We thought we understood statutes of limitations and choice-of-law rules in New Jersey. Until yesterday. That was when we read the New Jersey Supreme Court’s opinion in McCarrell v. Hoffmann-La Roche, Inc., No. 076524, 2017 WL 344449 (N.J. Jan. 24, 2017), which unhinged that state’s statute of limitations and choice-of-law jurisprudence from its own precedent and placed statutes of limitations in a special class without much explanation. And the court did all of this for the stated purpose of preserving plaintiffs’ claims and not “discriminating” against an out-of-state plaintiff’s ability to sue a New Jersey company in New Jersey, after the suit would be barred in the plaintiff’s home state.
How did we get here? Well, this is a New Jersey Accutane case, which tells you that it was contentious, as most things seem to be in that multi-county proceeding. Other than that, the facts in McCarrell are fairly typical—an out-of-state plaintiff (in this case a fellow from Alabama) who was prescribed a drug in his home state, used the drug in his home state, experienced alleged complications in his home state, and received medical treatment in his home state sued the drug’s manufacturer where the company is incorporated—in this case, New Jersey. McCarrell, at *3.
The rub in McCarrell was that the plaintiff’s claim was time barred under Alabama’s statute of limitations, but not under New Jersey’s statute of limitations, which includes a discovery rule. The choice of law therefore determined the outcome, which led the parties to contest the issue hotly in the trial court, the intermediate appellate court, and eventually the New Jersey Supreme Court.
Each court applied different rules, which is why this case is so interesting and why the Supreme Court’s opinion is so odd. We have long understood that the choice of forum does not determine the applicable substantive law. Sure, the forum’s procedural law applies, but the substantive law is determined by applying the forum state’s choice-of-law rules.
When it comes to statutes of limitations, the issue has always been whether they are procedural or substantive. The majority of states now hold that statutes of limitations are substantive law. That unambiguously includes New Jersey, which in 1973 was among the earliest states to reject the notion that statutes of limitations are procedural. See Heavner v. Uniroyal, Inc., 305 A.2d 412,140-41 (N.J. 1973). That meant that New Jersey’s courts would resolve conflicts among competing statutes of limitations by applying the “governmental interest” test, which was the rule in New Jersey at the time.
From 1973 to 2008, the New Jersey Supreme Court shifted away from the “governmental interest” test and adopted the “most substantial relationship” test set forth in Sections 146, 145, and 6 of the Restatement (Second) of Conflicts of Law (sometimes also called the “most significant relationship” test). A few different cases effected this change, but the definitive opinion seems to be P.V. ex rel. T.V. v. Camp Jaycee, 962 A.2d 453, 459-60 (N.J. 2008). In Camp Jaycee, the New Jersey Supreme Court adopted the Restatement’s “most significant relationship” test and acknowledged that the substantive law of the place of injury will usually govern. See McCarrell, at *12 (discussing Camp Jaycee).
Now, back to McCarrell. For reasons that are not clear, the trial judge eschewed prevailing law, applied the “governmental interest” test, and determined that the New Jersey statute (which allowed the claim) applied and the Alabama statute (which barred the claim) did not. McCarrell, at *4. This order is difficult to understand. The trial judge relied on a 1996 case that applied the “governmental interest” test to statutes of limitations, but that case predated the Supreme Court’s adoption of the “most substantial relationship” test in Camp Jaycee by 12 years. Id.
The Appellate Division reversed. Applying the “most substantial relationship” test, the Appellate Division held that Alabama’s statute applied and cut off the claim. This was the correct result: All of the case-specific events in this case occurred in Alabama, and the Appellate Division’s opinion followed New Jersey law to the tee: Are statutes of limitations procedural or substantive? We have known since Heavner that they are substantive law. What choice-of-law rules apply? We have known at least since Camp Jaycee that New Jersey applies the “most substantial relationship” test.
Easy, right? That’s what we thought, but the New Jersey Supreme Court nevertheless reversed the Appellate Division and created a whole new rule under which New Jersey’s statutes of limitations will presumptively apply to cases filed in New Jersey, unless there are “exceptional circumstances” under which New Jersey has “no substantial interest” in maintaining the claim. McCarrell, at *13.
