NJ Supreme Court Rules that Consumer Fraud Act Claims Are Preempted By Product Liability Act
June 2, 2008
The Vioxx litigation has consumed a great deal of judicial resources in New Jersey where the drug's manufacturer is headquartered. It has also clarified many unsettled areas of law.
In <em>McDarby v. Merck</em>, the New Jersey Supreme Court examined a punishing jury verdict against Merck that included an award in excess of $4,000,000 just for attorney's fees and costs for its violation of the Consumer Fraud Act ("CFA"). Under the CFA, a successful plaintiff can recover treble damages, attorneys fees and costs if an unconscionable commericial practice is proven. In contrast, New Jersey's Product Liability Act ("PLA") permits recovery if a product manufacturer fails to adequately warn prescribing physicians of the risks of a drug's use but without any provision for the recovery of enhanced damages. The question presented in <em>McDarby</em> was whether the PLA provided the exclusive remedy for claims of economic loss sustained by the plaintiffs or whether the CFA with its enhanced damages could be also be utilized. The issue was far from academic since the multi million dollar award of attorneys fees and costs hinged on the Supreme Court's decision.
In <em>McDarby</em>, plaintiffs' theories under the CFA and PLA overlapped. To support their CFA claim, plaintiffs argued that Merck's failure to "be truthful in the marketing of [Vioxx]" represented a misrepresentation designed to mislead consumers. To support their PLA claim, plaintiffs argued that Merck provided inadequate warnings regarding the cardiovascular risks of Vioxx, a claim that seemed remarkably similar to their CFA claim.
The PLA states that it is the exclusive remedy for harm caused by a product. The Supreme Court agreed with Merck that, under both theories of liability, plaintiffs were seeking recovery based on Merck's failure to provide adequate warnings, a classic product liability claim. Under New Jersey's statutory product liability scheme, the sole and exclusive remedy is provided in the PLA. Thus, the PLA preempts the CFA when a product liability claim is made.
Bottom line: in an action under the PLA, successful plaintiffs are limited to tort damages alone and cannot obtain treble damages, attorneys fees or costs under the CFA.