Although the jurisprudence interpreting New Jersey’s Product Liability Act (“PLA”), N.J.S.A. 2A:58C-1, et seq., has grown steadily since its adoption in 1987, this past year will be remembered as a watershed year. In 2008, personal injury and putative class actions filed in the wake of the 2004 Vioxx product withdrawal worked their way up through our court system and gave New Jersey’s courts several opportunities to clarify, or otherwise construe several key provisions of the PLA. These decisions have already had a profound effect on products liability litigation in the state, and will likely continue to shape the course of litigation in the years to come. This Alert reviews the highlights of 2008, and identifies anticipated developments to look for in 2009.
Consumer Fraud Claims are Subsumed by the PLA
Passed in 1960, New Jersey’s Consumer Fraud Act (“CFA”) provides recovery for economic loss sustained as a result of fraud or misrepresentation in connection with the sale of goods. N.J.S.A. 56:8-2. Successful claimants are entitled to collect treble damages as well as attorneys fees and costs. N.J.S.A. 56:8-19. In recent years, plaintiffs’ counsel have routinely pled violations of the CFA, presumably to enhance the value of otherwise traditional products liability claims or to support putative class allegations. This strategy was often successful, and if nothing else, gave plaintiffs leverage during settlement negotiations.
After rulings by the Appellate Division in McDarby v. Merck & Co., Inc., 401 N.J. Super. 10 (App. Div.), certif. granted on other grounds, 196 N.J. 597 (2008), and the Supreme Court in Sinclair v. Merck & Co., Inc., 195 N.J. 51 (2008), such opportunities will be severely limited, if not eliminated altogether. Both McDarby and Sinclair found that plaintiffs’ CFA claims regarding Vioxx were subsumed by the PLA.
Each court reasoned that the PLA was meant to be “expansive and inclusive” and to include all claims “for harm caused by a product irrespective of the theory underlying the claim, except for actions for harm caused by breach of an express warranty.” N.J.S.A. 2A:58C-1b(3). Since the essence of plaintiffs’ respective claims was harm caused by Vioxx (and were not express warranty claims), the courts limited plaintiffs’ remedy to the PLA. As a result, plaintiffs were not permitted to pursue alternative relief under the CFA.
There were two important developments here, both in McDarby. First, the Appellate Division rejected Merck’s argument that the federal Food Drug and Cosmetic Act (“FDCA”) preempted plaintiffs’ failure to warn claims. The court found no conflict between state law and federal regulations (in effect at the time) which required a manufacturer to revise its label to include a warning “as soon as there is reasonable evidence of an association of a serious hazard with a drug….” 21 C.F.R. § 201.57(e). The court acknowledged that the Preamble to the 2006 final rule on prescription drug labeling contained a policy statement favoring preemption, but nevertheless found it to be merely an expression of the current administration’s view, rather than a regulation to which deference was owed.
The Appellate Division will not have the final word here. In October 2008, New Jersey’s Supreme Court granted certification on this limited issue – notwithstanding the fact that the same legal issue (albeit with the Wyeth product, Phenergan, and a different labeling history) is currently under review by the U.S. Supreme Court in Levine v. Wyeth, 944 A.2d 179 (Vt. 2006), cert. granted, Wyeth v. Levine, 128 S. Ct. 1118 (2008). The Levine case is clearly more mature than McDarby – it is fully briefed and was argued in November 2008. A briefing schedule and date for argument has yet to be set in New Jersey. One cannot help but wonder if the New Jersey Supreme Court will defer its ruling in McDarby until after Levine is decided. Either way, important rulings on preemption are expected in New Jersey in 2009.
The second development in the area of preemption involved punitive damages. Under the PLA, punitive damages are not awarded in cases involving FDA approved drugs and devices unless there is evidence that the “product manufacturer knowingly withheld or misrepresented information required to be submitted under the agency’s regulations, [and the] information was material and relevant to the harm in question….” N.J.S.A. 2A:58C-5c. In McDarby, plaintiffs argued that FDA would have responded differently to Merck’s supplemental new drug application if Merck had not withheld from the agency a certain meta-analysis regarding Vioxx and heart attack. Relying on principles set forth in Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341 (2001), the court agreed with Merck that “policing fraud against federal agencies is hardly a field in which the States have traditionally occupied” and that plaintiffs’ punitive damages claims based on fraud on the FDA were impliedly preempted by the FDCA. McDarby, 401 N.J. Super. at 89, 93-94.
FDA Approved Labels/Presumption of Adequacy
Under the PLA, FDA approval of a drug or device label gives rise to a rebuttable presumption that the label is adequate. N.J.S.A. 2A:58C-4. Prior to 2008, the presumption could be rebutted only by showing evidence of “deliberate concealment or nondisclosure of after acquired knowledge of harmful effects….” Perez v. Wyeth Lab., 161 N.J. 1 (1999). In McDarby, the Appellate Division recognized an additional basis for rebutting the presumption, namely evidence of a company’s “economically driven manipulation of the post-market regulatory process.” McDarby, 401 N.J. Super at 63. The Appellate Division reasoned that flaws in the FDA’s postmarketing oversight process prior to 2007, along with Merck’s post-marketing efforts to dilute the labeling and prevent the results of a particular study from being communicated, justified a further exception to the presumption of adequacy. While McDarby expanded the type of evidence available to rebut the presumption, it is too early to tell what effect it will have on failure to warn claims. Within months of the McDarby decision, the trial judge managing hundreds of Hormone Replacement Therapy (“HRT”) cases granted defendants’ motions for summary judgment based in large part on plaintiffs’ failure to provide the “specific type of evidence necessary to overcome the rebuttable presumption of adequacy.” Bailey v. Wyeth, Inc., No. MID-L-0999-06MT, slip op. (Law Div. July 11, 2008)(unpublished), appeal pending. As of this writing, Bailey is on appeal and plaintiffs are scheduled to submit briefs by the end of January 2009. No date for oral argument has been set. Appellate review of Bailey will likely have implications for failure to warn claims in existing and future pharmaceutical and medical device cases.
PLA Claims for Medical Monitoring Require Physical Injury
In addition to filing thousands of personal injury claims, plaintiffs in Vioxx sought certification of a nationwide class for medical monitoring. Plaintiffs in Sinclair proposed a class which would consist of individuals who had taken Vioxx for six consecutive weeks, but were not pursuing personal injury claims. Rather, their requested relief was in the form of medical surveillance to detect an alleged latent or as yet unrecognized heart attack. Sinclair, 195 N.J. at 55-56.
In prior decisions, New Jersey’s Supreme Court had permitted medical monitoring as a remedy in environmental tort actions and in an asbestos case. The question in Sinclair was whether plaintiffs could recover medical monitoring damages based on their PLA claims. The starting point of this inquiry was whether plaintiffs had, in fact, suffered harm under the PLA. “Harm” is defined in relevant part as “personal physical illness, injury or death.” N.J.S.A. 2A:58C-1b(2). Giving these words their “common sense meaning,” the Court concluded that the PLA required a physical injury. Sinclair, 195 N.J. at 54. Since plaintiffs did not allege a physical injury, they failed to state a claim for medical monitoring. This was an important clarification – without it, plaintiffs could (incredibly) have sought damages in the absence of any known present injury.
We expect that 2009 will also produce significant product liability decisions. We will transmit additional Client Alerts as developments warrant.
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