A New Test for Statute of Limitations Choice of Law Decisions: Restatement Section 142

McCarrell v. Hoffman-LaRoche, Inc., 227 N.J. 569 (2017).  Justice Albin’s opinion for a unanimous (6-0, with Justice Patterson not participating) Court today referred to “our evolving choice-of-law jurisprudence.”  Today’s opinion, which adopted the test of the Restatement (Second) of Conflict of Laws §142 for the determination of choice of law in the statute of limitations context, is the latest step in that evolution.

This was one of the thousands of cases involving the drug Accutane, “a prescription medication for the treatment of severe cases of acne.”  The Accutane cases have been part of a multi-county mass tort litigation that was managed by Judge Higbee for a number of years until her promotion to the Appellate Division.

The case has a long procedural history, involving two lengthy trials, both of which resulted in verdicts for plaintiff.  In each instance, defendants appealed and the Appellate Division reversed the verdict.  The decision that resulted in today’s Supreme Court opinion held that the statute of limitations of Alabama, plaintiff’s home state, should have been applied at the trial level, not the longer limitations provision of New Jersey, where defendant, the manufacturer of Accutane, is based.  Plaintiff’s case was timely under New Jersey’s limitations law, but not under Alabama’s.

The Supreme Court granted review of that decision and reversed the Appellate Division, under the de novo standard of review, siding instead with Judge Higbee’s ruling in the Law Division.  That ruling applied the governmental interests test of Gantes v. Kason Corp., 145 N.J. 478 (1996), a products liability case that had stated that New Jersey had a strong interest in deterring wrongdoing by its domiciliary companies.

Justice Albin’s decision offers an exhaustive recap of the twists and turns in New Jersey’s choice of law jurisprudence.  In P.V. v. Camp Jaycee, 1979 N.J. 132 (2008), the Court replaced the governmental interests analysis with “the most significant relationship” test offered by the Restatement (Second).  (The governmental interests analysis itself superseded an earlier choice of law regime in the 1970’s, as Justice Albin recounted).  But P.V., and the Restatement sections on which it relied, did not involve statute of limitations issues.  A separate Restatement section, section 142, addressed choice of law in the limitations context.

It was only logical that, having adopted the Restatement test for choice of law in P.V., the Court would extend its commitment to the Restatement here and adopt section 142 for limitations-related choice of law issues.  As Justice Albin put it, the adoption of section 142 was “a natural progression in our conversion from the governmental-interest test to the Second Restatement begun in [P.V.], which adopted sections 146, 145, and 6 for resolving conflicts of substantive tort law.”  It was not to be expected that the Court would apply those same sections to limitations choice of law issues, Justice Albin said, since “the American Law Institute crafted section 142 of the Second Restatement precisely to address statutes of limitations as an independent issue for choice of law purposes,” and because “[t]he rationales for whether the forum state’s substantive law or statute of limitations should govern are different.”

Section 142 states that “the forum will apply its own statute of limitations barring the claim.”  So if the plaintiff would lose under the forum’s limitations law, the defendant gets the benefit of that law, without more.  But if forum limitations law would permit the claim, section 142 says, absent “exceptional circumstances,” that law will apply to permit the claim “unless (a) maintenance of the claim would serve no substantial interest of the forum; and (b) the claim would be barred under the statute of limitations of a state having a more significant relationship to to the parties and the occurrence.”

This test is consistent with Gantes, Justice Albin said, a case that “allowed an out-of-state citizen to pursue a products-liability action against a New Jersey manufacturer in our state courts because of New Jersey’s substantial interest in ensuring the manufacture and distribution of safe products.”  The Court today expressly and correctly rejected the “parochial” notion that New Jersey has no interest in protecting citizens of other states from injury.  “[P]roviding parity between an in-state and an out-of-state citizen makes perfect sense in a system sensitive to interstate comity.”

But section 142 also benefits defendants, as Justice Albin observed.  If Second Restatement sections 145 and 146 had applied instead of section 142, as defendants  argued should be the case, New Jersey defendants would lose the protection of New Jersey’s limitation period when the state of a plaintiff’s residence has a longer statute.  “A New Jersey company, generally, should not have to defend against a claim that is stale under this State’s statute of limitations in our courts, whether that claim is brought by a New Jersey resident or a citizen of another state.”  Justice Albin noted that Pitcock v. Kasowitz, Benson, Torres & Friedman, LLP, 426 N.J. Super. 582 (App. Div. 2012), discussed here, accurately predicted that the Supreme Court would adopt section 142.

Applying section 142 here, Justice Albin reaffirmed the view of Gantes that New Jersey has a substantial interest in deterring its manufacturers from making or distributing unsafe products.  Since New Jersey had a substantial interest, and there were no “exceptional circumstances,” section 142 dictated the application of New Jersey’s statute of limitations, under which plaintiff’s claims were timely.

The case is not over, however.  Defendants had raised other grounds for reversing the jury verdict.  The Supreme Court remanded the matter to the Appellate Division to consider those issues.

Besides adopting section 142 for the first time, the Supreme Court made another change to New Jersey’s choice of law jurisprudence.  Footnote 9 was part of Justice Albin’s review of Cornett v. Johnson & Johnson, 211 N.J. 362 (2012) (discussed here [Disclosure:  I argued Cornett for the plaintiffs]).  Cornett too was a statute of limitations choice of law case.  But there, as Justice Albin noted, the Court did not have to address whether section 142 should apply, because the Court found that there was no conflict between New Jersey law and that of Kentucky, Ms. Cornett’s home state.

Plaintiffs had argued that the difference between a one-year discovery rule (Kentucky’s statute, which barred the claim) and a two-year discovery rule (New Jersey’s statute, which permitted it) was a conflict, so that a choice of law analysis was required.  The Court did not agree.  But Justice Albin stated in footnote 9 of today’s opinion that, going forward, “when a lawsuit is filed timely under one state’s statute of limitations but not under another’s, a conflict of law exists, and a choice-of-law analysis is required.”  Under that new rule, Ms. Cornett would have defeated the defendants’ limitations argument.  The Supreme Court has come around to Ms. Cornett’s viewpoint, though too late for her.