Ischemia
Research and Ed. Found. v. Pfizer, Inc.
Filed
2/26/13 Ischemia
Research and Ed. Found. v. Pfizer, Inc. CA6
>NOT TO BE PUBLISHED IN OFFICIAL REPORTS
>
>
California Rules of Court, rule 8.1115(a), prohibits
courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH
APPELLATE DISTRICT
>
ISCHEMIA RESEARCH AND EDUCATION FOUNDATION, Plaintiff and Appellant, v. PFIZER INC., et al., Defendants and Appellants. | H034653 (Santa Clara County Super. Ct. No. CV026653) |
Plaintiff
Ischemia Research and Education Foundation (IREF) appeals from the href="http://www.fearnotlaw.com/">trial court’s order granting a new trial
to defendant Pfizer Inc. (Pfizer) on liability and defendant Dr. Ping Hsu (Hsu)
on damages after a jury returned a $38 million verdict in IREF’s favor in
IREF’s misappropriation of trade secrets
action against Pfizer and Hsu. IREF
contends that (1) the trial court’s order is void because the statutory period
for ruling on the new trial motions
had expired before the court issued its order, (2) the statutory provision
permitting a trial court to grant a new trial for insufficiency of the evidence
is unconstitutional, (3) the trial court’s order was an abuse of discretion,
and (4) the trial court’s decision not to award exemplary damages (an issue
upon which it granted IREF a new trial) was an abuse of discretion. Pfizer and Hsu have filed protective
cross-appeals. We reject IREF’s
contentions and affirm the trial court’s order.
Therefore, we need not address the cross-appeals.
>I.
Factual Background
IREF is a
nonprofit corporation that collects and analyzes data from href="http://www.sandiegohealthdirectory.com/">clinical trials, which it
stores in databases. Dr. Dennis Mangano
is a physician, the founder of IREF,
and its “principal scientist.†Beginning in 2001, he also served as IREF’s
chief executive officer (CEO). Mangano
is very experienced in conducting clinical trials. There are three types of clinical
trials. A pharmaceutical company may
sponsor a trial; the National Institutes of Health (NIH) may sponsor a trial;
or an independent entity, such as IREF, may initiate a trial. Mangano formed a group of physician
investigators, called McSPI, who represented the leading cardiac surgery centers. McSPI is an acronym for multi-center study of
perioperative ischemia. Perioperative means before, during, or after
surgery. Ischemia refers to an organ’s
lack of oxygen. Mangano’s plan was to
have these investigators contribute data to a database.
The McSPI
investigators joined together and did an observational study of 2,417 cardiac
artery bypass graft (CABG) surgery patients.href="#_ftn1" name="_ftnref1" title="">[1] An observational study simply observes the
history of patients as they go through surgery and during their hospitalization
thereafter, while a clinical trial tests a drug or technique. The McSPI investigators collected 3,000
pieces of data per patient in this study, and this data was used to create a
database called EPI-1. “EPI†stands for
epidemiology. It took IREF two years to
input and check the accuracy of this data.
EPI-1 was owned by IREF, and no other database contained this type of
information at this level of detail.
After all of the data was inputted and checked, the EPI-I database was
“locked†so that it could provide a basis for publishable work. EPI-1 was locked in 1995.
Clinical
trials of a drug called acadesine were conducted by IREF between 1990 and
1994. Acadesine was intended to help the
body protect itself from a heart attack.
The clinical trials of acadesine involved CABG patients. IREF was paid $30 million by Gensia, the
developer of acadesine, to do these clinical trials of the drug. IREF also received the right to publish the
research without constraints.href="#_ftn2"
name="_ftnref2" title="">[2] IREF’s agreements provided that IREF would
have joint ownership over the placebo data, which involved 2,700 patients. The acadesine studies collected 2,000 pieces
of data per patient. IREF was granted
the right to the acadesine databases created from these clinical trials, which
included all 4,000 patients involved in the trials.href="#_ftn3" name="_ftnref3" title="">[3]
IREF
participated in a second observational study of CABG patients known as the
EPI-2 study. The EPI-2 observational
study was a worldwide, 70-center study of over 5,000 CABG patients in 17
countries that collected more than 11,000 pieces of data per patient. The EPI-2 database was locked in late
2001. There are no other databases in
the world that contain this kind of information.
IREF stored
all of its databases on a server, which was kept in a locked room and was
password-protected. This server
contained the EPI-1 database, the EPI-2 database, and the acadesine databases.href="#_ftn4" name="_ftnref4" title="">[4]
Pfizer is a
pharmaceutical company. In 1999, Pfizerhref="#_ftn5" name="_ftnref5" title="">>[5]
was developing two drugs, parecoxib and valdecoxib. Valdecoxib was also known by the brand name
Bextra. Bextra and parecoxib are
nonsteroidal anti-inflammatory drugs (NSAIDs) called COX-2 inhibitors.href="#_ftn6" name="_ftnref6" title="">[6] Pfizer wanted to be able to market Bextra and
parecoxib to be used for acute pain, such as after surgery. The United States Food and Drug
Administration (the FDA) requires clinical trials of drugs before it will
consider approving them. Clinical trials
are done to determine both whether a drug is effective and whether it has
dangerous side effects.
