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Daniel Moore, et al. v. Johnson & Johnson

November 1, 2012

DANIEL MOORE, ET AL.
v.
JOHNSON & JOHNSON, ET AL.



The opinion of the court was delivered by: McLaughlin, J.

MEMORANDUM

This personal injury and wrongful death action arises out of injuries allegedly suffered by the plaintiffs' son after he ingested a dose of the over-the-counter medication, Children's Tylenol. The Children's Tylenol was produced by McNEIL-PPC, Inc. ("McNEIL-PPC") at its Fort Washington, Pennsylvania production facility. The plaintiffs allege that their son's injuries and eventual death are directly attributable to quality control problems and defective production at the Fort Washington plant.

On December 29, 2011, the plaintiffs, Daniel and Katy Moore, filed suit in the Pennsylvania Court of Common Pleas against seventeen defendants, asserting twelve separate claims all stemming from the death of their son, River. Among those named as defendants in the Moores' lawsuit are McNEIL-PPC, McNEIL-PPC's ultimate parent corporation, Johnson & Johnson ("J&J"), and J&J executives William C. Weldon ("Weldon") and Rosemary Crane ("Crane"), as well as Costco Wholesale Corporation ("Costco"), the corporate owner of the store that sold Ms. Moore the purportedly defective bottle of Children's Tylenol.*fn1

Several of the defendants, including J&J, McNEIL-PPC, Costco, and Weldon, jointly filed a notice of removal to this Court on January 30, 2012, to which other defendants consented. Crane neither joined in nor consented to the notice of removal. Removal was premised on this Court's diversity jurisdiction under 28 U.S.C. § 1332.

On February 14, 2012, the plaintiffs moved to remand the case to the Court of Common Pleas of Philadelphia County. The plaintiffs argue that removal is improper for several reasons: (1) McNEIL-PPC is a citizen of Pennsylvania and, under the "forum defendant" rule, is barred from removing a Pennsylvania state court action to a federal court sitting in that state; (2) Weldon and Crane are also citizens of Pennsylvania, similarly preventing removal under the "forum defendant" rule; (3) Costco, like the plaintiffs, is a citizen of Washington, defeating complete diversity among the parties; and (4) because Crane did not join in or consent to removing this case, the defendants have failed to comply with the requirement that consent to removal be unanimous among defendants.

The defendants contend that removal is proper and argue that (1) McNEIL-PPC is actually a citizen of New Jersey and may remove a Pennsylvania state court action to this Court; (2) forum defendants Weldon and Crane were fraudulently joined and their citizenship should not be considered for removal purposes; (3) Costco was fraudulently joined and its non-diverse citizenship does not deny this Court subject matter jurisdiction; and (4) Crane's consent to removal was unnecessary, either because she was fraudulently joined or because she had not been properly served with the summons and complaint when the removing defendants filed their notice of removal.

The Court will deny the plaintiffs' motion to remand.

I. Factual Background

The facts herein discussed are those necessary to determine the citizenship of McNEIL-PPC and the sufficiency of the plaintiffs' claims against Weldon, Crane, and Costco on a fraudulent joinder inquiry. The facts relevant to McNEIL-PPC's citizenship are drawn from unchallenged affidavits, deposition testimony, and exhibits submitted by the parties and constitute the factual findings of the Court. Any factual disputes are noted. Other facts are drawn from the assertions in the plaintiffs' verified complaint, which the Court must assume to be true when conducting a fraudulent joinder analysis. In re Briscoe, 448 F.3d 201, 217 (3d Cir. 2006).

A. McNEIL-PPC's Activities and Corporate Structure McNEIL-PPC is a wholly-owned subsidiary of J&J.*fn2 It is one of several J&J subsidiaries that make and sell a number of consumer products. The McNeil Consumer Healthcare Division of McNEIL-PPC makes and distributes over-the-counter ("OTC") medications, such as Tylenol, Motrin, and Benadryl, and operates out of a facility in Fort Washington, Pennsylvania. McNEIL-PPC's other divisions and business units produce and distribute a variety of other products, such as Listerine mouthwash, Reach dental products, feminine hygiene products bearing the OB, Stayfree, and Carefree labels, and Rogaine. Corporate executives who manage these non-OTC brands are based in Skillman, New Jersey. Individuals working at J&J's Morris Plains, New Jersey campus also perform work related to some of these consumer products. Vaswani Supp. Decl. ¶¶ 3, 5; 5/8/12 Vaswani Dep. 52-53, 55-56, 68.

