Michael Page, Durie Tangri ()
SAN FRANCISCO — The California Supreme Court declined Wednesday to review a $400 million verdict against a Swiss pharmaceutical company, despite warnings from business interests that the ruling could throw a wrench into corporate acquisitions.
None of the justices voted to grant review in Asahi Kasei Pharma v. Actelion, a tortious interference case that included $30 million in punitive damages against three Actelion executives. The First District Court of Appeal affirmed the award in December, leading one corporate lawyer to dub it “the most frightening holding of 2013″ for executives.
A San Mateo jury found that Actelion acquired South San Francisco-based Cotherix in 2007 so it could shut down development of a drug for pulmonary arterial hypertension that threatened its own monopoly on the market. Japanese pharmaceutical firm Asahi, which was developing the potentially lifesaving drug in partnership with Cotherix, sued for tortious interference even after recovering $91 million in contract damages via arbitration.
Most of the $400 million jury award represented damages for lost profits. Actelion argued they were highly speculative because the drug, fasudil, had not even been approved by the FDA, let alone proved commercially successful. The punitive award is the third largest to survive appeal in California history, according to the California Punitive Damages blog.
Actelion was represented before the Supreme Court by Mayer Brown and Quinn Emanuel Urquhart & Sullivan, and supported by amici curiae, including technology company executives who warned that the case threatens the principle of “efficient breach of contracts.”
“If a contracting party can obtain a better deal from a new deal with a third party, while still paying the original contractor the profit it bargained for, society and consumers benefit,” Durie Tangri’s Michael Page explained in an amicus letter for TechNet, an industry group backed by the CEOs of Amgen, Genentech, Cisco Systems and Yahoo, among others.
Modern technology companies often maintain separate corporate identities for the companies they acquire, for licensing or other reasons, Page wrote, but that doesn’t mean they should be exposed to tort damages for “interfering” with their own subsidiaries’ contracts. “In such circumstances, the proposition that the parent company is a ‘stranger’ to the existing contracts of the wholly-owned subsidiary is untenable,” he wrote.
Asahi, which has been represented throughout trial and appeal by Morgan Lewis & Bockius, argued that Actelion committed independent, wrongful conduct both before and after the acquisition. “California should not restrict interference liability on these unusual facts, where petitioners used a corporate acquisition to destroy Asahi’s contract rights,” partner Thomas Peterson wrote in Asahi’s answer.
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