "There were a lot of things that just didn't make sense," Mr. Shultz recalls in an interview, citing, for example, a potentially deal-breaking demand that customers be restricted to buying only one gun a month.

He was pleasantly surprised, however, that Messrs. Stier and Wolin, who as general counsel at the Treasury Department helps oversee the Bureau of Alcohol, Tobacco and Firearms, lacked what Mr. Shultz regards as the standard big-city bias against gun makers. They told him they were willing to bargain on practically every part of their proposal, which would require that handguns include low- and high-tech locks, that manufacturers for the first time supervise retail dealers' practices, and that an outside commission enforce the pact.

Equally surprising, Mr. Shultz discovered himself enjoying the company of the young men from Washington. The frost from his "good-long-life" remark to Mr. Stier melted quickly as the threesome mixed business with talk about food, television and the recent Super Bowl. Mr. Shultz recounted a humorous commercial that ran during the football championship, featuring cowboys trying to herd a large group of cats. Trying to organize gun executives to deal with common problems was "like herding cats," Mr. Shultz said.

The Washington lawyers laughed that the saying also applied to getting cities, states and their outside lawyers to agree on gun-policy goals.

That raised one of Mr. Shultz's main anxieties: Could the Feds assure him that if he settled, most of the 29 municipalities that had gone to court, as well as New York and Connecticut, would cease hostilities?

They would try. In a separate phone call, Mr. Cuomo told Mr. Shultz that if necessary, he would use his legal and fiscal influence on urban issues to persuade recalcitrant local officials.

The talks were still alive.

Gun-industry veteran Robert Delfay says in an interview that a sixth sense told him something might be up at Smith & Wesson. Mr. Delfay, president of the industry's main trade group, the National Shooting Sports Foundation, says he phoned Mr. Shultz in early February. "I want to know whether you are cutting your own deal," Mr. Delfay recalls saying. He says he took notes on the conversation.

There was history behind his suspicion. In 1997, as gun-control proponents in Congress tried to mandate safety locks on all firearms, Mr. Shultz unilaterally announced that Smith & Wesson would provide locks that could at least prevent curious small children from firing the weapon. Most other handgun manufacturers later made the same pledge at a Rose Garden ceremony hosted by President Clinton. The NRA, which resists almost any new restriction of gun owners' rights, lashed out at Mr. Shultz for helping engineer a Clinton political coup.

Mr. Delfay, who shares the NRA view of the trigger-lock episode, pressed Mr. Shultz about whether he was once more plotting his own course.

"I'm not going anywhere," Mr. Shultz said, according to Mr. Delfay. In retrospect, the comment seems studiously ambiguous. At the time, Mr. Delfay now says, "I took it as a reassurance." (Mr. Shultz says he doesn't recall making the comment and that, in any event, the conversation with Mr. Delfay took place before the face-to-face meetings with administration officials.)

Even as he kept Mr. Delfay and other industry leaders in the dark, Mr. Shultz continued to warm to his new acquaintances from Washington. The trio marked one subsequent get-together by going to lunch at Nashville's Bar-B-Cutie restaurant. Mr. Shultz picked up the check.

On other occasions, Mr. Shultz sent Smith & Wesson lawyers to Washington to hammer out specifics. Rather than risk the gun lawyers being seen near the headquarters of the Housing and Urban Development or Treasury Departments, Mr. Wolin arranged for meeting space at the Bureau of Engraving and Printing.

The assemblies at the mint seemed to stay clandestine, but negotiations began bogging down. Anne Kimball, Smith & Wesson's longtime top outside litigator, dug her heels in on several key issues -- for example, insisting that it would be "unworkable" for the manufacturer to enforce significant new curbs on all of its retail dealers, as the administration demanded.

To the Clintonites' relief, Mr. Shultz himself weighed in to say that he saw the retailer code of conduct as a reach, but not unworkable.

The stakes jumped in February, when Mr. Shultz raised the possibility of bringing another major handgun manufacturer into the deal. Paul Jannuzzo, vice president of the U.S. unit of Austria's Glock GmbH, joined the negotiations at the Mint, and Mr. Shultz successfully pressed for loosening a safety-related pistol-design provision that Glock opposed.

Mr. Shultz was eager for Smith & Wesson to have an ally in the face of industry and NRA recriminations. Mr. Jannuzzo shared the desire to end the court battles and didn't want Smith & Wesson to use the bargaining as a way to get an edge on law-enforcement and military contracts.

Mr. Jannuzzo balked at a handful of key measures, such as a three-year deadline to equip all new handguns with "smart" technology that allows only authorized users to fire. Smith & Wesson has been developing a fingerprint-recognition system for years; Glock has started research but doubts whether anything feasible will come of it. By March, Mr. Jannuzzo backed out. "I made myself scarce," he recalls, waiting to see how Smith & Wesson fared.

The Feb. 29 fatal shooting in Flint, Mich., of six-year-old Kayla Rolland by a classmate the same age added urgency to top Clinton officials' desire to close a deal with Mr. Shultz. Mr. Cuomo and Deputy Treasury Secretary Stuart Eizenstat separately telephoned the Smith & Wesson chief to warn him that they couldn't keep the talks secret indefinitely.

Indeed, a leak had already sprung: A Smith & Wesson official familiar with the talks had spoken to someone in the office of Eliot Spitzer, New York state's attorney general. Since mid-1999, Mr. Spitzer had been struggling to organize talks between gun companies and various state and city officials. He resented the administration's stepping in to take the lead. And when he learned of the Smith & Wesson negotiations, he angrily complained to the White House that he would blow everyone's cover unless he was given some role. (Mr. Spitzer's spokesman confirms the account.)

