This is a diversity case in which plaintiff-appellee seeks damages for personal injuries suffered as a result of his mother's ingestion of thalidomide during pregnancy. In the present appeal, appellant drug company challenges the district court of New Jersey's application of the New Jersey statute of limitation and consequent denial of its motion for summary judgment. Henry v. Richardson-Merrell, Inc., 366 F. Supp. 1192 (D.N.J., 1973).1 The district court's interlocutory order was certified for appeal under 28 U.S.C. 1292(b).

Twelve-year old appellee, Denis Henry, is a citizen and resident of Quebec, Canada. Appellant Richardson-Merrell, Inc., is a Delaware corporation with principal offices in New York which engages in national and international drug sales. Richardson-Merrell does transact some business in New Jersey.2

Plaintiffs originally filed this suit in the New Hersey State courts, at which the New Jersey State courts, at which Richardson-Merrell's registered agent in New Jersey. Defendant subsequently removed the suit to federal court on grounds of diversity of citizenship.

The present controversy deals with the statute of limitation to be applied in the case at bar. Quebec prescribes a one-year delictual limitaion3 which is not tolled for minors. New Jersey's two year personal injury limitation is tolled for minors until two years after the minor attains the age of 21.4 The law of no other jurisdiction was pleaded by the parties.

Appellant contends that the trial court's application of the New Jersey limitation must be reversed since the expired Quebec prescription properly applies.

After careful consideration of appellant's contention, the judgment of the district court will be reversed. The suit will be dismissed as timebarred under the applicable Quebec limitation since this court concludes that the choice of law principles of New Jersey, the forum state, mandate such a result.5

The facts alleged by plaintiff are as follows. Lorraine Henry, mother of the infant appellee, ingested Kevadon, Richardson-Merrell's brand of thalidomide, in July of 1961 during thr first trimester of pregnancy. The drug was prescribed by a Quebec physician while Mrs. Henry was a patient in a Quebec hospital. In March of 1962, plaintiff-appellee, Denis Henry, was born in the same hospital with severe and permanent birth defects.6

In 1961 appellant, Richardson-Merrell, was engaged in testing, manufacturing and marketing its thalidomide tablet, Kevadon. The complaint alleges that Denis Henry's infuries resulted from Richardson-Merrell's negligent, fraudulent, willful, wanton and reckless conduct in failing properly to test, label and market the drug, in improperly obtaining government permission to market the drug, in refusing to heed and supply adequate warnings, in failing to comply with the Canadian and United States food and drug laws, in manufacturing a defective drug and in violating express and implied warranties of fitness and merchantability.

Thalidomide was developed in Germany as a sleeping pill and was licensed by the German developer to Richardson-Merrell in 1958 for manufacture and distribution in North America. Although the Canadian Drug Directorate approved use of the drug in April of 1961, the United States Food and Drug Administration withheld approval because it found testing data, supportive of the new drug application, insufficient.

During the late 1950's defendant-appellant imported the active ingredient into the United States from Germany. The ingredient was synthesized into tablets and packed at Merrell-National Laboratories in Ohio. Sometime in 1961,7 Richardson-Merrell's subsidiary, Baker, began production of the active ingredient of Kevadon at its New Jersey plant. This ingredient was then shipped to Ohio where it was formed into Kevadon tablets and packed for shipment. The Canadian Kevadon shipments originated at the Merrell-National Laboratories in Cincinnati, Ohio.

Under Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1940), a federal court sitting in diversity must apply the conflicts of law principles of the forum state. In the present conflict between the laws of New Jersey and Quebec, the conflicts of law principles of New Jersey, the forum state, govern the limitation period which applies.

