NJ Supreme Court Adopts Restatement Second Section 142 to Determine Applicable Statute of Limitations

Jaret N. Gronczewski 

sfsfThe New Jersey Supreme Court has adopted Section 142 of the Restatement (Second) of Conflicts of Law (1971) as the test going forward to determine which State’s statute of limitations applies when there is a conflict between those laws. The Court’s opinion in McCarrell v. Hoffmann-La Roche, Inc., No. A-28-15 (Jan. 24, 2017), authored by Justice Albin, “completes the conversion from governmental-interest standard to the Second Restatement” for tort cases. The Court began that conversion in its opinion in P.V. ex rel. T.V. v. Camp Jaycee, 197 N.J. 132 (2008). The Court believes that its holding will “guide judicial discretion toward more predictable and just outcomes.”

The plaintiff in McCarrell is an Alabama resident that was prescribed Accutane in June 1995 to treat his acne. Defendants Hoffman-La Roche and Roche Laboratories, Inc.—both of which are incorporated and have their principal place of business in New Jersey—designed, manufactured, and labeled Accutane in New Jersey, and distributed Accutane from New Jersey as well. The plaintiff took Accutane for four months. Ten months after his usage stopped, the plaintiff began experiencing severe gastroenterological issues. He was diagnosed with inflammatory bowel disease in November 1996. He became anemic from constant rectal bleeding, he eventually had to have his colon and rectum removed, and he had to wear a colostomy bag for over four years. The plaintiff continues to suffer side effects from the irreversible organ damage.

The plaintiff filed a products-liability suit in New Jersey in July 2003. His primary theory was that the defendants failed to adequately warn about the risks and potential side effects of taking Accutane. He argued that had he known about those side effects, then he would not have agreed to take the drug. The defendants denied those allegations.

The defendants moved for summary judgment, arguing that Alabama’s two-year statute of limitation barred the claims. Unlike New Jersey, Alabama’s statute of limitations is not subject to equitable tolling under the “discovery rule.” The trial judge, using the governmental-interest test, found that New Jersey’s two-year statute of limitations applied, and because the plaintiff did not become aware that Accutane could have caused his condition until 2003, his claims were not barred. After a jury trial in 2007, the plaintiff was awarded a $2,619,000 judgment. Although the Appellate Division agreed that New Jersey’s statute of limitations applied, it reversed the judgment on other grounds.

A second trial was conducted in 2010, and the plaintiff then received a $25,159,530 verdict in his favor. The defendants moved for a judgment notwithstanding the verdict, arguing that in light of the Supreme Court’s intervening opinion in Camp Jaycee it was an error to apply New Jersey’s statute of limitations. The trial court rejected that argument. Moreover, it found that even if the court applied the substantial-interest test from the Second Restatement, then the result would be the same. The Appellate Division, however, agreed with the defendants, finding that Camp Jaycee “altered the landscape,” and that under Sections 146, 145, and 6 of the Second Restatement, Alabama’s statute of limitation should control. In rendering its decision, the Appellate Division found that the presumption favoring the law of the injury site taken from Sections 146, 145, and 6, could not be overcome. And it declined to apply Section 142, which specifically advances a presumption in favor of the forum law for conflicts between statutes of limitation.

The plaintiff argued that the Appellate Division’s refusal to apply Section 142 was erroneous. The defendants argued that applying Section 142 would be an “attempt[] to revive the now-defunct common-law rule that the forum state’s statute of limitations prevails as a matter of procedure.” The defendants also argued that adopting Section 142 would encourage forum shopping against New Jersey’s pharmaceutical companies. The Supreme Court agreed with the plaintiff.

As an initial matter, the Court observed there was a true conflict between the laws because the choice between them would be outcome determinative, i.e., the case is barred under Alabama’s statute and allowed under New Jersey’s statute. This necessitated that the Court determine which test is the appropriate test for determining conflicts between statutes of limitation in tort cases. The Court began by surveying the history of New Jersey’s choice-of-law jurisprudence.

