We wrote recently that California’s courts have never met a case they did not like. We were speaking somewhat tongue in cheek of course, but still California remains a destination for litigation tourists trying to take advantage of laws and procedures that many view as plaintiff friendly. One bulwark against blatant forum shopping is personal jurisdiction under the U.S. Supreme Court’s Bauman and Bristol-Myers Squibb cases, the latter reversing the California Supreme Court, which restored some measure of discipline to jurisdiction over out-of-state defendants.
Another potential bulwark is choice of law. That is to say, even when a plaintiff sues in California, the applicable choice-of-law rules might compel the application of another state’s law, which could doom the plaintiff’s claims.
That is what happened this week in Nelson v. F. Hoffmann-La Roche, Inc., No. 21-cv-10074, 2022 WL 17259056 (N.D. Cal. Nov. 28, 2022) (to be published in F. Supp. 3d), where a Florida resident and Army veteran used a generic prescription drug while stationed in Kentucky and overseas and allegedly suffered complications. But he chose to sue in California. Why? Because the manufacturer of the branded version of the drug (not the generic version that the plaintiff actually used) was based in California at the time he filed (having relocated from New Jersey), and California is one of a very few states that allows innovator liability—i.e., holding an innovator/branded manufacturer potentially liable for a generic product that it did not make, did not sell, and from which it did not make any profit.
The plaintiff’s plan did not work. As a court sitting in California, the district judge applied California’s choice-of-law rules, which follow the “governmental interest” approach. Under those rules, the court first determines if the different states’ laws are different and then, if so, determines what interest the competing jurisdictions have in the application of their respective laws. Id. at *8. If more than one jurisdiction has a legitimate interest, the court “should apply the law of the state whose interest would be more impaired if its law were not applied.” Id.
Here, the choice of law mattered a lot, because among the contenders, only California allows innovator liability. The contenders were many. The innovator defendants were responsible for the branded product’s labeling from 1989 to 2002, while being based in New Jersey. The plaintiff ingested the generic products (again, not the defendants’ branded product) in Kentucky in 2008 and while deployed in Afghanistan in 2008 and 2009. And he experienced alleged symptoms while residing in Oregon, Tennessee, and Florida. Id. at *1. The innovator defendants relocated to California in March 2009 through a merger with another company, which overlapped the plaintiff’s usage for less than two months. Id. at *2.
There was clearly a difference among the various states’ laws because, again, only California allow innovator liability. The district court put to rest any doubt on that point with a comprehensive discussion of each state’s law, including discussion of California’s wrongly decided T.H. v. Novartis Pharmaceuticals Corp. opinion and the laws of New Jersey, Oregon, Tennessee, and Florida establishing conversely that you cannot sue an innovator over a generic product in those states. Id. at *9-*10.
In light of the difference in law, the district court weighed the interests and applied New Jersey law. Oregon and Tennessee may have had an interest in protecting their citizens from harm, but the plaintiff no longer resided in either state, and he did not ingest the product in those states. The defendants also had no connection to Oregon or Tennessee. The latter points were true for Florida too—no ingestion of the product and no connection to the defendants. Plaintiff did reside in Florida, but that was not enough to tip the scale. Same for Kentucky, where the plaintiff ingested the generic drug, but only briefly. Unsurprisingly, no one suggested that the district court should apply the law of Afghanistan.
The true contenders were California and New Jersey.
Which leads to the key question: What interest would California have in applying its unique (and wrong) law on innovator liability to this dispute? The answer is, not much. Sure, the defendants are headquartered in California, and they relocated to California two months before the plaintiff last took the generic product. The defendants’ California headquarters, however, was not enough because “when the subject matter of the litigation occurred outside of California and the only connection to California is a corporation’s principal place of business, California does not have a sufficient interest in apply its law.” Id. at *12.
The reason for that is the basic unfairness of applying California’s flawed innovator liability doctrine to a dispute involving events and plaintiffs from somewhere else. As the district court concluded,
In the balance of equity, it would be unfair for Plaintiff to be able to bring his claims in California and, by virtue of the state’s innovator liability doctrine, he would be extended greater rights than he would be granted in his own state of residence, Florida. California has no interest in extending to out-of-state residents greater rights than are afforded them by their own state of domicile.
Id. (citations omitted). In the end, California’s product liability law “is appropriately confined to the protection of California residents and persons injured within California’s borders.” Id. That will be an important holding in similar future cases.
So New Jersey won, and so did the defendants. The alleged misconduct (inadequate warnings) emanated from New Jersey, and the defendants were headquartered there for 20 years. Id. at *12. Moreover, New Jersey has an interest in applying laws specifically enacted to limit liability for commercial activity within New Jersey. Under these circumstances,
[i]f Defendants were to be denied the protection afforded by the New Jersey Product Liability Act and were subjected to liability for generic drug labeling, it would rest solely upon the circumstance that after defendants engaged in the allegedly tortious conduct in New Jersey, they happened to move to California. . . . [¶] The imposition of liability . . . under California law, would strike at the essence of New Jersey law.
Id. at *14. Because New Jersey does not recognize innovator liability, and because the plaintiff did not use a product that the innovator defendants made or sold, the district court dismissed the case in its entirety, with prejudice. Id. at *15.
The district court addressed other issues too. The plaintiff sufficiently pled around the political question doctrine, i.e., he alleged facts showing that the district court would not be intruding on the executive branch by deciding a case involving the military’s decision to prescribe drugs. Id. at *4-*6. On the other side of the coin, the defendants did not meet their burden of establishing that the government contractor defense precluded liability. Id. at *6-*7. In our product liability world, we think the choice-of-law and innovator liability issues were the main event—and they were dispositive.