Eshelman v. Auerbach et al

Filing 445

ORDER denying 397 Motion for Attorney Fees; granting 403 Motion for Bill of Costs; denying 414 Order on Motion for Disallowance of Costs; denying 416 Motion for New Trial; granting 418 Motion to Alter Judgment; denying 441 Motion fo r Hearing. The court AWARDS Eshelman $205,903.55 in costs under28 U.S.C. § 1920 and Local Civil Rule 54.1. Finally, the court ALTERS the judgment to include $3,984,646.58 in prejudgment interest under N.C. Gen. Stat. § 24-5(b). Signed by District Judge James C. Dever III on 3/2/2020. (Sellers, N.)

THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTII CAROLINA
SOUTHERN DMSION
/No. 7:16-CV-18-D

FREDRIC N. ESHELMAN,
Plaintiff,

v.
PUMA BIOTECHNOLOGY, INC.,
Defendant.

)
)
)
)
)
)
)
)
)

ORDER

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 ~ee other people to the additional four seats. See [D.E. 370.; 1] ff 46--50.
Puma vigorously opposed Eshelman's proposal and published an investor presentation about
I

Eshleman in January 2016 on its own website and the website of the Securities and Exchange
Commission ("SEC"). See id. at

ff

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 158. Another
slide stated that "Puma's Board does not believ~ that someone who was involved in clinical trial
I

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 ,r 58.
On January 20, 2016, Eshleman wrote Puma and demanded a retraction and requested an

apology. See id. at ,r 143. Puma refused in a letter that it published with the SEC. See id. at fl
144--45. On February 3, 2016, Eshleman sued Puma for defamation. See id. at ,r 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~ 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~ 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. Mmphy, 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] ,r 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~ 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.2dat709; Gibby, 73 N.C. App. at 131-32, 325 S.E.2dat675-76.
2

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 ~ 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 ofthe 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 trial

_J

fraud'?" 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 ofpunitive damages. See id. at 22. Eshleman then argued in favor ofpunitive
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, Punk 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 ofthe 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]
4

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.
I.

Eshelman seeks $3,075,897.85 in attorneys' fees under N.C. Gen. Stat. § 1D-45. · See [D.E.
405] 1. UnderN.C. Gen. Stat.§ 1D-45, "[t]hecourtshallawardreasonableattorney[s'] fees against
(

a defendant who asserts a defense in a punitive damages claim that the defendant knows ~r 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 Com., 149 N.C. App. 672, 689, 562 S.E.2d 82, 94 (2002) (alteration and quotation
omitted),aff'd, 358N.C. 160,594 S.E.2d 1 (2004); seeRaynorv. G4S Secure Sols. (USA)Inc., 327
F. Supp. 3d 925,946 (W.D.N.C. 2018); Bryan v. Bry8!1, No.1:11CV141, 2013 WL 1010481, at'-*l
(W.D.N.C. Mar. 14, 2013) (unpublished); cf. Messerv. 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, 244N.C. App. 543, 781 S.E.2d351, 2015 WL 8755698, at *7 (Dec. 15, 2015) (unpublished
· table decision); Philips v. Pitt C1y. Mem'l Hosp .. Inc., 242 N.C. App. 456,458, 775 S.E.2d 885, 884
(2015). "A defense is malicious ifit 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 ofthe party
5

during 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 applying N.C. Gen. Stat. §

1D-45 have awarded attorneys' fees when a party "[k]nowingly and intentionally commit[s] perjury
on the stand on matters related to the punitive damages defense" and when a party "persistently
den[ies] a fact alleged byplaintiffbutthenlaterconfess[es] to such acts." Id.; see Fed. Point Yacht
Club Ass'n. 2015 WL 8755698, at *7-8; Philips, 242 N.C. App. at 458, 775 S.E.2d at 884; Bey~
2013 WL 1010481, at *1. At the same time, courts distinguish between a party engaging in
''malicious acts or practices as a corporation," which do not warrant awarding attorneys' fees under
N.C. Gen. Stat § 1D-45, and~ party asserting a malicious or frivolous defense. Rhyne,' 149 N.C.
App. at 689, 562 S.E.2d at 95.
Eshelman argues that he is entitled to an award ofreasonable attorneys' fees under N.C. Gen.

.

Stat. § 1D-45. In support, Eshelman alleges that Puma only stipulated to certain facts on ''the eve
oftrial after three years oflitigation," concealed facts during discovery, ''malicious[ly]" denied facts
at summary judgment, did not make a good faith effort to resolve the claim at mediation, and refused
\

to stipulate to certain facts. [D.E. 405] 3-10. Additionally, Eshelman alleges that Puma's Chief

Executive Officer Alan Auerbach ("Auerbach") "repeatedly contradicted the stipulated facts and his
own prior sworn deposition testimony'' (i.e., committed perjury) when Auerbach testified at trial.
Id. at 10-15.
Eshelman concedes that Puma's defenses were not frivolous. See [D.E. 438] 1-2. As for
whether Puma's defenses were malicious, the decision to go to trial by itself does not constitute a
malicious defense. Although Eshelman cites examples of allegedly malicious conduct, the co~
declines to find Puma's conduct malicious. Cf. Rhyne, 149 N.C. App. at 689-90, 562 S.E.2d at 95.
Moreover, although Eshelman vigorously cross-examined Auerbach and exposed Auerbach as anon6

i

credible witness, the court declines to find that Auerbach's testimony rises to the level ofperjury that
would justify awarding attorneys' fees to Eshelman. Accordingly, the court denies Eshelman's
motion for attorneys' fees under N.C. Gen. Stat. § lD-45.
II.

Federal Rule of Civil Procedure 54(d)(l) governs a post-judgment motion for an award of
costs. See Fed. R. Civ. P. 54(d)(l). Rule 54(d)(l) provides that "costs----other than attorney's
fees-should be allowed to the prevailing party." Id. A ''prevailing party" is "a party in whose favor
a judgment is rendered" or "one who has been awarded some relief by the court." Buckhannon Bd.
& Care Home, Inc. v. W. Va Dta>'tofHealth&HumanRes., 532 U.S. 598,603 (2001) (quotation
and alteration omitted). Rule 54(d)(l) creates "a presumption in favor of an award of costs to the
prevailing party." Teague v. Bakker, 35 F.3d 978, 996 (4th Cir. 1994); see Delta Air Lines, Inc. v.
August, 450 U.S. 3)46, 352 (1981); Cherry v. Champion Int'l Corp., 186 F.3d 442, 446 (4th Cir.
1999).
Federalcourtsmayassessonlythosecostslistedin28U.S.C. § 1920. See28U.S.C. § 1920;
Arlington Cent. Sch. Dist. Bd. of Educ. v. Mur,phy. 548 U.S. 291,301 (2006); Crawford Fitting Co.
v. J.T. Gibbons, Inc., 482 U.S. 437, 441-43 (1?87), superseded on other grounds hy statute, 42
U.S.C. § 1988(c);Herold v.HajocaCom .• 864F.2d317, 323 (4thCir.1988). 1 Loca1Civi1Rule54.1
1

Taxable costs under section 1920 include:

(1)

Fees of the clerk and marshal;

(2)

Fees for printed or electronically recorded transcripts necessarily obtained for
use in the case;

(3)

Fees and disbursements for printing and witnesses;

(4)

Fees for exemplification and the costs of making copies of.any materials
where the copies are necessarily obtained for use in the case;
7

"furtherrefines the scope ofrecoverable costs." Howard v. College ofthe Albemarle, No. 2: 15-CV39-D, 2017 WL 3754620, at *1 (E.D.N.C. Aug. 29, 2017) (unpublished) (quoting Earp v. Novartis
Phann. Cotp .• No. 5:11-CV-680-D, 2014 WL 4105678, at *1 (E.D.N.C. Aug~ 19, 2014)
(unpublished)); see Local Civil Rule 54.1.2
Eshelman lists various costs totaling $205,903'.55 on his bill of costs: fees of the clerk

(5)

Docket fees under section 1923 ... ; ,

(6)

Compensation of court appointed experts, compensation of interpreters, and
salaries, fees, expenses, and costs of special interpretation services ....

28 u.s.c. § 1920.
2

Local Civil Rule 54.1 (c)(1) provides a non-exhaustive list of normally recoverable costs:

(a)

those items specifically listed on the bill of costs form. The costs incident to
the taking of depositions (when allowable as necessarily obtained for use in
· the litigation) normally include only the reporter's fee and charge for the
original transcript of the deposition;

(b)

premiums on required bonds;

(c)

actual mileage, subsistence, and attendance allowances for necessary
witnesses at actual costs, but not to exceed the applicable statutory rates,
whether they reside in or out of the district;

(d)

one copy of the trial transcript for each party represented by counsel,

Local Civil Rule 54.l(c)(l). Local Civil Rule 54.l(c)(2) also identifies items ''normally not taxed,
without limitation" as
(a)

witness fees, subsistence, and mileage for individual parties, real parties in
interest, parties suing in representative capacities, and the officers and
directors of corporate parties;

(b)

multiple copies of depositions;

(c)

daily copy of trial transcripts, unless prior court approval has been obtained.