Pfizer
contracted with IREF in 1999 and paid IREF more than $4 million for IREF’s
assistance in designing and conducting one of Pfizer’s studies of Bextra and
parecoxib. This study was a clinical
trial called CABG I that was conducted in 2000.
The CABG I contract obligated IREF to utilize its databases to provide
responses to questions from Pfizer regarding CABG I. IREF referred to this as “productive accessâ€
to its databases. Under its contract
with Pfizer, IREF received the right to the placebo data and the right to publish
the results of the study, as was IREF’s normal practice to require. CABG I was conducted using McSPI. Over $2 million of the money paid to IREF by
Pfizer went to the McSPI investigators.
The amount that IREF retained amounted to $4,368 per patient. Pfizer employee Dr. Richard Charles Hubbard
was in charge of CABG I, and Pfizer employee Dr. Michael Snabes was also
involved in CABG I.
Hsu was an
employee of IREF from 1999 to 2004.href="#_ftn7"
name="_ftnref7" title="">[7] Hsu was a biostatistician, and he served as
IREF’s director of biometrics. When he
began working for IREF, he signed an agreement promising to protect the
confidentiality of IREF’s intellectual property. Hsu worked on CABG I and participated in the
analysis and drafting of IREF’s manuscript on CABG I.
CABG I studied 462 patients, 311 of
whom received the drugs, and 151 of whom received the placebo. As a result of CABG I, the FDA had concerns
about adverse events associated with parecoxib and Bextra.href="#_ftn8" name="_ftnref8" title="">[8] These concerns were heightened by the
controversy at that time over the risks associated with a drug called Vioxx,
which was another COX-2 inhibitor. In
July 2001, the FDA notified Pfizer that it would not approve parecoxib without
further studies due to concerns about the drug’s effectiveness and safety. Bextra was approved by the FDA for arthritis
and menstrual pain, and Pfizer began marketing it in 2001. Bextra was not approved for acute pain. CABG I had “demonstrated an excess of serious
adverse events, including death,†associated with parecoxib and Bextra. Pfizer needed to do further studies if it
wanted to obtain approval of parecoxib and approval of Bextra for acute
pain.
IREF
submitted a manuscript for publication of the CABG I results in November 2001,
but IREF’s manuscript was not ultimately published until June 2003.href="#_ftn9" name="_ftnref9" title="">[9]
In December
2001, Pfizer approached IREF about participating in another clinical trial of
parecoxib and Bextra. This new study,
which would be called CABG II, would need to be a much larger version of CABG
I. On January 9, 2002, both Hubbard, who
was in charge of designing CABG II for Pfizer, and Mangano participated in a
telephone conference during which possible outcomes of a three to five-arm CABG
II, potentially including an NSAID-comparator arm, were discussed.
Mangano
told Pfizer that IREF would charge about $10,000 per patient for IREF’s help in
designing the protocol for CABG II. A
study protocol is a “roadmap†for the conduct of the study. He recommended that the trial would need to
be “event-driven†and therefore continue to enroll patients until there were “a
certain number of adverse events.â€
Pfizer preferred to have a “fixed number of patients.†Given that preference, Mangano recommended that
they would need to enroll at least 4,500 patients in the trial. Mangano anticipated that an “intensive
two-week effort†would be required of IREF to help design the study
protocol.
In
mid-January 2002, Mangano sent to Pfizer a proposed contract for the CABG II
study. The contract proposed for IREF to
assist Pfizer in the design of the study by using information from IREF’s EPI-1
and EPI-2 databases. The EPI-2 database
had a large amount of information about other NSAIDs. IREF was not willing to agree to a database
access only or “a la carte†deal. IREF
did not offer to provide productive access to the acadesine databases.href="#_ftn10" name="_ftnref10" title="">[10] Mangano proposed that Pfizer pay IREF $10,081
per patient, which was anticipated to amount to about $15 million to $25
million for the 1,500 to 2,500 patients in the study. Mangano based the $10,081 amount on prior
studies where IREF had been paid between $4,500 and $32,000 per patient. The proposed contract also provided that IREF
would receive the placebo data and publication rights. IREF’s involvement would only be on the front
end, and the entire study would be over in less than a year.
In late
January 2002, while negotiations were underway between IREF and Pfizer, Hubbard
asked Mangano “about the possibility of probing IREF’s databases for
information regarding NSAIDs.â€
Apparently, Mangano did not reply.
At the time of Hubbard’s inquiry, Pfizer and the FDA were negotiating
about whether there should be an NSAID-comparator arm in the CABG II
study. By the end of January, Pfizer and
the FDA had decided not to have an NSAID-comparator arm.href="#_ftn11" name="_ftnref11" title="">[11]
In late
January 2002, Hubbard told Mangano that Pfizer would not accept the initial
IREF proposal. Negotiations continued
between IREF and Pfizer and included IREF’s for-profit subsidiary Gentiae. IREF submitted a new, more limited proposal,
which still included productive access to the databases, and would have charged
Pfizer $5,525 per patient. Pfizer did
not accept this proposal either. But
they continued to negotiate in February 2002.
