Eshelman v. Puma Biotechnology, Inc.

• Decision Date: 23 June 2021
• Docket Number: No. 20-1376,No. 20-1329,20-1329
• Citation: 2 F.4th 276
• Parties: Fredric N. ESHELMAN, Plaintiff – Appellee, v. PUMA BIOTECHNOLOGY, INC., Defendant – Appellant, and Alan H. Auerbach, Defendant. Fredric N. Eshelman, Plaintiff – Appellant, v. Puma Biotechnology, Inc., Defendant – Appellee, and Alan H. Auerbach, Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

2 F.4th 276

Fredric N. ESHELMAN, Plaintiff – Appellee,

v.PUMA BIOTECHNOLOGY, INC., Defendant – Appellant,andAlan H. Auerbach, Defendant.

Fredric N. Eshelman, Plaintiff – Appellant,

v.Puma Biotechnology, Inc., Defendant – Appellee,andAlan H. Auerbach, Defendant.

No. 20-1329

No. 20-1376

United States Court of Appeals, Fourth Circuit.

Argued: May 4, 2021

Decided: June 23, 2021

ARGUED: Roman Martinez, LATHAM & WATKINS LLP, Washington, D.C., for Appellant/Cross-Appellee. Elizabeth Marie Locke, CLARE LOCKE LLP, Alexandria, Virginia, for Appellee/Cross-Appellant. ON BRIEF: Charles S. Dameron, Margaret A. Upshaw, LATHAM & WATKINS LLP, Washington, D.C., for Appellant/Cross-Appellee. Joseph R. Oliveri, CLARE LOCKE LLP, Alexandria, Virginia, for Appellee/Cross-Appellant.

Before GREGORY, Chief Judge, and MOTZ and THACKER, Circuit Judges.

Affirmed in part, vacated in part, and remanded for further proceedings by published opinion. Judge Motz wrote the opinion, in which Chief Judge Gregory and Judge Thacker joined.

DIANA GRIBBON MOTZ, Circuit Judge:

In 2019, a jury found Puma Biotechnology, Inc. had defamed Fredric Eshelman and ordered Puma to pay Eshelman $22.35 million in compensatory and punitive damages. This verdict constituted the largest damages award in a defamation suit in North Carolina history. Puma appeals, challenging the jury verdict on a number of grounds, including excessiveness. For the reasons that follow, we affirm the liability verdict but vacate the damages award and remand the case to the district court for further proceedings consistent with this opinion.

I.

This lawsuit arises from an investor presentation created by Puma, a pharmaceutical company, in the midst of a proxy contest with Eshelman, a Puma shareholder. Eshelman is also the founder of Pharmaceutical Product Development ("PPD"), another pharmaceutical company. In 2015 and 2016, Eshelman attempted to take over the Puma board through a proxy contest.

In response, Puma invited its shareholders to visit a link on its investor-relations website where it had published an investor presentation. The presentation discussed events from a decade earlier; specifically, that PPD had contracted with another pharmaceutical company to determine the safety and effectiveness of the drug Ketek

. During the Ketek clinical trials, which occurred while Eshelman was CEO of PPD, a clinical investigator falsified documents. According to Eshelman, and later the jury, he was not involved in the fraud. To the contrary, an FDA Special Agent testified that PPD reported the fraud.

The Puma presentation, however, indicated that Eshelman had been culpably involved in the Ketek

clinical-trial fraud. Three slides in the presentation were titled "Eshelman Continues to Demonstrate a Lack of Integrity." One of those slides stated 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." 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."

Visitors to Puma's website viewed the page where the presentation was published at least 198 times. Puma also filed the presentation with the SEC, which made it permanently accessible on its website.

Eshelman, a resident of North Carolina, initiated this diversity action. He alleges state-law claims of defamation against Puma, which is incorporated in Delaware and has its principal place of business in California, and Alan Auerbach, Puma's CEO, who resides in California. Puma moved to dismiss the suit for lack of personal jurisdiction; the district court denied the motion.

Following cross-motions for summary judgment, the court held that two of Puma's statements were defamatory per se : (1) "Puma's statement that [Eshelman] was ‘involved in clinical trial fraud,’ " and (2) "Puma's statement that [Eshelman] was ‘replaced as CEO of PPD in 2009 after being forced to testify regarding fraud in 2008.’ " The case proceeded to a jury trial to determine whether Puma's statements were false and made with actual malice, and if so, the amount of damages to be awarded to Eshelman. The jury returned a verdict for Eshelman and awarded him $15.85 million in compensatory damages and $6.5 million in punitive damages.

Puma moved for a new trial or remittitur and Eshelman moved for attorneys’ fees. The district court denied all motions, and the parties now appeal.

II.

Puma first challenges the district court's denial of Puma's motion to dismiss for lack of personal jurisdiction. We review de novo . CFA Inst. v. Inst. of Chartered Fin. Analysts of India , 551 F.3d 285, 292 (4th Cir. 2009).