In a series of cases beginning with Mellk v. Sarahson, 49 N.J. 226, 229 A.2d 625 (1967) and Pfau v. Trent Aluminum Company,55 N.J. 511, 263 A.2d 129 (1970), New Jersey courts adopted the governmental interest approach to choice of law questions. This approach requires a two-step analysis. The court determines first the governmental policies evidenced by the laws of each related jurisdiction and second the factual contacts between the parties and each related jurisdiction. A state is deemed interested only where application of its law to the facts in issue will foster that state's policy.8 This approach does not count up contacts and make quantitative determinations of interest based on which state has the greatest number of contacts. Instead, the qualitative nature of contacts is considered so that only contacts which are likely to promote valid state policies are considered relevant. Mullane v. Stavola, 101 N.J.Super. 184, 243 A.2d 842, 845 (1968).

Until quite recently, the New Jersey governmental interest approach applied only to choices of substantive law. Procedural matters, such as the appropriate statute of limitations, were governed by forum law. In Heavner v. Uniroyal, Inc., 63 N.J. 130, 305 A.2d 412 (1973), the New Jersey Supreme Court abandoned the mechanistic application of the forum statute of limitation in cases where a foreign substantive law was chosen.9 The Heavner borrowing rule explicitly seeks to discourage forum shopping by litigants with slender ties to New Jersey who desire the benefit of New Jersey's more favorable limitation period.

In determining whether the present eause of action is timebarred, New Jersey choice of law rules therefore require a determination of which law will govern the merits of the case.10

In Heavner v. Uniroyal, Inc., supra, a North Carolina couple sued a tire manufacturer incorporated in New Jersey for injuries to the husband caused by the blowout of a defective tire. Plaintiff-husband purchased a truck equipped with the defective tire in North Carolina; the accident occurred in North Carolina and plaintiffs at all times were domiciled in North Carolina. Defendant manufacturer transacted business in each of the fifty states, including North Carolina and New Jersey.

The court Stated that mere incorporation in New Jersey was a contact insufficient to warrant the application of New Jersey substantive law. Since the North Carolina limitation period, borrowed with its substantive law, had already expired, the suit was dismissed.11

The court in Heavner did not explain its failure to examine the policies behind the laws of North Carolina and New Jersey but it is clear that there were insufficient factual contacts to justify the application of New Jersey law. Implicit in Heavner is a finding that New Jersey was a disinterested forum.

The methodology by which the court concluded that New Jersey was a disinterested forum in Heavner is not laid out. Heavner, supra, 305 A.2d at 414 n. 3. Instead the court makes reference to the earlier New Jersey cases of Mellk v. Sarahson and Pfau v. Trent Aluminum Co., supra. Applying the Mellk-Pfau governmental interest approach to Heavner, it appears that the policies evident in New Jersey's liberal products liability law would not have been fostered in the case. The primary purpose of a torts recovery is to compensate plaintiffs for their injury. Since the Heavners were domiciliaries of North Carolina, New Jersey had no interest in protecting their compensation rights. An alternate purpose of torts suits is to exact compensation from the tortfeasor in order to deter future misconduct.12 Where the tortious activity took place wholly outside of New Jersey as in Heavner, however, that policy could not be fostered. Similarly, the longer New Jersey statute of limitation in Heavner was probably enacted with a view toward protecting New Jersey citizens in whom the legislature had an interest.

Despite New Jersey's governmental policy favoring liberal products liability recovery, there was simply no factual basis to apply that policy in Heavner.

The disinterested forum conclusion in Heavner is in contrast to Mellk v. Sarahson and Pfau v. Trent Aluminum Co. In Mellk, plaintiff and defendant were New Jersey residents who were involved in an Ohio auto accident. Plaintiff was injured while riding as a passenger in a car driven by defendant. The car was owned and insured by a New Jersey resident. The court in Mellk refused to apply Ohio's guest statute which barred recovery to auto guests who failed to show wanton misconduct by the host driver. The court concluded that while sound principles of comity required the application of Ohio's rules of the road, 229 A.2d at 627, Ohio had no interest in the application of its guest statute. The guest statute was designed to prevent collusive lawsuits and a consequent increase in insurance rates. Where insurance rates were set and premiums paid in another state, Ohio's policy could not be advanced by the application of its guest statute. New Jersey's concern for protecting the plaintiff, who was a New Jersey domiciliary, gave it a sufficient interest to warrant the application of New Jersey law.

