An employee’s whistleblower suit in another state doesn’t toll the statute of limitations for filing a claim in New Jersey, a state appeals court held Wednesday.
The Appellate Division, in Schmidt v. Celgene Corp., A-2685-10, upheld dismissal of the litigant’s untimely filing of the New Jersey suit a year after he began pursuing claims in his home state of Texas.
A ruling on choice of law is a ruling on the merits, the court said, noting that the doctrines of substantial compliance and equitable tolling are applicable only where the initial court dismissed the litigation entirely, and not based on its merits, neither of which occurred.
David Schmidt began working for Summit-based Celgene Corp., a biopharmaceutical company, in 1997 as an immunology specialist.
He lived in Texas beginning in 2000, but reported to supervisors in New Jersey.
Schmidt received several promotions, and by 2005 was national account manager.
In that position, he dealt with pharmaceutical distributors, including CVS/Caremark Corp. Caremark distributed Revlimid, a cancer drug developed by Celgene and approved by the Food and Drug Administration for some patients.
The FDA required prompt reporting of adverse reactions, obligating Celgene’s distributors to report incidents to Celgene within five days of notification. Celgene demanded more swift action from its distributors, requiring submission of reports within 24 hours.
Caremark largely did not comply with either requirement, and regularly filed reports outside the five-day window.
Celgene management directed Schmidt to press Caremark for compliance and emphasized the importance of incident reporting elsewhere in the company.
In May 2007, Caremark complained about Schmidt’s conduct to his supervisor, alleging he was aggressive, argumentative, negative and inaccessible, among other traits. He was taken off the account.
Schmidt’s supervisor then called him to New Jersey for performance meetings, and later sent him correspondence documenting complaints from other Celgene employees, Caremark senior officers and representatives from other account holders who took issue with Schmidt’s conduct or objected to working with him.
On Dec. 20, 2007, Schmidt was relieved of all duties and officially terminated on May 14, 2008, effective that June 30, as part of a work-force reduction, he was told.
Also on May 14, Schmidt provided Celgene with a copy of a complaint he filed in Texas district court that day. The action asserted a count under New Jersey’s Conscientious Employee Protection Act and breach of contract claims against Celgene, and slander and disparagement claims against Celgene and Caremark.
In its answer, Celgene claimed that Texas, not New Jersey, law applied in the case, and then moved for an order granting choice of law. The Texas court, after first denying the motion, granted it on reconsideration, thus holding the CEPA claim inapplicable.
Schmidt, at the court’s direction, filed an amended complaint on March 22, 2010, excluding the CEPA count.
He sought no relief on the choice-of-law ruling, but sued in Morris County Superior Court on May 14, 2010, 178 days after the Texas court’s initial order, 73 days after a subsequent order confirming the choice of law and exactly two years after his termination. He asserted CEPA claims against Celgene and Caremark.
Judge Stephan Hansbury granted defense motions to dismiss based on the filing of the suit well outside CEPA’s one-year statute-of-limitations period and other factors.
Appellate Division Judges Jane Grall, Anthony Parrillo and Stephen Skillman affirmed, holding that a timely complaint in New Jersey court should have been filed by May 14, 2009.
While equitable tolling and substantial compliance may excuse untimely filing based on a timely claim filed in federal or another state jurisdiction, neither doctrine is applicable in Schmidt’s case, the court said.
In cases where the litigant obtained such relief, “the courts in the initial forums dismissed the complaints in their entirety and not based on a determination related to the merits of the claim,” Grall wrote. While a ruling on jurisdiction or public policy grounds would not be on the merits, a choice-of-law determination is, she added.
Schmidt, unlike the plaintiffs in those cases, was not precluded from pursuing his claims because of the Texas ruling, and that case continued, Grall said.
“Consequently, the primary purpose of these equitable doctrines — avoiding a technical defeat of a meritorious claim on which the doors of the courthouse have been shut — was not implicated,” she wrote. She added that the dual filing smacked of forum sampling and prejudiced Celgene’s interest in stability and repose.
Celgene had to defend two suits, which “is inconsistent both with the legitimate expectations of Celgene and the interest of judicial economy fostered by a statute of limitation,” and “is potentially disruptive of New Jersey’s harmonious relationship with Texas,” Grall wrote.
The court added that Schmidt’s six-month lag between the Texas court’s ruling and the New Jersey filing indicated lack of diligence and was “more consistent with an effort to preserve his options while looking for the most favorable forum.”
The Texas action continued through the Appellate Division’s argument date but was terminated when the court accepted Schmidt’s notice of nonsuit.
James Flynn of Epstein Becker Green in Newark, Celgene’s counsel, says, “If the opinion’s instructive on anything, it’s that you have to live with your strategic choices, and you can’t escape them.”
He adds that just because a ruling comes early in the case and doesn’t resolve the question of liability, it doesn’t mean it’s not on the merits.
Schmidt’s counsel, Neil Mullin of Smith Mullin in Montclair, says he intends to petition the state Supreme Court for certification.
“Our impression is the Appellate Division ignored the important public interest here,” Mullin says. “As it stands, the public interest will never be served in this case. … [It] will never be tried in Texas or New Jersey, and the public will never be protected.”