Pfizer sent
the FDA a study protocol on February
14, 2002. This protocol
contemplated two arms, one with parecoxib/Bextra, and the other a placebo arm,
with 500 patients per arm. By February
18, Pfizer had decided that it did not need access to IREF’s databases. Another proposal was made by IREF that would
have involved a payment of $3,628 per patient.
This too was rejected by Pfizer.
Ultimately, at the end of February, Pfizer accepted a more limited
proposal from Gentiae for $1,853,000 that did not involve database access. Although the final contract was with Gentiae,
Mangano was involved in Gentiae’s work on CABG II.
In early
March 2002, Hubbard contacted Hsu about serving on Pfizer’s independent data
monitoring committee (IDMC) for CABG II.
An IDMC is usually necessary for a blinded clinical trial such as CABG
II.href="#_ftn12" name="_ftnref12" title="">[12] The purpose of an IDMC is to serve as an
independent “watchdog†over the trial.
The members of the IDMC are experts who do not work for the company that
is conducting the trial.
In April
2002, Mangano learned from Hsu that Hsu had been asked by Pfizer to serve on
the IDMC for CABG II. Mangano thought it
would be a good opportunity for Hsu to “support his career,†and he viewed
Hsu’s role as “extremely narrow†because an IDMC reviews the data only “as it
drips down from the study.†Mangano believed
that Hsu’s service on the IDMC would consume only an hour or two per
month. Because an IDMC is supposed to be
independent of the company conducting the trial, Mangano did not expect Hsu to
have any contact with Pfizer. Mangano
told Hsu that he should submit his IDMC contract with Pfizer to the IREF board
for its review. Mangano also reminded
Hsu in writing that he “cannot use any of IREF’s intellectual property for
[Pfizer’s] purpose.†Mangano told Hsu
that he could “not say anything about the databases, period.†Hsu told Mangano that he would comply with
these conditions, but he never submitted his contract to the IREF board.
In April
2002, Hsu sent an e-mail to several Pfizer employees including Snabes, who was
serving as one of Pfizer’s study directors on CABG II, and Hubbard informing
them that he was available to serve on the IDMC. Hsu told them in this e-mail: “I cannot use IREF’s intellectual property
for [Pfizer’s] purpose.†Snabes
responded: “One area in this regard is
that we were considering being able to take advantage of your access to the
IREF databases when we are looking at AE [adverse event] rates. So are you saying that this now OFF the table
as an option.†Hsu responded: “If you need advice on where to find the data
to answer your question, I can provide that to you. If you want [an] opinion on the usefulness of
certain databases, I can provide that too i.e. whatever I know. If you want to access IREF databases, you
will need to include that in the contract with IREF/Gentiae.â€
Pfizer
continued to revise its study protocol over the next six months. In September 2002, a Pfizer employee sent an
e-mail to Hsu and two other IDMC members seeking data about the expected rate
of adverse events one day after surgery in a population similar to that being
studied in CABG II, which was part of the population studied in EPI-2. Hsu responded that this analysis could be
done only from the EPI-2 database. Hsu
suggested that Pfizer look at Mangano’s published aspirin paper. In 2002, Mangano had published an article in
the New England Journal of Medicine about aspirin and mortality in CABG
surgery. This article was based on the
EPI-2 database. Hsu also said in his
e-mail that he “will bring that statistics with me, hopefully it will be
helpful.†The aspirin paper did not
contain statistics regarding the expected rate of adverse events in this
population.
Pfizer
proceeded with its CABG II clinical trial and ultimately enrolled 1,671
patients in the study, which had three arms.href="#_ftn13" name="_ftnref13" title="">[13]
The third arm was placebo/Bextra. In May 2003, Pfizer inquired of Mangano
whether IREF would be interested in writing a manuscript using IREF’s EPI-2
database. IREF had done something
similar for another pharmaceutical company for $3 million. IREF sent a proposal to Pfizer offering to do
so for $7.5 million. Pfizer, which
wanted IREF’s assistance “for free,†did not respond to IREF’s proposal.
In
September 2003, Hsu asked for and received a raise from IREF. Shortly thereafter, he sought to establish a
system of bonuses. After the salary and
bonus issues were resolved, Hsu sought an ownership interest in the company
that was developing acadesine. That
company, AGTC, was owned by Mangano and his wife. IREF had done some work for AGTC, for which
AGTC reimbursed IREF. Mangano became
irritated at the tone of Hsu’s requests, even though Mangano was amenable to
the substance of them. In October 2003,
Hsu performed paid consulting work for another company without IREF’s
knowledge. In December 2003, unbeknownst
to IREF and Mangano, Hsu entered into a consulting agreement with another
company.
In late
2003 and early 2004, Mangano and Hsu engaged in a series of heated e‑mail
exchanges. On February 4, 2004, Hsu sent an e-mail to many of the
McSPI investigators implicitly accusing IREF of improprieties and stating that
he would be leaving his job at IREF on February
13, 2004. When Mangano
learned of this e-mail, he was angry. On
the night of February 5, Mangano went into Hsu’s IREF office and looked at Hsu’s
desktop computer to see what else Hsu had sent to McSPI investigators. The computer had been left on, and Mangano
did not need a password to access it.
