Background
Dr. Anthony Czarnik was employed by Illumina, Inc. (hereinafter “Illumina”). He co-founded the company along with Dr. John Stuelpnagel and Dr. Mark Chee. At the beginning of the company’s history, Dr. Stuelpnagel served as CEO, Dr. Chee served as Vice President of Genomics, and Dr. Czarnik served as Chief Scientific Officer.
His employment was subsequently terminated, and he filed suit against the company in the Superior Court of the State of California for the County of San Diego. The case was heard by Judge Ronald S. Prager and went to a jury trial. Dr. Czarnik was represented by attorney Anthony Pantoni, and Illumina was represented by attorneys Jennifer Kearns and Noemi Espinosa. The three claims raised by Dr. Czarnik were discrimination, retaliation, and wrongful discharge.
Testimony
Plaintiff’s Witnesses
Anthony Czarnik
Dr. Czarnik was the first to testify; he first gave some background information about himself and his family and then went on to describe his education, which included a Bachelor of Science from the University of Wisconsin, a master’s in biochemistry from the University of Champaign-Urbana, a PhD in chemistry from the University of Champaign-Urbana, and post-doctoral studies at Columbia University. He then went on to teach chemistry at The Ohio State University for 10 years.
Dr. Czarnik testified that he left academia to pursue a career in the private sector in order to have the ability to do research without the need to raise grant money; he explained that the success rate of grant writing at that time was decreasing, resulting in more time being spent on grants that were ultimately unsuccessful. He also indicated that he wanted to be involved in research that would have an impact on people’s lives. Dr. Czarnik described the grant writing process and indicated that he had written about 40 grants while at the university.
Dr. Czarnik testified that he left the university to work at Parke-Davis, a pharmaceutical company in Michigan that was later bought out by Pfizer Pharmaceutical Company. At Parke-Davis Dr. Czarnik worked as director of the bio-organic chemistry group, overseeing a group of 10 people.
Dr. Czarnik left Parke-Davis to work for IRORI in San Diego, California; IRORI is a company that invents and commercializes tools for combinatorial chemistry. There he served as Senior Director of Chemistry before being promoted to Vice President of Chemistry.
Dr. Czarnik then testified that he went to work for Illumina from June 1998 until September 5, 2000, at which point he was fired by Illumina. After his termination from Illumina, he served as Chief Scientific Officer (CSO) at Sensors for Medicine and Science, where he was still employed at that time. He indicated that the company is a start-up company working on a sensor for diabetic patients to be able to use to measure their glucose levels.
Dr. Czarnik testified about his inventions and research, noting that he was now being recognized for some of his early, groundbreaking work in the field of chemosensors; he also indicated that some of his most significant work was his work in the field of combinatorial chemistry. After discussing his credentials and résumé further, Dr. Czarnik began testifying about his time at Illumina.
Dr. Czarnik indicated that in November 1997 he received a phone call from either Dr. John Stuelpnagel or Larry Bock; the essence of the call was that Mr. Bock wanted to start a new company and wanted to meet to discuss it. Dr. Stuelpnagel, Mr. Bock, and Dr. Czarnik met for breakfast. Mr. Bock asked if Dr. Czarnik was interested in joining the company if they started it, and Dr. Czarnik indicated he was. Dr. Czarnik told them that he would only be interested in joining Illumina as a chief scientific officer because he wanted to essentially move up a level from his current position if he was going to join a start-up company; this was due to the fact that joining a start-up could be risky in terms of job security. Dr. Czarnik also testified that he liked being at IRORI and that if Mr. Bock and Dr. Stuelpnagel had not offered him the CSO position, he wanted to stay at IRORI. Mr. Bock indicated the position they had in mind for him was the CSO position. After learning from Dr. Stuelpnagel that they would be starting the company, Dr. Czarnik began to think about what would be an acceptable offer on his part. On April 6 the three of them met to negotiate based on Dr. Czarnik’s initial offer. Dr. Czarnik thought the stock offer was acceptable but that the salary was low; he ultimately accepted the offer after unsuccessfully attempting to negotiate the salary higher. On May 7, 1998, Dr. Czarnik signed an offer letter after the three agreed upon the name “Illumina” for the company. The letter indicated that Dr. Czarnik would be the CSO, gave bullet points of his responsibilities, and indicated that he would report to the acting president, who was Dr. Stuelpnagel at that time. The letter also laid out the stock agreement; Dr. Czarnik had the ability to purchase 400,000 shares of Illumina stock at $0.01 per share. The letter also indicated that Dr. Czarnik would be recognized as a founder in press releases and public disclosures.
Dr. Czarnik started working at Illumina on June 11, 1998. At the time, Dr. Chee and Dr. Czarnik were the only employees of Illumina, with Dr. Stuelpnagel technically employed by the venture firm CW Group but working on behalf of CW Group to start Illumina; Dr. Stuelpnagel officially joined Illumina as an employee in September 1998. Dr. Czarnik testified as to the roles the three of them had. He indicated that Dr. Chee did not report to him, despite the fact that he was CSO, because Dr. Chee had also wanted to be CSO. In order to get Dr. Czarnik to join the company, they allowed him to be CSO, but the three of them decided that Dr. Chee would be Vice President of Genomics and not report to Dr. Czarnik; rather, both would report to Dr. Stuelpnagel.
