Wednesday, February 17, 2010

Choice of law, punitive damages, and Harry Truman

Readers of this blog know that we have strong opinions about many issues. We like Twombly/Iqbal. We hate junk science. And we really, really like preemption.

On some issues, however, we don’t have strong views, such as most choice-of-law issues. There are some choice-of-law issues about which we care deeply – for example we heartily dislike principal place of business as a choice of law factor because it would facilitate class actions. We also don't like rote application of forum law to "procedural" statutes of limitations, because that creates too much of an opportunity for gamesmanship, even by our standards.

But most of the time, we don’t have strong opinions on choice-of-law questions because our main interest is having the court apply the law most favorable to our client. This isn’t some sneaky defense lawyer trick; plaintiffs’ lawyers follow the same approach. Any plaintiffs’ lawyer worth his or her salt will argue in one case to apply the law of the forum (which the plaintiff initially selects) and then argue in another to apply the law of the plaintiff’s residence, depending upon which state’s law is better for the plaintiff in each case. Non-lawyers might call that hypocrisy; we recognize that it is just zealously representing the client.

That roundabout introduction brings us to Meng v. Novartis Pharmaceuticals Corp., 2009 WL 4623715 (N.J. Super. L. Div. Nov. 23, 2009), an interesting mass tort choice-of-law case that has been stuck in our inbox for some time. The plaintiffs in Meng, citizens of Maine and Mississippi, were bellwether plaintiffs in mass tort litigation against Novartis, a company incorporated in Delaware and headquartered in New Jersey. Plaintiffs claimed they developed osteonecrosis of the jaw after taking Zometa.

Plaintiffs in Meng sought punitive damages. Thus the curtain was raised on a real choice-of-law opera. Novartis asked the court to decide which state’s punitive damages law would apply in these bellwether cases. Novartis wanted the law of New Jersey, where the bad conduct alleged by plaintiffs allegedly occurred – and where plaintiffs chose to file their suits; plaintiffs wanted the law of their home states, where they lived and were prescribed the drug.

The court first noted that the parties had agreed that the law of the state where each plaintiff received dental treatment would apply to their claims for compensatory damages. Fair enough. The court then said that New Jersey choice-of-law rules may dictate applying one state’s law to some issues in a case and another state’s law. This is the doctrine of depecage we told you about before, which may seem a little odd at first blush, but is followed by New Jersey and other states. We won’t give that one a “fair enough” – depecage is almost always invoked to try for a tactical litigation advantage.

The Meng court conducted the detailed, multi-factor analysis required by New Jersey’s choice-of-law rules, and we’ll give you the highlights rather than repeat each step (choice of law is one of those things that can get real boring real fast, even to us). Under the law of New Jersey and most states, there is a presumption that the law of the place of injury applies. This presumption was overcome, the court reasoned, because the location of the injury “bears almost no relationship to the issue of punitive damages.” 2009 WL 4623715 at 3. The court took particular note of the fact that over 150 plaintiffs from 41 states had filed Zometa suits against Novartis in New Jersey state court rather than in a pending federal MDL. As we said above, we’d usually expect plaintiffs to argue in favor of the law of their own chosen forum – they chose it after all – but that didn’t stop anyone here.

The court found “the place of plaintiffs’ alleged injuries ‘fortuitous’ because the place of injury bears little relation to Defendant’s alleged punitive conduct toward the parties,” conduct that allegedly occurred at Defendant’s headquarters in New Jersey. Id.
The court then considered the reasonable expectations of the parties and their need for a foreseeable result.

The imposition of punitive damages, generally, is not intended to address the expectations of a plaintiff. Instead, a plaintiff’s interest is addressed through the award of compensatory damages. Here, Plaintiffs’ interests and expectations in being adequately compensated for their alleged injuries will be served through compensatory damages awarded pursuant to Maine or Mississippi law. On the other hand, Defendant should reasonably expect to be governed by the punitive damages law of the state in which it maintains its principal place of business and be punished by New Jersey’s punitive damages law for any wrongdoing it may have committed at its corporate headquarters. In light of these reasonable expectations, this factor favors application of New Jersey law on punitive damages.
Id. at 4-5.

The court further reasoned that New Jersey had the greater interest in determining whether punitive damages should be awarded because the alleged unlawful conduct occurred in New Jersey. The court therefore concluded that New Jersey had the most significant relationship on the matter of punitive damages and held that New Jersey punitive damages law should apply.

We posted before on Depecage, Punitive Damages, and Mass Torts, and the court’s decision relies on many of the considerations we identified before: applying the defendant’s home state law may better serve parties’ expectations, and makes sense if the alleged misconduct allegedly occurred in the defendant’s home state. (We’d like to say that the court followed our analysis, but the decision came out before our post, although we learned about it afterwards.)

Because the defendant drug company won, we like the result, and we credit the court for hitting points we discussed in our prior post. Does that mean that there should be a bright-line rule that the punitive damages law of the defendant’s principal place of business should apply in every case? Not necessarily. One could imagine cases in which the right result would be to apply the punitive damages law of the plaintiff’s home state: for example, if that state had made a policy decision to cap punitive damages in order to encourage business in the state and keep medical costs down, particularly if the prescriber’s decision was heavily influenced by promotional activities limited to that state, then a good argument could be made for applying the punitive damages law of the plaintiff’s home state.

One may also argue that the Supreme Court’s punitive damages decisions in Philip Morris USA v. Williams, 549 U.S. 346 (2007), and State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), require punitive damages analysis to focus on the harm to the plaintiff, which occurred in the plaintiff’s home state.

One may also argue, as we have , especially after State Farm, that our federal system of government imposes territorial limits upon the power of states to punish activities that occur elsewhere.

Finally, one could make an argument that it simply makes more sense to look at the location where the alleged bad conduct had an effect rather that the place where it originated.

We’re lawyers. We have lots of arguments.

The point is that it is hard to make categorical statements on choice-of-law issues. The theoretical reason is that choice-of-law analysis is complex and depends upon analysis of the particular facts and policies of the states involved. The real reason is that we, like our opponents, may want to argue to apply the law of the forum or the plaintiff’s residence (or even some other place) depending upon the facts, the law, and (most importantly) our clients’ best interests.

If you paid attention to the title of this post, you probably are wondering what on earth this all has to do with Harry Truman. President Truman is said to have asked for a one-handed economist, because he was sick of economists who outlined the case for one course of action and then said, “On the other hand . . . .” On most issues we are the kind of one-handed lawyers Truman would have liked. But on choice-of-law questions, we freely admit to being two-handed lawyers because that is the kind of lawyer our clients like.

1 comment:

Anonymous said...

The correct WL citation is 2009 WL 4623715.