In Pfau v. Trent Aluminum Co., supra, a Connecticut domiciliary sued a New Jersey domiciliary for injuries suffered in an Iowa auto accident. At the time of the accident, both plaintiff and defendnat were resident students at an Iowa college. Since insurance rates were set in New Jersey, the court refused to apply Iowa's guest statute. The court concluded that, although New Jersey did not have an interest in protecting the plaintiff who was a citizen of Connecticut, it might have an interest in enforcing a New Jersey 'hosts duty to his guests.' 263 A.2d at 136.

Connecticut on the other hand had a clear interest in protecting its citizens which would allow for the application of its law on host-driver liability. Since the laws of both Connecticut and New Jersey were identical in requiring proof only of ordinary negligence by the host, there was a false conflict. The Pfau court did not decide, therefore, whether defendant's domicile was a sufficient contact upon which to base the application of New Jersey law since the New Jersey result could be reached under Connecticut law.

In each case where New Jersey has deemed itself interested there have been close ties between state and the parties.13 One commentator has concluded:

. . . a state is interested in applying its law to a particular case when it can be said that the law was designed to encompass the facts of just such a case. Laws of a state, in turn, are not designed to dispose of all conceivable cases, but only of those having factual contact with the state such that it may be affected by the outcome of the suit. A state is so affected when one of the persons it presumes to protect is a party to the dispute, when misconduct it finds culpable transpired within the state, when its courts are invoked to resolve a dispute which it wished to avoid, or when persons with a financial stake in the litigation are residents of the state. Comment, False Conflicts, 55 Cal.L.R. 74, 80-81 (1967).

This article cited with approval in Pfau seems to reflect the views of the New Jersey courts.

In the present case, Quebec and New Jersey are the only jurisdictions which the parties assert are related.14 Quebec's factual contacts with this case are numerous. Quebec is the place where the injury occurred, where the drug was prescribed and consumed, where the infant-appellee was born, where he and his parents resided in 1961 and still reside. Richardson-Merrell was in 1961 and is today licensed to do business in Quebec. Richardson-Merrell marketed Kevadon in Quebec upon the authorization of Canadian drug agencies.

New Jersey's contacts in turn are less than numerous. 1.7% Of the United States testing of Kevadon was undertaken by New Jersey physicians and appellant's subsidiary, Baker, operates a plant in New Jersey which manufactured the active ingredient of Kevadon.15 In addition, Richardson-Merrell sells other products and advertises in New Jersey.

The district court concluded that manufacture of an active ingredient and 1.7% Of United States testing were contacts sufficient to warrant the application of New Jersey's tolling provision in favor of the infant-plaintiff. Implicit in this conclusion was a finding that, unlike Heavner, New Jersey was sufficiently interested in the Henry case to apply its own law. An analysis of New Jersey's statutes dealing both with the substantive cause of action and the statute of limitation, however, reveals that the district court's finding of interest was erroneous.

The negligence-strict liability portion of this cause of action seeks chiefly to compensate plaintiffs. It is clear from Pfau and Heavner, however, that New Jersey does not consider itself interested in nondomiciliary plaintiffs. As with any other balancing test, however, New Jersey's governmental interest approach allows that lack of interest in the plaintiff may be outweighed by other factors. For example, in Heavner v. Uniroyal, Inc., 305 A.2d at 418, the court stated, '. . . there may well be situations involving significant interests of this state where it would be inequitable or unjust' to deny a plaintiff relief despite the fact that most of the operative facts have occurred outside the state.16 While acknowledging the appeal of plaintiff's claim, the district court record does not necessarily reflect all the options available to persons in the position of the minor plaintiff. The Heavner court cites Marshall v. George M. Brewster & Son, Inc., 37 N.J. 176, 180 A.2d 129 (1962),17 as an example of a case in which the New Jersey court was confronted with significant New Jersey interests.