Local Civil Rule 54.l(c)(2).
8

($593.00), fees for service of summonses and subpoenas ($3,819.75), fees for printed or
I

electronically recorded transcripts necessarily obtained for use in the case ($53,953.01), fees and
disbursements for printing ($43,078.76), fees for witnesses ($80.00), fees for exemplification and
the costs of making copies of any materials where the copies are necessarily obtained for use in the
case ($97,116.53), docket fees under 28 U.S.C. § 1923 ($22.50), and costs as shown on Mandate of
Court of Appeals ($1,840.00). See [D.E. 403] 1-2. Such fees are recoverable. See 28 U.S.C. §
1920; Local Civil Rule 54.1; Howard, 2017 WL 3754620, at *1 (collecting cases); Silicon Knights,
Inc. v. Epic Games.Inc., 917F. Supp. 2d503, 511-15 (E.D.N.C. 2012),aff'd, 551 F.1App'x646 (4th
Cir. 2014) (per curiam) (unpublished). Accordingly, the court grants Eshelman's motion for costs,
denies Puma's motion to disallow costs, and awards Eshelman $205,903.55 in costs under section
1920 and Local Civil Rule 54.1.

m.
A court ''may, on motion, grant a new trial on all or some ofthe issues ... for any reason for
which a new trial has heretofore been granted in an action at law in federal court." Fed. R. Civ. P.
59(a)(l)(A). Rem.ittitur "is the established method by which a trial judge can review a jury award
for excessiveness" and order "a new trial unless the plaintiff accepts a reduction in an excessive jury
award." Atlas Food Sys. & Servs., Inc. v. Crane Nat'l Vendors, Inc., 99 F.3d 587, 593 (4th Cir.
1996); see Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 430-31 (1996); Sociedad Espanola
de Electromedicinay Calidad, S.A. v. Blue Ridge X-Ray Co., 226 F. Supp. 3d 520, 527 (W.D.N.C.
2016). A district court may, in its discretion, grant a new trial if the verdict "(1) is against the clear
weight of the evidence; (2) is based upon false evidence; or (3) will result in a miscarriage of
justice." U.S. EqualEmp'tOpportunityComm'nv. Consol Energy, Inc., 860F.3d 131,145 (4th Cir.
\

2017); see Fed. R. Civ. P. 59(a)(l)(A); Gasperini, 518 U.S. at438-39; Huskeyv. Ethicon. Inc., 848
9

F.3d 151, 158 (4th Cir. 2017); see also Knussman v. Maryland, 272 F.3d 625,639 (4th Cir. 2001);
Cline v. Wal-Mart Stores, Inc., 144 F.3d 294,301 (4th Cir. 1998); Atlas Food Sys. & Servs., Inc.,
99 F.3d at 594; Variety Stores, Inc. v. Wal-Mart Inc., 359 F. Supp. 3d 315,325 (E.D.N.C. 2019);
. Sociedad Espanolg, 226 F. Supp. 3d at 527; SAS Inst., Inc. v. World Programming Ltd., No. 5:10CV-25-FL, 2016 WL 3435196, at •2 (E.D.N.C. June 17, 2016) (unpublished). A district court may
"weigh evidence and assess credibility in ruling on a motion for a new trial." Bristol Steel & Iron
'

Works v. Bethlehem Steel Cor,p., 41 F.3d 182, 186 (4th Cir. 1994) (quotation omitted); see Finch
v. Covil Cor,p .• 388 F. Supp. 3d 593, 608--09 (M.D.N.C. 2019).
Puma argues that the court should grant its motion because the jury's award of compensatory
and punitive damages was excessive and unlawful, ''the jury's liability finding~ were against the
clear weight of the evidence, and the verdict was marred by instructional, evidentiary, and other
errors that prejudiced Puma and impeded a fair trial." [D.E. 436] 3.
A.

Before the court addresses Puma's motion, the court recites the 146 stipulated facts in this
case. See [D.E. 370-1 ]. These stipulated facts provide necessary background information and help
to explain the jury's verdict.
EXHIBIT OF STIPULATED FACTS

Puma Biotechnology, Inc.
1. Defendant Puma Biotechnology, Inc. ("Puma") is a publicly-traded for profit
biopharmaceutical corporation incorporated in Delaware with its principal place of
business in Los Angeles, California.
2. Puma's lead product is neratinib (branded as NERLYNX), which is for the
extended adjuvant treatment of early stage, HER2-positive breast cancer.
3. Since founding Puma in 2010, Alan Auerbach has been Puma's President, Chief
Executive Officer ("CEO"), Secretary, and Chairman of its. Board of Directors.
10

)

4. From 2012 to 2014, Puma paid Mr. Auerbach compensation valued at more than
$52 million.
5. From 2012 to 2017, Puma paid Mr. Auerbach compensation valued at more than
$73 million.

6. In 2018, Mr. Auerbach received base pay of $757,260.
7. Between 2011 and 2013, Mr. Auerbach recommended that Puma shareholders
elect Jay Moyes and Troy Wilson to Puma's Board of Directors.
8. Before he !ecomm.ended that Puma's shareholders elect Mr. Moyes to the Board,
Mr. Auerbach and Mr. Moyes had been good friends for years, and it was Mr.
Auerbach who first asked Mr. Moyes ifhe was interested in joining Puma's Board.
9. Mr. Auerbach introduced Troy Wilson to Puma's Board of Directors in October
2013, and Mr. Wilson was approved to join Puma as a director shortly thereafter.
'
'

10. In April 2015, Adrian Senderowicz joined Puma's Board at Mr. Auerbach's
request.
11. In September 2015, FrankZavrljoined Puma's Board at Mr. Auerbach's request.
12. Before joining Puma's board, Mr. Zavrl had been a partner at Adage Capital
Management ("Adage Capital''), Puma's largest initial stockholder.
13. Mariann Ohanesian has been the senior director ofinvestment relations for Puma
since November 2011.
14. Charles Eyler has been the senior vice president and finance, admjnj !d:ration, and
corporate treasurer for Puma Biotechnology, Inc. since September 2011.

Dr. Fredric Eshelman
15. Plaintiff Dr. Fredric Eshelman is a resident o±: and is domiciled in, Wilmington,
North Carolina.
16. Dr. Eshelman has spent more than forty years working in the pharmaceutical
profession, developing medicines and bringing them to market, monitoring clinical
trials, and investing in new pharmaceutical products.
17. In 1985, Dr. Eshelman founded Pharmaceutical Product Development ("PPD"),
a North Carolina based contract research organization ("CRO"). A "CRO" is a group
that helps companies run clinical trials or preclinical trials.

11

18. From 1990 to 2009, Dr. Eshelman served as CEO of PPD.
19. Dr. Eshelman served as the Executive Chairman ofPPD's board ofdirectors from
2009-2011, when PPD was sold to two private equity firms.
20. Dr. Eshelman was the founding chairman of Furiex Pharmaceuticals, Inc.
(''Furiex''), and served as the Chairman ofthe board of directors ofFuriex from 2009
to 2014.
21.Jn 2014, Dr. Eshelman founded Eshelman Ventures, LLC, a company focused on
investing in healthcare companies.

Puma's Dealings W'ith Dr. Eshelman and Other Stockholders
22. Puma reported in its March 3, 2014 10-K, "We believe that there are
approximately 36,000 patients in the United States and 34,000 patients in the
European Union, or EU, with newly diagnosed HER2-positive breast cancer,
representing an estimated total market opportunity between $1 billion and $2
billion."
23. On August 11, 2014, Puma announced that it expected to file a New Drug
Application (''NDA") with the United States Food and Drug Administration ("FDA")
for neratinib during 201 S.

/

24. On November 10, 2014, Puma announced that it would increase its research and
development budget to support the development of neratinib and preparation of its
NDA
25. On December 2, 2014, Puma announced that it intended to "delay its proposed
timeline for filing the NDA [for neratinib] until the first quarter of 2016."
26. After the "first quarter of 2016" arrived and passed Puma announced that it
"anticipate[d] submittingaNewDrugApplication(NDA)totheFDAinm.id-2016."
27. Puma did not submit its NOA.for neratinib to the FDA until July 21, 2016.
28. On July 21, 2014, Puma's stock price was less than $60 per share.
29. On July 22, 2014, Puma and Mr. Auerbach represented that the drug and placebo
disease-free survival rates were "in line" with prior Herceptin Adjuvant Studies, i.e.,
clinical trials for an FDA approved early-stage breast cancer treatment.
30. On July 23, 2014, Puma's stock price exceeded $230 per share.

12

31. On July 23, 2014, the value ofAdage Capital's investment in Puma increased by
approximately $950 million.
32. Mr. Zavrl remembers July 23, 2014 "[k]ind of like the birth of [his] children"
because he was out on a fishing trip with his son and "came back $100 million
richer" as a result of his stockholdings in Pwna.
33. On July 30, 2014, Forbes reported that Puma's and Auerbach's July 22, 2014
announcement had caused Puma's stock price to increase significantly, making Mr.
Auerbach an "Overnight Billionaire," in an article for which Mr. Auerbach was
interviewed and did not dispute the reported numbers.
34. Between May 18 and 19, 2015, Dr. Fredric Eshelman invested nearly $9 million
inPwna.
35. On June 1, 2015, two weeks after Dr. Eshelman purchased Puma's shares, the
American Society of Clinical Oncology ("ASCO'') held a conference. During the
conference, it was revealed that the disease-free survival rates for neratinib were far
inferior to the Herceptin Adjuvant Studies, rather than "in line" with them, as Mr.
Auerbach had previously claimed.
36. An investor blog later reported:
Puma has a reputation of being very selective with data releases and
allegedly denied attendance to an investor event taking place around
the time of ASCO to those that were not bulls on the stock. The
company additionally allegedly selectively released data to a number
of sell-side analysts after a negative reaction to an ASCO abstract
release as a way to provide support to the company's poor performing
stock ... these seem to me to display a pattern of secrecy that makes
an investor question if management is being fully honest with
shareholders and disclosing all information (including negative
clinical information) when it .should. Some in the investment
community would note that this reputation is one thing that makes
them especially concerned about the data from the NSABP FB-7 trial
that Puma had originally stated it would release to investors back in
Q4 2013. These investors would suggest that Puma has avoided
releasing this data, as it is poor.
37. On June 1, 2015, when Puma announced the clinical data related to the"extent of
the benefit for ExteNET in the trial" at the ASCO conference, investors were
disappointed with the results.
38. Mr. Gross, the founder of Puma's then-largest stockholder, Adage Capital, was
disappointed with the June 1, 2015 ASCO conference data release, which had wiped
13

