After an ATF ruling, the bottom falls out for a St. Cloud firearms manufacturer

A dozen years ago, federal firearms regulators approved a new product aimed at gun owners with physical disabilities, instantly creating a new market — and St. Cloud-based Maxim Defense Industries jumped in.

Over the next decade, Maxim built a line of pistol braces, which fastened to the forearm give shooters more stability. It also developed a line of heavy-duty pistols equipped with braces, which grew to 74% of the company’s firearms sales.

Then in January 2023, the market evaporated overnight after the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) changed course and issued a rule reclassifying braced pistols as highly regulated short-barreled rifles.

The ATF had concluded that, instead of using the braces to steady a weapon, they were being used and promoted as stocks, allowing gun owners to shoulder-fire pistols as if they were rifles. To the ATF, this circumvented the landmark 1934 National Firearms Act, which is aimed at keeping high-powered, concealable guns out of the hands of criminals.

The new rule — which requires braced-pistol owners to register their guns and pay a $200 tax (with a short forbearance period), dismantle them or turn them into the government — prompted an uproar in firearms circles.

Maxim Defense joined with gun-rights groups to sue the ATF, claiming the agency overreached its authority and violated Second Amendment rights. Firearms-rights groups, individual gun owners and at least one other brace maker have filed several other similar suits against the ATF.

“We had already made the product, and we were stuck sitting on the inventory,” said Michael Windfeldt, Maxim’s founder and CEO. “We lost a ton of money last year, and it is lucky we are still here.”

Maxim and its fellow plaintiffs have been mostly victorious so far: Federal courts have suspended the new ATF rule to varying degrees, including an injunction issued by one judge in Texas covering all U.S. braced-pistol owners.

But like so many battles over guns, the court battle continues. The ATF has appealed the District Court injunctions, and the fight isn’t likely to end there.

“Every time the ATF wins a decision, the gun lobby appeals, and if the gun lobby wins, the ATF appeals,” said Dan O’Kelly, a former ATF agent and founder of International Firearm Specialist Academy, a consulting firm in Florida. “None of these are going to get fully settled until the Supreme Court says, ‘This is our decision, this is the bottom line.’ ”

The stabilizing brace idea came from a veteran named Alex Bosco, who in 2012 submitted his plans to the ATF. It was designed to help people with disabilities fire heavy pistols like an AR-15 style semiautomatic handgun. The brace was attached to the gun’s butt and fastened around a shooter’s forearm.

The ATF, in its 2012 ruling, gave Bosco the green light, saying his brace would not convert a pistol into an effective rifle by allowing the weapon to be shoulder-fired.

Now, there are at least 3 million braced pistols in circulation in the U.S., the ATF says.

Windfeldt, who’s from St. Cloud, founded Maxim in 2013.

“When we developed our brace product, we worked with the ATF to do it within their guidelines,” he said.

Maxim is the nation’s second largest brace manufacturer, the company said in court documents, trailing only Bosco’s firm, SB Tactical. Maxim has also branched out, selling its own branded stocks, suppressors (silencers), pistols, rifles and gun components.

Maxim’s premium handguns — including several that come with braces — retail for about $2,100 to $3,700 on the company’s website, considerably more than standard semiautomatic pistols. Maxim’s guns sport a military look, and the company says in court documents it has a reputation in the veteran and special operations communities.

Besides braced pistols in 2022 accounting for about three-fourths of Maxim’s $5 million-plus in firearms sales in 2022, freestanding braces comprised about 59% of the company’s $5 million-plus in nonfirearm sales, court documents said.

Maxim historically sold a significant number of braces to other firearms manufacturers who installed Maxim’s product on their own guns. But with the newer ATF rule, those orders dried up in early 2023.

By August, Maxim had laid off about half its workforce. Despite injunctions suspending the ATF rule, the brace business hasn’t recovered: The company’s employee count stood at 18 in February, down from 38 just before the rule came out.

“There is essentially zero demand for stabilizing braces now that the product may subject ordinary consumers to regulation under the [National Firearms Act],” said Dave Dahl, Maxim’s chief operating officer, in an August court filing.

After its initial designation on the brace, the ATF made several more — and sometimes inconsistent — decisions on braced pistols over the next decade.

The ATF conceded in the new rule that its previous determinations had led to “confusion.” The new rule intends to ensure “consistent regulation of pistol braces,” the ATF wrote.

“A majority of the firearms equipped with ‘stabilizing braces,’ currently or previously available on the market, incorporate rifle characteristics,” the ATF said in its published rule. The agency said it had inappropriately relied on manufacturers’ assertions that braces were meant only for single-handed firing.

The ATF said the new rule enhances public safety, noting that braced pistols have been used in two recent mass shootings: a 2019 shooting in Dayton, Ohio, that left nine dead, and a 2021 shooting in Boulder, Colo., with 10 fatalities. Braced pistols have turned up in several hundred criminal cases, according to the ATF. (U.S. firearms homicides of all kinds tallied nearly 20,000 in 2022.)

Noncompliance could lead to criminal penalties.

“The ATF had the right to do this, and it is for public safety,” said Joseph Vince, a former ATF agent and director of criminal justice programs at Mount St. Mary’s University in Maryland. “A pistol with a brace is substantially a rifle.”

But O’Kelly said the ATF should not have reclassified braced pistols to short-barreled rifles just because some people used them inappropriately and some companies market them improperly.

The ATF lacks “credibility” given its inconsistency on braces, O’Kelly said.

“They said for 10 years that these things were just braces, and now overnight they said they are stocks,” he said.

Soon after the rule’s publication, several lawsuits were lodged against the ATF.

Maxim teamed up with two Texas gun owners and the Firearms Policy Coalition, a gun-rights group, and sued in federal court in Texas. Maxim claimed the ATF’s rule had irreparably affected its business.

The plaintiffs sought an injunction, alleging violations of the U.S. Administrative Procedure Act — which covers federal rulemaking authority — and the U.S. Constitution’s First and Second Amendments.

The District Court denied an injunction. Maxim and its co-plaintiffs then appealed to the U.S. Fifth Circuit Court of Appeals in New Orleans, which reversed the lower court’s ruling in August.

The Appeals Court ruled the ATF likely violated the Administrative Procedure Act because the final pistol brace rule differed substantially from the agency’s initial 2021 proposal — a “monumental error.”

The New Orleans appellate court decision led to a District Court injunction that suspended the brace rule — but just for Maxim and its co-plaintiffs. Another Texas District Court in another lawsuit targeting the ATF’s rule issued an injunction in November that covers manufacturers and gun owners across the country.

The ATF has since appealed the injunctions in both cases — along with two other District Court injunctions suspending the rule. Briefs in the cases were filed last month.

While Maxim is fighting the rule, the company aims to expand its business beyond braced products. Windfeldt said Maxim is “pivoting” further into suppressors.

Aiming to reduce noise and muzzle flash, the Army and Marine Corps are looking at making suppressors standard issue for troops. Maxim has bid on a big Army suppressor contract, Windfeldt said.

“If we won that contract,” he said, “that would be a game changer for the company.”