Eshelman v. Puma Biotechnology, Inc.

• Decision Date: 11 March 2022
• Docket Number: 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.

FREDRIC N. ESHELMAN, Plaintiff, v. PUMA BIOTECHNOLOGY, INC., Defendant.

No. 7:16-CV-18-D

United States District Court, E.D. North Carolina, Southern Division

March 11, 2022

ORDER

JAMES C. DEVER III UNITED STATES DISTRICT JUDGE

On March 18, 2019, a jury awarded plaintiff Fredric N. Eshelman ("Eshelman" or "plaintiff) $22.35 million in compensatory and punitive damages against defendant Puma Biotechnology, Inc. ("Puma" or "defendant") for defamation [D.E. 388, 389]. OnMay 10, 2019, the court granted Puma's motion under Federal Rule of Civil Procedure 62(b) for a supersedeas bond to stay the judgment pending appeal [D.E. 434]. The court approved a $29.5 million bond [D.E. 434, 466-4]. On June 23, 2021, the United States Court of Appeals for the Fourth Circuit upheld the jury's liability verdict, vacated the jury's damages award, and remanded the case for a new trial on damages. See Eshelman v. Puma Biotechnology. Inc.. 2 F.4th 276, 286 (4th Cir. 2021).

On August 27, 2021, Puma moved to release the bond [D.E. 460]. On September 17, 2021, Eshelman responded in opposition [D.E 467]. On October 1, 2021, Puma replied [D.E. 471].

On September 3, 2021, Puma applied for the allocation of costs associated with its supersedeas bond [D.E. 466]. On September 17, 2021, Eshelman moved for a disallowance of costs [D.E 468]. On September 24, 2021, Puma responded in opposition to Eshelman's motion for disallowance of costs [D.E. 470].

On October 18, 2021, Eshelman filed a petition for a 'writ of certiorari in the United States Supreme Court. On December 13, 2021, the Supreme Court denied Eshelman's petitioa See Eshelman v. Puma Biotechnology. Inc.. 142 S.Ct. 714 (2021). As explained below, the court grants Puma's motion to release the supersedeas bond, grants Eshelman's motion for disallowance of costs, and denies Puma's application for costs.

I.

Puma seeks release of its supersedeas bond. Federal Rule of Civil Procedure 62 states that "[a]t any time after judgment is entered, a party may obtain a stay by providing a bond or other security. The stay takes effect when the court approves the bond or other security and remains in effect for the time specified in the bond or other security." Fed.R.Civ.P 62(b). The supersedeas bond's terms govern a party's liability under the instrument. See TVA v. Atlas Mach & Iron Works. Inc.. 803 F.2d 794, 798 (4th Cir. 1986). At one time, Federal Rule of Civil Procedure 73(d) guided the use of supersedeas bonds. Although Rule 73(d) has been rescinded, it "described what always has been good practice on a supersedeas bond, and, except as the matter now is regulated by local rules in a particular district, it is still a useful guide on these matters." Charles Allen Wright, Arthur A. Miller, et al., Federal Practice & Procedure. § 2905 (3d ed. April 2021 Update); see Atlas Mach.. 803 F.2d at 799. Under Rule 73(d), an appellant remained liable under a supersedeas bond "for the satisfactionction of the judgment in full together with costs, interests, and damages for delay, if for any reason the appeal is dismissed or the judgment is affirmed, and to satisfy in full such modification of the judgment and such costs, interest and damages as the appellate court may adjudge and award."

Puma's bond states, in relevant part:

If [Puma] shall duly prosecute said appeal, and shall moreover pay the amount of said judgment rendered, then this obligation to be null and void, otherwise to remain in full force and effect, provided however, the maximum liability of the Surety shall not exceed Twenty-Nine Million Five Hundred Thousand and 0/100 Dollars ($29, 500, 000.00).

[D.E. 466-4] 2 (emphasis omitted). According to the bond's plain language, the bond is nullified when (1) Puma duly prosecutes its appeal and (2) Puma pays the amount of the judgment rendered on appeal. The parties dispute whether the bond required Puma to prosecute its appeal "to effect." See [D.E. 467] 14-17; [D.E. 471] 6-7. Construing similar language in a supersedeas bond, the Fourth Circuit held that the bond implicitly contained such a requirement or at least had a substantially similar meaning. See Atlas Mach.. 803 F.3d at 798-99; see also Beatrice Foods Co. v. New England Printing & Lithographing Co.. 930 F.2d 1572, 1575 (Fed. Cir. 1991) (interpreting Atlas Machine similarly). A party prosecutes an appeal "to effect" if the lower court's judgment is "substantially reversed." Gav v.Parpart. 101 U.S. 391, 392 (18791: see Crane v. Buckley. 203 U.S. 441, 447 (1906) ("It is an expression substantially equivalent to prosecuting bis appeal with success; to make substantial and prevailing bis attempt to reverse the decree or judgment awarded against him."); Atlas Mach.. 803 F.2d at 799.

