Eshelman v. Puma Biotechnology, Inc.
| Decision Date | 02 March 2020 |
| Docket Number | No. 7:16-CV-18-D,7:16-CV-18-D |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | FREDRIC N. ESHELMAN, Plaintiff, v. PUMA BIOTECHNOLOGY, INC., Defendant. |
On October 28, 2015, Fredric N. Eshelman ("Eshleman" or "plaintiff"), a pharmacist and venture capitalist, submitted a proposal to the shareholders of Puma Biotechnology, Inc. ("Puma" or "defendant") to increase the size of Puma's board of directors from five to nine seats, while nominating himself and three other people to the additional four seats. See [D.E. 370-1] ¶¶ 46-50. Puma vigorously opposed Eshelman's proposal and published an investor presentation about Eshleman in January 2016 on its own website and the website of the Securities and Exchange Commission ("SEC"). See id. at ¶¶ 51, 55, 58, 130-45. One of Puma's slides stated that "Eshelman's misrepresentations are no surprise given his history," that Eshelman was the Chief Executive Officer ("CEO") of Pharmaceutical Product Development, LLC ("PPD") "when it managed a clinical trial during the development of the antibiotic drug Ketek," that "[f]raud was uncovered in this trial by the FDA's Office of Criminal Investigation," that "[a]s [CEO]" of PPD, Eshelman was "forced to testify before Congress regarding PPD's involvement in this clinical trial fraud in 2008," and that "Eshelman was replaced as CEO for PPD in 2009." Id. at ¶ 58. Another slide stated that "Puma's Board does not believe that someone who was involved in clinical trial fraud that was uncovered by the FDA should be on the Board of Directors of a public company; particularly a company that is in the process of seeking FDA approval." Id. at ¶ 58.
On January 20, 2016, Eshleman wrote Puma and demanded a retraction and requested an apology. See id. at ¶ 143. Puma refused in a letter that it published with the SEC. See id. at ¶¶ 144-45. On February 3, 2016, Eshleman sued Puma for defamation. See id. at ¶ 146; [D.E. 1] 5.
In this diversity action, North Carolina law applies. On September 28, 2018, the court granted in part and denied in part Eshelman's motion for partial summary judgment and denied Puma's motion for summary judgment [D.E. 304]. The court held that Puma's allegedly defamatory statements concerned Eshelman and that Puma published the allegedly defamatory statements. See [D.E. 306] 20. The court also held that two of Puma's statements were libelous per se. See id. at 20-24.
As for Puma's statement that Eshelman was "involved in clinical trial fraud," the court held that the statement is libel per se because fraud is an infamous crime that involves dishonesty. Id. at 23; see Badame v. Lampke, 242 N.C. 755, 757, 89 S.E.2d 466, 468 (1955); Boyce & Isley, PLLC v. Cooper, 153 N.C. App. 25, 30, 568 S.E.2d 893, 898 (2002); Raymond U v. Duke Univ., 91 N.C. App. 171, 182, 371 S.E.2d 701, 709 (1988); Gibby v. Murphy, 73 N.C. App. 128, 131-32, 325 S.E.2d 673, 675-76 (1985). When Puma said that "Puma's Board does not believe that someone who was involved in clinical trial fraud that was uncovered by the FDA should be on the Board of Directors of a public company" as part of a series of slides impugning Eshelman's integrity, Puma accused Eshelman of fraud. [D.E. 370-1] ¶ 58. The court also held that whether this statement was false and made with actual malice were jury questions, but as a matter of law the statement that Eshelman was "involved in clinical trial fraud" is libel per se. See [D.E. 306] 23; Badame, 242 N.C. at 757, 89 S.E.2d at 468; Boyce & Isley, PLLC, 153 N.C. App. at 30, 568 S.E.2d at 898; Raymond U, 91 N.C. App. at 182, 371 S.E.2d at 709; Gibby, 73 N.C. App. at 131-32, 325 S.E.2d at 675-76.
As for Puma's statement that Eshelman was "replaced as CEO of PPD in 2009 after being forced to testify regarding fraud in 2008," the court rejected Puma's argument that the word "replaced" in this statement does not mean "fired." [D.E. 306] 23. Stating that a CEO was "replaced" "after being forced to testify regarding fraud in 2008" impeaches that person in his trade or profession. See id. at 23-24; Badame, 242 N.C. at 757, 89 S.E.2d at 468; Boyce & Isley, PLLC, 153 N.C. App. at 30, 568 S.E.2d at 898; Raymond U, 91 N.C. App. at 182, 371 S.E.2d at 709; Gibby, 73 N.C. App. at 131-32, 325 S.E.2d at 675-76. The court also held that whether this statement was false and made with actual malice were jury questions, but as a matter of law, the court held that this statement is libel per se. See [D.E. 306] 23-24.
The trial began on March 11, 2019. Before trial, the parties entered 146 stipulations. See [D.E. 370-1]. At trial, the court received the stipulations as a joint exhibit of stipulated facts. See id. Additionally, Eshleman presented six witnesses, and the court received twenty-five exhibits from Eshleman. Puma presented seven witnesses, and the court received eighteen exhibits from Puma. See [D.E. 429-31]. During closing argument, Eshleman argued that the two statements at issue were false and that Puma made them with actual malice and requested $52,000,000 in compensatory damages. See [D.E. 431] 183-224. Puma argued in opposition.
