Ventas, Inc. v. HCP, INC.

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 11a0130p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________

X
Plaintiff-Appellee/Cross-Appellant, -
VENTAS, INC.,
-
-
-
Nos. 09-6385/6413
v.
,
>
-
-
HCP, INC., fka Health Care Property

Defendant-Appellant/Cross-Appellee. -
Investors, Inc.,
-
N
Appeal from the United States District Court
for the Western District of Kentucky at Louisville.
No. 07-00238—John G. Heyburn II, District Judge.
Argued: March 10, 2011
Decided and Filed: May 17, 2011
Before: MERRITT, CLAY, and GRIFFIN, Circuit Judges.

_________________

COUNSEL
ARGUED: Jeffrey A. Lamken, MOLOLAMKEN LLP, Washington, D.C., for
Appellant. David J. Bradford, JENNER & BLOCK LLP, Chicago, Illinois, for Appellee.
ON BRIEF: Jeffrey A. Lamken, MOLOLAMKEN LLP, Washington, D.C., Sheryl G.
Snyder, FROST BROWN TODD LLC, Louisville, Kentucky, Matthew C.
Blickensderfer, FROST BROWN TODD LLC, Cincinnati, Ohio, Mark C. Hansen,
Aaron M. Panner, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, PLLC,
Washington, D.C., for Appellant. David J. Bradford, Terri L. Mascherin, Daniel J.
Weiss, JENNER & BLOCK LLP, Chicago, Illinois, Paul M. Smith, JENNER & BLOCK
LLP, Washington, D.C., Eric L. Ison, Holland N. McTyeire V, GREENEBAUM DOLL
& McDONALD PLLC, Louisville, Kentucky, for Appellee.
CLAY, J., delivered the opinion of the court, in which GRIFFIN, J., joined.
MERRITT, J. (p. 54), delivered a separate opinion concurring in the result and much of
the reasoning of the majority opinion.

1
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 2

_________________

OPINION
_________________

CLAY, Circuit Judge. In this diversity action, Defendant HCP, Inc. appeals a
$101,672,807.00 judgment entered by the district court for Plaintiff Ventas, Inc.
following a jury trial on Ventas’ claim of tortious interference with a prospective
advantage, and Ventas cross-appeals. HCP attacks the judgment on the basis of res
judicata; the sufficiency of the evidence; and the jury instructions. Ventas seeks to
augment the judgment with punitive damages, additional compensatory damages, and
prejudgment interest.

For the reasons discussed below, the judgment of the district court is
AFFIRMED, but the district court’s decision to preclude Ventas from seeking punitive
damages is REVERSED, and the case is REMANDED with instructions that the matter
proceed to trial on the single issue of punitive damages. The judgment as previously
entered by the district court shall stand as a partial final judgment pursuant to Rule 54(b)
of the Federal Rules of Civil Procedure.

BACKGROUND

In late 2006, Sunrise Senior Living Real Estate Trust (“Sunrise”), a Canadian real
estate investment trust, conducted a confidential auction of its assets. The parties to this
appeal, Plaintiff Ventas, Inc. (“Ventas”) and Defendant HCP, Inc. (“HCP”), both large
American real estate investment trusts specializing in healthcare-related properties,
participated in the auction. The auction was to proceed in two rounds. During the first
round, several prospective buyers, including Ventas and HCP, would be invited to
submit non-binding bids to acquire Sunrise. From these initial bids, Sunrise would
select a smaller group of prospective buyers to participate in the second round, in which
each remaining participant could submit a final bid. Sunrise would enter into a purchase
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 3

agreement with the winning bidder, subject to approval by two thirds of Sunrise’s voting
unitholders.1

The auction procedures required each participant to sign a confidentiality
agreement, which included a standstill provision (“Standstill Agreement”) that would,
among other things, prohibit the participant from making or announcing any bid outside
of the auction process for a period of 18 months following the conclusion of the auction.
The Standstill Agreement also proscribed any actions that would require Sunrise to
publicly announce a bid outside of the auction process.

As invitees to the preliminary stages of the auction, both Ventas and HCP
independently negotiated and entered into Standstill Agreements with Sunrise. Neither
was a party to the other’s Standstill Agreement. HCP’s Standstill Agreement permitted
HCP to make only one final bid, but Ventas’ Standstill Agreement permitted Ventas to
make a second final bid if Sunrise accepted a competing offer after Ventas made its
initial final bid.

Ventas and HCP each made a preliminary bid for Sunrise. HCP offered $16.25
per unit, and Ventas offered $13.25 per unit.2 Each bid was expressly conditioned upon
the bidding party reaching an agreement with Sunrise Senior Living, Inc. (“SSL”), a
third party that managed Sunrise’s properties under long-term management contracts.
Following a review of the preliminary bids, Sunrise invited Ventas and HCP to proceed
to the second round. Ventas and HCP were the only participants in the second round.

During this round, Sunrise required each party to submit a final, binding bid by
January 14, 2007. The requirement of a binding bid had the practical effect of forcing
a bidding party to first reach an independent agreement with SSL. As the district court
explained, “[g]iven the complex agreements that provide SSL with rights that encumber,
restrain, and burden Sunrise [] and the Sunrise [] properties, it is easy to see why Sunrise

1
A unitholder is an owner of units in an investment trust, similar to a shareholder owning shares
in a corporation.
2
All dollar amounts hereinafter are in Canadian currency unless otherwise indicated.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 4

[] would desire to have its buyer establish the feasibility of taking ownership of Sunrise
[] prior to submitting a final bid, rather than later citing inability to work with SSL as a
reason for backing out of the sale.” (R. 34 at 2 n.2.)

Ventas reached an agreement with SSL, but HCP failed to do so. Although HCP
and SSL engaged in negotiations, the negotiations “blew up” just prior to the final bid
deadline. (Tr.4B at 69.) It appears that negotiations collapsed when issues relating to
another real estate portfolio became intertwined in the Sunrise negotiations. This other
portfolio, referred to as the “CNL Properties,” was a multi-billion dollar property
portfolio purchased by HCP in 2006 and managed by SSL. (Tr.2B at 23.) During the
negotiations, HCP “had an existing signed agreement with [SSL] on [the] CNL portfolio
but that was under negotiation to be revised.” (Tr.4B at 70.) In its negotiations
regarding the CNL Properties, HCP sought to “get the cost structure of [SSL] consistent
with the cost structure of other senior housing operators.” (Tr.5A at 77.)

The parties dispute the source of the breakdown in negotiations between HCP
and SSL. Each assigns fault to the other. According to HCP, it had “reached an
agreement” with SSL as to the Sunrise properties “early the week of January 8th” (Tr.4B
at 69), but SSL, at the eleventh hour, demanded “concessions in separate negotiations
concerning other properties.” (HCP Br. at 6 (citing Tr.4B at 69; Tr.5B at 42).) This,
HCP contends, doomed the negotiations because the cost of the concessions “approached
$200 million.” (Tr.4B at 129.)

According to Ventas, it was HCP, not SSL, that derailed the negotiations. HCP
Chairman and Chief Executive Officer (“CEO”) Jay Flaherty admitted that he was
playing “hardball” with SSL during the negotiations by, for instance, sending numerous
notices to SSL that terminated, or purported to terminate, management contracts with
SSL relating to other properties owned by HCP. (Tr.5A at 75-82.) The night before the
final bid deadline, at 8:00 p.m. on January 13, 2007, HCP sent SSL a counter-proposal
that included substantially different terms than the parties had previously discussed. (R.
481 at 267-78.)
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 5

A senior vice president at SSL, Christopher Feeney, recalled that HCP’s last-
minute proposal included a 30-year right of first offer on development properties. (Id.
at 268-75.) Feeney explained that the proposed terms were unacceptable—“actually
worse” than HCP’s prior proposal—and remarked, referring to HPC: “I had never had
seen a party engage in a series of negotiations and then introduce something that is
completely out of left field with the hope of signing it in a day.” (Id.) Feeney concluded
that HCP was not “acting in good faith.” (Id. at 277.) SSL informed HCP via email that
it would not agree to the proposed terms; HCP did not respond. (Id. at 277-78.) At the
time of trial, HCP was embroiled in litigation against SSL to terminate certain
management contracts. (Tr.5A at 107.)

HCP withdrew from the auction process after it was unable to reach an agreement
with SSL. Although Sunrise offered to “provide some additional time” for HCP to
attempt to reach an agreement with SSL, HCP CEO Flaherty “indicated that, no, that
they were moving on to other things.” (Tr.2A at 39.) At that time, Andrew Phillips, a
financial advisor to Sunrise, asked Flaherty “if there was a different price, that is, a lower
price, at which he would be prepared to offer that would somehow offset any risk that
HCP might be taking by going into a transaction” without having reached a deal with
SSL. (Id.) Flaherty responded, “no, that . . . his board . . . had indicated that th[e]
agreement had to be completed.” (Id.)

On January 14, 2007, having reached an agreement with SSL, Ventas submitted
an unconditional bid to acquire Sunrise at $15.00 per unit, for a total purchase price of
$1,137,712,410.00. Ventas’ offer of $15.00 per unit was approved by the Sunrise Board
of Trustees that same day, and Ventas and Sunrise entered into a binding agreement (the
“Purchase Agreement”), in which Ventas agreed to purchase Sunrise for $15.00 per unit,
subject to approval by two-thirds of Sunrise’s voting unitholders. Section 4.1 of the
Purchase Agreement required Sunrise to use best efforts to secure unitholder approval
of the Purchase Agreement. Although Sunrise remained free to respond to unsolicited
offers, Section 4.4 required Sunrise to abstain from activities in furtherance of alternative
bids and to enforce any existing Standstill Agreements with third parties.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 6

On January 15, 2007, Sunrise and Ventas publicly announced the Purchase
Agreement in a press release. Shortly thereafter, Sunrise informed HCP of the existence
of the Purchase Agreement and of the continued viability of the Standstill Agreement
between HCP and Sunrise. The Canadian financial markets reacted positively to the
news of the proposed acquisition: units of Sunrise, which had been trading at
approximately $10.50 per unit during the confidential auction, increased to
approximately $15.00 per unit after the deal was announced.

Initially, unitholder approval of the Purchase Agreement seemed to be a foregone
conclusion. (See, e.g., Tr.7A at 87-99 (testimony of Ventas’ expert, opining that the
Ventas offer had a 95% expectation of approval).) The offer represented the “full price”
of Sunrise. (Tr.6A at 80.) The 50% premium over Sunrise’s market price before the
deal was “record-breaking.” (Tr.3A at 80.) No similar deal had ever been rejected by
Canadian shareholders. (Tr.11A at 124-25.)

In the weeks following the public announcement of the Purchase Agreement,
Sunrise CEO Doug MacLatchy suggested to HCP CEO Flaherty via email that HCP
make a bid for Sunrise. (R. 485-2 at 384-85.) According to HCP, from approximately
January 15, 2007 until February 1, 2007, HCP “went intensively to work with [SSL] to
remove the obstacle that had been thrown at [HCP] at the 11th hour on Saturday, January
13th, which related to” the CNL Properties. (Tr.5B at 38.) On February 13, 2007, the
HCP Board approved a conditional bid of $18.00 per unit for Sunrise. (Id. at 55-56.)

On February 14, 2007, Flaherty advised Sunrise’s investment banker that HCP
would make an offer of $18.00 per unit, and sent Sunrise a letter explaining the details
of HCP’s offer and included an unsigned and unconditional purchase agreement. HCP
did not disclose that its offer was conditioned on reaching an agreement with SSL.

Sunrise requested that HCP refrain from publicly announcing its offer of $18.00
per unit. That request notwithstanding, HCP issued the following press release on
February 14, 2007:
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 7

Health Care Property Investors, Inc. (NYSE: HCP) today announced that
it has submitted a proposal to acquire the assets of Sunrise Senior Living
Real Estate Investment Trust (TSX: SZR.UN) in a transaction that values
each Sunrise [] unit at Cdn$18.00. HCP’s offer price represents a 20%
premium over the Cdn$15.00 price being offered in Sunrise[]’s proposed
sale to Ventas, Inc.
To underscore the clear superiority of its offer, HCP proposes to enter
into an acquisition agreement that reflects its significantly higher price
and is otherwise identical to the agreement between Sunrise [] and
Ventas. HCP’s offer values the equity of Sunrise [] at appropriately
Cdn$1.4 billion.
HCP’s offer has been unanimously approved by HCP’s Board of
Directors. The offer is not subject to any due diligence or financing
contingencies. Because of HCP’s superior financial condition and access
to funds and its experience in large acquisitions, HCP believes that its
proposed acquisition of Sunrise [] has greater certainty of completion
than the proposed Ventas transaction.

(App. at 454.) The press release also included a copy of the offer letter that Flaherty sent
to Sunrise, which stated that HCP was “confident” that it could “enter into arrangements
with [SSL] on terms comparable to those entered into by Ventas.” Ventas believed that
the press release and offer were in violation of the Standstill and Confidentiality
Agreements that HCP had with Sunrise.

After HCP issued this press release, Sunrise became concerned about whether
HCP’s bid contained an undisclosed condition, particularly because HCP had not signed
the proposed purchase agreement. Ventas presented evidence at trial that HCP informed
Sunrise on numerous occasions that it would transmit a signed, unconditional purchase
agreement, but failed to ever do so. At one point, Flaherty told Sunrise that he had
actually sent the signed agreement via Federal Express. Sunrise’s concerns were soon
borne out: later that evening, HCP disclosed to Sunrise that its bid was conditioned
upon reaching an agreement with SSL.

Before the markets opened on February 15, 2007, Sunrise issued a press release
stating that Sunrise would not consider the offer from HCP until “such time as it receives
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 8

a confirmation from HCP that their proposal is not conditional on [HCP] reaching an
agreement with [SSL].” (Id. at 1240; see also Tr.2A at 98.)

