Thursday, March 29, 2007

Welcome Sanity in New Jersey

We practice in New Jersey a lot – because so many of our pharmaceuticals clients are based there, and the state’s trial courts have tended to allow plaintiffs from all over the country to file there and avoid removal to federal court in diversity actions. New Jersey also just happens to have one of the most liberal consumer fraud statutes in the country – as well as a unique exception to the learned intermediary rule for drugs marketed by direct to consumer advertising.

Thus we were appalled when last year, in Rowe v. Hoffmann-La Roche Inc., 892 A.2d 694, (N.J. Super. A.D. 2006), the court held that New Jersey law would apply to any suit filed in New Jersey against a New Jersey domiciled drug manufacturer. What were those guys thinking? Did they want all the drug manufacturers in New Jersey to move to North Carolina?

Particularly absurd was the Appellate Division’s statement that there was no forum shopping problem to be concerned with, “Nor do we see any danger that applying New Jersey law in this case will lead to an influx of drug failure-to-warn cases brought by non-residents of New Jersey.” Id. at 708. That’s just a willful denial of reality. There are a dozen or so formally recognized pharmaceutical "mass torts" in New Jersey – and in every one of them 90%+ of the plaintiffs are from some other state. Those stats are all laid out in an excellent amicus brief filed in Rowe by Product Liability Advisory Council (“PLAC”) in the New Jersey Supreme Court (yeah, one of us had a hand in that, but the real credit goes to Anita Hotchkiss at Porzio). Not only that – the plaintiffs firms know that the Appellate Division was barmy as well. They’ve sent out solicitation letters to attorneys in other states touting New Jersey as the forum of choice (one of us has a copy - and so does the aforementioned PLAC brief).

Well we’re pleased to say that the New Jersey Supreme Court saw through the Appellate Division’s result-oriented choice of law smoke screen and reversed today. Rowe v. Hoffman-La Roche, Inc., ___ A.2d ___, 2007 WL 923512 (N.J. March 29, 2007). The case involved the Michigan drug immunity statute that conclusively presumes that an FDA-compliant drug is non-defective. New Jersey, by contrast, has a statute that provides a rebuttable presumption of non-defectiveness. That was enough for the court to find a true conflict of laws. Id. at whatever (no page numbers on Westlaw yet); slip op. at 10.

Looking at the facts of the case, the majority came to the only reasonable conclusion – that a Michigan resident who had never set foot in New Jersey – who took the drug in Michigan after it was prescribed by a Michigan doctor – should properly have his lawsuit determined under Michigan law. No other result would have maintained the comity between the states. New Jersey had no business inserting itself in a lawsuit by an out of state resident prescribed a drug in his or her home state.
[C]omity precludes closing our eyes to Michigan’s interest. . . . The question is not whether Michigan or New Jersey passed the better law; that is a normative judgment best suited for the legislative process. . . . To allow a life-long Michigan resident who received a FDA-approved drug in Michigan and alleges injuries sustained in Michigan to by-pass his own state’s law and obtain compensation for his injuries in this State’s courts completely undercuts Michigan’s interests, while overvaluing our true interest in this litigation.

Id. at whatever (emphasis added); slip op. at 19-20.

While the New Jersey presumption wasn’t conclusive like the Michigan one, it was still enacted to limit manufacturer liability. Therefore it would be a perversion of the statute’s intent to allow it to increase a manufacturer’s exposure as the Appellate Division had permitted:

The predominant object of the law is not to encourage tort recoveries by plaintiffs, whether New Jersey citizens or not, in order to deter this State's drug manufacturers. On the contrary, the law limits the liability of manufacturers of FDA-approved products by reducing the burden placed on them by product liability litigation. The Legislature carefully balanced the need to protect individuals against the need to protect an industry with a significant relationship to our economy and public health. New Jersey's interest in applying its law to [plaintiff’s] failure-to-warn issue, when properly discerned, is not antithetical to Michigan's interest but substantially congruent.
Id. at whatever; slip op. at 15.

Moreover, the Appellate Division had forgotten about the FDA. The fact of the Agency’s oversight was the key to both the New Jersey and the Michigan statute. Because of the FDA’s role in regulating drug manufacturers, New Jersey’s interest in doing the same through tort actions was correspondingly reduced:
The NJPLA impliedly accepts that the presumption of adequacy will not be rebutted in all cases. It accepts FDA regulation as sufficient, at least in part, to deter New Jersey pharmaceutical companies from manufacturing unsafe prescription drugs. . . . As this Court has stated, “absent deliberate concealment or nondisclosure of after-acquired knowledge of harmful effects, compliance with FDA standards should be virtually dispositive” of a failure-to-warn claim. Perez v. Wyeth Labs., Inc., 161 N.J. 1, 25 (1999). The Legislature also provides in the NJPLA that FDA approval of prescription drugs conclusively prohibits an award of punitive damages in products liability actions. This provision, along with the rebuttable-presumption. . .cede to FDA regulation some of this State's interest in policing local pharmaceutical manufacturers, thereby reducing New Jersey's interest in applying its law to this case.

Id. at whatever (emphasis added); slip op. at 14-15.

Why are we rejoicing? Isn’t this really an abjectly self evident result? One would hope so, but unfortunately this isn’t the only time the Appellate Division has endeavored to apply New Jersey law to this sort of claim. In fact, it had gone so far as to apply New Jersey law nationwide. In International Union of Operating Engineers Local #68 Welfare Fund v. Merck & Co., 894 A.2d 1136, 1151 (N.J. Super. A.D.), certification granted, 902 A.2d 1232 (N.J. 2006), the same court went so far as to apply the New Jersey consumer fraud statute to a nationwide class action – citing its prior decision in Rowe as precedent. The result in that case was that persons who purchased prescription drugs in states that did not even allow private enforcement of consumer fraud statutes were granted leave to seek mandatory treble damages under the New Jersey statute, even though their purchase had nothing whatever to do with New Jersey. Hello, North Carolina!

Hello, New Jersey Supreme Court! We’re of the opinion that the handwriting’s probably on the wall for that one.

We can only hope that the Court’s definitive ruling has put an end to such daft conflict of laws reasoning once and for all – at least for the FDA-regulated manufacturers we defend.

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