[00:00:03] Speaker 03:
be seated.

[00:00:12] Speaker 03:
Good morning, and it's our privilege to be hearing cases in Honolulu this week.

[00:00:17] Speaker 03:
It's great to be back in Hawaii, and we look forward to the arguments of all counsel, both today and the rest of the week.

[00:00:25] Speaker 03:
It's my special privilege to be sitting with Judge Sid Thomas and Judge Ana de Alba, and this is my first opportunity to hear cases with Judge de Alba, who's a new member of our court.

[00:00:34] Speaker 03:
I want to extend our warmest welcome to you.

[00:00:38] Speaker 03:
We have four matters on the calendar.

[00:00:40] Speaker 03:
Two were submitted on the briefs, United States versus Roberto and Evan Aldsousote versus Lauren Galindo.

[00:00:47] Speaker 03:
Those matters were submitted.

[00:00:49] Speaker 03:
We'll turn to the first case on the argument calendar.

[00:00:53] Speaker 03:
It's case 24-823, S&G Labs, Hawaii versus Graves.

[00:01:03] Speaker 00:
Good morning.

[00:01:04] Speaker 00:
May it please the court?

[00:01:07] Speaker 00:
There is a legislative intent, obviously, behind every statute.

[00:01:25] Speaker 00:
But it cannot have been Congress's intent when it passed ECRA, the Eliminating Kickbacks in Recovering Act, that a party

[00:01:37] Speaker 00:
should face the choice between criminal prosecution for violation of its terms or being exposed to a seven and a half million dollar judgment for refusing to enforce an executory contract that had been rendered unlawful by the statute yet that's exactly what happened here the district court

[00:02:09] Speaker 00:
taking it upon itself to rule on an issue that had not been briefed by either party, concluded that ECRA did not apply to the contract between Mr. Graves, the plaintiff, and our clients.

[00:02:36] Speaker 00:
even though that statute, even though that contract explicitly and quite rationally until the law was passed, rewarded him for the number of tests and the revenue generated by tests by the laboratory.

[00:02:56] Speaker 03:
So why, Mr. Coleman, why do you think ECRA should be read to prohibit

[00:03:02] Speaker 00:
what appears to be a standard marketing arrangement with somebody because this is not a standard market your honor it is in fact the case that sales that sales arrangements sales and marketing people are and ought to be rewarded for productivity for bringing in customers

[00:03:27] Speaker 00:
This, however, is not a regular market.

[00:03:31] Speaker 00:
Consumers who take the tests, patients, have very little to say and very attenuated preferences with respect to where their tests are taken.

[00:03:46] Speaker 00:
They go where their doctor tells them or where their insurance company tells them.

[00:03:51] Speaker 00:
In this case, Congress recognized that there was a problem.

[00:03:55] Speaker 00:
And that problem was the abuse of the relationship between laboratories and care providers.

[00:04:05] Speaker 00:
And Congress stepped in and said, although under normal circumstances, someone who brings in business is rewarded with commissions or with

[00:04:15] Speaker 00:
compensation that is appropriate for the amount of business you bring in, it's not going to be able to be done here.

[00:04:22] Speaker 00:
You can't do it that way anymore because this is not a normal market.

[00:04:25] Speaker 00:
This is not a market where supply and demand operate.

[00:04:29] Speaker 00:
It's a heavily regulated market.

[00:04:31] Speaker 00:
Consumers don't have particularly strong preferences.

[00:04:35] Speaker 00:
The real consumers here

[00:04:38] Speaker 00:
are the care providers, and therefore we're gonna cut off that direct revenue connection, and there's gonna have to be another way for you to reward your producers.

[00:04:49] Speaker 03:
The statute, though, uses the phrase, induce a referral of an individual.

[00:04:56] Speaker 03:
So why do you think that sort of undifferentiated generic marketing to a doctor's office, for example, would fall within that?

[00:05:06] Speaker 00:
Well, only an individual.

[00:05:09] Speaker 00:
and have a lab test.

[00:05:14] Speaker 00:
The weight placed by the district court on the word individual actually, as we explained in our brief, renders the previous part of the statute surplusage.

[00:05:26] Speaker 00:
There's no reason for it to exist.

[00:05:31] Speaker 03:
Let's assume you're right about this.

