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From Products Liability Law Daily, November 26, 2018

Fourth Circuit upholds jury verdict of ‘no defect’ in favor of bike maker

By David Yucht, J.D.

A trial court did not abuse its discretion in deciding evidentiary issues or in providing a jury instruction on spoliation in a product liability suit brought by a minor girl who claimed she was injured when the brakes on her new bike failed, according to an unpublished opinion issued by the U.S. Court of Appeals for the Fourth Circuit. Moreover, the trial court was correct to deny a motion requesting entry of judgment based on the bike manufacturer’s and retailer’s offer to settle. Consequently, the appeals court upheld a jury verdict of "no defect" in favor of the manufacturer and retailer (Callahan v. Pacific Cycle, Inc., November 21, 2018, per curiam).

A consumer bought a bike for her 11-year-old granddaughter. Allegedly, the second time the girl rode the bike, she was unable to apply the rear brakes and instead applied the front brakes, which caused her to flip forward and injure her mouth. Asserting that a manufacturing defect in the bike’s rear brake made the brake too difficult for the girl to engage, the consumers sued the manufacturer and the retailer of the bike. A jury found that the consumers failed to prove that the bike was defective [see Products Liability Law Daily’s January 24, 2017 analysis]. The trial court denied the consumers’ motion for a new trial [see Products Liability Law Daily’s May 19, 2017 analysis].

Pretrial orders. The appellate court first upheld the district court’s decision to allow the manufacturer and retailer to argue that the condition of the bike had changed, even though they had not identified that argument in their pretrial order. A trial judge has discretion to admit evidence that is outside the scope of the pretrial order. Here, the consumers alone possessed the bike during the five years between the accident and the trial. It was acknowledged that at some point during those five years, the position of the barrel at the end of the rear brake cable and the position of the handlebars in fact did change. Accordingly, the consumers were on notice that the condition of the bike might be an issue.

Expert testimony. Likewise, the appellate court was not swayed by the consumers’ assertion that the manufacturer’s expert causation testimony was unreliable based on the expert’s methodology and should have been excluded. During the trial, the expert testified that the accident was the result of user error. He characterized the accident as a "side spill" caused by misuse as opposed to a "pitch-over" caused by brake malfunction. Although the consumers objected to the expert’s qualifications, they never objected to his methodology and, therefore, they waived that issue for purposes of appeal. Moreover, the appellate court agreed with the trial court that the manufacturer’s expert was qualified and that he had previously discussed his opinion in his report and deposition. In addition, the consumers’ argument that the trial court erred in allowing the expert witness to use a "stickman" illustration to demonstrate the way the accident happened was unsuccessful because of a curative instruction cautioning the jury about the use of this evidence.

Hearsay—business records. The Fourth Circuit also upheld the trial court’s ruling admitting the manufacturer’s certificates of general conformity under the business records hearsay exception. The consumers argued that the manufacturer failed to demonstrate that the certificates were prepared by someone with knowledge because the records relied on testing done by a third party. Noting that reliance on third-party information does not render the business records hearsay exception inapplicable, the appellate court determined that an appropriate foundation was set forth to allow the admission of these records through a company executive who was familiar with the compilation of these certificates.

Physical evidence. The appellate court also upheld the trial court’s ruling that prohibited the jurors from handling or testing the bike. The appellate court noted that the evidence rules allow a trial court to exclude evidence if its potential to mislead or confuse jurors substantially outweighs its probative value. Here, the district court excluded in-court testing of the bike primarily because the condition of the bike had changed. The trial court’s conclusion that jurors might be misled regarding the condition of the brake at the time of the accident was not arbitrary or irrational.

Jury instructions—spoliation. The Fourth Circuit determined that the district court did not abuse its discretion by instructing the jury on spoliation. The subject bike had been in the custody of the consumers. Because of changes in its condition since the time it had been inspected by the manufacturer’s expert, the trial court was asked to instruct the jury on spoliation. The trial court instructed the jury that they could infer that the position of the front wheel relative to the handlebar was in a condition favorable to the manufacturer and retailer, and unfavorable to the consumers before the change in the bike’s condition. For a spoliation charge to be appropriate, there needs to be a showing that the consumers knew the evidence was relevant to some issue at trial and that their willful conduct resulted in its loss or destruction. "Willful conduct" does not necessarily require bad faith. The lower court reasonably concluded that the consumers’ intentional conduct damaged the bike, and its instruction was intended to offset the consumers’ testimony that the condition of the bike had not changed.

Offer of judgment. Finally, the appellate court upheld the lower court’s ruling denying the consumers’ post-trial motion to enter judgment based on a pretrial offer of judgment from the manufacturer. Here, pursuant to court rules, the manufacturer wrote to both consumers offering to settle the matter for $50,000. The grandmother responded in writing that she accepted the offer on her own behalf, but not on behalf of her granddaughter and that her granddaughter would continue to pursue her claims. The manufacturer and retailer considered this "acceptance" to be a counter offer and rejected it. Applying traditional principles of contract interpretation, the appellate court found that the grandmother did not accept the offer of judgment because her acceptance changed the terms of the offer, which had been made in exchange for "full and complete satisfaction of all claims." The grandmother did not accept the offer by accepting "on her own behalf" while her granddaughter continued to pursue her claims.

The case is No. 17-1739.

Attorneys: Francis Joseph Collins (Kahn, Smith & Collins, P.A.) for Virginia Callahan. Jonathan M. Judge (Schiff Hardin, LLP) for Pacific Cycle, Inc.

Companies: Pacific Cycle, Inc.

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