Once the markets opened on February 15, 2007, the first day of trading since
HCP publicly announced its offer of $18.00 per unit, the price of Sunrise increased from
approximately $15.00 per unit to approximately $18.00 per unit in the largest trading day
in the history of Sunrise. Within two business days of the press release, approximately
40 million units of Sunrise had been exchanged, representing nearly 60% of Sunrise’s
total outstanding units. Ventas presented evidence that arbitragers from the U.S. had
begun to purchase the units of Sunrise.

On February 18, 2007, HCP proposed to SSL that they enter into an agreement
that HCP presented as nearly “identical” to the agreement that SSL had reached with
Ventas. The proposed agreement, however, demanded certain development rights
previously rejected by SSL, and that SSL was unlikely to accept in any future
negotiations. (Tr.2A at 107; Tr.3A at 64-66; Tr.3B at 126; Tr.5A at 93-96; R. 481 at
310-313.)

Sunrise issued a second press release on February 19, 2007, stating that the HCP
offer was “expressly conditional on HCP entering into” an agreement with SSL, as
“certain agreements among the various parties” prevent HCP from negotiating with SSL.
(App. at 590; Tr.11A at 49-50.)

On February 20, 2007, HCP informed Sunrise that HCP had proposed an
agreement to SSL that was “materially the same” as the agreement between SSL and
Ventas. (Tr.5A at 130.) This prompted Sunrise to issue a press release on February 21,
2007, stating that HCP had amended its offer to include an express condition. The press
release also stated that HCP “indicated that they are prepared to enter into an agreement
with Sunrise Inc. on the terms HCP purports are substantially similar to the agreement
entered into between Ventas, Inc. and Sunrise, Inc.” (App. at 730A.) Ventas issued its
own press release on February 22, 2007, in which Ventas stated that HCP’s offer was
barred by the Standstill Agreement, and was a conditional offer that was in fact less
favorable than its own. (Id. at 1228.)
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 9

Amidst this flurry of press releases, on February 21, 2007, HCP submitted a
proposal to purchase another company, identified as “Slough,” for $3.1 billion. (Tr.4B
at 96.) HCP did not issue a press release relating to this proposed acquisition. (Id.;
Tr.9A at 73.) The Slough deal would be announced publicly months later, after which
Standard & Poors would immediately place HCP’s credit and senior notes on “credit
watch.” (Tr.9A at 73.)

Meanwhile, Sunrise and Ventas each filed applications in the Ontario Superior
Court of Justice, Canada (“Ontario Superior Court”), seeking declarations regarding the
continued validity of HCP’s Standstill Agreement.3 Sunrise, which filed its application
on February 19, 2007, sought to clarify whether HCP was permitted to negotiate with
SSL. Ventas likewise filed an application on February 21, 2007, seeking a declaration
that Sunrise was obligated to enforce its Standstill Agreement with HCP.

On March 5, 2007, the Ontario Superior Court ruled as follows: 1) Sunrise must
enforce its Standstill Agreement with HCP; 2) the Purchase Agreement was reasonably
designed to ensure enforcement of the Standstill Agreements; 3) neither the Standstill
Agreement with HCP nor any subsequent action by Sunrise authorized HCP to submit
a late bid; and 4) Sunrise conducted the auction in a manner consistent with the
Standstill Agreement. As a result of this ruling, on March 7, 2007, HCP withdrew its
offer to purchase Sunrise.

Voting on the Purchase Agreement began on or around March 7, 2007, when
Sunrise mailed ballots and proxy statements to its unitholders. Four of the largest
institutional unitholders—ING, Caisse, Cypress, and Morgan Stanley, which collectively
controlled approximately 39% of the vote—voted against the Purchase Agreement.
(App. at 1315-17.)

On March 26, 2007, during the voting period, the Ontario Court of Appeal
affirmed the decision of the Ontario Superior Court, holding as follows: 1) the HCP

3
Additionally, on April 5, 2007, Ventas filed an action against Sunrise in the Canadian courts,
claiming damages of $250 million from Sunrise’s efforts to facilitate HCP’s bid. This matter was resolved
with Ventas’ ultimate purchase of Sunrise for $16.50 per unit.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 10

Standstill Agreement precluded HCP from submitting a subsequent bid and the Purchase
Agreement required Sunrise to enforce the HCP Standstill Agreement; 2) the
requirement that Sunrise enforce the Standstill Agreement against HCP is balanced and
objectively reasonable in the context of the auction; and 3) Sunrise acted reasonably in
designing and conducting the auction process so as to maximize value.

By April 9, 2007, a sufficient number of proxies had been entered against the
Purchase Agreement to prevent its approval. (Tr.4A at 119; App. at 742.) On April 11,
2007, to salvage the deal and avoid injury to its reputation, Ventas increased its original
offer of $15.00 per unit to $16.50 per unit. The unitholders approved Ventas’ increased
offer on April 19, 2007, and the deal closed on April 26, 2007.

Ventas commenced this diversity action under 28 U.S.C. § 1332 soon thereafter.
On May 3, 2007, Ventas filed a Complaint against HCP in the district court, asserting
Kentucky state law claims of tortious interference with contract, and tortious interference
with a prospective advantage. Ventas alleged that HCP improperly interfered with its
valid expectancy that the Sunrise unitholders would approve its $15.00 per unit offer to
purchase Sunrise, causing Ventas to raise its offer to $16.50 per unit.

On July 2, 2007, HCP moved to dismiss the Complaint, arguing res judicata and
failure to state a claim. The district court denied the motion. On July 25, 2008, the
district court granted HCP leave to file counterclaims against Ventas, alleging that
Sunrise—whose liabilities Ventas had assumed—misled HCP about the fairness of the
auction process. On March 25, 2009, upon Ventas’ motion for judgment on the
pleadings, the district court dismissed HCP’s counterclaims, reasoning that HCP’s
allegations were not cognizable under Kentucky law.

On May 14, 2009, the parties cross-moved for summary judgment. HCP argued
that res judicata precluded Ventas’ claims and that Ventas could not prove tortious
interference with contract. Ventas sought summary judgment on its claim of tortious
interference with a prospective advantage, as well as on HCP’s “non-damages
affirmative defenses.” Ventas also sought resolution of numerous issues of collateral
estoppel stemming from the Canadian litigation.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 11

In a memorandum and opinion dated July 15, 2009, the district court granted
summary judgment for HCP on Ventas’ claim of tortious interference with contract, but
permitted Ventas’ claim of tortious interference with a prospective advantage to proceed
to trial. In so doing, the district court held that Ventas could not seek consequential
damages based on increased financing costs that it incurred as a result of any delay in
the closing of the Sunrise auction. Additionally, the district court once again rejected
HCP’s claim of res judicata.

A jury trial commenced on August 18, 2009 and lasted until September 4, 2009.
On August 28, 2009, the district court granted judgment as a matter of law for HCP on
the issue of punitive damages, holding that Ventas had not presented sufficient evidence
to present the issue to the jury.

Towards the end of the trial, the parties contested the substance of the jury
instructions. The central issue was whether the district court should instruct the jury in
accordance with § 767 or § 768 of the Restatement (Second) of Torts. Both sections
impose liability for tortious interference, but § 767 is a generally applicable section,
while § 768 treats tortious interference as between competitors and imposes a higher
standard for liability. The district court resolved the question in favor of § 768, but also
instructed the jury as to “some of the factors enumerated in section 767 [as] helpful
guideposts for examining the alleged wrongfulness of HCP’s actions.” The district court
also held, as a matter of law, that: 1) Ventas and HCP were competitors; 2) the actions
of Ventas and HCP did not “create or continue an unlawful restraint of trade;” and 3) the
purpose of any tortious interference by HCP was “at least in part to advance [HCP’s]
interest in competition.” (R. 450 at 6 n.5.)

On September 4, 2009, the jury returned a verdict for Ventas in the amount of
$101,672,807.00 (U.S.), apparently calculating Ventas’ damages as follows:

Purchase Agreement Price $15.00 / unit
Actual Purchase Price $16.50 / unit
Difference (damage) $1.50 / unit
Number of Units Outstanding 75,847,494
Damage to Ventas (units x damage per unit) $113,771,241.00
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 12

Conversion Rate (4/26/07) $1.00 (Can.) = $0.89366 (U.S.)
Total Damages (U.S.) $101,672,807.00 (U.S.)

(See Tr.7A at 59.) (The district court, not the jury, performed the currency conversion.)

The parties filed post-trial motions. HCP sought judgment as a matter of law
under Rule 50(b) of the Federal Rules of Civil Procedure based on the sufficiency of the
evidence, and, once again, res judicata. HCP alternatively sought a new trial based on
claimed deficiencies in the jury instructions; erroneous evidentiary rulings; and the
overall weight of the evidence. Ventas moved to alter or amend the judgment under
Rule 59(e) of the Federal Rules of Civil Procedure, requesting that the district court: 1)
convert damages from Canadian to U.S. dollars as of the date of judgment rather than
the date of injury; and 2) award prejudgment interest on the jury verdict. On November
16, 2009, the district court denied both parties’ post-trial motions. This timely cross-
appeal followed.

DISCUSSION – APPEAL BY HCP

The Court first turns to the issues that HCP raises on appeal. HCP argues that
the district court erroneously: 1) concluded that Ventas’ claims were not barred by res
judicata; 2) instructed the jury on the elements of “improper interference” and “but-for”
causation; and 3) denied HCP judgment as a matter of law on the element of causation.
Because we find that these arguments lack merit, we AFFIRM the judgment below in
its entirety.

I. Res Judicata

We begin our analysis with HCP’s argument that Ventas’ claim is barred by the
doctrine of res judicata. According to HCP, Ventas could have—and should
have—asserted its tortious interference claims when it filed its application in the Ontario
Superior Court on February 21, 2007. The district court rejected this argument, and we
now AFFIRM.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 13

A. Standard of Review and Legal Standard

The district court’s application of the doctrine of res judicata is reviewed de
novo. Bragg v. Flint Bd. of Educ., 570 F.3d 775, 776 (6th Cir. 2009). Under Kentucky
law,4 res judicata consists of two distinct components, claim preclusion and issue
preclusion. Kentucky courts generally follow the Restatement (Second) of Judgments
(1982) for purposes of applying res judicata.5 This appeal raises only claim preclusion,
which, under Kentucky law, bars the litigation of “entire claims that were brought or
should have been brought in a prior action.” Morgan v. Standard Elec. Co., Inc., 62 F.
App’x 110, 111 (6th Cir. 2003). Under Kentucky law, for claim preclusion to bar a
subsequent action:

First, there must be identity of parties. Second, there must be identity of
the two causes of action. Third, the action must be decided upon its
merits. In short, the rule of res adjudicata does not act as a bar if there
are different issues or the questions of law presented are different.
Likewise, it has long been recognized that a party may not split his cause
of action, therefore, if a cause of action should have been presented and
the party failed to do so and the matter should again arise in another
action, it will be held that the first action was res adjudicata as to all
causes that should have properly been presented.

Newman v. Newman, 451 S.W.2d 417, 419 (Ky. 1970).

4
A federal court sitting in diversity applies the choice of law rules of the forum state to determine
questions of res judicata. See Taveras v. Taveraz, 477 F.3d 767, 783 (6th Cir. 2007). Here, the parties
did not brief whether Kentucky, as the forum state, would apply its own res judicata law or that of Ontario
in determining the preclusive effect of the prior Canadian action. The parties have instead assumed, as did
the district court, that Kentucky and Ontario would apply the same rules of res judicata. For purposes of
this appeal, we need not disturb this assumption. See C.D. Herme, Inc. v. R. C. Tway Co., 294 S.W.2d
534, 538 (Ky. 1956) (holding that where the parties fail to argue that the law of a jurisdiction other than
Kentucky governs, the Kentucky Supreme Court will “assume[] that the [law of the other jurisdiction] is
the same as that of Kentucky.”).
5
See, e.g., Smith v. Bob Smith Chevrolet, Inc., 275 F. Supp. 2d 808, 813 (W.D. Ky. 2003);
Coomer v. CSX Transp., Inc., 319 S.W.3d 366, 371 & n.9, 14, 31 (Ky. 2010); Berrier v. Bizer, 57 S.W.3d
271, 280-81 (Ky. 2001); Yeoman v. Commonwealth Health Policy Bd., 983 S.W.2d 459, 465 (Ky. 1998);
Capital Holding Corp. v. Bailey, 873 S.W.2d 187, 193 (Ky. 1994); Watts By and Through Watts v. K, S
& H, 957 S.W.2d 233, 237 (Ky. 1997); ESI Cos., Inc. v. Ray Bell Const. Co. Inc., No. 2008-CA-00176-
MR, 2009 WL 4060478, at *8 (Ky. Ct. App. Nov. 25, 2009); Parker v. Carrington, No. 2004-CA-002614-
MR, 2006 WL 2517898, at *2 (Ky. Ct. App. Sept. 1, 2006); Black v. CMT Trucking, No. 2004-CA-
001079-WC, 2005 WL 267568, at *5 (Ky. Ct. App. Feb. 4, 2005); Wheeler v. Wheeler, 154 S.W.3d 291,
294 (Ky. Ct. App. 2004); Hauling v. Powell, No. 2002-CA-002340, 2003 WL 21204976, at *6 (Ky. Ct.
App. May 23, 2003); Dennis v. Fiscal Court of Bullitt Cnty., 784 S.W.2d 608, 609-10 & n.2 (Ky. Ct. App.
1990); Rev. Cabinet, Commonwealth of Ky. v. Samani, 757 S.W.2d 199, 202 (Ky. Ct. App. 1988).
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 14

B. Application

The district court concluded that res judicata is inapplicable because Ventas’
claim of tortious interference was not ripe on February 21, 2007, when Ventas filed its
application in the Ontario Superior Court. The district court relied upon the well-settled
principle that res judicata “cannot be used to cut off a cause of action before it accrues.”
Watts By & Through Watts, 957 S.W.2d at 237. On appeal, the parties dispute whether
Ventas’ claims of tortious interference were ripe on February 21, 2007.

