In September 2009, a jury in the Western District of Kentucky found Defendant-Appellant HCP, Inc. (“HCP”) liable under Kentucky law for tortious interference with a prospective advantage, which claim was advanced by Plaintiff-Appellee Ventas, Inc. (“Ventas”). Finding that HCP’s tortious interference caused Ventas to purchase certain assets of the Sunrise Senior Living Real Estate Trust (“Sunrise”) at $1.50/unit over the original purchase agreement price that Ventas had earlier offered, the jury concluded that HCP was liable for total compensatory damages in excess of $101.6 million. The district court, however, had ruled against Ventas as a matter of law as to Ventas’s punitive damages claim. In Ventas, Inc. v. HCP, Inc. (6th Cir., Nos. 09-6385/6413, May 17, 2011) (PDF), the Sixth Circuit affirmed the jury’s award of compensatory damages, yet reversed the district court and remanded the matter back for trial on the single issue of punitive damages. This is believed to be one of the largest jury verdicts ever affirmed by the Sixth Circuit.
The matter below concerned a somewhat involved transaction in which Sunrise, a Canadian real estate investment trust, conducted a two-round, confidential auction of its assets in which HCP and Ventas participated. As part of the auction, invitees, including Ventas and HCP, had to sign “standstill agreements” with Sunrise, in which the invitees agreed not to make or announce any bid outside of the auction process for 18 months. In their preliminary bids, HCP offered $16.25/unit, and Ventas offered $13.25/unit. Sunrise invited HCP and Ventas to proceed to the second round, where they were the only invitees participating. Each bidder was required first to enter into an independent agreement with Sunrise Senior Living, Inc. (“SSL”), which managed Sunrise’s properties under long-term management contracts. Ventas was able to negotiate an agreement with SSL, but HCP could not. On the day the bids were due, Ventas submitted a bid of $15.00/unit, which Sunrise’s Board of Trustees approved that same day, and Sunrise and Ventas entered into a binding purchase agreement, subject only to the approval of two-thirds of Sunrise’s voting unitholders, which “seemed to be a foregone conclusion.” However, in subsequent weeks, officials from Sunrise and HCP discussed whether the parties could still reach terms. More than a month after Ventas’s bid had been accepted and the binding purchase agreement executed, HCP made a conditional bid of $18.00/unit and issued a press release stating the same. The first market day after HCP’s announcement, the selling price of Sunrise shares increased from approximately $15.00/unit to approximately $18.00/unit. The parties quickly came to loggerheads over HCP’s maneuvering, which culminated in each asking a Canadian court for a declaration regarding the validity of the earlier standstill agreements. That court concluded that the standstill agreements were, in fact, valid and that HCP was not authorized to submit a late bid. HCP then withdrew its offer to purchase Sunrise, and when Sunrise’s unitholders began to vote against the sale to Ventas, Ventas was forced to increase its original bid from $15.00/unit to $16.50/unit. Having done so, Sunrise’s unitholders approved the deal — and Ventas filed suit in U.S. district court against HCP, asserting Kentucky state law claims of tortious interference with contract and tortious interference with a prospective advantage. The district court ruled against Ventas as a matter of law on punitive damages, but the case went to trial and the jury found HCP liable for tortious interference with a prospective advantage and awarded Ventas $101 million in compensatory damages: effectively, the difference between Ventas’s $15.00/unit original bid and the $16.50/unit bid that Ventas had been forced to make to keep the deal from imploding.
Writing for a unanimous panel that included Judges Merritt and Griffin, Judge Clay affirmed the jury verdict but reversed on the district court’s punitive damages ruling. In doing so, the Court found no fault with the district court’s jury instructions on tortious interference under Kentucky law. The Court also expressly found that the jury’s verdict was supported by sufficient evidence. As to punitive damages, applying Kentucky law, the Court found that there was also sufficient evidence for a jury to conclude that: 1) HCP “acted toward Ventas” with fraud, 2) HCP had the “intention of causing injury” to Ventas, and 3) HCP’s fraud proximately caused Ventas’s injury. In so concluding, the Court observed that “[t]he record is replete with evidence of intentional misrepresentations, deceit, and/or concealment of material facts by HCP.” For those reasons, the Court remanded for a trial solely on the issue of punitives.
Judge Merritt filed a very brief concurrence in which he did not concur with the admonitions given by the Court to the parties’ attorneys in footnote 17 of the opinion. In that footnote, the Court complained that the attorneys had filed excessive conditional briefing and supplementary authority letters on a “completely collateral and immaterial issue,” observing that such activities must have required “scores if not hundreds of attorney hours.” In his concurrence, Judge Merritt stated that, “[a]s a matter of fairness,” he would not draw the inference that the attorneys in the case had “improperly run up the number of hours spent on the case” without giving counsel an opportunity to explain their actions.