Eshelman v. Auerbach et al

Filing 474

ORDER granting 460 Motion to Release Supersedeas Bond; denying 466 Application for Costs; granting 468 Order on Motion for Disallowance of Costs. Not later than April 1, 2022, the parties SHALL file a joint statement updating the court on the status of this case, including a proposed schedule leading toward a jury trial on damages in July, August, or September, 2022. Signed by District Judge James C. Dever III on 3/11/2022. (Sellers, N.)

IN TIIE UNITED STATES DISTRICT COURT
FOR TIIE EASTERN DISTRICT OF NORTII CAROLINA
SOUTIIERN DIVISION
No. 7:16-CV-18-D

FREDRIC N. ESHELMAN,
Plaintiff,

v.
PUMA BIOTECHNOLOGY, INC.,
Defendant.

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ORDER

On March 18, 2019, a jury awarded plaintiff Fredric N. Eshelman ("Eshelman" or
''plaintiff") $22.3S million in compensatory and punitive damages against defendant Puma
Biotechnology,Inc. ("Puma"or"defendant")fordefamation[D.E. 388,389]. OnMay 10,2019, the
court granted Puma's motion under Federal Rule of Civil Procedure 62(b) for a supersedeas bond
to stay the judgment pending appeal [D.E. 434]. The court approved a $29.S million bond [D.E. 434,
466-4]. On June 23, 2021, the United States Court of Appeals for the Fourth Circuit upheld the
jury's liability verdict, vacated the jury's damages award, and remanded the case for a new trial on
damages. See Eshelman v. Puma Biotechnology, Inc., 2 F.4th 276, 286 (4th Cir. 2021).
On August 27, 2021, Puma moved to release the bond [D.E. 460]. On September 17, 2021,
Eshelman responded in opposition [D.E. 467]. On October 1, 2021, Puma replied [D.E. 471].
On September 3, 2021, Puma applied for the allocation of costs associated with its
supersedeas bond [D.E. 466]. On September 17, 2021, Eshelman moved for a disallowance ofcosts
[D.E. 468]. On September 24, 2021, Puma responded in opposition to Eshelman's motion for
disallowance of costs [D.E. 470].

On October 18, 2021, Eshelman filed a petition for a writ of-certiorari in the United States

Supreme Court. On December 13, 2021, the Supreme Court denied Eshelman's petition.. See
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Eshelman v. Puma Biotechnology. Inc., 142 S. Ct. 714 (2021). As explained below, the court grants
Puma's motion to release the supersedeas bond, grants Eshelman' smotion for disallowance ofcosts,
and denies Puma's application for costs.
I.

Puma seeks release of its supersedeas bond. Federal Rule of Civil Procedure 62 states that
"[a]t any time after judgment is entered, a party may obtain a stay by providing a bond or oth~
security. The stay takes effect when the court approves the bond or other security and remains in
effect for the time specified in the bond or other security." Fed. R. Civ. P. 62(b). The supersedeas
bond's terms govern.a party's liability under the instrument. See TVAv. Atlas Mach. & Iron Works,
Inc., 803 F.2d 794, 798 (4th Cir. 1986). At one time, Federal Rule of Civil Procedure 73(d) guided
the use of supersedeas bonds. Although Rule 73(d) has been rescinded, it "described what always
has been good practice on a supersedeas bond, and, except as the matter now is regulated by local

rules in a particular district, it is still a useful guide on these matters." Charles Allen Wright, Arthur
A. Miller, et al., Federal Practice & Procedure, §\2905 (3d ed. April 2021 Update); see Atlas Mach.,
J