out $250 million of the value of Adage ,Capital's investment in Puma. But when he
asked to speak with Mr. Auerbach at the ASCO conference, Mr. Auerbach said, ''you
have 30 seconds" and then "started to count, one, two, three." That was "a very, very
difficult conversation," and Adage Capital was ''very, very frustrated with Alan."
39. When confronted with.Mr. Gross's video testimony about Mr. Auerbach counting
"one, two, three" at the ASCO conference, Mr. Auerbach yelled, "FALSE! FALSE!
FALSE!" while the video of Mr. Gross's testimony played on.
40. Mr. Gross explaiiled that,_ with Puma, "it happens quite frequently that, the
company sets expectations, and they're disappointed-investors are disappointed by
the actual results. It happens all the time." Mr. Gross testified that ''this was a
recurring pattern with Alan Auerbach, in his ... disclosures to investors, and then the
actual results when we saw them."
41. Adage Capital offered to restrict its stock (remove its ability to trade its shares in
-order to gain access to nonpublic information) so that it could review Mr. Auerbach's
slide decks prior to presenting them to the public to help Mr. Auerbach better manage
investors' expectations, but Mr. Auerbach ''want[ed] no part of that."
42. Frustrated with Puma's stock price and Mr. Auerbach's mismanagement, Dr.
Eshelman began speaking about Puma to Mr. Gross, whom he had previously met
because of Dr. Eshelman's positions as the CEO ofFuriex Pharmaceuticals, Inc. and
as a director for The Medicines Company.
43. Mr. Gross, who understood Dr. Eshelman to have a reputation for caring ''more
about shareholders getting a good return on their investment than he cares about
management remaining entrenched and in charge of the company," spoke with Dr.
Eshelman several times about Puma.
44. Beginning in June 2015, Puma and Mr. Auerbach were repeatedly sued for
securities fraud in publicly-filed complaints alleging that they had ''made false and/or
misleading statements" regarding the clinical trial for their flagship drug, neratinib,
on July 22, 2014.
45. On February 4, 2019, a unanimous jury found that Puma and Mr. Auerbach had
committed securities fraud on July 22, 2014 by knowingly misleading the public
about the effectiveness of neratinib.
The Consent Solicitation
46. On July 16, 2015, Dr. Eshelman sent a stockholder's "books and records" request
to Puma pursuant to Delaware Code section 220.

14

47. Puma's outside counsel, Latham & Watkins, advised Puma regarding Dr.
Eshelman's books and records request.
48. By October 22, 2015, Dr. Eshelman.had invested considerable money to purchase
shares of Puma
49. As of October 28, 2015, Dr. Eshelman had served as the Non-Executive
Chairman ofthe Medicines Company and on the Boards ofthe following companies:
AeroMD Inc.; Cellective Biotherapy, Inc.; Dignify Therapeutics, Inc.; Eyenovia, Inc.;
GI Therapeutics, Inc.; Innocrin Pharmaceuticals, Inc.; Medikidz USA, Inc.; Meryx,
Inc. and Neoantigenics LLC. As of October 28, 2015, Dr. Eshelman also served on
the advisory Board of Auven Therapeutics.
50. On October 28, 2015, Dr. Eshelman filed a PreJiminary Consent Statement with
the United States Securities and Exchange Commission ("SEC"), proposing that
Puma's stockholders vote to increase the size of Puma's Board from five to nine
directors and elect Dr. Eshe~ James Daly, Seth Rudnick, and Ken Lee to fill the
proposed additional four director seats (the "Consent Solicitation").
51. Mr. Auerbach expressed his frustrations, to both Puma's Board and Charles Eyler
that Dr. Eshelman's Consent Solicitation was "a major distraction," and "utterly
ridiculous."
52. In early November 2015, Ms. Ohanesian asked Benjamin Matone ofNASDAQ
Corporate Solutions to obtain "sell-side notes" (industry research) to gather
information on Dr. Eshelman and PPD.
53. On November 12, 2015, Ms. Ohanesian sent an email calling Dr. Eshelman
"quite annoying."
54. On November 17, 2015, Ms. Ohanesian sent an email calling Dr. Eshelman a
''fool."

55. Puma's outside counsel, Latham & Watkins, advised Puma regarding Puma's
response to Dr. Eshelman's Consent Solicitation.
56. On December 23, 2015, Institutional Shareholder Services ("ISS") issued its
recommendation against Dr. Eshelman's Consent Solicitation, while acknowledging
'
that "[m]uch of [Puma's] stock price volatility driving the consent solicitation
appears to have resulted from two specific events: Puma's stock shot up nearly 300
percent in July 23, 2014, following the company's announcement that trial results
'demonstrated that treatment with neratinib resulted in 33% disease-free survival
versus placebo,' and in the first week of June 2015, Puma stock dropped nearly 30%
following the presentation of neratinib data at the American Society of Clinical
Oncology (ASCO) Annual Meeting. Since then the company's stock price has
15

continued a gradual decline." The ISS report also acknowledged that Dr. Eshelman' s
"assertion that Puma's board composition is still not optimal may hold some truth."
57. After ISS-issued its recommendation, Mr. Gross texted Mr. Zavrl: "We :finally
had contact [with ISS] yesterday, hence you see their recommendation today...."

Puma's Research Regarding and Publication of the Presentation
58. On January 7, 2016 Puma published an investor presentation entitled, "Continued
Focus on Developing Shareholder Value" ("Presentation"), which included the
following slides:

, A whistleblower from PPD, Ann Marie Cisneros - a clinical trial associate for PPD - testified
that she sent evidence of fraud to PPD management, which was ignored
, "[b]ased upon what I observed and learned in monitoring the Kirkman-Campbell site, Dr.
Kirkman-Campbell indeed had engaged in fraud ... I knew it, PPD knew it"
, Cisneros' Testimony: http://www.circare.org/foiaS / cisneros testimony. 20070213. pdf*

• Eshelman denied before Congress that fraud had occurred at the time despite Cisneros' e-mail
to PPD management summarizing fraudulent practices and "red flags"
, Fshehnan's Video Testimony:
, Part 1: hllps:L(www.youtube.com/watch?v=rnzOBlX7hLMs•
, Part 2: htlps:l(www.youtube.com/watch?v=GeM9ZDMBc0M*
, Part 3: https://www.voutube.com/watch?v=FhEOvN8ceAE*
, Eshelman's Statement and Testimony:
, https://www.gpo.gov/fdsvs/pkg/ CHRG-11 0hhrg48587 /htrnl/CHRG-11 0hhrg48587.htm•

, 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
'Please paste the links above into your browser to view the content.

13
Ai;;;

16

Esllelma11 1s 111isreprese11tatio11s are 110 sitrprise give11 Iris l1istory
• Eshelman was Chief Executive Officer (CEO) of Pharmaceutical Product Development (PPD)
when it managed a clinical trial during the development of the antibiotic drug l<etek for the
treatment of outpatient upper respiratory infections and pneumonia
• Fraud was uncovered in this tri.11 by the FD A's Office of Criminal Investigation

• Fraud with the trial included:
• Pabrication of data at one clinical site (investigator convicted of fraud)
Manipulation of data at nnolher site (investigator had medical license suspended)

• Fraud occurred at highest enrolling site
~

As Chief Executive Officer of PPD, Eshelman was fo[ced to testify before Congress
regarding PPD's involvement in this clinical trial fraud in 2008

, Eshelman was replaced as CEO of PPD in 2009

12

59. The drafting ofthe Presentation was done by Mr. Auerbach with consultation and
advice from Latham & Watkins:

60. No member of the Board of Directors of Pu.ma or anyone else from Pu.ma asked
any questions about the statements that Mr. Auerbach had made about Dr. Eshelman
and the Ketek clinical trial in the Presentation.

The Ketek Clinical Trial
61. On November 1, 2001, Aventis Pharmaceuticals Inc. ("Aventis") hired PPD to
monitor Study 3014, a clinical trial of Ketek, an antibiotic that Aventis had
developed for the treatment of upper-respiratory tract infections.
62. The Ketek clinical trial had approximately 25,000 study subjects enrolled by
nearly 2,000 physicians who were the principal investigators ("Pis") for the trial.
63. Dr. Kirkman-Campbell was one of the Pis on the Ketek clinical trial.
17

64. At the time she was a PI on the Ketek clinical trial, Dr. Kirkman-Campbell was
not on a blacklist maintained by the FDA, the Institutional Review Board, or anyone
else. All ofthe Pis on the Ketek clinical trial, including Dr.Kirkman-Campbell, were
required to attend training for the Ketek clinical trial.
6S. 'An "Institutional Review Board" or "IRB" is a group of people who monitor a
clinical trial.
,66. Dr. John Reynolds, a pharmacovigilance and drug safety professional who
worked for PPD, was in charge of analyzing and reviewing lab values for the Ketek
clinical trial.
I

67. On February 13, 2002, PPD's Dr. Reynolds emailed Aventis's Study Manager
Nadine Grethe and voiced his concern that Dr. Kirkman-Campbell had not actually
recruited the number of patients into the study that she had r~rted.
68. Dr. Reynolds spoke with Ann Marie Cisneros (a PPD employee and clinical
research associate ("CRA")) and Abby Wear (aPPD employee and site management
CRA) to discuss potential issues with Dr. Kirkman-Campbell's site and to help
prepare Ms. Cisneros for an upcoming site review at Dr. Kirkman-Campbell's office.
69. On February 18, 2002, Ms. Cisneros conducted a site review at Dr. KirkmanCampbell's office. She reported various issues she identified at the site to the IRB.
70. On Wednesday, February 20, 2002, Dr. Reynolds analyzed data from Dr.
Kirkman-Campbell's site, which led him to believe that Dr. Kirkman-Campbell may
have been engaging in "blood splitting," i.e., assi~ certain blood samples to
multiple patients. He reported his concerns to Aventis' s Nadine Grethe via email the
next Monday.
71. On February 27, 2002, PPD employee Jessica Lasley sent an email titled
"Teleconference to discuss findings from monitoring Kirkman-Campbell" to Aventis
employees Nadine Grethe and Ranjan K.hosla, copying PPD personnel Ann Marie
Cisneros, John Reynolds, Robert McCormick, Cathy Tropmann, Teresa Dunlap,
Melinda Edwards, and Mary Price. The email stated: "We would like to hold a
teleconference with you to review some of the information that is of concern to us.
. . . Ann Marie [Cisneros] and John [Reynolds] had assembled some examples ofthis
information that we can sha,e with you. Let us know when it would be possible to
discuss this with you. We have attached a summary of Ann Marie's findings during
her visit." A ,:mmmary of Ann Marie Cisneros's findings was attached to the email.
72. PPD held a teleconference with Aventis on March 4, 2002 to discuss PPD's
concerns about Dr. Kirkman-Campbell's trial site. On behalfofPPD, the participants
on the teleconference were Dr. John Reynolds, Ann Marie Cisneros, Abby Wear, and
Robert McCormick. The Aventis representatives on the teleconference were Nadine
18

