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Gordon v. Sig Sauer, Inc.

United States District Court, S.D. Texas, Houston Division

September 20, 2019

DANTE GORDON, individually and on behalf of all others similarly situated, Plaintiff,
v.
SIG SAUER, INC., Defendant.

          MEMORANDUM AND OPINION

          LEE H. ROSENTHAL CHIEF UNITED STATES DISTRICT JUDGE.

         Sig Sauer, Inc. designs and manufactures pistols for military, law enforcement, and civilian use. One pistol model, manufactured from 2014 to 2017, the P320, could allegedly “drop fire”- discharge a round of ammunition if dropped to the floor-a design defect. Dante Gordon alleges that he purchased his P320 in 2014. Gordon does not allege that his P320 fired after being dropped. Instead, Gordon alleges that he would not have purchased the P320, or would have paid less, if he knew that it was not “drop safe”; that he has stopped using his P320; and that his P320 has lost resale value.

         Although Gordon alleges that Sig Sauer learned of the problem in internal testing before launching the P320 in 2014, he also alleges that in 2016, the United States Army notified Sig Sauer of the potential to drop-fire. In 2017, Sig Sauer implemented a Voluntary Upgrade Program that made modifications designed to address drop performance, without charging customers. Under the Program, customers had to send in their P320s to have the drop-fire issue fixed. Gordon has not sent in his P320. Sig Sauer changed the design for pistols made in 2017 and after. (Docket Entry No. 1).

         Sig Sauer moved to dismiss. Gordon amended his original complaint, asserting claims for express and implied warranty breach, unjust enrichment, fraudulent concealment, fraud, and violations of the Magnuson-Moss Warranty Act and the Texas Deceptive Trade Practices Act. Sig Sauer answered and moved to dismiss for lack of subject-matter and personal jurisdiction and for failure to state a plausible claim. Gordon argues that he has alleged facts sufficient for standing, and that the amended complaint allegations state plausible claims under the Magnuson-Moss Warranty Act and Texas law. Gordon sued on behalf of both himself and a nationwide class of P320 purchasers; Sig Sauer moved to strike Gordon’s proposed class definitions or to narrow them to Texas purchasers. Gordon responded that it is premature to address the class definitions or personal jurisdiction as to putative class members.

         After carefully reviewing the amended complaint; the motion to dismiss, response, and reply; the properly considered documents; and the applicable law, the court grants in part and denies in part the motion to dismiss, and grants the motion to strike. (Docket Entry No. 35). Gordon must amend his complaint to conform to these rulings no later than October 28, 2019.

         The motions to dismiss for lack of subject-matter jurisdiction and lack of personal jurisdiction are denied. (Docket Entry No. 35). Sig Sauer’s Rule 12(b)(6) motion to dismiss is granted in part and denied in part. The court grants the motion to dismiss for insufficient pleading as to:

• the claim for written warranty breach under the Magnuson-Moss Warranty Act, without prejudice and with leave to amend;
• the express warranty claim under Texas law, without prejudice and with leave to amend;
• the fraudulent concealment claim, with prejudice and without leave to amend;
• the fraud by misrepresentation and concealment claims, without prejudice and with leave to amend;
• the Texas Deceptive Trade Practices Act claim for false, misleading, or deceptive statements, without prejudice and with leave to amend.
The court denies Sig Sauer’s motion to dismiss as to:
• the implied warranty claims under the Magnuson-Moss Warranty Act and Texas law;
• the unjust enrichment claim; and
• the Texas Deceptive Trade Practices Act claims based on warranty breach and unconscionable conduct.
The motion to strike the class definitions is granted, as follows:
• the common-law fraud claims and the Texas Deceptive Trade Practices Act claims based on false and misleading statements are stricken as to both the putative Texas and nationwide classes; and
• the express and implied warranty claims, Magnuson-Moss Warranty Act claims based on the Texas-law warranty breach claims, the Texas Deceptive Trade Practices Act claims based on warranty breach, and the unjust enrichment claims are stricken as to the putative nationwide class.