803 F.2d at 799. U~der Rule 73(d), an appellant remained liable under a supersedeas bon~ ''for the
· satisfaction· of the judgment in full together with costs, interests, and damages for delay, if for any
reason the appeal is dismissed or the judgment is affirmed, and to satisfy in full such modification
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ofthe judgment and such costs, ~terest'and damages as the appellate court may adjudge and award."
Puma's. bond states, in relevant part:
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If[Puma] shall duly prosecute said appeal, and shall moreover pay the amount of said

judgment rendered, then this obligation to be null and void, otherwise to remain in
full force and effect, provided however, the maximum liability ofthe Surety shall not
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exceed Twenty-Nine Million Five Hundred Thousand and 0/100 Dollars
($29,500,000.00).
[D.E. 466-4] 2 (emphasis omitted). According to the bond's plain language, the bond is nullified
when (1) Puma duly prosecutes its appeal and (2) Puma pays the amount of the judgment rendered
on appeal. The parties dispute whether the bond required Puma to prosecute its appeal ''to effect."
See [D.E. 467] 14-17; [D.E. 471] 6-7. Construing similar language in a supersedeas bond, the
Fourth Circuit held that the bond implicitly contained such a requirement or at least had a
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substantially similar meaning. See Atlas Mach., 803 F.3d at 798-99; see also Beatrice Foods Co.
v. New England Printing & Lithographing Co., 930 F.2d 1572, 1575 (Fed. Cir. 1991) (interpreting
Atlas Machme similarly). A party prosecutes an appeal ''to effect'' if the lower court's judgment is
"substantially reversed." Gay v. Par,part, 101 U.S. 391, 392 (1879); see Crane v. Buckley, 203 U.S.
441, 447 (1906) ("It is an expression substantially equivalent to prosecuting his appeal with success;
to make substantial and prevailing his attempt to reverse the decree or judgment awarded against

him."); Atlas Mach., 803 F.2d at 799.
The courtneednotresolvewhetherthe bond's language requires Puma to prosecute its appeal
''to effect'' because under either reading, the court releases the bond. If the bond's plain language

controls and the bond contains no requirement that Puma prosecute its appeal ''to effect," then the
bond's conditions

are satisfied. Puma prosecuted an appeal to the Fourth Circuit. See Eshelman,

2 F.4th at 286. And based on the Fourth Circuit's judgment, Puma has nothing left to pay of ''the
amountofsaidjudgmentrendered." [D.E. 466-4] 2; seeNeeleyv. Bankers Tr. Co. ofTx., 848 F.2d
658, 660 (5th Cir. 1988) ("The bond is limited to any decree of the court of appeals; it does not
include an entirely new judgment ofthe district court."); Goss Jnt'l Cor;p. v. rok;yo K.ikai Seisakusho,
Ltd., No. 00-CV-35-LRR, 2006 WL 4757279, at *3 (N.D. Iowa Aug. 9, 2006) (unpublished).
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Even if the bond required Putna to prosecute its appeal ''to effect," Putna did so. When an
appellate court vacates the trial court's damages award, whether the vacatur constitutes a substantial
reversal depends on the scope of the 'appellate court's ruling. "If, after an appeal, there remains a
question of whether any compensable harm was done, then the bond may be allowed to lapse."
Beatrice Foods Co., 930 F.2d at 1576 (emphasis omitted); see Morrison Knudsen Corp. v. Ground
Improvement Techniques, Inc., 532 F.3d 1063, 1069-70 (10th Cir. 2008); see, e&, Neeley. 848 F.2d
at 660 (holding no liability on a bond when "the entire award of money damages was vacated" and
the plaintiff "had to prove his damages on remand"). However, "it is not unreasonable" for a bond
to remain in place ''when the question on remand is not whether a party will receive damages, but

merely how the damages will be calculated." Beatrice Foods Co., 930 F.2d at 1576; see Morrison
Knudsen Corp., 532 F.3d at 1069-70; Neeley, 848 F.2d at 660; see,~' Rector v. Mass. Bonding
&Ins. Co., 191 F.2d329, 332-33 (D.C. Cir.1951) (holding1;he surety was stillliablewhenremand