Mangano discovered, to his surprise, “a lot of e-mail traffic with
Pfizer.†Looking more closely, Mangano
found that Hsu’s computer contained files that appeared to be associated with
Pfizer that contained analyses of the EPI-2 database.href="#_ftn14" name="_ftnref14" title="">[14] These files were from February and August
2002. Some of the analyses on Hsu’s
computer concerned NSAID use in CABG patients.
Hsu had been communicating by e-mail with Snabes and Hubbard throughout
this period. Mangano had an IT person
download Hsu’s files so that he could examine them in more detail.
On February 17, 2004, Mangano set up a
meeting with Hsu for the following day.
At the meeting, Mangano asked Hsu to explain his interactions with
Pfizer. Hsu did not provide satisfactory
answers. Mangano placed Hsu on paid
administrative leave. On February 21, 2004, Hsu burned
numerous “business†files from his laptop computer to CD and deleted more than
200 files from his laptop computer. Hsu
also deleted a folder of files on IREF’s server. In addition, Hsu attempted to delete the CD
creation logs from February 21 by placing the log files in the recycle bin. One of the files that was deleted and burned
to a CD was called “EPI-2 summary.doc.â€
Another file was called “Searle 1.doc†and a third was called “EPI-2
sum-Searle.doc.â€href="#_ftn15" name="_ftnref15"
title="">[15] The “Searle 1.doc†had been created in August
2002, at a time when Hsu would have had no legitimate reason to be probing
EPI-2 for that information.
Mangano
terminated Hsu’s employment after he came to the conclusion that Hsu “was
effectively stealing data from the foundation, from our principal databases,
the gold of the foundation, and using it to help Pfizer in a study of a major
drug, Bextra.†Hsu had taken data from
the EPI-1, EPI-2, and acadesine databases.
Mangano believed that Hsu’s probing of IREF’s databases and
communications with Hubbard tracked Pfizer’s development of its protocol for
CABG II. Mangano also concluded that Hsu
had used IREF’s database to analyze other issues that were being considered by
the IDMC and by Pfizer.
>II.
Procedural Background
In 2004,
IREF and Mangano filed an action against Pfizer and Hsu for misappropriation of
trade secrets. In October 2007, Mangano
executed a written assignment of his rights in this litigation to IREF.
At Pfizer’s
request, the trial court bifurcated the issue of the amount of exemplary
damages.
IREF’s expert
Sam Leopold Teichman testified at trial that the IREF data accessed by Hsu
would have been useful to Pfizer in connection with CABG II. IREF’s damages expert Jimmy Joe Jackson
testified at trial as an expert on the quantification of damages. Jackson
asserted that Pfizer would have paid $14.7 million for productive access to
IREF’s EPI-1 and EPI-2 databases in 2002 if it had not misappropriated
information from those databases. He
also opined that Pfizer would have paid an additional $15 million for productive
access to those databases during a 10-month “extension†in 2003.href="#_ftn16" name="_ftnref16" title="">[16] Jackson
further testified that Pfizer would have paid $16 million for productive access
to the acadesine databases. Jackson
also valued the “lost placebo data†that IREF would have obtained if it had
contracted with Pfizer at $8 million. He
made no attempt to determine a damages figure that did not combine the damages
attributable to the conduct of both Hsu and Pfizer. Pfizer’s damages expert Alan Ratliff
testified that, if Pfizer was found liable, IREF’s damages “would be a range
somewhere between [$]100,000 and [$]330,000.â€
At the
close of evidence, Pfizer and Hsu moved for a directed verdict, but the court
denied their motions. The jury returned
a special verdict in favor of IREF. It
unanimously found that both Hsu and Pfizer had misappropriated IREF’s trade
secret databases in February 2002. The
jury set the damages at over $38 million.href="#_ftn17" name="_ftnref17" title="">[17] The damages findings were not unanimous; the
jury voted 10-2. The jury also found by
clear and convincing evidence that the misappropriation by both Pfizer and Hsu
was “willful and malicious.†The jury
was unanimous on this finding as to Hsu but voted 10-2 as to Pfizer.
In January
2009, IREF filed a motion seeking exemplary damages under Civil Code section
3426.3, subdivision (c). In March 2009,
the court denied the motion. On May 5, 2009, the court entered
judgment. The judgment provided that
IREF would recover from Pfizer and Hsu “jointly and severally†more than $38
million plus prejudgment interest of more than $19 million.
All parties
sought a new trial.href="#_ftn18"
name="_ftnref18" title="">>[18] The trial court issued an order vacating the
judgment, granting Pfizer’s motion for a new trial on liability, granting Hsu’s
motion for a new trial on damages, and granting IREF’s motion for a new trial
on exemplary damages. IREF timely filed
a notice of appeal from the trial court’s order granting the new trial motions
and from the judgment “insofar as the Judgment fails to award exemplary
damages . . . .â€
Pfizer timely filed a notice of cross-appeal from the new trial order
and the judgment. Hsu timely filed a
notice of cross-appeal from the court’s order denying his JNOV motion and from
the judgment.
>III.
Discussion
>A.
Timeliness of New Trial Order
>1.
