New Jersey Supreme Court Reinstates $25M Verdict Against Accutane Manufacturer

The New Jersey Supreme Court recently reinstated a jury award of $25 million for a plaintiff who sustained personal injuries after taking the acne drug, Accutane. See Andrew McCarrell v. Hoffman-La Roche Inc. et al., No. 076524 (N.J. Jan. 24, 2017).  In so doing, the Supreme Court decided that New Jersey’s statute of limitations – and not the limitation period of Alabama, where the plaintiff resided – controlled. Thus, because plaintiff commenced suit within New Jersey’s limitations period, the Court held that his claims could stand, even if the claims would have been barred by Alabama’s statute of limitations.

The plaintiff, Alabama resident Andrew McCarrell, was prescribed Accutane to treat his acne in 1995. Id. at 5.  In 1996, he experienced severe stomach pain, was diagnosed with inflammatory bowel disease, and subsequently underwent multiple surgeries to address complications from this condition. Id. at 6. Accutane was designed, manufactured, and labeled in New Jersey by Hoffman-La Roche, Inc. and Roche Laboratories, Inc. (collectively “Roche”). Roche is incorporated and headquartered in New Jersey. Id. at 7. Roche also distributed the medication from New Jersey. Plaintiff was prescribed and ingested Accutane in Alabama, where he also received medical treatment. Id. In 2003, plaintiff filed suit in New Jersey against Roche. Id. at 5.  Plaintiff alleged that the defendant had failed to provide adequate warnings about the risks and side effects associated with Accutane. Id. Further, he claimed that had Accutane’s warning labels adequately informed him of the risks and dangers associated with the drug, he would not have taken it. Id.

Roche moved for summary judgment, arguing that plaintiff’s personal injury claims were barred by Alabama’s two-year statute of limitations, as plaintiff’s injury occurred in 1996 and his complaint was not filed until 2003. Id. at 9. In response, plaintiff argued that under New Jersey’s “discovery rule,” the statute of limitations does not begin to run “until the injured party discovers, or by an exercise of reasonable diligence and intelligence should have discovered that he may have a basis for an actionable claim.” Id. (quoting Lopez v. Swyer, 62 N.J. 267, 272 (1973)). The plaintiff claimed, therefore, that because he did not learn that Accutane could have caused his inflammatory bowel disease until 2003, his claims were timely under New Jersey’s statute of limitations. Alabama does not recognize such an equitable tolling provision. Id.

The trial court found that under the governmental-interest test set forth in Gantes v. Kason Corp., 145 N.J. 478, 484 (1996), New Jersey’s statute of limitations applied; and therefore denied Roche’s motion. Id. at 9 (finding that Alabama had no “discernable interest in barring one of its residents from pursuing a claim against a New Jersey pharmaceutical company in a New Jersey court” and that New Jersey “had a singularly distinct interest in deterring the manufacture and distribution of unsafe products within the state.”). After a complicated procedural history, a jury found in favor of the plaintiff on his failure-to warn claims and awarded him$25 million. Id. at 11.

Roche moved for a judgment notwithstanding the verdict, arguing that New Jersey’s statute of limitations was erroneously applied since “the governmental-interest test had been supplanted by the most significant-relationship test of sections 146 and 145 of the Second Restatement, which starts with a presumption in favor of the substantive law of the state where the injury occurred.” Id. at 11.  The trial court denied Roche’s motion. Id. at 11-12.

The Appellate Division agreed with the defendant and dismissed the action, concluding that under the “substantial-relationship test,” Alabama’s statute of limitations controlled. Id. at 3 (citing Restatement (Second) of Conflicts of Law (1971)). Specifically, the Appellate Division held that under section 146 of the Restatement (Second), “the law of the state where the injury occurred” – Alabama – applies ‘unless another state has a more significant relationship to the issue.’” Id. at 13. The Appellate Division found that because Alabama was where the plaintiff resided, where he was prescribed Accutane, where he developed, was diagnosed, and was treated for inflammatory bowel disease, Alabama has the most significant interest and that “New Jersey has little interest in protecting the compensation right of an out of state resident.” Id. at 13 (internal citations omitted). The Appellate Division expressly declined to apply section 142 of the Restatement (Second), pursuant to which, when two states’ statutes of limitations are in conflict, the limitations period of the forum state applies unless it has “no substantial interest” in maintaining the claim in its courts. Id. Thus, the Court vacated the jury’s verdict and award and dismissed plaintiff’s complaint as untimely under Alabama’s statute of limitations.

The Supreme Court of New Jersey, however, found that section 142 of the Restatement (Second) of the Conflict of Law is the “operative choice-of-law rule for resolving statute of limitations conflicts.” Id. at 4 (finding that its application will “channel judicial discretion and lead to more predictable and uniform results that are consistent with the just expectations of the parties”).  Under section 142, the statute of limitations of the forum state generally applies whenever that state has a “substantial interest in the maintenance of the claim.” Id. at 30. In such a circumstance, the inquiry ends “unless exceptional circumstances would render that result unreasonable.” Id. Only when the forum state has “no substantial interest” in the maintenance of the claim will a court then consider whether “the claim would be barred under the statute of limitations of a state having a more significant relationship to the parties and the occurrence” by taking into account the following factors:

  1. the needs of the interstate and international systems,
  2. the relevant policies of the forum
  3. the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue
  4. the protection of justified expectations
  5. the basic policies underlying the particular field of law
  6. certainty, predictability and uniformity of result, and
  7. ease in the determination and application of the law to be applied.

Id. at 31 (quoting Restatement (Second) Conflicts of Law, §6(2)).

Here, the Court found that under section 142, New Jersey’s statute of limitations controls because the Court could not conclude that “maintenance of the claim would serve no substantial interest” of New Jersey and because there are no “exceptional circumstances” that mandate the application of Alabama’s limitations period. Id. at 38.

New Jersey companies should take note that, although the Court reinstated a $25 million judgment against a pharmaceutical company, the Court explained that its decision could actually be largely beneficial for other New Jersey corporations. Id. at 32. The Court observed that under the Appellate Division’s application of sections 146 and 145 of the Restatement (Second), “the statute of limitations of the state where the injury occurred would presumptively apply even when the New Jersey limitations period had expired.” In that circumstance, an out of state citizen could be allowed to proceed with a claim against a New Jersey corporation, even where a New Jersey citizen would be barred; thus depriving the New Jersey company “of the protections of this State’s statute of limitations against another state’s longer limitations period.” The Court further explained that when the forum state has no interest in the litigation and the claim is barred by another state’s statute of limitations, “the forum state generally should not entertain the claim.” Id. at 35.