Dr. Czarnik then described the technology of Dr. David Walt that the company was working on. The technology involved dipping optical fibers into acid and rinsing them off, which resulted in small pits being formed on the ends. Then the bundles of fibers were dipped into a water solution with beads in it, and the beads would be driven into the pits. The arrays of beads could be useful if one could decode what bead was in what position at the end of the experiment. The beads at issue were made of glass and on the order of a hundred micrometers; by the time Dr. Czarnik was fired from Illumina, they were working with beads the size of three microns. Dr. Stuelpnagel, Dr. Chee, and Dr. Czarnik decided to use that technology to determine what kind of DNA was in a solution. Dr. Czarnik testified that he fully participated in every discussion that he was aware of regarding the business area the company would be focused on. He indicated that most of the back-and-forth was between himself and Dr. Chee because they had the most direct scientific training. By the middle of July 1998, they had decided to focus on the technology’s application to genomics. The plan was to put DNA on the beads, make arrays of the beads with DNA on it, and use the arrays to measure DNA in solutions.
Dr. Czarnik also testified that he was involved in every aspect of fundraising. The company had an initial $750,000, which came from CW Group, the company both Dr. Stuelpnagel and Mr. Bock were working with. Dr. Czarnik explained what he did to help the company appealable to venture firms, including making recruiting trips to talk with potential employees. He indicated that the company closed its first major round of fundraising in November 1998 and that the company was very frugal at all times.
Dr. Czarnik testified that they recruited scientists in the summer and fall of 1998. Dr. Czarnik indicated that he flew out to recruit them to join the company and that he was the only one who went on those trips. He testified that he typically worked from 8:00 A.M. to 7:00 P.M. and at that time he, Dr. Stuelpnagel, Dr. Chee would decide they had done enough for the day. He testified that he often suggested they work on Saturdays, but the consensus was that they did not need to do so. During the summer of 1998, they all worked equally hard. Once they moved into the research facility, Dr. Stuelpnagel typically worked from 7:00 A.M. until 9:00 or 10:00 P.M.; Dr. Czarnik continued working from about 8:00 A.M. to 6:30 or 7:00 P.M. Dr. Czarnik also discussed some preexisting speaking engagements that he had committed to; he testified that he had disclosed the schedule of these commitments to Dr. Stuelpnagel and that being able to keep those commitments was part of the discussion when he was offered the CSO position.
Dr. Czarnik described what the company was trying to do in the area of genomics. The research was aimed at personalizing medicine based on subtle differences in people’s DNA. Illumina’s goal was to demonstrate that its tool was able to measure the amount of DNA in a solution with 99% accuracy over 95% of the sample. He explained that there are four nucleobases, A, T, G, and C, and Illumina was designing a test so that a different color at a given position would indicate a different nucleobase.
Dr. Czarnik next described the two groups at Illumina—the chemistry group that he headed up and the molecular biology group headed up by Dr. Chee. Both were trying to develop the bead array for DNA identification. They had to make small pieces of DNA and then attach them to the beads. Then the molecular biology team would take the arrays and use them to develop tests to know what DNA was there. He testified that he brought in Dr. Michal Lebl to assist in being able to make the DNA that Illumina needed; he had known of Dr. Lebl from his work in combinatorial chemistry. Dr. Czarnik, Dr. Stuelpnagel, and Dr. Chee all agreed to bring Dr. Lebl on board. Dr. Lebl’s machine was used to make thousands of different kinds of DNA at the same time; it had never been used for this purpose before, as it had primarily been used to make proteins. From the time he joined until December 1999, Dr. Lebl reported to Dr. Czarnik; after that, he reported directly to Jay Flatley.
Dr. Czarnik also testified about his role in promoting the company. He indicated that he reached out to writers and editors of various journals and authored at least one paper that went into a scientific magazine. He also spoke at various scientific meetings and played a role in getting articles about Illumina published in multiple magazines and newspapers.
Dr. Czarnik indicated that morale at the company changed in December 1998; while it had previously been high, Dr. Stuelpnagel indicated that he was unhappy with the rate of progress the company was making. Dr. Czarnik characterized the goals being set by Dr. Stuelpnagel as “extraordinarily stretch goals” that “were just bordering on stupid.” As a result, by January 1999 some chemists were telling Dr. Czarnik that they were thinking of leaving. Dr. Czarnik described his attempts to boost morale, including buying a popcorn popper and making popcorn for the staff every day and going out to lunch with the scientists. He indicated that he also tried to improve communications between the two science groups through a series of weekly lunches where they would talk about progress.
Dr. Czarnik denied that Dr. Stuelpnagel ever gave him a counseling session in August 1998; instead, Dr. Stuelpnagel had a meeting with him in November 1998 in which Dr. Stuelpnagel expressed how upset he was that the company was not meeting its milestones. Dr. Czarnik characterized it as a “venting” session, and he indicated that Dr. Stuelpnagel placed the blame on all three members of the management team—himself, Dr. Czarnik, and Dr. Chee. Dr. Czarnik indicated Dr. Stuelpnagel only had one piece of constructive criticism—that Dr. Chee and Dr. Czarnik write a detailed research plan—and he was also going to discuss that with Dr. Chee. Dr. Czarnik reiterated that Dr. Stuelpnagel never counseled him or pointed out specific problems with his performance during the meeting.
