United States District Court, E.D. Pennsylvania
May 20, 2015
IN RE: TYLENOL (ACETAMINOPHEN) MARKETING, SALES PRACTICES AND PRODUCTS LIABILITY LITIGATION
McNEIL-PPC, Inc., McNeil Consumer Healthcare, and Johnson & Johnson, Inc., Defendants. This Document Relates to: Rana Terry, as Personal Representative and Administrator of the Estate of Denice Hayes, Deceased, Plaintiff, No. 2:13-md-02436
LAWRENCE F. STENGEL, District Judge.
This case is part of a Multidistrict Litigation (MDL) involving claims of liver damage from the use of Tylenol. At the heart of this MDL is the question of whether Tylenol poses a serious risk of liver damage to consumers taking it at or just above the recommended dosage. The plaintiff claims that her sister died of acute liver failure after taking Tylenol "as directed" by its label. She asserts that Johnson & Johnson and McNeil-the makers of Tylenol-knew or should have known of this risk of acute liver failure to consumers, yet failed to warn users or to redesign the drug to minimize this risk. The court chose this case as a "bellwether" case and has scheduled it for trial.
The parties have a dispute about whether Alabama law or New Jersey law applies to the claims for wrongful death and punitive damages. For the reasons explained below, I find that Alabama law applies to all of the plaintiff's claims.
Plaintiff Rana Terry alleges that her sister Denice Hayes died as a result of acute liver failure caused by taking Extra Strength Tylenol as its label directed. Hayes lived in Alabama, purchased the Tylenol in Alabama, was treated for liver damage in Alabama, and died in Alabama. Defendants Johnson & Johnson and McNeil are New Jersey corporations. Johnson & Johnson is headquartered in New Brunswick, New Jersey. Johnson & Johnson considers its headquarters to be its principal place of business. McNeil is headquartered in Fort Washington, Pennsylvania but maintains that its principal place of business, or "nerve center, " is located in Skillman, New Jersey.
The parties agree that Alabama law applies to all but two of the plaintiff's claims: wrongful death and punitive damages. "Because choice of law analysis is issue specific, different states' laws may apply to different issues in a single case, a principle known as depecage.'" Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 462 (3d Cir. 2006). Therefore, it is possible for Alabama law to apply to some of the plaintiff's claims, while New Jersey law may apply to other claims.
Alabama's wrongful death statute does not provide for compensatory damages, only punitive damages. See, e.g., Savannah & M.R. Co. v. Shearer, 58 Ala. 672, 680 (1877)("The damages [under the wrongful death statute] are punitive...."); Industrial Chemical & Fiberglass Corp. v. Chandler, 547 So.2d 812, 818 (Ala. 1988)("[T]he statute is punitive' in its purposes..."). Under Alabama law, damages in a wrongful death case "... are awarded to preserve human life, to punish... wrongful conduct, and to deter or discourage [the defendants] and others from doing the same or similar wrongs in the future." Alabama Pattern Jury Instructions: Civil 2d § 11.28. Alabama's wrongful death statute, not the state's general punitive damages statute, governs personal injury actions resulting in death. See Susan Randall, Only in Alabama: A Modest Tort Agenda, 60 ALA. L. REV. 977, 985 (2009)("The legislature exempted wrongful death damages from its treatment of punitive damages generally...")(citing Alabama's general punitive damages statute Ala. Code § 6-11-29 (2005)). For this reason, the parties dispute the applicable choice of law on both the wrongful death claim and the punitive damages claim. The "issue" in dispute is which state's law applies to a punitive damages recovery. I will apply the choice-of-law analysis to the issue of punitive damages. The choice is between Alabama's wrongful death statute (which provides only punitive damages) and New Jersey's punitive damages statute coupled with its wrongful death statute.
