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Smith v. Alza Corp.

June 9, 2008

ROGER SMITH AND MARTHA KING SMITH, HIS WIFE, PLAINTIFFS-APPELLANTS/ CROSS-RESPONDENTS,
v.
ALZA CORPORATION, GUM TECH INTERNATIONAL, INC., HEALTH AND NUTRITION SYSTEMS INTERNATIONAL, INC., HERITAGE CONSUMER PRODUCTS, LLC, INSIGHT PHARMACEUTICAL CORP., LEE CAPITAL HOLDINGS LLC, NOVARTIS CONSUMER HEALTH, INC., NOVARTIS PHARMACEUTICALS CORPORATION, THE PENN TRAFFIC COMPANY, J.B. LABORATORIES, ERIC KURTHS, DEFENDANTS, AND STERITEK, INC., DEFENDANT-RESPONDENT/CROSS-APPELLANT.



On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-009872-02.

The opinion of the court was delivered by: Parrillo, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued May 5, 2008

Before Judges Parrillo, S.L. Reisner and Baxter.

Plaintiff Roger Smith, an Alabama resident, brought a products liability action in New Jersey against, among others, New Jersey-based defendant Steritek, Inc., after suffering a hemorrhagic stroke allegedly as a result of taking the diet drug Acutrim, an over-the-counter product containing phenylpropanolamine (PPA), which defendant labeled and packaged in bulk for sale. The motion judge summarily dismissed plaintiff's complaint finding that defendant qualified for "seller" immunity under N.J.S.A. 2A:58C-9.

The essential issue on appeal concerns the distinction between "seller" and "manufacturer" and presents the question whether a product packager or labeler is a "seller" entitled to statutory protection from strict liability or instead is a part of the "manufacturing" process otherwise subject to account for a product defect under New Jersey's Products Liability Act, N.J.S.A. 2A:58C-1 to -11. We adhere to the latter view based on the facts of record and therefore reverse the summary judgment dismissal of plaintiff's complaint. We also hold that under New Jersey's choice-of-law rules, the State's procedural and substantive law governs plaintiff's claims, including those under the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to 8-20, over Alabama's counterparts.

The facts material to resolution of these issues are largely undisputed. Plaintiff was a 52-year old Army helicopter pilot residing in Alabama when the incident occurred on October 3, 1999. A few weeks earlier, he had been on temporary duty in Philadelphia where he purchased a small amount of Acutrim to help suppress his appetite. Following his routine, while at home in Alabama on the afternoon of October 3, plaintiff ingested one pill before his daily workout. After exercising for about forty-five minutes, plaintiff fell ill and entered the shower. He has no recollection of what transpired next.

Plaintiff was found unconscious in the shower by emergency personnel who transported him to the local hospital where, appearing "comatose," he was intubated. A CT scan revealed a large intraparenchymal hematoma of the right posterior parietal occipital area. Plaintiff was transferred the next day to South Alabama Medical Center, where he underwent surgery for an emergency "right parietal occipital craniotomy [for] evacuation of intracerebral hematoma." He was eventually discharged on October 21, 1999 with a prognosis of likely permanent injuries.

Plaintiff's expert opined that plaintiff suffered a hemorrhagic stroke "due to the ingestion of Acutrim containing PPA." At the time, plaintiff had been in reasonably good health and had no known risk factors, including hypertension, for stroke.

Acutrim is an over-the-counter weight loss product that was advertised as providing maximum strength appetite control. On the front of the Acutrim package were the words "Safe, Effective Weight Loss - Works All Day." According to the label on the rear of the package, the active ingredient in Acutrim is PPA.

"Phenylpropanolamine [PPA] is a synthetic sympathomimetic amine commonly found in appetite suppressants and cough and cold remedies."*fn1 "Sympathomimetic" means that it shares many of the same effects as stimulation of the sympathetic nervous system (fight or flight response) including cardiovascular effects (elevation of blood pressure and force of contraction of the heart) and central nervous system effects (increased alertness, anxiety).

There have been studies, reports, and articles dating back more than twenty years warning of the grave risks of PPA, such as (1) high blood pressure; (2) hemorrhagic stroke due to PPA's tendency to elevate blood pressure and narrow the cerebral vessels; and (3) seizures. Medical studies have concluded that PPA's risk-benefit ratio does not justify its clinical use, as it is "not an essential or irreplaceable medication because alternatives are available to treat each of its indications (nasal congestion, obesity), and have been for several decades."

