Bank holding $1.6 million ‘hostage’ from Slide Fire, lawsuit says

Texas-based Slide Fire says the financial institution that processed transactions for its online store is holding “hostage” more than $1.6 million in an effort to force the gun accessory maker into a less favorable business agreement.

By withholding the funds, Utah-based Merrick Bank Corporation is trying to “shield themselves from tangential, hypothetical, unviable, and currently non-existent liability in personal injury lawsuits involving (Slide Fire),” according the complaint, obtained by The Trace, filed in an Abilene federal court in April.

The lawsuit says Merrick took advantage of the negative attention Slide Fire had received after the deadly shooting at the Route 91 Harvest music festival in Las Vegas last October. During the incident, a gunman used a dozen or so rifles equipped with Slide Fire’s bump stock — a device that mimics full-auto firing — to murder 58 people and cause injury to some 850 others.

According to the lawsuit, Slide Fire and Merrick entered into an agreement to process sales through the company’s online retail store in 2011 in which the bank could hold onto a “reasonable amount” of funds to cover chargebacks. The company had a chargeback rate of about 0.5 percent of total sales before the 2017 shooting. However, after the shooting, when sales increased, the chargeback rate fell to 0.3 percent, yet, Merrick withheld about 20 percent of total sales.

Merrick held onto a significant amount of those funds for nearly 90 days, which hurt Slide Fire’s ability to fund operations, the lawsuit says. As a result, the company sought a new merchant to process sales and ended its relationship with Merrick in December. Yet, the bank continues to hold $1.63 million until the company agrees to an “onerous agreement providing new and unreasonably expanded personal guarantees, warranties, covenants, and indemnities.”

During the two months in court, Merrick filed a motion to dismiss the case, arguing the lawsuit “fails to state any claims” and that Slide Fire listed a series of overused allegations that leave the bank and the court “speculating” as to how their merchant agreement had been breached.

However, Slide Fire fired back, saying the motion for dismissal “is nothing more than another attempt to delay providing (Slide Fire) with its money” and fleshed out the allegations in an 29-page response.

In the complaint, Slide Fire lists six causes of action that include breach of contract and deceptive trade practices, and asks the court to award it the more than $1.6 million plus damages.

Since the Las Vegas shooting, bump stock devices have become a key topic in the debate about gun control. Yet, the devices aren’t as polarized as other issues. Both the National Rifle Association and gun control groups say Slide Fire’s design circumvents the federal law that regulates machine guns and blamed the ATF for failing to properly classify it.

However, when ATF officials issued a ruling on Slide Fire’s bump stock in 2010, they determined federal law does not explicitly prohibit the device’s construction and instead categorized it as an attachment and thus legal to sell.

Despite protest by other pro-gun groups, the Trump Administration is trying to regulate bump stocks like machine guns without changing the law. Although a bipartisan group of federal lawmakers signed onto banning bump stocks, bump stocks have only been banned at the local and state level in some areas. Still, Slide Fire stopped taking orders and shutdown its online store in May.

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