a. Pennsylvania Choice-of-Law Principles Apply
Pennsylvania choice-of-law principles apply to this case. A federal court sitting in diversity must apply the choice-of-law rules of the state in which the court sits to determine which state's law applies. Chin v. Chrysler, LLC, 538 F.3d 272, 278 (3d Cir. 2008)(citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). In the context of an MDL, courts routinely apply the choice-of-law rules of the court from which the case was transferred. See In re Diet Drugs (Phentermine/ Fenfluramine/Dexfenfluramine), No. MDL 1203, Civ.A. 03-20284, 2004 WL 1925010, at *1 (E.D. Pa. Aug. 30, 2004)("As the MDL transferee court in this matter, we must apply the choice-of-law rules of Florida, the state where the transferor court sits.") (citations omitted); In re American Investors Life Ins. Co. Annuity Marketing and Sales Practices Litigation, 2007 WL 2541216, at *27 n. 16 (E.D. Pa. Aug. 29, 2007)("Although neither the Supreme Court nor the United States Court of Appeals for the Third Circuit has explicitly ruled on the issue, it appears that in MDL proceedings the transferee court applies the choice-of-law rules that would govern in the transferor forum.")(citations omitted). Despite the fact that the decedent was in Alabama, this case was originally filed in the Court of Common Pleas of Philadelphia, Pennsylvania, removed to the Eastern District of Pennsylvania based on diversity jurisdiction, and then transferred into this MDL. See Doc. No. 1, 27. For these reasons, Pennsylvania choice-of-law principles should be used to decide which state law applies.
b. Pennsylvania Choice-of-Law Analysis
Pennsylvania employs a "flexible rule" which combines the "significant contacts" analysis of Restatement (Second) of Conflict of Laws § 145 and a "governmental interest analysis." See Griffith v. United Air Lines, Inc., 203 A.2d 796, 805 (Pa. 1964)("[W]e are of the opinion that the strict lex loci delicti rule should be abandoned in Pennsylvania in favor of a more flexible rule which permits analysis of the policies and interests underlying the particular issue before the court."). "The merit of such a rule is that it gives to the place having the most interest in the problem paramount control over the legal issues arising out of a particular factual context' and thereby allows the forum to apply the policy of the jurisdiction most intimately concerned with the outcome of [the] particular litigation.'" Id. at 806 (citation and quotation marks omitted). Pennsylvania's choice-of-law analysis asks three questions: 1) is there an actual conflict or a false conflict between potentially applicable states' laws, 2) if there is an actual conflict, is there a "true conflict" based on the governmental interests underlying each law, and 3) if there is a "true conflict, " which state has more significant contacts and a greater interest in its law being applied. See Specialty Surfaces Intern., Inc. v. Continental Cas. Co., 609 F.3d 223, 229-36 (3d Cir. 2010); Hammersmith v. TIG Ins. Co., 480 F.3d 220, 229-36 (3d Cir. 2007).
1. An Actual Conflict Exists
It is clear that an actual conflict exists between Alabama's and New Jersey's laws. Alabama allows for uncapped punitive damages, not compensatory damages, in the case of wrongful death. See Ala.Code § 6-5-410. New Jersey, on the other hand, precludes punitive damages in wrongful death actions. N.J.S.A. § 2A:31-5. A jury may only award pecuniary damages. Id. New Jersey's general punitive damages statute caps recovery at five times the compensatory damages award or $350, 000, whichever is greater. N.J.S.A. § 2A:15-5.14(b). New Jersey's general punitive damages provision precludes recovery of punitive damages in drugs products liability cases in which a drug has been "generally recognized as safe and effective" by the Food and Drug Administration (FDA). See N.J.S.A. § 2A:58C-5. In short, the plaintiff could gain maximum punitive damages under Alabama law and minimal, if any, punitive damages under New Jersey law.
2. A "True Conflict" Exists
There is a "true conflict" between Alabama and New Jersey law. A "true conflict" exists when "the interests of both [states] would be adversely affected to some degree by the application of the other state's law." Specialty Surfaces Intern., Inc., 609 F.3d at 232.
Alabama has made clear that its wrongful death statute is intended to protect the lives of those within its borders by imposing damages without limits on tortfeasors causing death. By making a wrongful death "expensive, " Alabama seeks to deter similar tortious conduct. See Louis Pizitz Dry Goods Co. v. Yeldell, 274 U.S. 112, 116 (1927)(explaining that the Alabama statute was an "attempt to preserve human life by making homicide expensive."); Tillis Trucking Co., Inc. v. Moses, 748 So.2d 874, 889 (Ala. 1999)(explaining that the goal of the statute is "preservation of life because of the enormity of the wrong, the uniqueness of the injury, and the finality of death.")(citation omitted)).