Grethe, William Stager, M. Shoemaker, M. Aschenbrenner, and Rajan Kbosla
During the teleconference, Dr. Reynolds and Ms. Cisneros elaborated on the issues
and concerns that PPD had previously reported to Aventis via email. After ~e
teleconference, a written "Investigative Plan" was developed in which Aventis was
to perform a statistic~ analysis of the lab data; to ensure that a follow-up letter was
sent to the Dr. Kirkman-Campbell site asking for a written explanation of issues; and
to review the follow-up letter before it was sent to ensure that all outstanding issues
had been addressed and appropriate follow up was requested.
73. Ms. Cisneros left PPD shortly after the March 4, 2002 teleconference and has no
knowledge of what took place at PPD or Aventis after that teleconference.
74. Data from the Ketek clinical trial was submitted to the FDA.
7S. Beginnjng 1n 2002, Special Agent Robert West of the FDA's Office of Criminal
Investigations led an investigation into the Ketek clinical· trial.
76. Special Agent West began his career as a criminal investigator in the U.S. Army,
where he served by conducting criminal investigations for more than twenty-one
years. After retiring from the Army in 1996, he was hired by the FDA's Office of
Criminal Investigations, where he served for another twenty years, received multiple
promotions, and handled criminal investigations into clinical trial fraud and other
matters.

77. Over the course of his forty-one-year career, Special Agent West has conducted
close to ten thousand investigations, at least half of which he led.
78. Special Agent West describes himself as ''very detail-oriented" and, in
conducting investigations, he follows the trail as it leads him, interviewing everyone
who needs to be interviewed. Special Agent West tries, to the best of his ability, to
conduct his investigations objectively, ethically, and thoroughly.
79. Special Agent West's investigation into the Ketek clinical trial was conducted by

a team of approximately twenty-five federal agents who spent between 20,000 and
30,000 hours working on the case, reviewing close to one million documents, and
interviewing Dr. Kirkman-Campbell's staff and patients; PPD employees, and
Aventis employees.
80. Special Agent West prepared written reports and memoranda of interviews in
connection with his investigation of the Ketek clinical trial.
81. Special Agent West personally interviewed Aventis personnel including Nadine
Grethe and Ranjan Khosla

19

82. Special Agent West personally interviewed PPD personnel including Ann Marie
Cisneros, Dr. John Reynolds, Cathy Tropmann, and Robert McCormick.
83. Special Agent West obtained a search warrant to search Dr. Kirkman-Campbell's
clinic and home. Through use of that search warrant, he found in Dr. Kirkman.Campbell's home a record that had been missing from her clinic, as well as some
medication for the Ketek study.
84. The Office of Criminal Investigatio~ accepted Special Agent West's
recommendation and later opened an investigation into Aventis; that investigation
was led by Special Agent Douglas Loveland.
85. The FDA did not rely on the data from Study 3014 intapproving Ketek.
86. Ketekremained on the market until March 11, 2016 when it was discontinued for
, business reasons.

Congressional Testimony About the Ketek Clinical Trial
87. On February 13, 2007, Ann Marie ~Cisneros testified before a Congressional
committee about the Ketek clinical trial.
88. Ms. Cisneros also submitted a statement, dated February 13, 2007, in whiFh she
wrote, ''what brings me here today is my disbelief at Aventis' s statements that it did
not know that fraud was being committed. Mr. Chairman, I knew it, PPD knew it,
and Aventis knew it."
89. On February 12, 2008, Ms. Cisneros, Special Agent West, Special Agent
Loveland, and Dr. Eshelman testified before a Congressional committee about the
Ketek clinical trial. Their testimony was included in a hearing transcript titled,
"Ketek Clinical Study Fraud: What Did Aventis Know?"
90. The 2008 Congressional hearing transcript indicated that Ms. Cisneros had
previously testified in a Congressional hearing.
·91. The 2008 Congressional hearing transcript indicated that on the Ketek clinical
trial, Aventis was the drug sponsor, PPD was the CRO, and Copernicus was the IRB.
92. The 2008 Congressional hearing transcript included the following testimony from
Ms. Cisneros:
While at the site, I was so concerned about patient safety, I called
Copernicus Independent Review Board or IRB to express my
concerns and seek guidance. An IRB, which is under contract to the
drug sponsor, has as its primary purpose patient advocacy. It is
20

allowed to contact patients directly and is duty-bound to report to the
FDA any unanticipated problems involving risk to subjects and
serious noncompliance with regulations.
93. The 2008 Congressional hearing transcript included the following testimony from
Ms. Cisneros:

I e-mailed a summary ofmy site visit findings to Robert McCormick,
head of quality assurance at PPD, and copied Aventis personnel. I
also participated in a teleconference between PPD and Aventis, at
which I discussed issues identified in my site visit.
At some point after that, I understand that Aventis took site
management responsibilities away from PPD because Dr. Campbell
would not cooperate with anyone but the sponsor.
94. The 2008 Congressional hearing transcript included the following:
.,
MR. WALDEN. Thank you, Mr. Chairman. Ms. Cisneros, you

participated in that conference call with Aventis in March of2002 to
discuss concerns with-Dr. Kirkman-Campbell's site, correct?
Ms. CISNEROS. Correct.

MR. WALDEN. And what follow-up did Aventis decide to do to
address PPD's concerns?
Ms. CISNEROS. Well, unfortunately, I left PPD shortly after that
teleconference, so I am not quite sure what took place after that
teleconference.

Before Publishing the Presentation, Puma Knew About the
Congressional Testimony Regarding the Ketek Clinical Trial
95. Before publishing the Presentation, Mr. Auerbach read Ms. Cisneros's February

13, 2007 statement.
96. Before publishing the Presentation, Mr. Auerbach read the entire transcript ofthe
February 12, 2008 Congressional hearing titled "Ketek Clinical Study Fraud: What
Did Aventis Know?"
97. Mr. Auerbach "assumed that the work done by the FDA" was both factual and
accurate.

21

Puma Has a Multi-Million Dollar Multi-Year Contract with PPD and Multiple
Points ofContact at PPD, But Never Asked Anyone at PPD About Dr. Eshelman
98. Pwna has "been working with contract research organizations" from the day it
was founded.
99. Mr. Auerbach is "knowledgeable about the relationship between a drug sponsor
and a contract research organization on clinical trials."
100. Pwna hired PPD as a CRO on the clinical trial of Pwna's flagship drug,
neratinib.
101. In the beginning of their contractual relationship-from 2012-2014-Pwna
hired PPD to provide regulatory strategy and overall clinical triaJ management related
to the development and subsequent FDA approval of neratinib.
102. To date, Pwnahas received CRO services worth roughly $16 million from PPD.
103. Pwnaenteredinto a "MASTER CONTRACT SERVICESAGREEMENT''with
PPD, on September 25, 2012, and Pwna renewed its contract with PPD on April 25,
2014 and September 28, 2016.
104. Mr. Auerbach signed the amendments that extended Pwna's contractwithPPD.
105. Pwna maintains that its Master Contract Services Agreement with PPD is
confidential and should be concealed from the public.
106. Paragraph 2.4 of the Master Contract Services Agreement between PPD and
Pwna--entitled Regulatory Contacts-states:
Pwna will be solely responsible for all contacts and communications
(including submissions of information) with any regulatory
authorities with respect to matters relating to Services.
Unless required by applicable law, Service Provider will have no
contact or communication with any regulatory authority regarding
Services without the prior written consent of Puma, which consent
will not be unreasonably withheld.
Unless prohibited by applicable law, Service Provider will consult
withPwnaregarding the response to any inquiry or observations from
any regulatory authority relating in anyway to Services and will allow
Pwna at its discretion to participate and, to the extent such inquiry is
directly related to the Services, control, any further contacts or
communications relating to Services.
22

107. Puma's contract with PPD provides that it ''will expire on the later of (a) six
years from the Effective Date or (b) the completion of all Services under all
Statements of Work executed by the parties prior to the sixth anniversary of the
Effective Date."
108. The earliest the Master Contract Services Agreement between PPD and Puma
could end is six years after September 28, 2016.
I

109. Beginning in 2014, as Puma comlilenced Phase II pivotal trial of neratinib,
Puma became "disenchanted with the CRO that was managing the trial in~ U.S.,
Latin America, and [the] Paci.fie Rim, and [Puma] changed CROs and employed PPD
to manage said trial."
110. In 2014, representatives from Puma traveled to North Carolina and conducted
a quality audit of PPD.
111. Puma's quality assurance audits typically last for several days.
112. Since 2014, Puma and PPD have conducted bi-weekly teleconferences..
113. Puma has more than 600 pages of business records relating to its relationship
withPPD.
114. Representatives from Puma and PPD held several face-to-face meetings in
North Carolina between 2014 and 2016.
115. Puma has ongoing business communications withPPD representatives in North
Carolina.
116. Puma had six or eight points of contact with PPD who were located in North
Carolina.
117. Puma was introduced to PPD through Richard Phillips, who was an employee
ofPPD before becoming an employee ofPuma. Puma never asked Mr. Phillips about
Dr. Eshelman before January 2016.
118. No one from Puma ever asked anyone from PPD about Dr. Eshelman before
January 2016.