Dr. Czarnik then testified about his depression. He indicated that he was diagnosed with depression in 1992 and that he was currently on two medications, Wellbutrin and Effexor. He also indicated he was engaged in talk therapy when necessary; the only time his doctor thought it was necessary was beginning in April 1999. Dr. Czarnik indicated that he did not disclose his diagnosis with anyone at Illumina prior to joining the company, due to the stigma associated with it. He indicated that in September 1998 his physician switched his medicine; he noticed increasing symptoms in February 1999 and talked to his doctor about the need to make another change. He indicated that it began to affect his work at the end of March 1999—manifesting itself through difficulty focusing and sleeping.
He was supposed to complete a grant application to the National Institute of Standards and Technology for the Advanced Technology Program. The management team originally discussed the grant in November 1998, but it was not until January and February 1999 that the scope of the grant came into context. At that time, Dr. Czarnik thought it would take about five days to write the grant, based on his experience with prior grants. He began attempting to write the application on April 1, 1999.
Dr. Czarnik indicated that he had talked to Dr. Chee on March 29 to discuss how he was doing at his job; Dr. Czarnik knew he was suffering from depression and wanted an outside perspective on his performance. Dr. Czarnik asked Dr. Chee how he thought he was doing as CSO, and Dr. Chee told him he thought he was doing fine. Dr. Czarnik asked if Dr. Stuelpnagel felt the same way, and Dr. Chee indicate that he just thought he was upset that Dr. Czarnik had missed some days in the summer. Dr. Czarnik asked Dr. Chee if he thought it would be better to have him transition to the CSO role, but Dr. Chee indicated that he saw no reason to change titles or positions.
Dr. Czarnik discussed his difficulty in writing the grant application, explaining that depression often inhibits one’s creative writing abilities. On April 6, 1999, he was a little over two pages into what would be a 15-page application and realized he would be unable to meet the deadline. He called for a meeting between himself, Dr. Chee, and Dr. Stuelpnagel in Dr. Stuelpnagel’s office to tell them that if he could not write it, the company needed to still submit the application. As he began to talk to them, Dr. Czarnik broke down crying. All he was able to get out was that he was having difficulty writing the grant and did not think he would be able to complete it on time but that there was still time for someone else to finish it. He indicated that Dr. Stuelpnagel responded by yelling at him and berating him for not meeting the deadline. After some back and forth, Dr. Stuelpnagel brought up a CSO from another company who had “flamed out” and left the company and told Dr. Czarnik, “I guess maybe you just shouldn’t stay.” Dr. Czarnik responded by reiterating that he wanted to stay at Illumina. During this discussion, Dr. Stuelpnagel never asked him what was wrong; Dr. Chee attempted to intercede on Dr. Czarnik’s behalf, but Dr. Stuelpnagel would not let him talk. The meeting ended by Dr. Czarnik indicating he wanted to go home to try to get better; he gathered up his things from his office and went home, where he stayed in bed for a day.
The next day, Dr. Czarnik left a message for Dr. Chee, indicating he would not be in for the weekly company meeting and asked him to run it. At about 10:00 P.M., Dr. Czarnik called his brother, who is a doctor, and asked for anything he could do on a short-term, emergency basis. His brother told him that one treatment that is no longer used is to take an amphetamine, which very quickly reverses depression.
Dr. Czarnik took an amphetamine that he had in the house early the next morning; within two hours he felt drastically better. He drove to work and tried to find Dr. Stuelpnagel and Dr. Chee, but Dr. Chee was not there, so he met with Dr. Stuelpnagel and Dr. Rich Pytelewski, the Vice President for Operations, who was a member of the senior management team. He explained to them his depression diagnosis and the change in medication and indicated he was going to try to finish the grant. Dr. Chee arrived at the office about an hour later, and Dr. Czarnik had the same discussion with him. Dr. Czarnik was able to pull an all-nighter and submitted the grant on April 14.
Dr. Czarnik then testified about how his relationships with Dr. Stuelpnagel and Dr. Chee changed after his breakdown. He indicated that Dr. Stuelpnagel simply stopped talking to him and that his opinions were no longer valued during management meetings. He also testified that the management team no longer involved him in business development activities and cut him out of involvement with business collaboration efforts in which he had been previously involved. Dr. Czarnik indicated that despite the fact that he had been involved with previous funding rounds, he was not asked to be involved with the round of financing after he disclosed his depression. On cross-examination Dr. Czarnik conceded that there were numerous meetings with other companies that he helped plan but did not attend prior to his disclosure of his depression.
Dr. Czarnik discussed Illumina bringing in a new CEO, Mr. Flatley, in the fall of 1999; he indicated that he was not involved in the discussions about who the CEO should be. He indicated that the only discussion he had with Mr. Flatley when he started as CEO was a brief 15-minute conversation; Mr. Flatley never talked with him about the science of the company or what role Dr. Czarnik would have under his leadership. On cross-examination, Illumina introduced evidence that showed that the meeting had actually been 45 minutes, but Dr. Czarnik disputed that evidence; he later conceded that it could have been 45 minutes. He indicated that he sent Mr. Flatley an email to his home email (because he did not know if he had an Illumina email address) to discuss his schedule, in order to get off to a good start with the new CEO; Mr. Flatley responded by saying he was fine with Dr. Czarnik’s schedule. Dr. Czarnik also indicated that he emailed Mr. Flatley requesting a lunch meeting; at that meeting they talked about the early days of the company and where Dr. Czarnik thought the company should put its focus. Dr. Czarnik indicated that he told Mr. Flatley that he could be cynical at times, and Mr. Flatley asked, “Are you sure it isn’t more than that?” The word “depression” was never used in the discussion. Back at the office, Mr. Flatley inquired if Dr. Czarnik needed weekly meetings or if they could simply meet when things were not going the way they should; Dr. Czarnik indicated that the latter was fine but made sure that Mr. Flatley knew that unless he heard from Mr. Flatley, he could assume that he was doing an excellent job. Dr. Czarnik testified that Mr. Flatley never used him as a true CSO, never sought his input on scientific matters, and did not involve him with any project teams—even though he had been involved with two specific projects earlier.