New Jersey, on the other hand, considers limiting damages to be more important, especially for pharmaceutical companies operating within its borders. Under the New Jersey punitive damages statute, punitive damages are not available in drug products liability actions when a drug has been approved by the Food and Drug Administration (FDA). N.J.S.A. § 2A:58C-5. In 1987, the New Jersey Legislature enacted this provision in order to "re-balance the law in favor of manufacturers.'" Rowe v. Hoffman-LaRoche, Inc., 917 A.2d 767, 772 (N.J. 2007)(quoting William A. Dreier, et al., N.J. Prods. Liab. & Toxic Torts Law at 15:4 (2007)). The legislature saw this enactment as a response to an "urgent need" to establish clearer rules on recoverable damages in products liability cases. Id.
New Jersey's wrongful death statute is not intended to be punitive and, instead, is intended to provide family members with "contributions, reduced to monetary terms, which the decedent might reasonably have been expected to make to his or her survivors." Smith v. Whitaker, 734 A.2d 243, 248 (N.J. 1999)(quoting Alexander v. Whitman, 114 F.3d 1392, 1398 (3d Cir. 1997). The wrongful death statute serves to "bring parity both to claims by a victim who lives and to claims by his survivors if he dies." Aronberg v. Tolbert, 25 A.3d 1121, 1130 (N.J. 2011). In other words, it does not give the decedent any more chance of recovering damages simply because he died than if he had been injured and lived. This purpose directly conflicts with the purpose of Alabama's law. For these reasons, there is a "true conflict" between Alabama and New Jersey's laws: an application of one state's statute would adversely affect the interest embodied in the other state's statute.
3. Alabama Has the "Most Significant Relationship" and a Greater Interest
The final inquiry asks which state has more "significant" contacts to the issue as set forth in the Restatement (Second) of Conflicts of Laws. Specialty Surfaces Intern., Inc., 609 F.3d at 230. The contacts are then weighed on a "qualitative scale according to their relation to the policies and interests underlying the [issue at hand]." Id. (quoting Shields v. Consol. Rail Corp., 810 F.2d 397, 400 (3d Cir. 1987))(quotation mark omitted). When applying Pennsylvania choice-of-law principles to an action for personal injuries, "the law of the state where the injury occurred normally determines the rights and liabilities of the parties, unless another state, applying the contacts test, has a more significant relationship to the occurrence and parties." Laconis v. Burlington County Bridge Com'n, 583 A.2d 1218, 1223 (Pa. Super. Ct. 1990). Contacts considered to be "significant" are: "the place where the injury occurred; the place where the conduct causing the injury occurred; the domicile, residence, nationality, place of incorporation, and place of business of the parties; and the place where the relationship between the parties is centered." Id.
Alabama has several significant contacts related to this action. It is the place of the decedent's injury and death. The decedent allegedly purchased Tylenol in Alabama, ingested Tylenol in Alabama, was treated by her doctors for her injuries in Alabama, and eventually died from those injuries in Alabama. Some of the conduct considered to have caused the injury occurred in Alabama. The decedent received warnings about the product in Alabama and viewed advertising about Tylenol in Alabama.
On the other hand, New Jersey has contacts relevant to the issue of punitive damages-a claim which considers the egregiousness of the defendants ' behavior. The defendants are incorporated in New Jersey. Both maintain their principal place of business is in New Jersey. Many of the corporate decisions about how to market Tylenol, how to test its efficacy, and how to comply with necessary regulations appear to have been made in New Jersey. Some conduct related to the defendants' conduct on the issue of punitive damages also appears to have taken place in Pennsylvania.
More importantly, the place in which the parties' relationship is centered is clearly Alabama. The defendants sold the Tylenol in Alabama, marketed the Tylenol in Alabama, and were expected to comply with the laws of Alabama. It appears the decedent had no contact with New Jersey. She didn't travel there, ingest Tylenol there, nor was she injured there. The two parties interacted through their consumer relationship in Alabama. See Henderson v. Merck & Co., Inc., No. 04-CV-05987-LDD, 2005 WL 2600220, at *8 (E.D. Pa. Oct. 11, 2005)("Indeed, because plaintiff is a Michigan resident, because plaintiff purchased, was prescribed, and ingested Bextra within Michigan's borders, and because plaintiff allegedly suffered injuries in Michigan, the interests of Pennsylvania, New York, and New Jersey in applying their product liability laws to such extraterritorial conduct lose vigor."); Blain v. Smithkline Beecham Corp., 240 F.R.D. 179, 195 (E.D. Pa. 2007)("The only factor favoring this forum is that GSK is headquartered here... The law governing liability and damages will be controlled by the individual [class] member's home state's jurisprudence" where each class member was likely injured, domiciled, and the parties' relationship was centered.); Knipe v. SmithKline Beecham, 583 F.Supp.2d 602, 638 (E.D. Pa. 2008)(finding New Jersey's contacts, as the place of injury and plaintiff's domicile, outweighed defendant's contacts with its home state on the issue of punitive damages). Alabama has more relevant contacts than does New Jersey.
