Due to Reed Smith’s involvement with the Nuvaring litigation discussed below, this post is from the Dechert side of the blog only.
As an almost lifelong resident of New Jersey, this member of our blogging team knows things like — it’s “the shore” not “the beach”; how to navigate a circle, but not how to pump my own gas; jug handles are for making lefts not for pouring water; and where the Highway 9 is from Springsteen’s “Born to Run.” I’ve also heard all the jokes. Toxic waste, the accent, the big hair, the malls. Or, how about that tolls are collected on all New Jersey bridges as you leave the state. Why? Because nobody would pay to go into New Jersey. Well, maybe not nobody. In the last ten days, three separate courts have ruled on defendants’ motions seeking to embrace New Jersey punitive damages law. That’s right, in addition to Thomas Edison, Frank Sinatra, Jack Nicholson, corn and tomatoes, and full service gas stations, New Jersey has some pretty good law too.
As we’ve said before, when it comes to choice of law on punitive damages it is a question of “where you stand depends on where you sit.” And if you sit in New Jersey, you are probably well aware that New Jersey’s Products Liability Act immunizes drug and device manufacturers from punitive damages (there is that fraud-on-the-FDA exception, but we all know that’s preempted). So while this certainly isn’t a one size fits all argument, it’s no surprise that New Jersey manufacturers (or manufacturers from any state with good punitive damages law) argue that their home state has the greater interest with respect to the conduct at issue on a punitive claim.
While we’ve posted several times on this issue (see here for example), it remains both important and intriguing because courts continue to come down on both sides of the issue. To start, let’s compare Troutt v. Novartis Pharms. Corp., 2013 U.S. Dist. LEXIS 102135 (M.D. Fla. Jul. 22, 2013) and Prather v. Organon USA, Inc. (In re Nuvaring Prods. Liab. Litig.), 2013 U.S. Dist. LEXIS 99734 (E.D. Mo. Jul. 12, 2013). Hmmm. One decision from Florida and one decision from Missouri. Can you guess which one we like better?
In both cases, defendants’ principal places of business are in New Jersey. In both cases, defendants reside elsewhere (Pennsylvania for Troutt and Missouri for Prather). In both, plaintiffs were prescribed the drug at issue in their states of residence and that is where the alleged injury occurred. Troutt, at *1; Prather, at *70. Both courts acknowledged that there was a true conflict between New Jersey punitive damages law and the law of plaintiff’s home state. Troutt, at *7-8; Prather, at *74. And, on the choice of law question, both courts employed the “most significant relationship” test established by the Restatement (Second) of Conflict of Law. Troutt, at *3-4; Prather, at *74-77. Indeed, both opinions set forth exactly the same list of factors to be considered. Id. With respect specifically to punitive damages, both courts quote the exact same standard:
Where, as with punitive damages, the primary purpose of the rule involved is to deter or punish misconduct, the place where the conduct occurred has particular significance.
Prather, at *77-78; Troutt, at *9. So, how do these two courts come to different conclusions? It’s in the definition of “the place where the conduct occurred.” In Troutt (the case we think got it right), the court found that the relevant conduct was defendant’s “decisions as to the labeling, packaging, and warning of the . . . drugs,” Troutt, at *9, which occurred in New Jersey. Therefore, New Jersey “has the greater interest in regulating the conduct of a New Jersey business.” Id. at *10.
The Missouri court viewed things differently. Plaintiff Prather argued (as did plaintiff Troutt) that the relevant conduct occurred in Missouri by defendant’s sales representatives who promoted the drug to and failed to warn plaintiff’s physician. Prather, at *79. And the court agreed:
[T]he conduct causing injury in a prescription drug products liability case, including failure to warn and warranty cases, occurs primarily where the injured party was prescribed and ingested the drug.
Id. at *79-80 (quoting Yocham v. Novartis Pharms. Corp., 736 F. Supp. 2d 875, 882 (D.N.J. 2010). We don’t usually reference the court’s sources, but we thought it noteworthy that nowhere in the Yocham decision will you even find the word punitive. The claims discussed in that decision are express and implied warranty, design defect, unjust enrichment, fraud, and failure-to-warn. So relying on Yocham flies directly in the face of Section 146 of the Restatement (Second) of Conflicts also quoted by the Prather court which:
calls for states to apply the substantive law of the state where the injury occurred unless, with respect to the particular issue[,] some other state has a more significant relationship to the parties and occurrences
Prather, at *77 (emphasis added). The particular issue here is alleged corporate misconduct – actions which took place at defendant’s principal place of business. On this issue, defendant’s home state has the greater interest.
We looked at Troutt and Prather side-by-side because they invoked almost identical analyses to reach completely opposite results. But, we did mention a third case – Matthews v. Novartis Pharmaceuticals Corp., 2013 U.S. Dist. LEXIS 99495 (S.D. Ohio Jul. 12, 2013). It was decided the same day as Prather and involves the same drug and defendant as Troutt. Fortunately, Matthews makes it a 2 to 1 split in favor of defendants on this issue. It simply does so with a lot less analysis. Rather straightforwardly, and applying New York law (the greater interest test), the court found that “because the alleged corporate misconduct took place in New Jersey, New Jersey law governs Plaintiff’s proposed claim for punitive damages.” Id. at *8. Easy enough.
There you have it, New York and Florida welcome the Garden State and Missouri closes its doors. So, if it’s true that with respect to punitive damages “where you stand depends on where you sit” – it’s equally true that “how you fare depends on where you’re sued.”