Dr. Czarnik also testified that the management team removed him as a founder from promotional materials. A slide presentation to a venture capital conference listed only Dr. Stuelpnagel and Dr. Chee as founders; when Dr. Czarnik saw it, he emailed Dr. Stuelpnagel, asking him to fix it. Mr. Flatley responded to his email, indicating that it was his error and that he would fix it.
On February 7, 2000, Dr. Czarnik had a dinner with Mr. Flatley, at which time he asked Dr. Czarnik how he was dealing with his depression and if he thought it was work related. Dr. Czarnik told him he was doing fine. Dr. Czarnik testified that he had never told Mr. Flatley about his depression. Dr. Czarnik also told Mr. Flatley that he was still interested in staying with Illumina. Dr. Czarnik indicated that a couple weeks earlier he had gone to Mr. Flatley to let him know that since he was not utilizing Dr. Czarnik as a real CSO, if he wanted to make a change in the CSO position, he just wanted what was best for the company; at the dinner Mr. Flatley brought up the subject and asked Dr. Czarnik if he still meant this. Dr. Czarnik indicated that he wanted to stay with the company, even if it was in a non-management role. The two discussed the possibility of establishing a research fellow position. Dr. Czarnik also expressed his desire to participate in the search for a new CSO if he began to look for one; Mr. Flatley never disclosed that he had already discussed the CSO position with someone.
Dr. Czarnik next discussed his written goals while at Illumina. He had originally written a set of draft goals in the summer of 1999, which were submitted to Dr. Stuelpnagel. He had no written goals in 2000 until Mr. Flatley requested that everyone write goals prior to a February board meeting; Mr. Flatley never indicated that the goals Dr. Czarnik drafted were inappropriate. In his goals email, Dr. Czarnik reiterated his desire to help find a CSO if Mr. Flatley wanted to bring in a new one. Mr. Flatley never responded to the email but spoke to Dr. Czarnik on March 1 to tell him he was no longer CSO and that Dr. David Barker would be the new CSO. Dr. Czarnik’s new position would be research fellow, and his salary would be $20,000 less. Mr. Flatley also indicated the company would buy back 150,000 shares of stock, which was roughly two-thirds of the remaining stock he was going to vest. Dr. Czarnik indicated the decrease in salary and stock was a surprise, considering their previous conversations. Dr. Czarnik requested a meeting with Mr. Flatley and the board to discuss his history with the company, fearing that it had been misconstrued to the board. Mr. Flatley initially told him that he could meet with the board at the next meeting in April, but that never happened.
Dr. Czarnik testified that Illumina was preparing to go public and had prepared an S1 registration statement filed with the Securities and Exchange Commission (SEC). Dr. Czarnik asked to be involved in the process, but Mr. Flatley told him his involvement was not necessary. On cross-examination Dr. Czarnik conceded that he had never worked on an S1 before but noted that he had knowledge of the science and technical parts necessary to draft it. The draft S1 indicated that Dr. Stuelpnagel and Dr. Chee were co-founders of Illumina but that Dr. Czarnik only helped found Illumina. Dr. Czarnik emailed Mr. Flatley to make sure it was corrected, but Mr. Flatley never got back to him on the matter; Dr. Czarnik was not included in further emails circulating the updated drafts.
On March 15, 2000, Dr. Czarnik emailed Mr. Flatley, indicating he would accept the salary and stock reduction if he would be allowed to keep the remainder of the stock unless he was terminated for cause. Mr. Flatley indicated he would not agree to that and implied that the deal was a good deal for Dr. Czarnik and that things would be difficult for him if he did not accept the deal. Dr. Czarnik testified that he could tell he was not a valued employee, and he brought up a possible severance package with Mr. Flatley in late March.
On April 3, 2000, Dr. Czarnik received an alert from the SEC that the S1 had been filed. Any reference to the role Dr. Czarnik played in founding the company had been removed. He went in to confront Dr. Stuelpnagel and Mr. Flatley about it, but Mr. Flatley did not think it was a big deal.
Two days later, Dr. Czarnik sent an email to Mr. Flatley, indicating that he would not agree to a reduction or sign a new contract, because the reduction was discriminatory. The two continued to engage in back-and-forth negotiations and discussions about the discrimination Dr. Czarnik had faced, never coming to a severance deal.
Dr. Czarnik was not permitted to speak at the April board meeting, but one board member, Dr. Walt, reached out to Dr. Czarnik to discuss what happened at the meeting. Dr. Czarnik indicated he had known Dr. Walt for close to 15 years at that point. Dr. Walt was trying to convince Dr. Czarnik to accept a severance package and told Dr. Czarnik that Mr. Flatley had told the board that he was planning on giving Dr. Czarnik goals he could not meet. Dr. Walt told him that the board had given him authority to negotiate severance terms, but Dr. Czarnik indicated he would still not accept the proposed terms.