There are policy considerations as well. The policy behind Alabama's wrongful death statute-to protect those within its borders from tortious conduct causing death-is longstanding. Alabama's wrongful death statute and its unique punitive scheme date back to the late 1800s. See Louis Pizitz Dry Goods Co., Inc. v. Yeldell, 274 U.S. 112, 114 (1927)("The legislation now challenged has been on the statute books of Alabama in essentially its present form since 1872."); Savannah & M.R. Co. v. Shearer, 58 Ala. 672, 680 (1877). Despite challenges to its unique scheme in the legislature and state Supreme Court, the wrongful death statute continues to serve as a means to protect human life and punish tortfeasors. See Boudreaux v. Pettaway, 108 So.3d 486, 496-98 (Ala. 2012) (reaffirming the purpose of the wrongful death statute as protecting the lives of Alabama citizens),  overruled on other grounds by, Gillis v. Frazier, ___ So.3d ___, 2014 WL 3796382, at *6 (Ala. Aug. 1, 2014). Alabama also has an interest in regulating the activities of those corporate entities that choose to do business within its borders. See Shields v. Consol. Rail Corp., 810 F.2d 397, 401 (3d Cir. 1987)("Having elected to transact business in Indiana and having exposed itself to a policy that fails to give rein to contribution, Conrail's rights must be governed by that determination. We cannot agree with the district court's conclusion that Pennsylvania law travels with Conrail wherever it runs.").
Enacted in the era of tort reform, New Jersey's statute serves to regulate the damages levied against its corporate citizens-specifically pharmaceutical companies within its borders-in order to provide economic certainty and stability. Where one state's interest is to protect the economic interests of its corporations and another state's interest is to protect its citizens from tortious conduct within its borders, courts in this district are inclined to find the latter interest to be greater, especially when the plaintiff's home state is also the place of injury. See, e.g., Wolfe v. McNeil-PPC, Inc., 703 F.Supp.2d 487, 494 (E.D. Pa. 2010)("Maine has a greater interest in having its law applied [to the punitive damages claim]. Maine, as the place where the drugs were prescribed and taken by one of its citizens, has a strong interest in applying its law to conduct that allegedly caused an injury in its borders."); Bearden v. Wyeth, 482 F.Supp.2d 614, 622 (E.D. Pa. 2006)("[W]e find that Arkansas has a greater interest in applying its laws to protect and provide redress for a citizen who was prescribed a drug, received any relevant representations or warnings about it, purchased it, ingested it, and was injured by it-all within his home state of Arkansas..."). This is true even when the corporation is headquartered in Pennsylvania.  I am persuaded by the reasoning in these cases. As the place of injury, domicile of the decedent, and location of the parties' relationship, Alabama has a greater interest in having its law applied in light of its longstanding policy to protect its citizens from fatal tortious conduct.
Applying New Jersey law to the punitive damages claim would also substantially frustrate Alabama's state interest in protecting its citizens and regulating corporate entities doing business within its borders. Applying New Jersey law to the issue of punitive damages could require this court to apply New Jersey law on other substantive claims. See Knipe v. SmithKline Beecham, 583 F.Supp.2d 602, 638 (E.D. Pa. 2008)("[T]he Court is mindful that New Jersey has sought to comprehensively regulate products liability actions in its state through the PLA and that the PLA applies to all of the substantive claims in this action."). Under these circumstances, Alabama's interest in having its law applied to all of its claims outweighs New Jersey's interest in having its law applied to the punitive damages claim.