With the stroke of a pen, the New Jersey Supreme Court has unmoored its own choice-of-law jurisprudence. It once was clear that statutes of limitations in New Jersey were substantive law. What are they now? Are they in some category between procedural and substantive? And what about the applicable rules? Statutes of limitations are clearly not procedural, so why does this one category of substantive law warrant a departure from the well-established “most substantial relationship” test?
The Supreme Court explained that it was applying Restatement Section 142 and that its prior opinions did not foreclose the application of a new rule to statutes of limitations. But the new rule still has problems. First, it is difficult to reconcile the new rule with the Court’s own precedent. The Court held in Heavner that the forum would not determine the applicable statute of limitations. But now, the Court has held that New Jersey’s statutes of limitations presumptively will apply to lawsuits in New Jersey. We understand that courts retain some discretion under the “exceptional circumstances” formulation, but even so, the new rule is awfully similar to a rule that the Supreme Court itself discredited in 1973.
Second, the new rule will encourage forum shopping. Take the McCarrell facts as an example. The Alabama legislature made the public policy decision that its statute of limitations for these kinds of claim would not have a discovery rule. An Alabama resident can now evade that policy choice by filing in New Jersey, and New Jersey can be sure that others are paying attention. This is not quite as bad as the California Supreme Court’s recent resurrection of universal general jurisdiction under the guise of specific jurisdiction, thus opening California’s courts to more litigants (the worst drug/medical device decision of 2016 in our book). But it is in the same vein. It is also contrary to the concept of “borrowing,” codified in many states, under which courts will apply the shorter of two statutes to prevent plaintiffs from evading statutes of limitations in this fashion. Bottom line, when faced with a choice between New Jersey’s largest industry and litigation tourists, the court sided with the out-of-state litigants.
The Court attempted to justify its new rule as easy to apply and providing predictable/certain results. Id. at *14. We are not fans of the saying “this argument proves too much,” but this argument proves too much. If we want easy and clear results, we can go back to the old days of lex loci delicti. That was easy to apply, yet virtually all states have rejected it, including New Jersey. Moreover, if the “most substantial relationship” test is workable for other forms of substantive law in New Jersey, then why is an easier-to-apply rule necessary for statutes of limitations.
The Court also emphasized that the new rule “places both this State’s and out-of-state’s citizens on an equal playing field.” Id. Actually, it doesn’t. It gives out-of-state plaintiffs an advantage by presumptively allowing them the benefit of New Jersey’s discovery rule when suing in New Jersey, even where their home states have said that no such rule will apply. As for the Court’s observation that the new rule “also benefits New Jersey companies” because it gives them “the protection of this State’s statute of limitations against another state’s longer limitations period” [Id. at *14], think about that for a second. If a plaintiff were still within his home state’s “longer limitations period,” why on Earth would he file a time-barred claim in New Jersey? He never would. The purported “benefit” to New Jersey companies is fiction.
What we fear is that “placing citizens on an equal playing field” is code for “providing an opportunity for more people to sue.” The pro-litigation tone of the opinion is unmistakable. The Court promotes New Jersey’s interest in deterring manufacturers from selling unsafe products and providing remedies for “not just the citizens of this State, but also the citizens of other states.” But it simultaneously denigrates Alabama’s interest in protecting its manufacturers “and others” from stale claims. Id. at *16. When it comes to protecting lawsuits, New Jersey’s courts reach out to all. When it comes to Alabama’s policy against stale claims, New Jersey companies are exempt—they are the “others” that the New Jersey Supreme Court has dismissed. The Court seems not to realize that these interests are all equal and compatible. Statutes of limitations place no substantial limitation on a diligent plaintiff’s ability to seek a remedy, and it causes no injustice to enforce them.
New Jersey’s laws on statutes of limitations and choice of law were fine. There is no evident reason why the Supreme Court changed them, other than sympathy for this plaintiff. If that is the case, then the old saying is true: Bad facts make bad law. It’s early yet, but we have it straight from the horse’s mouth that, for the second year running, a New Jersey Supreme Court decision will probably appear on our annual bottom ten list.