New Jersey originally followed the common law approach favoring application of the forum’s statute of limitation as a matter of procedural law. The New Jersey Supreme Court abandoned that inflexible doctrine in 1973 in favor of a governmental-interest analysis, and the Court later reaffirmed that holding in 1996. The governmental-interest analysis had already been declared the test for conflicts between substantive tort laws in 1967. The Court then moved away from the governmental-interest approach for substantive tort law conflicts in Camp Jaycee. Instead, the Court found that the Second Restatement’s “most-significant-relationship test in Sections 146, 145, and 6” was the preferred choice because it was “a more nuanced approach than the governmental-interest test.”

One major benefit that the Court found to the Second Restatement’s approach in Camp Jaycee was “the use of ‘presumptions and detailed considerations that bear on conflicts analyses’ in deciding choice of law.” In terms of personal-injury matters, the presumption is to use the substantive law of the place of injury, which the Court adopted. The Court noted that, in deciding Camp Jaycee, it “was well aware that the Second Restatement had crafted different presumptions to apply in various other scenarios.” And the fact pattern in Camp Jaycee did not raise the issue of choosing between different statutes of limitation. If it did, then the Court “surely would have acknowledged Section 142, which is entitled ‘Statute of Limitations of Forum.’”

The Court specifically rejected the defendants’ argument that Camp Jaycee was a signal that the same presumption favoring the law of the injury site would apply to a statute-of-limitations conflict. The Court observed that the ALI purposefully placed Section 142 in the Second Restatement to deal with such conflicts. Moreover, it observed that the rationales “for whether the forum state’s substantive law or statute of limitations should govern are different.” Those differing rationales explain the divergent presumptions set forth in Section 142 and 146. The Court reasoned that adopting Section 142 was the logical next step to complete the implementation of the Second Restatement for conflicts in tort cases.

Under Section 142, if the forum state’s statute of limitations would permit the claim, then the presumption is to apply the forum’s law when the forum state has a substantial interest. If the forum state has no substantial interest, then the other state’s statute of limitations would apply if the other state has “a more significant relationship to the parties and the occurrence.” To determine whether the other state has a more significant relationship, a court must use the factors provided in Section 6. That general approach is to be followed “unless the exceptional circumstances of the case make such a result unreasonable.”

The Court also opined that Section 142’s test is preferable to the government interest approach because “Section 142 is a less malleable standard than the governmental-interest test.” Pursuant to a Section 142 analysis, the forum state’s significant interest creates a strong presumption in favor of that state’s statute of limitations, which can be overcome only in exceptional circumstances. In the governmental interest approach, the forum state’s substantial interest is not as conclusive. Thus, “[f]or all practical purposes, under section 142, once a court finds that the forum state has a substantial interest in the litigation, the inquiry is at an end.” The Court was persuaded that Section 142’s presumption “will channel judicial discretion to ensure a higher degree of uniformity and predictability in resolving choice-of-law issues.”

Next, the Court applied Section 142 to the case facts. It found that New Jersey “has a substantial interest in deterring its manufacturers from developing, making, and distributing unsafe products, including inadequately labeled prescription drugs.” And New Jersey’s “interest extends to protecting not just citizens of this State, but also the citizens of other states.” In other words, the Court determined that “[o]ur national compact and our interstate system suggest that we should treat the citizens of other states as we treat our own.” It also observed that had it found that New Jersey had no substantial interest, it still was not “self-evident that Alabama has a more significant relationship than that of New Jersey.” In addition, in the Court’s view, there were no “exceptional circumstances” that would warrant overriding the presumption in favor of applying New Jersey’s statute of limitations. As a result, the Court reinstated the jury verdict and remanded the matter to the Appellate Division to consider the remaining unaddressed appellate issues.

The Supreme Court’s clear pronouncement that the Second Restatement applies to conflicts between statutes of limitations will benefit both New Jersey’s courts and attorneys. McCarrell gives attorneys a measure of predictability to advise clients that are facing conflicting statutes of limitation. Whether the defendants’ prediction of increased forum shopping by out-of-state litigants against New Jersey’s numerous pharmaceutical companies comes to fruition will remain to be seen.

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