McNEIL-PPC has 40 officers. Thirty of those officers are located at corporate facilities in New Jersey: 23 are at J&J offices in New Brunswick, and the rest work out of Skillman and Morris Plains.*fn3 Three of McNEIL-PPC's highest-ranking officers are based at its Fort Washington facility: President Denice Torres; Vice President/Chief Financial Officer Kirk Barton; and Secretary Shane Freedman. The office location of McNEIL-PPC's fourth senior officer, Treasurer Gregory Herlan, is unclear. His office is either in Skillman, New Jersey or Fort Washington, Pennsylvania.*fn4 Vaswani Decl. ¶ 6; 5/2/12 Vaswani Dep. 65-66, 72-76; 5/8/12 Vaswani Dep. 43-44.

McNEIL-PPC's bylaws vest Denice Torres, as president, with "general charge and supervision of the business of the Corporation." Pls.' 5/21/12 Supp. Br., Ex. C. Torres also serves as president of the McNeil Consumer Healthcare Division. Her actual management responsibilities are limited to that division. She directs and coordinates activities, such as marketing, only with respect to the OTC products manufactured by McNeil Consumer Healthcare. As a practical matter, McNEIL-PPC's vice president/CFO, Kirk Barton, also only manages the brands within the McNeil Consumer Healthcare Division. 5/2/12 Vaswani Dep. 71, 89-91; 5/8/12 Vaswani Dep. 60.

The bulk of the management functions for McNEIL-PPC and other J&J subsidiaries that produce consumer products are carried out by executives associated with J&J's Family of Consumer Companies ("FCC"), an operating group consisting of J&J's consumer businesses. The FCC is overseen by a Group Operating Committee ("GOC") that exercises high-level direction for the corporate entities within the sector. Roberto Marques, who sits on the GOC as company group chairman of the FCC in North America, has "overall responsibility for the consumer business in North America." Marques' office is in Skillman, New Jersey. J&J's internal directory states that Torres reports to Marques. 5/2/12 Vaswani Dep. 103-06, 138-41; 5/8/12 Vaswani Dep. 76-77; Vaswani Supp. Decl. ¶¶ 6, 8; Pls.' 5/21/12 Supp. Br., Ex. A.

Several other senior managers within the FCC, working from offices in Skillman, assist with the coordination and oversight of various aspects of J&J's consumer businesses. These executives, Roberto DiBernardini, Caitlin Pappas, and Larry Montes, are in charge of human resources, sales, and compliance, respectively, for the FCC in North America. A fourth, Gregory Herlan, directs and oversees the financial operations of the consumer businesses. As previously noted, the location of Herlan's office is uncertain. These four executives meet regularly with North American Company Group Chairman Roberto Marques in Skillman. With the exception of Herlan, who is McNEIL-PPC's treasurer, none of the senior executives running operations for the FCC are officers of McNEIL-PPC, nor are they employees of that particular corporation. They are employed by other J&J entities. 5/2/12 Vaswani Dep. 103-06, 112-15; 5/8/12 Vaswani Dep. 75; Vaswani Supp. Decl. ¶¶ 6, 8-12; Pls.' 5/21/12 Supp. Br., Ex. A.

B. McNEIL-PPC's Production of OTC Products*fn5

J&J and McNEIL-PPC have a history of quality control problems dating back at least ten years. Beginning in 2002, J&J management undertook cost-cutting measures in quality control and production oversight to enhance corporate profits. J&J terminated experienced quality control staff and replaced them with inexperienced contract workers. These cost-cutting measures led to lax oversight of production at J&J's facilities, including those run by McNEIL-PPC. Compl. ¶¶ 63-66, 73.

Quality control issues at McNEIL-PPC facilities also resulted in the Food and Drug Administration ("FDA") issuing reports critical of the company. For instance, in 2004, the FDA issued a report citing McNEIL-PPC's failure to conduct complete investigations and to maintain proper sampling practices and recordkeeping. Successive FDA reports in 2008 and 2009 also described problems with McNEIL-PPC's investigatory practices. On April 30, 2010, the FDA reported twenty "observations" of deficiencies in quality control and production operations at McNEIL-PPC's Fort Washington facility. Compl. ¶¶ 67, 78-79, 153-58.

On April 30, 2010, McNEIL-PPC also issued a recall of approximately 40 types of children's and infant liquid medications, including Tylenol, due to "filth and contamination" at the Fort Washington, Pennsylvania production facility. The recalled medication had "particulate contamination," and some of the products had an elevated concentration of the active ingredient. The recall, encompassing over 136 million bottles of product, was "the largest recall of children and infant medicine in history." In addition to the recall, J&J and McNEIL-PPC shut down operations at the Fort Washington plant. Compl. ¶¶ 120-22, 163.

