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Eshelman v. Puma Biotechnology, Inc.

United States District Court, E.D. North Carolina, Southern Division

June 7, 2017



          Robert B. Jones, Jr. United States Magistrate Judge

         This matter comes before the undersigned to address Plaintiff Frederic N. Eshelman's ("Plaintiff or "Eshelman") Motion to Compel [DE-67] and Defendant Puma Biotechnology, Inc.' s ("Defendant" or "Puma") Motion to Compel [DE-74]. Plaintiff moves pursuant to Rules 33, 34, and 37 of the Federal Rules of Civil Procedure for an order (1) permitting a jury instruction in response to Defendant's failure to preserve certain internet web browser and search histories; (2) compelling Puma to produce all non-privileged documents and information responsive to Plaintiffs Requests for Production of Documents ("RFP")Nos. 26-28, 33, 58, and 59; and (3) overruling Puma's general objections to Eshelman's written discovery requests. Pl.'s Mot. [DE-67]. Defendant moves pursuant to Rules 26 and 37 of the Federal Rules of Civil Procedure to compel Plaintiff to produce a privilege i log. Def.' s Mot. [DE-74]. All responsive briefing is complete and the matters raised in the motions, are ripe for decision. The motions have been referred to the undersigned for purposes of disposition pursuant to 28 U.S.C. § 636(b)(1)(A). [DE-72, -78]. On March 19, 2017, Plaintiff filed a Notice withdrawing his opposition to Defendant's Motion to Compel, alerting the court that he had agreed to produce a privilege log and thus rendering the motion to compel moot. [DE-102]. Accordingly, Defendant's motion [DE-74] is denied as moot and for the reasons set forth below, Plaintiff s motion [DE-67] is allowed in part and denied in part.

         I. BACKGROUND

         On February 2, 2016, Eshelman filed a complaint against Puma and Alan H. Auerbach (" Auerbach"), Puma's chief executive officer ("CEO") and Board Chairman, asserting claims of libel per se and libel per quod related to an allegedly defamatory investor presentation. See [DE-1, 5].[1] Puma is biopharmaceutical company focused on acquiring, developing, and commercializing innovative cancer-care products. Compl. [DE-5] ¶ 6. Eshelman founded Pharmaceutical Product Development ("PPD"), a North Carolina-based global contract pharmaceutical research organization. Id. ¶¶ 5, 16. On November 1, 2001, PPD contracted with Aventis Pharmaceuticals, Inc. ("Aventis") to provide clinical research services during a clinical trial to determine the safety and effectiveness of the drug Ketek. Id. ¶¶ 22-23. During the Ketek trial, a clinical investigator falsified documents. Id. ¶¶ 24-25. Eshelman was the CEO of PPD when these events occurred. Id. ¶ 23.

         Eshelman owns stock in Puma, and on October 28, 2015, he proposed that the board of directors be increased from five to nine members and suggested that he be elected along with three other individuals to the new board positions. Id. ¶ 29. Eshelman alleges that in response Auerbach set out to discredit him by falsely relaying to stockholders and the public that Eshelman had been involved in the Ketek clinical trial fraud and as a result was fired from his position as CEO of PPD. Id. 30-31. On January 7, 2016, Auerbach shared the allegedly defamatory investor presentation regarding Eshelman's proposal with some of Puma's stockholders and then mailed the presentation to all of the company's stockholders and published it on the company's website. Id. ¶¶ 1-2, 32-33. The investor presentation included statements asserting that Eshelman lacked integrity, had a history of making misrepresentations, was CEO of PPD during the Ketek trial when the Food and Drug Administration ("FDA") discovered fraud in the trial, was called to testify before Congress in 2008 about the clinical trial fraud, and was replaced as PPD's CEO in 2009. Id. ¶ 33. Additionally, the investor presentation 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." Id.

         On January 20, 2016, Eshelman sent a letter to Puma, Auerbach, and the remaining Puma board members, demanding an immediate apology and retraction of the investor presentation. Id. ¶ 34. In response, Puma posted several documents on its website: another solicitation document asserting that the investor presentation "included certain factual and publicly available information regarding Eshelman's background;" Eshelman's January 20th retraction request; and a letter sent by Puma to Eshelman in response asserting that

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 of this information if you persist with further public statements or filings about Puma, its Board, and its management.

Id. ¶¶ 36-37. Eshelman then filed the complaint at issue on February 2, 2016. [DE-1].

         On February 16, 2016, two weeks after the complaint was filed, Puma issued an internal litigation hold notice related to Eshelman's claims in this case. Sampson Stmt. [DE-73-1] at 2 ¶ 3; Eyler Stmt. [DE-73-2] at 2 ¶ 3. The litigation hold notice required the preservation of all documents relating to "Frederic Eshelman or Pharmaceutical Product Development, LLC" and Puma's "public statements and filings in connection with the proxy contest launched by Frederic Eshelman[.]" Feb. 16, 2016 Hold Notice [DE-73 -3 ] at 2. The hold notice defined documents to include electronically-stored information and advised employees to err on the side of preservation if there was a question as to whether material qualified as documents, but did not explicitly reference internet browser histories, internet search histories, or internet sites visited. Id. at 2-4. According to Charles Eyler ("Eyler"), Puma's Treasurer and Senior Vice President of Finance and Administration, "Puma does not have a formal document retention or destruction policy. Accordingly, documents and emails remain on Puma's systems unless or until manually deleted by individual users." Eyler Stmt. [DE-73-2] at 2 ¶ 2. Moreover, Paul Sampson ("Sampson"), counsel for Puma, states that Puma uses the internet browser Google Chrome, which "automatically and by default drops internet browser history after 90 days." Sampson Stmt. [DE-73 -1 ] at 2 ¶ 4; see also [DE-73 -4] at 2 (instructions from Google Chrome on how to delete a user's browsing history, confirming that the browsing history is saved for 90 days).