         As to Gordon, individually, the implied warranty breach claim, the Magnuson-Moss Warranty Act claim based on implied warranty, the unjust enrichment claim, and the Texas Deceptive Trade Practices Act claims based on warranty breach and unconscionable conduct remain pending. As to the putative Texas class, the implied warranty breach claim, the Magnuson-Moss Warranty Act claim based on implied warranty, the unjust enrichment claim, and the Texas Deceptive Trade Practices Act claims based on warranty breach and unconscionable conduct remain pending. As to the nationwide class, only the Texas Deceptive Trade Practices Act claim based on unconscionable conduct remains pending.

         The reasons for these rulings are stated in detail below.

         I. Background

         A. The Amended Complaint Allegations

         The facts are drawn from Gordon’s amended complaint allegations, accepted as true for this motion, and the documents referred in and central to those allegations. Brand Coupon Network, L.L.C. v. Catalina Mktg. Corp., 748 F.3d 631, 635 (5th Cir. 2014).

         Sig Sauer, a Delaware corporation with its principal place of business in Portsmouth, New Hampshire, designs and manufactures “firearms for military, law enforcement, and commercial markets, ” including “pistols, rifles, short barrel rifles, [and] accessories.” (Docket Entry No. 34 at 4). The firearms are marketed and sold by licensed dealers. (Id.). In 2014, Sig Sauer began manufacturing the P320, a handgun with “a striker firing mechanism.” (Id. at 1–2).

         That year, Dante Gordon bought a P320 “from an ARS Outdoors store in Cypress, Texas.” (Id. at 3). Before buying the pistol, Gordon “reviewed the portion of the [Sig Sauer] website concerning the P320”; “relied on [Sig Sauer’s] marketing statements about the safety of the firearm”; and “understood” the “accompanying labels, disclosures, warranties, and marketing materials . . . as representations and warranties . . . that the P320 was properly designed, was ‘drop safe[, ]’ and ‘won’t fire unless you want it to.’” (Id.).

         Gordon alleges that Sig Sauer’s “Safety Without Compromise marketing campaign” included the statement that “[f]rom the trigger, to the striker and even the magazine, the P320 won’t fire unless you want it to.” (Id. at 5 (internal quotation marks omitted)). He alleges that advertisements associated with the marketing campaign stated that the P320 would fire only after a trigger pull and was “drop safe.” (Id. at 5–6). Gordon does not allege in what years or months this marketing campaign began or ended, or what statements he read and relied on when he bought his P320. (See Id . at 3–6). Instead, he alleges that he “understood” what he saw on Sig Sauer’s marketing materials and website as stating that the P320 was “drop safe.” (Id. at 3).

         The P320 Owner’s Manual warned that “[i]f dropped, the pistol may fire, ” and that “[a]ny firearm may fire if dropped.” (Docket Entry No. 36 at 3 (emphasis omitted)). It is unclear whether Gordon saw the Manual before making his P320 purchase. Gordon alleges that the P320 became a “popular and commercially successful pistol” used “by law enforcement agencies all over the country” and owned “by hundreds of thousands of civilians.” (Docket Entry No. 34 at 1). In 2015, the United States Army contracted with Sig Sauer to manufacture the P320 for military use. (Id. at 2, 6).

         Gordon alleges that the P320 model manufactured between 2014 and August 2017 had a design defect allowing it to “inadvertently” fire if dropped with a round in the chamber. (Id. at 1– 2, 8). Because of unspecified “internal testing, ” Gordon alleges, Sig Sauer has known of the “defect since at least 2014.” (Id. at 2).