[00:05:34] Speaker 03:
that to induce a referral of an individual that can cover somebody like Graves who's not a doctor who's actually making referrals.

[00:05:46] Speaker 03:
But even so, why would it cover somebody who's just engaged in standard marketing and not actually

[00:05:54] Speaker 03:
moving a patient from one service to another, for example?

[00:05:59] Speaker 00:
Your Honor, because it's not a standard market.

[00:06:03] Speaker 00:
This is a statute that was meant to solve a problem

[00:06:09] Speaker 00:
I think the court recognizes very well and Congress recognized very well that the market and the economy related to the provision of medical services and all the services that attend the provision of medical care is a highly regulated, highly inefficient and highly manipulatable market.

[00:06:35] Speaker 03:
That's a fair point, but I guess I'm just looking at the language chosen, and induce is a somewhat strong term, right?

[00:06:42] Speaker 03:
And I'm not sure that we would normally think that just generic marketing, if somebody puts an advertisement on television, would you say they've induced my purchase of the good?

[00:06:52] Speaker 03:
I'm not sure that's right.

[00:06:54] Speaker 00:
Well, the statute does say reduce indirectly or indirectly.

[00:07:00] Speaker 00:
That's pretty important.

[00:07:02] Speaker 00:
And what you have here is, the record is very clear that what Mr. Graves did, which was what his job was, was to develop relationships with caregivers and with institutions that control many caregivers and

[00:07:24] Speaker 00:
induce them, induce them to use the laboratories that he worked with to send them their business.

[00:07:33] Speaker 03:
But, I mean, is there any suggestion that what he was doing was not, you know, the Fifth Circuit, for example, in the anti-kickback statute context talks about unduly influencing or exercising sort of control over the referral itself.

[00:07:48] Speaker 03:
Is there any allegation that that's what your client was hiring Graves to do?

[00:07:53] Speaker 00:
No, not at all.

[00:07:54] Speaker 00:
Of course, the anti-kickback statute is a different law.

[00:07:58] Speaker 00:
It is one in which, with respect to which, the Attorney General has, over the very long period that it's been in place, has issued numerous regulations to deal with the economic realities of that situation.

[00:08:14] Speaker 00:
But again, here Congress made a different decision saying that

[00:08:20] Speaker 00:
just as many forms of economic activity are regulated and for important public policy reasons normal economic incentives have to be changed and the facts here demonstrate that our clients reacted to that change by saying to the plaintiff

[00:08:46] Speaker 00:
According to our legal advice that we've gotten from counsel, which is a point that the district court did not permit to be placed before the jury, our lawyer, who is an expert on health care, tells us that this new law prevents us from paying you the way we always paid you.

[00:09:06] Speaker 00:
So here's what we want to do.

[00:09:09] Speaker 00:
We're going to give you a

[00:09:10] Speaker 00:
raise from a $50,000 salary plus commissions to a million dollar salary to do the same thing.

[00:09:21] Speaker 00:
We just can't tie your compensation to revenue the way we used to.

[00:09:31] Speaker 00:
That's a pretty good economic outcome for everyone concerned.

[00:09:35] Speaker 02:
Council, I'm sorry to interrupt.

[00:09:36] Speaker 02:
I want to know a little bit more about why you think this does not fall under the safe harbor provisions, the ECRA safe harbor provisions that, and I quote, a payment made by an employer to an employee or independent contractor for employment is permitted so long as the employee's payment is not determined by or does not vary by, A, the number of individuals referred to a laboratory, the number of tests or procedures performed, or the amount billed or received from a patient's insurance company.

[00:10:04] Speaker 00:
Well, for one thing, to read the safe harbor, that broadly would be to eviscerate the entire statue.

[00:10:15] Speaker 00:
Because precisely what was happening here is what the statue was passed to prevent.

[00:10:24] Speaker 00:
The district court did not rule that the safe harbor

[00:10:29] Speaker 00:
was the basis here.

[00:10:31] Speaker 00:
Rather, the district court ruled that the statute didn't apply under exceptions based on the Anti-Kickback Act.

[00:10:45] Speaker 03:
You focused a lot of your argument, all of it actually, on this issue of ECRA, but if you win on that, hypothetically, does that take away all of this verdict or only some of it?