Background
Mangano was a party to this lawsuit when it was filed in
2004, but he assigned his rights to IREF in October 2007. IREF filed a notice of this assignment with
the court in October 2007. The notice
stated that “this action shall continue with IREF as the sole Plaintiff.†During voir dire in 2008, the court and the
parties discussed the fact that Mangano had assigned his interest in this
action to IREF but had not yet been “formally . . . dismissed
as a party.†The court then orally
ordered that “Mangano will be dismissed as a plaintiff. The remaining plaintiff will be [IREF].†Mangano testified at trial that he had
assigned all of his rights in this action to IREF in October 2007. He testified:
“I’ve dropped out of this as a plaintiff. I assigned everything to the
foundation.†Mangano was not listed as a
plaintiff on the jury’s special verdict forms.
On May 5, 2009, the court entered
judgment in favor of IREF. The clerk of
the superior court filed a proof of service of the judgment on that date stating
that “a true copy of†the judgment “was served†on the parties.
At a May 8, 2009 hearing, the court
said: “You all received a copy of the
judgment that I cranked out ultimately a little earlier this week, I
believe. I do want to state for the record
that I did not order the clerk to send out a notice of entry of judgment. That was not a notice of entry of judgment;
that was just a service of the judgment on the parties. [¶] So
I believe that one of the things we’re going to be talking about this morning
is the timing for the filing of any motions for new trial. And so at this point there has been no notice
of entry of judgment prepared or served. . . . [¶] My concern, of course, here, ultimately is
that once a notice of intention to move for new trial is filed, the Court only
has 60 days in which to rule on those motions.
So, at this point, I guess I can ask the plaintiff: Has a notice of entry of judgment been sent
out?†IREF’s attorney replied: “It hasn’t been done.â€
The court
proceeded to discuss scheduling. “Do we
want to talk about a schedule for a hearing on the motions for new trial? I mean, at this point we don’t know precisely
when the last day is going to be. But if
you indicate you’re going to mail your notice of entry of judgment no later
than Monday, I believe a notice of intention to file a motion for new trial has
to be filed within 15 days of the date of the service of the entry of judgment;
so I think that’s 15. If it’s going to
be served by mail, it would be 20 days.
[¶] . . . I
just want to make sure the hearing date is scheduled so that I have enough time
to consider everything that’s raised at the hearing before I have to
rule.†The attorneys agreed to “try to
work out something that coordinates†with the court’s schedule, which was
limited.
On May 20, 2009, the parties stipulated
in writing to a schedule for posttrial motions, which was approved by the
court. This stipulation provided that
IREF “will serve its notice of entry of judgment on June 1, 2009 (which will trigger the 60-day deadline in
CCP § 660 and the filing deadline for IREF’s memorandum of costs and motion for
attorneys fees).†It further identified
the dates upon which the notices of intent and the motions for new trial and
JNOV would be filed by each party.
Finally, it provided that the court “will hold oral argument on July 17, 2009†and “will have
jurisdiction to render its decisions until July 31, 2009 (the last of 60 days allowed under CCP §
660).â€
On June 1, 2009, IREF filed and served a
notice of entry of judgment on counsel for Hsu and Pfizer. On June
16, 2009, both Pfizer and Hsu filed and served separate notices of
intent to move for a new trial. On June 26, 2009, IREF also filed and
served a notice of intent to move for a new trial. The court held oral argument on the motions
on July 17, 2009. At the end of the hearing, the court
asked: “And what’s my -- what are my
deadlines, here? I know I have a
deadline on the motion for new trial. Is
that the end of this month?†Pfizer’s
attorney replied: “July 31st, Your
Honor.†Hsu’s attorney agreed. IREF’s attorney said nothing.
On July 30, 2009, the trial court issued
an order vacating the judgment, granting Pfizer’s motion for a new trial on
liability, granting Hsu’s motion for a new trial on damages, and granting
IREF’s motion for a new trial on exemplary damages.
2. Analysis
“Except as
otherwise provided in Section 12a of this code, the power of the court to rule
on a motion for a new trial shall expire 60
days from and after the mailing of notice of entry of judgment by the clerk of
the court pursuant to Section 664.5 or 60 days from and after service on the
moving party by any party of written notice of the entry of the judgment,
whichever is earlier, or if such notice has not theretofore been given,
then 60 days after filing of the first notice of intention to move for a new
trial. If such motion is not determined
within said period of 60 days, or within said period as thus extended, the
effect shall be a denial of the motion without further order of the
court.†(Code Civ. Proc., § 660, italics
added.)
Code of
Civil Procedure section 664.5 provides:
“(a) In any contested action or special proceeding other than a small
claims action or an action or proceeding in which a prevailing party is not
represented by counsel, the party submitting an order or judgment for entry
shall prepare and mail a copy of the notice of entry of judgment to all parties
who have appeared in the action or proceeding and shall file with the court the
original notice of entry of judgment together with the proof of service by
mail. This subdivision does not apply in
a proceeding for dissolution of marriage, for nullity of marriage, or for legal
separation. [¶] name=I902298D0020611DFAAB2F323B67BC090>(b) >Promptly upon entry of judgment in a
contested action or special proceeding in which a prevailing party is not
represented by counsel, the clerk of the court shall mail notice of entry of
judgment to all parties who have appeared in the action or special
proceeding and shall execute a certificate of such mailing and place it in the
court’s file in the cause. [¶] name=I902298D1020611DFAAB2F323B67BC090>(c)
For purposes of this section, ‘judgment’ includes any judgment, decree, or
signed order from which an appeal lies.
