Eshelman v. Auerbach et al

Filing 487

ORDER granting in part and denying in part 482 Motion for Discovery. Counsel should read the order in its entirety for critical deadlines and information. Signed by District Judge James C. Dever III on 5/19/2022. (Edwards, S.)

IN TIIE~UNITED STATES DISTRICT COURT
FOR TIIE EASTERN DISTRICT OF NORTH CAROLINA
SOUTIIERN DMSION
No. 7:16-CV-18-D
FREDRICN. ESHELMAN, _,
Plaintut:

v.
PUMA BIOTECHNOLOGY, INC.,
Defendant.

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·ORDER

On March 15, 2019, a jury awarded plaintiff Fredric N. Eshelman (''Eshelman" or
''plaintiff") $15.85 million in compensatory damages and $6.5 million in punitive damages against
defendant Puma Biotechnology, Inc. ("Puma" or "defendant") for defamation [D.E. 388, 389]. On
June 23, 2021, the United States Court ofAppeals for the Fourth Circuit affirmed that Puma defamed
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Eshelman but vacated the jury's damages awards and remanded for a new trial on damages. See
Eshelman v. Puma Biotechnology, Inc., 2 F.4th 276, 280-8'6 (4th Cir.), cert. deni~ 142 S. Ct. 714
(2021 ). On April 26, 2022, Eshelman moved for discovery and filed a memorandum and exhibits
in support [D.E. 482, 483]. On May 10, 2022, Puma responded in opposition and filed exhibits in

support [D.E. 484,485].

9n May 19, 2022, the court held a hearing [D.E. 486].

As explained

below, the .court grants in part Eshelman's motion for discovery.
I.

The district court has broad discretion to control and manage trials. When the proceeding
is a r~al, the court's discretion extends "on remand to all areas not covered by the higher court's
· mandate." Cleveland ex rel. Cleveland v. Piper Aircraft Com.• 985 F.2d 1438, 1449 (10th Cir.

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1993), abrogated on other grounds as stated in US Airways, Inc. v. O'Donnell, 627 F.3d 1318 (10th
Cir. 2010); see Sprague v. Ticonic Nat'l Bank, 307 U.S. 161, 168 (1939) ("While a mandate is
controlling as to matters within its compass, on the remand a lower court is free as to other issues.").
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After all, as to new issues arising for a retrial, ''the district court is in the best position to control all

aspects oftrial, including further motions, discovery and court time." Habecker v. Clark Equip. Co.,
36 F.3d 278,288 (3d Cir. 1994).
The parties dispute whether the court should apply a "good cause" or a ''manifest injustice"
standard to requests for new discovery in preparation for a retrial. See [D.E. 483] 3; [D.E. 484] 3.
A court's scheduling order typically governs the timing of discovery in a civil action, and under Rule
16(b)(4}, a court may modify its scheduling order only ''for good cause." Fed. R. Civ. P. 16(b)(4).
But once the court issues its final pretrial order, that order "controls the course of the action unless
the court modifies it." Fed. R. Civ. P. ,16(d). A court can modify a final pretrial order only ''to
prevent manifest injustice." Fed. R. Civ. P. 16(e). The final pretrial order, at aminimnm, supersedes
the pleadings anp controls the action going forward. See Beyant Real Estate, Inc. v. Toll Brothers,
Inc., 106 F. App'x 182, 187 n.8 (4th Cir. 2004) (per curiam)(unpublished). Although allowing new ·
discovery for a retrial requires setting a discovery schedule, it also potentially requires modifying the
final pretrial order from the first trial to include any new witnesses or exhibits. Categorically
precluding parties from amending the final pretrial order.from the first trial to disclose new witnesses
and evidence "would greatly hobble the parties from meaningfully relitigating an issue which [a]
courthasdecidedrequiredretrial." Johns Hopkins Univ. v. CellPro,Inc., 152F.3d 1342, 1357 (Fed.
Cir. 1998).
When deciding whether to admit additional evidence in a new trial, a court considers
''fairness and justice to all parties." 11 Charles A. Wright & Arthur R. Miller, et al., Federal Practice
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& Procedure§ 2803 (3d ed., Apr. 2022 Update); see Clevelimd, 985 F.2d at 1449 (stating a court's
rulings ''nevertheless must be balanced with constitutional fairness so as not to prejudice the basic
rights of the parties''). Applying this fairness principle,
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if the trial court perceives in limiting.evidentiary proof in a new trial, a manifest
injustice, to one side or the other, the court must retain broad latitude and may with·
proper notice allow additional witnesses and relevant proof. In this regard, if a party
makes a timely motion to produce new and material evidence which was not
otherwise readily accessible or known, the court should, within the exercise of
discretion, consider whether· denial of the new evidence would create manifest
injustice.... [T]he court should allow sufficient leeway for the parties to produce
new evidence, without undue prejudice to their interest.... [C]ommon sense should
control.

Cleveland, 985 F.2d at 1450; see, e.g., CGB Occupational Therapy, Inc; v. RHA Health Servs., Inc.,
499 F.3d 184, 188 n.2 (3d Cir. 2007); Martin's Herend Imps., Inc. v. Diamond & Gem Trading
U.S.A. Co., 195 F.3d 765, 775 (5th Cir. 1999); Washington v. Kellwood Co., No. 05-CV-10034
(SN), 2016 WL 5680374, at *7-8 (S.D.N.Y. Sept. 30, 2016) (unpublished), aff'd,-714 F. App'x 35
. (2d Cir. 2017) (unpublished); Little v. Cicy: ofRichmond, No. 13-cv-02067-JSC, 2015 WL 798544,
at *1-2 (N.D. Cal. Feb. 23, 2015) (unpublished); MyGallons LLC v. U.S. Bancor,p. No. 7:09-CV057-BR, 2013 WL 12291484, at *1-2 (E.D.N.C. Aug. 9, 2013) (unpublished); Fresno Rock Taco,
LLC v. Nat'l Sur. Cor,p., No. 1:11-cv-0084_5-SKO, 2013 WL 3803911, at •1 (E.D. Cal. July 19,
2013) (unpublished); Total Containment Inc~ v. Dayco Prods., Inc., 177 F. Supp. 2d 332, 338 (E.D.
Pa. 2001 ). Thus, the court applies a "manifest injustice" standard to requests for additional discovery
in advance of a retrial.
To evaluate whether a ''manifest injustice" w9uld result from amending or denying
amendment of the final pretrial order, the court considers fout factors: "(1) prejudice or surprise to
the party opposing trial ofthe issue; (2) the ability ofthat party to cure any prejudice; (3) disruption
to the orderly and efficient trial of the case by inclusion of the new issue; and (4) bad faith by the

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party seeking to modify the order." Cunningham v. LeGrand, Civil Action No. 2: 11-0142, 2012 WL
302801S, at *2 (S.D.W. Va July 24, 2012) (unpublished) (quotation omitted); see Koch v. Koch
Indus., Inc., 203 F.3d 1202, 1222-23 (10th Cir. 2000); Adams v. Trs. ofUniv. ofN.C.-WHmington,
No. 7:07-CV-64-H, 2014 WL 12626268, at *1 (E.D.N.C. Mar. 10, 2014) (unpublished); Bistro of
Kansas City, Mo., LLC v. Kansas City Live Block 12S Retail, LLC, Civil Action No. ELH-10-2726,
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2013 WL 4431292, at *20 (D. Md. Aug, 16, 2013) (unpublished).
In addition to examining whether denial of new discovery would result in a manifest
injustice, the court also considers the general discovery standard in Rule 26. Rule 26(b)(1) allows
parties to "obtain discovery regarding any nonprivileged matter that is relevant to any party's claim
or defense and proportional to the needs ofthe case, considering the importance ofthe issues at stake
in the action, the amount in controversy, the parties' relative access to relevant information, the
parties' resources, the importance of the discovery in resolving the issues, and whether the burden
or expense of the proposed discovery outweighs its likely benefit." Fed. R. Civ. P. 26(b)(l). Rule
26(e) requires a party to supplement or correct its disclosures or responses. See Fed. R. Civ. P.
26(e).

n.
Eshelman seeks to (1) disclose a new expert witness, (2) disclose two previously unavailable
percipient witnesses, and (3) serve four requests for production. See [D.E. 482] 1. Pwna seeks to
depose witnesses from the first trial concerning new testimony and evidence, an exchange of new
documents, and up to five interrogatories. See [D.E. 484] 8. Pwna also requests an order "directing
that no new witnesses that have not already been disclosed may testify at trial." Id. The new trial
date is November 7, 2022, and neither Eshelman nor Puma entirely opposes some new, limited
discovery in preparation for the retrial. The parties are litigating these new discovery issues far in
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advance of the retrial and thus there is no surprise to either party from allowing some new, limited
discovery. Moreover, allowing some new, limited discovery will facilitate an orderly and efficient
retrial on damages. See Koch, 203 F.3d at 1222-23.
A.

The court grants Eshelman's request to disclose anew expert. Esh~lmanmayretain one new
expert witness to analyze and testify regarding the reach of Puma's defamatory presentation..
Defendant may retain one new expert witness to rebut plaintiff's new expert witness. The parties
may depose each of these new expert witnesses.
· The Fourth Circuit explained when it vacated the jury's damages award that ''North Carolina
law 'presumes that general damages actually, proximately, and necessarily result' from defamation
~se." Eshehrum,2F.4that283 (quotingFlakev. GreensboroNewsCo.,212N.C. 780,785,195
S.E. 55,,59 (1938)). Thus, "'no proof is required' to support the precise amount of a damages
award." Id. (quoting Flake, 212 N.C. at 785, 195 S.E. at 59). However, even when a jury is properly
instructed that evaluating the "direct and natural consequences of the libel" inherently requires "an
element of speculation" concerning "the probable extent of actual hatm," the jury "cannot faithfully
complete [its] task when there is no evidence whatsoever of actual harm sufficient to support the
damages award." Id. at 284 (quotations omitted). The Fourth Circuit clarified the governing legal
standard in Eshelman and defined the ''proof' required for a substantial damages award in a
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defamation~ se case ·to be "evidence of widespread circulation or comparable harm" and "some
evidence of its effect on [the plaintiff's] reputation." Id. at 284-85.
The court and the parties now have the benefit ofthe Fourth Circuit's clarification. The court
concludes it would be manifestly unjust for the parties to be unable to prepare evidence for a jury
trial on damages that accounts for the Fourth Circuit's ruling. Evidence of widespread circulation ·

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or comparable harm (or lack thereof) could include, for example, expert testimony concerning the
reach of the defamatory presentation. See id. (discussing the reach ofthe presentation as a relevant
consideration). Allowing two new experts does not insert a new issue into this case but instead will
facilitate the presentation ofevidence concerning damages. See, e.g., Hoffinan v. Tonnemacher, No.
CIV F 04-5714 AWi DLB, 2007 WL 2318099, at *3 (E.D. Cal. Aug. 10, 2007) (unpublished)
(allowing new experts for retrial when, among other considerations, allowing the experts would ''not
change the issues or complexity of the case").
Of course, a new trial is not "an invitation to reopen discovery for newly retained expert
witnesses and to enlarge trial time unnecessarily through the addition of totally new exhibits and
testimony." Cleveland, 985 F.2d at 1449; Total Containment, Inc., 177 F. Supp. 2d at 339 (stating
a party at its original trial "omits evidence necessary to sustain its damage award at its peril"). But
here, allowing limited discovery of two new experts in light of the Fourth Circuit's legal
determinations in this case will not unnecessarily enlarge the trial time.
In opposition, Puma cites MyGallons LLC v. U.S. Bancor,p. in which the trial court denied
the plaintiff's request to disclose a new expert in advance of a new trial on damages iri a defamation
case. See. e...&, [D.E. 484] 4. MyGallons does not help Puma. In MyGallons, the Fourth Circuit
held that the trial court should have excluded certain expert, testimony at the first trial. See
MyGallons LLC v. U.S. Bancor,p. 521 F. App'x 297, 306-07 (4th Cir. 2013) (unpublished). The
expert testimony that the trial court should have excluded supported the jury's special damages
award. See id. The Fourth Circuit vacated the entire damages award and remanded for a new trial
on damages because it was impossible to tell from the jury's general verdict what portion of the
award was general damages and what portion was special damages. See id On remand to the trial
court, the plaintiff sought to substitute a new expert for the expert the Fourth Circuit excluded. See
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MyGallons, 2013 WL 12291484, at* 1. The trial court concluded no manifest injustice would result
from denying the new expert. Had the trial court excluded the expert before the first trial, it would
have been too late for the plaintiff to substitute a new expert in time for that trial. See id. at *2.
Denying the motion to designate a1i additional expert for the retrial left the parties "in the same
position they would have been had this court excluded" the expert originally. Id.
So too here. If the parties.had known the Fourth Circuit's interpretation of North Carolina
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law (i.e., that proof of widespread circulation, effect on reputation, and other comparable harm is
required to sustain a I~arg~ damages award for defamation per se under North Carolina's "presumed
damages" regime), Eshelman would have noticed an expert concerning the reach ofthe defamatory
presentation at the first trial and Puma would have retained a rebuttal expert. As in MyGallons,
allowing the parties to retain one. expert each for the retrial and depose them is responsive to the
Fourth Circuit's ruling. Moreover, the benefit of allowing two additional experts outweighs the
burden or expense, is not privileged, would give the parties equal access to information, is accessible
to both parties in terms of the parties' resources, and the proposecftestimony g~es directly to the
relevant damages issues in the new trial. See Fed. R. Civ. P. 26(b)(l).
Eshelman may retain one new expert witness 'to analyze and testify regarding the reach of
Puma's defamatory presentation. Defendant may retain one new expert witness to rebut plaintiff's
new expert witness. The parties may depose each of these new expert witnesses. '

B.
Eshelman seeks to call as witnesses Puma's two former defense
lawyers in the first
I
trial-David Levy ("Levy'') and Devlin K. Horton ("Horton"}--to testify about their knowledge of
"Puma's continuation of its wrongful conduct during and after the first trial." [D.E. 483] 5.
Eshelman makes this unusual request, in part, because after the first trial, Puma sued its defense
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lawyers from the first trial and alleged legal malpractice. See [D.E. 482-S] (complaint against Levy
and his law 1~

Hedrick Gardner Kincheloe & Garofalo, L.L.P.); [D.E. 482-6] (answer to the/

complaint).
Initially, Eshelman and Puma dispute whether Puma's on-going legal malpractice suit against
Levy and his law firm waives attorney-client privilege. See [D.E. 483] S n.3; [D.E. 484] 5'--6.
Merely :filing a malpractice suit, however, does not immediately waive the attorney-client privilege
as to third parties in a separate action that concerns the same ~bject matter as the attorney
malpractice action. See Indus. Clearinghouse Inc. v. BrownjngMfg. Div. ofEmersonElec.. Co., 953
F.2d 1004, 1007 (5th Ch-. 1992). The question is whether any confidential communications have
been revealed during the course of the malpractice suit that would waive the privilege as to third
parties and the subject matter of those communications. See id.; accord Sheet Metal Workers Int'l
Ass'n v. Sweeney, 29 F.3d 120, 125 (4th Ch-. 1994). The analysis focuses on each communication.
Thus, the existence of the malpractice suit alone does not categorically waive the privilege
concerning Puma's communications with Levy and Horton. Moreover, the examples of possible
testimony that Eshelman proffers, see [D.E. 483] S, do not appear to be privileged'because the
alleged communications were not necessarily directedatLeVY and Horton, were apparently not made
.to secure legal assistance, and were made in public. See NLRB v. Interbak:e Foods, LLC, 637 F.3d
492, S01-02 (4th Cir. 2011); State v. Farook, No. 4S7PA20, 2022 WL 1437660, at *9 (N.C. May
6, 2022).
In any event, the court denies the addition of Levy and Horton as new witnesses because no
manifest injustice would occur from excluding them. Except for a conclusory argument, Eshelman
has not shown that the two attorneys could testify concerning the dissemination of Puma's

defamatory presentation, the effect on Eshelman's reputation, or some other comparable harm that
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would support compensatory damages. Cf. Jury Instrs. [D.E. 386] 21-22. Instead, Eshelman
apparently wants the lawyers to testify regarding topics that might support Eshelman' s arguments
for punitive damages. The proposed testimony is not relevant to punitive damages. See Jury Instrs.
~

[D.E. 387] 12-13; N.C. Gen. Stat§ 1D-35. Moreover, even
if relevant,
adding these two new
.
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witnesses is unduly prejudicial,.manifestly unjust, and not proportional to the needs ofthe case. See
Fed. R. Civ. P. 26(b)(l); cf. Fed. R. Evid. 403. Thus, the court denies the request.

C.
Eshelman seeks production of four categories of documents. See [D.E. 482-2] 7-8. First,
Eshelman seeks all communications from September 20, 2017, to the present sent or received by
Alan Auerbach, Mariann Ohanesian, or any member of Puma's board relating to or referring to
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Eshelman or this litigation (Request for Production No. 118). See id. at 7. Second, Eshelman seeks
discovery of all agendas, minutes, presentations, notes, transcrip~, recordings, or other materials
relating to any Puma board meeting (or any meeting of any committee of Puma's board) that
occurred from September 20, 2017, to the present, during which Eshelman or this litigation was
mentioned, referenced, or discussed (Request for Production No. 119). See id. at 8. Third,
Eshelman seeks discovery of documents sufficient to show Puma's revenue expectations and
projections for each quarter of the 2022 calendar year, including any information, models, charts,
and forecasts that demonstrate how Puma derived such expectations and projections (Request for
Production No. 120). See id. Finally, Eshelman seeks all documents produced in Puma's
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malpractice suit against Levy and his law firm (Request for Production No. 121). See id. Puma
objects to these requests. See [D.E. 484] 6-8.
Under Federal Rule of Civil Procedure 26(e)(l), parties must supplement any Rule 26(a)
disclosure or response to an interrogatory, request for production, or request for admission. See Fed.
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R. Civ. P. 26(e). The duty to supplement does not ordinarily encompass non-expert deposition
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testimony. ·see Fed. R. Civ. P. 26, advisory committee notes to 1993 amendment. The duty to
supplement is triggered when a ''party learns that in some material respect the disclosure or response
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is incomplete or incorrect, and if the additional or corrective information has not otherwise been
made known to the other parties during the discoveey process or in writing." Fed. R. Civ. P.
26(e)(l)(A). ·Toe obligation continues after discoveey closes. See Covil Con,. ex rel. Protopapas
v. U.S. Fid. & Guar. Co., 544 F. Supp. 3d588, 595--96 (M.D.N.C. 2021); Wearev. Bennett Brothers
Yachts, Inc., :No. 7:17-CV-155-FL, 2019 WL 12267845, at *3 (E.D.N.C. June 12, 2019)
(unpublished). Additionally, the court may order the parties to supplement their responses. See Fed.
R. Civ. P. 26(e)(l)(B); 8A Wright & Miller, Federal Practice & Procedure§ 2049.1 ("The rule also

authorizes the court to direct supplementation or correction beyond what the rule itselfcommands.").
The court assumes the parties met their obligations under Rule 26(e)(1) before the first trial.
The court- orders the parties to supplement their discoveey responses up to the current date and,
ultimately, up to the date of the second trial. See Fed. R. Civ. P. 26(e)(l)(B).
As for Eshelman's Requests for Production No. 118, No. 119, and No. 120, these requests

presumably encompass documents Eshelman requested during dis~veey before the first trial. To
I

