Wednesday, November 7, 2012

Nerve Center Test in Drug/Device Cases

The folks over at Drug and Device Law Blog have a post on some recent cases applying the Hertz v. Friend nerve center test to pharmaceutical litigation.

From the post: 

That was the one of the central questions in Moore v. Johnson & Johnson, No. 12-490, slip op. (E.D. Pa. Nov. 1, 2012). It’s a Tylenol case and the Tylenol in question was produced by a subsidiary of Johnson & Johnson, McNeil-PPC, Inc. (also a defendant) at a Pennsylvania facility.  Plaintiff also sued two J&J executives and Costco (where plaintiff bought the Tylenol). Plaintiff is from Washington state but brought her suit in Pennsylvania.  Defendants removed and plaintiffs filed a motion to remand arguing in part that McNeil-PPC is a citizen of Pennsylvania and therefore barred from removing a Pennsylvania state court action.  Slip op. at 2.  Plaintiff contended that McNeil’s “nerve center” was in Pennsylvania because three out of four of its highest-ranking officers are based in Pennsylvania.  Id. at 5.   

            Defendant, on the other hand, claimed McNeil’s principal place of business was in New Jersey.  The basis for this position is that McNeil’s Pennsylvania-based officers’ “actual management responsibilities are limited to that division.”  Id. at 6.  Meanwhile, defendants argued that
The bulk of the management functions for McNeil-PPC and other J&J subsidiaries . . . are carried out by executives associated with J&J’s Family of Consumer Companies (“FCC”). . . overseen by a Group Operating Committee (“GOC”) that exercises high-level direction for the corporate entities within its sector. 
Id.  And that the GOC and FCC are made of people who work in Skillman, New Jersey.  Id. at 6-7.   However, with the exception of one, “none of the senior executives running operations for the FCC are officers of McNeil-PPC, nor are they employees of that particular corporation.  They are employed by other J&J entities.” Id. at 7.  So, to agree with defendants – which the court did -- it had to “consider activities of executives outside a party’s corporate structure.”  Id. at 17.  That sounds a lot like piercing the corporate veil – something corporate defendants usually vehemently oppose.  So, while defendants got the result they wanted in this case – remand denied -- we actually aren’t sure how to feel about this decision.


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