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From Products Liability Law Daily, August 16, 2018

Attorneys’ fees and court costs sanctions against maker of rock wall components reversed

By Pamela C. Maloney, J.D.

The award of attorneys’ fees and court costs against the manufacturer of defective cylinders used in a rock wall’s auto-belay system was reversed because it was unclear to the New Jersey Supreme Court how the offer of judgment rule applied in a case involving the joint and several liability of a number of defendants and in which the pro rata share of the manufacturer’s liability for the jury’s $350,000 verdict fell below the threshold required to trigger the rule. However, the state high court affirmed the appellate division’s finding that the trial court’s refusal to instruct the jury that evidence of the manufacturer’s alleged improper conduct was irrelevant to the strict liability manufacturing defect claim brought by a day camp counselor who was injured when he fell while descending the wall was harmless in light of the judge’s use of the model jury instructions for such a claim (Willner v. Vertical Reality, Inc., August 15, 2018, Fernandez-Vina, F.).

The 16-year old counselor had been climbing a mobile rock wall at Ivy League Day Camp where he was employed when, as he pushed off the wall in order to descend, he heard a loud noise and the cable connected to his harness suddenly and rapidly lost tension. The counselor dropped to the ground and fractured his ankle, which subsequently required surgery. An investigation into the accident revealed that the cast aluminum retainers in the hydraulic cylinders had failed, causing a loss of fluid from the cylinder that, in turn, caused the auto-belaying cable, which was designed to prevent a climber from falling all the way down, to lose tension.

The counselor and his parents filed a complaint alleging strict products liability, negligence, and per quod claims against Ivy League, Vertical Reality, Inc., the rock wall manufacturer, and ASCO Numatics, Inc. (Numatics), the manufacturer of the cylinders used in the rock wall's auto-belay system. Vertical Reality Manufacturers, Inc. was later added as a defendant. After an offer of judgment was rejected, the case proceeded to trial where, prior to summation, the trial court dismissed the design defect and failure-to-warn claims, allowing the case to go to the jury on the strict liability manufacturing defect claim alone. The jury found in the counselor’s favor, deciding that: the rock wall was defectively designed; the design defect was the proximate cause of the accident; the cylinders had a manufacturing defect; the cylinders proximately caused the accident; the rock wall contained inadequate warnings; and Vertical Reality's inadequate warning was the proximate cause of the accident. The jury awarded $358,000 in damages, to which the trial court added attorneys’ fees of $62,963.00, court costs of $12,160.83, and prejudgment interest of $115,727.70.

In response to Numatics appeal, the appellate division found that there was sufficient evidence in the record to support the jury’s determination that the cylinder had been defectively manufactured and was a proximate cause of the accident [see Products Liability Law Daily’s June 8, 2017 analysis]. Numatics petitioned for review to the state supreme court challenging: (1) the standard the appellate division had employed in its review of the trial judge’s jury instructions; (2) the trial court’s instructions regarding evidence of Numatics’ conduct; and (3) the award of attorneys’ fees and court costs.

Manufacturing defect jury instructions. Although conduct evidence is necessarily implicated in strict liability claims for design defect or failure to warn, the court explained that it was never relevant to a strict liability manufacturing defect claim. The only issue for the factfinder was whether the product in question was assembled in a substandard condition based on the manufacturer’s own standards or in comparison to identical units that had been made in accordance with the manufacturing specifications. Numatics argued that once the design defect and failure-to-warn claims had been dismissed, the judge should have cautioned the jury that any evidence of Numatics’ conduct proffered at trial—such as evidence related to its knowledge of the cylinders’ deficiencies, its failure to evaluate the safety of its products, and its failure to repair deficient cylinders already in use—was not relevant to the manufacturing defect claim. The trial court’s failure to do so, according to Numatics, constituted reversible error because evidence of its conduct improperly influenced the jury and caused confusion during deliberations.

After determining that Numatics objection had been properly preserved for appeal, the state supreme court held that although a limiting instruction would have been appropriate, the absence of such an instruction was harmless because the court’s instruction on the elements of a manufacturing defect claim, which substantially mirrored the model jury instruction, appropriately directed the jury’s attention away from any irrelevant evidence of Numatics’ misconduct. In addition, when Numatics’ alleged misconduct was highlighted during the summation by another defendant’s attorney, the trial judge quickly instructed the jury that such evidence was not to be considered. Concluding that there was no genuine possibility that the trial judge’s actions led the jury to reach a verdict it otherwise would not have reached, the state supreme court affirmed the appellate division’s ruling that the jury instructions were proper.

Attorneys’ fees and court costs. Numatics also challenged the award of sanctions against it, arguing that because its pro rata share of the total verdict was $107,400, its liability fell below the 120 percent threshold of $144,000 required to trigger the sanction rule.

The New Jersey rule providing for sanctions—also known as the offer of judgment rule—imposes financial consequences on a party who rejects a settlement offer that turns out to be more favorable than the ultimate judgment by a specified amount. In this case, the counselor and his parents had made a single pre-trial offer of settlement to all the defendants in the amount of $125,000. None of the defendants accepted the offer or counteroffered.

In the supreme court’s opinion, the rule itself left unclear the circumstances triggering the imposition of sanctions on an individual defendant when a single plaintiff makes a global offer to multiple defendants, there is no acceptance of the offer, and no counteroffer is made in response. According to the high court, the rule provides for the award of fees and costs to a plaintiff when the jury’s verdict is greater than 120 percent of its offer to a defendant. Comparing the jury’s full award of damages to a plaintiff to a single plaintiff’s offer of judgment to a single defendant was uncomplicated. Doing the same in the joint and several liability context was not, the court explained.

In this case, the jury awarded the counselor a total of $358,000 in damages and set Numatics responsibility for those damages at 30 percent. Thus, Numatics’ molded share of the judgment—$107,400—was less than 120 percent. The counselor and his parents argued that because the total verdict was greater than 120 percent of their $125,000 pre-trial offer, Numatics was liable for sanctions. The supreme court opined that flaw in this argument was that the only way that Numatics could have escaped an award of sanctions would have been to accept the global offer for an amount greater than the amount for which Numatics ultimately was determined to be at fault. Concluding that this outcome was unfair and emphasizing that the offer of judgment rule must balance the competing interests of plaintiffs and defendants, the supreme court ruled that the effect of the rule and how it should operate in the case at bar remained unclear. The high court added that if the sanction, which constituted fee shifting, was to be awarded, there must be advance notice of that consequence, which did not happen in this case. Finding that it was improper for the trial court to have awarded fees and costs in this case, the state supreme court reversed the award of attorneys’ fees and court costs.

The case is No. 079626.

Attorneys: Cynthia A. Walter (Budd Larner P.C.) for Josh Willner. Joseph DiRienzo (DiRienzo, DiRienzo & Dulinski, PA) for Vertical Reality, Inc., Vertical Reality Manufacturing, Inc. and ASCO Numatics, Inc.

Companies: Vertical Reality, Inc.; Vertical Reality Manufacturing, Inc.; ASCO Numatics, Inc.

MainStory: TopStory DamagesNews DesignManufacturingNews DefensesLiabilityNews SportsandRecEquipmentNews NewJerseyNews

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