Thursday, February 3, 2005
High Court to Review $500 Million Judgment for City of Hope
By KENNETH OFGANG, Staff Writer/Appellate Courts
The California Supreme Court yesterday agreed to review a ruling by this district’s Court of Appeal upholding City of Hope National Medical Center’s $500 million verdict against biotechnology company Genentech Inc.
The justices, at their weekly conference in San Francisco, voted 5-1 to hear Genentech’s challenge to the ruling in City of Hope National Medical Center v. Genentech, Inc. (2004) 123 Cal.App.4th 306. Justice Carlos Moreno cast the lone vote not to take the case, while Justice Kathryn M. Werdegar, whose husband is a physician and former public health official, recused herself.
The lawsuit grew out of a 1976 royalty agreement.
City of Hope sued Genentech in 1999, claiming the South San Francisco-based biotechnology giant concealed licensed sales of protein products, such as hepatitis vaccines, over a 15-year period that were worth about $16.7 billion.
City of Hope, which made the protein manufacturing discovery, contended it was owed $457 million in royalties and interest. The jury awarded $300 million in compensation and $200 million in punitive damages after finding Genentech failed to pay a 2 percent royalty on drugs based on the patents developed by two City of Hope physicians.
City of Hope successfully contended that the agreement required Genentech to pay royalties on the product sales of its licensees even if those licensees did not “practice” the patents—follow the manufacturing process contained in the patent—when manufacturing their products.
The Court of Appeal’s Div. Two, in an opinion by Justice Judith Ashmann-Gerst, said retired Los Angeles Superior Court Judge Edward Kakita, who heard the case on assignment, correctly submitted the interpretation of the agreement to the jury, and that the jury’s interpretation was reasonable.
In upholding the punitive damage award, Ashmann-Gerst said there was “substantial evidence of fraud and malice” by Genentech and that the award did not violate due process.
“...Genentech’s scheme of concealing licenses and withholding royalties spanned decades. The conduct may not have been widespread as to the number of victims, but it was pervasive and continuous as to City of Hope,” the justice wrote. “While Genentech did not directly jeopardize anyone’s life, safety, or health, it damaged an entity that is in the business of providing medical care to the poor, often at City of Hope’s own expense....Genentech essentially cheated City of Hope out of a staggering amount of money.”
In other conference action, the court let stand the public admonishment of Placer Superior Court Judge Joseph W. O’Flaherty by the Commission on Judicial Performance. No justice voted to grant review.
The CJP said O’Flaherty violated canons of judicial ethics by encouraging potential jurors to lie about their possible racial bias during jury selection.
While accepting the conclusion of a panel of special masters that O’Flaherty acted in a good faith attempt to avoid seating biased jurors, the CJP said his actions in two cases nonetheless merited discipline.
Noting that the criminal convictions in the two cases were reversed, with appellate jurists describing O’Flaherty’s actions as “grave error,” “astonishing,” and “shocking,” the commission declared:
“At some point, a judge’s obliviousness to the consequences of the means to a given end may override, as a matter of law, a judge’s statement of subjective good intent.”
One of the cases involved an African American defendant, while in the other the defendant was Iranian. Placer County jury panels are overwhelmingly white.
In the first case, O’Flaherty told jurors that if they harbored a racial bias they were uncomfortable admitting, it would be all right for them to “lie” and make up another reason to avoid serving. In the second, the judge did not suggest that jurors lie, but said they should “do whatever you have to do to get off the jury” if they felt biased against the defendant because of his race.
O’Flaherty conceded at a hearing before special masters that his actions were wrong and expressed regret over them. But he continued to deny that he violated the canons.
The CJP rejected O’Flaherty’s contention that he could not be subjected to discipline because he was guilty only of making a good faith error of law.
Distinguishing Oberholzer v. Commission on Judicial Performance, the commission said O’Flaherty did not commit mere legal error but “engaged in a repeated course of improper conduct” that constituted “an intentional disregard of the law, a disregard of fundamental rights and an abuse of judicial authority.”
In both cases, O’Flaherty told jurors he would not ask them to openly admit to racial bias. Instead, he advised them to come up with another excuse to avoid service.
In addressing potential jurors for the trial of Joy Ann Mello, subsequently convicted of aiding and abetting the robbery and false imprisonment of a gas station attendant, and of being armed with a firearm in the commission of those offenses, O’Flaherty said jurors who doubted their ability to fairly judge the African American defendant should “lie” by citing “some other reason to get excused.”
Noting that jurors might find it “insulting and embarrassing to raise your hand and say I’m a racist,” the judge commented:
“It doesn’t take a rocket scientist to figure out how to get excused, if you put your mind to it, and I’d rather have you do that than sit on the jury if there’s a problem in this area.”
The justices yesterday also agreed to decide whether a pretrial detainee who is not released on his or her own recognizance when his preliminary hearing has been continued to a date more than 10 days after arraignment, as required by Penal Code Sec. 859b, is entitled to have the charges against him or her dismissed under Sec. 995.
This district’s Div. Three answered that question in the affirmative in People v. Standish (2004) 123 Cal.App.4th 799.
Copyright 2005, Metropolitan News Company