Henry v. Richardson-Merrell, Inc.

Decision Date22 January 1975
Docket NumberNo. 74-1198,RICHARDSON-MERREL,INC,74-1198
Citation508 F.2d 28
PartiesDenis HENRY, a minor by Gaston Henry and Lorraine Henry, his natural parents and guardians, et al., Appellees, v., a Delaware corporation and Merrell-National Laboratories, Division of Richardson-Merrell, Inc., a Delaware Corporation, Appellants.
CourtU.S. Court of Appeals — Third Circuit

Robert P. Gorman, Michael R. Cole, Clapp & Eisenberg, Newark, N.J., Raynes, McCarty & Binder, Arthur G. Raynes, Philadelphia, Pa., for appellees.

Riker, Danzig, Scherer & Brown, Peter N. Perretti, Jr., James S. Rothschild, Jr., Newark, N.J., for appellants.

Appeal from the United States District Court for the District of New jersey.

Before VAN DUSEN, HUNTER and GARTH, Circuit Judges.

OPINION OF THE COURT

JAMES HUNTER, III, Circuit Judge:

This is a diversity case in which plaintiff-appellee seeks damages for personal injuries suffered as a result of his mother's ingestion of thalidomide during pregnancy. In the present appeal, appellant drug company challenges the district court of New Jersey's application of the New Jersey statute of limitation and consequent denial of its motion for summary judgment. Henry v. Richardson-Merrell, Inc., 366 F.Supp. 1192 (D.N.J., 1973). 1 The district court's interlocutory order was certified for appeal under 28 U.S.C. 1292(b).

Twelve-year old appellee, Denis Henry, is a citizen and resident of Quebec, Canada. Appellant Richardson-Merrell, Inc., is a Delaware corporation with principal offices in New York which engages in national and international drug sales. Richardson-Merrell does transact some business in New Jersey. 2

Plaintiffs originally filed this suit in the New Hersey State courts, at which the New Jersey State courts, at which Richardson-Merrell's registered agent in New Jersey. Defendant subsequently removed the suit to federal court on grounds of diversity of citizenship.

The present controversy deals with the statute of limitation to be applied in the case at bar. Quebec prescribes a one-year delictual limitaion 3 which is not tolled for minors. New Jersey's two year personal injury limitation is tolled for minors until two years after the minor attains the age of 21. 4 The law of no other jurisdiction was pleaded by the parties.

Appellant contends that the trial court's application of the New Jersey limitation must be reversed since the expired Quebec prescription properly applies.

After careful consideration of appellant's contention, the judgment of the district court will be reversed. The suit will be dismissed as timebarred under the applicable Quebec limitation since this court concludes that the choice of law principles of New Jersey, the forum state, mandate such a result. 5

I.

The facts alleged by plaintiff are as follows. Lorraine Henry, mother of the infant appellee, ingested Kevadon, Richardson-Merrell's brand of thalidomide, in July of 1961 during thr first trimester of pregnancy. The drug was prescribed by a Quebec physician while Mrs. Henry was a patient in a Quebec hospital. In March of 1962, plaintiff-appellee, Denis Henry, was born in the same hospital with severe and permanent birth defects. 6

In 1961 appellant, Richardson-Merrell, was engaged in testing, manufacturing and marketing its thalidomide tablet, Kevadon. The complaint alleges that Denis Henry's infuries resulted from Richardson-Merrell's negligent, fraudulent, willful, wanton and reckless conduct in failing properly to test, label and market the drug, in improperly obtaining government permission to market the drug, in refusing to heed and supply adequate warnings, in failing to comply with the Canadian and United States food and drug laws, in manufacturing a defective drug and in violating express and implied warranties of fitness and merchantability.

Thalidomide was developed in Germany as a sleeping pill and was licensed by the German developer to Richardson-Merrell in 1958 for manufacture and distribution in North America. Although the Canadian Drug Directorate approved use of the drug in April of 1961, the United States Food and Drug Administration withheld approval because it found testing data, supportive of the new drug application, insufficient.

During the late 1950's defendant-appellant imported the active ingredient into the United States from Germany. The ingredient was synthesized into tablets and packed at Merrell-National Laboratories in Ohio. Sometime in 1961, 7 Richardson-Merrell's subsidiary, Baker, began production of the active ingredient of Kevadon at its New Jersey plant. This ingredient was then shipped to Ohio where it was formed into Kevadon tablets and packed for shipment. The Canadian Kevadon shipments originated at the Merrell-National Laboratories in Cincinnati, Ohio.