The parties and the district court, however, have overlooked the well-settled rule
that an action for declaratory relief does not have preclusive effect in a subsequent
litigation between the same parties. Under § 33 of the Restatement (Second) of
Judgments,

[a] plaintiff who wins declaratory judgment may go on to seek further
relief, even in an action on the same claim which prompted the action for
a declaratory judgment. This further relief may include damages which
had accrued at the time the declaratory relief that could have been
requested initially.

Restatement (Second) of Judgment § 33, cmt. (c). The Restatement expressly permits
claim splitting where, as here, the first action sought only declaratory relief. Id. (stating
that “a declaratory action determines only what it actually decides and does not have a
claim preclusive effect on other contentions that might have been advanced.”).

Consistent with Kentucky’s general adherence to the Restatement (see supra note
5 (collecting cases)), Kentucky has “adopted essentially the same rule [as Restatement
§ 33],” even though Kentucky has done so without expressly referencing the
Restatement. See Andrew Robinson Int’l, Inc. v. Hartford Fire Ins. Co., 547 F.3d 48, 56
(1st Cir. 2008) (discussing Kentucky law). In Cooke v. Gaidry, 218 S.W.2d 960 (Ky.
1949), for example, the Kentucky high court held that “suits for declaratory judgments”
under state law do not fall within the general rule that “a former judgment is conclusive
not only of all matters actually adjudicated thereby, but in addition, as to all matters
which could have been presented for adjudication in the original action.” Id. at 961-62
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 15

(holding that prior declaratory judgment action on a lease did not preclude a subsequent
action for damages). The rule as stated in Cooke is oft-repeated and is now well-settled
Kentucky law.6 See, e.g., Holbrook v. Shelter Ins. Co., 186 F. App’x 618, 622 (6th Cir.
2006); City of Paducah v. Elec. Plant Bd. of the City of Paducah, 449 S.W.2d 907, 910
(Ky. 1970).

It is undisputed in the instant case that the prior proceedings in Canada were
declaratory in nature. (HCP Br. at 13; Ventas Br. at 62.) In fact, the Ontario Superior
Court expressly stated that Ventas “applie[d] for a declaration” as to the parties’
obligations under the various agreements. See Ventas, Inc. v. Sunrise Senior Living Real
Estate Invest. Trust, 07-CL-6893 (Ont. Sup. Ct. Mar. 6, 2007). It is thus clear that the
prior Ontario action does not have preclusive effect under Kentucky law,7 and does not
bar Ventas’ present tort action against HCP. See Stericycle, Inc. v. City of Delavan, 120
F.3d 657, 659 (7th Cir. 1997) (“The effect of such a declaration . . . is not to merge a
claim in the judgment or to bar it.”) (internal quotation marks and citation omitted).

Accordingly, we AFFIRM the decision of the district court decision as a matter
of Kentucky law, declining to accord preclusive effect to the prior Canadian litigation.
See Angel v. Kentucky, 314 F.3d 262, 264 (6th Cir. 2002) (“[W]e are free to affirm the
judgment on any basis supported by the record.”).

6
The Kentucky rule is consistent with the majority rule. As the First Circuit recently noted, the
“vast majority of states that have addressed this problem unapologetically apply a special rule of claim
preclusion, consistent with that of section 33 of the Second Restatement, in the declaratory judgment
context.” Hartford Fire Ins. Co., 547 F.3d at 56; see also Duane Reade, Inc. v. St. Paul Fire & Marine
Ins. Co., 600 F.3d 190, 196 (2d Cir. 2010); Am. Forest Council v. Shea, 172 F. Supp. 2d 24, 29 (D.D.C.
2001) (“Where a party asks only for declaratory relief, courts have limited the preclusive effect to the
matters declared, hence permitting a later action seeking coercive relief based on the same cause of
action.”).
7
As noted supra note 4, the Court assumes, as the parties and district court did, that Kentucky law
governs the application of res judicata in this case. Nonetheless, even if Ontario law so governed, it
appears that Ontario law would not give the prior action preclusive effect. (See, e.g., R. 28, Ex. 9 at 8
(“The courts of Ontario, and the courts elsewhere in Canada, have been cautious about applying the cause
of action estoppel branch of the doctrine of res judicata in circumstances in which the prior proceeding
was an application . . . rather than an action.”) (collecting cases) (Decl. of John W. Morden, former Assoc.
Chief Justice of Ontario).)
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 16

II. Jury Instructions

We now turn to HCP’s argument that the district court erred as a matter of
Kentucky law in its instructions to the jury. Specifically, HCP asserts that the district
court improperly instructed the jury on two of the elements of tortious interference under
Kentucky law, namely “improper interference” and “but-for” causation. As we explain
below, we find no error in the district court’s jury instructions.

A. Standard of Review

We review the “legal accuracy of jury instructions de novo,” United States v.
Blanchard, 618 F.3d 562, 571 (6th Cir. 2010), and the denial of a proposed jury
instruction for abuse of discretion. See United States v. Adams, 583 F.3d 457, 468-69
(6th Cir. 2009). Reversal of a judgment on the basis of an erroneous jury instruction
may occur “only if the instructions, viewed as a whole, were confusing, misleading, or
prejudicial.” United States v. Harrod, 168 F.3d 887, 892 (6th Cir. 1999) (internal
quotation marks and citation omitted).

B. Tortious Interference Under Kentucky Law

Because the district court’s jury instructions were based on Kentucky law, we
first review the relevant state law on which the jury was instructed. Under Kentucky
law, liability for tortious interference arises when a party improperly interferes with a
valid expectancy of another. See Nat’l Collegiate Athletic Ass’n By and Through
Bellarmine College v. Hornung, 754 S.W.2d 855, 857 (Ky. 1988). In Hornung, the
Kentucky Supreme Court first recognized the tort, expressly adopting §§ 766, 767 and
773 of the Restatement (Second) of Torts. Id.

Section 766B sets forth the basic elements of a tortious interference claim:

§ 766B: Intentional Interference with Prospective Contractual
Relation
One who intentionally and improperly interferes with another’s
prospective contractual relation . . . is subject to liability to the other for
the pecuniary harm resulting from loss of the benefits of the relation,
whether the interference consists of (a) inducing or otherwise causing a
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 17

third person not to enter into or continue the prospective relation or (b)
preventing the other from acquiring or continuing the prospective
relation.
Restatement (Second) of Torts § 766B (emphasis added).

Section 767 elaborates on the element of “improper interference” set forth in
§ 766B:

§ 767. Factors In Determining Whether Interference Is Improper
In determining whether an actor’s conduct in intentionally interfering
with a contract or a prospective contractual relation of another is
improper or not, consideration is given to the following factors:
(a) the nature of the actor’s conduct,
(b) the actor’s motive,
(c) the interests of the other with which the actor’s conduct
interferes,
(d) the interests sought to be advanced by the actor,
(e) the social interests in protecting the freedom of action of the
actor and the contractual interests of the other,
(f) the proximity or remoteness of the actor's conduct to the
interference and
(g) the relations between the parties.

Id. § 767. Summarizing these factors, the Kentucky Supreme Court has held that
“improper interference” under § 766B requires the plaintiff to “‘show malice or some
significantly wrongful conduct.’” Leo J. Brielmaier Co. v. Newport Hous. Auth., 173
F.3d 855 (6th Cir. 1999) (table) (quoting Hornung, 754 S.W.2d at 859); Steelvest, Inc.
v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 487 (Ky. 1991) (defining “unlawful
means” as including fraud, deceit, and coercion).

In the case of a tortious interference claim between competitors, § 768 holds
plaintiffs to a more exacting standard. Section 768 makes clear that “competition is not
an improper basis for interference,” Restatement (Second) of Torts § 768, cmt. (a), and
provides, in pertinent part:

§ 768. Competition As Proper or Improper Interference
(1) One who intentionally causes a third person not to enter into a
prospective contractual relation with another who is his competitor . . .
does not interfere improperly with the other’s relation if
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 18

(a) the relation concerns a matter involved in the competition
between the actor and the other and
(b) the actor does not employ wrongful means and
(c) his action does not create or continue an unlawful restraint of
trade and
(d) his purpose is at least in part to advance his interest in
competing with the other.

Restatement (Second) of Torts § 768 (emphasis added). It is unclear whether the
Kentucky Supreme Court would apply § 768, or how § 768 may otherwise impact the
factors set forth in § 767.

C. Jury Instructions

HCP requested that the district court instruct the jury under § 768. Ventas
objected, arguing that § 767 sets forth the proper legal standard. The district court noted
that Kentucky law was unclear on this point, and proceeded to “predict how Kentucky
courts would resolve which section properly articulates the analysis for the facts at issue
in this case.” (R. 450 at 2); see also Bailey v. V & O Press Co., Inc., 770 F.2d 601, 604
(6th Cir. 1985) (stating that federal courts should look to “all relevant data” when
predicting a state supreme court’s decision, including state appeals court rulings,
restatements of the law, academic publications, and the majority rule).

HCP argued below, as it does now on appeal, that the commentary to § 767
directs courts to apply § 768 in the case of a tortious interference claim between
competitors. See Restatement (Second) of Torts § 767, cmt. (a). The relevant
commentary states that, in cases between competitors, § 768 “supplant[s] the
generalization expressed” in § 767. Id.

The district court held as a matter of Kentucky law that “the appropriate use of
sections 767 and 768 is to apply section 768 as the test for whether the defendant’s
conduct was improper. However, section 767 can still be used to illuminate the
requirements of section 768.” (R. 450 at 4.) The district court accordingly instructed
the jury pursuant to § 768, but used “some of the factors enumerated in section 767 [as]
helpful guideposts for examining the alleged wrongfulness of HCP’s actions.” (Id.)
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 19

In its instructions to the jury, the district court first set forth the elements that
Ventas was required to prove to prevail on its tortious interference claim:

One, Ventas had a reasonable likelihood or probability of acquiring
Sunrise [] at $15 per unit; two, HCP knew about the probable acquisition
of Sunrise []; three, HCP intentionally and improperly interfered with
Ventas’[] acquisition of Sunrise [] at $15 per unit; four, HCP’s improper
interference prevented Ventas from acquiring Sunrise [] at $15 per unit;
and five, HCP’s improper interference was a substantial factor in causing
Ventas’[] damages.

(Tr.12B at 100.) The district court then turned to the issue of competition:

Ventas and HCP were business competitors generally, and were
competing here to acquire Sunrise []. Improper interference, as
referenced in element number three, has a special meaning among
competitors. In these circumstances then, the only way to find in favor
of Ventas is to find that HCP employed—I put it in quotes because it’s
a defined term—“significantly wrongful means” to interfere with
Ventas’[] acquisition of Sunrise [] at $15 per unit.[8]

For purposes of this instruction, “significantly wrongful means” includes
conduct such as fraudulent misrepresentation, deceit and coercion.
Among other things, you may consider the parties’ conduct, motive and
the circumstances of the transaction to illuminate whether HCP’s conduct
amounts to significantly wrongful means. To the extent you consider a
party’s motive in causing harm, it must be based on actual evidence of
motive rather than a witness’[] opinion of another’s motive.

Now, as part of element number 3 . . . Ventas must also show that HCP
intended to improperly interfere with the acquisition of Sunrise []. As
the word “intent” is used there, HCP’s conduct must be intentional . . .
HCP’s conduct was intentional if its purpose was to improperly interfere
with Ventas’[] acquisition of Sunrise [] or if HCP knew the improper
interference was certain or substantially certain to occur.

(Id. at 101-02 (paragraph breaks added).)

8
Although “malice” would also be sufficient to show “improper interference” under Kentucky
law, the district court determined that HCP did not act with “malice” because it did not act with the sole
purpose of harming Ventas. (See R. 450 at 6 n.5.) The parties do not appeal that decision.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 20

Additionally, the district court gave the following instruction concerning the
Canadian litigation between the parties:

The parties to this action have previously resolved related issues in the
Canadian court system. The important facts of these cases are as follows:
In the week after HCP made its $18 topping bid, Sunrise [] sought
guidance from a Canadian court in interpreting its confidentiality
agreement with HCP and its purchase agreement with Ventas. In that
case Sunrise [] and HCP generally took the position that the
confidentiality agreement and the purchase agreement did not prohibit
HCP's $18 bid. Ventas took the opposite position.
The Canadian court found: One, HCP’s confidentiality agreement
precluded it from making the $18 topping bid. By making the bid, HCP
breached its confidentiality agreement with Sunrise []. Two, the
purchase agreement between Sunrise [] and Ventas prohibited Sunrise []
from submitting HCP’s bid to its unitholders. Finally, three, Sunrise[’s]
auction process leading to the Ventas purchase agreement was
objectively reasonable and fair.

(Id. at 103.) The district court then discussed the relevance of the breach of contract:

HCP did breach its confidentiality agreement by submitting the February
14 topping bid. This fact alone is not sufficient to establish tortious
interference. However, it may be considered along with the other
evidence in determining whether HCP engaged in improper interference.
(Id. at 103-04.)

D. Application

HCP attacks the jury instructions on four grounds: 1) that the district court
improperly blended §§ 767 and 768 of the Restatement (Second) of Torts; 2) that the
instructions erroneously permitted the jury to consider HCP’s breach of its contract with
Sunrise as improper conduct; 3) that the district court permitted the jury to consider
motive without providing the proper legal standard; and 4) that the district court failed
to adequately explain the element of causation. We now review each of these
assignments of error, and reject each as meritless.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 21

1. “Blending” of Sections 767 and 768

HCP first argues that the jury instructions were erroneous because the district
court “blended” §§ 767 and 768 instead of relying exclusively on § 768. Before
considering the propriety of the district court’s hybrid approach, we must consider the
threshold issue of whether the district court properly looked to § 768 in the first instance.
As explained below, we find no error in the district court’s decision to apply § 768 as a
matter of Kentucky law.