[00:10:57] Speaker 03:
What about the defamation, for example?

[00:10:59] Speaker 00:
Your Honor, of all the issues in this case, the defamation seems to be

[00:11:05] Speaker 00:
the least the least of our clients concerns not because it's an insignificant amount of money in fact we would argue that there was no evidence presented to justify defamation damages whatsoever we argue in our brief that the defamation claim is simply not supported by Hawaii law far more important to us was the award of front

[00:11:34] Speaker 00:
and back wages both in the absence of adequate evidence to justify those awards.

[00:11:40] Speaker 00:
The front wages award of three and a half million dollars was obviously based on the offer by our clients of a million dollar a year annual salary prorated for the three and a half years.

[00:11:58] Speaker 00:
That contract law provides the benefit of the bargain damages for a breach.

[00:12:05] Speaker 00:
It does not provide the benefit of the non-bargain.

[00:12:07] Speaker 00:
There was no bargain.

[00:12:09] Speaker 00:
That offer of a million dollar salary was not accepted.

[00:12:12] Speaker 03:
We're talking about a measure of damages.

[00:12:16] Speaker 03:
So why wasn't it a reasonable measure of damages based on your client's own assessment of what he was likely to make if they restructured the contract?

[00:12:28] Speaker 00:
That was not the contract the jury found a breach of the the judge ruled that the Original contract was not illegal and therefore that mr. Graves should be paid pursuant to the original contract you can't have the benefit of a contract breach for an executory contract and the damages for a

[00:12:57] Speaker 00:
non-accepted alternative contract especially when my clients were prevented from submitting any evidence about first of all there was no expert testimony with respect to damages and my client was unable to testify about how their business had suffered to the extent that

[00:13:21] Speaker 00:
any inference that could be made from the offer of a million dollars salary could have been rebutted.

[00:13:26] Speaker 00:
I see I'm down to my last couple of minutes, so I'd like to say that.

[00:13:32] Speaker 00:
Thank you.

[00:13:41] Speaker 01:
May it please the court, your honors.

[00:13:42] Speaker 01:
My name is Leighton Hara, and I represent Darren Graves, the appellee in this matter.

[00:13:48] Speaker 01:
Mr. Graves' request that this court affirm the district court's ruling and affirm the jury's verdict in this case.

[00:13:56] Speaker 01:
The central issue in this case is whether ECRA applies to prohibit Darren Graves' commission-based compensation agreement.

[00:14:05] Speaker 01:
And we submit that it does not, and Judge Kobayashi ruled correctly on this issue for three reasons.

[00:14:11] Speaker 01:
The first one being the plain language of the statute.

[00:14:14] Speaker 01:
Section 228-2, the provision that applies in this case, prohibits SNG from paying kickbacks to induce a referral of an individual to a laboratory.

[00:14:25] Speaker 01:
In this case, it's undisputed that ECRA does not specifically, the plain language does not specifically proscribe

[00:14:32] Speaker 01:
compensation, commission-based compensation agreements.

[00:14:35] Speaker 01:
That's not in the plain language of the statute.

[00:14:37] Speaker 01:
It needs to be interpreted.

[00:14:38] Speaker 01:
However, the term individual is in there, and the court correctly utilized the dictionary definition of individual to define it as a natural person, and then

[00:14:50] Speaker 01:
rationed that Mr. Graves did not market or solicit or do any marketing activities to the end user, the individual patient.

[00:15:00] Speaker 04:
So how do you deal with the directly or indirectly language in the statute?

[00:15:05] Speaker 04:
So the indirect and direct?

[00:15:07] Speaker 04:
I mean, the argument is, their argument is, it doesn't matter if indirectly, if somebody indirectly solicits, it's still a violation of the statute.

[00:15:18] Speaker 01:
Well, indirectly solicit would apply to the S&G company.

[00:15:21] Speaker 01:
They're indirectly using Darren Graves, right, the sales representative.

[00:15:26] Speaker 01:
And then Darren Graves is talking to the clinic, not the individual end user.

[00:15:31] Speaker 01:
So it's attenuated in that sense.

[00:15:36] Speaker 04:
Your argument is that the language does not apply to your client?

[00:15:42] Speaker 04:
What I'm arguing, Your Honor, is that... What do you think indirectly means in the statute?