Based on these reports, particularly a large scale epidemiologic study, known as the Yale Study, concluded in 1999, the Food and Drug Administration (FDA), which earlier declined to categorize PPA as safe and effective in 1985*fn2 , and again in 1994*fn3 , published a Proposal to Withdraw Approval in the Federal Register on August 14, 2001, declaring its intention to withdraw approval of all PPA containing products.*fn4

Notwithstanding these reports, the labels of products containing PPA failed to warn of the associated risks of increased blood pressure, hypertension and the potential for strokes. No such warnings were included on the Acutrim label.

Acutrim was manufactured by Michigan-based J.B. Laboratories (J.B. Labs), which shipped the finished tablets in bulk to Steritek, a New Jersey contract packager of a variety of healthcare, beauty and pharmaceutical products for packaging, labeling, and distribution. The packaging was actually provided by another Acutrim manufacturer, Heritage Consumer Products (Heritage).*fn5 Once received at its Moonachie plant, Steritek packaged the Acutrim tablets in "blister" packaging, placed the labeling on the boxes, put the boxes into cartons, and shipped the packaged Acutrim to an out-of-state distribution center designated by Heritage. Steritek's Executive Vice-President emphasized, however, that at no time during the period of its contract services -- from 1999 to prior to the FDA's recall of PPA products -- did Steritek maintain or exercise significant control over "the labeling, directions for use, warnings, or other consumer information placed or intended to be placed on the Acutrim product."

Plaintiff's original complaint named a number of defendants involved in the manufacture, packaging, and distribution of products containing PPA and alleged causes of action grounded in negligence, products liability for defective design and failure to warn, breach of express and implied warranty, and violations of New Jersey's Consumer Fraud Act, among others. The complaint was later amended to include Steritek.

Following discovery, Steritek moved for summary judgment arguing that under Alabama's statute of limitations, which does not recognize the "discovery rule," plaintiff's action is time-barred and, alternatively, that defendant was a "seller,"

N.J.S.A. 2A:58C-8, and therefore entitled to seller's immunity, N.J.S.A. 2A:58C-9. The motion judge, applying the "governmental interests" test, concluded that New Jersey procedural law applied, but that Steritek qualified for the statutory "product seller" exemption inasmuch as it did not "exert significant control over the manufacture of the product to hold them [sic] strictly liable." The judge reasoned:

In this case, the Court finds that Steritek was indeed a 'product seller', because they distributed the product as recognized at oral argument, and packaged and labeled the product according to Heritage's specifications. The [c]court further finds that Steritek failed to exert the requisite control relative to the alleged defect, which would prevent them from utilizing the [N.J.S.A.] 2A:58C-9 escape provision.

Accordingly, the judge dismissed plaintiff's complaint.*fn6

Plaintiff appeals, maintaining Steritek is a non-selling "manufacturer" within the meaning of N.J.S.A. 2A:58C-8, and therefore not entitled to seller's immunity under N.J.S.A. 2A:58C-9. Defendant disagrees, and cross-appeals, arguing that plaintiff's complaint should be dismissed as time-barred under Alabama's procedural law and as not viable under that state's substantive law of products liability and breach of warranty. We hold that New Jersey law applies and that defendant is not entitled to statutory immunity under our law.

We address these points in the order presented.

(i)

"Product liability actions in New Jersey are governed by our Products Liability Act [(PLA)], N.J.S.A. 2A:58C-1 to -11." Banner v. Hoffmann-La Roche Inc., 383 N.J. Super. 364, 375 (App. Div. 2006), certif. denied, 190 N.J. 393 (2007). Liability under the PLA is limited to manufacturers and "product sellers."

A manufacturer or seller of a product shall be liable in a product liability action only if the claimant proves by a preponderance of the evidence that the product causing the harm was not reasonably fit, suitable or safe for its intended purpose because it:

a. deviated from the design specifications, formulae, or performance standards of the manufacturer or from otherwise identical units manufactured to the same manufacturing specifications or formulae, or b. failed to contain adequate warnings or instructions, or c. was ...


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