By Andrea Orr

SAN FRANCISCO, Nov 20 (Reuters) - A U.S. Appeals court on Thursday reinstated a wrongful death lawsuit against Glock Inc. and gun sellers, ruling they could be charged with negligence for using a distribution scheme that made it likely their guns would end up in the hands of illegal buyers.

The ruling, by the 9th U.S. Circuit Court of Appeals, reverses a lower court ruling that had dismissed a lawsuit by family members injured and killed in a high-profile shooting spree at a Jewish center in Southern California four years ago.

In 1999, white supremacist Buford Furrow armed himself with an arsenal of guns, walked into a Jewish Community Center in Granada Hills, California, and shot and injured three young children, a teenager, and an adult worker. While fleeing the scene, he shot and killed postal worker Joseph Ileto.

The relatives of some of those victims filed a lawsuit charging gunmakers used negligent marketing strategies that caused their guns to end up in the hands of the wrong people.

Specifically, the suit charged that the gunmakers intentionally produced more guns than the market demanded, with the intent of selling the surplus on the black market.

The suit, which had been dismissed by a lower court, said that gunmakers such as Glock encouraged legitimate buyers such as police departments to trade in their firearms earlier than was necessary so that they could sell more guns to police and sell former police guns at a markup on the civilian market.

In a 2-1 ruling, the appeals court reversed the lower court opinion and reinstated negligence charges against Glock, as well as various distributors including China North Industries Corp., RSR Management, and RSR Wholesale Guns Seattle Inc.

The defendants in the case were not immediately available for comment.

"It is reasonably foreseeable that this negligent behavior and distribution strategy will result in guns getting into the hands of people like Furrow who are forbidden by federal and state law from purchasing a weapon," Judge Richard Paez wrote in the appeals court opinion.

"It also is reasonably foreseeable that once these prohibited purchasers obtain the firearms they will use them for criminal activity."

Offering a rare window into the means by which guns get into the wrong hands, the lawsuit had traced one of the guns used in the community center shooting.

The suit said the gun, manufactured by Glock, had been originally purchased by a Washington state police department, but within a week was found unsuitable for police needs and resold to a local gun dealer.

Under terms that encouraged frequent trade-ins, the police were not required to pay for the new guns until the gun dealer had sold the former guns.

That gun dealer would then resell these police guns to a gun collector who was unlicensed and therefore did not have to get background checks from buyers.