Gilead’s Counsel Has Answered Merck Counsel’s Claim: No “Crime Or Fraud” Exception Applies — In Sovaldi® Patent Wars

I am a little late in posting this, with the holiday busy-ness, and airport runs — but it took Gilead’s legal team only one elapsed day to reply to Merck’s lawyers (detailed here, and here — previously).

In sum, Gilead says the disputed emails were in fact privileged communications — from a predecessor-entity officer, to outside counsel, and thus are properly the subject of a claw-back order. Moreover, Gilead’s counsel says Merck never really articulated any plausible crime or fraud theory — let alone offered prima facie evidence of it — so, it all should amount to. . . nothing.

Of course, because both documents are heavily redacted, we have no way of evaluating these arguments, and counter arguments. We are just reporting them. Here is that six-page PDF of the latest Gilead letter — with all of its various redactions — and a bit:

. . . .Simply put, neither Gilead nor its predecessor Pharmasset committed any crime or fraud, nor have Plaintiffs shown that they have. The crime-fraud exception requires that Plaintiffs “make a prima facie showing that (1) the client was committing or intending to commit a fraud or crime, and (2) the attorney-client communications were in furtherance of that alleged crime or fraud.” In re Chevron Corp., 633 F.3d 153, 166 (3d Cir. 2011) (internal citations omitted). Plaintiffs have shown neither. Plaintiffs have not and cannot show: (1) that any fraud was, in fact, committed; and (2) that Pharmasset had any intent to perpetrate a fraud.

The court applies a “reasonable basis” standard to assess the sufficiency of the required prima facie showing, generalized allegations of fraud are not sufficient, rather the proponent of the exception must provide the “requisite factual basis” for the crime-fraud exception to apply. In re ML-Lee Acquisition Fund II, L.P. & ML-Lee Acqueistion Fund (Ret. Accounts) II, L.P. Sec. Litig., 848 F. Supp. 527, 566 (D. Del. 1994); See also Manetar Tech. Corp. v. Six Flags Theme Park, Inc., 886 F.Supp.2d 466, 487 (D. Del. 2012) (noting that to “demonstrate a prima facie case of fraud” sufficient to sustain the crime-fraud exception’s application, “generalized allegations… will not suffice”). That factual basis must include the relevant intent evidence. See, e.g., Finley Assocs., Inc. v. Sea & Pines Consol. Corp., 714 F. Supp. 110, 118 (D. Del. 1989) (noting that the party requesting the crime-fraud exception’s application must “present[] a reasonable basis for believing that the [client’s] objective was fraudulent”) (emphasis added). Plaintiffs fail wholly to meet their burden.

As a threshold matter, Plaintiffs never identify the elements of the fraud or crime they allege. . . .

Now the very able Judge Stark will have to decide: are the emails excluded from evidence, and thus not available for any purpose, in the global perhaps multi-billion dollar litigation? Or, may Merck make hay out of what may have been some intemperate remarks, by a Pharmasset science officer, many, many years ago? We will have to wait and see — our best — to all of good will, and good cheer!

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