Court Opinion

ID: 4697997
Source: CourtListenerOpinion
Date Created: 2021-06-23 19:00:52.750483+00
Date Added: 2024-06-11T08:05:50.089917
License: Public Domain

PUBLISHED

                       UNITED STATES COURT OF APPEALS
                           FOR THE FOURTH CIRCUIT

                                   No. 20-1329

FREDRIC N. ESHELMAN,

          Plaintiff – Appellee,

    v.

PUMA BIOTECHNOLOGY, INC.,

          Defendant – Appellant,

    and

ALAN H. AUERBACH,

          Defendant.

                                   No. 20-1376

FREDRIC N. ESHELMAN,

          Plaintiff – Appellant,

    v.

PUMA BIOTECHNOLOGY, INC.,

          Defendant – Appellee,

    and

ALAN H. AUERBACH,

          Defendant.
Appeals from the United States District Court for the Eastern District of North Carolina, at
Wilmington. James C. Dever, III, District Judge. (7:16-cv-00018-D)

Argued: May 4, 2021                                                Decided: June 23, 2021

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.

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.

                                             2
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.

                                            3
       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

                                             4
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 (1956) (per curiam). The Petrowski defendant had specifically

stipulated that it “voluntarily submits to the jurisdiction of the . . . court,” id. at 496, 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.

                                                 5
                                             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 (1938). In North Carolina, “[w]hether a publication is libelous per se

       1
         Eshelman argues that Puma has failed to preserve this issue for our consideration
because Puma seeks review of the district court’s denial of summary judgment after a full
trial and final judgment. Such orders generally are not appealable. See Varghese v.
Honeywell Int'l, Inc., 424 F.3d 411, 422 (4th Cir. 2005). However, Puma and Eshelman
filed cross-motions for summary judgment on the same issue. That is, Puma argued that
its statements were not defamatory and Eshelman argued that they were not only
defamatory, but defamatory per se. Thus, when the district court ruled in favor of
Eshelman, it denied Puma’s motion, but it also granted in part Eshelman’s motion. And
when “appeal from a denial of summary judgment is raised in tandem with an appeal of an
order granting a cross-motion for summary judgment, we have jurisdiction to review” that
denial. Monahan v. County of Chesterfield, 95 F.3d 1263, 1265 (4th Cir. 1996) (citing
Sacred Heart Med. Ctr. v. Sullivan, 958 F.2d 537, 543 (3d Cir. 1992)).
                                              6
is a question of law for the court.” Boyce & Isley, PLLC v. Cooper, 568 S.E.2d 893, 899

(N.C. Ct. App. 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., 312 S.E.2d 405, 409–10 (N.C. 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., 195 S.E. 55, 60 (N.C. 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–

                                             7
09, 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 (citing

Flake, 195 S.E. at 60). We have little trouble concluding that the statements at issue — at

a minimum — impeach Eshelman in his profession. See Badame v. Lampke, 89 S.E.2d

466, 468 (N.C. 1955) (statement that plaintiff engaged in “shady deals” was defamatory

per se); Clark v. Brown, 393 S.E.2d 134, 137 (N.C. 1990) (statement that plaintiff was fired

for being incompetent was libel per se).

                                              8
       Thus, because the investor presentation statements were susceptible of only one

reasonable interpretation, and that interpretation was defamatory, we affirm the district

court’s determination that the statements were defamatory per se.

                                             B.

       Puma also contends that asserted errors in the verdict form warrant a new trial. We

“holistically” review a verdict form for abuse of discretion. Benjamin v. Sparks, 986 F.3d

332, 346–47 (4th Cir. 2021). We must evaluate “whether the form ‘adequately presented

the contested issues to the jury when read as a whole and in conjunction with the general

charge, whether submission of the issues to the jury was fair, and whether the ultimate

questions of fact were clearly submitted to the jury.’” Id. (quoting Horne v. Owens Corning

Fiberglas Corp., 4 F.3d 276, 284 (4th Cir. 1993)).

       Puma asserts two errors; both arise from the instruction that the jury determine

whether Puma’s statements that “Eshelman was ‘replaced as CEO of PPD’ after being

‘involved in clinical trial fraud’” were false and made with actual malice. First, Puma

contends that the district court erred in inserting “after being” between the quoted material.

