Friday, March 15, 2013

Another Choice of Law Win on Punitive Damages

In a departure from blog tradition (and possibly etiquette), I’m going to break the fourth wall and speak in the first-person singular for a moment. After much encouragement from my colleagues and several not-so-subtle hints from Bexis directed at having to post yet another guest post from me, today I become an official member of the DDL blog team. I’m honored to join such an esteemed group. And while my first “official” post is a brief one, happily, it’s about a victory. Or, more accurately, another victory for the defense in the Aredia/Zometa litigation.

A few weeks ago, we reported (yes, back to the plural) on the Chiles case, in which the defendant emerged victorious from a choice of law battle over which state’s law should be applied to plaintiffs’ punitive damages claims: Florida’s, where the plaintiff lived and took the drug, or New Jersey’s, where the defendant was located. The distinction was a significant one, as New Jersey law doesn’t permit recovery of punitive damages if a drug company complies with FDA labeling requirements (ostensibly absent proof of a fraud on the FDA, but those claims were found to be preempted by the New Jersey appellate court in McDarby v. Merck). In Chiles, the Middle District of Florida accepted the defendant’s position, finding that “the relevant conduct at issue” took place in New Jersey, making that state’s law applicable to punitive damages claims.  

In Krause v. Novartis Pharmaceuticals Corp., 2013 WL 785229 (N.D. Fla. Feb. 28, 2013), another Florida district court took the same approach, holding, as its sister court had a few weeks earlier, that New Jersey law must be applied to the punitive damages claims in the case. Id. at *4-5. We’ll spare you an extended choice-of-law analysis. Basically, applying Florida’s “most significant relationship” test, the Krause court found that in a failure to warn case, because decisions regarding labeling, packaging and warnings were made at the defendant’s location in New Jersey, “this factor favors application of New Jersey law on this issue, because, in relation to the issue of punitive damages, the relevant misconduct occurred in New Jersey and the place where the injury occurred is ‘simply fortuitous’ to the failure to warn claim.” Id. at *3. We would have preferred for the court to use the term “alleged relevant misconduct” – after all, this is a motion for partial summary judgment, not a JNOV motion. But we won’t quibble. The Krause court went on to acknowledge that “the New Jersey legislature made a deliberate decision to insulate New Jersey manufacturers from punitive damages after “carefully balanc[ing] the need to protect individuals against the need to protect an industry with a significant relationship to [the New Jersey] economy and public health.” Id. at *4. Again, we wouldn’t have chosen the word “insulate,” but we do think the court was correct in looking at the legislature’s intent. Finally, the Krause court noted that application of New Jersey law met the “justified expectations” of both sides in the case - i.e., plaintiff got his home state’s law applied to his compensatory damages claims, while the defendant got its home state’s law applied to the punitive damages claims – helping to “ensure judicial certainty, predictability and uniformity of results in tort law.” Id. Notably, the Krause court did not address the issue of McDarby preemption, as the parties had not raised that issue in their motion; they sought only a ruling on which state’s law would apply to the punitives claims. Id. at *4, n. 1.  Presumably that battle will be fought later. 

We’re mindful of Bexis’ caution that “where you stand depends on where you sit” when it comes to choice of law on punitive damages, but we think the legal analysis in Krause was spot on – for New Jersey law, that is.
 

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