Although the Kentucky Supreme Court has not considered whether to apply
§ 768 in cases involving competitors, the reported cases on the issue have predicted that
the state high court would apply § 768. See, e.g., Brake Parts, Inc. v. Lewis, Nos. 09-132
& 10-212, 2011 WL 42973, at *3 (E.D. Ky. Jan. 6, 2011) (“Kentucky courts would
utilize the Section 768 factors as the appropriate factors for evaluating the legality of
competitive conduct.”); Midwest Agency Servs., Inc. v. JP Morgan Chase Bank, N.A.,
No. 2:09-135, 2010 WL 935450, *9 (E.D. Ky. Mar. 11, 2010) (citing AMC of Louisville,
Inc. v. Cincinnati Milacron, Inc., No. 3:97-CV-343, 2000 WL 33975582, at *7-8 (W.D.
Ky. Jan. 25, 2000) (relying on Section 768 in considering a tortious interference claim
between competitors under Kentucky law)).

We believe that these decisions make the proper prediction. Kentucky courts
generally follow the Restatement (Second) of Torts, which, of course, includes Section
768, and nothing of which we are aware suggests that Kentucky courts would not apply
that section under the facts of this case. Indeed, the Restatement’s heightened scrutiny
of claims between competitors under § 768 is consistent with Kentucky’s strong interest
in robust competition.9 See, e.g., ATC Distrib. Grp., Inc. v. Whatever It Takes
Transmissions & Parts, Inc., 402 F.3d 700, 717 (6th Cir. 2005) (“[S]imply attempting

9
Kentucky courts have consistently recognized a strong state interest in promoting competition
across many areas of the law. See, e.g., Anderson v. Jett, 12 S.W. 670, 672 (Ky. 1889) (“Rivalry is the life
of trade. The thrift and welfare of the people depend upon it.”); see also Ky. Farm Bureau Mut. Ins. Co.
v. Shelter Mut. Ins. Co., 326 S.W.3d 803, 810 (Ky. 2010) (insurance law); Covington Inn Corp. v. White
Horse Tavern, Inc., 445 S.W.2d 135, 137 (Ky. 1969) (unfair competition); Gen. Elec. Co. v. Am. Buyers
Co-op, Inc., 316 S.W.2d 354, 360 (Ky. 1958) (“Our economic system is founded upon competition—‘the
life of trade.’”); Love v. Kozy Theater Co., 236 S.W. 243, 246 (Ky. 1921).
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 22

to advance one’s own legitimate economic interests at the expense of another’s interests
does not constitute malice.”) (applying Kentucky law); Brooks v. Patterson, 29 S.W.2d
26, 29 (Ky. 1930) (distinguishing cases where the alleged injury resulted from an
“outgrowth of competition in business” from those where it was “brought about by the
exercise of either fraud or force.”); accord Carvel Corp. v. Noonan, 350 F.3d 6, 18-20
(2d Cir. 2003) (stating that “[t]he Restatement’s distinction between competitors and
non-competitors is intended to strike a balance between protecting economic
relationships and encouraging competitive behavior in the market.”).

Having determined that Kentucky law would look to § 768 in cases between
competitors, we now turn to HCP’s argument that the district court erred by also
considering § 767. Specifically, HCP contends that it was error to instruct the jury on
certain factors listed in § 767 to define “significantly wrongful means” within the
meaning of § 768. HCP’s argument relies principally on commentary to § 767, which
states that § 768 “supplant[s]” § 767 in cases of competitors. See Restatement (Second)
of Torts § 767, cmt. (a). HCP contends that the word “supplant” is dispositive and
renders § 768 inapplicable to claims as between competitors. We disagree with HCP’s
myopic reading of, and unreasonable reliance on, one word in the commentary.10

Section 768 does not define “wrongful means,” and in fact places no limitation
whatsoever on the factors that a jury might consider to determine whether the
interference of a competitor was wrongful. Without any instruction regarding the
meaning of “significantly wrongful conduct,” the jury would have been left without any
guidance. See Bucyrus-Erie Co. v. Gen. Prods. Corp., 643 F.2d 413, 418 (6th Cir. 1981)
(“The purpose of jury instructions is to inform the jury on the law and to provide proper
guidance and assistance in reaching its verdict.”).

10
As the district court explained, courts have interpreted the commentary in a variety of ways.
Some courts have “strictly interpreted” it to render § 767 inapplicable if the parties are competitors (R. 450
at 3 (citing, inter alia, Pino v. Prudential Ins. Co. of Am., 689 F. Supp. 1358, 1362 (E.D. Pa. 1988)), while
other courts have used the § 767 factors to supplement the standard set forth in § 768, or to provide an
affirmative defense of competition. (Id. (citing, inter alia, Buztronics, Inc. v. Theory3, Inc., No.
104CV1485, 2005 WL 1865512, at *6 (S.D. Ind. Aug. 5, 2005).)
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 23

In seeking guidance, the district court properly looked to § 767, as many other
courts have done, to illuminate the meaning of “wrongful” conduct under § 768. See,
e.g., Franklin Music v. Am. Broad. Cos., Inc., 616 F.2d 528, 545 (3d Cir. 1979);
Buztronics, 2005 WL 1865512, at *6; White Sands Grp., L.L.C. v. PRS II, L.L.C., Nos.
1080312 & 1080673, 2009 WL 2841114, at *11 (Ala. Sept. 4, 2009); Siren, Inc. v.
Firstline Sec., Inc., No. 06-1109, 2006 WL 3257440, at *6 (D. Ariz. May 17, 2006); RTL
Distrib., Inc. v. Double S Batteries, Inc., 545 N.W.2d 587, 591 (Iowa Ct. App. 1996);
Downers Grove Volkswagen, Inc. v. Wigglesworth Imports, Inc., 546 N.E.2d 33, 37 (Ill.
Ct. App. 1989).

Part of the same Restatement, § 767 immediately proceeds § 768, and both
sections relate to tortious interference. Section 768 stands simply as “special application
of the factors determining whether an interference is improper or not, as stated in § 767.”
Restatement (Second) or Torts § 768, cmts. (a) (“Like § 767, this Section speaks of an
interference that is improper or not.”) and (b). Section 768 itself refers to § 767 in its
discussion of wrongful means. See Restatement (Second) of Torts § 768, cmt. (b) (“The
predatory means discussed in § 767, Comment c, physical violence, fraud, civil suits and
criminal prosecutions, are all wrongful in the situation covered by this Section.”).
Moreover, § 767 specifically defines “improper interference,” a phrase also used in
§ 768, and that the Kentucky Supreme Court has interpreted to mean “wrongful,” the
operative word under § 768. Cf. Atlantic Cleaners & Dyers v. United States, 286 U.S.
427, 433 (1932) (noting the “natural presumption that identical words used in different
parts of the same act are intended to have the same meaning.”).

Finally, we address HCP’s policy argument that the “district court’s [] effort to
‘blend’ § 767 with § 768 diluted the competitive protections § 768 is designed to
provide.” (HCP Br. at 50.) We do not agree. To the extent the district court’s hybrid
approach may have increased the likelihood of liability under the facts of this case, the
approach did not dilute the competitive protections of § 768. Robust competition may
also require regulation, and unfair competitive practices certainly do not fall within the
protections of § 768. Although courts should be circumspect in adjudicating claims
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 24

between competitors, wrongful and anti-competitive conduct should not be insulated
from liability. Indeed, the public interest in full and fair competition is furthered by
imposing liability on a market player, such as HCP, for fraudulently leveraging a public
market to sabotage a competitor, as liability for such conduct will deter similar future
conduct and promote economic certainty in the marketplace.

Under these circumstances, we find that the district court properly resolved the
interplay between §§ 767 and 768 as a matter of Kentucky law by instructing the jury
pursuant to § 768 and also using certain factors listed in § 767 to explicate § 768.

2. Breach of Contract

HCP next argues that the district court erred by allowing the jury to consider
HCP’s breach of its Standstill Agreement with Sunrise as wrongful conduct sufficient
to establish “improper interference.” HCP’s objection focuses on the following
instruction given by the district court:

HCP did breach its confidentiality agreement by submitting the February
14 topping bid. This fact alone is not sufficient to establish tortious
interference. However, it may be considered along with the other
evidence in determining whether HCP engaged in improper interference.

(Tr.12B at 103-04.) Instead of this instruction, HCP had requested an instruction that
its breach of the Standstill Agreement with Sunrise “does not constitute wrongful means
for purposes of Ventas’[] claim.” HCP argues that the district court’s instruction was
erroneous because a breach of contract with a third party is not sufficient to satisfy the
requirement of “improper interference.” See, e.g., Windsor Sec., Inc. v. Hartford Life
Ins. Co., 986 F.2d 655, 664 (3d Cir. 1993).

HCP’s argument fails as a matter of fact, and as a matter of law. First, HCP’s
argument rests on a misreading of the record: the district court did not permit the jury
to consider HCP’s breach of the Standstill Agreement with Sunrise as sufficient to
establish “significantly wrongful” conduct. The jury instructions explicitly defined
“significantly wrongful means” to include “fraudulent misrepresentation, deceit and
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 25

coercion,” and stated that breach of the Standstill Agreement “alone is not sufficient to
establish tortious interference.” (Tr.12B at 103-04.)

Second, the district court did not commit legal error by permitting the jury to
consider HCP’s breach of its contract with Sunrise “along with the other evidence in
determining whether HCP engaged in improper interference.” (Id. at 104.) Although
the relevance of a breach of contract with a third party in a tortious interference action
has not been examined by many courts, other courts have similarly held that such a
breach is evidence of “improper interference.” See, e.g., Kapunakea Partners v. Equilon
Enters. LLC, 679 F. Supp. 2d 1203, 1217 (D. Haw. 2009); Foam Supplies, Inc. v. Dow
Chem. Co., No. 4:05CV1772, 2008 WL 3159598, at *7 (E.D. Mo. Aug. 4, 2008); Leigh
Furniture & Carpet Co. v. Isom, 657 P.2d 293, 306 (Utah 1982); Island Air, Inc. v.
LaBar, 566 P.2d 972, 980 (Wash Ct. App. 1977). HCP cites no case that holds a breach
of contract with a third party is completely irrelevant.

As the district court observed, to ignore HCP’s breach of its contract with Sunrise
would “create an artificial reality within the case.” (R. 520 at 9.) HCP’s breach of its
Standstill Agreement with Sunrise illuminates the anti-competitive activities in which
HCP engaged and is central to an understanding of Ventas’ allegations of fraud and
deception. As Ventas argued at trial, HCP misled the market by making public
statements that were contrary to its obligations under the Standstill Agreement without
disclosing the existence of the agreement or other relevant information. See, e.g.,
Hornung, 754 S.W.2d at 859 (“[M]alice may be inferred in an interference action by
proof of lack of justification.”).

Accordingly, because the jury instruction regarding the relevance of HCP’s
breach the Standstill Agreement was an accurate and clear statement of the law, HCP’s
argument is without merit.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 26

3. Motive

HCP next argues that the district court erred by allowing the jury to consider
HCP’s motive without also “advis[ing] the jury . . . that the defendant’s motive is not a
sufficient basis for liability unless the defendant acted solely to inflict harm.” (HCP Br.
at 56 (emphasis omitted).) As described above, the district court instructed the jury, in
pertinent part, as follows:

Among other things, you may consider the parties’ conduct, motive and
the circumstances of the transaction to illuminate whether HCP’s conduct
amounts to significantly wrongful means.

(Tr.12B at 101-02.)

HCP contends that the district court should have instructed the jury that HCP did
not act solely to injure Ventas. HCP asserts that the jury was “left free to punish HCP
[because HCP] may have been motivated not merely to acquire Sunrise, but also in part
to disadvantage Ventas.” (HCP Rep. at 33-34.) This, according to HCP, would not
amount to “improper interference” because a defendant does not engage in “improper
interference” if “his purpose is at least in part to advance his interest in competing with
the other.” Restatement (Second) of Torts § 768(1)(d).

We find HCP’s argument unavailing. The district court did not instruct the jury
that it may find “improper interference” on the basis of motive alone. Nor do the jury
instructions reasonably suggest that the jury was permitted to do so. Instead, the district
court instructed the jury that “the only way to find in favor of Ventas is to find that HCP
employed—I put it in quotes because it’s a defined term—‘significantly wrongful
means’ to interfere with Ventas’[] acquisition of Sunrise [] at $15 per unit.” (Tr.12B at
101.)

The district court defined “significantly wrongful means” to include fraudulent
misrepresentation, deceit and coercion. It was only after defining “significantly
wrongful means” that the district court instructed the jury that HCP’s motive may be
relevant in determining whether it engaged in the type of conduct necessary to create
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 27

liability. See, e.g., United Parcel Serv. Co. v. Rickert, 996 S.W.2d 464, 468 (Ky. 1999)
(noting that intent is relevant to fraud under Kentucky law). Nothing in the district
court’s jury instructions suggested that any degree of motive, without more, would be
sufficient to establish “improper interference.”

Accordingly, because the jury instructions regarding the relevance of HCP’s
motive were an accurate and clear statement of the law, HCP is not entitled to relief on
the basis of this instruction.

4. Causation

Finally, HCP argues that the district court failed to adequately instruct the jury
on the

element of “but-for” causation. HCP requested the following jury instruction:

If you are satisfied from the evidence that other factors, including truthful
information in HCP’s offer and press release, would have been sufficient
to cause Sunrise[’s] unitholders not to accept Ventas’[] $15 offer, then
you will find for HCP[.]