[00:15:48] Speaker 01:
not direct, attenuated further out from Mr. Graves doing something to induce the referral of an individual.

[00:15:57] Speaker 03:
Isn't the individual the person who needs care?

[00:16:00] Speaker 03:
You're inducing a referral of an individual, so that is the person being referred.

[00:16:05] Speaker 03:
Correct, Your Honor.

[00:16:09] Speaker 03:
A doctor could induce a referral.

[00:16:13] Speaker 03:
Why couldn't Mr. Graves induce a referral by forcing a doctor to refer somebody, for example?

[00:16:22] Speaker 01:
Forcing, yes, in certain cases that interpreted the AKS under the Fifth Circuit and GIF industries, they did interpret ECRA and the companion statute, AKS, to include some level of inducing or bad conduct in addition to referring the individual.

[00:16:43] Speaker 01:
In that situation, the sales representative had to improperly influence

[00:16:49] Speaker 01:
the healthcare decision maker, which I think your honor is alluding to.

[00:16:53] Speaker 03:
Correct, right.

[00:16:54] Speaker 03:
I mean, it seems to me, at least the way I read the district court's decision, was that somebody like your client could just never be with INECRA at all.

[00:17:03] Speaker 03:
And I'm questioning whether that's correct and whether it is more like what you just mentioned, whether it should be somebody who improperly influences or something like that.

[00:17:14] Speaker 01:
Your Honor, just based on the scarcity of case law, so reviewing the Fifth Circuit cases, the GF Industries, the District of Pennsylvania case, and Judge Kobayashi's ruling, in addition to the Sheena case, courts have included an improper undue influence element into whether or not a contract has

[00:17:35] Speaker 01:
been violated, it violates ECRA.

[00:17:38] Speaker 01:
Judge Kobayashi's ruling does not include that and stands on the plain language of an individual.

[00:17:44] Speaker 01:
I disagree, I think that graves could still be found, SNG or graves could be found in violation of ECRA under its plain meaning if graves directly marketed an individual.

[00:17:57] Speaker 01:
He would not fall under the safe harbor provision if he walked in front of a clinic that didn't use S&G lab services and talked to every patient that came in and said, hey, why don't you come to S&G labs?

[00:18:09] Speaker 01:
We offer better services.

[00:18:11] Speaker 01:
That would be a violation of Section A2.

[00:18:13] Speaker 01:
And because he's being paid a commission-based compensation, it would not fall under the safe harbor provision.

[00:18:22] Speaker 02:
So because in your scenario there, Council, he's talking to the individuals and not the doctor

[00:18:27] Speaker 02:
That's where he could be in violation of ECRA.

[00:18:30] Speaker 02:
But if he goes to that clinic, same clinic, same scenario you're showing me, and instead of people who are walking out says, hey, come to SNG, he goes inside and says to the doctor, hey, you should send all these folks to SNG.

[00:18:41] Speaker 02:
Would that be in violation?

[00:18:43] Speaker 01:
No, it wouldn't because he's talking to the doctor and he hasn't done anything to exert undue influence.

[00:18:48] Speaker 01:
That's the typical marketing scenario.

[00:18:50] Speaker 01:
That would be equivalent of buying a newspaper ad or a targeted solicitation in like a medical journal saying, hey, S&G Labs is the great lab, come to us.

[00:19:01] Speaker 01:
So there's no element of undue influence in there and more importantly,

[00:19:06] Speaker 01:
he's not marketing to an individual.

[00:19:08] Speaker 01:
So under Judge Kobayashi's order, he would not be in violation.

[00:19:12] Speaker 03:
What would count as undue influence?

[00:19:15] Speaker 01:
Undue influence, according to the Fifth Circuit cases and Eastern District of Pennsylvania, undue influence would be going out of your way to

[00:19:25] Speaker 01:
Influence the healthcare decision-maker in the cases that were cited like miles and shoemaker I believe that the salesperson when they did find under influence the salesperson basically stood in the shoes of the decision-maker so the salesperson could direct where everything went and

[00:19:44] Speaker 01:
and didn't give, like they stood in the place of the doctor basically.