Puma has waived its personal jurisdiction claim. In a pretrial order, the parties stipulated to jurisdiction, agreeing that "[t]he Court has jurisdiction of the parties," and "[a]ll parties are properly before the Court."

In Petrowski v. Hawkeye-Sec. Ins. Co. , the Supreme Court considered a similar claim. 350 U.S. 495, 76 S.Ct. 490, 100 L.Ed. 639 (1956) (per curiam). The Petrowski defendant had specifically stipulated that it "voluntarily submits to the jurisdiction of the ... court," id. at 496, 76 S.Ct. 490, but after a trial on the merits, it contested personal jurisdiction. The Supreme Court rejected the defendant's attempt to roll back its stipulation, concluding that it had, "by its stipulation, waived any right to assert a lack of personal jurisdiction." Id.

So too here: Puma cannot now dispute that to which it has already agreed.

III.

Puma next argues that it is entitled to a new trial on liability for two reasons. First, it contends that the district court erred in its summary judgment determination that the two investor presentation statements were defamatory per se . Second, it argues that the verdict form prejudicially misrepresented those statements. We reject both claims.

A.

At summary judgment, the district court determined that two statements from the investor presentation were defamatory per se : "(1) Puma's statement that [Eshelman] was ‘involved in clinical trial fraud,’ and (2) Puma's statement that [Eshelman] was ‘replaced as CEO of PPD in 2009 after being forced to testify regarding fraud in 2008.’ "¹

We review de novo , Miller v. FDIC , 906 F.2d 972, 974 (4th Cir. 1990), and because we sit in diversity, we apply North Carolina substantive law, see Erie R.R. Co. v. Tompkins , 304 U.S. 64, 78–80, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). In North Carolina, "[w]hether a publication is libelous per se is a question of law for the court." Boyce & Isley, PLLC v. Cooper , 153 N.C.App. 25, 568 S.E.2d 893, 899 (2002).

To resolve this question, a court begins by asking if each of the statements is "subject to only one interpretation" "when considered alone without innuendo, colloquium or explanatory circumstances" by "ordinary people." Renwick v. News & Observer Publ'g Co. , 310 N.C. 312, 312 S.E.2d 405, 409–10 (1984).

Puma argues that both statements are capable of more than one interpretation. Puma notes that its statement that Eshelman was "involved in clinical trial fraud" does not explicitly claim that he "committed trial fraud." For this reason, Puma contends the statement could be interpreted to say that Eshelman was an innocent bystander and not culpable of the fraud. Similarly, Puma argues that the statement that Eshelman was "replaced as CEO of PPD" cannot be defamatory per se because it does not say Eshelman was fired; it only says he was "replaced."

But this is not how an ordinary person would "naturally understand" the presentation. Flake v. Greensboro News Co. , 212 N.C. 780, 195 S.E. 55, 60 (1938). The three slides at issue are entitled "Eshelman Continues to Demonstrate a Lack of Integrity." The second slide states that Eshelman was CEO of PPD during the Ketek

clinical trial, and that "[f]raud was uncovered in this trial by the FDA's Office of Criminal Investigation." The next four bullet points explain various aspects of the fraud. The slide next states that "Eshelman was forced to testify before Congress regarding PPD's involvement in this clinical trial fraud in 2009." The slide ends with a sub-bullet point stating that "Eshelman was replaced as CEO of PPD in 2009." With no "explanatory circumstances," Renwick , 312 S.E.2d at 408–09, 310 N.C. 312, the ordinary reader would presume that Eshelman was removed as CEO due to the fraud.

On the third slide, Puma asserts that a PPD associate "sent evidence of fraud to PPD management, which was ignored." The slide then states that "Eshelman denied before Congress that fraud had occurred," links to Eshelman's congressional testimony, and concludes with a statement 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." In this "context," Boyce & Isley, PLLC , 568 S.E.2d at 897, the presentation is susceptible to only one reasonable interpretation: that Eshelman's "involvement in clinical trial fraud" was sinister.

Each statement is thus capable of a singular interpretation. Under well-established North Carolina law, we next inquire if that interpretation "(1) charges that a person has committed an infamous crime; (2) charges a person with having an infectious disease; (3) tends to impeach a person in that person's trade or profession; or (4) otherwise tends to subject one to ridicule, contempt or disgrace." Renwick , 312 S.E.2d at 408–09, 310 N.C. 312 (citing Flake , 195 S.E. at 60, 212 N.C. 780 ). We have little trouble concluding that the statements at issue — at a minimum — impeach Eshelman in his profession. See Badame v. Lampke , 242 N.C. 755, 89 S.E.2d 466, 468 (1955) (statement that plaintiff engaged in "shady deals" was defamatory per se ); Clark v....