In a recent case, a jury awarded a plaintiff over $22 million in damages, but the defendant appealed. The court determined that the award was too large and not supported by the evidence. Although the Fourth Circuit upheld the decision finding that defamation existed, it determined that a new trial on damages was required, since the jury’s initial damages decision was based not on evidence of actual harm sufficient to support the award.
Eshelman v. Puma Biotechnology, Inc.
Fredric Eshelman is the founder of Pharmaceutical Product Development (“PPD”) and a shareholder of Puma Biotechnology, Inc. (“Puma”), a pharmaceutical company. In 2015 and 2016 Eshelman attempted to take over the Puma board through a proxy contest. In response, Puma invited shareholders to view an investor presentation on its investor-relations website, which discussed events around a clinical trial, while Eshelman was CEO of PPD, when a clinical investigator falsified documents. A jury determined that Eshelman wasn’t involved in the fraud and an FDA agent testified that PPD reported the fraud.
The Puma presentation indicated that Eshelman was culpably involved in the fraud and contained statements including: “Eshelman Continues to Demonstrate a Lack of Integrity;” “[a]s [CEO] of PPD, Eshelman was forced to testify before Congress regarding PPD’s involvement in this clinical trial fraud in 2008;” “Eshelman was replaced as CEO for PPD in 2009;” and “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.” Eshelman filed suit alleging defamation against Puma. In 2019, a jury found Puma had defamed Eshelman and ordered Puma to pay $22.35 million in compensatory and punitive damages and Puma appealed.
The Fourth Circuit here considered whether statements from the investor presentation were defamatory per se. For a statement to be libelous per se, it must be “subject to only one interpretation” by ordinary people “when considered alone without innuendo, colloquium or explanatory circumstances.” Here, the court found that under the context, the statements in the presentation are “susceptible to only one reasonable interpretation.” The court considered that when the statements are read together, an ordinary reader would presume that Eshelman was removed as CEO due to fraud. Additional slides implied that Eshelman’s involvement in the fraud was sinister.
Additionally, for a statement to be defamatory per se, the interpretation must: (1) charge that a person committed an infamous crime; (2) charge a person with having an infectious disease; (3) tend to impeach a person in his trade or profession; or (4) otherwise tend to subject one to ridicule, contempt, or disgrace. The court concluded that it had “little trouble” concluding that the statements here “at a minimum” impeach Eshelman in his profession. Thus, the court concluded that the statements were defamatory per se.
The primary focus of the appeal was Puma’s argument that the jury award of damages was excessive. The court here concluded that “the jury awarded excessive damages that the evidence could not justify.”
The court noted that the jury’s $22.35 million award was “exceptionally large” and that no North Carolina jury has awarded anything close to such an amount in a defamation case. Additionally, the court determined that “there is no evidence justifying such an enormous award.” Eshelman estimated that his damages were $7.5 million before trial, $100 million at his deposition, and $52 million at closing argument, but provided no support for any of these very different and fluctuating estimates. Specifically, Eshelman testified he did not have any idea about any kind of financial or economic harm he suffered as a result of the statements. He also was unable to name any person who refused to do business with him or had knowledge of damage to his reputation.
Puma presented evidence that after publication of the presentation, Eshelman continued to serve on boards of at least seven companies and received numerous accolades in the following years, including “CEO of the Year.” Thus, the court concluded that the evidence indicated that Eshelman’s reputation remained intact after the publication. Finally, the district court instructed the jury that it must award the plaintiff an amount that “is a direct and natural consequence” of the defamatory statements. The court here concluded that a jury “cannot faithfully complete this task when there is no evidence whatsoever of actual harm sufficient to support the damages award.” The court ultimately vacated the compensatory and punitive damages awards and remanded the case to the district court for a new trial on damages.
What Does Eshelman v. Puma Biotechnology, Inc. Mean for Defamation Claims?
The Fourth Circuit here focused primarily on the main issue of the case: damages. However, the court’s initial analysis of the defamation claims at issue does offer some insight into whether statements will be found defamatory. The court stressed here that for a statement to be libelous per se, it must be “subject to only one interpretation” by ordinary people. What was important to the court’s finding was how the statements would be interpreted by ordinary people, without explanatory circumstances.
The court’s discussion of damages may also offer guidance about what parties may expect from damages findings. While the jury decided on a large jury award, the court found it was exceptionally large and not supported by evidence. The court considered that Eshelman was not able to quantify any financial or economic potential he suffered as a result of the statements or offer any evidence of harm that was a direct and natural consequence of the defamation. Thus, the jury award could not stand and a new trial to decide damages is required. While it’s unclear what the ultimate damages award will be, the case does show the importance of availability of evidence that economic harm resulted from alleged defamation.
General Counsel, P.C. attorneys have extensive knowledge and experience with defamation and libel cases through Virginia and the DC Metro Area. If you need more guidance or information, contact General Counsel, PC today at 703-991-7973 or email us at email@example.com.