[00:19:49] Speaker 01:
And in this case, there's evidence, Dr. Puana testified in her affidavit that she submitted in support of her motion for summary judgment that the clinics don't have any contractual relationship with SNG labs, that they could terminate their agreement any time and it's been done via a single page email.

[00:20:10] Speaker 01:
So there is evidence that,

[00:20:13] Speaker 01:
Darren Graves has not exerted any undue influence.

[00:20:17] Speaker 01:
There's no evidence in the record that he has.

[00:20:19] Speaker 01:
Consulate admitted that during his argument that there's no allegation that Graves has paid remunerations or done anything to unduly influence healthcare decision makers or patients.

[00:20:31] Speaker 03:
Can I ask you about some of the other components of the jury verdict?

[00:20:34] Speaker 03:
There was a, well, let me start with the defamation.

[00:20:38] Speaker 03:
So what was the defamation?

[00:20:40] Speaker 01:
Okay, so, Your Honor,

[00:20:43] Speaker 01:
To answer that question, you've got to take a couple of steps back.

[00:20:47] Speaker 01:
Graves was employed.

[00:20:48] Speaker 01:
He had an employment contract.

[00:20:51] Speaker 01:
He was placed on suspension, leave with pay, in June of 2019.

[00:20:58] Speaker 01:
He was placed on leave with pay.

[00:21:02] Speaker 01:
Okay?

[00:21:03] Speaker 01:
So then what happened was he was prohibited from contacting any of his clients, the clinics and the drug treatment centers.

[00:21:11] Speaker 01:
And during that time when he was prohibited from contacting them but still employed, Dr. Welch or Dr. Puana, she goes by both names, and her associate Stephanie Castro visited all of Darren Graves' clients and told them,

[00:21:27] Speaker 01:
At least two of them, Tony Acurio, who testified, and we cited to his testimony in the brief, and Taylor Yap, another clinic worker, their clients of S&G Labs, both of them testified that Dr. Pawana told them that Darren is no longer with the company.

[00:21:44] Speaker 04:
And that was true, wasn't it?

[00:21:46] Speaker 01:
No.

[00:21:46] Speaker 04:
He was suspended.

[00:21:48] Speaker 01:
yes your honor he was suspended so i'm answering your question that yes he was suspended it's incorrect in the sense that he was not terminated he was not separated from employment and the other point that i was going to make is that in addition to telling them an untrue statement that darren is no longer with the company they rub salt in the wound by telling taylor that she had to file a federal lawsuit against them for

[00:22:14] Speaker 01:
stealing trade secrets and information.

[00:22:18] Speaker 01:
So that is what the defamatory statement is.

[00:22:22] Speaker 01:
It's an untrue statement.

[00:22:24] Speaker 01:
And she was, there's a credibility determination, right?

[00:22:27] Speaker 01:
Dr. Puana testified that she did not say that.

[00:22:30] Speaker 01:
Darren Graves did, and so did Taylor Yap, and so did Tony Acura.

[00:22:34] Speaker 01:
The jury weighed credibility and made a determination which is shown by the punitive damages awards for defamation.

[00:22:41] Speaker 02:
Council, I just want to confirm that through the facts, as I recall them, the term terminated or separated from the company was never used.

[00:22:49] Speaker 02:
It was just he's no longer employed here.

[00:22:51] Speaker 02:
Is that correct?

[00:22:53] Speaker 01:
Okay, so let me break that down.

[00:22:56] Speaker 01:
So yes to your first question, Your Honor.

[00:22:59] Speaker 01:
The term terminated and fired, they were not used.

[00:23:03] Speaker 01:
I've never ever argued that in my brief and that's undisputed.

[00:23:08] Speaker 01:
With respect to the second part of your question though,

[00:23:13] Speaker 01:
The statement was he's no longer with the company.

[00:23:16] Speaker 01:
That's what was told to the two people.

[00:23:18] Speaker 01:
So no longer with the company, and they took that to mean he was fired.

[00:23:21] Speaker 01:
So there is a distinction between he's suspended while we sort things out or he's no longer with the company.

[00:23:27] Speaker 01:
I had to file a federal lawsuit against him for stealing trade secrets.

[00:23:31] Speaker 03:
Would it have made things any better if she had said he was suspended?

[00:23:35] Speaker 03:
What's the difference between saying he's no longer with the company and he's suspended

[00:23:41] Speaker 03:
as a practical matter in terms of what one would take away from that.