         In April 2016, after the Army “discovered that the SIG P320 pistol [model manufactured starting in 2014] would fire unintentionally” when dropped, the Army informed Sig Sauer, which promptly “modified the trigger mechanism” to fix the issue. (Id. at 6–7). Gordon alleges that this initial modification “only applied to military versions of the SIG P320.” (Id.). Sig Sauer did not “implement the drop fire fix for its civilian pistols until [August] 2017, at which point it began manufacturing the P320 with a lighter trigger and modified sear.” (Id. at 7–8). Gordon alleges that gun owners, law enforcement, and firearm dealers “replicated the drop fire incidents in their own testing” of pistols manufactured before 2017. (Id.).

         Gordon alleges that, on August 4, 2017, Sig Sauer’s Chief Executive Officer, Ron Cohen, released a statement that “[t]here have been zero (0) reported drop-related P320 incidents in the U.S. Commercial market.” (Id. at 11). Days later, on August 8, 2017, Sig Sauer “announced a ‘voluntary upgrade’ for the P320 pistol, ” inviting P320 owners to send in their guns to enhance “overall safety including drop performance” by reducing trigger, sear, and striker weight. (Id. at 11, 14). Sig Sauer did not issue a mandatory recall. Instead, “[t]he voluntary upgrade was presented as purely optional, not urgent, and not mandatory.” (Id. at 11).

         Sig Sauer did not send individual notice to P320 owners of the Voluntary Upgrade Program to address the drop-fire problem. (Id. at 13). Instead, Sig Sauer posted information about the upgrade on its website. (Id. at 14–18). Gordon alleges that “[t]he only information about the drop fire design first appeared around August 8, 2017, [and] is buried in the Frequently Asked Questions [section] in [Sig Sauer’s] website.” (Id. at 16). That section describes why Sig Sauer offered the Voluntary Upgrade Program:

Through additional testing above and beyond standard American National Standards Institute (ANSI)/Sporting Arms & Ammunition Institute (SAAMI), National Institute of Justice (NIJ), Department of Justice (DOJ), Massachusetts, California, and other global military and law enforcement protocols, we have confirmed that usually after multiple drops, at certain angles and conditions, a potential discharge of the firearm may result when dropped. Although it is a rare occurrence, with very specific conditions, SIG SAUER is offering an upgrade to all of its current P320 owners.

(Id.). The Frequently Asked Questions section of the website also stated that, even as originally designed, the P320 “meets and exceeds all U.S. safety standards” and “exceeds all ANSI/SAAMI, NIJ, DOJ, California, Massachusetts, and safety standards.” (Id. at 17). The section also stated that “[m]inimal reported drop-related P320 incidents have occurred in the U.S. commercial and law enforcement markets, with hundreds of thousands of guns delivered to date, ” and that the reported incidents “occurred in conditions that appear to be outside of normal testing protocols.” (Id.).

         Gordon alleges that “more than 500, 000 SIG P320 pistols were sold to the public with the design defect.” (Id. at 8). Gordon identified four individuals injured when their P320s fired when dropped; these individuals allegedly reported the incidents to Sig Sauer as early as January 2017. (Id. at 9–10).

         B. The Claims for Relief and Motions to Dismiss and Strike

         The amended complaint alleges that Sig Sauer defectively designed the P320, and that it misrepresented and warrantied that “the P320 pistols were ‘drop safe’ and ‘won’t fire unless you want them to, ’” despite knowledge of the defect. (Id. at 1 (alteration omitted)). Gordon’s design-defect theory appears to be that the defect occurred when Sig Sauer first used a striker-firing mechanism in a pistol design, rather than the hammer-firing mechanism it had customarily used. (Id. at 1–2). Gordon asserted claims for express and implied warranty breach, Magnuson-Moss Warranty Act violations, unjust enrichment, fraudulent concealment, fraud, and Texas Deceptive Trade Practices Act violations. (Id. at 20–29).

         Gordon seeks to represent two classes. The first proposed class consists of “all persons in the United States who purchased a SIG P320 semi-automatic pistol, in both the full-size and compact versions.” (Id. at 18). The second is “all Class members in Texas.” (Id.). Gordon has not limited the classes by dates.