Puma Did Not Ask Any ofIts North Carolina Contacts About Dr. Eshelman
119. Puma has contracted with Biologics, Inc., a North Carolina corporation, for
clinical research services. No one at Puma reached out to Puma's North Carolina
contacts at Biologics, Inc. to ask whether they knew anything about Dr. Eshelman
before January 2016.
23

120. Puma has contracted with Rho, Inc., a North Carolina corporation, for
biostatistical analysis. Puma's points of contact at Rho, Inc. were located in North
Carolina No one at Puma reached out to Puma's North Carolina contacts at Rho, Inc.
to ask whether they knew anything about Dr. Eshelman before January 2016.
121. Puma has contracted with Cato Research, a company headquartered in North
Carolina Puma's points ofcontact at Cato Research were located in North Carolina
No one at Puma reached out to Puma's North Carolina contacts at Cato Research to
ask whether they knew anything about Dr. Eshelman before January 2016.
122. Puma has contracted with Personalized Medicines Partners, a North Carolina
Company, for consulting services. No one at Puma reached out to their points of
contact at Personalized Medicine Partners in North, Carolina about Dr. Eshelman
before January 2016.
Puma Purposefully Avoided Numerous Sources That Would Have
Rebutted Its Accusations About Dr. Eshelman
123. No one at Puma reached out to Ann Marie Cisneros or Special Agent Robert
West before Puma published the Presentation.
I

124. Mr. Auerbach never asked Mr. Gross if he knew Dr. Eshelman, ifhe had ever
heard of Dr. Eshelman, if Dr. Eshelman had been involved in fraud, or anything else
about Dr. Eshelman.
125. Mr. Auerbach never bothered to look for Dr. Kirkman-Campbell's indictment,
even though it is publicly available, and Mr. Auerbach's staff would have pulled it
for him if he had asked.
126. While drafting the Presentation, Mr. Auerbach reviewed Ms. Cisneros's
February 13, 2007 Congressional statement that says: "In my eight years in clinical
research work, this is the only instance I've come across of such bad behavior by a
drug sponsor. I feel I can speak for those who agonized over this situation when I say
we are pleased that Dr. Kirkman-Campbell is serving prison time for her actions. But
what brings me here today is my disbeliefatAventis's statements that it did not know
· that fraud was being committed. Mr. Chairman, I knew it, PPD knew it, and Aventis
knew it."
127. A draft of the Presentation from 1:04 a.m. on January 6, 2016 stated:
o

A
whistleblower from PPD, Arm Marie Cisneros, testified that she sent evidence of fraud to the
head of quality assunmce at PPD and to perso1mel at Avenlis, which was ignored by both
organizations.
24

128. Mr. Auerbach revised that paragraph to read as follows: "A whistleblower from
PPD, Ann Marie Cisneros - a clinical trial associate for PPD -testified that she sent
evidence of fraud to PPD management, which was ignored.
r...............................

i OAwluJtleolower from rm, Ann Marie Cl~n~l'O~i ~ a~Jink~]Jrial G~)odate for rfD.~Je~tifiea tlmt ~Ile ~ent

eviam1t~ of frauU lo H1i1i~1~~-PPD iii.~~~~ al;i;;1~11i11!!, wl1kfi wai 1,red~)'

~l!R:0r~1~•

.

129. The final version ofthe Presentation that Puma published contains no references
to Aventis and omits all details of PPD's numerous reports to Aventis.

Scope ofPublication
130. Puma published the Presentation on its website at the "Consent Revocation"
portion of Puma's website at the following URL:
http://investor.pumabiotechnology.com/consent-revocation.
'

131. From January 7, 2016 through February 2, 2016, there were 85-page views of
the "Consent Revocation" portion of Puma's website located at
investor.pumabiotechnology.com/consent-revocation. Those page views included
users from: (1) Janus, an institutional investor; (2) UBS, a brokerage firm; (3)
Comerica, a bank; (4) CSFB, Credit Suisse First Boston; (S) Amgen, a large
biotechnology company; and (6) RBCCM, a bank. Those page views included users
in New York City, El Monte, Los Angeles, San Francisco, Denver, Wasbjngton,
D.C., Hong Kong, Atlanta, Madrid, Mumbai, and Portland. Puma's page view data
does not include views ofits website that may have occurred after February 2, 2016
or views of the Presentation on the SEC's website.
132. Between January 7, 2016 and July 11, 2016, there were 198-page views of the
"Consent Revocation" portion of Puma's website located at
investor.pumabiotechnology.com/consent-revocation. Those page views included
users inNew York City, Washington, D.C., Los Angeles, Raleigh, Durham, Chicago,
and Milwaukee.
133. Puma also published the Presentation at the "SEC Filings" portion of Puma's
website at the following URL: http://investor.pumabiotechnology.com/secfiHngs. The
Presentation was available for download at this location.
134. Puma posted the "Consent Revocation" and "SEC Filings" URLs under the
"Investors" tab on its website. From January 7, 2016 through February 2, 2016, there
were 436 views ofthe "Investors" tab on Puma's website. Those page views included
25

users located in California, New York, Massachusetts, Maryland, Texas, Florida,
Illinois, Arizona, North Carolina, Virginia, and England.
135. Puma filed the Presentation with the SEC on January 7, 2016.
136. Puma's page view data does not include how many times the Presentation may
have been downloaded and distributed from either ofthe locations from which it was
available on Puma's website or how many times the Presentation may have been
downloaded and distributed from the SEC's website.
137. At Puma's direction, Revocation Cards and Revocation Statements were mailed
to Puma's shareholders, including sharehold~s in North Carolina; those materials
directed Puma's stockholders to the "Investors" tab of Puma's website where Puma
posted the Presentation.
13 8. Puma alsq published its Revocation Statement under the "Consent Revocation"
portion of its website.
139. At the request of Mr. Auerbach, Puma sent the Presentation to Vanguard-an
investment manager-on January 13, 2016.
140. When asked what he understood Puma to be saying in the Presentation, Mr.
, Gross testified that, "They believe that his associates at PPD and PPD' s association
with Ketek made [Dr. Eshelman] a party to fraud."
[I]t's a very spurious relationship anyways,just because he's CEO of
the company, and that company- if you know how PPD works, it's
a contract research organiz.ation. So anybody inside the c01:µpany can
commit fraud. You know, they could go out·and steal- the could
shoplift. It doesn't make the CEO responsible for that So even when
I read this back then, this is, you know, ridiculous.
Well, Pwna's board is making the connection between, again, the
CEO of a company, the conduct ofthat company, of somebody inside
that company, not necessarily systematically, and,.therefore, it's a
spurious connection, but they've chosen to decide to connect the two,
which I would say the same thing I said on the other one. Anybody
who is ... practiced in ... the business wouldn't necessarily blame
the CEO for the conduct of a single trial or a single ... person or ..
. clinical trial, especially if it's a contract research organiz.ation.
141. Mr. Gross would "absolutely not" support someone who had been involved in
fraud to be a director on the board of one of the ·companies in which Adage Capital
invests. When evaluating whether Adage Capital should invest in a company, the fact
26

that one of the company's directors had been involved in fraud would absolutely
impact whether he chose to invest in the company.
142. Puma's Presentation is publicly available on the intern.et where it can easily be
reviewed, re-published, and called up in electronic searches.
143. On January 20, 2016, Dr. Eshelman sent Puma a retraction demand, requesting
an apology and retraction of Puma's defamatory Presentation.
144. On January 26, 2016, Mr. Auerbach emailed Puma's Board:
On Friday we received a letter from our good buddy Fred Eshelman
where he has asked that we retract all of the negative statements that
we have made about him in our Investor Presentations and issue an
apology to him. Ifwe do not, he is threatening to sue us. Note that his
letter (attached) did not come from an attorney, like his other letters
did, but instead directly from him. As you can see in our attached
response to ~ all of our comments were based on publicly
available information, hence we have done nothing wrong. We will
be filing this 1~A tomorrow after the market close with his letter and
o[u]r response to it.

145. On January 27, 2016, Puma filed a Form 14A with the SEC. The filing attached
a letter from Puma's outside counsel, Latham & Watkins, to Dr. Eshelman, and
published the following statements to a global intern.et audience:
'

LATHAM & WATKINS LLP
Dear Mr. Eshelman:
As you know, our firm represents Puma Biotechnology, Inc.
("Puma"). Your January 20, 2016 letter to Mr. Alan Auerbach of
Puma has been referred to our attention for handling. Your demands
that Puma retract its investor presentation filed with the U.S.
Securities and Exchange Commission on January 7, 2016 (the
"Investor Presentation") and issue an apology are rejected. Puma
stands by the truth of the statements contained in the Investor
Presentation.

In addition, Puma has uncovered additional, public, and true
information about you and your past activities which would be
relevant to your shareholder proposal and prior comments in this
regard. Puma will be compelled to ensure that shareholders are aware

27

of this information if you persist with further public statements or
filings about Pwna, its Board, and its management.
146. On February 3, 2016, Dr. Eshelman filed this defamation lawsuit against Puma.
[D.E. 370-1].