[00:23:45] Speaker 01:
It would be speculation on my part, Your Honor, and there's no evidence to that in the record, but to answer your hypothetical, yes, I think telling the clientele that he's suspended is different because it would have been truthful, and it wouldn't be a situation where he's completely out

[00:24:06] Speaker 01:
I apologize, Council, for cutting you off there.

[00:24:12] Speaker 02:
I'm going to continue with the line of questioning from my colleague, Judge Bras.

[00:24:18] Speaker 02:
For all intents and purposes, suspended versus terminated for a purpose of a customer or a client, what's the difference?

[00:24:26] Speaker 02:
I mean, if he's suspended, he cannot continue to do work for them.

[00:24:28] Speaker 02:
He cannot continue to market for them or do whatever it is that he was doing for them.

[00:24:33] Speaker 02:
So for them, isn't there really not a difference between him being suspended or no longer with the company?

[00:24:40] Speaker 01:
I wouldn't be able to speak to that in the sense that they weren't told that he was suspended, but the testimony that they gave in court was that, based on the fact that he was, the statement, he's no longer with the company, they took that to me, and the other things they said, they took that to me, there was no way that Darren was ever gonna service their accounts again.

[00:25:00] Speaker 01:
So what that did was it had a chilling effect on all his sales like after Darren left even though he wasn't subject to a non-compete clause He couldn't get any of his former clients back

[00:25:12] Speaker 03:
So we're talking about the false statement being no longer with the company.

[00:25:19] Speaker 03:
When in fact he was with the company, he was just suspended.

[00:25:22] Speaker 03:
If we didn't have this, if she had just said, he's been suspended, was there a defamation claim based on some other evidence?

[00:25:31] Speaker 03:
Or is it really hanging on this distinction between whether he's still with the company or not?

[00:25:35] Speaker 01:
Your Honor, it hangs on the distinction that he was no longer with the company.

[00:25:40] Speaker 01:
That's the false statement.

[00:25:42] Speaker 01:
And coupled with all the other evidence that came in.

[00:25:46] Speaker 03:
Right, well that's what I'm wondering about the other evidence, because how much of that goes into the claim?

[00:25:50] Speaker 03:
The other evidence being we filed a lawsuit against him, which they had, so that was seemingly true.

[00:25:56] Speaker 03:
He disputed the basis for the lawsuit, but they had done that.

[00:26:00] Speaker 01:
Right, and then the court later on found that those claims of stealing trade secrets were

[00:26:05] Speaker 03:
not valid and found in his favor.

[00:26:17] Speaker 01:
Are you not arguing that?

[00:26:18] Speaker 01:
No, I'm not arguing that the statements about the law, because she did file a federal lawsuit, but what I'm saying is when taken as a whole, when you have your boss coming to your clients and telling them a lie, he's no longer with the company, I had to file a federal lawsuit against them for stealing trade secrets, it connotes this

[00:26:37] Speaker 01:
cloud of wrongdoing that envelopes my client, and it succeeded in keeping his clients from ever coming back to him.

[00:26:46] Speaker 02:
Is it your position then, had Dr. Puana said, I had to suspend him, and now I'm suing him for trade secrets, that makes it materially different in terms of what would happen to his, you know, you talked about chilling effects, would you not agree that that would also have chilling effects?

[00:27:06] Speaker 01:
I think it would have a negative effect on his relationship with his clients, Your Honor, but it would be a true statement that he was suspended.

[00:27:14] Speaker 01:
I don't agree with the suspension, and I think the reasons, therefore, are protectional, as it played out at trial.

[00:27:20] Speaker 01:
But I agree with you.

[00:27:22] Speaker 01:
If she said suspended, that would have been truthful.

[00:27:24] Speaker 01:
And there are emails

[00:27:25] Speaker 01:
that came into evidence that say, you know, I had, she's, Dr. Poirnot emails clients and tells them that she had to suspend Aaron.

[00:27:34] Speaker 01:
But it's different from what she told these clinic, you know, workers and who I had testify at trial.

[00:27:41] Speaker 01:
So that's the distinction.

[00:27:43] Speaker 01:
No longer with the company, they took that to mean terminated.