         As to his injuries, Gordon alleges that he has stopped using and “would not have purchased his SIG P320 if he had known that it was not, in fact, properly designed and unduly susceptible to drop fires, or he would not have been willing to pay as much for it.” (Id. at 3–4). Gordon also alleges that the Voluntary Upgrade Program “would not compensate him for his lost use of the pistol during the upgrade period, and it would not compensate him for the significantly diminished resale value of his SIG P320 resulting from the drop fire design defect.” (Id. at 4). Gordon characterizes his lawsuit as intended to ensure that “gun owners like himself are not duped into paying hundreds of dollars for guns that are unsafe.” (Id. at 2).

         Sig Sauer has moved to dismiss based on: lack of subject-matter jurisdiction due to the absence of the injury-in-fact needed for standing; lack of personal jurisdiction over non-Texas absent putative class members; and failure to state a claim. (Docket Entry No. 35). Sig Sauer argues that there is no injury and that the express and implied warranty claims fail, because “the product Gordon claims he bargained for-a P320 without an alleged drop-fire defect-is being provided by SIG Sauer to all customers free of charge.” (Id. at 27–34).

         On the class allegations, Sig Sauer moves to strike because the proposed definitions are overbroad and fail to satisfy the Federal Rule of Civil Procedure 23 requirements or to show personal jurisdiction over absent non-Texas putative class members. (See Id . at 10–11, 13, 18, 23– 25).

         On the claim-sufficiency challenges, Sig Sauer argues that: Gordon has not alleged facts supporting a plausible inference that Sig Sauer’s alleged Deceptive Trade Practices Act violations caused him injury; “[b]rochures and consumer advertising cannot create a warranty enforceable under the [Magnuson-Moss Warranty Act]”; Gordon failed to give Sig Sauer sufficient notice to cure the drop-fire issue before suing for warranty breach, as required under federal and Texas law; Texas law does not recognize stand-alone unjust enrichment or fraudulent concealment claims; and Sig Sauer had no duty to disclose the alleged defect before Gordon purchased his P320. (Id. at 27–34).

         Gordon responds that he suffered economic injury from Sig Sauer’s defective design and misrepresentations; Sig Sauer’s marketing materials created an express warranty that Gordon may enforce under both Texas law and the Magnuson-Moss Warranty Act; the Voluntary Upgrade Program did not remedy Gordon’s economic injuries from loss of use and decrease in resale value, and, even if it did, Sig Sauer has not effectively notified P320 owners of the Program; Gordon provided Sig Sauer sufficient notice of his warranty claims; Texas law recognizes an unjust enrichment claim, and it is pleaded in the alternative; Sig Sauer had a duty to disclose the drop-fire defect in 2014 because “it possessed superior knowledge about firearm” and learned about the defect from “internal testing” in 2014, before the Army informed Sig Sauer of it in 2016; and the amended complaint alleges enough facts to support a plausible inference that the alleged Texas Deceptive Trade Practices Act violations caused Gordon’s injuries. (Docket Entry No. 37 at 10, 18, 22, 24–25, 28–34). Sig Sauer replied to reiterate its arguments and to emphasize that Gordon lacks Article III standing because he has not alleged a “manifest defect.” (Docket Entry No. 38 at 5–7). As to the class allegations, Gordon argues that in advance of any effort to certify a class, it is premature to strike the class definitions based on scope or personal jurisdiction as to the putative class members. (Docket Entry No. 37 at 11).

         The parties’ arguments and responses are examined in detail below, against the pleadings and the applicable law.

