Asahi Kasei Pharma Corp. v. Actelion Ltd.
169 Cal. Rptr. 3d 689
Cal. Ct. App.2013Background
- Asahi Kasei Pharma licensed Fasudil to CoTherix in 2006 for development in the U.S./EU; CoTherix promised to pursue oral and inhaled formulations for PAH and SA.
- Actelion (market leader with Tracleer) acquired CoTherix in January 2007 and promptly discontinued Fasudil development; Asahi alleges the acquisition was used to kill Fasudil as a competitive threat.
- Asahi obtained an ICC arbitration award (~$91M) against CoTherix for breach; it then sued Actelion, three Actelion executives, and others for tortious interference with contract, interference with prospective economic advantage, breach of confidentiality (third‑party beneficiary), and breach of confidence.
- At jury trial Asahi won on intentional interference with the License Agreement and related claims; jury awarded ~$546.9M compensatory (later offset/remitted to $377.325M) and punitive damages totaling $30M against the individual executives. Trial court denied most post‑trial challenges but conditionally granted remittitur on duplicative development‑cost damages; Asahi accepted remittitur.
- On appeal defendants argued (inter alia) that Actelion (and its executives) could not be liable for interfering with the License Agreement because they were not strangers after the acquisition, that discovery sanctions/instructions and evidentiary rulings were erroneous, and that damages were speculative; the Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Can an acquirer/nonparty be liable for tortious interference with a contract between seller and third party? | Asahi: Nonparties (including owners/executives) can be liable; privilege/justification is an affirmative defense requiring proof of no improper means. | Actelion: Applied Equipment bars liability because the acquirer was not a stranger after the acquisition; interference is at most a contractual remedy against CoTherix. | Court: Rejected broad reading of Applied Equipment; ownership does not create automatic immunity. Jury instruction on justification/unlawful means proper; liability can be imposed on nonparties who used improper means. |
| 2) Personal liability of officers/executives for interference and punitive damages | Asahi: Executives personally participated in and directed wrongdoing and so may be individually liable and punished. | Executives: Acts were within scope of employment; manager’s privilege/agency shields them; cannot be personally liable for corporate acts. | Court: Officers can be personally liable if they authorized, directed, or actively participated (or knowingly consented) in tortious conduct; summary adjudication of manager’s privilege was proper where not managers of CoTherix. Jury’s punitive findings supported by substantial evidence. |
| 3) Were discovery sanction/instruction and evidentiary rulings prejudicial error? | Asahi: instruction and certain evidentiary rulings remedied defendants’ willful discovery suppression; evidence (FDA warning letter, expert testimony) was relevant. | Actelion: Sanctionary instruction and admitted evidence were unduly prejudicial and invited juror speculation; excluded evidence (e.g., third‑party licensing reasons, Japanese blinded study) was wrongfully excluded. | Court: Trial court did not abuse discretion. Instruction was a tailored sanction; FDA materials and expert testimony admissible; exclusions (blinded Japanese study, hearsay third‑party statements, late Asahi email) were proper. |
| 4) Damages and punitive damages sufficiency and excessiveness | Asahi: Lost M&R (lost profits) and development costs were provable with reasonable certainty; punitive awards justified. | Actelion & executives: Lost‑profit and development awards speculative; duplicative; punitive awards excessive and unsupported. | Court: Substantial evidence supported lost‑profit and development‑cost awards (remittitur on duplicative development items was proper). Punitive awards against individuals were supported and not excessive under state or federal standards. |
Key Cases Cited
- Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503 (Cal. 1994) (tort of interference does not lie against a contracting party; scope of ‘stranger’ language discussed)
- Woods v. Fox Broadcasting Sub., Inc., 129 Cal.App.4th 344 (Cal. Ct. App. 2005) (ownership does not automatically immunize persons from interference liability; privilege is a defense)
- Sargon Enterprises, Inc. v. University of Southern California, 55 Cal.4th 747 (Cal. 2012) (reasonable‑certainty standard for lost profits; expert evidence admissibility)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (U.S. 2003) (constitutional guideposts for punitive damages review)
- Philip Morris USA v. Williams, 549 U.S. 346 (U.S. 2007) (limits on using punitive damages to punish harm to nonparties; admissibility of nonparty harm in reprehensibility analysis)
- Mintz v. Blue Cross of California, 172 Cal.App.4th 1594 (Cal. Ct. App. 2009) (agents of contracting parties generally not liable for interfering with principal’s contract when acting as agent)
- Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc., 78 Cal.App.4th 847 (Cal. Ct. App. 2000) (standard of review for punitive damages findings under clear and convincing evidence)