Anatomy of a Lawsuit

By Charles H. Van Gorder

In August, 1994, Lyle Lange (d/b/a Mountain Sports) of Clinton, New Jersey, received the veritable "knock on the door." He was mailed notice of a lawsuit that had been filed against him by Richard Bailey, a climber hurt on a two-person climb in a closed quarry in August, 1993. While climbing with his partner (Jeremy Esch), the rope the pair had been using allegedly broke, thereby causing Bailey to fall and sustain injuries while rappelling. Jeremy Esch claimed to have purchased from Mountain Sports, a year earlier, a defective climbing rope manufactured by Pigeon Mountain Industries, Inc.

Lawsuit Details
The lawsuit initially named Lange (Mountain Sports) and Pigeon Mountain as defendants and alleged: 1) the rope had been designed, manufactured and sold in a negligent manner, 2) the defendants had failed to adequately warn Bailey of the dangerous nature of the rope, and to provide adequate safety devices, and 3) the defendants had breached express and implied warranties regarding the quality and appropriateness of the rope. Initially, the plaintiff sought damages in the range of $50,000.00. By chance, Lange compared a photograph of the allegedly defective rope with one pictured in a catalog from New England Rope Company. After examining the rope, New England Rope admitted it had manufactured the rope used by Bailey and Esch, and took the place of Pigeon Mountain as a defendant. Mountain Sports later filed a claim against Jeremy Esch, Bailey's climbing partner and purchaser of the rope. Mountain Sports claimed Esch had the responsibility to properly inspect and maintain the rope in question, heed all warning labels and instructions regarding the rope, and was responsible for the safety of his climbing partner while rappelling.

Mountain Sports' Third-Party Complaint was filed in February, 1996, 18 months after the initial complaint was filed. Another 18 months later, after responding to 66 pages of written questions and having taken the depositions of Bailey and Esch, Mountain Sports was ready to go to trial. However, in September, 1997, just before a jury was to be selected, the parties reached a settlement in the judge's chambers. The original plaintiff, Richard Bailey, received a total of $15,000 as a settlement. Of this amount, $12,500 was paid by New England Rope; the remaining $2,500 was paid by Jeremy Esch through his homeowner's insurance. Mountain Sports contributed nothing to settle this lawsuit. One can only speculate how much was actually received by the plaintiff (rather than his attorney) after more than three years of litigation.

In reviewing Mountain Sport's involvement in this lawsuit, it is useful to look at the things they did right, as well as the things they could have done better.

What Mountains Sports Did Right
Lange determined the attorney initially assigned to defend Mountain Sports knew virtually nothing about the climbing industry. When it was necessary to change law firms when the case was transferred to a different county, Lange was successful in persuading his insurer to assign his case to an attorney who was willing to learn the basics of climbing. Lange, the director of Mountain Sports' climbing school, took Bill Joachim with Ruth Larson Law Offices of New Brunswick, New Jersey,  on a climbing course to familiarize him with the technical issues that underlay the defense of the lawsuit.

The original manufacturer named in the lawsuit was found not to have been the actual manufacturer of the rope Bailey and Esch had used. Mountain Sports' inventory records revealed New England Ropes was the likely manufacturer of the rope, a fact later confirmed by that company. According to Joachim, Mountain Sports' retention of meticulous records was one of the keys to his ability to successfully defend against this lawsuit. Although both Mountain Sports and New England Rope's records indicated Lange had never stocked a climbing rope of the color used by Bailey and Esch, questions of fact prevented Mountain Sports from being dismissed from the case prior to trial.

To support an assumption of the risk defense, Mountain Sports was also able to produce copies of the warnings related to climbing ropes posted in the store and printed on every receipt. Although the validity of this defense was not tested in this case, Mountain Sports was in a position to prove that it had clearly warned and informed purchasers of the risks involved in utilizing climbing ropes, and of the steps necessary to maintain and safely use climbing equipment.

The lawsuit was originally filed in Essex County, a highly urbanized area of the state that includes Newark. At Lange's suggestion, his attorneys moved the case to Hunterdon County, a more rural, blue collar area of the state which presumably would have been less sympathetic with plaintiff's claims.