In Marshall, decedent was killed in Pennsylvania because of the negligence of an association of New Jersey defendants who had engaged in a joint venture in Pennsylvania. Plaintiff-administrator, an Ohio resident, sued the New Jersey defendants in a New Jersey state court. The court applied the Pennsylvania wrongful death statute but refused to apply Pennsylvania's limitation period which would have barred suit. The court in Heavner seems to read Marshall as saying that a state which has very significant contacts with the defendant will be deemed interested.

Presumably New Jersey's contacts with a defendant as in Marshall, give the state an interest in enforcing legal duties owed by its citizens and in deterring future misconduct, an interest substantially similar to that adverted to in the false conflict context of Pfau, supra.

In the instant case New Jersey's sole contact is with Baker, the local subsidiary of Richardson-Merrell. Although the sheer presence of a defendant might be sufficient to give New Jersey a government interest in cases like Marshall where no other jurisdiction is likely to have greater contacts with the defendant, such a rationale does not apply to a corporation which operated in some fashion in all fifty states and has more substantial activity in other places. The court in Heavner seems to question the view that defendant's presence alone, which in Heavner was combined with New Jersey incorporation, can be sufficient to give New Jersey courts an interest.18

The manufacturing activity of Richardson-Merrell's subsidiary in this case was similarly insufficient to give New Jersey an interest, even assuming that the state courts would posit an interest in deterring misconduct because of defective manufacture within the state.

Although plaintiff's complaint sounds in negligence, strict liability and warranty, defendant's allegedly improper conduct cannot be traced to manufacturing activities in New Jersey.19 Plaintiff alleges throughout that his mother did not ingest a 'bad batch' of thalidomide which failed to conform to specification because of a defect developing during manufacture in New Jersey. Such an allegation would have been founded on tortious conduct in the forum state. Instead plaintiff alleges that the drug was inherently defective and that its defects were analogous to defects in design.20 It is undisputed that New Jersey's contacts with the drug began long after the design stages and that the raw thalidomide manufactured in New Jersey did not deviate from the specifications set by the German developer and the Ohio laboratories of defendant Richardson-Merrell. Thus, any possible New Jersey policy of enforcing a duty, owed because of tortious misconduct in New Jersey, is inapplicable; the plaintiff has specifically stated that there is nothing improper about the way the drug was manufactured.

Plaintiff's complaint also charges that the drug was insufficiently tested. The district court seems to have concluded that since 1.7% Of the United States testing had been conducted in New Jersey, New Jersey was an interested forum. This contact is even more tenuous than the manufacturing contact, however. There is no allegation that the testing in New Jersey was improperly conducted. Any charge of insufficient testing would seem to relate to the place where testing decisions were mede, Richardson-Merrell's National Laboratories in Ohio. New Jersey was merely one of forty-one states in which clinical testing of the drug was conducted.21 New Jersey testing simply did not give the State an interest in applying its product liability law to these plaintiffs.

Absent a finding that New Jersey substantive law applies, Heavner requires borrowing of the foreign limitation period.

Although the district court did not investigate the policy behind New Jersey's tolling provision, it is clear that the policy behind that statute also would not be fostered by application to these plaintiffs. The New Jersey tolling provisions were enacted to protect infants during minority. Higgins v. Schneider, 61 N.J.Super. 36, 160 A.2d 165 (1960). There are no New Jersey cases construing the scope of this precise statute. A panel of this court, however, has held that the New Jersey statute which tolls for defendants absent from the state, N.J.S.A. 2A:14-22, should be limited to resident, plaintiffs. Zelson v. Thomforde, 428 F.2d 1360 (3d Cir., 1970). The Zelson court stated: '. . . it is fair to assume that in enacting the tolling statute the Legislature was intent in protecting New Jersey residents who had New Jersey claims against nonresident debtors from having to go to foreign jurisdictions to enforce their claims.' 428 F.2d at 1362.