[00:27:47] Speaker 04:
Was there any testimony that indicated that suspension had more of a defamatory or less defamatory meaning than no longer with the company?

[00:27:59] Speaker 04:
know your honor because I think that's the question we're trying to differentiate what the damages might flow from saying he's no longer with the company plus and we're suing him versus he's suspended and we're suing him to me it doesn't seem to me there's not much quantitative difference in terms of damage

[00:28:23] Speaker 04:
But you say there is.

[00:28:24] Speaker 04:
My only question is, is there anything in the record on that?

[00:28:27] Speaker 04:
I think your answer is no.

[00:28:30] Speaker 01:
My answer is no, Your Honor, because that wasn't my burden to prove regarding the suspension versus... What was your burden to show it was false and had defamatory meaning?

[00:28:41] Speaker 01:
Yes, correct.

[00:28:42] Speaker 01:
And I believe I did that.

[00:28:44] Speaker 01:
And the jury agreed because the statement, no longer with the company, he was

[00:28:49] Speaker 01:
still employed, Dr. Puana testified that at the time she suspended him, if her investigation proved, fell in Darren's favor, she would have reinstated him wholeheartedly.

[00:29:00] Speaker 01:
And coupled together, just taking the facts as a whole, that supports the jury's decision that a false statement was made and Darren was harmed because of it.

[00:29:09] Speaker 04:
And you had to show proximate cause.

[00:29:12] Speaker 03:
Go ahead, sorry.

[00:29:13] Speaker 03:
No, no, go ahead.

[00:29:15] Speaker 03:
Well, I mean, maybe building on that,

[00:29:19] Speaker 03:
What is the basis for saying that this conduct that we're talking about was wanton or rises to the level of punitive damages?

[00:29:26] Speaker 03:
Because we're talking about a somewhat fine distinction between whether you're still with the company or whether you're suspended.

[00:29:33] Speaker 03:
Maybe it was technically untrue, but she had filed a lawsuit.

[00:29:38] Speaker 03:
She had accusations, allegations.

[00:29:40] Speaker 03:
They didn't pan out in court, but what is the basis for saying this was wanton?

[00:29:47] Speaker 01:
The history of her employment relationship with Darren, the jury got to hear everything, right?

[00:29:52] Speaker 01:
They got to hear how he helped build the company.

[00:29:55] Speaker 01:
He brought in these clients to S&G Labs.

[00:29:58] Speaker 01:
He took it from a million dollar, $800,000 a year company to a multi-million dollar company.

[00:30:03] Speaker 01:
And then when their relationship soured in 2018, when in the middle of his employment contract, Dr. Puana used ECRA in a

[00:30:15] Speaker 01:
as a negotiating tool to insert a non-compete clause, the jury got to see that.

[00:30:19] Speaker 01:
They got to see how she unilaterally changed his compensation.

[00:30:23] Speaker 01:
She ratcheted it down from, his commissions were about 1.8 million a year.

[00:30:27] Speaker 01:
She ratcheted it down based on her calculations to about a million dollars, and she paid him that while he was on suspension.

[00:30:34] Speaker 01:
And then after that, she ratcheted it down to 50,000.

[00:30:37] Speaker 01:
So the jury gets to see this.

[00:30:39] Speaker 01:
She files a trade secret lawsuit against him, preliminary injunction.

[00:30:43] Speaker 01:
She loses it.

[00:30:44] Speaker 01:
The court rules against her.

[00:30:46] Speaker 01:
And then she goes to his clients while he's on suspension, makes false statements, tells them that he's no longer with the company, gives his clients the thought that he's fired and no longer there when he, in fact, is.

[00:30:57] Speaker 01:
So the jury had all that.

[00:30:58] Speaker 01:
So that shows willful and wanton, Your Honor.

[00:31:02] Speaker 01:
It's got to be taken as a whole.

[00:31:04] Speaker 01:
And that's what the members of the jury got to see through the presentation of evidence at trial.

[00:31:10] Speaker 03:
We'd like to go a little over, but let me see if my colleagues have additional questions.

[00:31:14] Speaker 03:
Thank you very much for your presentation this morning.

[00:31:17] Speaker 03:
Oh, you're welcome, your honor.

[00:31:26] Speaker 00:
Thank you for the opportunity to address a couple of points.