II.

Under Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1940), a federal court sitting in diversity must apply the conflicts of law principles of the forum state. In the present conflict between the laws of New Jersey and Quebec, the conflicts of law principles of New Jersey, the forum state, govern the limitation period which applies.

NEW JERSEY'S CHOICE OF LAW RULES

In a series of cases beginning with Mellk v. Sarahson, 49 N.J. 226, 229 A.2d 625 (1967) and Pfau v. Trent Aluminum Company,55 N.J. 511, 263 A.2d 129 (1970), New Jersey courts adopted the governmental interest approach to choice of law questions. This approach requires a two-step analysis. The court determines first the governmental policies evidenced by the laws of each related jurisdiction and second the factual contacts between the parties and each related jurisdiction. A state is deemed interested only where application of its law to the facts in issue will foster that state's policy. 8 This approach does not count up contacts and make quantitative determinations of interest based on which state has the greatest number of contacts. Instead, the qualitative nature of contacts is considered so that only contacts which are likely to promote valid state policies are considered relevant. Mullane v. Stavola, 101 N.J.Super. 184, 243 A.2d 842, 845 (1968).

Until quite recently, the New Jersey governmental interest approach applied only to choices of substantive law. Procedural matters, such as the appropriate statute of limitations, were governed by forum law. In Heavner v. Uniroyal, Inc., 63 N.J. 130, 305 A.2d 412 (1973), the New Jersey Supreme Court abandoned the mechanistic application of the forum statute of limitation in cases where a foreign substantive law was chosen. 9 The Heavner borrowing rule explicitly seeks to discourage forum shopping by litigants with slender ties to New Jersey who desire the benefit of New Jersey's more favorable limitation period.

In determining whether the present eause of action is timebarred, New Jersey choice of law rules therefore require a determination of which law will govern the merits of the case. 10

In Heavner v. Uniroyal, Inc., supra, a North Carolina couple sued a tire manufacturer incorporated in New Jersey for injuries to the husband caused by the blowout of a defective tire. Plaintiff-husband purchased a truck equipped with the defective tire in North Carolina; the accident occurred in North Carolina and plaintiffs at all times were domiciled in North Carolina. Defendant manufacturer transacted business in each of the fifty states, including North Carolina and New Jersey.

The court Stated that mere incorporation in New Jersey was a contact insufficient to warrant the application of New Jersey substantive law. Since the North Carolina limitation period, borrowed with its substantive law, had already expired, the suit was dismissed. 11

The court in Heavner did not explain its failure to examine the policies behind the laws of North Carolina and New Jersey but it is clear that there were insufficient factual contacts to justify the application of New Jersey law. Implicit in Heavner is a finding that New Jersey was a disinterested forum.

The methodology by which the court concluded that New Jersey was a disinterested forum in Heavner is not laid out. Heavner, supra, 305 A.2d at 414 n. 3. Instead the court makes reference to the earlier New Jersey cases of Mellk v. Sarahson and Pfau v. Trent Aluminum Co., supra. Applying the Mellk-Pfau governmental interest approach to Heavner, it appears that the policies evident in New Jersey's liberal products liability law would not have been fostered in the case. The primary purpose of a torts recovery is to compensate plaintiffs for their injury. Since the Heavners were domiciliaries of North Carolina, New Jersey had no interest in protecting their compensation rights. An alternate purpose of torts suits is to exact compensation from the tortfeasor in order to deter future misconduct. 12 Where the tortious activity took place wholly outside of New Jersey as in Heavner, however, that policy could not be fostered. Similarly, the longer New Jersey statute of limitation in Heavner was probably enacted with a view toward protecting New Jersey citizens in whom the legislature had an interest.

Despite New Jersey's governmental policy favoring liberal products liability recovery, there was simply no factual basis to apply that policy in Heavner.

The disinterested forum conclusion in Heavner is in contrast to Mellk v. Sarahson and Pfau v. Trent Aluminum Co. In Mellk, plaintiff and defendant were New Jersey residents who were involved in an Ohio auto accident. Plaintiff was injured while riding as a passenger in a car driven by defendant. The car was owned and insured by a New Jersey resident. The court in Mellk refused to apply Ohio's guest statute which barred recovery to auto guests who failed to show wanton misconduct by the host driver. The court concluded that while sound principles of comity required the application of Ohio's rules of the road, 229 A.2d at 627, Ohio had no...

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