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Schulman Bhattacharya Prevails at Maryland Court of Special Appeals—Court Upholds Entirety of Schulman Bhattacharya’s Win in $160 Million Tortious Interference and Defamation Litigation

Jun 15

Just ten days after hearing oral argument, the Maryland Court of Special Appeals has issued a unanimous decision affirming yet another victory secured by Schulman Bhattacharya for its clients ExeGi Pharma, LLC and Professor Claudio De Simone against Alfasigma USA, Inc. On August 20, 2020, Judge Ronald B. Rubin of the Circuit Court for Montgomery County, Maryland, granted the Firm’s motion for summary judgment, dismissing all five of Alfasigma’s claims against ExeGi Pharma and Professor De Simone “with prejudice, and without leave to amend.”  Judge Rubin took this action after staying all discovery and determining that discovery was not necessary to resolving the matter fully and finally on summary judgment.  On June 11, 2021, the Court of Special Appeals affirmed Judge Rubin’s orders in their entirety in a unanimous opinion authored by Judge Melanie M. Shaw Geter.

This appellate win is the latest in a string of successes Schulman Bhattacharya has achieved on behalf of ExeGi Pharma and Professor De Simone against Alfasigma and its collaborators. In the Firm’s November 2018 trial victory over Alfasigma, a federal jury found Alfasigma liable for falsely advertising its VSL#3® product as containing the same formula as the proprietary probiotic formula developed by Professor De Simone and sold in the U.S. exclusively by ExeGi Pharma, awarding ExeGi Pharma $15 million on that claim.

When Alfasigma continued to engage in false advertising despite the jury’s verdict, Schulman Bhattacharya, on behalf of its clients, sent a series of “cease and desist” letters to the various distributors and retailers that were still selling VSL#3® and demanded that they stop selling VSL#3® to the extent it continued to be associated with Alfasigma’s false product claims. The letters specified that they were from ExeGi Pharma and Professor De Simone’s litigation counsel, summarized the relevant facts and prior litigation, and instructed the recipients to preserve documents in anticipation of future litigation. Most recipients of the letters complied, effectively cutting off sales of Alfasigma’s falsely advertised product. One recipient who initially refused to comply, the online payments company TrueCommerce, became the subject of a federal lawsuit in San Diego, immediately after which the company capitulated and agreed to stop facilitating Alfasigma’s false advertising.

Claiming that the cease and desist letters sent by Schulman Bhattacharya, on behalf of its clients, were so effective as to have caused sales of VSL#3 to plummet, Alfasigma brought suit against ExeGi Pharma and Professor De Simone asserting claims for tortious interference with business relations, tortious interference with contract, injurious falsehood, libel per se, and unfair competition. Subsequent to submitting its complaint, Alfasigma filed a statement with the court indicating that it was seeking, among other things, $160,000,000 in damages, including “at least $30,000,0000 in compensatory economic damages,” “at least $40,000,000 in compensatory reputational damages,” and “punitive damages in an amount not less than $90,000,000.”

Believing these claims to be completely meritless, Schulman Bhattacharya vigorously opposed them.  Early in the proceeding, the Firm sought and obtained a stay of all discovery in the case, successfully arguing that the case could and should be decided without burdening ExeGi Pharma or Professor De Simone with unnecessary discovery.  Then, the Firm moved for summary judgment, arguing that Alfasigma’s case should be immediately dismissed with prejudice on a variety of grounds.  After lengthy briefing and oral argument, Judge Rubin granted the Firm’s motion, holding that (1) “ExeGi and Prof. De Simone were plainly looking to enforce their rights, established after the federal jury’s verdict”; (2) “[t]he letters were properly targeted to the distributors and sellers of VSL#3”; and (3) “[t]here is a strong public interest in ‘true’ advertising of products.”  Based on these determinations, Judge Rubin held that the absolute litigation privilege applied to the cease and desist letters and, therefore, all of Alfasigma’s claims must be dismissed in their entirety.

In its ruling on June 11, 2021, the Court of Special Appeals completely agreed with Judge Rubin’s analysis, both as to denying Alfasigma’s request for discovery and as to applying the litigation privilege to dismiss the entirety of Alfasigma’s case.  On the issue of discovery, the appellate court stated:  “As we see it, Alfasigma’s discovery requests were overly broad and were not tailored to the core arguments made in appellee’s summary judgment motion.  We hold the court properly exercised its discretion in granting the stay [of discovery].”  With regard to granting Schulman Bhattacharya’s summary judgment motion, the Court of Special Appeals found that “[i]n the case at bar, it is evident that the circuit court thoroughly reviewed the record before concluding that the absolute litigation privilege applied to the cease and desist letters.  While this Court performs a de novo review, we believe the trial court’s analysis and ruling was not in error.  We, therefore, reprint the contents of the court’s memorandum and order.” 

Schulman Bhattacharya’s managing member, Jeremy W. Schulman, stated: “We are proud to have achieved yet another excellent result for ExeGi Pharma and Professor De Simone in their ongoing battle against Alfasigma.  This victory was particularly gratifying, as we were able to obtain it early in the case, thus avoiding costly discovery.  And we are pleased that the Court reaffirmed the important principle that when litigators in Maryland send legitimate cease and desist letters standing up for the legal rights of their clients, those letters are privileged and may not form the basis for later litigation.  We will continue to push hard to protect and enforce our clients’ legal rights using the tools available to us, and we will not be inappropriately silenced by disaffected counterparties.” 

Reacting to the Court of Special Appeals’ decision, Professor Claudio De Simone stated: “I am extremely pleased that the Maryland courts have done swift justice in this case, promptly dismissing Alfasigma’s frivolous lawsuit against us and upholding our rights to fight against Alfasigma’s false advertising.  Yet again, our team of lawyers at Schulman Bhattacharya, led by Jeremy Schulman and Jeffrey Gavenman, has performed at the highest level.  I am grateful for their efforts.  They truly are the best litigators in America.”

The Schulman Bhattacharya team handling this matter was led by partners Jeremy Schulman and Jeffrey Gavenman, with significant assistance from associates Sabina Schiller and Mace Phillips.

A copy of the Court of Special Appeals decision can be found by clicking here.

To view Jeremy Schulman’s oral argument before the Court of Special Appeals, click here.