An expected bankruptcy filing by Remington, which the gun manufacturer announced on Monday, could jeopardize a landmark class action settlement involving the company's iconic Model 700 bolt-action rifle, according to an attorney involved in the case.
"If they file for bankruptcy, it will stay all proceedings," said Mark Lanier, a lead attorney for plaintiffs who claim that for decades, Remington covered up a deadly design defect that allows the rifle — and a dozen similar models — to fire without the trigger being pulled. CNBC first investigated the allegations, which Remington staunchly denies, in 2010.
In 2014, while still maintaining the guns are safe, Remington agreed to replace the trigger mechanisms, free of charge, on millions of guns in order to settle the case. But two Model 700 owners, Richard Denney of Oklahoma and Lewis Frost of Louisiana, appealed the settlement. They argue the agreement deliberately downplays the risks from the guns, and does not do enough to notify the public. A three-judge panel of the Eighth U.S. Circuit Court of Appeals is scheduled to hear oral arguments in the case on Wednesday in Kansas City.
Lanier, who stands to share in $12.5 million in legal fees should the deal go through, said that while much depends on how the bankruptcy is structured, he is concerned that none of the guns will be retrofitted.
"There is a real chance that these objectors have messed this up for everyone," Lanier said in an email.
But an attorney for Denney and Frost, J. Robert Ates in New Orleans, calls Lanier's comments "specious and scurrilous."
Ates blames what he calls the "bogus settlement" for the delay, noting that fewer than 30,000 gun owners out of 7.5 million have submitted claims to have their guns retrofitted, which he attributes to a "totally flawed notice campaign."
"The fact is that at the end of the day, no guns were going to be repaired anyway (under the settlement)," Ates said.
Ates says the bankruptcy filing should be "of no moment" in terms of the class action case, particularly because the suit also named as a defendant E.I. du Pont de Nemours and Company, which owned Remington when the original Model 700 trigger mechanism was developed in the 1940s until it sold the company in 1993. The company, which merged with Dow Chemical last year to form DowDuPont, recorded $24 billion in revenues 2016.
Under the proposed settlement — which Remington and plaintiffs have claimed could be worth upwards of $500 million — DuPont would fund only a tiny amount, covering product vouchers being offered to owners of some of the oldest Remington models. DuPont has also continuously maintained that the guns are safe.
Neither Remington nor its attorneys responded to multiple emails about whether the company intends to abide by the agreement in the event of a bankruptcy filing. While the settlement includes a guarantee that the company will meet its financial obligations under the agreement, it does not address the possibility of a bankruptcy.