Connecticut Court Rejects Requested $7.7M Civil Penalty for Florida Company's Marketing "Ghost Gun" Parts on Its Web Site

From Connecticut Superior Court Judge Daniel Klau's long opinion last week in State v. Indie Guns LLC:

The principal question presented is whether the Connecticut Unfair Trade Practices Act applies to deceptive and unfair advertisements that appear on a Florida limited liability company's website. By its plain language, CUTPA only applies to unfair and deceptive acts and practices that occur in trade or commerce in Connecticut. See General Statutes § 42-110a (4) (defining trade and commerce as "the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property … in this state." (emphasis added]).

As set forth below, the court concludes that an out-of-state or foreign company that operates an interactive internet website is not, on that basis alone, engaged in trade or commerce in Connecticut. Consequently, the court lacks the statutory authority under CUTPA to impose civil penalties on such foreign companies based solely on allegedly false and deceptive advertisements on their websites. To hold otherwise would require the court to ignore the clear limits that the General Assembly placed on the geographic scope of CUTPA and would expose foreign companies across the country, if not the world, to CUTPA liability based solely on statements that appear, or allegedly should appear per Connecticut law, on their websites….

In 2019, the State of Connecticut enacted … "An Act Concerning Ghost Guns," to address the growing public safety threat posed by untraceable firearms. Ghost guns are privately made firearms that do not have serial numbers and cannot be traced back to the original owner or dealer. The act provides, in relevant part, "[n]o person shall purchase or receive or sell, deliver or otherwise transfer an unfinished frame or lower receiver, except as provided [herein]." The act does not proscribe advertising the sale of such components….

[T]he manufacture and sale of ghost guns and parts remain legal under state law throughout much of the United States, including in the State of Florida…. [T]he federal Gun Control … does not ban ghost gun parts outright. Nor does it ban advertising. Rather, it requires sellers to secure federal licenses, conduct background checks, keep sales records, and mark their products with serial numbers.

[The Act Concerning Ghost Guns] is a penal statute, the violation of which is a Class C felony. Although the Office of the Attorney General generally lacks the legal authority to enforce the state's criminal laws through criminal prosecutions, it has the authority to enforce CUTPA. In March 2023, the Office of the Attorney General announced that it had filed the present civil lawsuit against four out-of-state firearm companies. The lawsuit alleges that the companies violated CUTPA by advertising the sale, offering for sale, and selling products that are expressly prohibited under Connecticut law except in limited circumstances not relevant to this case….

Indie Guns LLC[] is a Florida limited liability corporation not registered in Connecticut as a foreign corporation. Indie Guns operated a website that advertised ghost gun parts for sale. After Indie Guns failed to file an appearance, the state moved for entry of a default, which the clerk granted in the normal course…. [At the damages hearing], the state introduced evidence of a single sale of ghost gun parts to an undercover agent in Connecticut…. [T]he state seeks the maximum civil penalty under CUTPA of $5000 for each day that Indie Guns' website operated between October 1, 2020 and the hearing in damages, i.e., 1539 days. Thus, the state seeks a total civil penalty of $7,695,000….

The court noted that, even when a defendant has defaulted, the court must still consider whether the plaintiff's allegations "are sufficient on their face to make out a valid claim for the relief requested." It concluded that the allegations were sufficient as to the one sale in Connecticut as to which the state introduced evidence (and which would lead to a $5000 penalty). But the court stressed that "the state does not seek a civil penalty on [the] basis of that sale."

Rather, the state's penalty argument focused solely on the Indie Guns' website, and the court held that this argument was legally unfounded:

CUTPA only applies to unfair or deceptive conduct that occurs in trade or commerce in Connecticut. The court determines that a website owned and operated by an out-of-state person or business entity does not, alone, constitute the conduct of trade or commerce in Connecticut.

To hold otherwise would mean that every website owner or operator throughout the entire country, indeed the world, is potentially subject to CUTPA liability, including for advertisements that may be lawful in the owner's jurisdiction but potentially unfair or deceptive under Connecticut law. As discussed below, the state not only is untroubled by this position, but instead embraces it and describes a contrary position as dangerous and bizarre….

As previously noted, Indie Guns' advertising of ghost gun parts is not forbidden under Florida law or federal law. Nor does Connecticut's ghost gun act forbid the advertising of such parts…. [I]n the court's view, a view an appellate tribunal may not share, CUTPA does not authorize a court to impose civil penalties on foreign companies based solely on the contents of their websites.

The government also noted that Indie Guns and its owner, Lawrence DeStefano, had posted various things on its Instagram account:

One Instagram post shows DeStefano sitting in front of a sign that says: "TO ALL YOU GOVT ANTI-GUN ASS CLOWNS, YES! THESE ARE UNTRACEABLE UNSERIALIZED UNREGISTERED GHOST GUNNERS! AND YOU CAN'T DO SHIT ABOUT IT!!!"

Another post shows DeStefano putting packages into a large white mail bag. He says, "I am at an undisclosed location shipping out packages … they are trying to disarm us, I want you to understand that … this is about disarmament, this is about tyranny … they want all these ghost guns … serialized because … they want to know who's got 'em so they can take them away." He repeatedly professes his mission, to help people build guns in their homes even when in violation of state law, and to avoid oversight of gun purchases and ownership by law enforcement.

In another post, a video opens by thanking "Willie" Tong. Next is a clip from the [Connecticut] Attorney General's press conference. Attorney General Tong, with advocates for gun violence prevention by his side, displays the lower receiver … purchased from Indie Guns … and explains that a person could build a fully functioning AR-15 from the part. The words "In Stock: Ghost Gunner" are superimposed on the clip. Indie Guns then plays footage showing how a machine that Indie Guns advertises, sells, and offers for sale, called the "Ghost Gunner," can be used to easily turn [the displayed lower receiver] into a functional gun part. The video end with a clip of a scene from the film Scarface, during which Al Pacino uses an automatic assault weapon to spray people with gunfire. The "Ghost Gunner" was offered for sale on Indie Guns' website up until the date of the hearing….

DeStefano complains about the cooperation of other illegal gun parts dealers with Attorney General investigations, specifically, AR Industries, an original defendant in this matter. DeStefano explains that "the DIY gun movement … culture … has always been a secret society … we didn't care what government regulations were out there, what the laws were, or where it was illegal to ship. We just didn't care." …

DeStefano states: "I supply people from all walks of life … different age groups, whether you're young …. I don't care…. I specialize … I offer a service, which is extreme discretion …. I don't take credit cards, I make personal contact with you … and I make sure I get the product to them, regardless where they live at …. Typically the customers that call me, they can't get their products from somewhere else … and that's why they deal with me, so that's my customer base." …

But the court held that these statements didn't matter:

[T]he obvious contempt that Indie Guns' owner showed for this lawsuit and the Attorney General [does not] support an award of CUTPA civil penalties. The first amendment to the United States constitution protects Indie Guns' right to make those statements through social media. They may be relevant to showing willfulness, but they do not constitute CUTPA violations. And they do not transform the Indie Guns' website—which is separate from India Guns' Instagram account—into trade or commerce in Connecticut….