Second, Puma argues that the district court never determined that the statement “Eshelman

was ‘replaced as CEO of PPD’ after being ‘involved in clinical trial fraud’” was defamatory

per se because at summary judgment it had separately analyzed the statements “Eshelman

was ‘replaced as CEO of PPD in 2009 after being forced to testify regarding fraud in 2008’”

and “Eshelman was ‘involved in clinical trial fraud.’”

       These quibbles do not render the verdict form unclear or the verdict unfair. The

district court carefully delineated between Puma’s statements and the court’s summary by

                                              9
its use of quotation marks. Moreover, the jury received a copy of the investor presentation

and was properly instructed to consider the quoted statements “in the context of the entire

presentation.”   Accordingly, when “read as a whole,” the verdict form “adequately

presented” Puma’s statements to the jury. Horne, 4 F.3d at 284. Thus, we reject Puma’s

challenge to the verdict form.

                                               IV.

       We now reach the crux of this appeal: Puma’s contention that the jury award was

excessive and that the district court erred in denying its motion for a new trial or remittitur. 2

       We review for abuse of discretion, Fontenot v. Taser Int’l, Inc., 736 F.3d 318, 334

(4th Cir. 2013), and apply “state law standards,” Konkel v. Bob Evans Farms Inc., 165 F.3d

275, 280 (4th Cir. 1999) (citing Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 435–

39 (1996)). Rule 59(a) of the North Carolina Rules of Civil Procedure permits a new trial

for “[m]anifest disregard by the jury of the instructions of the court,” “[e]xcessive or

inadequate damages appearing to have been given under the influence of passion or

prejudice,” or “[i]nsufficiency of the evidence to justify the verdict or that the verdict is

contrary to law.” N.C. Gen. Stat. § 1A-1, Rule 59(a)(5)–(7). Here, in manifest disregard

       2
         Eshelman argues that Puma waived its damages arguments when it failed to move
for judgment as a matter of law. But that Rule 50 requirement applies to challenges to the
sufficiency of the evidence, not to Rule 59 motions alleging an excessive damages verdict.
See Belk, Inc. v. Meyer Corp., 679 F.3d 146, 160–61 (4th Cir. 2012).
                                               10
of the jury instructions, the jury awarded excessive damages that the evidence could not

justify.

       We start with the observation that the jury’s $22.35 million award — $15.85 million

for compensatory damages and $6.5 million for punitive damages — is exceptionally large.

No North Carolina jury has awarded anything close to such an amount in a defamation

case. The next highest jury awards that have been upheld on appeal are an order of

magnitude lower. See Hien Nguyen v. Taylor, 723 S.E.2d 551, 556 (N.C. Ct. App. 2012)

(upholding $1 million in compensatory damages per plaintiff); see also Desmond v. News

& Observer Publ’g Co., 846 S.E.2d 647 (N.C. Ct. App. 2020) (affirming judgment of $1.5

million in compensatory damages). One would expect ample evidence of the harm suffered

by Eshelman to support a jury award ten times the size of the largest defamation awards in

North Carolina history.

       But there is no evidence justifying such an enormous award. Eshelman estimated

that his damages were $7.5 million before trial, $100 million at his deposition, and $52

million at closing argument. Yet he provided no support for any of these very different

and fluctuating estimates.

       Although Eshelman testified on his own behalf that he suffered “incalculable”

damage to his reputation, when asked for support for that assertion, he said he did not “have

any idea” about “any kind of financial or economic harm [he suffered] as a result of these

                                             11
statements.” He also was unable to name any person who refused to do business with him,

or any person who had knowledge of damage to his reputation.

       Eshelman offered testimony from only one person who had read the presentation:

his friend, Kenneth Lee. Lee testified not only that he did not believe that Eshelman

committed fraud, but also that Eshelman had a “very generous [public] persona” and

remained a “leader in the industry” after the publication of the defamatory statements. In

sum, neither Eshelman nor his witness identified any lost business opportunities, damaged

relationships, or foregone contracts resulting from the investor presentation.

       Moreover, Puma presented evidence that after publication of the presentation,

Eshelman continued to serve on boards of at least seven companies, and that he received

numerous accolades in the following years. These accolades included “CEO of the Year”

from the Council on Entrepreneurial Development, a Star News Lifetime Achievement

Award, an honorary degree, and induction into the North Carolina Business Hall of Fame.