B.
As for Puma's argument that the jury's award of compensatory damages was excessive, the
court reviews the jury's award applying North Carolina law. See Gasperini. 518 U.S. at 430--31,
438-39 (state standards for reviewing damages awards are substantive under Erie R.R. v. Tompkins,
304 U.S. 64 (1938)); Fontenot v. Taser Int'l, Inc., 736 F.3d 318, 334-35 (4th Cir. 2013); Konkel v.
Bob Evans Farms. Inc., 165 F.3d 275, 280--81 (4th Cir. 1999). Although the court may, in its
discretion, set aside an excessive judgment, North Carolina trial courts "have traditionally exercised
their discretionary power to grant a new trial in civil cases quite sparingly in proper deference to the
finality and sanctity of the jury's findings." Worthington v. Bynum, 305 N .C. 478, 487, 290 S.E.2d
599,605 (1982); see Fine~ 388 F. Supp. 3d at 621-23.
The court determined that the two statements at issue in the trial were libelous ~ se. See
Order [D.E. 306] 20--24. At trial, the parties presented evidence on three issues: whether Puma's
statements were false, whether Puma made the statements with actual malice, and what amount of
compensatory damages, if any, Eshelman was entitled to recover. See [D.E. 372-74, 388,429-31].
The court instructed the jury that compensatory damages "include matters such as loss of reputation
, or standing in the community, mental or physical pain and suffering, inconvenience, or loss of
enjoyment which cannot be definitively measured in monetary terms." [D.E. 386] 21; see N.C.
Pattern Jury Inst. - Civ. 806.83. The court instructed the jury that Eshelman need not specifically
prove his compensatory damages, that the jury should estimate ''the probable extent of actual harm"

28

to Eshelman, and that the jury may award Eshelman nominal damages. [D.E. 386] 21-22. The jury
deliberated for over eleven hours on the three issues. See [D.E. 378-79, 432-33].3 The jury found
that Pwna's statements were false and that Pwnamade the statements with actual malice. See [D.E.
388]. The jury awarded Eshelman $15,850,000 in compensatory damages. See id.
Under North Carolina law, damages are presumed in libel m se claims. See Renwick v.
News&ObserverPlibl'gCo., 310N.C. 312,316,312 S.E.2d405,408 (1984);Flakev. Greensboro
News Co., 212 N.C. 780, 785, 195 S.E. 55, 59 (1938). Because the law presumes that damages
result from the publication of a libelous

m

se statement, a plaintiff is not required to present

evidence "as to any resulting injury." Boyce & Isley, PLLC, 153 N.C. App. at 30, 568 S.E.2d at 898;
see Renwick, 310N.C. at 316,312 S.E.2dat408; Roth v. Greensboro News Co., 217N.C. 13, 22,
6 S.E.2d 882,888 (1940); Flake, 212 N.C. at 785, 195 S.E. at 59 ("The law presumes that general
damages actually, proximately, and necessarily result from an unauthorized publication which is
libelous m se and they are not required to be proved by evidence since they arise by inference of
)

law, and are allowed whenever the immediate tendency of the publication is to impair plaintiff's
reputation, although no actual pecuniary loss has in fact resulted."); cf. Gertz v. Robert Welch. Inc.,
418 U.S. 323, 349 (1974) ("Juries may award substantial sums as compensation for supposed
damages to reputation without any proofthat such harm actually occurred."); N .C. Pattern Jury Inst. Civ. 806.83. Pwna concedes that ''presumed d~ages are not required to be proved by evidence"
and that "such damages are inherently speculative and imprecise." [D.E. 436] 8 (quotation omitted).
The Restatement (First) ofTorts lists factors that the trier offact may consider in determining
the amount of presumed damages. These factors include ''the character of the plaintiff and his
3

On the fourth day of the trial, the Juey deliberated from 9:45 a.m. to 5:02 p.m. See [D.E.

378, 432]. On the fifth day of the trial, the jury deliberated from 9:01 a.m. to 10:39 a.m. and from
10:50 a.m. to 1:26 p.m.'1 See [D.E. 379,433].
29

general standing and reputation in the community," ''the character ofthe defamatory publication and
the probable effect of the language used as well as the effect which it is proved to have had," ''the
area of dissemination and the extent and duration of the circulation ofthe publication," whether the
defendant ''made a public retraction or apology," whether the defendant unsuccessfully argued that
the statement was true, and whether the plaintiff was "engaged in a trade, business, or profession."
Restatement (First) of Torts § 621 cmt. c (Am. Law. Inst. 2019). These factors comport with North
Carolina law. See N.C. Pattern Jury Inst. - Civ. 806.83; [D.E. 386] 21-22.
Puma argues that the jury's compensatory damages award was "excessive" without citing any
persuasive factor to support its argument That Eshelman did not prove his actual damages at trial
is inherent in the law of libel~ se in North Carolina and does not warrant a new trial. See, ~
Renwick, 310N.C. at 316,312 S.E.2dat408; Roth, 217N.C. at 22, 6 S.E.2dat 888; Flake, 212N.C.
at 785, 195 S.E. at 59; Boyce & Isley, PLLC, 153 N.C. App. at 30, 568 S.E.2d at 898. Under North
I

Carolina law, damages are presumed in libel~ se cases specifically because of the difficulty of
determining the harm that publishing a libelous statement causes. Additionally, the jury was entitled
to consider the very unique facts of this case, including the 146 stipulations and the extensive trial
record.
The evidence showed that Eshleman built an extraordinary reputation over a 40-year period.
Eshelman rose from humble beginnings in North Carolina to train as a pharmacist and then founded
PPD. Eshleman developed PPD from a one-man consulting company into a publicallytraded multi.billion dollar contract research organiz.ation. During his lengthy career, Eshelman became a noted
CEO, philanthropist, board member, and investor. He is prominently involved in the community,
including at the University ofNorth Carolina at Chapel Hill which named its Pharmacy School after
him. As witness Judd Hartman testified, Eshleman was ''the founder of [PPD]" and "dedicated his
\

30

life, [and] his professional career to the industry, [and] was passionate and committed to ethical
clinical research and ethical business conduct." [D.E. 430] 11-13. Witness Kenneth Lee testified
that Eshleman had an "excellent'' reputation and was considered a "leader in the industry." [D.E.
429] 102-15.
Puma's Chief Executive Officer Alan Auerbach personally drafted the defamatory
statements, and Puma permanently published the defamatory statements on Puma's website and the
SEC's web site, which have global reach. The statements can be reviewed and republished forever.
See, ~ ' [D.E. 370-1] ff 58-59, 125-39. The jury found that Puma's statements were false and
made with actual malice. See [D.E. 388]. Puma has never retracted the false statements or
apologized for making them. Rather, Auerbach testified, and Puma unsuccessfully argued, that the
statements were and are true.
The jury deliberated for over eleven hours before determining liability and the amount of
Eshelman's compensatory damages, and Puma does not raise a persuasive argument to set asid~ the
jury's verdict. In fact, this court could not locate a single case applying North Carolina law in which
a trial court remitted a jury's award of presumed damages or a North Carolina appellate court
reduced such an award. Accordingly, in light of the stipulations, the evidence produced at trial, the
credibility of the witnesses, and North Carolina law, the court declines to set aside the jury's
compensatory damages award. See Worthingtoll, 305 N.C. at 487,290 S.E.2d at 605; Finch, 388
F. Supp. 3d at 621-23; accord Cantu v. Flanigim, 705 F. Supp. 2d 220, 226-31 ~.D.N.Y. 2010)
Gury award of $150 million for general damages was not excessive for defaming a businessman by
falsely accusing him of corruption); Anagnost v. The Mortgage Specialists, Inc., No.
216201CV0027, 2017 WL 7690898 (N.H. Super. Ct. Sept. 29, 2017) (unpublished) (award of$105
' million in general damages not excessive for falsely accusing a local developer, a cardealer, and a
31

banker of dealing drugs and related crimes); Wynn v. Francis, No. B245401, 2014 WL 2811692, at
*4-10 (Cal. Ct. App. June 23, 2014) (affirming $17 million award for presumed damages for oral
accusation offraud).4

C.
As for Puma's argument that the jury's award of punitive damages was excessive, the court

applies North Carolina law. See Gasperini. 518 U.S. at 430-31, 438-39. The court's instructions
on punitive damages comported with N.C. Gen. Stat. § 1D-35. See [D.E. 387] 12-13. The jury
deliberated for over an.hour and awarded Eshelman $6,500,000 in punitive damages. See [D.E. 379,
389,433].
Under North Carolina law, a jury may award punitive damages ''to punish a defendant for
egregiously wrongful acts and to deter the defendant and others from committing similar wrongful
acts." N.C. Gen. Stat. § 1D-1. In determining the amount ofpunitive damages, a jury must consider
the purposes of punitive damages and may consider only evidence that relates to the following:
a.

The reprehensibility of the defendant's motives and conduct

b.

The likelihood, at the relevant time, of serious harm.

c.

The degree ofthe defendant's awareness ofthe probable consequences ofits conduct.

d.

The duration of the defendant's conduct.

e.

The actual damages suffered by the claimant.

4

The cases that Puma cites in support of setting aside the verdict are factually and legally
distinguishable. See,~ MyGallons LLC v. U.S. Bancor.p. 521 F. App'x 297, 304--06 (4th Cir.
2013) (per curiam) (unpublished); Blue Ridge Bank v. Veribanc, Inc., 866 f.2d 681, 687-90 (4th
Cir. 1989); Mann v. Swiggett, No. 10-CV-182, 2012 WL 5512453, at *1 (E.D.N.C. Nov. 14, 2012)
(unpublished); Beach v. Hughes, 199N.C. App. 615,687 S.E.2d 319 (2009) (unpublished); Boileau
v. Seagrave, 193 N.C. App.454, 667 S.E.2d 341 (2008)(unpublished); Kroh v. Kroh, 152 N.C. App.
347, 355-58, 567 S.E.2d 760, 765-67 (2002); McLean v. Mechanic, 116 N.C. App. 271, 272-76,
447 S.E.2d 459, 461-62 (1994).
,

32

f.

Any concealment by the defendant of the facts or consequences of its conduct.

g.

The existence and frequency of all-Y similar past conduct by the defendant.

h.

Whether the defendant profited from the conduct.

i.

The defendant's ability to pay punitive damages, as evidenced by its revenues or net
worth.

Id. § 1D-35(1_)-(2). In reviewing a punitive damages award, the court also must assess the
constitutionality of the award under the Due Process Clause. See,~ BMW ofN. Am.. Inc. v.
Gore, 517 U.S. 559, 574 & n.22 (1996); Equal Emp't Opportunity Comm'n v. Fed. Express Corp.,
513 F.3d 360,376 (4th Cir. 2008). Reviewing courts must consider the degree of reprehensibility
of the defendant's misconduct, the disparity between the actual or potential harm suffered by the
plaintiff and the punitive damages award, and the difference between the punitive damages awarded
by the jury and the civil penalties authorized or imposed in comparable cases. See State Farm Mut.
Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418 (2003). "The most important indicium of the
reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's
conduct," which may be evidenced by the defendant's "intentional malice, trickery, or deceit." Id.
at 419 (quotation omitted). In comparing a compensatory damages award to a punitive damages
award, "[sJingle-digit multipliers are more likely to comport with due process, while still achieving
the State's goals of deterrence and retribution ...." Id. at 425.
Eshelman presented compelling evidence that~ through Auerbach who is Puma's most
senior employee and drafted the defamatory presentation himself, acted with actual malice in making
the statements about Eshelman. See,

~

[D.E.. 359]

,r,r 124-30; [D.E. 370-1] ,r,r 123-29.

