McNeil Pharmaceuticals, a subsidiary of Johnson & Johnson, might have manufactured allegedly defective batches of children’s Tylenol in Pennsylvania, but it’s a New Jersey company, a federal judge in Philadelphia has ruled, preserving the diversity jurisdiction to keep the case in federal court.
U.S. District Judge Gene E.K. Pratter of the Eastern District of Pennsylvania is the fourth judge in the district to hold that way after the plaintiff—in this case, the father of a 4-year-old who died after ingesting children’s Tylenol—moved to remand the case to the Philadelphia Court of Common Pleas.
Johnson & Johnson argued that its executives, based in Skillman, N.J., set the direction for McNeil. Johnson & Johnson lawyers argued that makes McNeil, which maintains offices in Fort Washington, Pa., actually a New Jersey company.
“This disagreement over the principal place of business of McNeil turns on how the ‘nerve center’ test, adopted by the Supreme Court in Hertz v. Friend … applies to the particular facts of this case,” Pratter said, referring to the 2010 U.S. Supreme Court case.
In 2012, U.S. District Judge Mary A. McLaughlin decided in Moore v. Johnson & Johnson that McNeil is run primarily by executives of its parent company in New Jersey, making the company a citizen of that state, not Pennsylvania, where the allegedly defective medicine was produced.
Nearly a year later, after holding an evidentiary hearing, McLaughlin restated that decision, saying in that second opinion, “That was the court’s conclusion after its initial review of the record, and the facts adduced at the evidentiary hearing only reinforce this conclusion.”
Her initial opinion was also bolstered by the U.S. Court of Appeals for the Third Circuit’s opinion issued last June in Johnson v. SmithKline Beecham, finding that pharmaceutical giant GlaxoSmithKline’s U.S. base for its holding company is the single office it rents in Wilmington, Del., since that is where board meetings happen and decisions about the company are made.
In that case, the Third Circuit “recognized that a corporation’s nerve center may lie outside its corps of officers,” McLaughlin had said.
Earlier this year, U.S. District Senior Judge Robert F. Kelly followed McLaughlin’s reasoning in a similar case as did U.S. District Judge Paul Diamond.
Pratter had put this case on hold pending the outcome of McLaughlin’s opinion in Moore.
“Application of the ‘nerve center’ test to the facts of this case leads this court to embrace the Moore analysis and result. The key inquiry in determining the ‘nerve center’ is the location of the ‘direct[ion], control, and coordinat[ion] of the corporation’s activities,’ even when this ‘simple’ approach produces a counterintuitive result,” Pratter said.
Even though some of the McNeil executives are based in Fort Washington, they don’t control the direction of the company; rather, they answer to their superiors in Skillman, Pratter said.
No judges in the district have found differently from McLaughlin in Moore.
“After a careful reading of Judge McLaughlin’s decisions in Moore and in consideration of the numerous briefings filed by the parties before us, we agree with the court’s rationale in Moore and adopt it here,” Kelly had said in January in Sherfey v. Johnson & Johnson. “Accordingly, we find that McNeil’s principal place of business is in Skillman, New Jersey,” he had said.
The lawsuits spring from batches of children’s Tylenol made in Fort Washington that were recalled in 2010.
In this case, Shawn Arndt gave his 4-year-old son a dose of the medicine and, within minutes, the child started bleeding from the nose and mouth, according to the opinion. He was rushed to the hospital and pronounced dead on arrival.
In 2012, Arndt filed suit in the Philadelphia Court of Common Pleas, which was later removed to federal court. Despite Arndt’s bid to remand the case, Pratter will maintain jurisdiction.
Also named as a defendant was Tops supermarket, where Arndt bought the medicine. Both Arndt and Tops are New York state residents. Pratter, however, held that all of Arndt’s claims against the store were either time-barred or without merit, so she dismissed Tops from the suit, meaning that it couldn’t be used to defeat diversity jurisdiction.
(Copies of the 18-page opinion in Arndt v. Johnson & Johnson, PICS No. 14-0363, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •