Eshelman v. Auerbach et al
ORDER denying as moot 29 Cross Motion; denying 20 Motion to Dismiss for Lack of Jurisdiction; denying 20 Motion to Transfer Case; denying 20 Motion to Dismiss for Failure to State a Claim; denying 20 Motion to Strike. Signed by Chief Judge James C. Dever III on 2/6/2017. (Briggeman, N.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
FREDRIC N. ESHELMAN,
PUMA BIOTECHNOLOGY, INC.,,
On February 2, 2016, Fredric N. Eshelman ("Eshelman") filed a complaint against Alan. H.
Auerbach ("Auerbach") and Puma Biotechnology, Inc. ("Puma") alleging libel per se and libel per
guod [D.E. 1, 5]. OnApril4, 2016, PumaandAuerbachmoved to dismiss Eshelman's complaint
for lack of personal jurisdiction and failure to state a claim upon which reli~f can be granted, moved
to transfer the case, moved for relief under California's Anti-SLAPP statute [D.E. 20], and filed a
memorandum in support [D.E. 21 ]. On May 2, 2016, Eshelman voluntarily dismissed Auerbach as
a defendant [D.E. 27], responded in opposition to Puma's motion [D.E. 28], and filed a cross-motion
concerning Puma's motion for relief under the Anti-SLAPP statute [D.E. 29]. On May 19, 2016,
Puma replied [D .E. 31]. On November 23, 2016, with leave of the court, Eshelman responded to
Puma's reply [D.E. 55, 62]. On December 7, 2016, Puma replied to Eshelman's supplemental
response [D.E. 69]. As explained below,.the court denies Puma's motion to dismiss for lack of
personal jurisdiction, denies Puma's motion to transfer, denies Puma's motion to dismiss for failure
to state a claim, denies Puma's motion for relief under California's Anti-SLAPP statute, and
dismisses as moot Eshelman's cross-motion concerning the Anti-SLAPP statute.
Eshelman resides in Wilmington, North Carolina. Compl. [D.E. 5] ~ 5. Eshe~an founded
Pharmaceutical Product Development ("PPD") .. Id. Puma is a Delaware corporation based in Los
Angeles, California. Id. ~ 6. More than 50 Puma stockholders (including Eshelman) reside in North
Carolina. See id. ~ 10.
On November 1, 2001, PPD contracted with Aventis Pharmaceuticals ("Aventis") for
research services concerning "a clinical study ... to determine the safety and effectiveness" of the
drug Ketek. ld.
22-23. During the Ketek trial, a clinical investigator falsified documents. ld.
24--25. Eshelman was the CEO ofPPD when these events occurred. Id.
Between May 18 and June 4, 2015, Eshelman acquired stock in Puma. [D.E. 28-1] ~ 19. On
October 28, 2015, Eshelman solicited proxy
for a proposal to increase Puma's board of
directors from five to nine directors, and proposed that Eshelman and three others be nominated to
the new board positions. Compl. ~ 29; [D.E. 20-6, 22]. On December 10, 2015, Puma responded
to Eshelman's proxy solicitation by mailing a consent revocation to stockholders, including those
in North Carolina, which directed stockholders to the homepage ofPuma' s investor-relations website
for further consent-revocation materials. Compl. ~ 10; [D.E. 20-5] 52.
On January 7, 2016, Puma posted a link on the homepage of Puma's investor-relations
website to download a .pdf file of an "Investor Presentation" addressing Eshelman's proposal.
33. Three slides of the Investor Presentation were titled "Eshelman Continues to
Demonstrate a Lack oflntegrity." Id.; [D.E. 5-1] 13-15. One ofthose slides stated that "Eshelman's
misrepresentations are no surprise given his history," that Eshelman was the CEO ofPPD ''when it
managed a clinical trial during the development of the antibiotic drug Ketek," that "[fJraud was
uncove;red in this trial by the FDA's Office of Criminal Investigation," that "[a]s [CEO] ofPPD,
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." Compl. ~ 33; [D.E. 5-1]
14 (emphasis omitted). Another slide with the same title stated that "Puma's Board does not believe
that someone who was involved in clinical trial fraud that was uncovered by the FDA should be on
the Board of Directors of a public company; particularly a company that is in the process of seeking
FDA approval." Compl. ~ 33; [D.E. 5-1] 15.
On January 20, 2016, Eshelman sent a letter to Puma and its board of directors, demanding
that Puma apologize for and retract the statements in the Investor Presentation, which Eshelman said
were defamatory. Compl. ~~ 34-36. On January 27, 2016, Puma posted a document titled
"[a]dditional proxy soliciting materials" to their investor-relations homepage. ld. ~~ 36-37. In the
document, Puma disclosed the contents of Eshelman's January 20th letter, stated that the Investor
Presentation "included certain factual and publicly available information regarding Eshelman's
background," and rejected Eshelman's demands. ld.; [D.E. 5-2] 5-10.
Puma's statements in the Investor Presentation and the January 27th rejection ofEshelman' s
demands harmed Eshelman's professional reputation. Compl. ~~ 39-45.
On February 2, 2016, Eshelman filed a complaint alleging state-law claims oflibel m se and
libel m quod against Puma and Auerbach. OnApril4, 2016, Puma and Auerbach moved to dismiss
Eshelman's complaint for lack of personal jurisdiction and failure to state a claim upon which relief
can be granted, moved to transfer the case, moved for relief under California's Anti-SLAPP statute
[D.E. 20], and filed a memorandum in support [D.E. 21]. On May 2, 2016, Eshelman voluntarily
dismissed Auerbach as a defendant [D.E. 27], responded in opposition to Puma's motion [D .E. 28],
and filed a cross-motion concerning Puma's motion for relief under the Anti-SLAPP statute [D.E.
29]. On May 19, 2016, Puma replied [D.E. 31]. On November 23, 2016, with leave of court,
Eshelman responded to Puma's reply [D.E. 55, 62]. On December 7, 2016, Puma replied to
Eshelman's supplemental response [D.E. 69].
Puma moves to dismiss 'under Federal Ru1e of Civil Procedure 12(b)(2) for lack of personal
jurisdiction. To defeat a Ru1e 12(b)(2) motion, a plaintiff typically must prove by a preponderance
of the evidence that the court can exercise personal jurisdiction. See Grayson v. Anderson, 816 F.3d
262, 268 (4th Cir. 2016); Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989). If a court rules on
amotion to dismiss for lack ofpersonal jurisdiction without an evidentiary hearing, the plaintiffneed
only establish a prima facie case. Combs, 886 F .2d at 676. When determining whether the plaintiff
has met this burden, courts resolve all factual disputes and draw all reasonable inferences in the light
most favorable to the plaintiff. ld.; see Mylan Labs .. Inc. v. Akzo. N.V., 2 F.3d 56, 60 (4th Cir.
1993). However, an evidentiary hearing need not include live testimony, but merely the opportunity
for the parties to present evidence and argument on the question ofjurisdiction. Grayson, 816 F .3d
at 268. After the court has considered such evidence and argument, it determines whether a plaintiff
have proven by a preponderance of the evidence that the court has personal jurisdiction over the
A federal court may exercise personal jurisdiction over a person to the extent allowed by state
law in the state where the federal court sits. See Fed. R. Civ. P. 4(e)(1), (h)(1)(A).
Carolina long-arm statute extends personal jurisdiction over out-of-state defendants in all cases in
which the Fourteenth Amendment's Due Process Clause permits. See Dillon v. Numismatic
Funding Corp., 291 N.C. 674, 676, 231 S.E.2d 629, 630-31 (1977); Century Data Sys.. Inc. v.
McDonald, 109 N.C. App. 425,427,428 S.E.2d 190, 191 (1993). To determine whether the North
Carolina long-arm statute reaches a particular defendant, courts analyze whether the defendant has
sufficient minimum contacts with North Carolina such that "maintenance ofthe suit does not offend
traditional notions offairplayand substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310,
316 (1945) (quotation omitted); see Dillon, 291 N.C. at 676-80, 231 S.E.2d at 630-33.
Courts recognize two types of personal jurisdiction: general and specific. See Goodyear
Dunlop Tires Operations. S.A. v.Bro:M!, 131 S. Ct. 2846,2851 (2011). Initially, the court addresses
Eshelman's argument tb.at the court has specific jurisdiction.
When assessing specific jurisdiction, courts consider three factors: "(1) the extent to which
the defendant has purposefully availed itself of the privilege of conducting activities in the [forum]
state; (2) whether the plaintiffs' claims arise out of those activities directed at the state; and
(3) whether the exercise of personal jurisdiction would be constitutionally 'reasonable."' Carefirst
ofMd.. Inc. v. Carefirst Pregnancy Ctrs.. Inc., 334 F.3d 390,397 (4th Cir. 2003); see Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 474-77 (1985). When analyzing the first two elements, courts
consider only the defendant's activities. See Burger King, 471 U.S. at 472-78. In accordance with
this principle, "[t]he substantial connection between the defendant and the forum State necessary for
a finding of minimum contacts must come about by an action of the defendant purposefully directed
toward the forum State." Asahi Metal Indus. Co.. Ltd. v. Super. Ct. of Cal., 480 U.S. 102, 112
(1987) (plurality opinion) (citations and emphasis omitted). A defendant has engaged in sufficient,
intentional contact with a forum state if''the defendant has intentionally directed his tortious conduct
toward the forum state, knowing that the conduct would cause harm to forum resident." Carefirst
ofMd.. Inc., 334 F.3d at 397-98; see Calder v. Jones, 465 U.S. 783, 788-89 (1984); Young v. New
Haven Advocate, 315 F.3d 256, 261--64 (4th Cir. 2002); PCS Phosphate Co. v. Norfolk S. Corp.,
520 F. Supp. 2d 705, 712-13 (E.D.N.C. 2007), affd, 559 F.3d 212 (4th Cir. 2009).
Specific jurisdiction over Puma is proper because Eshelman's claims arise out of Puma's
sufficient minimum contacts with North Carolina. Puma mailed consent-revocation statements
concerning the proxy contest at issue in this case to stockholders residing in North Carolina. The
consent-revocation letter directed stockholders in North Carolina to the homepage of Puma's
investor-relations website, where Puma would later post the allegedly defamatory statements that
form the basis of Eshelman's complaint. That Puma first directed stockholders to the page and later.
posted the allegedly defamatory statements-and not the other way around-does not change the
court's jurisdictional analysis. These mailings constituted purposeful contacts wi~ perso~ in North
Carolina, and Puma desired that its statements would influence the decisions ofthose North Carolina
stockholders. Therefore, the statements in the Investor Presentation may serve as the basis for
specific jurisdiction for torts arising from their contents. Furthermore, the allegedly defamatory
statements were clearly and solely directed at Eshelman, a North Carolina resident, and he would
suffer harm from the statements in North Carolina. Thus, the court has specific jurisdiction over
Puma concerning Eshelman's claims arising out of the statements in the mailings directed to North
Carolinians directing them to documents posted to Puma's investor-relations website. See Calder,
465 U.S. at 788-90; Carefirst ofMd., Inc., 334 F~3d at 397-98; Young. 315 F.3d at 262--64. 1
As for Puma's motion to dismiss the complaint for improper venue, "if all defendants are
residents of the State in which the district is located," venue is proper in "a judicial district where
any defendant resides." 28 U.S.C. § 1391(b)(1). A corporation resides "in any judicial district in
which [the corporation] is subject to the court's personal jurisdiction with respect to the civil action
in question." Id. § 13 91 (c)(2). Because the court has personal jurisdiction over Puma in this action,
and Puma is the only defendant, venue is proper in this court.
As for Puma's motion to dismiss for failure to state a claim upon which relief can be granted,
Eschelman alleges one count of libel m se and one count of libel per quod. A motion to dismiss
under Rule 12(b)(6) tests the legal and factual sufficiency of the complaint. See Fed. R. Civ. P.
12(b)(6); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007); Coleman v. Md. Court of Appeals, 626 F.3d 187, 190 (4th Cir. 2010), aff'd, 132 S. Ct.
1327 (2012); Giarratano v. Johnso!!, 521 F.3d 298,302 (4th Cir. 2008); accord Erickson v. Pardus,
551 U.S. 89, 93-94 (2007) (per curiam). The court "accepts all well-pled facts as true and construes
these facts in the light most favorable to the plaintiff in weighing the legal sufficiency of the
complaint." N emet Chevrolet. Ltd. v. Consumeraffairs.com. Inc., 591 F .3d 250, 255 (4th Cir. 2009).
The court need not, however, accept as true a complaint's "legal conclusions, elements of a cause
In light ofthis conclusion, the court need not address the parties' dispute concerning general
jurisdiction. Compare [D.E. 62], with [D.E. 69].
of action, and bare assertions devoid of further factual enhancement." Id. In evaluating a motion
to dismiss, the court looks to the complaint and materials attached to or incorporated into the
complaint. E.I. DuPont de Nemours Co. V. Kolonlndus., 637 F.3d435, 448 (4thCir.2011); Philips
v. Pitt Cty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009); Sec'y of State for Defence v. Trimble
Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007); Thompson v. Greene, 427 F.3d 263, 268 (4th
Cir. 2005); Am. Chiropractic Ass'n v. Trigon Healthcare. Inc., 367 F.3d 212, 234 (4th Cir. 2004).
This court's subject-matter jurisdiction is based on diversity jurisdiction. Thus, the court
applies state substantive principles and federal procedural rules. See Erie R.R. v. Tompkins, 304
U.S. 64,78-80 (1938); Dixon v. Edwards, 290 F.3d699, 710 (4thCir. 2002). Afederalcourtsitting
in diversity applies the choice-of-law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co.,
313 U.S. 487, 496 (1941); DiFederico v. Marriott Int'l, Inc., 714 F.3d 796, 807 (4th Cir. 2013).
North Carolina courts apply the law of the state where a plaintiff suffered his injury. See Boudreau
v. Baughmm1, 322 N.C. 331, 335, 368 S.E.2d 849, 854-55 (1988); Harco Nat'l Ins. Co. v. Grant
Thornton LLP, 206 N.C. App. 687, 692, 698 S.E.2d 719, 722-23 (2010); Ascend Health Corp. v.
Wells, No. 4:12-CV-83-BR, 2013 WL 1010589, *1-2 (E.D.N.C. Mar. 14, 2013) (unpublished);
Martinezv. Nat'l Union Fire Ins. Co., 911 F. Supp. 2d331, 336 (E.D.N.C. 2012); see also Wells v.
Liddy, 186F.3d 505,521-22 (4thCir. 1999). Eshelman resides in North Carolinaandfelttheeffects
of any tortious damage to his reputation in North Carolina. Thus, North Carolina law applies to his
. Under North Carolina law, a plaintiff asserting a defamation claim must show that a
defendant made "false, defamatory statements of or concerning the plaintiff, which were published
to a third person." Boyce & Isley. PLLC v. Cooper, 153 N.C. App. 25, 29, 568 S.E.2d 893, 897
Because the court applies North Carolina substantive law and federal procedural law,
California's "Anti-SLAPP" rule, Cal. Code Civ. P. § 425.16, does not apply. Even if it did apply,
the court rejects Puma's arguments about California's "Anti-SLAPP" rule.
(2002); see Lewis v. Rapp, 220 N.C. App. 299, 301--02, 725 S.E.2d 597, 600 (2012). The parties
do not dispute that the statements at issue concerned Eshelman or that the statements were published
to the public generally and to Puma's stockholders specifically.
Whether a publication is libelous m se is a question oflaw. Ellis v. N. Star Co., 326 N.C.
219,225,388 S.E.2d 127, 130 (1990).
Libel~ se "is a
publication which, when considered alone
without explanatory circumstances: (1) charges that a person has committed an infamous crime;
(2) charges a person with having an infectious disease; (3) tends to impeach a person in that person's
trade or profession; or (4) otherwise tends to subject one to ridicule, contempt, or disgrace." Boyce
& Isley. PLLC, 153 N.C. App. at 29, 568 S.E.2d at 898 (quotation omitted); see Lewis, 220 N.C.
App. at 302, 725 S.E.2d at 601. The defamatory nature of a statement "must be susceptible ofbut
one meaning" when ''taken in the sense which is most obvious and natural and according to the ideas
that they are calculated to convey to those who see them." Flake v. Greensboro News Co., 212 N.C.
780, S.E. 55, 60 (1938). "[F]alse words imputing to a ... business man conduct derogatory to his
character and standing as a business man and tending to prejudice him in his business are actionable"
as libel~ se. Badame v. Lampke, 242 N.C. 755, 757, 89 S.E.2d 466, 468 (1955); see Boyce &
Isley. PLLC, 153 N.C. App. at 30, 568 S.E.2d at 898. If a series of statements are by themselves not
false, but are presented together in such a way that a reasonable audience of ordinary people would
understand the statements to convey a defamatory message, the statements constitute libel ~ se.
See Boyce & Isley. PLLC, 153 N.C. App. at 31-32,568 S.E.2d at 898-900.
In context, the statements in Puma's Investor Presentation plausibly constitute libel m se.
Assuming without deciding that no statement was individually false, together and in context Puma's
Investor Presentation conveyed to an ordinary reader the false impression that Eshelman had been
culpably involved in fraud. Such statements tended to impeach Eshelman's reputation in his trade
A statement constitutes libel per quod if it is "not obviously defamatory" but becomes
libelous· ''when considered in connection with innuendo, colloquium, and explanatory
circumstances." Flake, 212 N.C. at 785, 195 S.E. at 59; see Ellis, 326 N.C. at 223, 388 S.E.2d at
130; Skinnerv. Reynolds, 237N.C. App. 150, 157,764 S.E.2d652, 657 (2014). Even to the extent
the statements in Puma's Investor Presentation were not obviously defamatory, they were by
innuendo. The report made true statements about Eshelman's term as the CEO of PPD on a slide
titled "Eshelman Continues to Demonstrate a Lack of Integrity," suggesting that Eshelman was
personally involved with, culpable for, and fired because of instances of :fraud that occurred at PPD
when Eshelman was CEO. Thus, Eshelman has plausibly alleged libel per quod.
Puma also argues that Eshelman was a limited-purpose public figure because of his role in
Puma's proxy contest, and therefore Eshelman must plausibly allege that Puma acted with malice.
But the only North Carolina case Puma cites for this proposition discusses the libel defense of a
qualified privilege, not the limited-purpose public-figure doctrine. See [D .E. 21] 21 (citing Hanton
v. Gilbert, 126N.C. App. 561,567-68,486 S.E.2d432, 436-37 (1997), abrogated on other grounds
by Newbeme v. Dep't of Crime Control & Pub. Safety, 359 N.C. 782, 618 S.E.2d 201 (2005)). In
any event, assuming without deciding that Eshelman is a limited-purpose public figure, 3 the
qualified-privilege defense does not help Puma because "[w]hen a publication is libelous per se"
North Carolina courts adopt "a prima facie presumption ofmalice." Arnold v. Sharpe, 296 N.C. 533,
537-38,251 S.E.2d 452,455 (1979).
In sum, Puma's motion to dismiss for lack of personal jurisdiction, to transfer venue, to
dismiss for failure to state a claim, and for relief under California's Anti-SLAPP statute [D.E. 20]
is DENIED. Eshelman'smotionpursuantto California'sAnti-SLAPP statute [D.E. 29] is DENIED
Cf. Foretich v. Capital Cities/ABC. Inc., 37 F.3d 1541, 1553-55 (4th Cir. 1994); Blue Ridge
Bank v. Veribanc. Inc., 866 F.2d 681, 687-89 (4th Cir. 1989).
SO ORDERED. This _k__ day ofFebruary 2017.
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