Dr. Czarnik described his job as a research fellow, indicating that it was a science position without any managerial responsibilities, other than possibly directing the research of other scientists. He indicated that he reported to Dr. Barker, the new CSO. Dr. Czarnik wrote a job description for the position, which was approved by Mr. Flatley and Dr. Barker; there were no written goals in place for the position when Dr. Czarnik started. Eventually Dr. Barker asked Dr. Czarnik to draft written goals, which he did and gave to Dr. barker; Dr. Barker indicated he thought the goals were aggressive. The two revised the goals and presented them to Mr. Flatley; all three of them met to discuss the goals a week before the April board meeting.
On May 4, 2000, Mr. Flatley emailed the entire company, indicating that Dr. Czarnik would be immediately reporting to him instead of Dr. Barker. Additionally, on May 4 Mr. Flatley held a meeting with Dr. Czarnik and Deborah Flamino, the head of human resources. Mr. Flatley indicated that because Dr. Czarnik had turned down the severance proposal Dr. Walt had given, he was going to change his reporting relationship and gave him a counseling memo regarding things Dr. Czarnik had done wrong. One item mentioned in the memo was an allegation that Dr. Czarnik had a pattern of leaving the office for extended periods of time when Dr. Stuelpnagel and Mr. Flatley were gone; the memo did not say who had made this allegation, and Dr. Czarnik indicated it was incorrect. The memo also chastised him for making a joke about Dr. Stuelpnagel being indicted. Dr. Czarnik asked Mr. Flatley to give him the dates he was allegedly excessively out of the office, but Mr. Flatley never did so.
Dr. Czarnik then discussed his decision to file a formal complaint of disability discrimination with the California Department of Fair Employment and Housing (DFEH). On May 17, 2000, he advised Mr. Flatley that he would be meeting with DFEH but expected to make it to their weekly meeting. On May 18 Dr. Czarnik filed a formal charge of discrimination as he indicated he would be doing. To his knowledge, Illumina never investigated the complaint.
On May 19, 2000, Mr. Flatley gave Dr. Czarnik a new set of goals. Some goals were the same, but the new goals added the goal that Dr. Czarnik “[d]emonstrate binary oligo encoding technology” and to write a new grant application every three months. Dr. Czarnik felt the goal regarding binary oligo encoding was unreasonable; he explained that the 90-day goal was to demonstrate feasibility of decoding 4,096 bead types, but after 18 months of work, Dr. Chee’s entire team of 25 people had only been able to decode up to 128 types. Dr. Czarnik explained to Mr. Flatley that he thought the goals were unreasonable and that Illumina did not have the technology to achieve some of the goals. Dr. Czarnik indicated that he had previously asked Dr. Barker for an assistant, and Dr. Barker thought that was reasonable, but when he asked Mr. Flatley for assistance, he denied the request.
On July 10, 2000, Dr. Czarnik emailed Mr. Flatley to indicate that he was taking his previous severance offer off the table because he wanted to stay and work for his vestable stock. Throughout July Dr. Czarnik continued to work on achieving the goals assigned to him as best he could, given the technology available to him.
Dr. Czarnik discussed various emails related to his explaining to Dr. Stuelpnagel why he had been out of the office and his schedule of prior commitments related to when he would be out of the office.
Dr. Czarnik also testified about his role on Illumina’s Scientific Advisory Board (SAB), indicating that as CSO he had the job of organizing the meetings and working with Dr. Walt to create the agenda and lead the meeting discussion. He testified that Dr. Stuelpnagel had told him that the SAB meetings were not a good use of the company’s time or resources. Dr. Czarnik discussed the January 2000 SAB meeting. He sent out an email on January 18, 2000, which listed a number of people, including Dr. Walt, indicating that Dr. Czarnik planned on spending most of the time at the next SAB meeting discussing experimental challenges. After Dr. Czarnik sent the memo to Dr. Stuelpnagel and Dr. Chee, they came to him and told him not to discuss problems at the SAB meeting, so the agenda was changed on short notice, removing that item.
Dr. Czarnik discussed conversations he had with Mr. Flatley regarding his change of position agreement. He indicated that he told Mr. Flatley he would not sign it. His salary was reduced, but Illumina did not buy back his stock, because Mr. Flatley learned from the company’s attorneys that doing so without Dr. Czarnik’s approval was illegal.
Dr. Czarnik testified that despite asking to be involved with the drafting of the S1 statement, he was not allowed to be involved with it. Additionally, he was never asked to participate in the initial public offering (IPO) roadshow or invited to any roadshow preparation meetings.
Dr. Czarnik discussed the 768 decode experiment, indicating that most of the scientific and technical staff were involved with it. Dr. Czarnik indicated he had participated in planning and preparing an earlier 16-bead decoding experiment in late 1998 through early 1999. After that experiment, the company moved to a 128-bead experiment; as time went on, Illumina could fit more beads on the ends of the fibers by using smaller beads. In 1999 during the 128-bead experiment, Dr. Czarnik indicated that he raised concerns that the dyes they were buying might not be labeled properly; he indicated he raised concerns to Dr. Chee and Dr. Stuelpnagel, and Mr. Flatley when he became CEO. He indicated he raised these concerns from March 1999 through December 1999 but got pushback from Dr. Chee and Dr. Stuelpnagel about doing anything about it. Dr. Chee indicated that testing the dyes would take too long and slow down progress; in Dr. Czarnik’s opinion, testing would take no more than a day. At a later discussion about the topic, Dr. Stuelpnagel also objected to testing the dyes because it would slow down progress. In November 1999 he discussed the issue with Mr. Flatley when he became CEO; Mr. Flatley never responded to his concerns.