Following this recall, the House Committee on Oversight and Government Reform held two congressional hearings into J&J's activities. At the second hearing, on September 30, 2010, William C. Weldon, then chairman and CEO of J&J, testified. He apologized for J&J's failure to maintain "high quality standards" with respect to its children's and infant products and attempted to minimize the danger posed by J&J products then on the market. Compl. ¶¶ 163-73 (quotation marks omitted).

The April 2010 recall was one of several McNEIL-PPC recalls issued between July 2009 and July 2010 due to quality control problems. The first occurred on July 9, 2009, when McNEIL-PPC publicly recalled 88,000 packages of Motrin IB. Sometime earlier, McNEIL-PPC tried to remove the defective Motrin IB from the market through a "phantom" or "stealth" recall, in which it hired third-party contractors to purchase the drug from retailers' shelves. This "phantom" recall was effectuated "without notification to the customers or the retailers." Compl. ¶¶ 83, 85-88, 93-95, 98.

Next, in August or September 2009, J&J and McNEIL-PPC issued a formal recall of nearly 8 million bottles of liquid adult and Children's Tylenol products due to suspected bacterial contamination. This recall did not include all Infant and Children's Tylenol products. In September, McNEIL-PPC wrote a letter to healthcare professionals explaining that certain Children's Tylenol products were being recalled because of potential adulteration by the bacteria B. cepacia. In describing the recall on the Tylenol website, McNEIL-PPC did so without mention of the bacterial contaminant. Compl. ¶¶ 100-01, 104-10.

Between November 2009 and July 2010, McNEIL-PPC also issued and expanded a recall of various products in pill form that had a "musty, moldy odor[]" linked to contamination by a pesticide used in storing and transporting the medication's packaging materials. The products implicated by this recall were manufactured at McNEIL-PPC's Las Piedrad, Puerto Rico facility. Neither this recall nor the July 2009 Motrin IB recall appears to have involved liquid Children's Tylenol products. Compl. ¶¶ 111, 113, 115-19, 126-29.

C. Involvement of Weldon and Crane Weldon and Rosemary Crane, a former company group chairman at J&J, had personal knowledge of the poor conditions at J&J's manufacturing facilities, including the Fort Washington plant. According to the verified complaint, Weldon and Crane were "integrally involved in and responsible for the decisions" that led to worsening production oversight and the release of contaminated OTC medications into the public marketplace. The verified complaint states that it was Weldon's "lack of leadership [that] resulted in the degradation of quality control at J&J." Compl. ¶¶ 23, 25.

The complaint makes several additional specific allegations against Weldon. First, Weldon "drastically cut" J&J's corporate compliance team in 2007. Second, around the time of the recalls in 2010, Weldon stated that the problems at J&J were not "systemic." Third, during his testimony before Congress on September 30, 2010, Weldon acknowledged that J&J had let the public down by not maintaining high production standards and accepted "full accountability for the problems at McNeil." Compl. ¶¶ 73, 81, 171 (quotation marks and emphasis omitted).

D. Costco's Sale of Children's Tylenol

At some point in 2010, plaintiff Katy Moore purchased a bottle of Very Berry Strawberry flavored Children's Tylenol from a Costco store in Union Gap, Washington.*fn6 The medication had been manufactured at McNEIL-PPC's Fort Washington facility. The complaint states that Costco "placed into the stream of commerce the defective and contaminated Children's Tylenol which killed River Moore." No other factual allegations specific to Costco appear in the complaint. Compl. ¶ 22, 174-75.

E. Injury to River Moore

As of July 2010, the Moores were not aware of, and "would have no way of knowing" about, the manufacturing problems and poor quality control at the McNEIL-PPC Fort Washington production facility. Compl. ¶ 177.

On July 22, 2010, the Moores' two-year-old son, River, came down with a fever and, that night, awoke with a temperature of 101 degrees. Ms. Moore gave River a dose of the Children's Tylenol that she had earlier purchased at Costco, "unknowingly administer[ing] a defective and contaminated recalled dose of Children's Tylenol." Within 30 minutes of ingesting the Children's Tylenol, River began spitting up blood and, at some point, went into shock. Ms. Moore took River to Yakima Memorial Hospital for treatment. By the next day, July 23, River's liver had failed and he died. Compl. ¶¶ 178-84, 188, 237.