(R. 430 at 4 (emphasis added).) The district court declined to give the proposed
instruction, and instead instructed the jury as follows:

Now, in element 4, to find that HCP prevented Ventas from acquiring
Sunrise [] at $15 a unit, you must determine that but for HCP’s improper
interference, Ventas would have acquired Sunrise [] at $15 per unit. This
but-for test means that if HCP’s improper interference had never
occurred, Ventas would have acquired Sunrise [] at $15 a unit.

(Tr.12B at 102-03.) HCP argues that the district court’s instruction was erroneous
because it did not require the jury to “separate the effect of the allegedly false
representations from that of truthful statements.” (HCP Br. at 59.)

We are unpersuaded by HCP’s argument. Consistent with HCP’s request during
trial, the district court instructed the jury that in order to recover, Ventas must show that
HCP’s “improper interference,” if any, was the but-for cause of Ventas’ injury. This is
an accurate statement of Kentucky law. The district court previously instructed the jury
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 28

with regard to “improper interference,” and it was properly left to the jury to determine
whether any of HCP’s conduct amounted to “improper interference,” and whether any
such “improper interference” was the but-for cause of Ventas’ injury.

Although the district court did not specifically enumerate “truthful information”
as a relevant consideration, as HCP requested, it was not an abuse of discretion for the
district court to decline to give this specific instruction. The instruction as given was
clear and accurate, and enumerating one factor that may favor HCP, without
enumerating others that may favor Ventas, could have unduly prejudiced Ventas by
suggesting to the jury that the press release indeed contained independently truthful
information.

Accordingly, the district court did not err in its instructions regarding the element
of causation.

III. Sufficiency of the Evidence

We next turn to the sufficiency of the evidence. HCP contends that the district
court erred in denying its motion for judgment as a matter of law on the element of
causation under Rule 50(b) of the Federal Rules of Civil Procedure. For the reasons
discussed below, we find that the jury verdict on the element of causation was supported
by sufficient evidence.

A. Standard of Review

Our case law establishes that “in diversity cases, where the Rule 50(b) motion
is based on a challenge to the sufficiency of the evidence, a state-law standard of review
applies.”11 Hartford Fin. Servs. Grp., Inc. v. Cleveland Pub. Library, 168 F. App’x 26,

11
Our case law is unambiguous on this point, but most if not all of our sister circuits disagree.
See, e.g., Specialty Beverages, L.L.C. v. Pabst Brewing Co., 537 F.3d 1165, 1175 (10th Cir. 2008) (“In
diversity cases, the substantive law of the forum state governs the analysis of the underlying claims,
including specification of the applicable standards of proof, but federal law controls the ultimate,
procedural question whether judgment as a matter of law is appropriate.”); Marvin Lumber & Cedar Co.
v. PPG Indus., Inc., 401 F.3d 901, 906 (8th Cir. 2005); Fruend v. Nycomed Amersham, 347 F.3d 752, 761
(9th Cir. 2003) (“We conclude that the district court erred in permitting California law to trump Federal
Rule 50.”); Mathis v. Exxon Corp., 302 F.3d 448, 453 (5th Cir. 2002); Ed Peters Jewelry Co., Inc. v. C & J
Jewelry Co., Inc., 215 F.3d 182, 193 (1st Cir. 2000); Alfaro v. Wal-Mart Stores, Inc., 210 F.3d 111, 114
(2d Cir. 2000); accord Herron v. S. Pac. Co., 283 U.S. 91, 94-95 (1931) (stating that a federal court sitting
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 29

30-31 (6th Cir. 2006); see also In re Brown, 342 F.3d 620, 626 (6th Cir. 2003) (citing
Morales v. Am. Honda Motor Co., Inc., 151 F.3d 500, 506 (6th Cir. 1998)). Under
Kentucky law,

a motion for a directed verdict . . . should be granted only if there is a
complete absence of proof on a material issue in the action, or if no
disputed issue of fact exists upon which reasonable minds could differ.
In deciding such a question, every favorable inference which may
reasonably be drawn from the evidence should be accorded the party
against whom the motion is made.

Morales, 151 F.3d at 506 (internal quotation marks and citations omitted).

B. Application

HCP argues that Ventas presented insufficient evidence of but-for causation,
which required Ventas to prove that, “but for HCP’s improper interference, Ventas
would have acquired Sunrise [] at $15 per unit.” (Tr.12B at 102-03 (jury instruction).)
According to HCP, Ventas failed to prove causation in two principal ways: first, Ventas
did not separate the impact of any misrepresentations by HCP from that of any truthful
disclosures by HCP; and second, HCP corrected any misrepresentations in the market
prior to the unitholder vote on Ventas’ offer. We address each argument in turn.

1. Impact of Claimed Truthful Disclosures

In its first argument, HCP contends that Ventas was “required to prove that
significantly wrongful conduct—alleged misrepresentations, not truthful
disclosures—caused its injury,” and that Ventas failed to carry this burden. (HCP Br.
at 27-28.) Put another way, HCP asserts that Ventas failed to offer any proof that would
allow the jury to separate the impact of any misrepresentations from that of any truthful

in diversity is “not subject” to a state rule that a court “shall not direct a verdict, where the evidence is such
that a verdict the other way would be set aside”). Our sister circuits appear to have the better view.
Although a federal court sitting in diversity applies the substantive law of the forum state, the federal court
ordinarily applies its own rules of procedure to adjudicate the dispute. See, e.g., Shady Grove Orthopedic
Assoc., P.A. v. Allstate Ins. Co., 130 S. Ct. 1431, 1442-45 (2010) (citing, inter alia, Hanna v. Plumer, 380
U.S. 460, 463-64 (1965)). We are bound by prior decisions of this Court that apply a so-called “state law
standard” for judgment as a matter of law under Rule 50, but perhaps this Circuit’s en banc Court will in
the future reconsider the issue.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 30

statements. This is significant, HCP argues, because its February 14, 2007 press release
contained the truthful statement that HCP was willing to pay $18.00 per unit for Sunrise.
HCP asserts that the unitholders rejected Ventas’ initial offer “for the obvious reason
that HCP was willing to pay more.” (Id. at 27.) Investor reliance on such a truthful
statement, HCP continues, is insufficient to support the verdict because it cannot amount
to “improper interference.” (Id. at 27-28 (citing Restatement (Second) of Torts §772(a)
& cmt. (b)).)

HCP relies on this Court’s decision in Technology for Energy Corp. v.
Scandpower, 880 F.2d 875 (6th Cir. 1989). In Scandpower, we held that the presence
of a truthful statement that accompanied a false statement defeated the element of
causation in that case because the truthful statement “alone was sufficient to ‘doom’
[the] bid.” Id. at 878. HCP argues that this case is analogous to Scandpower as “no
Sunrise unitholder testified that its vote was affected by any alleged misrepresentation.”
(HCP Br. at 31.)

We find HCP’s argument unavailing. HCP’s argument rests on the faulty factual
premise that HCP was “willing to pay $18 per unit of Sunrise,” and that this stated
willingness was independently truthful. (See id. at 30.) Indeed, the jury could
reasonably have found that HCP made no such statement, and that even if it did, the
statement was not independently truthful.

The jury could reasonably have found that HCP never stated that it was “willing”
to pay $18.00 per unit. HCP’s February 14, 2007 press release merely stated that HCP
had “submitted a proposal to acquire the assets of [Sunrise] in a transaction that values
each [] unit at Cdn$18.” (App. at 454-55.) The press release then described the
proposed transaction as containing an “acquisition agreement that . . . is otherwise
identical to the agreement between Sunrise [] and Ventas.” It further stated that HCP
was “confident” that it would reach a deal with SSL and that its proposed acquisition of
Sunrise had a “greater certainty of completion” than the Ventas transaction. The press
release only references the offer of $18.00 per unit as part of an overall “transaction.”
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 31

Even if the jury found that HCP had stated its willingness to pay $18.00 per unit,
the jury reasonably could have also found that such a statement was not truthful. HCP
never made an unencumbered assertion that it was willing to pay $18.00 per unit, and
the jury could reasonably have found that HCP’s announcement of its proposed
“transaction” was contaminated by fraud, misrepresentations, and concealment. See
Dennis v. Thomson, 43 S.W.2d 18, 23 (Ky. 1931) (“[C]ausing a false impression
constitutes a palpable fraud, even though the statement is true as far as it goes, since such
concealment is in fact a false representation of that which is disclosed, as the whole
truth.”).

HCP failed to disclose in its February 14, 2007 press release that its offer was
conditioned on reaching an agreement with SSL. HCP also failed to disclose that HCP
and SSL had previously failed to reach an agreement during the auction process; that
HCP and SSL otherwise had a tense relationship that could frustrate future attempts to
negotiate an agreement; and that HCP was a party to a Standstill Agreement with Sunrise
that may have prohibited HCP from making an offer for Sunrise in the first place.
Rather than disclosing these details, HCP misled the market by announcing that the
terms of its proposed acquisition of Sunrise were “identical to the transaction entered
into by Ventas,” and the proposed acquisition itself had “greater certainty of
completion.”

Moreover, HCP’s conduct at the time of its purported offer casts further doubt
on the genuineness of its offer. HCP never sent Sunrise a signed, unconditional offer.
The purchase agreement that HCP sent to Sunrise made no mention of a condition.
Sunrise described HCP’s omission of a signature as “unprecedented” (Tr.3A at 47) and
tantamount to a “bait and switch.” (App. at 456.) When confronted about the missing
signature, HCP CEO Flaherty falsely stated to Sunrise’s banker that he had sent a signed
agreement via Federal Express. Flaherty subsequently admitted, however, that he did
not do this and in fact was not authorized by HCP to make an unconditional bid. (Tr.4B
at 32-34.) Ventas also presented evidence that HCP stated it was “moving on to other
things” in January of 2007 after it was unable to reach an agreement with SSL, and in
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 32

fact, on February 21, 2007, made a $3.1 billion proposal to buy another company,
referred to as “Slough.” (Tr.2A at 39; Tr.4B at 96.)

2. Impact of Claimed Corrective Disclosures

HCP next argues that the subsequent disclosures of truthful information about
its offer broke the chain of causation as a matter of law. Specifically, HCP asserts that
any misrepresentations contained in its February 14, 2007 press release were corrected
prior to the unitholder vote on the Ventas deal. HCP cites the testimony of certain
unitholders to suggest that unitholders were aware of the conditional nature of the offer
shortly after HCP’s February 14, 2007 press release. (See, e.g., HCP Br. at 34-35 (citing,
inter alia, R. 486 at 188-89 (Morgan Stanley).) To the extent that any confusion lingered
in the market, HCP notes that the condition was explicitly referenced in a February 19,
2007 press release by Sunrise, and a February 22, 2007 press release by Ventas. (App.
at 590, 1228-29.) The proxy statements sent to unitholders on or about March 6, 2007
also discussed the existence of the condition. (Id. at 1240-54.)

HCP relies heavily on the market price of Sunrise during the relevant period.
After HCP publicly announced its bid, the market price of Sunrise increased from
approximately $15.00 per unit to $18.00 per unit, and remained at that approximate price
until the unitholders rejected the Ventas deal. HCP notes that Ventas’ expert admitted
that he failed to find any statistically significant drop in the price of Sunrise after HCP
disclosed that its bid was conditional. Because the alleged corrective disclosures had no
effect on the stock price, HCP contends that “any alleged misrepresentations either did
not mislead or ‘were immaterial as a matter of law.’” (HCP Br. at 42 (quoting In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1425 (3d Cir. 1997).)

We again find HCP’s argument unavailing. The purported corrective
disclosures—none of which were made by HCP directly—do not disprove causation as
a matter of law. The jury could reasonably have found that any purported corrections
were “incomplete and did not neutralize the effect of HCP’s fraud on proxy voting that
started on March 7.” (Ventas Br. at 40.) This would explain why the market price of
Sunrise did not fall significantly after the market learned of the existence of the
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 33

condition, and therefore why HCP’s argument fails to show a break in the chain of
causation. We note the many reasons that doom HCP’s argument on appeal.

First, the public never learned of the difficulties that HCP would likely face in
reaching an agreement with SSL and thus in satisfying the condition. Although investors
may have come to know of the existence of the conditional nature of HCP’s offer,
investors never learned the details of the troubled relationship between HCP and SSL,
or that HCP’s insistence on certain development rights threatened to prevent a deal from
materializing as quickly as HCP suggested that it would, if a deal materialized at all.
Even if the jury were to credit HCP’s argument that it was SSL, not HCP, that caused
the breakdown of the original negotiations, the difficult relationship between the parties,
regardless of the cause of the difficulty, could likely frustrate future negotiations.

Moreover, to the extent the public learned of the existence of the condition, the
jury could reasonably have found that HCP falsely suggested to the market that it would
remove the condition. On February 28, 2007, for instance, Flaherty suggested, in a letter
to Sunrise that was made public, that HCP might be “willing to remove the closing
condition” (App. at 733.) But Flaherty admitted at trial that he did not make an
unconditional offer because he was not sufficiently confident that HCP would reach a
deal with SSL, and in fact was not authorized to make a binding offer. (See, e.g., Tr.4A
at 75.)

Second, Ventas presented evidence that, in the aftermath of HCP’s wrongful
conduct, investors recognized that Ventas would be forced to raise its bid to complete
the transaction so as to avoid injury to its reputation. (See, e.g., id. at 101-03, 112; Tr.7B
at 18.) This would suggest that the effects of HCP’s wrongful conduct lingered in the
market because investors sought to capitalize on its effects on Ventas’ original offer.

Third, the on-going litigation in Canada was not resolved until approximately
two weeks after voting on the Ventas deal had begun. This timeline may have suggested
to unitholders that the HCP deal was viable. Because HCP disclosed neither the
difficulties it would likely encounter in reaching an agreement with SSL, nor any other
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 34

factual barrier to the agreement, the pendency of the Canadian proceedings may explain
why Sunrise’s unit price did not fall.