Faced with a similar tolling statute for minors, we feel that a New Jersey court would limit its applicability to local infants in whom the New Jersey legislature has an interest. The state clearly did not intend to extend tolling protection to all plaintiffs from distant locales whose legislature had failed to afford similar protection.22

We conclude that a New Jersey court, confronted with these facts would deem itself a disinterested forum and apply the law of Quebec to dismiss this suit as timebarred. To apply New Jersey's tolling provision here would violate the Heavner dictate that forum shopping should be discouraged by litigants with slender ties to New Jersey.

Although the New Jersey Supreme Court in Heavner did not feel obligated to do more than point out North Carolina's interest in the facts of that case, we deem it helpful to prove that Quebec's interest in this case is overwhelming.

The trial court properly concluded that Quebec CC Article 2262, supra n. 3, was directed toward 'protecting Quebec citizens and the Quebec courts from excessive and tardy litigation.' 366 F. Supp. 1202.

The trial court then concluded that because Quebec was not the forum court and because defendant was not a Quebec corporation, the policy behind the Quebec limitation would not be fostered by application in this case. 366 F. Supp. at 1202. Although Richardson-Merrell was not a Quebec corporation, it was at all times licensed to do business in Quebec. The protection afforded by the Quebec limitation was aimed at defendants like Richardson-Merrell acting within the territorial limits of Canada.23 Thus in refusing to apply the statute on these facts, the district court did in fact frustrate a policy of Quebec.

In addition, it is Quebec which has the chief concern with these plaintiffs, who may become public charges to the Quebec government if they are not compensated.24 In the same vein, much of the allegedly tortious conduct of defendants, including the marketing and sale of the drug, any misrepresentations made to secure Canadian approval, and any violation of the Canadian Federal Foods, Drug and Cosmetics Act, occurred in Canada. Surely Canada has a governmental interest in deterring future misconduct within its borders and in punishing past misconduct. That Quebec has chosen to subordinate interests of deterrence, punishment and compensation to a concern for speedy litigation should have no bearing on this court's finding that Quebec's interest in this matter is paramount.

There are additional and more serious problems with contending that anything but Canadian law should apply to this case. In Pfau and Mellk, the New Jersey courts conceded without hesitation that the state where the auto accident occurred had a paramount interest in applying its 'rules of the road.' To judge conduct occurring in another state by New Jersey's highway rules would violate fundamental principles of fairness and comity. By analogy, New Jersey would not presume to tell a drug seller that its activity in Canada should be judged by the rules of New Jersey or for that matter by the United States Food and Drug Law.25 With respect to those portions of plaintiff's complaint alleging conduct occurring entirely within Canada, therefore, New Jersey would refuse to apply its substantive law. Canada clearly had the paramount interest in determining what testing and supportive data it would require before approving drugs for sale in Canada to Canadian citizens. Sound principles of comity direct that any misrepresentation to the Canadian drug authorities, or any inadequacy of labels be judged by that nation's laws. Once this court finds that the substantive law of another jurisdiction must be applied, Heavner, of course, directs that we borrow that jurisdiction's limitation period.

The trial court found that Heavner was distinguishable because in that case there were no contacts to support a government interest whereas in this case there were contacts which resulted in forum interest.

The contact of manufacture is not determinative in a products liability suit decided under New Jersey's governmental interest analysis. Although it will be relevant in most cases where injury has resulted from a defect of manufacture, each case must be examined on its own facts. On the facts of this case, plaintiff has never alleged that the defect arose during manufacture. As such, New Jersey has no interest in having its law applied to this case. Like the court in Heavner, we conclude:

We need go no further now than to say that when the cause of action arises in another state, the parties are all present in and amenable to the jurisdiction of that state, New Jersey has no substantial interest in the matter, the substantive law of the foreign state is to be applied, and its limitation period has expired at the time suit is commenced here, New Fersey will hold the suit barred. 305 A.2d at 418.

The judgment of the district court will, therefore, be reversed and the suit dismissed as timebarred under the applicable Quebec statute of limitations.