The complaint alleges that River's liver failure and subsequent death were caused by his ingestion of defective and contaminated Children's Tylenol placed into the stream of commerce by, among others, McNEIL-PPC, which manufactured the drug, and Costco, which sold the drug to Ms. Moore. The complaint states that J&J, McNEIL-PPC, Costco, and J&J executives Weldon and Crane, failed to properly test the medication for contamination prior to its distribution and sale. The complaint also alleges that these defendants failed to warn the plaintiffs about the danger and potential impurity of the Children's Tylenol that Ms. Moore purchased. Compl. ¶¶ 184-85, 191, 193-94, 217.

II. Analysis

The Court must determine whether removal of the

Moores' underlying state court lawsuit was proper. The Court first addresses whether McNEIL-PPC is a citizen of Pennsylvania precluded from removing a Pennsylvania state court action to this Court. The Court concludes that McNEIL-PPC is a citizen of New Jersey only and was, therefore, permitted to join in removing this action to federal court. Next, the Court considers whether the inclusion of Pennsylvania citizens Weldon and Crane as defendants bars removal of the present action. The Court finds that Weldon and Crane have been fraudulently joined and that their status as Pennsylvania citizens does not make removal improper. The Court then addresses the plaintiffs' argument that this Court lacks jurisdiction based on complete diversity among the parties, as defendant Costco and the plaintiffs are all Washington citizens. Because the Court determines that Costco has been fraudulently joined on all claims, this commonality of citizenship does not divest the Court of subject matter jurisdiction. Last, the Court considers and rejects the plaintiffs' claim that Crane's consent was necessary to effectuate removal. Joinder of Crane was fraudulent. Consequently, the other defendants were permitted to remove this action without her consent.

A. Citizenship of McNEIL-PPC

A civil action originally brought in state court is removable to federal court on the basis of diversity of citizenship provided that no defendant is a citizen of the state in which the action is brought. 28 U.S.C. § 1441(b). A corporation is considered to be a citizen of its state of incorporation and the state where it has its "principal place of business." Id. § 1332(c).

There is no dispute that McNEIL-PPC is incorporated in the State of New Jersey. The parties disagree only as to the location of its principal place of business. The plaintiffs argue that McNEIL-PPC's principal place of business is Fort Washington, Pennsylvania. The defendants, on the other hand, argue that McNEIL-PPC's principal place of business is Skillman, New Jersey. The Court finds that McNEIL-PPC's principal place of business is Skillman, New Jersey.

1. Hertz "Nerve Center" Test

Until recently, the circuits employed a variety of tests and looked to a multiplicity of factors to determine a corporate party's principal place of business for jurisdictional purposes. In Hertz Corp. v. Friend, the Supreme Court sought to end the disunity and establish a single, more easily administrable approach to the "principal place of business" test. 130 S. Ct. 1181 (2010). In Hertz, the Supreme Court adopted the "nerve center" test, holding that a corporation's principal place of business is "the place where a corporation's officers direct, control, and coordinate the corporation's activities." Id. at 1192.

In doing so, the Supreme Court also clarified that the "principal place of business" referred to in § 1332(c) is a single location within a state and not the state with the greatest number of aggregate contacts to the corporation. Id. at 1192-93. Hertz counsels that this single locus of corporate coordination and direction should normally be the corporate headquarters, but only where "the headquarters is the actual center of direction, control, and coordination." Id. at 1192. The corporate nerve center is "not simply an office where the corporation holds its board meetings." Id. Nor can it be proven by "the mere filing of a form like the Securities and Exchange Commission's Form 10-K listing a corporation's ‗principal executive offices.'" Id. at 1195.

In Hertz, the Supreme Court acknowledged that the "nerve center" test may sometimes lead to counterintuitive results. The Court provided the example of a hypothetical corporation where "the bulk of [its] business activities visible to the public take place in New Jersey, while its top officers direct those activities just across the river in New York." Id. at 1194. Despite the fact that the hypothetical corporation's public-facing activities were centered in New Jersey, the Supreme Court explained that such a corporation's principal place of business would be New York, where its corporate actions were coordinated and controlled. Id.

Because Hertz states that "‗principal place of business' refers to the place where the corporation's high level officers direct, control, and coordinate the corporation's activities," the threshold question in determining McNEIL-PPC's principal place of business is whether the "nerve center" test permits this Court to consider activities of executives outside a party's corporate structure. Id. at 1186 (emphasis added).

Hertz itself did not directly address that question. In Hertz, the uncontroverted facts demonstrated that petitioner Hertz Corporation's "leadership" was based at the company's headquarters in Park Ridge, New Jersey. Id. (quotation marks omitted). The Supreme Court was not called on to determine the composition of Hertz's "leadership" or resolve who, for citizenship purposes, may participate in a corporation's "nerve center," more generally. For that reason, this Court does not ...


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