Re: 2/28/02 - [HEB] Law.com: Jury Finds Broker Didn't Defame Drug Company
Jury Finds Broker Didn't Defame Drug Company
Lori Litchman
The Legal Intelligencer
February 28, 2002
After nearly four weeks at trial, a Philadelphia common pleas jury has concluded that a registered broker and investment banking company did not defame a drug company in statements made surrounding the short selling of stock.
The case, Hemispherx Biopharma Inc. v. Asensio, was tried before Judge Albert W. Sheppard in the common pleas court's Commerce Case Management Program.
The verdict was rendered Friday by a nearly unanimous 12-member jury.
The defense verdict is a victory for Dilworth Paxon attorney Thomas S. Biemer and Goldfein & Hosmer attorney Frederic L. Goldfein. David C. Franceski Jr. of Stradley Ronon Stevens & Young, along with Boston attorney Michael A. Walsh, represented HBI.
HBI researches, develops and tests drugs for regulatory approval and sale. Its primary focus has been the development and testing of the antiviral drug Ampligen for the possible treatment of chronic fatigue syndrome, chronic hepatitis and AIDS. HBI trades its common stock on the American Stock Exchange.
HBI sued New York-based Manuel P. Asensio, Asensio & Co. Inc. and asensio.com, asserting claims of defamation, product disparagement, civil conspiracy and tortious interference with contract. HBI was seeking more than $80 million in damages, plus punitives.
The jury had only to decide the defamation and disparagement claims because the other claims were dismissed.
Asensio & Co. is a registered broker and investment banking company that publishes and distributes analytical research reports regarding publicly traded companies and that trades securities of those companies for its own account. HBI accused the defendants of illegally manipulating the price and short selling of HBI stock by publishing defamatory statements.
HBI first filed suit in federal court, but then it turned to state court after the federal action was dismissed.
Prior to trial, Sheppard ruled that HBI was a private figure for the purpose of the defamation case even though the company received federal funding and was subject to peer review articles.
Asensio.com was dismissed prior to the case's going to the jury. The jury, therefore, decided the defamation and disparagement claims against Asensio and Asensio & Co.
The statements at issue included accusations that Ampligen was "highly toxic," "medically useless" and "obsolete," Biemer said.
Biemer, who represented Asensio & Co. and asensio.com, said that at trial, he countered the plaintiff's medical testimony with testimony about whether the drug had commercial value. "And we said the answer to that question was no," Biemer said.
Goldfein, who also represented Asensio, said that protecting freedom of speech was one of the global issues of the trial.
"It's so important not to be silenced," Goldfein said, saying his client "protects people."
"You don't want to silence people, like the defendant, who are pointing out bad things about publicly traded stock," Biemer said.
Franceski said he argued that the statements the defendants made were harmful to HBI. He said he presented an expert to testify about the alleged lack of due diligence Asensio exhibited by putting out his research report.
Biemer said he presented expert testimony from Marvin Roffman, who testified about the standard of care for an analyst issuing a research report.
Both parties also had expert economists testify as to damages.
Several significant evidence issues cropped up during trial, both sides said.
According to Biemer, he was prepared to offer testimony about a U.S. Securities and Exchange Commission investigation of HBI, legal problems for several of HBI's underwriters, and U.S. Food and Drug Administration infraction letters about HBI's promotion of Ampligen, but Sheppard precluded that evidence.
And, according to Franceski, there was also evidence of sanctions against Asensio made by the National Association of Securities Dealers, which Sheppard precluded.
Biemer said the jury deliberated from about 2 p.m. last Thursday to 4 p.m. Friday. There was one dissenter on the 12-member jury, he said.
Franceski said he was disappointed with the verdict but was "gratified that we were able to tell our story about the company and the promise of Ampligen to the jury."
He said he had already made an oral motion for a JNOV and a new trial. He said he would file his post-trial motions this week.
"We believe there were some errors in trial that need to be corrected in post-trial motions," Franceski said. "The proceeding is far from over."
law.com
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Drug Company Is a Private Figure in Pennsylvania Defamation Case
Lori Litchman
The Legal Intelligencer
September 18, 2001
A drug company is a private figure for the purpose of a defamation case even though it received federal funding and was subject to peer review articles, a Philadelphia common pleas court judge has ruled.