Finally, HCP’s initial misleading statements changed the unitholder composition
of Sunrise, which made approval of Ventas’ $15.00 per unit offer highly unlikely. In the
48 hours after HCP announced its offer, over 40 million units of Sunrise changed hands,
representing the largest day in the trading history of Sunrise. The evidence suggests that
these new unitholders were largely arbitragers from the United States and had little
incentive to accept Ventas’ $15.00 bid, even after HCP withdrew its offer. As the
district court observed, “[t]he jury could reasonably decide that in the absence of this
market shift, which it decided was caused by [HCP’s] significantly wrongful conduct,
[Ventas’] $15 offer would have been approved.” (R. 520 at 5.)

HCP asserts “those new unitholders could not have affected the outcome of the
vote” because the four largest unitholders “by themselves cast more than sufficient votes
to defeat Ventas’[] offer.” (HCP Br. at 45-46 (emphasis omitted).) But Ventas
presented evidence that its initial offer of $15.00 was a good price to the unitholders and
was recognized as such by the market and certain institutional unitholders. (See, e.g.,
R. 482 at 102-03 (testimony of representative from Caisse, the largest Canadian
unitholder, that he would have initially recommended approval); Tr.7A at 87-95
(testimony of Ventas’ expert, opining that the Ventas offer had a 95% expectation of
approval).) To the extent HCP cites competing testimony, the jury was not compelled
to credit this speculative testimony, particularly in light of Ventas’ evidence suggesting
the opposite. Moreover, Ventas presented evidence that the institutional investors never
learned of the obstacles that might prevent the condition from being realized, namely the
difficult relationship between HCP and SSL. Such knowledge alone could have caused
the unitholders to doubt the viability of the HCP offer and thus vote in favor of the
Ventas deal. Institutional investors, for instance, testified that they believed a deal with
HCP might still be viable even after HCP withdrew its bid. (See, e.g., Tr.3A at 78.)

In light of the totality of the evidence presented at trial, the jury arrived at a
reasonable conclusion regarding the element of causation. The jury had sufficient
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 35

evidence to find that HCP’s “improper interference” caused injury to Ventas.
Accordingly, we find that Ventas presented sufficient evidence to support a jury finding
of causation, and AFFIRM the decision of the district court on that basis.

IV. Summary

For the reasons set forth above, we AFFIRM the judgment of the district court
in the amount of $101,672,807.00 in favor of Ventas. Although the case shall be
remanded, as discussed below, we find no reason to disturb the final judgment
previously entered on the original jury verdict. Accordingly, the judgment as previously
entered by the district court shall constitute a final partial judgment pursuant to Rule
54(b) of the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 54(b) (“[T]he court
may direct entry of a final judgment as to one or more, but fewer than all, claims . . . if
the court expressly determines that there is no just reason for delay.”).

DISCUSSION - CROSS-APPEAL BY VENTAS

As an initial matter, we note HCP’s argument that Ventas has waived the issues
it raises on cross-appeal because Ventas’ arguments are “based largely on cryptic
assertions and unexplained citations.” (HCP Rep. at 43 (citing El-Moussa v. Holder, 569
F.3d 250, 257 (6th Cir. 2009).) Although Ventas’ briefing left much to be desired, we
nonetheless find that the issues raised by Ventas on cross-appeal are properly presented.

We now turn to those issues. Ventas challenges the judgment below on the basis
that the district court erroneously precluded it from recovering additional damages.
Specifically, Ventas argues that the district court erred by: 1) refusing to submit the issue
of punitive damages to the jury; 2) converting its damages from Canadian to U.S. dollars
based on the exchange rate as of the date of injury, rather than the date of judgment; 3)
precluding Ventas from seeking compensatory damages based on increased financing
costs and currency market fluctuations; and 4) declining to award prejudgment interest.

As explained below, we conclude that the district court erred by not submitting
the issue of punitive damages to the jury, therefore requiring us to REVERSE the
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 36

decision below as to punitive damages, and REMAND for further proceedings. We
AFFIRM in all other respects.

I. Punitive Damages

Ventas argues that there was sufficient evidence of fraud to submit the issue of
punitive damages to the jury. The district court disagreed and granted judgment as a
matter of law to HCP on the issue of punitive damages.12 See Fed. R. Civ. P. 50(a).
Upon review, we conclude that the district court erred in granting judgment as a matter
of law in this instance.

A. Standard of Review

“The question of whether there was sufficient evidence to support a punitive
damages award is a question of law, which we review de novo.” Virostek v. Liberty
Twp. Police Dep’t, 14 F. App’x 493, 508 (6th Cir. 2001). Because we are sitting in
diversity, “we use the standards for a judgment as a matter of law applicable under the
law of the forum state.” Dewit v. Morgen Scaffolding, Inc., 78 F.3d 584 (6th Cir. 1996)
(table); see also Estate of Riddle ex rel. Riddle v. S. Farm Bureau Life Ins. Co., 421 F.3d
400, 407-08 (6th Cir. 2005); Arms v. State Farm Fire & Cas. Co., 731 F.2d 1245, 1248
(6th Cir. 1984). As we have explained:

Under Kentucky law, a motion for a directed verdict—the same thing as
a motion for judgment as a matter of law under Rule 50(a)—should be
granted only if there is a complete absence of proof on a material issue
in the action, or if no disputed issue of fact exists upon which reasonable
minds could differ. In deciding such a question, “every favorable
inference which may reasonably be drawn from the evidence should be
accorded the party against whom the motion is made.

12
Although the issue was presented to the district in a motion in limine filed by HCP, the
disposition of the motion is properly reviewed as one for judgment as a matter of law under Rule 50(a) of
the Federal Rules of Civil Procedure. Both parties agree. (R. 439; HCP Mot. at 4 (noting that the district
court previously “granted a directed verdict on punitive damages”); Ventas Rep. at 5-8.) HCP’s motion
was based on an argument of insufficient evidence, and the district court granted the motion during trial
on that basis. See Fed. R. Civ. P. 50(a) (providing that a district court may grant judgment as a matter of
law on any issue for which it finds that “a reasonable jury would not have a legally sufficient evidentiary
basis to find for the party on that issue.”).
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 37

Estate of Riddle, 421 F.3d at 408 (quoting Adam v. J.B. Hunt Transp., Inc., 130 F.3d
219, 231 (6th Cir. 1997)) (internal quotation marks, citations, and alterations omitted).

B. Punitive Damages Under Kentucky Law

Before turning to the evidentiary record, we outline the applicable legal standard
governing punitive damages under Kentucky law. Kentucky has long-recognized the
availability of punitive damages in tort actions. See, e.g., Horton v. Union Light, Heat
& Power Co., 690 S.W.2d 382, 388 (Ky. 1985) (collecting cases); Engleman v. Caldwell
& Jones, 47 S.W.2d 971, 972 (Ky. 1932).

In 1988, Kentucky abrogated the common law of punitive damages with the
enactment of Kentucky Revised Statute (“K.R.S.”) §§ 411.184, et seq. The statute
defines punitive damages as those “damages, other than compensatory and nominal
damages, awarded against a person to punish and to discourage him and others from
similar conduct in the future.” K.R.S. § 411.184(1)(f); see also Young v. Vista Homes,
Inc., 243 S.W.3d 352, 366-76 (Ky. Ct. App. 2007). The party seeking punitive damages
“shall recover punitive damages only upon proving, by clear and convincing evidence,
that the defendant from whom such damages are sought acted toward the plaintiff with
oppression, fraud, or malice.” K.R.S. § 411.184(2).

Here, Ventas seeks punitive damages on the sole basis of fraud. Under the
statute, “[f]raud means an intentional misrepresentation, deceit, or concealment of
material fact known to the defendant and made with the intention of causing injury to the
plaintiff.” K.R.S. § 411.184(1)(b). This standard appears similar to that required to
impose tort liability for fraud under Kentucky law, which requires a showing of the
following by clear and convincing evidence:

(a) material representation; (b) which is false; (c) known to be false or
made recklessly; (d) made with inducement to be acted upon; (e) acting
in reliance thereon; and (f) causing injury.

Rickert, 996 S.W.2d at 468; see also Miller’s Bottled Gas, Inc. v. Borg-Warner Corp.,
817 F. Supp. 643, 646 (W.D. Ky. 1993).
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 38

Additionally, although not expressly stated in the statute, Kentucky law requires
a plaintiff seeking punitive damages to prove that the relevant actions of the defendant
were the proximate cause of the resulting injury to the plaintiff. See, e.g., Jackson v.
Tullar, 285 S.W.3d 290, 297 (Ky. Ct. App. 2007).

C. Application

Based on the applicable law, the issue we confront is whether sufficient evidence
exists that 1) HCP “acted towards Ventas” with fraud; 2) HCP had the “intention of
causing injury” to Ventas; and 3) HCP’s fraud proximately caused Ventas’ injury. See
K.R.S. § 411.184(1)(b); Jackson, 285 S.W.3d at 297. Viewing the evidence in the light
most favorable to Ventas, as we must in reviewing this issue, we find that the issue of
punitive damages should have gone to the jury.13 See Estate of Riddle, 421 F.3d at 410
(remanding case for trial on punitive damages).

The record is replete with evidence of intentional misrepresentations, deceit,
and/or concealment of material facts by HCP. See Rickert, 996 S.W.2d at 468 (noting
the following as relevant to a finding of fraud: “character of the testimony, the
coherency of the entire case as well as the documents, circumstances and facts
presented” ); Cintas Corp. v. Sitex Corp., No. 2005-CA-002377, 2005-CA-002415, 2007
WL 3226984, at *1 (Ky. Ct. App. Nov. 2, 2007) (upholding punitive damage award on
tortious interference claim between competitors).

We begin by noting the testimony of Michael Warren, the Chairman of Sunrise.
Warren testified that after being approached by HCP about its interest in making a
topping bid, Warren requested that HCP not make its bid public and instead engage in
confidential negotiations. When HCP refused, Warren was “flabbergasted” and
“surprised.” (Tr.3A at 35-36.) This was the “first time” Warren had ever known a
participant in a confidential auction process to make an unauthorized public bid. (Id. at
35.) Warren also testified that Flaherty falsely stated to Sunrise that Flaherty had sent

13
In light of our holding, we need not consider Ventas’ argument that the district court applied
an erroneous legal standard as to the availability of punitive damages under Kentucky law.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 39

a signed, unconditional offer to Sunrise. Flaherty admitted at trial that he was not
authorized to make an unconditional bid.

Moreover, as discussed supra pages 28-34, the jury could reasonably conclude,
based on the evidence, that HCP’s February 14, 2007 press release was contaminated by
fraudulent misrepresentations, and concealment. See Anderson v. Wade, 33 F. App’x
750 (6th Cir. 2002) (upholding punitive damages award under Kentucky law, where
defendant intentionally concealed material facts and made material misrepresentations
in the sale of land). Without repeating our entire discussion, we again note that HCP’s
announcement of its purported offer of $18.00 per unit failed to disclose material facts
known to HCP, including: 1) that its offer of $18.00 per unit was conditional on HCP
reaching an agreement with SSL; 2) that HCP’s prior experiences with SSL suggested
that it would be difficult for HCP and SSL to reach an agreement; and 3) that HCP was
a party to a Standstill Agreement that likely prohibited its public offer. (See, e.g., Tr.2B
at 89 (testimony of Sunrise’s independent investment banker, stating that HCP’s 2/14/07
press release was “misleading”). HCP instead misrepresented that its offer was largely
“identical” to that made by Ventas, and that the HCP transaction had a “greater certainty
of completion.” HCP never corrected the record directly, and in fact maintained that its
offer was superior. (See, e.g., Tr.5A at 25-27.) Flaherty admitted that he was not
sufficiently “confident” of reaching an agreement with SSL to make an unconditional
bid. (Tr.4B at 64.)

We also believe that a reasonable jury could conclude that HCP engaged in its
fraudulent conduct with the intention of inflicting harm on Ventas. Indeed, as we
discussed, supra at pages 28-34, HCP’s conduct suggests that its purported offer of
$18.00 per unit was not genuine: the purported offer was not signed, which a
knowledgeable witness described as “unprecedented” (Tr.3A at 47); HCP’s CEO
informed Sunrise that he had sent a signed contract to Sunrise, when in fact he had not;
and HCP’s CEO admitted that he was not authorized to make an unconditional bid for
Sunrise. As Sunrise’s CEO testified at trial about his experience with HCP:
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 40

after you’ve been through all of that, you know, the conclusion that you
come to as a business person is that these people are not real, they are not
reliable, and so we were not going to attach our star to HCP.

(Id. at 82.) In fact, a financial advisor from Sunrise testified that, in January of 2007,
HCP CEO Flaherty declined an offer of additional time to attempt to reach an agreement
with SSL, stating that HCP was “moving on to other things.” (Tr.2A at 39.)

HCP’s investment banker reported to his colleagues that, although HCP remained
focused on acquiring Sunrise, “at a minimum, they plan on causing the other side to have
to pay more.” (App. at 362.) HCP’s CEO code-named its topping bid strategy as
“project show me what you got, yoe mama,” referring to the female CEO of Ventas.
(Tr.4B at 126.) HCP believed that it would be “hosed” if Ventas acquired Sunrise (id.
at 156), as it might allow Ventas to “catch” HCP in the marketplace. (Id. at 102.)
Sunrise’s CEO testified at trial that he did not believe HCP’s offer for Sunrise to be bona
fide, and suggested that HCP’s bid “drove up the market . . . and killed the $15 bid.”
(Tr.3A at 81.) A managing director of ING, one of the largest unitholders, testified
about the possibility that HCP had used ING to cause Ventas to pay more for Sunrise.
(R. 487 at 146.) A senior executive of HCP suggested that it “would be okay if she
ended up in 17.50.” (Tr.5A at 135-37.)

