The Second Circuit Court of Appeals has upheld a default judgment entered against out-of-state retail firearms dealers, but remanded for the district court to reconsider the injunctive relief imposed. City of New York v. Mickalis Pawn Shop, LLC, Nos. 08-4804, 09-1345 (2d Cir., decided May 4, 2011). New York City filed a nuisance lawsuit in a New York federal court against numerous out-of-state gun dealers, alleging that they intentionally or negligently sold firearms in a manner susceptible to illegal trafficking to the city. The appellants are dealers located in South Carolina and Georgia; one had no contacts with New York, and the other’s contacts were limited to Websites that allowed out-of-state purchasers to place an order that could be consummated by an in-store visit only.
Both defendants participated in the proceedings for several years by contesting personal jurisdiction at every opportunity. Counsel for each eventually filed motions to withdraw at their clients’ request, and the lower court granted the motions after the gun dealers were fully advised that failure to defend would lead to the entry of a default judgment against them and the imposition of injunctive relief. Default judgments were entered against both, and injunctions were imposed. The defendants appealed, continuing to assert a lack of personal jurisdiction and citing the district court’s failure to require that the plaintiff prove its case, including the existence of personal jurisdiction over the defendants.
The Second Circuit determined that the defendants waived the issue by affirmatively signaling to the court their intention to cease participating in their own defense, despite warnings that a default would result. According to the court, “a defendant forfeits its jurisdictional defense if it appears before the district court to press that defense but then willfully withdraws from the litigation and defaults, even after being warned of the consequences of doing so.” The court also found that the defendants submitted to the district court’s jurisdiction by appearing, litigating and then intentionally withdrawing from the proceedings. In this regard, the court stated, “We will not allow the defendants to ‘escape the consequences’ of their strategic decisions simply because they have proven to be disadvantageous to them.”
Still, the court vacated the injunctions because they were vague and overbroad and invested a special master with too much authority to determine the content of the injunctions and wield the court’s contempt powers.