New Jersey Supreme Court Reins In Appellate Division's Expansive Tort Conflicts-Of-Law Analysis

Tuesday, May 1, 2007 - 00:00

New Jersey's highest court has reversed a decision rendered last year by the Appellate Division of the Superior Court which threatened to make the New Jersey Products Liability Act available to out-of-state plaintiffs with no connection to New Jersey. The Supreme Court's decision in Rowe v. Hoffmann-La Roche, Inc. No. A-19 (N.J. March 29, 2007) addresses important conflicts of law principles in the context of a failure-to-warn claim relating to Accutane, a pharmaceutical product for the treatment of acne. The Supreme Court held that New Jersey's interest in enforcing its products liability laws did not override Michigan's interest in applying Michigan law to the claim of a Michigan plaintiff. The decision restores a modicum of reason in a climate of expanding tort liability. The cause of defendants-appellants was joined by amici curiae Product Liability Advisory Council, Healthcare Institute of New Jersey, New Jersey Defense Association, and Pharmaceutical Research and Manufacturers of America. The cause of plaintiff-respondent was supported by amicus curiae The Association of Trial Lawyers of America - New Jersey.

The Facts

Plaintiff Robert Rowe is a life-long Michigan resident who was sixteen years old when, in 1997, he obtained a prescription for Accutane from a Michigan physician. Accutane is manufactured and marketed by defendants Hoffmann-La Roche and Roche Laboratories, and was approved by the United States Food and Drug Administration ("FDA") in 1982 for the treatment of a severe type of acne. Rowe filled the prescription at a Michigan pharmacy and used the drug for approximately three months. Three months after discontinuing Accutane, Rowe began to suffer from depression and ultimately attempted suicide. After his suicide attempt, he received psychiatric treatment in Michigan and Ohio.

Hoffmann-La Roche is a New Jersey corporation and has its principal place of business in Nutley, New Jersey. Roche Laboratories also has its principal place of business in New Jersey. The manufacturing, labeling, and packaging of Accutane took place in New Jersey, as did almost all of defendants' sales activities and communications with the FDA about Accutane. Presumably for these reasons, in 2001, Rowe chose to file his suit against Hoffmann-La Roche and Roche Laboratories in the Superior Court of New Jersey. The suit alleged, among other things, that the defendants had failed to provide adequate warnings against the potential psychological effects of the drug.

The Laws In Conflict

At the heart of Rowe is a conflict over whether the laws of New Jersey or Michigan should apply to plaintiff's claim. Under Michigan law, the manufacturer of a drug that has been approved by the FDA is virtually immune from suit for an alleged defect in the product or its warnings. Michigan law provides that a drug "is not defective or unreasonably dangerous, and the manufacturer or seller is not liable, if the drug was approved for safety and efficacy by the [FDA], and the drug and its labeling were in compliance with the [FDA's] approval at the time the drug left the control of the manufacturer or seller." Mich. Comp. Laws 600.2496(5). New Jersey law, in contrast, is less favorable to manufacturers, providing only a rebuttable presumption against - and not full immunity from - liability in defect and failure-to-warn claims against manufacturers of FDA-approved drugs. Specifically, "if the warning or instruction given in connection with a drug . . . has been approved by the [FDA], a rebuttable presumption shall arise that the warning or instruction is adequate." N.J.S.A. 2A:58C-4.

The Litigation And Appeal

The trial court, applying a governmental interest analysis, found that Michigan law applied to plaintiff's claim, and therefore dismissed the lawsuit. The Appellate Division reversed in a 2-1 decision, holding that New Jersey had the greater interest and that the plaintiff was entitled to a trial governed by New Jersey law. In the Appellate Division majority's view, Michigan's law is intended to shield Michigan drug manufacturers from liability, while New Jersey's law is intended to deter the manufacture of unsafe products within its borders. The majority concluded that Michigan's interests would not be served by applying Michigan law to a claim against a New Jersey manufacturer, and, moreover, would be contrary to New Jersey's interest in seeing its own law applied. In a dissent, the third judge on the Appellate Division panel opined that the Michigan law was not intended to be limited to Michigan drug manufacturers, and criticized the majority decision for extending a protection provided by New Jersey law to a Michigan resident when the Michigan legislature had declined to do so. Because the Appellate Division was divi-ded in its decision, the defendants were able to take an appeal as of right to the New Jersey Supreme Court.

The New Jersey Supreme Court Decision

The Supreme Court reversed and remanded the case for reinstatement of the dismissal, holding that the Appellate Division had afforded insufficient weight to Michigan's interest in having its tort law applied and had overstated New Jersey's interest in applying its statutory rebuttable presumption.