Last Wednesday afternoon, an administration contingent flew to Hartford, Conn., where Mr. Shultz met them. In a conference room at the airport Sheraton, the gun executive sat between Messrs. Cuomo and Stier and reviewed the 21-page draft agreement, line by line.

After five hours of discussion, the terms fell into place: Smith & Wesson would develop the electronic smart gun, but all existing firearm models could continue to be made with old-fashioned mechanical technology. The company would consent to oversee its retail dealers to an unprecedented degree, but the administration gave some ground. Rather than the one-gun-a-month rule, multiple sales would still be allowed, but the customer would be able to walk away with only one handgun on the day of purchase. The customer would have to return 14 days later for his additional weapons; during that time, the authorities would be notified and given a chance to investigate.

On Thursday, the White House presented a copy of the proposed settlement to Dennis Henigan, the top lawyer with Handgun Control Inc., the advocacy group representing many of the municipalities in their suits. A startled Mr. Henigan liked much of what he saw but made one nonnegotiable demand: that Smith & Wesson agree to abide by any tougher terms that were later squeezed out of any other settling gun companies.

Mr. Shultz agreed.

Mr. Henigan then lent his support to a White House phone marathon seeking commitments from cities and counties. Fifteen municipalities agreed; several others indicated they likely would follow.

Glock's Mr. Jannuzzo also received a copy of the pact on Thursday. He was tempted again to join Mr. Shultz's bold foray. Early Friday morning, he sent Mr. Shultz an e-mail, asking for modest changes to provisions on the smart gun. But because of a computer glitch, the e-mail never arrived, Mr. Jannuzzo says, and time for amending the deal expired.

Mr. Spitzer's anger had faded, and he flew to Washington for the noon announcement ceremony. He praised the deal and signed it.

Mr. Shultz got stuck in Springfield by bad weather and had to participate in the announcement by speakerphone. Standing at a lectern in Washington, Mr. Cuomo asked, "Are you with us, Ed?" There was no reply at first. Mr. Cuomo asked again.

Finally, Mr. Shultz's disembodied voice: "Yes, I guess I am."

Write to Paul M. Barrett, Joe Mathews and Vanessa O'Connell at paul.barrett@wsj.com, joe.mathews@wsj.com and vanessa.o'connell@wsj.com
 
<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>A startled Mr. Henigan liked much of what he saw but made one nonnegotiable demand: that Smith & Wesson agree to abide by any tougher terms that were later squeezed out of any other settling gun companies.[/quote]

It's the finicky little details that rise up and bite you in the *** later.

I hope Mr. Schultz still likes his new buddies after the slime that they represent bend Mr. Schultz over a stump and re-enact a scene from Deliverance.

:mad:
LawDog
 
Lawdog: That Schultz agreed to that one clause tells me that he really doesn't intend to be in this business much longer; It amounts to giving the gun control movement the power to re-write the agreement anyway they see fit, unilaterally. They get that 50%, they can destroy every company that's signed on!

------------------
Sic semper tyrannis!
 
Marty,

Thanks for posting the second article.

Interesting how close Glock came to
signing on.
Interesting also, how Ed Shulz was asked
by Bob Delfay if he was working his own
deal and Shulz,in essence, denied it.
 
Shultz spends most of his time in Nashville, not Springfield? And this is the man who had the authority to compromise S&W? The whole matter becomes more bizarre all the time. Shultz ought to come out of this affair looking like an idiot, which he is for being suckered by the Clintonites into destroying the company and the tradition he's supposedly responsible for.
 
Is there any doubt now to the ulterior motives behind Smith & Wesson's deal with the Communists? Does anyone still believe Sell-us-out and Waffle still has the best interests of the public at heart?

I understand how many of you feel who own Smiths and I have enjoyed shooting them in the past. That having been said, all of us need to refrain from buying any NEW Smith's until a new owner comes in a refutes all of this hogwash.

Maybye we should start an on-line grief counseling center for all of the S&W addicts out there. In the meantime, support those who support us.

------------------
"When guns are outlawed;I will be an outlaw."
 
VERY interesting how close Glock came. Certainly not the "I'm sick of this extortion" attitude that Jannuzzo put on the day Glock announced it wasn't going to deal. Sounds like Jannuzzo was fine with it, then when he couldn't amend the deal he decided he'd better make it sound like he all-fired agin' it.
But I'll still make it clear to them that it was a good idea not to sign, no matter the motive.
 
Extortion by any other name. Just shows how much the Administration actually believes in the American tradition, they really ARE Nazis. We really do need to hang all the lawyers, starting with Stier and Wolin. What a Maalox moment. M2
 
Looks to me like S&W cares about the company only. If the Cliton deals gets forced down other gun manufacturers throat, S&W potentially has the better deal, good faith and all.

However when the courts finally stamp out all the litigation, S&W can declare the contract they signed as void for 1) they were forced, and/or 2) Its unconstitutional and void.

Either way they come out ahead at the cost of doing the right thing.

*shrug* my .02 cents.
 
<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>They would try. In a separate phone call, Mr. Cuomo told Mr. Shultz that if necessary, he would
use his legal and fiscal influence on urban issues to persuade recalcitrant local officials.[/quote]

our tax dollars at work!!!!!!!!!!!!!!!!!!!!
 
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