Dr. Czarnik testified that he participated in regular planning meetings about the 768 decode experiment, both as CSO and as research fellow. The results of the first 768 decode experiment were that no conclusions could be drawn. There was a second 768 decode experiment that began in May 2000. In June 2000 Dr. Czarnik sent emails about meeting to discuss the dyes to Dr. Chee, Dr. Barker, and scientists in the chemistry group. At the meeting, Dr. Czarnik indicated that the poor results in decoding might be due to poor dye choice or impure dyes. Dr. Czarnik testified that he learned of a problem with the dyes when the manufacturer sent Illumina a letter indicating they had mislabeled one of the dyes sold to the company.
Dr. Czarnik testified about his extensive experience in the field of fluorescence and how the dyes were used in the 768 decode experiment. Each different type of DNA was dyed with a different color. The array was then examined under a microscope to see what color each bead was.
Dr. Czarnik testified that the experiment was going on during the IPO roadshow. He said that they called the experiment the “Roadshow Experiment”; it was done specifically so that the roadshow team could say that Illumina could decode a lot of beads. Without the ability to decode a lot of beads, the technology would not be valuable. Dr. Chee and Dr. Barker both stressed the importance of getting the experiment done before the roadshow. He testified that Dr. Chee had expressed his intent to send the experiment results to the roadshow team as soon as they were available. Dr. Czarnik thought that the dye mislabeling was a problem because it would hamper the ability to tell what color a bead was at each stage of decoding. He explained that decoding requires an overlay of several pictures. The colors in the experiment were red, green, and blue, but the pictures showed other colors, including yellow, white, and purple; had the experiment worked right, they should have seen the three colors red, green, and blue. The brightness of each bead also varied; for dim spots, it was hard to tell if there was color or not.
Once he learned of the mislabeled dye sometime around July 21 or 22, 2000, he immediately talked to Dr. Chee and told Dr. Chee to tell the roadshow team not to use the data in the roadshow, because doing so could be construed as a “defraud of investors”. Dr. Chee did not give him any verbal response.
Dr. Czarnik discussed resumption of meetings with Mr. Flatley once he returned from the roadshow. He indicated that in August 2000 Mr. Flatley emailed him to tell him that he owed him feedback on his performance plan; Mr. Flatley had not yet given him any feedback on his work plan. Mr. Flatley made comments on Dr. Czarnik’s progress, and Dr. Czarnik had a memo rebutting the comments placed in his personnel file. Dr. Czarnik indicated he asked for a witness to be present in his weekly meetings with Mr. Flatley because Mr. Flatley was being uncivil during the meetings; Dr. Czarnik was not permitted to have a witness of his own choosing in the meetings. The weekly meetings continued through August. Dr. Czarnik indicated Mr. Flatley would review his work and comment that it looked as if he had worked one day and inquired what he had done all the other days.
On September 5, 2000, Dr. Czarnik emailed Mr. Flatley related to issues with the 768 decoding experiment after having a conversation with Dr. Chee. Dr. Czarnik indicated that he sent Mr. Flatley some materials related to experiments he had run, pursuant to a request by Mr. Flatley. At 6:00 P.M. that day, Mr. Flatley met with Dr. Czarnik and Ms. Flamino and terminated Dr. Czarnik’s employment; the reason he gave was that Dr. Czarnik had not achieved his goals. Dr. Czarnik testified that Mr. Flatley told him, “I understand you’ve been making some strong statements about decoding. If you tell anyone outside of the company about the reagent problem, the company will go after you with everything it has.” Dr. Czarnik did not respond to that. Mr. Flatley did make Dr. Czarnik a severance proposal, but Dr. Czarnik did not accept it.
On September 12, 2000, Illumina sent Dr. Czarnik a letter indicating the company was repurchasing some of his stock in the company. The company included a check for $4,516.67 to repurchase 2226,667 shares at $0.01 and 25,000 at $0.09, which was the price he had paid for them. The shares were worth a little over $10 million at market value at that point. Dr. Czarnik never cashed the check.
Dr. Czarnik discussed the emotional effects all of this had on him. He indicated that he felt a powerful feeling of betrayal and was extraordinarily hurt. He was also saddened by realizing that the excellent job he had done moving the company’s science forward had not been valued.
On cross-examination Dr. Czarnik testified that he does have some memory impairments from his depression.
During cross-examination, Dr. Czarnik testified about his responsibilities as CSO that he had not had experience in prior to coming to Illumina. He indicated that he did not have experience in going on an IPO roadshow or drafting an S1. He initially testified that he had experience selecting potential applications for a new technology, but in his earlier deposition, he had testified that he did not have prior experience with selecting among potential applications for a new technology.
Dr. Czarnik stipulated that he was not seeking lost salary as part of his economic damages; the economic damages sought were for lost value of stock only.
On cross-examination, Dr. Czarnik testified that he first talked to an attorney, specifically his brother Michael Czarnik, concerning his issues at Illumina in the first quarter of 2000; however, the transcript of his deposition indicated this occurred in the first quarter of 1999. Dr. Czarnik indicated the transcript was incorrect or that he had misspoken during his deposition.
