Case of the Day: Stone v. Ranbaxy Pharmaceuticals

The Case of the Day is Stone v. Ranbaxy Pharmaceuticals, Inc. (S.D.N.Y. 2011). Paula Palladino was prescribed generic ciprofloxacin for treatment of an infection. Shortly thereafter, she went to the hospital with a fever and a rash. She was eventually diagnosed with Stevens Johnson Syndrome, a rare skin condition, and ultimately died. Her heirs sued Ranbaxy Laboratories, Ltd., an Indian corporation that manufactured the drug, and its subsidiary and  exclusive US distributor, Ranbaxy Pharmaceuticals, Inc., on product liability, negligence, misrepresentation, and wrongful death claims. Ranbaxy Laboratories, the Indian parent company, moved to dismiss for lack of personal jurisdiction and insufficient service of process.

The plaintiffs attempted to serve Ranbaxy Labs by delivering the summons and complaint to Ranbaxy Pharmaceuticals’ offices in Princeton, New Jersey. But the Ranbaxy employee who accepted the documents, while acknowledging his authority to accept service on behalf of Ranbaxy Pharmaceuticals, did not acknowledge his authority to accept service on behalf of Ranbaxy Laboratories.

The court rejected the notion that service on the subsidiary constituted service on the parent. Under New York law, the test has four factors: (1) do the parent and subsidiary have common ownership; (2) is the subsidiary financially dependent on the parent; (3) to what degree does the parent interfere with the selection of the subsidiary’s executives or fail to observe corporate formalities; and (4) the extent of control. Volkswagenwerk AG v. Beech Aircraft Corp., 751 F.2d 117 (2d Cir. 1984). The plaintiffs had satisfied the first factor but had offered no evidence on the other factors.

But the court also noted that dismissal was not mandatory, and in the circumstances it gave the plaintiffs sixty days to make service.

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