Philadelphia Court of Common Pleas Judge Albert W. Sheppard's decision came in a legal battle between Delaware-based drug company Hemispherx Biopharma Inc. (HBI) and New York-based investment firm Asensio & Co. Inc. HBI's principal place of business is in Philadelphia.
HBI researches, develops and tests experimental drugs for regulatory approval and sale. Its primary focus has been the development and testing of the anti-viral drug Ampligen for the possible treatment of chronic fatigue syndrome and chronic hepatitis. HBI trades its common stock on the American Stock Exchange.
Asensio & Co. is a registered broker and investment banking firm that publishes and distributes analytical research reports regarding publicly traded companies and trades securities of those companies for its own account. Manuel P. Asensio is the founder and chairman of Asensio & Co.
Sheppard said HBI sued Manuel P. Asensio, Asensio & Co. Inc. (A&C) and Asensio.com Inc. for allegedly making defamatory statements in press releases and research reports to "illegally manipulate" the price of and short sell HBI's stock.
In August 1998, Sheppard said A&C started accumulating short positions in HBI and then in September of the same year, the company published "through means of interstate commerce including the Internet," a research report and a press release that had a "strong sell recommendation" attached.
The report and press release contained statements such as "Ampligen is 'toxic'; and that "HBI has made 'fraudulent misrepresentations about Ampligen's FDA filing status and CFS earnings claims.'"
The defendant also made statements that appeared in articles in Business Week and the Philadelphia Inquirer.
"The publication of these statements allegedly caused the price of HBI's common stock to decline precipitously, reduce the value of the company, and impaired HBI's business relations with third parties," Sheppard wrote.
HBI sued first in federal court, but the case, Hemispherx Biopharma v. Asensio, was transferred to the Common Pleas Court's Commerce Case Management Program in July 2000. HBI asserts four counts: defamation; disparagement; intentional interference with existing and prospective business relations; and civil conspiracy.
A&C moved for summary judgment, asserting that the actions were not actionable since the statements were opinions based on facts and "substantially true." A&C also asserted that HBI was a public figure and could not prove that the statements were made with actual malice. The defendants also assert several objections to HBI's potential damages recovery.
The court said the threshold issue to decide was whether Pennsylvania or New York law should apply.
The court first had to determine whether HBI was a public or private figure because the choice of law would only be an issue if HBI were a private figure because New York and Pennsylvania have similar laws with regard to alleged defamation involving a public figure.
A&C argued that HBI was a public figure because it had been involved in two public controversies -- the effectiveness of Ampligen in treating high-profile diseases and the value of publicly traded stock.
"In support of their position, defendants argue that HBI's stock is traded on the AMEX, HBI promotes Ampligen in press releases, HBI has released the results of clinical trials regarding Ampligen that has resulted in over two hundred peer-review publications and articles, and HBI has solicited research grants from the federal government," Sheppard wrote. "Plaintiff, in response, argues that it cannot be deemed a public figure simply because it received research grants for Ampligen."
The court said, however, that the company is not a public figure, nor is there evidence to show that public controversies exist around Ampligen.
"Rather, it may well be that defendants created this 'controversy' by publishing its negative reports regarding HBI and its product, and such conduct may not constitute a defense," Sheppard wrote. "Therefore, this court finds that HBI should be considered a private plaintiff and HBI need only prove that the alleged defamatory statements were negligently published."
Sheppard also said that it is unclear whether the statements made were opinions "which can reasonably be construed as implying undisclosed facts which may have a derogatory meaning."
Therefore, the court said, summary judgment was inappropriate because of genuine issues of material fact.
Turning to the choice of law issue, the court having determined that HBI was a private figure, deemed that Pennsylvania law was the more appropriate guiding law because Pennsylvania has the greatest interest in protecting HBI's interest.
Margaret Manolakis of Stradley Ronon Stevens & Young in Philadelphia represents HBI and Lawrence G. McMichael of Philadelphia's Dilworth Paxson represents A&C.
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