For

example, Eshelnian presented an e-mail that Auerbach wrote shortly before Puma published the
statements in which Auerbach stated that he was ''just getting warmed up" and that he was going to

33

''fl'•• this Eshelman guy up. Bad." [D.E. 431] 65. The jury was entitled to discredit Auerbach's
explanation for this e-mail and other evidence contemporaneous with the publication reflecting
Puma's malice. Moreover, Auerbach was a particularly non-credible witness. In fact, it is really
hard to describe how incredible (i.e., disastrous) a witness Auerbach was. You needed to see it to
. understand it completely. For example, Auerbach indignantly and repeatedly contradicted his
deposition testimony and facts to which Puma stipulated. See [D.E. 431] 6-7, 9-10, 15-17, 19-20,
24-27,29-44, 45-53, 55-56, 51-59, 60-63, 64-67, 68-99, 100-14, 115-23, 124-28, 167--69.
Auerbach did not testify credibly, and was impeached repeatedly during cross examination. See id.
Moreover, Eshelman presented compelling evidence about the reprehensibility and duration of
Puma's conduct and Puma's ability to pay. See,~ [D.E. 370-1] ff 130-38, 142, 145-46.
In light ofthe stipulations, the evidence presented at trial, and the credibility ofthe witnesses,

the punitive damages award was not excessive. The jury properly considered evidence pursuant to
N.C. Gen. Stat. § 1D-35, carefully deliberated, and reached a unanimous verdict. Eshelman
presented compelling evidence ofthe reprehensibility ofPuma's motives and conduct, the likelihood
of serious harm to Eshelman, Puma's awareness of the probable consequence of its actions, the
duration of Puma's conduct, and Puma's ability to pay. Additionally, the jury's punitive damages
award totals less than half of its compensatory damages award, and does not violate the Due Process
Clause. Cf. Campbell, 538 U.S. at418-19. Moreover, the court rejects Puma's argument that the
punitive damages award is simply ''too high." On the unique facts of this case, the jury's punitive
damages award was not a miscarriage of justice, and the court declines to set it aside.

D.
As for Puma's argument that the jury's findings on falsity and actual malice were against the

clear weight ofthe evidence, the court has considered the stipulations, the evidence presented at trial,
34

and the credibility of the witnesses. As for the falsity of the statements, the court credits the
overwhelming evidence that Puma's statements were false. The evidence includes the testimony of
Judd Hartman ("Hartman"), general counsel and ChiefAdministrative Officer of PPD, that PPD did
not fire or replace Eshelman as CEO but instead promoted him to Executive Chairman of PPD's
Board ofDirectors. See [D.E. 429] 123-25. The court also credits Hartman's testimony and Special
Agent Robert West's testimony that Eshelman was not involved in clinical trial fraud. See [D.E.
429] 125; [D.E.430] 24; [D.E. 375-1] 12-13, 15. ThecourtalsocreditsEshelman'stestimonyabout
the antibiotic drug Ketek·and the ensuing FDA investigation.- See, e.g., [D.E. 430] 194-96. · The
stipulations and exhibits bolster these conclusions. See, e.g., [D.E. 370-1] ft 64-72.
The jury carefully and thoughtfully considered the evidence. The jury rejected Puma's
I

evidence and argument that the statements, when read in the context ofthe entire presentation, were
'

true. Cf. [D.E. 388]. Accordingly, the court finds that the jury's determination that Puma's
statements were,false is not against the clear weight of the evidence.

As for actual malice, abundant evidence supports the jury's verdict. First, before publishing
the statements about Eshleman, Puma's attorneys informed its Board and Mariann Ohanesian
informed Auerbach that Eshleman had served as Executive Chairman of PPD from 2009 until 2011.
See PX-314, at 12; PX-217; [D.E. 376-1] 1, 7. Second, the parties stipulated that Auerbach had read
''the entire transcript of the February 12, 2008 Congressional hearing titled 'Ketek Clinical Study
Fraud: What Did Aventis Know?"' before publishing the defamatory presentation, that Auerbach
"assumed that the work done by the FDA was both factual and accurate," and that Puma purposefully
avoided numerous sources thatwouldhaverebuttedPuma's accusations about Eshelman. [D.E. 3701] ft 96-97, 124-30.

35

Tellingly, Puma stipulated that it had worked with contract research organizations ("CROs")
since its founding, see id. ,r 98, and that Auerbach knew the relationship between a CRO and a drug
sponsor on a clinical trial. See id. ,r 99. Nonetheless, Puma omitted facts from the SEC presentation
about Eshleman that would have revealed the falsity of Puma's accusations about Eshleman.
Moreover, Puma stipulated that PPD had reported the issues that it had concerning the clinical drug
trial concerning Aventis, but Puma deleted that fact from its SEC presentation about Eshelman. See
id.

,r,r 126-29; PX-42; PX-193.

Furthermore, Puma (which had an ongoing, multi-year, multi-

million dollar contract with PPD as a CRO) knew that PPD could not communicate directly with the
FDA without its client's consent. See [D.E. 370-1] ,r,r 98-108. The jury was entitled to find that
Puma attached hyperlinks to the 2008 Congressional testimony but omitted material facts relevant
to understanding that testimony in order to bolster Puma's assertion that Eshleman had been forced
to testify and had been ''replaced as CEO" after being involved in "clinical trial fraud." See PX-42.
Puma also stipulated that it "[p]urposefully avoided numerous sources that would have
rebutteditsaccusationaboutDr.Eshleman." See,~, [D.E. 370-l]ff98-125. Forexample,Puma
did not ask Puma contacts at PPD or Puma's contacts within the pharmaceutical industry about
Eshleman. Likewise, Puma did not ask Special Agent Robert West who investigated Aventis and
the clinical trial fraud of Dr. Kirkman-Campbell. See id. at ,r,r 118-24. Moreover, Auerbach knew
from reading the 2008 Congressional transcript that a federal grand jury in Alabama indicted Dr.
Kirkman-Campbell for clinical trial fraud and had named PPD as a victim of Dr. Kirkman.Campbell's fraud. See id.

,r 96; PX-15 at 8; PX-1.

Puma also stipulated that Auerbach ''never

bothered to look for Dr. Kirkman-Campbell's indictment, even though it is publically available, and
Mr. Auerbach's staffwouldhavepulledforhimifhehadasked." [D.E. 370-1] ,r 125. Furthermore,
1

Puma stipulated that "[n]o member of the Board of Directors of Puma or anyone else from Puma
36

asked any questions' about the statements that Mr. Auerbach had made about Dr. Eshleman and the
Ketek clinical trial in the Presentation." Id. at ,r 60. Puma's stipulations show that it was aware of
"key witness[es] and ... failed to make any effort to interview [them]" and support a finding of
actuai malice. See Harte-Hanks Commc'ns, Inc. v. Connaughton, 491 U.S. 657, 692 (1989); see also ·
CurtisPubl'gCo. v. Butts, 388 U.S. 130, 156-58 (1967); Youngv. Gannett Sateliteinfo. Network,
Inc., 734 F.3d 544, 548 (6th Cir. 2013).
Puma's refusal to retract the defamatory statements also supports the jury's actual malice
finding. Eshleman' s retraction demand specifically referenced Dr. Kirkman-Campbell's indictment
and its reference to PPD as a victim of the fraud. See PX-189 at S--6. In response, Puma filed a
public letter with the SEC and doubled-down on ''the truth of [its] statements" and threatened to
release "additional" information about Eshleman. PX-189 at 7. Puma's response supports the
jury's actual malice finding. See, e..,g._, Zerangue v. TSP Newspapers, Inc., 814 F.2d 1066, 1071-72
(5th Cir. 1987).
Puma's motive to defame Eshleman also supports the jury's actual malice finding. When
Eshleman decided to initiate the proxy contest, Puma had missed financial targets and Auerbach
appeared to have his own.hand-picked Board ofDirectors. See [D.E. 370-1] ff 1-14. Puma's Board
had rewarded Auerbach with compensation valued at tens of millions of dollars, despite serious

allegations of mismanagement, including allegations of Auerbach's own securities fraud following
statements that Auerbach made about Puma's drug neratanib. See id. at ff 4--11, 22-27, 41, 44--45;
PX-20; PX-344. In the proxy contest, Eshleman wanted to add four independent directors to the
Board to add oversight to Puma's management, including Auerbach. See, ~ DX-30. The jury
was entitled to disbelieve Auerbach's testimony about an alleged motive to tell the truth in the SEC
presentation and to believe the opposite. Cf. United States v. Meji~ 82 F.3d 1032, 1038 (11th Cir.
37

1996) ("A proper inference the jury can make from disbelieved testimony is that the opposite of the
testimony is true."), abrogated on other grounds by Bloate v. United States, 559 U.S. 196 (2010).
The jury also was entitled to consider that evidence of motive, with the other substantial evidence
I

'

in the case, tofindactualmalice. See,~Connaughton,491 U.S. at668,689-93; Young~ 734F.3d
at 548 n.1; Suzuki Motor Cor,p. v. Consumers Union, 330 F.3d 1110, 1135-36 (9th Cir. 2003).
Puma's stipulations, when coupled with Auerbach's incredible testimony and the other
evidence at trial, show that the jury's finding that Puma acted with actual malice was not against the
clear weight of the evidence. Accordingly, the court denies Puma's motion for a new trial.
E.
Puma argues that evidentiary, instructional, and other rulings by the court were erroneous and
prejudicial. The court rejects the argument.
First, Puma argues that the verdict form improperly combined Puma's statements on the
verdict form.