[¶] name=I9023AA40020611DFAAB2F323B67BC090>name=I902298D2020611DFAAB2F323B67BC090>(d)
Upon order of the court in any action or special proceeding, the clerk shall
mail notice of entry of any judgment or ruling, whether or not
appealable.†(Code Civ. Proc., § 664.5,
italics added.)
IREF’s
contention is that the trial court’s ruling on the new trial motion was void
because the clerk’s May 5, 2009
mailing of the judgment to the parties was a “notice of entry†under
subdivision (b) of Code of Civil Procedure section 664.5.href="#_ftn19" name="_ftnref19" title="">[19] The clerk would have been required to give
notice under Code of Civil Procedure section 664.5, subdivision (b) >only if there was “a prevailing
party . . . not represented by counsel†at the time of
judgment. IREF claims that Mangano was,
at the time of judgment, a prevailing party not represented by counsel.
IREF
disputes the effectiveness of the trial court’s 2008 oral order dismissing Mangano as a party on the ground that a >written order is required. IREF therefore claims that Mangano remained a
party at the time of judgment due to the absence of a written order dismissing
him from the action. Assuming arguendo
that Mangano was a party
unrepresented by counsel at the time of the judgment, IREF’s claim still cannot
succeed because Mangano was not a “prevailing
party†at the time of judgment. The jury
did not return a verdict in favor of Mangano, and the court did not enter
judgment in favor of Mangano. IREF
argues that Mangano would qualify as a “prevailing party†if those words were
given a “practical definition.†None of
the authorities cited by IREF on this point concerned the requirements of Code
of Civil Procedure section 664.5, subdivision (b). Since the clerk, unlike a court, is
performing a ministerial duty based on the face of the judgment, IREF’s
proposed “practical†approach to the meaning of “prevailing party†would create
an impossible burden on the clerk. Code
of Civil Procedure section 664.5, subdivision (b) could only be referring to
the party who prevails on the face of the judgment. Because Mangano did not prevail on the face
of the judgment, he was not a prevailing party for purposes of Code of Civil
Procedure section 664.5, subdivision (b), and the clerk was not required to
give notice of entry of judgment.
Consequently, the premise for IREF’s jurisdictional contention is
absent, and its contention fails.
B. Constitutionality of Code of
Civil Procedure Section 657
Code of
Civil Procedure section 657 provides that a new trial may be granted on the
ground of “[i]nsufficiency of the evidence to justify the verdict or other
decision . . . .†“A
new trial shall not be granted upon the ground of insufficiency of the evidence
to justify the verdict or other decision . . . unless after
weighing the evidence the court is convinced from the entire record, including
reasonable inferences therefrom, that the court or jury clearly should have reached
a different verdict or decision.
[¶] . . . [I]f the motion is granted[, the order]
must state the ground or grounds relied upon by the court, and may contain the
specification of reasons.†An order
granting a new trial on the ground of insufficiency of the evidence “shall be
reversed as to such ground only if there is no substantial basis in the record
for any of such reasons.†(Code Civ.
Proc., § 657.)
IREF
contends that Code of Civil Procedure section 657’s provision for the granting
of a new trial based on insufficiency of the evidence is an unconstitutional
violation of its right to a jury trial.
“It has long been held that the right to jury trial is not violated by
the power in question.†(>Clemmer v. Hartford Insurance Co. (1978)
22 Cal.3d 865, 889 [rejecting claim under both the California and United States
Constitutions].) When the California
Supreme Court rejected this contention in 1915, it noted that the contention
had been repeatedly rejected previously.
(In re Estate of Bainbridge (1915) 169 Cal. 166, 167-168 [under California
Constitution]; Ingraham v. Weidler
(1903) 139 Cal. 588, 589-590 [same]; see also Fortenberry v. Weber (1971) 18 Cal.App.3d 213, 224 [rejecting
contention under United States Constitution].)
As we are bound by the California Supreme Court’s repeated holdings on
this point over the last century (Auto
Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455), we need
not further address IREF’s contention.
C. Merits of Order
1. Standard of Review
“The standards
for reviewing an order granting a new trial are well settled. After authorizing
trial courts to grant a new trial on the grounds of
‘[e]xcessive . . . damages’ or ‘[i]nsufficiency of the
evidence,’ section 657 provides: ‘[O]n
appeal from an order granting a new trial upon the ground of the insufficiency
of the evidence . . . or upon the ground of excessive or
inadequate damages, . . . such order shall be reversed as to such ground only if there is no
substantial basis in the record for any of such reasons.’ (Italics added.) Thus, we have held that an order granting a
new trial under section 657 ‘must be sustained on appeal unless the opposing
party demonstrates that no reasonable finder of fact could have found for the
movant on [the trial court’s] theory.’
[Citation.] Moreover, ‘[a]n abuse
of discretion cannot be found in cases in which the evidence is in conflict and
a verdict for the moving party could have been reached . . . .’ [Citation.]