[00:31:28] Speaker 00:
The court was very interested in the question of defamation, and Your Honor has asked some hypothetical questions.

[00:31:38] Speaker 00:
I'm going to answer, if I may hypothetically, that if someone were to call my office

[00:31:44] Speaker 00:
where I formerly worked and was told Mr. Coleman is no longer with the firm, that would be consistent with my being fired.

[00:31:52] Speaker 00:
It would also be consistent with my being elevated to the Ninth Circuit Court of Appeals.

[00:31:56] Speaker 00:
There are lots of things that no longer with the firm can mean.

[00:32:00] Speaker 00:
Suspended, however, does not include any good things.

[00:32:05] Speaker 00:
And in fact, we would submit that suspended is a better

[00:32:09] Speaker 00:
is a worse thing, even if it's true, it's a worse thing than no longer with the company.

[00:32:16] Speaker 03:
Was this argument made to the jury?

[00:32:20] Speaker 00:
I don't know that it was, but I also

[00:32:23] Speaker 00:
Since your honors are asking the question about how do we take this concept of suspended to be defamatory, I don't believe it holds that weight.

[00:32:35] Speaker 03:
Well, let's assume you're right on this point, but what does it do for you?

[00:32:39] Speaker 00:
What it does for me is

[00:32:42] Speaker 00:
Demonstrate that there was no defamation.

[00:32:47] Speaker 04:
There was no defamatory statement When you couple couple with and we're suing him But that doesn't necessarily certainly connote a promotion But that was true

[00:33:01] Speaker 04:
Well, yes, of course, but I mean, you're arguing as you could have been elevated to a higher position with being no longer with the company, but in the whole context, it's hard to see, hard to attribute that meaning to it.

[00:33:14] Speaker 00:
It is possible, Your Honor.

[00:33:16] Speaker 00:
There was a question about undue influence.

[00:33:18] Speaker 00:
There's no language in the statute requiring a shelling of undue influence or any conduct involving fraud or undue influence or force.

[00:33:28] Speaker 00:
Your Honor's asked me at the very beginning, actually Judge D'Alba asked me about the Safe Harbor.

[00:33:35] Speaker 00:
The Ecra Safe Harbor

[00:33:38] Speaker 00:
does apply to employment-related payments only if payments to an employee, quote, were not determined by or did not vary by the number of tests or procedures performed or the amount billed to or received from a health benefit care program.

[00:33:54] Speaker 00:
So that is it.

[00:33:57] Speaker 00:
an exception to the exception.

[00:33:58] Speaker 00:
So the safe harbor definitely does not apply.

[00:34:00] Speaker 00:
That's why the court didn't hold that it did.

[00:34:03] Speaker 00:
And finally, there was a very, I think, illuminating colloquy where counsel said it's not as if he stood in front of the clinic and told people to go.

[00:34:12] Speaker 00:
It's hard to imagine Congress passing this statute in order to prevent people from handing out hand bills and talking individual patients

[00:34:22] Speaker 00:
into going from one lab to another, especially, again, as I pointed out at the beginning, patients don't usually care.

[00:34:28] Speaker 00:
They just want to know that they're covered and that their doctor is satisfied with the laboratory testing.

[00:34:33] Speaker 03:
Well, but let me just ask you before you sit down.

[00:34:35] Speaker 03:
I mean, if S&G had hired Graves to just prepare brochures, you know, come up with a glossy brochure and walk around Oahu and drop it off at all the clients and

[00:34:51] Speaker 03:
later structured the payments so that Graves would get percentages if any of the doctor's offices sent patients.

[00:34:59] Speaker 03:
Are you saying that the sending of the brochure would be inducing a referral?

[00:35:04] Speaker 00:
I think that would be quite a leap, Your Honor, and we would not be arguing that.

[00:35:08] Speaker 00:
What the facts in this case, however, show is that Mr. Graves had very specific and very lucrative relationships with the care providers who made the referrals.

[00:35:18] Speaker 00:
And that is what ECRA was meant to address.

[00:35:22] Speaker 03:
OK.

[00:35:23] Speaker 03:
Well, thank you very much, Mr. Coleman.

[00:35:25] Speaker 03:
Thank you, Mr. Harra.

[00:35:26] Speaker 03:
This matter is submitted.