Facts
- Asahi Kasei Pharma Corporation (Asahi) developed fasudil, a drug candidate for treatment of pulmonary arterial hypertension (PAH).
- Asahi entered into a licensing and development agreement (License Agreement) with CoTherix, Inc. (CoTherix), under which CoTherix would help develop and commercialize fasudil in North America and Europe.
- Actelion Ltd. sold a competing PAH drug (Tracleer) and held a dominant share of the relevant market.
- Actelion, through affiliated entities, acquired all of CoTherix’s stock.
- At or around the time of the acquisition, Actelion informed Asahi that CoTherix would discontinue development of fasudil for stated “business and commercial reasons.”
- Asahi presented evidence that Actelion acquired CoTherix because Actelion viewed fasudil as a competitive threat and wanted to prevent its development.
- Asahi sued Actelion entities and three Actelion executives, and the case went to trial on claims including: (1) intentional interference with the License Agreement, (2) interference with prospective economic advantage, (3) breach of a CoTherix–Actelion confidentiality agreement on a third‑party‑beneficiary theory, and (4) breach of confidence.
- The jury returned a unanimous liability verdict against Actelion and the individual executives, awarding nearly $546.9 million in compensatory damages and finding malice, oppression, or fraud; it also awarded punitive damages against the individual executives.
- The trial court reduced the net recovery by offsets, including amounts Asahi had obtained in arbitration against CoTherix.
- Defendants appealed, challenging (among other things) whether Actelion could be liable for interference after acquiring CoTherix, whether any “economic interest” or “manager’s privilege” barred liability, and whether the interference instructions were legally correct.
Issues
- Whether Actelion, after acquiring all of CoTherix’s stock, was legally barred from liability for intentional interference with the Asahi–CoTherix License Agreement on the theory that it was no longer a “stranger” to the contract.
- Whether an owner’s economic interest in a subsidiary’s contracts creates an absolute defense to interference, or only a qualified defense that can be lost when the defendant uses wrongful means.
- Whether Actelion executives who were not officers or managers of CoTherix could avoid personal liability under a manager’s privilege theory.
- Whether the trial court’s jury instructions correctly stated California law on interference, including the limits on justification/privilege and the rule that a contracting party cannot interfere with its own contract.
Decision
- The Court of Appeal affirmed the judgments for Asahi (with the trial court’s post‑trial offsets and other reductions applied; the appellate opinion was later modified without changing the judgment).
- The court rejected Actelion’s contention that it became immune from interference liability merely because it acquired CoTherix; ownership of a contracting party did not make Actelion a contracting party to the License Agreement.
- The court treated Actelion’s claimed economic interest as a potential qualified defense, not an automatic bar, and approved submitting to the jury whether defendants used wrongful means that would defeat any claimed justification.
- The court held the evidence supported personal liability for the individual executives and concluded the manager’s privilege did not protect them where they were not managers of the contracting party and the record supported their active participation in the interference.
- The court upheld the interference instructions and found sufficient evidentiary support for the verdict on liability and damages.
Legal Principles
- Intentional interference with contract requires proof of: (1) a valid contract between the plaintiff and a third party, (2) the defendant’s knowledge of the contract, (3) intentional acts designed to induce breach or disrupt performance, (4) breach or disruption, and (5) resulting damages.
- A contracting party cannot be liable in tort for interfering with its own contract; the rule does not automatically extend to a separate legal entity that owns one of the contracting parties.
- A corporate parent, acquirer, or controlling owner may be treated as a nonparty capable of interfering with the subsidiary’s contractual relations; stock ownership alone does not convert the owner into a contracting party.
- Any “economic interest” or justification defense available to an owner or interested actor is not absolute; it can be defeated where the interference is accomplished through wrongful means (for example, conduct the jury is instructed to treat as unlawful means such as intentional misrepresentation, concealment, or extortion).
- Corporate executives can be personally liable for interference when they actively participate in the tortious conduct; a manager’s privilege does not protect officers of a separate entity who are not managers of the contracting party, particularly where the proof supports wrongful conduct rather than good‑faith contract management.
Conclusion
Asahi Kasei Pharma Corp. v. Actelion Ltd. affirmed a substantial verdict arising from an acquisition alleged to have been undertaken to stop development of a competing PAH drug. The court held that acquiring all of a contracting party’s stock did not immunize the acquirer from intentional interference liability, that an ownership-based economic interest supplied at most a qualified defense subject to defeat by wrongful means, and that executives of the acquiring company could be personally liable when they were not managers of the contracting party and the evidence showed their direct participation in the interference.