On March 15, 2019, after extensive deliberations, the jury returned a verdict in favor of Eshelman on his defamation claim against Puma. In its verdict, the jury answered three issues. Issue one was, "When read in the context of the entire presentation, were defendant Puma Biotechnology, Inc.'s statements that plaintiff Fredric N. Eshelman was 'replaced as CEO of PPD' after being 'involved in clinical trial fraud' false?" The jury answered, "Yes" to issue one. See id. Issue two was, "Did defendant Puma Biotechnology, Inc. act with actual malice when it accused plaintiff Fredric N. Eshelman of being 'replaced as CEO of PPD' after being 'involved in clinical trialfraud'?" The jury answered, "Yes" to issue two. See id. Issue three was, "What amount of compensatory damages is plaintiff Fredric N. Eshelman entitled to recover from defendant Puma Biotechnology, Inc.?" The jury answered "$15,850,000." Id.
The jury then considered punitive damages. See [D.E. 433]. Eshleman introduced one additional exhibit, and the court instructed the jury that it could consider the other trial evidence in considering the issue of punitive damages. See id. at 22. Eshleman then argued in favor of punitive damages and requested $100,000,000 in punitive damages. See id. at 22-28. Puma argued in opposition. See id. at 29-35. After deliberating, the jury awarded Eshleman $6,500,000 in punitive damages. See id. at 57-58; [D.E. 389]. On March 25, 2019, the court entered judgment pursuant to the jury verdict. See [D.E. 395].
On April 3, 2019, Eshelman moved for an award of reasonable attorneys' fees under N.C. Gen. Stat. § 1D-45 [D.E. 397]. On April 8, 2019, Eshelman filed a memorandum in support [D.E. 405]. On April 29, 2019, Puma responded in opposition [D.E. 426]. On May 13, 2019, Eshelman replied [D.E. 435]. On May 17, 2019, Puma supplemented its response [D.E. 437]. On May 30, 2019, Eshelman replied to Puma's supplement [D.E. 438].
On April 8, 2019, Eshelman timely moved for $205,903.55 in costs [D.E. 403]. On April 22, 2019, Puma moved to disallow some of the costs [D.E. 414] and filed a memorandum in support [D.E. 415]. On April 29, 2019, Eshelman responded in opposition [D.E. 425]. On April 22, 2019, Puma moved for a new trial or, in the alternative, remittitur [D.E. 416]. On May 17, 2019, Puma filed a memorandum in support [D.E. 436]. On June 7, 2019, Eshelman responded in opposition [D.E. 439]. On June 21, 2019, Puma replied [D.E. 440]. On June 21, 2019, Puma moved for a hearing concerning its motion for a new trial or, in the alternative, remittitur [D.E. 441]. Finally, on April 22, 2019, Eshelman moved to amend the judgment to include prejudgment interest [D.E. 418]and filed a memorandum in support [D.E. 419].
The court has reviewed the entire record. As explained below, the court denies Eshelman's motion for attorneys' fees, grants Eshelman's motion for costs, denies Puma's motion to disallow costs, denies Puma's motion for a new trial or remittitur, grants Eshelman's motion to amend the judgment to include prejudgment interest, and denies Puma's motion for a hearing.
Eshelman seeks $3,075,897.85 in attorneys' fees under N.C. Gen. Stat. § 1D-45. See [D.E. 405] 1. Under N.C. Gen. Stat. § 1D-45, "[t]he court shall award reasonable attorney[s'] fees against a defendant who asserts a defense in a punitive damages claim that the defendant knows or should have known to be frivolous or malicious." N.C. Gen. Stat. § 1D-45. "A defense is frivolous if a proponent can present no rational argument based upon the evidence or law in support of it." Rhyne v. K-Mart Corp., 149 N.C. App. 672, 689, 562 S.E.2d 82, 94 (2002) (alteration and quotation omitted), aff'd, 358 N.C. 160, 594 S.E.2d 1 (2004); see Raynor v. G4S Secure Sols. (USA) Inc., 327 F. Supp. 3d 925, 946 (W.D.N.C. 2018); Bryan v. Bryan, No. 1:11CV141, 2013 WL 1010481, at *1 (W.D.N.C. Mar. 14, 2013) (unpublished); cf. Messer v. Pollack, 809 S.E.2d 375, 2018 WL 710051, at *2 (N.C. Ct. App. Feb. 6, 2018) (unpublished table decision); Fed. Point Yacht Club Ass'n v. Moore, 244 N.C. App. 543, 781 S.E.2d 351, 2015 WL 8755698, at *7 (Dec. 15, 2015) (unpublished table decision); Philips v. Pitt Cty. Mem'l Hosp., Inc., 242 N.C. App. 456, 458, 775 S.E.2d 885, 884 (2015). "A defense is malicious if it is wrongful and done intentionally without just cause or excuse or as a result of ill will." Rhyne, 149 N.C. App. at 689, 562 S.E.2d at 94 (quotation omitted); see Raynor, 327 F. Supp. 3d at 946.
Because "punitive damages are intended to punish a litigant for conduct that had already occurred by the time that the litigation had commenced," a court "focuses on the conduct of the partyduring litigation" to determine whether to award reasonable attorneys' fees under N.C. Gen. Stat. § 1D-45. Raynor, 327 F. Supp. 3d at 946 (quotations omitted). Courts apply...
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