was limited to determining, based on a counterclaim, "the amount to be set off against the principal .
claim''); Franklinville Realty Co. v. Arnold Constr. Co., 132 F.2d 828, 829 (5th Cir. 1943) (leaving
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a bond in place when reversal was "limited to taking evidence and obtaining findings ... upon
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whether the judgment [the party] had obtained should be for the same or a less sum").
Other courts have followed this distinction. See, e.g., PHI, Inc. v. Apical Indus., Inc., No.
6:13-cv-00015, 2020 WL 1303965, at *2 (W.D. La. Mar. 17, 2020) (unpublished); Laborers Pension
Tr. Fund-Detroit & Vicinity v. Interior Exterior Specialists Co., 824 F. Supp. 2d 764, 773 (E.D.
Mich. 2011); Derkevorkian v. Lionbridge Techs., Inc., No. 04-cv-01160-LTB-CBS, 2009 WL
735650, at *5--6 (D. Colo. Mar. 18, 2009) (unpublished).
The Fourth Circuit vacated the damages judgment this court entered pursuant to the jury's
verdict and remanded for a new trial on damages. Thus, the remand involves more than merely
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recalculating damages. Rather, the Fourth Circuit's opinion targeted the sufficiency ofthe evidence
supporting the jury's award of damages. The Fourth Circuit held that ''there [was] no evidence
justifying such an enormous award" and that Eshelman ''failed to offer ~vidence of widespread
circulation or comparable harm as a direct and natural consequence ofthe libel." Eshelm!m, 2 F.4th
at 283, 285 (cleaned up). Eshelman must ''prove his damages on remand" in a new trial;
"[t]herefore, there is no liability on the supersedeas bond." Neeley, 848 F.2d at 660. Eshelman will
r~ver at least nominal damages in the new trial, but the Fourth Circuit still "substantially reversed"
the damages award, and Pwna prosecuted its appeal ''to effect." See, e.g., Crane, 203 U.S. at 447.
Accordingly, regardless ofwhether Pwna' s bond requires it to have prosecuted its appeal ''to effect,"
the conditions in the bond are satisfied, and the court releases the bond.
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In opposition, Eshelman argues it would be inequitable to release the bond because Pwna's
allegedly weak :financial position means Eshelman would be irreparably harmed if he obtains a
second damages award, Pwna was unable to pay it, and. the bond no longer insured the award. See
[D.E. 467] 21-25. Pwna disputes Eshelman's characterization of Pwna's :financial strength and of
the balance of equities if the court releases the bond. See [D.E. 471] 8-10.
A supersedeas bond "insures the judgment creditor against the risk oflack of funds to satisfy
the award" if the appellate court affirms the judgment. Revlon, Inc. v. Carson Prods. Co., 647 F.
Supp. 905, 905--06 (S.D.N.Y. 1986); see Poplar Grove Planting & Refining Co. v. Bache Halsey
Stuart, Inc., 600 F.2d 1189, 1190-91 (5th Cir. 1979); Goss Int'l, 2006 WL 4757279, at *2. Thus,
the supersedeas bond secures the judgment against the insolvency ofthe judgment debtor during the
,.
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appellate process. See Beatrice Foods Co., 930 F.2d at 1574; Poplar Grove, 600 F.2d at 1189--90;
Nexteer Auto. Cor;p. v. Korea Delphi Auto. Sys. Cor;p., No. 13-CV-15189, 2018 WL 1291132, at
*3 (E.D. Mich. 2018) (unpublished); Kifa:fi v. Hilton Hotels Ret. Plan., 79 F. Supp. 3d 93, 100
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(D.D.C. 2015); Halliburtan Energy Servs. Inc. v. NL Indus., 703 F. Supp. 2d 666, 669 (S.D. Tex.
2010); Goss Int'l, 2006 WL 4757279, at *2; Revlon, Inc., 647 F. Supp. at 905.
Puma's appeal is no longer pending. The Fourth,Circuit issued its mandate, and the Supreme
Court denied certiorari. Moreover, the Fourth Circuit vacated.the damagei; award, meaning there
is no monetary award for the bond to insure. See Goss, 2006 WL 4757279, at *3 ("Courts release
supersedeas bonds when the bond has served its purpose and no outstanding judgment remains.").
Instead, this court must enter a new judgment after a new trial on damages. See Neeley, 848 F.2d
, at 660 ("The retrial 011 damages results in an entirely new judgment. The bond is limited to any
decree of the court of appeals; it does not include an entirely new judgment of the district court.").
The court cannot predict the future and divine whether, in light of Puma's alleged present financial
position, Puma could not pay the amount of damages a jury could conceivably award. See id.; cf.
Eshebrum, 2 F.4th at 282-85. Thus, having considered the record, the equities, and the governing
law, the court releases the bond.
II.