John Stuelpnagel
At the time of litigation, Dr. Stuelpnagel was Senior Vice President of Operations and a board member. He had a Bachelor of Science in biochemistry and a Doctorate of Veterinary Medicine. He also had an MBA from UCLA. Prior to founding Illumina, he was involved in a number of start-ups. He began working for Larry Bock in 1996 at a venture capital firm, which became CW Group. Dr. Stuelpnagel testified that working at Illumina was the first time he had scientists reporting to him.
He acknowledged that Dr. Czarnik was a founder of the company and indicated that he was part of the team that recruited Dr. Czarnik to Illumina; there was consensus among him, Dr. Walt, Mr. Bock, and Dr. Chee to hire Dr. Czarnik.
Dr. Stuelpnagel testified about strategic planning meetings during the summer of 1998. He indicated that he, Dr. Chee, and Dr. Czarnik all participated but that Dr. Czarnik’s participation regarding strategic vision was minimal. Dr. Stuelpnagel discussed the goals and milestones of the company and how they decided to focus on genomics.
Dr. Stuelpnagel discussed Dr. Czarnik emailing him about needing to be absent for preexisting commitments. He estimated that during the summer of 1998 Dr. Czarnik was absent 10–15 full days, with 7–10 of those being for preexisting commitments. Dr. Stuelpnagel said he had a counseling session in August 1998 with Dr. Chee and Dr. Czarnik “to alter Dr. Czarnik’s performance positively.” One of the issues discussed was Dr. Czarnik’s absenteeism and not spending full days at the office.
Dr. Stuelpnagel testified about what he described as the first major crisis in his presidency—in January 1999. The company had developed a research timeline and goals and was not meeting its milestones; a board meeting was coming up, and he expected to have to talk about overly optimistic expectations the team had had in the summer and fall.
In June 1999 an employee resigned; during his exit interview he said it was because he did not have respect for Dr. Pytelewski, his senior manager. Dr. Stuelpnagel also acknowledged it was because he had a problem with Dr. Chee; he never counseled Dr. Chee about his interactions with that employee.
Dr. Stuelpnagel said that he talked with Dr. Czarnik about his performance in November 1998, denying that the discussion was about the company not meeting its milestones. He indicated that things were going well for the company in November 1998, including finalizing financing to bring in additional funding. After that, the company began to fall behind as it tried to improve its technology.
Dr. Stuelpnagel discussed the SAB and its meetings. He said that he counseled Dr. Czarnik in advance of the January 1999 meeting because the preparation was not adequate in his opinion; he counseled him again after the meeting. He told Dr. Czarnik to model his preparation for the SAB meetings after his own preparation for the board meetings. Dr. Stuelpnagel conceded that he echoed Mr. Bock’s opinion that the meetings were a waste of time; however, he denied that he told Dr. Czarnik that the meetings should be held less frequently but later conceded that he advocated for holding them once a year.
Dr. Stuelpnagel discussed the incident on April 6, 1999, when Dr. Czarnik broke down in his office about the grant application. He indicated that he was frustrated by what Dr. Czarnik said but denied yelling at him; he testified that it was his impression that Dr. Czarnik was having a nervous breakdown. Dr. Stuelpnagel estimated that the meeting lasted about 15 minutes and that Dr. Czarnik only cried for the last two to five minutes. He never asked Dr. Czarnik what was wrong and assumed it was a nervous breakdown. He indicated that at the beginning of the meeting, he questioned if anybody else could do the grant and told Dr. Czarnik that he had let the company down; he described his delivery at this point as stern. When Dr. Czarnik began crying, Dr. Stuelpnagel thought he had been too stern and “was a little rough” on him; he said he told Dr. Czarnik to settle down and that it would be okay. He indicated that Dr. Czarnik suggested that he should leave Illumina or step down as CSO; Dr. Stuelpnagel indicated he was sympathetic and told Dr. Czarnik to just take off as much time as he needed. After Dr. Czarnik left his office, Dr. Stuelpnagel and Dr. Chee had a brief conversation simply about how shocking the incident had been and expressing disappointment in the grant not being able to be done.
Dr. Czarnik emailed Dr. Stuelpnagel that night, and Dr. Stuelpnagel called him the next morning to see how he was feeling. Dr. Czarnik talked about the grant, and Dr. Stuelpnagel told him not to think about it and to just take care of himself.
On April 8 Dr. Czarnik met with Dr. Stuelpnagel and Dr. Pytelewski in Dr. Stuelpnagel’s office. At that point, Dr. Czarnik advised them that he suffered from depression, had changed his medication, and that it was now under control. Dr. Czarnik asked Dr. Stuelpnagel to pass the information on to Dr. Chee, which he did.
On April 11 Dr. Stuelpnagel and Dr. Chee discussed getting a new CSO. Dr. Chee told Dr. Stuelpnagel that in March 1999 Dr. Czarnik had approached him about taking the CSO position. They decided not to look for a new CSO.
Dr. Stuelpnagel denied avoiding talking to Dr. Czarnik after he disclosed his depression. The two had another counseling session in late April; among other things, they discussed Dr. Czarnik’s performance.
He indicated that he did not involve Dr. Czarnik in business development activities for genotyping because he had not been involved with them before.
Dr. Stuelpnagel indicated that he raised alleged performance problems related to Dr. Czarnik with the board of directors; he did this specifically during a time when the company was deciding how to compensate senior management for closing a business deal with another company.
Dr. Stuelpnagel testified that when Mr. Flatley came to the company, he did not brief him regarding the backgrounds or strengths and weaknesses of the senior management team. He indicated that the first time he discussed Dr. Czarnik’s performance with Mr. Flatley was in January 2000 after the SAB meeting—about three months after he had joined the company as its new CEO.