The verdict form, however, merely quotes Puma's statements and properly

summarizes the statements at issue. See [D.E. 388] 1-2. Moreover, the jury received a copy of
Puma's entire presentation and was properly instructed to consider the quoted statements "in the
context of the entire presentation." [D.E. 388] 1; see [D.E. 386] 14--15; Badame, 242 N.C. at 757,
89 S.E.2d at 468; Boyce&. Isley. 153 N.C. App. at 31, 568 S.E.2d at 899. Relatedly, the court
rejects Puma's argument that the statement "Eshelman was replaced as CEO" was not and had not
been found defamatory~ se. See [D.E. 306] 22-24 (collecting cases).
Second, Puma argues that the court's order excluding Puma's damages expert, Dr. Anil
Shivdasani' s ("Shivdasani"), was prejudicial. The court will not recite the entire twelve-page order
excluding Shivdasani's testimony and report. See [D.E. 368]. Nonetheless, as the court explained
at length in its order excluding Shivdasani's testimony and report, some ofShivdasani's opinions
38

were within the everyday knowledge of the jury. See id. at 8. Moreover, Puma failed to show, inter
all~ that other Shivdasani' s opinions were the product ofreliable methodology. See id. at 9-12. For

example, Shivdasani opined that business opportunities correspond to reputation and concluded that,
because Eshelman did not experience a decline in business opportunities, he did not suffer
reputational harm. See [D.E. 335-1] ,r 10. But Shivdasani also opined that, even if Eshelman had
experienced a decline in business opportunities, ''that alone would not constitute sufficient evidence
of reputation harm caused by Puma's statements." Id. ,r 27 n.40. Because Shivdasani's model is
premised on the relationship between business opportunities and reputation (i.e., that business
opportunities are dependent on reputation), and because Shivdasani concedes in his report that
business opportunities are independent ofreputation, the court properly excluded Shivdasani's expert
opinion and testimony. See [D.E. 368] 9-12; see also Fed. R. Evid. 104(b), 702; Gen. Elec. Co. v.
Joiner, 522 U.S. 136, 143-50 (1997).
Third, Puma objects that admission of evidence of a securities fraud judgment against Puma

and Auerbach constitutes prejudicial error. Specifically, in February 2019, a federal jury in the
United States District Court for the Central District of California found in favor of a plaintiffs' class
and against Puma and Auerbach with respect to a misleading statement that Auerbach and Puma
made about neratanib's efficacy and a resulting dramatic decline in Puma's stock price following
disclosure of the truth about neratanib. See [D.E. 370-1] ,r,r 44-45; [D.E. 431] 125-28.
The court rejects Puma's arguments about the admission ofthe securities fraud litigation for
numerous reasons.

Initially, the court never limited the admissibility of this evidence to

impeachment evidence on cross examination ofAuerbach under Federal Rule of Evidence 608. See

39

[D.E. 394] 37-38; [D.E. 360]; [D.E. 371] 17-18.5 Moreover, Puma waived any objection to
"extrinsic evidence" of the securities fraud litigation when it included such evidence in its exhibits
and failed to ask for a limiting instruction at trial. See DX-30. Furthermore, Puma stipulated that,
in February 2019, a jury found that Puma and Auerbach committed securities fraud. See [D.E. 3701] fl 44--45.

The jury in this defamation case was entitled to consider whether Puma and Auerbach's
securities fraud motivated, in part, Puma to respond to Eshleman' s proxy fight by publishing the
defamatory statements about Eshleman. Such evidence is relevant to the issue of Puma's actual
malice. See, ~Connaughton, 491 U.S. at 667-68. Additionally, any alleged error in permitting
the jury to hear about the securities fraud verdict was harmless in that Eshleman properly used the

5

Fed. R. Evid. 608 provides:

(a) Reputation or Opinion Evidence. A witness's credibility may be attacked or
supported by testimony about the witness's reputation for having a character for
· truthfulness or untruthfulness, or by testimony in the form of an opinion about that
character. But evidence of truthful character is admissible only after the witness's
character for truthfulness has been attacked.
(b) Specific Instances of Conduct. Except for a criminal conviction under Rule 609,

extrinsic evidence is not admissible to prove specific instances of a witness's conduct
in order to attack or support the witness's character for truthfulness. But the court
may, on cross-examination, allow them to be inquired into ifthey are probative ofthe
character for truthfulness or untruthfulness of:
(1) the witness; or
(2) another witness whose character the witness being cross-examined has testified
about.
By testifying on another matter, a witness does not waive any privilege against
self-incrimination for testimony that relates only to the witness's character for
truthfulness.
Fed. R Evid. 608.
40

adverse judgment under Rule 608 when cross-examining Auerbach. See Fed. R. Evid. 608(b).
Moreover, Pwna never requested a limiting instruction.
Next, Pwna objects to the jury instructions concerning actual malice and presumed damages.
"Instructions will be considered adequate if construed as a whole, and in light of the whole record,
/

.

they adequately inform the jury of the controlling legal principles without misleading or confusing
thejurytotheprejudiceoftheobjectingparty." Rowland v. Am. Gen. Fin., Inc., 340 F.3d 187, 191
(4th Cir. 2003) (alterations and quotations omitted).
As for Pwna's objection to the jury instruction concerning actual malice, Puma's proposed

instruction failed to adequately instruct the jury about what constitutes actual malice in a defamation
case., See [D.E. 341] 22. In contrast, the court's.instructions properly used the phrase "clear and
convincing evidence," provided examples of what constitutes actual malice, and, importantly,
emphasized what does not constitute actual malice (e.g., ''mere negligence," ''mere mistake," "a
defendant's personal hostility or ill will towards the plaintiff," and a defendant's "failure to
investigate"). See [D.E. 386] 18-19. The court cited the controlling legal principles behind each
example in the instructions. See [D.E. 430] 216, 221-24. A~ditionally, the court incorporated
nearly all of Pwna' s proposed instruction.concerning the definition of actual malice. Accordingly,
the court rejects Pwna's attack on the jury instruction concerning actual malice.
As for Pwna's objection to the jury instruction concerning presumed damages, Puma's

proposed instruction did not contain the ''reasonable certainty'' language that Pwna claims is error
to have excluded. See [D.E. 341] 26-28. Indeed, Pwna's proposed instruction, which tracks the
North Carolina Pattern Instruction, concedes that presumed damages "arise by inference oflaw and
are not required to be specifically proved by evidence," that presumed damages "cannot be measured
precisely or definitively in monetary terms," that determining the amount of presumed damages "is
41

not a task which can be completed with mathematical precision and is one which unavoidably
includes an 'element of speculation," and that the amount of presumed damages "is an estimate,
however rough, of the probable extent of actual harm." Id. Thus, Puma waived this objection. See
Fed. R. Civ. P. Sl(c)(l).
Alternatively, the court's instruction properly informed the Jury about presumed damage$.
Moreover, excluding the phrase "such as one dollar'' did not materially change the statement that the
jury could award Eshelman nominal damages.. Accordingly, the jury instruction concerning
presumed damages did notprejudice Puma.

IV.
Eshelman seeks to modify the judgment to include $3,984,646.58 of prejudgment interest
for a total award of $26,334,646.58. See [D.E. 418]. Rule S9(e) of the Federal Rules of Civil
Procedure allows a party to file a motion to alter or amend a judgment ''no later than 28 days after
the entry of the judgment." Fed. R. Civ. P. S9(e). Rule S9(e) permits three grounds for amending
a prior judgment: (1) to accommodate an intervening change in controlling law, (2) to account for
new evidence that was not available at trial, or (3) to correct a clear error oflaw or prevent manifest
injustice. See Pac. Ins. Co. v. Am. Nat'l Fire Ins. Co., 148 F.3d 396,403 (4th Cir. 1998); EEOC v.
Lockheed· Martin Cor;p., 116 F.3d 110, 112 (4th Cir. 1997); Hutchinson v. Staton, 994 F.2d 1076,
1081 (4th Cir. 1993).
North Carolina law governs the award of prejudgment interest in this diversity case. See
Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 633 (4th Cir. 1999); Silicon Knights, 917
F. Supp. 2dat524-2S; HexionSpecialtyChems.. Inc. v. Oak-BarkCor;p.• No. 7:09-CV-105-D,2012

WL 2458638, at *1 (E~D.N.C. June 27, 2012) (unpublished). Under North Carolina law, "[i]n an
action other than contract, any portion of a money judgment designated by the fact finder as
\

42

compensatory damages bears interest from the date the action is commenced until the judgment is
,satisfied." N.C. Gen. Stat.§ 24-5(b); see, e-&, Castles Auto & Truck Serv., Inc. v. Exxon Com.. 16
F. App'x 163, 168 (4th Cir. 2001) (per curiam) (unpublished). Under N.C. Gen. Stat. § 24-5(b),
prejudgment interest is mandatory. See Castles Auto & Truck Serv., 16 F. App'x at 168; Hamby v.
Williams, 196 N.C. App. 733,738,676 S.E.2d 478,481 (2009). Therefore, a manifest injustice
would arise ifthe court failed to award Eshleman prejudgment interest "at the legal rate." N .C. Gen.
Stat. § 24-5(b); see N.C. Gen. Stat.,§ 24-1 (setting the legal rate at 8% per annum).
Eshelman filed this action on February 2, 2016, and the court entered judgment on March 25,
2019. Accordingly, Eshelman is entitled to prejudgment interest at 8% per annum (i.e., $1,268,000
per annum), and the court grants Eshelman's motion to alter the judgment to include $3,984,646.58

a

in prejudgment interest for total award of $26,334,646.58.

V.
.

.

In sum, the court DENIES Eshelman's motion for ·attorneys' fees [D.E. 397], GRANTS
Eshelman's motion for costs [D.E. 403], DENIES Puma's motion to disallow costs [D.E. 414],
\

DENIES Puma's motion for a new trial or remittitur [D.E. 416], GRANTS Eshelman's motion to
amend the judgment to include prejudgment interest [D.E. 418], and DENIES Puma's motion for
a hearing or, in the alternative, remittitur [D.E. 441]. The court AWARDS Eshelman $205,903.55
in costs under28 U.S.C. § 1920 and Local Civil Rule 54.1. Finally, the court ALTERS the judgment
to include $3,984,646.58 in prejudgment interest under N.C. Gen. Stat. § 24-5(b). The clerk shall
close the case.

43

SO ORDERED. This t-- day of March 2020.

JSC.DEVERID

United States District Judge

44