         II. Analysis

         A. Subject-Matter Jurisdiction

         The threshold issue is whether Gordon has alleged the injury-in-fact needed for Article III standing and subject-matter jurisdiction. See Rivera v. Wyeth-Ayerst Labs., 283 F.3d 315, 319 (5th Cir. 2002) (“[W]e must decide standing first, because it determines the court’s fundamental power even to hear the suit.”). Standing requires a plaintiff to plead an (1) injury in fact (2) fairly traceable to the challenged conduct of the defendant (3) that is likely to be redressed by a favorable judicial decision. Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016). “Standing of the constitutional variety-the well-known injury, causation, and redressability trifecta-is a question of subject matter jurisdiction.” Norris v. Causey, 869 F.3d 360, 366 (5th Cir. 2017). “The party invoking federal jurisdiction bears the burden of establishing these elements.” Deutsch v. Annis Enters., Inc., 882 F.3d 169, 173 (5th Cir. 2018) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992)).

         “That a suit may be a class action adds nothing to the question of standing, for even named plaintiffs who represent a class must allege and show that they personally have been injured, not that injury has been suffered by other, unidentifiable members of the class which they purport to represent.” Singh v. RadioShack Corp., 882 F.3d 137, 151 (5th Cir. 2018) (alterations omitted) (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40 n.20 (1976)); see Rivera, 283 F.3d at 319 (“[S]tanding is an inherent prerequisite to the class certification inquiry.” (quoting Bertulli v. Indep. Ass’n of Cont’l Pilots, 242 F.3d 290, 294 (5th Cir. 2001))); see also Patel v. Facebook, Inc., No. 18-15982, 2019 WL 3727424, at *3–4 (9th Cir. Aug. 8, 2019). Gordon must allege facts supporting a plausible inference that he has suffered an injury-in-fact fairly traceable to Sig Sauer, and that a favorable judicial decision would likely redress his injury.

         “To establish an injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’” Spokeo, 136 S.Ct. at 1548 (quoting Lujan, 504 U.S. at 560). “For an injury to be ‘particularized, ’ it must affect the plaintiff in a personal and individual way.” Id. (quoting Lujan, 504 U.S. at 560 n.1). “A ‘concrete’ injury must be ‘de facto’; that is, it must actually exist.” Id. “The injury in fact test requires more than an injury to a cognizable interest. It requires that the party seeking review be himself among the injured.” Rivera, 283 F.3d at 320 (alteration omitted) (quoting Sierra Club v. Morton, 405 U.S. 727, 734–35 (1972)).

         Gordon has alleged four injuries: (1) he stopped using his P320 after learning of the drop-fire issue; (2) he would not have purchased a P320, or would have paid less for it, but for Sig Sauer’s representations and warranties that the P320 was drop-safe; (3) his P320 has decreased in resale value, even with the Voluntary Upgrade Program availability; and (4) had he used the Voluntary Upgrade Program, he would have been unable to use his P320 while Sig Sauer modified it. (Docket Entry No. 34 at 3–4).

         Sig Sauer argues that these alleged injuries are insufficient for standing because “Gordon received a functioning pistol that has not manifested any defect, ” and because “he received the benefit of his bargain, ” a pistol that, according to Sig Sauer, has not drop-fired. (Docket Entry No. 35 at 15–16). Gordon has not alleged attempts to sell his pistol, precluding a claim for out-of-pocket costs. Nor has he sought a fix under the Voluntary Upgrade Program, precluding a claim for loss of use. Sig Sauer contends that “Gordon may only assert breach-of-contract, benefit-of-the-bargain standing based on a defect that has manifested or that is inevitable.” (Docket Entry No. 38 at 6 (quotation omitted)). Gordon responds that he has alleged “quintessential economic harm” allowing him to overcome the motion to dismiss. (Docket Entry No. 37 at 15).

         The parties cite two Fifth Circuit cases-Coghlan v. Wellcraft Marine Corp., 240 F.3d 449 (5th Cir. 2001), and Rivera v. Wyeth-Ayerst Laboratories, 283 F.3d 315 (5th Cir. 2002). A more recent Fifth Circuit precedent, Cole v. ...


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