In other words, ‘the presumption of correctness normally accorded on
appeal to the jury’s verdict is replaced by a presumption in favor of the [new
trial] order.’ [Citation.] [¶]
The reason for this deference ‘is that the trial court, in ruling on [a
new trial] motion, sits . . . as an independent trier of
fact.’ [Citation.] Therefore, the trial court’s factual
determinations, reflected in its decision to grant the new trial, are entitled
to the same deference that an appellate court would ordinarily accord a jury’s
factual determinations. [¶] The trial court sits much closer to the
evidence than an appellate court. Even
the most comprehensive study of a trial court record cannot replace the
immediacy of being present at the trial, watching and hearing as the evidence
unfolds. The trial court, therefore, is
in the best position to assess the reliability of a jury’s verdict and, to this
end, the Legislature has granted trial courts broad discretion to order new
trials. The only relevant limitation on
this discretion is that the trial court must state its reasons for granting the
new trial, and there must be substantial evidence in the record to support
those reasons. [Citation.]†(Lane
v. Hughes Aircraft Co. (2000) 22 Cal.4th 405, 411-412 (Lane).) “[S]o long as the
evidence can support a verdict in favor of either
party—a properly constructed new trial order is not subject to reversal on
appeal.†(Lane, at p. 414.)
2. The Trial Court’s Reasons
Pfizer’s
new trial motion contended, among other things, that there was insufficient
evidence to support the jury’s verdict and that the damages were
excessive. Hsu’s new trial motion
asserted, among other things, that the damages were excessive, and he joined
Pfizer’s motion.
The trial
court found, “[a]fter weighing the evidence[,] . . . that
the jury clearly should have reached a different verdict as to [Pfizer’s]
liability†and “as to damages.†Although
the court concluded that there was sufficient evidence that >Hsu had misappropriated IREF’s trade
secrets, it found that “[t]here was insufficient evidence that >Pfizer knew, or had reason to know,â€
that Hsu had done so, and “insufficient evidence that Pfizer acquired or used
any trade secrets of IREF knowing, or having reason to know, that the
information was acquired through improper means.†(Italics added.) The court explicitly “credit[ed] the
testimony of the IDMC members and Pfizer employees†that no IDMC member or
Pfizer employee had ever asked Hsu to access IREF’s databases or had ever had
any suspicion that information provided by Hsu ‘was based on improper access to
IREF databases.†The court found IREF
expert Teichman’s testimony to be inadequate to support Pfizer’s
liability. In addition, the court found
that Hsu was not Pfizer’s agent and that Pfizer had not conspired with
Hsu. The court took the position that
“[t]he weight of the evidence established that Hsu acted without the knowledge
and consent of Pfizer.â€
The trial
court also found the damage award “clearly excessive.†“[T]he actual loss to IREF from any
misappropriation is the amount that it would have received if the data access
had been purchased rather than stolen.
The evidence was insufficient to show that the amount IREF would have
received for granting database access in this case is anywhere near†$38
million. “Considering all of the
contracts entered into by IREF, the proposals to Pfizer for the CABG-II study,
and all of the other evidence in the case, it is unreasonable to conclude that
the loss to IREF from any misappropriation in this case would exceed the range
of $1 million to $3 million.â€
3. Analysis
Our review
of appellant IREF’s challenge to the trial court’s new trial order in this
appeal is hampered by IREF’s failure to produce an appellate record that
includes all of the evidence that was before the jury. Videotaped deposition testimony of numerous
individuals was played for the jury at trial, but this testimony was not
transcribed by the court reporter in the record of the trial. The deposition transcripts were instead
marked as court exhibits. However, IREF failed to have these exhibits (or any
others, for that matter) transferred to this court. (Cal. Rules of Court, rule 8.224.) Consequently, the testimony of the witnesses
who testified by videotaped deposition is not part of the appellate record produced
by IREF.
“It is well
settled, of course, that a party challenging a judgment has the burden of
showing reversible error by an adequate record.†(Ballard
v. Uribe (1986) 41 Cal.3d 564, 574.)
“It is appellant’s burden to demonstrate error by an adequate record
[citation], and without an adequate record we
must assume facts in support of the trial court’s order.†(Vermeulen
v. Superior Court (1988) 204 Cal.App.3d 1192, 1198-1199, italics
added.) “ ‘A judgment or order of the lower court is >presumed correct. All intendments and presumptions are indulged
to support it on matters as to which the record is silent, and error must be
affirmatively shown.’ †(Denham
v. Superior Court (1970) 2 Cal.3d 557, 564.) Since the testimony of numerous witnesses is
missing from our record, we must presume that this missing testimony supports
the trial court’s reasons for granting the new trial motions.href="#_ftn20" name="_ftnref20" title="">[20]
The trial
court’s theory regarding Pfizer’s lack of liability was that there was
insufficient evidence that Pfizer knew or had reason to know that Hsu had
misappropriated IREF’s information or that he had transmitted information to
Pfizer acquired by improper means. The
court specified that it credited the testimony of the IDMC members and Pfizer
employees in this regard.
The IDMC
was composed of Dr. Faich, who was the chairman of the IDMC, Hsu, Dr. Mark
Newman, White, and, apparently, Berry. Of these men, only Newman testified live at
trial. The videotaped deposition
testimony of Berry and White was
played for the jury. Hsu and Faich did
not testify at trial live or otherwise.
