Pll number 16 8-17-2005.qxd
U.S. Product Liability Law
T H E L I T I G A T I O N D E P A R T M E N T
Product Liability Update #16 - Jurisdiction OverForeign Companies
I came across an interesting decision by a California appellate court today (F.
Hoffman-La Roche v. The Superior Court of Santa Clara County
). The underlying
case arose from a tragic situation in which a 14-year old boy who had been takingthe acne medication Accutane for six months committed suicide by throwinghimself in front of an oncoming railroad train. His parents claimed that the drugmade their son suicidal and sued six "Roche Group" pharmaceutical companies.
Included were F. Hoffman-La Roche Ltd. (a Swiss company which "only sells the
active ingredient in Accutane in Switzerland to the domestic U.S. Roche affiliates
that manufacture and sell the drug" in the U.S.), Roche Holding Ltd. (the Swiss
parent of F. Hoffman and the Roche companies (New Jersey corporations whichmade and sold Accutane in the U.S.), and two New Jersey Roche corporations
(which were wholly owned by Roche Holding Ltd.)
Plaintiffs admitted that the Swiss companies themselves did not have sufficient
minimum contacts with California to justify jurisdiction but claimed that juris-diction was proper pursuant to the "representative services" doctrine -- "a species
of agency that permits . jurisdiction over a foreign defendant where that entity is
the principal of a related domestic entity that functions merely as its instrumen-
tality or agent." The appellate court disagreed.
The court found that "although all the Roche companies are affiliated, each Swiss
defendant was a distinct and separate company, with its own board and assets,
and each company maintained its own separate corporate records, bank accounts,and other financial and accounting books and records." Additionally the court
explained, "for purposes of jurisdiction, the analysis begins with the firm proposi-tion that neither ownership nor control of a subsidiary . without more, subjects
the parent to the jurisdiction of the state where the subsidiary does business.
degree of control . must veer into management by the exercise of control overthe internal affairs of the subsidiary and the determination of how the companywill be operated on a day-to-day basis.here, the degree of control . exercised byany Swiss entity was not pervasive or continual, and it did not exceed that ordi-nary and necessary degree of control incident to ownership of a subsidiary."(internal citations omitted)
Furthermore, the court refused to find jurisdiction because of extensive coopera-tion and coordination between the Swiss companies and their foreign affiliatesconcerning product safety matters. "Here, a holding that jurisdiction over theSwiss defendants should be exercised due solely to their global collaborative drugsafety efforts would ultimately discourage such laudable .efforts . and lead tothe balkanization of drug safety data ."
T H E L I T I G A T I O N D E P A R T M E N T
Product Liability Update #16 - Jurisdiction Over Foreign Companies
Although theoretically irrelevant, it is interesting that at the very end of its opin-ion the court pointed out that the plaintiffs "are not left without a remedy; thereis no jurisdictional barrier to the pursuit of their claims against the U.S. Rochedefendants, and no hint in this record that these domestic companies are inca-pable of responding in damages in the event of an adverse result."
A word of caution: This is a California decision interpreting California law. Aspointed out in the decision, courts in New Jersey and Florida in other cases havesustained jurisdiction over the Swiss Roche defendants. The law can vary fromstate to state and the evidence presented in each case may not be the same.
Having said that, I find the California opinion to be well-reasoned and persuasive.
Hope this is helpful. As always, please let me know if you have questions or com-ments.
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