January 26, 2017

New Jersey Supreme Court Adopts the Substantial-Interest Test for Statute of Limitations Choice of Law

On January 24, the New Jersey Supreme Court adopted the substantial-interest test to determine choice-of-law questions in the application of statutes of limitations. New Jersey’s statute of limitations applies if (1) New Jersey has a substantial interest in the maintenance of the claim; and (2) there are no “exceptional circumstances” that “make such a result unreasonable.” The Court also found that the first part of the test is met by the state’s interest in deterring New Jersey manufacturers from placing dangerous products into the stream of commerce. This ruling is likely to result in plaintiffs suing local defendants in New Jersey on claims time-barred elsewhere.  

On Tuesday, January 24, 2017, the New Jersey Supreme Court issued a unanimous decision in McCarrell v. Hoffman-La Roche, Inc. et al., holding that the substantial-interest test set forth in section 142 of the Restatement (Second) of Conflicts of Law is now the operative choice-of-law rule for resolving statute of limitations conflicts in New Jersey. Under section 142, New Jersey’s statute of limitations controls if (1) New Jersey has a substantial interest in the maintenance of the claim; and (2) there are no “exceptional circumstances” that “make such a result unreasonable.”

In McCarrell, plaintiff was a citizen of Alabama, who had ingested Accutane and been treated for allegedly resultant injuries in his home state. He filed suit for his injuries in New Jersey against New Jersey-domiciled defendant manufacturer Hoffman-La Roche, Inc. within New Jersey’s statutory period, but after Alabama’s statute of limitations had expired.

Two different conflicts-of-law tests had earlier been applied in this case by lower courts. First, in 2003, the trial court denied defendants’ summary judgment motion by applying the governmental-interest test set forth in Gantes v. Kason Corp., 145 N.J. 478, 484 (1996). The Court found that Alabama had no discernable interest in barring an Alabama resident from pursuing a claim against a New Jersey pharmaceutical company in a New Jersey court, while New Jersey had a distinct interest in “deterring the manufacture and distribution of unsafe products within the state.” After appeal from a plaintiff’s verdict, reversal and remand on grounds unrelated to the statute of limitations issue, defendants renewed their statute of limitations challenge, arguing that  the decision of the New Jersey Supreme Court in P.V. ex rel. T.V. v. Camp Jaycee, 197 N.J. 132 (2008) mandated application of the substantial-relationship test set forth in sections 146, 145 and 6 of the Second Restatement. In Camp Jaycee, the Court had held those provisions applicable to the resolution of conflicts of substantive law in tort actions, with a presumption favoring the law of the state where the injury occurred. The trial court again denied the motion, but the Appellate Division reversed and dismissed the action, ruling that the substantial relationship test required application of Alabama’s statute of limitations.  

In Tuesday’s ruling, the New Jersey Supreme Court reversed, holding that section 142 is the provision specifically intended by the drafters of the Second Restatement to govern statute of limitations conflicts, and that New Jersey will now follow its substantial-interest test, in choice-of-law determinations involving statutes of limitations. The Court reasoned that the substantial-interest test “will channel judicial discretion and lead to more predictable and uniform results that are consistent with the just expectations of the parties.” Slip op. at 4, 36. The Court further held that New Jersey has a substantial interest in “deterring its manufacturers from placing dangerous products into the stream of commerce” and that there were no exceptional circumstances in McCarrell to make the application of New Jersey’s statute of limitations unreasonable. Id. at 4, 37-39. It also noted that the outcome was the same as under the governmental-interest test that initially had been applied by the trial court.

The Court observed that section 142’s “presumption” of application of the forum’s statute of limitations whenever the forum state has a substantial interest in maintenance of the action “advances notions of uniformity and predictability.” But so did the First Restatement’s now-discredited treatment of statutes of limitations as procedural. There seems little doubt that plaintiffs’ counsel will read the decision to mandate application of New Jersey’s statute of limitations whenever a plaintiff sues a New Jersey-based defendant in New Jersey’s courts. However, in citing approvingly its earlier decision in Heavner v. Uniroyal, Inc., 63 N.J. 130 (1973), the McCarrell Court suggested that incorporation in New Jersey is not enough to give New Jersey a substantial interest. McCarrell relied on the facts that the defendants designed, manufactured and labeled the drug in New Jersey. Would manufacture in New Jersey be enough if the drug was designed and labeled outside of New Jersey and there was no allegation of a manufacturing defect? Conversely, would design and/or labeling in New Jersey suffice if the drug were manufactured outside of New Jersey and the injury were due solely to a manufacturing defect? These and other questions involving application of section 142’s statute of limitations choice-of-law rule to myriad distinct fact patterns remain open to argument and further development of New Jersey law in future cases. Only time will tell if the Court achieved its goals of uniformity and predictability.

For further information please contact the following member of Goodwin’s Products Liability and Mass Torts PracticeJonathan Price.