Finally, based on the evidence, a reasonable jury could conclude that HCP’s
fraud was the proximate cause of Ventas’ injury. The jury found that HCP’s tortious
interference caused Ventas to pay an additional $1.50 per unit of Sunrise beyond its
initial offer of $15.00 per unit. Although Sunrise units were trading at approximately
$15.00 per unit after Ventas announced its proposed acquisition, the price per unit
increased by 20% to approximately $18.00 per unit after HCP made its unauthorized
public offer on February 14, 2007. The price would never return to $15.00 per unit, and
Ventas would eventually raise its offer to $16.50 per unit to complete the acquisition.

If the question had been presented to the jury, the jury could reasonably have
found that it was the fraudulent character of HCP’s conduct that proximately caused the
injury to Ventas. As discussed above, the evidence suggests that HCP’s public
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 41

announcement of its offer was more than a simple breach of its Standstill Agreement
with Sunrise, but instead was a fraudulent act designed to mislead the market and harm
Ventas. The fraud contained in the February 14, 2007 press release caused the market
price of Sunrise to increase from $15.00 to $18.00. The jury could reasonably have
found that absent the fraudulent character of HCP’s public announcement, the market
price of Sunrise would not have increased, or would not have increased as dramatically.
Additionally, the jury could have reasonably found that HCP never directly corrected its
fraud, allowing some if not all of the effects of the fraud to linger in the market and
continue to operate against Ventas.

This is not a case where the alleged fraud by the defendant was collateral to the
plaintiff’s injury. For instance, in Hardaway Management v. Southland, 977 S.W.2d
910, 916-17 (Ky. 1998), the Kentucky Supreme Court denied recovery of punitive
damages in a wrongful termination action under a state employment law. The only
evidence of fraud was a termination letter from the employer that falsely stated the
reasons for the plaintiff’s termination. Id. at 916. The court disallowed punitive
damages because the false statements did not cause any injury to the plaintiff. Id. at 917.
The court reasoned that even if the statements “were intended to prevent [the plaintiff
from] recovering damages for her wrongful discharge, they failed in their intended
effect.” Id.

Unlike Hardaway Management, HCP’s alleged fraud in this case was the direct
cause of Ventas’ injury. Simply put, the jury could reasonably find that the fraud itself
was the primary vehicle by which HCP inflicted injury on Ventas. Absent the
intentional misrepresentations, deceit, and/or concealment by HCP, which we detail
above, the market may well have reacted less favorably to HCP’s purported offer of
$18.00 per unit, or may perhaps have dismissed HCP’s offer altogether. Cf. Bierman v.
Klapheke, 967 S.W.2d 16, 19-20 (1998) (upholding punitive damages award, where the
fraudulent acts exacerbated any injury that may have occurred).

In light of the evidence presented at trial, we believe it was error for the district
court to prevent the jury from considering an award of punitive damages. Accordingly,
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 42

we REVERSE the decision of the district court as to punitive damages, and REMAND
with instructions that the matter proceed to trial on the single issue of punitive damages.
See Estate of Riddle, 421 F.3d at 410 (remanding case for trial on punitive damages).
On remand, the district court shall be guided in part by K.R.S. § 411.186, which sets
forth numerous factors that the jury “should consider” if the jury decides to award
punitive damages.

II. Applicable Exchange Rate

Ventas appeals the district court’s decision to apply the U.S./Canadian exchange
rate as of the date of injury, rather than the date of judgment. Because the decision of
the district court rests on an interpretation of state law, we review de novo. See
Competex, S.A. v. Labow, 783 F.2d 333, 334 (2d Cir. 1986) (stating that “[b]ecause
determination of the date on which to convert a foreign currency debt into dollars is a
substantive question,” federal courts sitting in diversity will apply state law).

In the proceedings below, the parties disputed the exchange rate applicable to
Ventas’ damages. Ventas sought to apply the exchange rate as of the date of judgment,
while HCP sought to apply the exchange rate as of the date of injury. The district court
agreed with HCP, and held that “[t]he proper exchange rate for Ventas’[] damages is
determined on the date of injury,” which was April 26, 2007, the date that the Sunrise
unitholders approved Ventas’ revised offer of $16.50 per unit. The district court relied
upon the rule set forth in two older Supreme Court cases, that if the cause of action arises
under U.S. law, then the conversion date is the date of injury. See, e.g., Die Deutsche
Bank Filiale Nurnberg v. Humphrey, 272 U.S. 517 (1926); Hicks v. Guinness, 269 U.S.
71 (1925).

On appeal, Ventas argues that the district court should have used the date of
judgment exchange rate. Ventas contends that the Supreme Court cases cited by the
district court are not controlling because “state law governs the appropriate currency rate
in diversity cases.” (Ventas Br. at 71.) Ventas asserts that Kentucky would follow the
commentary to § 823 of the Restatement (Third) of Foreign Relations Law (1987), which
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 43

states that “if the foreign currency has appreciated since the injury or breach, judgment
should be given at the rate of exchange applicable on the date of judgment or the date
of payment.” Restatement (Third) of Foreign Relations Law § 823, cmt. (c).

Although no Kentucky law is on point, we find that the district court correctly
predicted that Kentucky would select the exchange rate from the date of injury. Nothing
in Kentucky jurisprudence suggests that the state would rely on a comment to the
Restatement (Third) of Foreign Relations, particularly in the face of Supreme Court
precedent to the contrary. See, e.g., Mt. Lebanon Pers. Care Home, Inc. v. Hoover
Universal, Inc., 276 F.3d 845, 852-53 (6th Cir. 2002) (predicting that the Kentucky
Supreme Court would reject a certain rule because, among other reasons, the U.S.
Supreme Court had done so); accord Siematic Mobelwerke GmbH & Co. KG v. Siematic
Corp., 669 F. Supp. 2d 538, 542 (E.D. Pa. 2009) (“In the absence of pertinent state law
precedent, federal courts in diversity suits have frequently adopted the federal
approach.”) (collecting cases from courts applying the laws of Minnesota, Illinois,
Colorado, Missouri, Tennessee, and Florida); Elite Entm’t, Inc. v. Khela Bros. Entm’t,
Inc., 396 F. Supp. 2d 680, 694 (E.D. Va. 2005) (“Courts generally agree that the
judgment day interest rate is relevant only when the cause of action arises entirely under
foreign law.”) (predicting Virginia law).

Furthermore, because the purpose of compensatory damages is to make the
victim whole, selecting the date of injury for purposes of the exchange rate would better
approximate the damage sustained by the victim since such an approach looks to the
point at which the victim was injured.14 The date of judgment is merely an arbitrary and
speculative future date that is determined by variables unrelated to the underlying injury,
including litigation posturing and docket pressures. Setting the currency conversion rate
as of the date of injury provides for greater certainty in economic relationships, allowing

14
In this regard, we note that Kentucky provides for prejudgment interest in many cases, which
is intended to compensate the plaintiff for any delay in obtaining relief. See, e.g., Curtis v. Campbell, 336
S.W.2d 355, 361 (Ky. 1960) (“[E]quity and justice demand that one who uses the money or property of
another for his own benefit, particularly in a business enterprise, should at least pay interest for its use in
the absence of some agreement to the contrary.”).
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 44

market players to more accurately assess their risks. It also prevents bad faith attempts
to, for instance, delay the entry of judgment to engage in currency speculation.

Accordingly, we AFFIRM the district court decision to apply the date of injury
rule for currency conversion as a matter of Kentucky law.

III. Compensatory Damages

Ventas appeals the district court’s decision to deny Ventas recovery of certain
claimed compensatory damages. Specifically, the district court precluded Ventas from
recovering: 1) “the increased cost in U.S. dollars for the $15.00 component of the
purchase price on April 26, 2007 as compared to the April 2, 2007 contracted-for closing
date;” and 2) “the loss suffered by Ventas because HCP’s improper interference delayed
Ventas’[] planned equity raise to finance the acquisition.” We now AFFIRM.

A. Legal Standard for Compensatory Damages Under Kentucky Law

We briefly review the applicable law governing compensatory damages. Under
Kentucky law, a successful tort plaintiff may recover compensatory damages arising
from the defendant’s tortious conduct. The existence of these damages must be proved
to a “reasonable certainty.” See, e.g., Morgan v. Lanham, No. 2008-CA-001412, 2011
WL 918735, at *18 (Ky. Ct. App. Mar. 18, 2011) (emphasis omitted).

Additionally, the defendant’s tortious conduct must be the proximate cause of the
damages. As the Kentucky Supreme Court has explained, “[p]roximate cause . . .
consists of a finding of causation in fact, i.e., substantial cause,” as well as legal
causation, meaning “the absence of a public policy rule of law which prohibits the
imposition of liability.” Deutsch v. Shein, 597 S.W.2d 141, 144 (Ky. 1980). With
regard to legal causation, Kentucky courts look to foreseeability: “it is not necessary
that the defendant should have been able to anticipate the precise injury sustained, or to
foresee the particular consequences, but only that the injury is a natural and probable
consequence” of the tortious conduct. Louisville Gas & Elec. Co. v. Roberson, 212
S.W.3d 107, 112 (Ky. 2006) (Wintersheimer, J., concurring) (citing Eaton v. Louisville
& N. R. Co., 259 S.W.2d 29 (Ky. 1953)); see also Pile v. City of Brandenburg, 215
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 45

S.W.3d 36, 42 (Ky. 2006) (noting that an intervening cause may break the chain of
causation if it is of an “independent origin, unassociated” with the underlying tortious
conduct).

B. Increased Costs to Finance Acquisition Due to Delay

Ventas first argues that it is entitled to “damages from the increased cost of
financing the transaction.” (Ventas Br. at 74.) Ventas explains as follows:

HCP’s deceptive press release forced Ventas to delay, from February
22[, 2007] to May 18, 2007, its planned sale of equity to finance the
acquisition. As a result, Ventas incurred substantially higher financing
costs as its stock value declined.

(Id. at 72.) The district court granted summary judgment for HCP on this claim.

We review the district court’s grant of summary judgment de novo. Wuliger v.
Mfrs. Life Ins. Co., 567 F.3d 787, 792 (6th Cir. 2009). Summary judgment is appropriate
if the pleadings, depositions, answers to interrogatories, and admissions on file, together
with any affidavits, “show that there is no genuine issue as to any material fact and that
the movant is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(a).

The district court acknowledged that “HCP’s topping bid delayed any plan
Ventas may have had to issue shares in February[ of 2007],” but granted summary
judgment because it found no evidence that “establishes an actual date for issuing
shares.” The district court reasoned that the “evidence does not suggest that HCP knew
of any actual plan by Ventas’ to issue equity in this transaction, [n]or does any evidence
suggest that HCP would know the timing on that issuance.” Therefore, the district court
found, “Ventas’[] issuance of shares was not clearly foreseeable.” The district court also
held that HCP’s “acts [were] not substantial factors in bringing about the harm” for
which Ventas seeks compensation, and that “Ventas received full market value for the
shares when issued.”

On appeal, Ventas argues that it “presented ample evidence that it planned to
raise equity in late February 2007 to finance the acquisition.” Ventas cites, with little
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 46

explanation, an affidavit from its CEO; a presentation to the Ventas Board; and
correspondence about a planned $1 billion equity raise. (Ventas Br. at 73-74 (citing
App. at 748-50, 844-46; R. 193, Ex. 65 ¶¶ 4-6, 9 & Ex. C).) Ventas also notes that it was
“hell bent” on proceeding with an equity raise. (Id. at 74 (citing record evidence).)
Additionally, Ventas argues that the record contains “ample evidence of foreseeability,”
and cites: 1) a January 17, 2008 analysis from HCP’s investment bankers “showing that
Ventas would finance the acquisition through $1.059 billion of ‘New Common Equity
Issued;’” (id. (citing App. 366, R. 193, Ex. 104)); and 2) the testimony of HCP’s CEO,
stating that he expected Ventas’ stock price to decline after HCP’s public offer. (Id.
(citing Tr.4B at 154).)

Having reviewed the record, we find that the district court properly granted
summary judgment for HCP on this claim for damages. Kentucky law “does not tolerate
uncertainty as to the fact of damage,” Lanham, 2011 WL 918735, at *18 (emphasis
omitted), and as such, Ventas must show, with a “reasonable certainty,” that it sustained
damages in the first instance. See id. Based on our review of record, we conclude that
no reasonable jury could find, with any reasonable certainty, that Ventas had decided to
conduct an asset sale to take place at any particular time. Without the record supporting
such a finding, Ventas’ claim for damages arising out of the timing of its claimed asset
sale fails as a matter of law.

The evidence relied upon by Ventas in support of this claim for damages is
wholly speculative and does not purport to identify a planned date for the equity
offering. (See, e.g., App. at 844 (“considering asset sales”); id. at 1387 (“examining a
number of different options”).) In fact, Ventas’ CEO acknowledged in an email that the
planned equity raise could well occur after February 22, 2007: she stated on February
3, 2007 that Ventas seeks “maximum flexibility to hit the market for debt and/or equity
securities (which might even be prior to the closing),” then scheduled for April 2, 2007.
(Id. at 750 (emphasis added).)

Accordingly, we AFFIRM the grant of summary judgment for HCP on Ventas’
claim for damages due to a claimed delay in its equity raise.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 47

C. Increased Costs of the Original $15.00 Purchase Price in U.S. Dollars

Ventas next argues that it is entitled to damages based on the “increased cost of
the original $15.00 purchase price in U.S. dollars,” as a result of exchange rate
fluctuations in the international currency markets. (See Ventas Br. at 69.) Ventas
explains as follows:

Ventas contacted to acquire Sunrise on April 2, 2007 for $15 per share,
a total of C$1,137,712,410 . . . plus assumption of Sunrise’s debt. HCP’s
interference forced Ventas to delay the closing to April 26[, 2007]. By
April 26, 2007, the value of the U.S. dollar declined against the Canadian
dollar from .89366 to .86565. The C$1,137,712,410 price cost
$31,867,325 more in U.S. dollars on April 26[, 2007] than on April
2[, 2007].