The record thus indicates that Eshelman’s reputation remained both commendable and

intact after the publication.

       North Carolina law “presumes that general damages actually, proximately, and

necessarily result” from defamation per se. Flake, 195 S.E. at 59. The doctrine of

presumed damages means that “no proof is required” to support the precise amount of a

damages award. Id. But, nevertheless, the North Carolina pattern jury instructions for libel

make clear that a plaintiff must demonstrate that the award it seeks “is a direct and natural

consequence of the libel.” N.C.P.I.—Civ. 806.83. See also Hien Nguyen, 723 S.E.2d at

559 (the “party seeking damages must show that the amount of damages is based upon a

                                             12
standard that will allow the finder of fact to calculate the amount of damages with

reasonable certainty”); Mann v. Swiggett, 2012 WL 5507255, at *4 (E.D.N.C. Oct. 9,

2012).

         Here the jurors could not have calculated the $22.35 million in damages with the

requisite level of certainty because they received no evidence sufficient to support a multi-

million-dollar damages award.       The district court properly instructed the jury as to

presumed damages. Consistent with North Carolina pattern jury instructions, the court told

the jurors that presumed damages “unavoidably include[] an element of speculation.”

Eshelman v. Puma Biotechnology, Inc., No. 2:16-CV-00018-D, Dkt. 286 at 21–22; see also

N.C.P.I.—Civ. 806.83. However, the court also instructed the jury that it was nonetheless

required to evaluate “the probable extent of actual harm in the form of loss of reputation or

standing in the community, mental or physical pain and suffering, . . . inconvenience or

loss of enjoyment which [Eshelman] has suffered or will suffer in the future as a result of

the [Puma’s] publication of the libelous statements.” Id. Finally, the court instructed the

jury that it must award the plaintiff an amount that “is a direct and natural consequence of

the libel of [Eshelman] by [Puma].” Id.

         A jury cannot faithfully complete this task when there is no evidence whatsoever of

actual harm sufficient to support the damages award. See MyGallons LLC v. U.S. Bancorp,

521 F. App’x 297, 305 (4th Cir. 2013) ($4 million general damages verdict for defamation

per se would be “excessive” because it had “no support in the record”); see also Fontenot,

736 F.3d at 334–35 (jury award amounted to “pure conjecture” because plaintiff provided

no supporting evidence).

                                             13
      Eshelman relies on a number of defamation cases where larger jury awards were

approved. See, e.g., Cantu v. Flanigan, 705 F. Supp. 2d 220 (E.D.N.Y. 2010) ($150 million

compensatory damages award); Anagnost v. The Mortg. Specialists, Inc., No.

2162016cv00277, 2017 WL 7690898 (N.H. Super. Ct. Sept. 29, 2017) ($105 million

compensatory damages award), aff’d, 2018 WL 4940850 (N.H. Sept. 25, 2018); Wynn v.

Francis, No. B245401, 2014 WL 2811692, at *1 (Cal. Ct. App. June 23, 2014) ($17 million

presumed damages award). But these out-of-state awards are inapposite. All involved

defamatory statements published in widely circulated newspapers, on billboards, on

television, or on popular websites. At trial, Eshelman failed to demonstrate similar

widespread publication.

      The trial record shows that the website linking to the investor presentation at issue

here was viewed only 198 times. The Puma presentation is permanently available on the

SEC website, but Eshelman has made no attempt to quantify the number of people who

have viewed, or will view, it there. And if many people had seen the presentation on the

SEC website, we would expect to see some evidence of its effect on Eshelman’s reputation.

      Where North Carolina courts have awarded million-dollar damages awards for

defamation, there has been little doubt that the defamatory statements were widely

publicized. See Desmond v. News & Observer Publ’g Co., 823 S.E.2d 412, 438 (N.C. Ct.

App. 2018) ($1.6 million in compensatory damages for two defamatory articles published

in major regional newspaper stating plaintiff had falsified evidence and committed

perjury); Hien Nguyen, 723 S.E.2d at 556 ($1 million in compensatory damages per

                                           14
plaintiff for a DVD that falsely showed plaintiffs conducting a wrongful and racially-

motivated arrest; the video profited $40 million for the defendant).

