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The Penalty Game


Courtesy of Chris Potter and Stockmonkeys.comJohnson and Johnson (J&J) and its subsidiary Janssen Pharmaceuticals have been dealing with multiple lawsuits stemming from its drug Risperdal. Shortly after dodging a $1.2 billion judgment in Arkansas, J&J has returned its focus to the multidistrict litigation (MDL) currently pending in Pennsylvania. The company is now trying to shield itself from the punitive damages requested by approximately 375 plaintiffs in the MDL proceedings.

J&J has filed a motion for summary judgment claiming that a New Jersey law should be applied to the case in order to shield the company from these requested punitive damages. The law that J&J is citing is the New Jersey Products Liability Act, which limits product liability for any drug that is subject to premarket approval or licensure by the federal Food and Drug Administration. They are claiming that since J&J is headquartered in New Jersey, any potential punitive conduct would have taken place in that state, which means that this New Jersey law should apply.

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The plaintiffs claim that this contention runs counter to J&J’s earlier position where it stated that the law of the state where Risperdal was prescribed, ingested, and marketed should control the issue of punitive damages. They also argue that since the company maintains offices in Pennsylvania, and because Janssen officials regularly met in the state to discuss marketing strategies, that Pennsylvania law should apply in the cases. This is important because Pennsylvania does not have a statute that would cap punitive damages like New Jersey.

This is not the first time this argument has been presented by a pharmaceutical company. In 2012, Novartis, also located in New Jersey, made the same argument. The decision will hinge on which state had a more “significant relationship” to the conduct. However, this test is notoriously discretionary and can go either way depending on what factors the court decides to look at. This is evidenced by the fact that a Pennsylvania court decided not to apply the New Jersey statute in the Novartis cases while a court in New York did. Based off of the prior Pennsylvania court ruling and J&J’s prior position on the issue, there is a good chance that the court in this case will dismiss the motion. Be that as it may, it is by no means a sure thing.

Because the test is discretionary, the court can really go either way on the decision to allow for punitive damages. However, for policy reasons, it would be an error for the court to apply the New Jersey statute to this case. It was mentioned earlier that Novartis along with J&J is located in New Jersey. This is not a coincidence. Laws in New Jersey are very favorable to pharmaceuticals. As a result, a large amount of companies are headquartered there. If the court decides to apply the New Jersey law merely because J&J is headquartered there, it will set a terrible precedent that other companies headquartered in New Jersey will likely use in future arguments over the application of punitive damages in products liability cases.

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