the extent these documents are, in fact, covered by Eshelman's requests for production during
discoveey before the first trial, the court orders Puma to supplement its responses -and produce
responsive documents encompassed within Eshelman's Requests for Production No. 118, No. 119,
and No. 120. To the extent that Eshelman's Requests for Production No. 118, No. 119, and No. 120
are not already covered by earlier requests, the court finds that the requested documents go to the
heart of the relevant damages issues,

are proportional to the needs of the case, Slid are needed to

avoid manifest injustice. Thus, Puma shall produce the requested documents.
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The court denies Eshelman's Request for Production No. 121, which'seeks documents
produced in Pwna's malpractice suit against Levy and lns law firm. Except for a conclusory
argument, see [D.E. 483] 6, Eshelman has not demonstrated these documents contain relevant:
information concerning his compensatory or punitive damages. And even if the documents could
marginally support Eshelman's compensatory or punitive damages arguments, Eshelman has not
demonstrated a manifest injustice would result if the court denies discovery of these documents.

D.
Pwnarequests that new discovery include "depositions oftrial witnesses concerning any new
testimony concerning post-trial events, exchange of new documents, and no'·more than five
interrogatories." [D.E. 484] 8. Pwna also requests an order "directing that no new witnesses that
have not already been disclosed may testify at trial." Id. The court grants Pwna's requests in part.
In its response to Eshelman' s motion for discovery, ~ requested an order "directing that
no new witnesses that have notJalready been disclosed may testify at trial." [D.E. 484] 8. At the
hearing, Pwna expanded its request and sought to exclude any witness who did not testify at the first
trial, regardless of whether a party had previously disclosed that witness. The court denies Pwna's
request. Witnesses who were previously disclosed may testify at the retrial, regardless of whether
a party previously deposed that witness. To the extent a party did not depose an "already disclosed"
witness, each party must live with that choice. Either side could have deposed an already disclosed
witness and decided not to do so. It is not manifestly unjust to deny Pwna' s request to depose those
witnesses, and deposing those witnesses at this stage is not proportional to the needs of the case.
Puma also seeks.to depose ''trial witnesses [from the first trial] concerning any new testimony
concerning post-trial events." Id. .The court finds that supplementation under Rule 26(e) obviates
the need for new depositions of these witnesses. As the court stated at the hearing, if information
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arises concerning a particular witness that would be relevant to the court's decision concerning
whether to allow a deposition of that particular witness, the parties may meet and confer and bring
it to the court's attention, if court intervention is needed.
As for Pwna' s request to require the parties to exchange new documents regarding post-trial

events, the court grants the request in the form ofthe supplementation order. As discussed, the court
orders the parties under Rule 26(e) to supplement their previous discovery responses. See Fed. R.
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Civ. P. 26(e)(l)(B). The court finds that the parties' Rule 26(e) supplements will satisfy Puma's
request.
As for Puma's request that the parties each propound up to five new interrogatories, the court

denies the request. The parties' Rule 26(e) supplements will provide the parties with updated
information and documents relevant to the retrial on damages.\ As the court stated at the hearing, to
the extent the documents produced in the parties' Rule 26(e) supplements give rise to the need for
new interrogatories, the parties may meet and confer and bring that to the court's attention, if court
intervention is n~ed.

m.
In sum, the court GRANTS IN PART plaintiff's motion for discovery [D.E. 482]. Plaintiff

may retain one new expert witness to analyze and testify regarding the reach of Puma's defamatory .
presentation. Defendant may retain one new expert witness to rebut plaintiff's new expert witness.
The parties may depose each of these new expert witnesses. The parties SHALL supplement their
previous discovery responses pursuant to Rule 26(e). As part of the supplementation, defendant
SHALL respond to plaintiff's Requests for Production No. 118, No. 119, and No. 120. The court
DENIES all other requests in plaintiff's motion for discovery. The court DENIES defendant's
,

request to exclude any witness who did not testify at the first trial, request to depose previously
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disclosed witnesses and witnesses who testified at the first trial, and request to propound up to five
new interrogatories. The court is entering a Case Management Order that sets specific deadlines and
governs future proceedings in this case.
SO ORDERED. This Jj_ day of May, 2022.
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~ /\gv½

JSC.DEVERID
United States District Judge

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