Puma asks the court to allocate the costs of the supersedeas bond between it and Eshelman
[D.E. 466]. 1 Eshelman moves for disallowance of costs [D.E. 468], and Puma opposes Eshelman's
motion [D.E. 470].

1

On July 29, 2021, Puma asked the Fourth Circuit to allocate cqsts associated with its
supersedeas bond. See Appellant Puma Biotechnology, Inc. 's Motion for Allocation ofCosts Under
Rule 39(a)(4), Eshebrum, 2 F.4th276 (4th Cir. July 29, 2021), [D.E. 58]. On August 30, 2021, the
Fourth Circuit denied Puma's motion without prejudice to Puma seeking costs in this court. See
Order, Eshebrum,2F.4th276 (4th Cir.Aug. 30,2021), [D.E. 66]. Thus, the court considers Puma's
motion. Cf. City of San Antonio v. Hotels.com, L. P., 141 S. Ct. 1628, 1633-37 (2021) ("[I]fa court
of appeals thinks that a district court is better suited to allocate the appellate costs listed in Rule
39(e), the court of appeals may delegate that responsibility to the district court."); Fourth Circuit
Local Rule 39(c) (''Various costs incidental to an appeal must be settled at the district court level,"
including ''the premiums paid for any required appeal bond.").
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Puma seeks allocation ofits bond premiums and letter of credit costs under Federal Rule of
Appellate Procedure 39. Under Appellate Rule 39, a district 1court may tax ''premiums paid for a
bond or other security to preserve rights pending appeal" to the extent a party is entitled to costs
under that rule. Fed. R. App. P. 39(e)(3). Eshelman argues this court may not allocate costs under
Appellate Rule 39 because Federal Rlile of Civil Procedure 54(d) generally governs post-judgment
motions for awards of costs, and under that rule, a court may only assess costs listed in 28 U.S.C.
§ 1920 and as refined by local rules. See 28 U.S.C. § 1920; Arlington Cent. Sch. Dist. Bd. of Educ.

v. Murphy, 548 U.S. 291, 301 (2006); Crawford Fitting Co. v. J.T. Gibbo~. Irie., 482 U.S. 437,
441-43 (1987), superseded on other grounds by statute, 42 U.S.C. § 1988(c); Herold v. Hajoca
Con,., 864 F.2d 317,323 (4th Cir. 1988); Horton v. Methodist Univ.~ Inc., No. 5:16-CV-945-D,
2019 WL 9143510, at* 1 (E.D.N.C. Apr. 1, 2019) (unpublished); Howard v. Coll. ofthe Albemarle,
No. 2:15-CV-39-D, 2017 WL 3754620, at *1 (E.D.N.C. Aug. 29, 2017) (unpublished); Petersen v.
Midge.tt, No. 2:12-CV-60-D, 2015 WL 7681257, at *1 (E.D.N.C. Nov. 25, 2015) (unpublished);
Eatp v. Novartis Pharm.. Con,., No. 5:l 1-CV-680-D, 2014 WL 4105678, at •1 (E.D.N.C. Aug. 19,
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2014) (unpublished); see also [D.E. 469] 13-16.
However, Congress approved Appellate Rule 39 under 28 U.S.C. § 2074 after it enacted 28
U.S.C. § 1920, and Appellate Rule 39 provides a source of authority to tax the costs enumerated in
· that rule, independent of Civil Rule 54. See Berkley Reg'l Ins. Co. v. Philadelphia Indem. Ins. Co.,
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600 F. App'x 230, 237 (5th Cir. 2015) (per curiam) (unpublished); Re,t>ublic Tobacco Co. v. N.

