Monday, September 10, 2012

A Better Look at Preemption in New Jersey

Those of us who practice New Jersey products liability law know McDarby v. Merck, 401 N.J. Super. 10 (App. Div. 2008).  It addressed a provision of New Jersey’s Product Liability Act that both granted manufacturers immunity from punitive damages if their product was approved by the FDA and tried to take that immunity away if the manufacturer made knowing misrepresentations to the FDA. Here’s the language of the statute:
Punitive damages shall not be awarded if a drug or device . . . which caused the claimant's harm was subject to premarket approval . . . by the federal Food and Drug Administration . . . and was approved . . . . However, where the product manufacturer knowingly withheld or misrepresented information required to be submitted under the agency's regulations, which information was material and relevant to the harm in question, punitive damages may be awarded.
N.J.S.A. 2A:58C-5c (emphasis added).  We know what you’re thinking: “Wouldn’t that be preempted under Buckman? Yup.  And that’s what McDarby held. 
And, since this decision in 2008, courts applying New Jersey law on this topic generally cite McDarby and apply its holding.  But, last week, the court in Zimmerman v. Novartis Pharm. Corp., 2012 U.S. Dist. LEXIS 126002 (D. Md. Sep. 5, 2012), did something better.  It offered a well-reasoned, thoughtful explanation of the law on preemption and Buckman, along with an effective criticism of decisions that (we believe) get Buckman wrong.  It’s good stuff, and it provides good quotes for future briefing.  In fact, you might want to consider citing McDarby but quoting Zimmerman. 
Now, Buckman, even read narrowly, held that tort claims based on a manufacturer withholding information from or misleading the FDA are impliedly preempted because the FDCA grants the power to enforce its provisions to the United States, not private citizens.  When a federal law such as this creates an inherently federal relationship and exclusive enforcement mechanism, the presumption against implied preemption that ordinarily attaches goes away.  As the Zimmerman court wrote: 
[I]n Buckman, the Court held that there is no presumption against preemption where a jury is asked to decide whether there has been a material fraud on the FDA during the regulatory process.  This is because federal law dictated the Defendant’s interactions with and representations to the FDA. Thus, unlike circumstances that implicate “federalism concerns and the historic primacy of state regulation of matters of health and safety,” the relationship between a regulated entity and the FDA is “inherently federal in character because the relationship originates from, is governed by, and terminates according to federal law.”
Id. at *37 (citations omitted).
The Zimmerman court rejected the reasoning of courts that upheld other state statutes that allowed failure to warn claims to go forward if there was a showing of fraud on the FDA.  One such court reasoned that such statutes “cannot reasonably be characterized as a state’s attempt to police fraud on the FDA” but rather they are a state’s attempt to limit tort claims.  Id. at *38 (quoting Desiano v. Warner-Lambert & Co., 467 F.3d 85, 94 (2d Cir. 2006)).  But the Zimmerman court didn’t lose track of the most important point – it’s different when a state tort claim requires determinations about fraud on the FDA:
Although this Court agrees that the presumption against preemption applies to state tort claims implicating health and safety generally, the Court concludes that such a presumption does not apply to that part of Plaintiff’s claim, which by virtue of New Jersey law, conditions any recovery of punitive damages on a showing that a defendant-drug manufacturer “knowingly withheld or misrepresented information required to be submitted under the [FDA’s] regulations, which information was material and relevant to the harm in question.” [Quoting the N.J. statute]. This conclusion is confirmed by the Court’s analysis in Buckman. There, the Court found that the presumption against preemption did not apply to a specific type of tort claim--a fraud on the FDA claim--even though the presumption against preemption applies to traditional tort claims implicating health and safety matters.
Id. at *39-40 (citation omitted).
This is because the key question is not whether the state tort claim seeks to “police” fraud-on-the-FDA, but whether it is an obstacle to FDA regulation.  Id. at *42.  A state statute that hinges compensatory or, more so, punitive damages on a jury’s – more likely, multiple juries’ – determinations of whether the FDA was defrauded raises obstacle after obstacle.  Companies concerned that juries will see fraud where the FDA doesn’t will understandably respond by providing the FDA with the kitchen sink, causing nothing but greater delay and inefficiency. 
The Zimmerman court went further, holding that even if a presumption against preemption applied, it is rebutted because the statute requires a jury determine something exclusively left to the FDA.  Id. at *41-52.  The court rejected (what we believe is wrong-headed) reasoning by some courts that Buckman preemption applies only to pure fraud-on-the-FDA claims, not claims in which such fraud is an element of, or gateway to, a broader claim:
This distinction is meaningless because it is simply not entirely accurate. In Buckman, the plaintiffs not only had to prove the device maker’s non-compliance with FDCA disclosure requirements, which served as the predicate false representation in a common law fraudulent misrepresentation action, but also other common law elements of a fraudulent misrepresentation action such as injury and proximate cause.  Put another way, the preemption analysis does not change simply because, under New Jersey law, this Plaintiff must prove something in addition to non-compliance with a FDCA disclosure requirement to recover punitive damages.
Id. at *54 (citations omitted). 
The Zimmerman  court was not moved by the argument that the New Jersey statute does not create a fraud-on-the-FDA claim, like in Buckman, but rather only gives plaintiffs the opportunity to rebut a presumption and thereby bring a tort claim under New Jersey common law:
Once New Jersey passed the statutory immunity provision for punitive damages, the traditional cause of action is no more rooted in common law doctrine than the stand-alone claim in Buckman. This is because, in the post-statutory immunity world, a plaintiff’s punitive damages claim hinges on whether the defendant-drug maker made adequate disclosures to the agency and whether, in the face of these inadequate disclosures, the agency would have approved the drug. In this way, New Jersey’s statutory immunity provision makes fraud on the FDA a “critical element” of every punitive damages claim.
Id. at *55-56 (citation omitted).
It really is a simple analysis.  The statute authorizes juries to dig into the details of regulations and New Drug Applications and make independent determinations of what the FDA should have done or would have done, but didn’t do.  In other words, precisely what juries can’t do under federal law:
Simply put, Plaintiff’s claim for punitive damages requires a state fact finder to determine what was required to be submitted to the FDA, whether it was submitted to the FDA and, whether the FDA would have made a different approval decision had it been provided with the correct or missing information. Plaintiff’s claim thus requires a fact finder to make these types of determinations as a matter of state law even though federal law makes such determinations the exclusive province of the FDA. Accordingly, Plaintiff’s claim for punitive damages poses an obstacle to the objectives and purpose of the FDCA, and is therefore preempted by the FDCA.
Id. at *51-52.
It doesn’t, and shouldn’t, matter whether this improper determination is an element of a claim, a gateway to a broader claim, or the entirety of the claim.  Jury after jury deciding what the FDA should have gotten and done about it gets in the way of the FDA doing its job.  The Zimmerman court gave a good quotation for this too:
Allowing state fact finders to second-guess the very decisions that federal law leaves entirely to the agency presents “the same inter-branch-meddling concerns that animated Buckman.” As in Buckman, allowing punitive damages liability here would require applicants to submit a “deluge” of unnecessary information during the approval process, which in turn, delays the approval of new drugs.  In seeking to comply with various statutory immunity provisions, drug manufacturers would “exert an extraneous pull on the scheme established by Congress.”
Id. at *57. 

We told you that the court's discussion was much better than just, "see McDarby."  Keep it handy for future briefs. 

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