The court need not resolve whether the bond's language requires Puma to prosecute its appeal "to effect" because under either reading, the court releases the bond. If the bond's plain language controls and the bond contains no requirement that Puma prosecute its appeal "to effect," then the bond's conditions are satisfied. Puma prosecuted an appeal to the Fourth Circuit. See Eshe1manT2 F.4th at 286. And based on the Fourth Circuit's judgment, Puma has nothing left to pay of "the amount of said judgment rendered." [D.E. 466-4] 2; see Neeley v. Bankers Tr. Co. of Tx.. 848 F.2d 658, 660 (5th Cir. 1988) ("The bond is limited to any decree of the court of appeals; it does not include an entirely new judgment of the district court"); Goss Iht'l Corp. v. Tokyo Kikai Seisakusho. Ltd.. No. 00-CV-35-LRR, 2006 WL 4757279, at *3 (N.D. Iowa Aug. 9, 2006) (unpublished).

Even if the bond required Puma to prosecute its appeal "to effect," Puma did so. When an appellate court vacates the trial court's damages award, whether the vacatur constitutes a substantial reversal depends on the scope of the appellate court's ruling. "If, after an appeal, there remains a question of whether any compensable harm was done, then the bond may be allowed to lapse." Beatrice Foods Co._T 930 F.2d at 1576 (emphasis omitted); see Morrison Knudsen Corp. v. Ground Improvement Techniques. Inc.. 532 F.3d 1063, 1069-70 (10th Cir. 20081: see, e.g.. Neelev. 848 F.2d at 660 (holding no liability on a bond when "the entire award of money damages was vacated" and the plaintiff "had to prove his damages on remand"). However, "it is not unreasonable" for a bond to remain in place "when the question on remand is not whether a party will receive damages, but merely how the damages will be calculated." Beatrice Foods Co.. 930 F.2d at 1576; see Morrison Knudsen Corp.. 532 F.3d at 1069-70; Neelev. 848 F.2d at 660; see, e.g, Rector v. Mass. Bonding & Ins. Co.. 191 F.2d 329, 332-33 (D.C. Cir. 1951) (holding the surety was still liable when remand was limited to determining, based on a counterclaim, "the amount to be set off against the principal claim"); Franlrlimrillp Realty Co. v. Arnold Constr. Co.. 132 F.2d 828, 829 (5th Cir. 1943) (leaving a bond in place when reversal was "limited to taking evidence and obtaining findings ... upon whether the judgment [the party] had obtained should be for the same or a less sum").

Other courts have followed this distinction. See, e.g.. PHI. Inc. v. Apical Indus.. Inc.. No. 6:13-cv-00015, 2020 WL1303965, at *2 (W.D. La. Mar. 17, 2020) (unpublished); Laborers Pension Tr. Fund-Detroit & Vicinity v. Interior Exterior Specialists Co.. 824 F.Supp.2d 764, 773 (E.D. Mich. 2011); Derkevorkian v. Lionbridge Techs.. Inc.. No. 04-cv-01160-LTB-CBS, 2009 WL 735650, at *5-6 (D. Colo. Mar. 18, 2009) (unpublished).

The Fourth Circuit vacated the damages judgment this court entered pursuant to the jury's verdict and remanded for a new trial on damages. Thus, the remand involves more than merely recalculating damages. Rather, the Fourth Circuit's opinion targeted the sufficiency of the evidence supporting the jury's award of damages. The Fourth Circuit held that "there [was] no evidence justifying such an enormous award" and that Eshelman "failed to offer evidence of widespread circulation or comparable harm as a direct and natural consequence of the libel." Kshelmary 2 F.4th at 283, 285 (cleaned up). Eshelman must "prove his damages on remand" in a new trial; "[t]herefore, there is no liability on the supersedeas bond." Neeley. 848 F.2d at 660. Eshelman will recover at least nominal damages in the new trial, but the Fourth Circuit still "substantially reversed" the damages award, and Puma prosecuted its appeal "to effect." See, e.g.. Crane. 203 U.S. at 447. Accordingly, regardless of whether Puma's bond requires it to have prosecuted its appeal "to effect," the conditions in the bond are satisfied, and the court releases the bond.

In opposition, Eshelman argues it would be inequitable to release the bond because Puma's allegedly weak financial position means Eshelman would be irreparably harmed if he obtains a second damages award, Puma was unable to pay it, and the bond no longer insured the award. See [D.E. 467] 21-25. Puma disputes Eshelman's characterization of Puma's financial strength and of the balance of equities if the court releases the bond. See [D.E. 471] 8-10.

A supersedeas bond "insures the judgment creditor against the risk of lack of funds to satisfy the award" if the appellate court affirms the judgment. Revlon. Inc. v Carson Prods. Co.. 647 F.Supp. 905, 905-06 (S.D.N.Y. 1986); see Poplar Grove Planting & Refining co v. Bache Halsev Stuart. Inc.. 600 F.2d 1189, 1190-91 (5th Cir. 1979); Goss Int'l. 2006 WL 4757279, at *2. Thus, the supersedeas bond secures the judgment against the insolvency of the judgment debtor during the appellate process. See Beatrice Foods Co.. 930 F.2d at 1574; Poplar Grove. 600 F.2d at 1189-90; Nexteer Auto. Corp. v. Korea Delphi Auto. Sys. Corp.. No....