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Atlantic Tradjng Co., 481 F.3d 442, 447-48 (7th Cir. 2007); Ericsson Inc. v. TCL Commc'n Tech.
Holdjngi:i, Ltd., No. 2:15-cv-00011-RSP, 2020 WL 3469220, at •4-5 (E.D. Tex. June 23, 2020)
(unpublished); BASF AGv. Great Am. Assur. Co., 595 F. Supp. 2d 899,902 (N.D. ID. 2009); cf.
Ciey of San Antonio, 141 S. Ct. at 1636 n.4.
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Under Rule 39(a), "if a judgment is affirmed in part, reversed in part, modified, or vacated,
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costs are taxed only as the court orders." Fed. R. App. P. 39(a)(4); see Eshelman, 2 F.4th at 286.
Rule 39 ''provides that costs shall be allowed to the prevailing party in an appeal unless the court
otherwise orders." Square Constr. Co. v. Wash. Metro. Area Transit Auth., 800 F.2d 1256, 1266
(4th Cir. 1986); see Fourth Circuit Lo.cal Rule 39(c) (allowing applications for costs to a district
court "by the successful party on appeal").
''In football, victory is measured by the final score alone. So too in litigation when a party

seeks [costs] asa 'prevailing party.'" Am.Ass'nofPol. Consultantsv. Wilkinson, 518F. Supp. 3d
881, 888 (E.D.N.C. 2021); see Meriwether v. Coughlin, 727 F. Supp. 823, 832 (S.D.N.Y. 1983)
("[A] reading ofRule 39(a) clearly indicates that taxing of costs on appeal is made in consideration
of the success of the parties to appeal relative to each other."). On appeal, the game ended in a tie.
In the first half, Eshelman prevailed on the issue of liability when the Fourth Circuit affirmed that
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Puma is liable to Eshelman for defamation. In the second half, however, Puma substantially
prevailed on the issue ofdamages when the Fourth Circuit vacated the jury's verdict. When ''neither
side is the clear winner'' because, "each side w[on] something and los[t] something," then it is
appropriate under Rul~ 39 for "each party to bear its own costs on appeals.,, Exxon Valdez v. Exxon
Mobil, 568 F.3d 1077, 1081 (9th Cir. 2009); see McKnight v. Circuit City Stores, Inc., 14 F. App'x
147, 157 (4th Cir. 2001) (per curiam) (unpublished) '(holding each party had to bear its own costs ·
for the appeal under Rule 39(a)(4) when the lower court's judgment was affirmed in part and vacated
and remanded in part); ITH Tax, Inc. v. H & R Block E. Tax Servs., Inc., 245 F. Supp. 2d 756,
760-61 (E.D. Va. 2002) ("Given the fact that both parties prevailed under different issues, the Court
directs that each parties must bear its own costs [from the appeal].''); Meriwether, 727 F. Supp. at
832 ("declin[ing] to tax costs to either party'' under Rule 39(a) when "both parties were partially
I

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successful on the appeal").
In this case, neither party ''utterly prevailed" on appeal, and there is much more to do beyond

"enter[ing] final judgment in [one party's] favor and address[ing] costs." Gicy of San Antonio v.
Hotels.com,L.P.,959F.3d 159, 164(SthCir.2020),aff'd, 141 S. Ct.1628 (2021).

Instead, the court

must conduct a new jury trial on the issue of damages. Thus, Eshelman has established liability and
will receive at least nominal damages, but nobody knows the exact amount of damages that Puma
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will owe Eshelman. Having considered the record and governing law, the court grants Eshelman's

motion for disallowance of costs and denies Puma's application for costs.
Ill
In sum, the court GRANTS defendant's motion to release its supersedeas bond [D.E. 460],

· GRANTS plaintiff's motion for disallowance of costs [D.E. 468], and DENIES defendant's.
application for costs [D.E. 466]. Not later than April 1, 2022, the parties SHALL file a joint
statement updating the court on the status ofthis case, including a proposed schedule leading toward
a jury trial on damages in July, August, or September, 2022.
SO ORDERED. This the _u_ day of March, 2022.

United States District Judge

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