The defendants want New Jersey law to control on the issue of punitive damages, citing a 1996 Eastern District of Pennsylvania case, Kelly v. Ford Motor Co . Kelly predicted the Pennsylvania Supreme Court would consider defendant's contacts to be the relevant contacts in a choice-of-law analysis for a punitive damages claim. 933 F.Supp. 465, 469 (E.D. Pa. 1996). Kelly adopted the reasoning in Serbin Dev. Corp. v. North River Ins. Co., Civ.A. No. 85-4273, 1986 WL 4315 (E.D. Pa. Apr. 8, 1986), a similar "prediction" from ten years earlier. Id. Kelly found the comments following Restatement (Second) Conflict of Law § 145 to be instructive: "If the primary purpose of the tort rule involved is to deter or punish misconduct... the state where the conduct took place may be the state of dominant interest and thus that of most significant relationship." Id. (quoting § 145 cmt. c, at 416). Kelly predicted that the Pennsylvania Supreme Court would rule similarly if faced with this issue. The defendants also cite Campbell v. Fawber, 975 F.Supp.2d 485 (M.D. Pa. 2013). Campbell found Kelly to be persuasive and adopted its reasoning. Id. at 507-08.
Kelly appears more often distinguished than followed. See, e.g., Bearden v. Wyeth, 482 F.Supp.2d 614, 621 n. 6 (E.D. Pa. 2006)("We note plaintiff's reliance on Kelly v. Ford Motor Co., 933 F.Supp. 465 (E.D. Pa. 1996), for the proposition that we must apply Pennsylvania law, but we find that case distinguishable."); Knipe v. SmithKline Beecham, 583 F.Supp.2d 602, 638 n. 36 (E.D. Pa. 2008)("Plaintiffs cite to Kelly v. Ford Motor Co., 933 F.Supp. 465 (E.D. Pa. 1996) in support of its argument that depecage should apply to allow a conflict of laws analysis with respect to a punitive damages claim. This case, however, is distinguishable...").
Kelly is distinguishable from this case. Unlike in Kelly, the corporate conduct which may have caused the plaintiff's injury occurred in two different states, Pennsylvania and New Jersey. This dilutes the significance of New Jersey as the alleged principal place of business of the defendants. Alabama's interest in having its law applied also is more significant than the state law interests discussed in Kelly. Like many other courts in this Circuit, I will decline to follow Kelly.
This same choice-of-law issue was very recently addressed in a New Jersey court in a very similar case. In Lyles v. McNeil-PPC, Judge Johnson ruled that New Jersey law applied to the issue of punitive damages, using New Jersey choice-of-law principles. See 12-cv-7263, Doc. No. 35, Ex. C. New Jersey choice-of-law analysis is similar to Pennsylvania's in that it considers the governmental interests of each state and then determines which state has the most significant relationship to the parties. See Lebegern v. Forman, 471 F.3d 424, 428-29, 433 (3d Cir. 2006). Lyles, however, is distinguishable. Because Judge Johnson was presiding in a New Jersey state court using New Jersey choice-of-law principles, he found New Jersey had a greater interest in having its punitive damages law applied. See 12-cv-7263, Doc. No. 35, Ex. C at 9 ("Regardless of any choice of law considerations urged by the Plaintiff, the fact remains that the Defendant is a New Jersey citizen and this is a New Jersey Court."). Judge Johnson also indicated that New Jersey policies would be frustrated if Alabama's wrongful death statute were applied to the defendants, New Jersey citizens. See id. ("Were McNeil a resident of Alabama, this Court's decision would likely be different, but neither the Constitution of our state, New Jersey statutory law nor our common law permit punishment of a defendant in a civil tort trial without an initial finding of conduct warranting punishment."). Given that I am sitting in a federal court in Pennsylvania applying Pennsylvania choice-of-law principles, New Jersey's interests in this case hold less weight than they did in Lyles. Instead, the law of the location of the injury holds greater significance.
Viewing the facts in light of the relevant policies, Alabama has more significant contacts with the decedent and her injuries in this case. The decedent purchased Tylenol in Alabama, she ingested Tylenol in Alabama, she was treated for injuries allegedly related to Tylenol in Alabama, and died in Alabama. She received warnings about Tylenol in Alabama and presumably viewed advertising about Tylenol in Alabama. The parties' consumer relationship was based in Alabama. These contacts outweigh the defendants' contacts to New Jersey and Pennsylvania. Alabama law shall apply to the plaintiff's wrongful death and punitive damages claims.
For the foregoing reasons, Alabama law shall be applied to all of the plaintiff's claims in this case.
An appropriate Order follows.