         On May 6, 2016, approximately 120 days after the publication of the investor presentation, counsel for Eshelman sent a letter to Puma's counsel "requesting that Puma preserve, among other things, the 'web browser histories' of individuals involved in the drafting of the January 7, 2016 presentation." Sampson Stmt. [DE-73-1] at 2 ¶ 5; see also May 6 Letter [DE-73-5]. Counsel for Eshelman advised that she assumed Puma had

already instructed all relevant people and companies to preserve and retain all documents, data, and electronically stored information relating in any way to Dr. Eshelman, [PPD], Ketek®, Dr. Eshelman's consent solicitation and Puma's conduct during the course of that consent solicitation (the "Proxy Contest"), and the researching, drafting, editing, fact checking, discussing, presenting, publishing, posting, filing, and disseminating of Puma's January 7, 2016 investor presentation

May 6 Letter [DE-73-5] at 2. Additionally, counsel for Eshelman informed Puma

that [i]f you have not already done so, promptly instruct a discovery vendor (or in-house information technology professional experienced with forensic document collection) to forensically collect and preserve all electronic data (including metadata) stored in the email accounts, web browser histories, computers, smartphones, and other electronic storage devices in the possession, custody, or control of Mariann Ohanesian and all Puma employees or directors who researched, drafted, edited, commented on, fact-checked, discussed, presented, published, posted, filed, or disseminated the Presentation or contributed to the Presentation in any way.


         Eshelman served written discovery inquiring into the process Puma undertook in preparing the investor presentation. See [DE-67-8]. In response, Puma stated that Auerbach and counsel for Puma reviewed the following information for inclusion in the investor presentation:

[i]nformation about Dr. Eshelman's appearance and testimony before ... Congress, the statements by members of Congress, PPD's management of the trials for Ketek and the fraud involved in it, and Dr. Eshelman's role at PPD at and after that time were provided by Dr. Eshelman in his Congressional testimony, by others who spoke in those hearings and documents related to them, and was reviewed on the Internet, including in video clips of Dr. Eshelman testifying and transcripts of testimony before the Congressional committee ....

[DE-67-8] at 4.

         On June 3, 2016, Eshelman served Puma with document requests seeking, in addition to other information, the web browser histories, web search histories, and all documents and websites viewed or utilized in any way in connection with preparing the investor presentation. See RFP Nos. 26-28 [DE-67-3] at 10-11. In a November 11, 2016 email discussing these discovery requests, counsel for Puma advised Eshelman's counsel that although Puma issued an internal litigation hold notice shortly after the complaint was filed, directing relevant individuals to preserve documents related to Eshelman's claims, the hold notice did not identify web browser histories as among the type of documents to be preserved. [DE-67-13] ¶ 3-4. Puma's counsel acknowledged receiving the May 6, 2016 letter from Eshelman's counsel, which asked Puma to preserve the web browser histories of individuals involved in preparing the investor preparation. Id. Counsel for Puma noted, however, that Puma uses Google Chrome as an internet browser, which deletes web browser history after 90 days, and accordingly, the web browser history information sought in the discovery requests no longer exists and did not exist at the time of the May 6 letter. Id. at 4. Puma's counsel concluded by stating that Puma has been unable to retrieve this deleted web browser history information, but Puma would produce such responsive information as could be identified while reviewing Puma's emails and other files. Id.


         A. Failure to Preserve Web Browser Information

         Eshelman argues that Puma failed to preserve the internet web browser and search histories of individuals who worked on the investor presentation and this information is the most probative evidence of whether Puma acted with actual malice. Pl's Mem. [DE-68] at 3-5. Eshelman seeks a jury instruction to help mitigate the harm caused by Puma's failure to comply with its discovery obligations and preserve this information, and argues that such an instruction is appropriate even if Puma did not act in bad faith. Id. at 5.

         As an initial matter, while Eshelman states that he seeks a jury instruction to mitigate the harm caused by Puma's failure to preserve electronically stored information ("ESI"), Eshelman does not define the particular instruction sought. Rule 37(e) of the Federal Rules of Civil Procedure governs the court's power to sanction a party for failing to preserve ESI. Rule 37(e)(2) provides for explicit relief in the form of an adverse jury instruction, but the court may also impose some form of a jury instruction under Rule 37(e)(1) to the extent necessary to cure prejudice caused by the loss of the ESI. See Fed. R. Civ. P. 37(e) advisory committee's note to 2015 amendment (approving of measures necessary to cure prejudice pursuant to Rule 37(e)(1) such as "permitting the parties to present evidence and argument to the jury regarding the loss of information, or giving the jury instructions to assist in its ...

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