Newman testified that he was not aware of any IREF database information
being provided to the IDMC by Hsu.
Newman also testified that Hsu had never suggested that any information
he provided to the IDMC came from IREF databases. We must presume that White and Berry
also provided testimony that supported the trial court’s finding that they
lacked any reason to believe that Hsu was providing IREF’s trade secret
information to the IDMC.
Pfizer
employee Hubbard testified at trial that he had never asked Hsu for any IREF
database information, that Hsu had never offered him any such information, and
that, to his knowledge, Hsu had never offered such information to anyone at
Pfizer. Although Hsu offered comments on
Pfizer’s study protocol, Pfizer did not accept any of Hsu’s comments. Hsu made no references to IREF databases in
his communications with Hubbard, and Hubbard had no reason to believe that any
of Hsu’s comments were based on IREF database information. The videotaped deposition testimony of Pfizer
employees Needleman, Snabes, Anders, Torri, Verburg, and Veidemanis was played
for the jury at trial, and we must presume that it, like Hubbard’s testimony,
supports the trial court’s finding.
Teichman testified that his opinion was limited to whether the
information “was useful or could have been useful to Pfizer. I wasn’t asked to express an opinion of whether
that information was provided to Pfizer.â€
Evidence that the information taken by Hsu “could have been useful†to
Pfizer did nothing to establish that Pfizer knowingly received that
information.
As to the
damages award, since substantial evidence supports the trial court’s finding
that Pfizer did not know or have reason to know of Hsu’s misconduct, there is
also substantial evidence that Hsu was not acting as Pfizer’s agent. Since IREF presented no evidence regarding
damages that was based solely on Hsu’s misappropriation of its trade secrets,
it naturally follows that the trial court’s grant of a new trial to Hsu on
damages was supported by substantial evidence.
No evidence at trial indicated that Hsu
would have paid IREF $38 million (or any amount) for its trade secrets or that
Hsu obtained $38 million in unjust enrichment as a result of his
misappropriation of IREF’s trade secrets.
In its
opening brief, IREF purported to argue that the trial court’s new trial order
was an abuse of discretion because the evidence could not support a verdict for
Pfizer. However, its actual arguments
were based on the evidence it
presented at trial, rather than the conflicting evidence presented by Pfizer at
trial. For instance, IREF argued with
regard to the agency/conspiracy issue that the court’s finding was erroneous
because “there was ample evidence†and “substantial evidence†to support >IREF’s claim. As Pfizer pointed out in its respondent’s
brief, these arguments attempted to turn the standard of review on its
head. IREF’s burden was to show the
absence of substantial evidence to support Pfizer’s defense. It is irrelevant whether substantial evidence
could support a contrary finding in IREF’s favor.
In its
reply brief, IREF argues for the first time that the trial court was biased
against it, and therefore the order “should be vacated†or “[a]t the very
least†should not be subjected to the deferential standard of review ordinarily
applied to new trial orders. Appellate
courts ordinarily do not consider new issues raised for the first time in an
appellant’s reply brief because such a tactic deprives the respondent of the
opportunity to respond to the contention.
(Reichardt v. Hoffman (1997)
52 Cal.App.4th 754, 764-765.) It is only
upon a showing of good cause for failing to raise the issues earlier that an
appellate court will address issues that are initially raised in the reply
brief. (Ibid.)
IREF
argues, without any supporting documentation, that it “only learned of [the
trial judge’s] bias and prejudice . . . in October 2010
(several months after IREF filed its Opening Brief) . . . .†IREF claims that, more than a year after the
judgment, and after the trial judge retired from the bench, the retired judge
joined a law firm that had represented IREF in the early stages of this
case. That law firm had withdrawn from
its representation of IREF after what IREF characterizes as a “contentious
relationship.†IREF claims that the
judge had a bias against IREF when he ordered a new trial because he >subsequently became associated with its
former law firm, which IREF assumes was biased against it. The logic of this argument escapes us, as it
premised on a theory that bias may be created retroactively. IREF does not
suggest that the judge and law firm were somehow associated at the time of or
before the judge’s ruling on the new trial order.
In any
case, IREF has failed to show good cause for us to consider this issue
notwithstanding its failure to raise it earlier. IREF filed its opening brief in July
2010. Respondents did not file their
respondent’s brief until January 2011.
If, as IREF claims, it learned of this issue in October 2010, it could
have sought leave to file a supplemental opening brief. Instead, it waited until August 2011, 10
months after it allegedly learned of this issue, to raise it for the first
time. Since IREF has failed to establish
good cause, we decline to consider this contention.
IREF has
failed to establish that the trial court’s new trial order is unsupported by
the record.
D. Exemplary Damages
IREF’s new
trial motion sought a new trial solely on exemplary damages. Because the trial court granted IREF’s motion for a new trial on exemplary damages (an
order that is not challenged in this appeal), IREF’s appellate challenge to the
trial court’s failure to award exemplary damages is moot.
IV. Disposition
The trial
court’s new trial order is affirmed.
_______________________________
Mihara,
J.
WE CONCUR:
_____________________________
Premo,
Acting P. J.
_____________________________
Elia,
J.