Lange noticed on numerous occasions after the lawsuit had been filed that a friend of the plaintiff and plaintiff's mother visited the store to inquire about the purchase of climbing ropes. He took note of the comments made by these "customers" and passed them along to Mountain Sports' attorneys. This information proved quite useful when plaintiff's witnesses were questioned under oath during pre-trial discovery of facts underlying his claim.

Lange attended the deposition of Jeremy Esch, the alleged purchaser of the rope from Mountain Sports. During the questioning of Esch by Mountain Sports' attorney, Lange was instrumental in recognizing the inaccuracies and inconsistencies in Esch's testimony. Much of this testimony, such as that involving the type of rope generally used for this kind of climbing and standard methods of belay, was demonstrably inaccurate and assisted in moving the plaintiff toward a settlement. Lange's own climbing expertise enabled him to enumerate the many ways in which Bailey and Esch had violated the basic tenants of safe climbing. These observations would have been critical in proving contributory negligence on the part of the two climbers.

Whether by design or by luck, Lange's choice of a liability insurance carrier turned out to be providential. CIGNA chose to stand by Mountain Sports and to aggressively defend Lange against a suspect lawsuit rather than to cave in and pay an early settlement. According to Joachim, this aggressive stance was in large part due to Lange's strong belief the case should not be settled. However, CIGNA's refusal to roll over for a quick settlement will hopefully discourage rather than encourage future lawsuits. As noted below, however, CIGNA's stance had its price! 

What Else Mountains Sports Could Have Done Right
One of the unanswered questions in this lawsuit was whether Jeremy Esch actually bought the subject rope from Mountain Sports, or whether Mountain Sports was targeted just because it sells climbing ropes and gear. Although Mountain Sports had a procedure whereby a customer's name could be entered on a receipt when purchasing climbing gear, this information was not routinely input by all company sales personnel. Thus, the lack of Esch's name in Mountain Sport's customer base could not be used as evidence that he bought the climbing rope elsewhere. In this age of computerized sales registers, customer information can easily be recorded for every sale and should certainly be considered as a regular practice. Even though New England Rope was willing to concede it had never sold a rope of the same color as Esch's rope to Mountain Sports, that alone was not enough to get Mountain Sports dismissed from the lawsuit.

The chances of prevailing on an assumption of risk defense might have been increased if Mountain Sports had a practice of giving clients written warning or instructions concerning the maintenance and use of climbing ropes and equipment. If such material were prepared by the manufacturers and routinely distributed by retailers, potential plaintiffs could find it more difficult to avoid the responsibility of their own actions.

At the time of the lawsuit, Lange ran Mountain Sports as a sole proprietorship. Thus, his personal assets were undoubtedly on the line had this matter gone to trial and the plaintiff prevailed. Since then, Mountain Sports has been incorporated, thereby inserting some levels protection between the liabilities of the company and the assets of the owners.

The Bottom Line
Mountain Sports did not lose this lawsuit, but what was the price of this experience? Lange estimated his mental anguish over the three years of the lawsuit to have been at the 20 bottle + level of Maalox. He spent at least a week of his time (uncompensated) responding to plaintiff's discovery requests, attending Esch's deposition, and searching his records for evidence Mountain Sports did not sell the allegedly defective rope to Esch. He was fortunate to have escaped the experience of having his own deposition taken. Had this matter gone to trial, additional work week would have been lost sitting in the court room at trial.

Fortunately for Lange, Bailey's claims were covered by Mountain Sports' liability insurance. Its legal fees and costs in this case, which approximated $20,000, were picked up entirely by CIGNA, and exceeded the total settlement payment to the plaintiff. However, CIGNA canceled its liability insurance, forcing Mountain Sports to locate a new insurer at substantially higher premiums.

Finally, involvement in a lawsuit of this type often generates adverse publicity. Who knows what impact, if any, Bailey's claims had on Mountain Sports' business. It is all but impossible to estimate the extent of lost sales or of opportunities lost because Lange's attention was focused on a lawsuit rather than on running his business.

The clear moral to this story is that lawsuits can be expensive, even if you win. Retailers should be aware of steps they can take to minimize their exposure to potential liability - many of which Mountain Sports had in place. If there are industry standards and procedures applicable to your product lines, be sure they are followed ALL THE TIME. The key is to keep the lawsuit from ever being filed in the first place; that's the only way you can be a sure winner!

Originally publshed July, 1998