(Id. (internal record citations omitted).)

In an August 27, 2009 oral ruling, the district court denied Ventas’ claim for this
measure of damages. The court reasoned that Ventas did not have an “expectancy that
could be proven to acquire the company on a specific date and certainly not at a
particular value of the Canadian dollar.” (Tr.7A at 28.) Rather, the district court held,
Ventas’ “expectancy was to purchase the company at $15 Canadian.” (Id. at 50.) The
district court also noted that “the risk of currency changes is a risk everybody faced.”
(Id.)

Ventas makes two arguments on appeal. The first is factual, that whether Ventas
had a contractual expectation that the acquisition would close on April 2, 2007 is “a fact
issue for the jury.” (Ventas Br. at 69.) The second is legal, that “a decline in currency
value is a direct and foreseeable consequence of a delay in contractual performance and
is compensable.” (Id. (citing Walther & Cie v. U.S. Fid. & Guar., 397 F. Supp. 937, 945
(M.D. Pa. 1975).) Ventas contends that the tortfeasor “should bear the risk of
fluctuations in market prices during a period of delay caused by its wrongful conduct.”
(Id. (citing Payne v. Wood, 62 F.3d 1418 (6th Cir. 1995) (table).) Additionally, Ventas
argues that “the increased currency cost was part of Ventas’[] reasonable costs to
mitigate its loss by extending the shareholder vote on approval of the deal at $16.50.”
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 48

(Id. (citing Australian Gold, Inc. v. Hatfield, 436 F.3d 1228, 1237-38 (10th Cir. 2006);
Restatement of Torts § 919).)

We reject Ventas’ arguments and affirm the decision of the district court. As an
initial matter, we agree with the district court that, as a matter of law, Ventas “did not
have a contractual expectancy” to acquire Sunrise “on a specific date and certainly not
at a particular value of the Canadian dollar.” (Tr.7A at 28.) The sole claim at trial was
for tortious interference with a prospective advantage, which by its terms requires the
plaintiff to prove an expectancy with which the defendant tortiously interfered. “The
right to recover . . . consequential damages can hardly be divorced from the tort that
allegedly caused them,” QSI-Fostoria D.C., LLC v. Gen. Elec. Cap. Bus. Asset Funding
Corp., 389 F. App’x 480, 486 (6th Cir. 2010), and as the district court aptly noted:

It seems to me that in the tort of the expectancy . . . the expectancy sued
upon is the expectancy to purchase the company, to acquire the company,
and to acquire the company at 15. I don’t think there was an expectancy
that could be proven to acquire the company on a specific date and
certainly not at a particular value of the Canadian dollar. So I think that
in terms of the tort of tortious interference with business expectancy, that
expectancy that I have been defining it is to acquire the company at 15.

It is undisputed that Ventas voluntarily obligated itself in the Purchase
Agreement to acquire Sunrise, a Canadian company, at a fixed amount of Canadian
dollars. (App. at 281.) The Purchase Agreement with which HCP tortiously interfered
did not address the risk of currency fluctuations. Ventas cites to no evidence that it
selected April 2, 2007 as the original closing date because of any expectation that the
exchange rates would be of a certain value. Because Ventas’ underlying tort claim
alleges interference with an agreement completely divorced from the international
currency markets, Ventas’ instant claim for damages fails as a matter of law. Cf.
Humphrey, 272 U.S. at 519 (“A suit in this country is based upon an obligation existing
under the foreign law at the time when the suit is brought, and the obligation is not
enlarged by the fact that the creditor happens to be able to catch his debtor here.”).

Moreover, any subjective expectation that Ventas had of closing the deal on
April 2, 2007 was destroyed by its own actions. On March 24, 2007, Ventas sent a letter
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 49

to Sunrise in which it expressly “waive[d] its right” under the Purchase Agreement to
insist that the Sunrise convene a unitholder meeting by March 31, 2007, which would
permit the closing to occur on April 2, 2007. (App. at 1294-95.) Ventas instead
requested that Sunrise postpone the unitholder meeting until April 11, 2007, so that the
parties could update proxy materials to: 1) disclose that Sunrise’s “financial performance
in the fourth quarter is materially worse than street estimates;” and 2) describe the
decision of the Ontario Court of Appeal. The letter explained that “Ventas believes that
it would be appropriate to give Unitholders 10 business days after release of the financial
and other information described [in the letter] to evaluate such information.” (Id. at
1295.)

Furthermore, although Kentucky courts have not addressed the question, we
believe that Kentucky law would deny recovery of compensatory damages arising from
currency market fluctuations wholly unrelated to the defendant’s conduct. These
damages are unforeseeable. See, e.g., Oregon Steel Mills, Inc. v. Coopers & Lybrand,
LLP, 83 P.3d 322, 344-45 (Or. 2004) (holding that claimed damages caused by market
forces during a delay caused by a defendant were unforeseeable as a matter of law).
Ventas offers no citation to anything in the record to suggest otherwise. (Ventas Br. at
69-70; Ventas Rep. at 18-21.)

We considered a similar issue in Layne v. Bank One, Kentucky, N.A., 395 F.3d
271 (6th Cir. 2005) (applying Kentucky law). In Layne, two individuals obtained a loan
from a bank that was secured by their pledge of shares of stock in an internet company
as collateral. The internet bubble burst in February of 2001, and as a result, the value
of the collateral substantially declined. The loans eventually went into default, after
which the debtors discussed with the bank either paying down the balance, or pledging
additional collateral, rather than have the bank liquidate the collateral. The discussions
were unsuccessful, and the bank liquidated the shares for a fraction of their former price.

The debtors brought a diversity action in federal court against the bank alleging,
among other things, breach of a duty under Kentucky law to preserve the value of their
collateral. The district court granted summary judgment to the bank on this claim, and
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 50

we affirmed. We held, as a matter of Kentucky law, that the duty of preservation does
not extend to protecting against market declines. Id. at 276. The investment risk, we
held, is properly placed on the borrower “given the volatility of the stock market.” Id.
at 277 (internal quotation marks and citation omitted). We then set forth a general rule
that stock market fluctuation is unforeseeable as a matter of law, where the defendant has
no knowledge of a pre-defined event that will impact the value of the security. See id.
at 277 n.7 (internal quotation marks and citations omitted).

The same reasoning applies with equal force to the present case. The risk of
market fluctuations is an uncontrollable, background risk that lurks in every commercial
transaction. See, e.g., In re Callister, 15 B.R. 521, 533 (Bankr. D. Utah 1981) (stating
that a market player is “at the mercy of events beyond its control”). More importantly,
the risk is constant, and no more affects a plaintiff on one day rather than the next.
Although the risk may have enured to Ventas’ detriment in this case, Ventas “could have
received a windfall had the fluctuation differed.” Mutuelles Unies v. Kroll & Linstrom,
957 F.2d 707, 714 (9th Cir. 1992).

We believe that it is only when a defendant’s conduct is connected to the
movements in the markets, or the defendant has knowledge of a pre-determined future
event, that Kentucky courts will permit recovery of consequential damages arising from
market fluctuations.15 See Layne, 395 F.3d at 276-77 & n.7. Cf. Burstyn v. Worldwide
Xceed Grp., Inc., No. 01 CV 1125, 2002 WL 31191741, at *6 (S.D.N.Y. Sept. 30, 2002)
(holding, in the securities law context, that “the misrepresentations, and not the market
forces behind the dot com collapse, must be the proximate cause of plaintiffs’ injuries”).
Here, it is undisputed that HCP’s tortious conduct was not directed at the currency
markets; Ventas makes no allegation that HCP’s tortious conduct in any way affected
the U.S./Canadian dollar exchange rate. HCP’s conduct simply “provide[d] the occasion

15
Our prediction about Kentucky law on this point comports with the general rule that,“‘[w]hen
given a choice between an interpretation of [state] law which reasonably restricts liability, and one which
greatly expands liability, we should choose the narrower and more reasonable path.’” Combs v. Int’l Ins.
Co., 354 F.3d 568, 577 (6th Cir. 2004) (quoting Todd v. Societe Bic, S.A., 21 F.3d 1402, 1412 (7th Cir.
1994) (en banc)).
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 51

by which the injury was made possible.” Clay v. Chesapeake & O. Ry. Co., 239 S.W.2d
231, 232 (Ky. 1951).

Accordingly, we AFFIRM the grant of judgment as a matter of law for HCP on
Ventas’ claim for damages on account of fluctuations in the currency markets.

IV. Prejudgment Interest

Ventas appeals the denial of its Rule 59(e) motion for an award of prejudgment
interest under state law. Because the Court is sitting in diversity, prejudgment interest
is governed by state law. See Conte v. Gen. Housewares Corp., 215 F.3d 628, 633 (6th
Cir. 2000). We review the denial of a Rule 59(e) motion for an abuse of discretion. See
U.S. Fire Ins. Co. v. City of Warren, 87 F. App’x 485, 493 (6th Cir. 2003). As applied
to prejudgment interest, a district court abuses its discretion if it declines to award
prejudgment interest that is mandatory under state law. See id.

“Under Kentucky law, if the claim is liquidated, interest follows as a matter of
right, but if it is unliquidated, the allowance of interest is in the discretion of the trial
court.” Hale v. Life Ins. Co. of N. Am., 795 F.2d 22, 24 (6th Cir. 1986). As the
Kentucky Supreme Court has explained:

Precisely when the amount involved qualifies as “liquidated” is not
always clear, but in general “liquidated” means “made certain or fixed by
agreement of parties or by operation of law.” Common examples are a
bill or note past due, an amount due on an open account, or an unpaid
fixed contract price.

Nucor Corp. v. Gen. Elec. Co., 812 S.W.2d 136, 141 (Ky. 1991).

The district court in the instant case correctly concluded that Ventas’ claim is
unliquidated and therefore Ventas was not entitled to prejudgment interest as a matter
of right. Although, as Ventas argues, the jury may have resorted to “simple arithmetic”
to calculate damages in this case, Kentucky law is clear that “in determining if a claim
is liquidated or unliquidated, one must look at the nature of the underlying claim, not the
final award.” 3D Enters.3d Enters. Contracting Corp. v. Louisville & Jefferson Cnty.
Metro. Sewer Deis., 174 S.W.3d 440, 450 (Ky. 2005) (emphasis in original).
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 52

The value of Ventas’ underlying tort claim was neither “agreed upon by the
parties [nor] fixed by operation of law or the parties.” Travelers Prop. Cas. Co. of Am.
v. Hillerich & Bradsby Co., 598 F.3d 257, 275 (6th Cir. 2010). Indeed, Ventas sought
to recover damages beyond the $1.50 per unit increase in its offer, and, as the district
court explained, the jury was free under the applicable law to award Ventas less than
$1.50 per share if it found that Ventas could have offered a lower price to acquire
Sunrise. (Tr.11B at 17); see also Prosoft Automation, Inc. v. Logan Aluminum, No. 03-
CV-142, 2006 WL 1228773, at *2 (W.D. Ky. Apr. 28, 2006) (“[A]lthough the jury
ultimately awarded Prosoft the full amount requested as compensation for [certain hours
worked,] they were not reduced to a certainty in amount prior to trial.”) (emphasis in
original).

Accordingly, the district court’s denial of an award of prejudgment interest to
Ventas is AFFIRMED.16

V. Summary

For the reasons set forth above, the grant of judgment as a matter of law on the
issue of punitive damages is REVERSED, and the case is REMANDED with
instructions that the matter proceed to trial on the single issue of punitive damages. The
remaining decisions of the district court discussed herein are AFFIRMED.

CONCLUSION

For the reasons discussed above, the judgment of the district court is
AFFIRMED, but the district court’s decision to preclude Ventas from seeking punitive
damages is REVERSED, and the case is REMANDED for a trial solely on the question
of punitive damages. The judgment of the district court as previously entered by the

16
Ventas argues only that it was entitled to prejudgment interest as a matter of law. Ventas makes
no argument that the district court should have, in the exercise of its discretion, awarded prejudgment
interest. For this reason, we need not consider whether the district court erred in not doing so, although
even if we were to consider the issue, nothing in the record suggests an abuse of discretion. See Travelers
Prop. Cas. Co. of Am., 598 F.3d at 276.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 53

district court on September 8, 2009 shall stand as a partial final judgment under Rule
54(b) of the Federal Rules of Civil Procedure.17

17
In light of the disposition of this appeal, HCP’s motion to strike three paragraphs of Ventas’
Reply Brief is DENIED as moot. We feel compelled, however, to note that the parties have filed nearly
100 pages of additional argument on this issue, complete with a panoply of uninvited conditional briefing
that culminated in a sur-reply. Surely scores if not hundreds of attorney hours were devoted to this
completely collateral and immaterial issue. We have not been asked to consider the reasonableness of
counsels’ time or actions in litigating this motion, but will simply note that counsels’ conduct speaks for
itself. We also will note, as we did at oral argument, that counsel for both parties have flouted the rules
of this Court by filing numerous unauthorized letters, responses, and replies under the guise of Rule 28(j),
but that contain additional argumentation not properly authorized under Rule 28(j), which only permits a
party to advise the Court of supplemental authority under specified conditions. We trust that counsel will
review the rules of this Court should counsel have occasion to appear before us in the future.
Nos. 09-6385/6413 Ventas, Inc. v. HCP, Inc. Page 54

_____________________

CONCURRENCE
_____________________

MERRITT, Circuit Judge, concurring. I agree with the result and much of the
reasoning of Judge Clay’s well-written opinion in this case, but I do not concur in the
language of footnote 17 suggesting that counsel for both parties have “flouted the rules”
and improperly run up the number of hours spent on the case. As a matter of fairness,
I would not draw those inferences without knowing the details of counsel’s work and
charges and without giving counsel an opportunity to explain their actions.

Also, as to footnote 11, I would point out that the result would be the same
whether we apply a state-law standard as a matter of substance or a federal law standard
as a matter of procedure.