Preliminary to its analysis was the Supreme Court's determination that there was an actual conflict between Michigan's conclusive presumption and New Jersey's rebuttable presumption as to the adequacy of an FDA-approved warning. The Court's next step was to perform a governmental interest analysis, i.e., to determine each state's respective interest in having its own substantive law applied to the claim. To make this determination, the Court examined the policies underlying each state's statute and then determined the extent to which those policies were implicated by the parties and the litigation. It was in this determination that the Court concluded that the Appellate Division had improperly overvalued New Jersey's interest in the litigation and had undervalued Michigan's interest.

The Rowe Court carefully distinguished the facts in this case from its previous holding in Gantes v. Kason Corp., 145 N.J. 478 (1996). Gantes involved a claim on behalf of a decedent who was killed when a shaker machine manufactured in New Jersey struck him in the head at his workplace in Georgia. Georgia's statute of repose prevented the plaintiff from bringing a products liability claim more than ten years after the product was originally sold; New Jersey law had no such limitation. The Gantes Court determined that New Jersey law applied, finding that New Jersey had a strong interest in discouraging the manufacture of unsafe products. On the other hand, the intent of Georgia's statute of repose was to protect Georgia's insurance companies and prevent stale claims from being heard in its courts - two interests not implicated by allowing the suit to go forward under New Jersey law. For this reason, the Rowe Court concluded that Gantes did not control its determination of the present case.

With regard to the case before it, the Rowe Court found that New Jersey law recognizes FDA approval as not merely a factor in determining the adequacy of a warning, but as a presumption of adequacy that, in a given case, may or may not be rebutted. The Court noted that it had previously construed the Products Liability Act to establish that, absent some deliberate concealment of a serious hazard, FDA compliance should be all but dispositive in a failure-to-warn case. FDA approval of a prescription drug also precludes a punitive damages award under the Products Liability Act. The Court concluded that New Jersey, in ceding some of its regulatory authority to the FDA, had already diluted its interest in applying its own law in a failure-to-warn case.

On the other hand, Michigan had passed a comprehensive tort law with an express purpose of immunizing drug companies that complied with FDA regulations. Contrary to the Appellate Division's view, the Supreme Court concluded that another purpose of Michigan's tort law was to increase the availability of prescription drugs to its residents. The Michigan legislature had determined that broader liability for drug companies would result in fewer and costlier drugs, and was not motivated solely by a concern for protecting Michigan businesses.

The Rowe Court concluded that it was not its role to question the effectiveness of the Michigan statute in achieving its goals. Rather, the Court's inquiry was limited to whether Michigan or New Jersey had a greater interest in having its own law apply to the controversy. Michigan's goals of immunizing drug manufacturers and making more drugs available to Michigan residents by providing virtual immunity for FDA-approved drugs would be undercut if a Michigan plaintiff were permitted to receive compensation under New Jersey law. Furthermore, New Jersey's interest in deterring New Jersey corporations from manufacturing or selling unsafe products was not paramount in a case involving an FDA-approved drug brought by an out-of-state plaintiff. As such, New Jersey's interest in applying its law to the controversy properly yielded to Michigan's.

The Dissent

Judge Stern dissented, with Justice Long joining, on the issue of which state's competing interests should control the choice-of-law issue. Judge Stern would have affirmed the decision of the Appellate Division. He wrote that Gantes, although distinguishable from the present case, should control the outcome. He emphasized New Jersey's interest in promoting the safe manufacture of goods. Judge Stern concluded that extensive regulation by the FDA of prescription drugs did not warrant ignoring New Jersey's interest, and noted that, under New Jersey law, FDA approval is not sufficient, in and of itself, to preclude recovery in a failure-to-warn case. Additionally, the New Jersey Products Liability Act precludes only punitive damages - not all damages. Therefore, in Judge Stern's view, New Jersey's interest in providing compensation when the presumption of a warning's adequacy could be overcome was paramount, and Michigan's interest in protecting drug manufacturers was too far removed when a suit was brought in a New Jersey court against a New Jersey manufacturer.

The Rowe decision is certainly of some benefit to New Jersey manufacturers and suppliers of products in a case involving an out-of-state claimant when the claimant's state's law is more favorable to the defense than is New Jersey law. However, the broader effect of the decision should be to reduce the incentive for out-of-state claimants to choose New Jersey as their desired forum for filing product liability claims.

Benjamin E. Haglund is a Partner at Day Pitney LLP, where his practice focuses on product liability disputes, shareholder/investor suits, and commercial disputes. Marc D. Crowley is Counsel to the firm. His practice focuses on products liability defense, general commercial matters, and franchise litigation in the federal and state courts of New Jersey and New York. Amy Valentine McClelland is an Associate at the firm, where her practice focuses on insurance and reinsurance disputes and products liability and torts litigation.

Please email the authors at bhaglund@daypitney.com, mcrowley@daypitney.com or amcclelland@daypitney.com with questions about this article.