       Moreover, the defamation cases in North Carolina yielding far lower damages

awards involve statements which, at least on their face, seem considerably more harmful

than those here. For example, in Lacey v. Kirk, the jury awarded $50,000 in compensatory

damages for statements by the defendant that the plaintiff had committed murder. 767

S.E.2d 632, 648 (N.C. Ct. App. 2014). And in Kroh v. Kroh, the plaintiff accused the

defendant of molesting his children as well as the family dog; the defendant was awarded

$20,000 in compensatory damages. 567 S.E.2d 760, 762 (N.C. Ct. App. 2002).

       Eshelman has failed to offer evidence of widespread circulation or comparable harm

as a “direct and natural consequence[s] of the libel.” MyGallons LLC, 521 F. App’x at

305. Accordingly, the district court abused its discretion in failing to grant Puma’s motion

for a remittitur or new trial.

                                            V.

       We now turn to the remedy. When an appellate court concludes that a jury’s

damages award is excessive, “it is the court’s duty to require a remittitur or order a new

trial.” Cline v. Wal–Mart Stores, Inc., 144 F.3d 294, 305 (4th Cir. 1998).

       Because the Seventh Amendment preserves for the plaintiff his jury right, “the

preferable course, upon identifying a jury’s award as excessive, is to grant a new trial nisi

remittitur, which gives the plaintiff the option of accepting the remittitur or of submitting

to a new trial.” Id.; see also 11 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane,

                                             15
Federal Practice and Procedure § 2820 (2d ed. 1995). In determining the appropriate

amount for remittitur, a court looks to “the outermost award that could be sustained.”

Konkel, 165 F.3d at 282. This course of action thus has the practical advantage of notifying

the parties of the upper limit of damages that will withstand scrutiny, while comporting

with the Seventh Amendment. See Kennon v. Gilmer, 131 U.S. 22 (1889); see also

Defender Indus. v. Nw. Mut. Life Ins. Co., 938 F.2d 502 (4th Cir. 1991) (en banc).

         However, “our options in remedying an excessive verdict are not unlimited,” Cline,

144 F.3d at 305 n.2, and identifying the outermost award that can be sustained presents

considerable difficulty in this case. For the reasons explained above, we find no evidence

to support the amount awarded by the jury. By the same token, we cannot ourselves

determine with the requisite level of certainty what amount may compensate Eshelman for

the defamatory statements. And under North Carolina law, punitive damages depend in

part on compensatory damages, N.C. Gen. Stat. § 1D-35(2), so we also cannot identify an

appropriate remitted punitive damages award. Thus, while ordering a new trial nisi

remittitur is an “option,” Cline, 144 F.3d at 305 n.2, it is an option we reject in this case.

See Knussman v. Maryland, 272 F.3d 625, 642 (4th Cir. 2001); see also Kennon, 131 U.S.

at 29.

                                             16
       Instead, we vacate the compensatory and punitive damages awards and remand the

case to the district court for a new trial on damages. 3

                                              VI.

       In sum, we affirm the liability judgment of the district court, vacate the damages

award, and remand for a new trial on damages.

                                            AFFIRMED IN PART, VACATED IN PART,
                                      AND REMANDED FOR FURTHER PROCEEDINGS

       3
           As a result of our decision to remand this case for a new trial, “the basis for the
district court’s denial of attorney fees no longer exists.” Sasaki v. Class, 92 F.3d 232, 243
(4th Cir. 1996). Accordingly, we do not address Eshelman’s cross-appeal challenging
denial of attorneys’ fees.
        Because we order a new trial, we do resolve his conditional cross-appeals.
Eshelman first argues that the district court erred in determining that a crudely worded
email from Auerbach to his attorneys was privileged attorney-client information.
Reviewing for abuse of discretion, Minter v. Wells Fargo Bank, N.A., 762 F.3d 339, 349
(4th Cir. 2014), we reject this claim. For the reasons stated by the district court, the e-mail
constituted a privileged communication under North Carolina law. Eshelman next argues
that the district court should have nevertheless allowed him to publish parts of the email to
the jury. But, because the district court correctly determined that the email is privileged in
its entirety, it is not admissible evidence, even for the purposes of impeachment. State v.
Lowery, 723 S.E.2d 358, 363 (N.C. Ct. App. 2012). Accordingly, we reject Eshelman’s
conditional cross-appeals.
                                              17