Dr. Stuelpnagel testified about Dr. Czarnik being missing from slides in various presentations. He indicated that that was an oversight and noted that there were other individuals mistakenly omitted from the slide.
Dr. Stuelpnagel testified about meeting with Mr. Flatley, Dr. Chee, and Dr. Barker to set Dr. Czarnik’s goals when he was a research fellow. He indicated that in May 2000 Illumina could decode 500 bead types and had shown feasibility and proof of concept for over 2,000 bead types. He said that at the June 2000 board meeting, one board member asked if Mr. Flatley thought Dr. Czarnik would be able to meet the goals. Mr. Flatley responded by saying that, based on Dr. Czarnik’s previous inability to meet any goals, he did not think he would be able to.
Dr. Stuelpnagel indicated that to his knowledge the first time Dr. Czarnik made a claim of discrimination was during severance negotiations with Mr. Flatley in April 2000. He testified that he did not think Ms. Flamino ever investigate the claim of discrimination; however, an attorney affiliated with the company did investigate Dr. Stuelpnagel regarding the claim.
Regarding the 768 decoding experiment, Dr. Stuelpnagel denied that he wanted it completed specifically in time for the IPO roadshow. On cross-examination he indicated that there were never representations made to potential investors about the number of beads Illumina was decoding. He also denied that the experiment was referred to as the “roadshow experiment”. He denied that Dr. Czarnik ever expressed concern to him about the data being shared with the roadshow team or investors being misled. Dr. Stuelpnagel testified that the mislabeled dye did not impact the conclusions from the experiment and described the conclusions as “absolutely perfectly legitimate.”
Dr. Stuelpnagel Called as Defense Witness / Cross-Examined
Dr. Stuelpnagel testified about a conversation he had with Dr. Czarnik in the summer of 1998 regarding his employment at IRORI. Dr. Czarnik had told him he was glad the Illumina opportunity came up because he knew he had to leave IRORI. Dr. Czarnik told him that senior managers had started having meetings that he was not invited to attend; he felt like his opinion was not valued. The Court limited this testimony to the issue of Dr. Czarnik’s credibility—to impeach prior testimony of Dr. Czarnik that was inconsistent with what Dr. Stuelpnagel had testified.
He testified about Dr. Czarnik’s work ethic in the summer of 1998, describing it as “incredibly poor”. He indicated that Dr. Czarnik would arrive in the mid-morning, leave an hour or two after lunch, and sometimes come back in the late afternoon; typically he was only there for four to six hours, but sometimes he was there for a full day. Dr. Stuelpnagel also testified that Dr. Czarnik only contributed four pages of the 80-page business plan and that he had to assign him a specific section just to get those four pages. He felt like the work done on the portion he contributed was also poor, and some of it had to be completely rewritten. He also indicated that Dr. Czarnik did not contribute to the strategic planning of the company as well as he and Dr. Chee did. Dr. Stuelpnagel contradicted Dr. Czarnik’s testimony regarding the three of them working roughly the same hours every day. On redirect examination, Dr. Stuelpnagel conceded that he never gave Dr. Czarnik a written warning or brought up his alleged poor performance at a board meeting.
Dr. Stuelpnagel discussed the meeting he and Dr. Chee had with Dr. Czarnik in August 1998. He claimed they addressed issues regarding his productivity, lack of effort, and poor performance. He described Dr. Czarnik as very passive during the discussion.
Dr. Stuelpnagel said that Dr. Czarnik’s performance did not improve in the fall of 1998 after the company moved buildings. He talked with Dr. Czarnik again in November 1998 and discussed the positive things he had contributed to the company and what he needed to work on; he told Dr. Czarnik that if he did not improve, he predicted that he would be marginalized, lose respect, and have less responsibility. The topics Dr. Stuelpnagel raised with Dr. Czarnik were unfulfilled expectations, a lack of leadership, and his time away from Illumina. He also discussed his positive contributions, including some inventions, identifying one of the scientists, setting corporate culture, and solving a 401(k) issue. Dr. Stuelpnagel had a notepad with notes he had prepared before the meeting; all of them were related to Dr. Czarnik and not about the company not making its goals or milestones. Dr. Stuelpnagel described Dr. Czarnik’s response as nonchalant.
Dr. Stuelpnagel discussed the company’s business development prior to the April 6, 1999, incident when Dr. Czarnik had his breakdown. He indicated that there were meetings Dr. Czarnik was not in and meetings that Dr. Chee was not in; it was common for business development presentations to not necessarily include all members of the senior management team.
Dr. Stuelpnagel testified that he had members of his immediate family that suffered from depression. During his meeting with Dr. Czarnik a couple weeks after Dr. Czarnik’s breakdown, Dr. Stuelpnagel talked to Dr. Czarnik about this.
Dr. Stuelpnagel again reiterated that he did not treat Dr. Czarnik differently after learning about his depression and did not conclude that he needed to leave the company because of his depression. He indicated that he did not prevent Dr. Czarnik from engaging in any business activity due to his depression.
Dr. Stuelpnagel discussed the fact that as a board member he participated in discussions related to Dr. Czarnik’s proposed severance package. Mr. Flatley disclosed that Dr. Czarnik was claiming discrimination; at the time of that disclosure, settlement negotiations had been going on for over a month.
David Barker
Dr. Barker was a vice president and CSO of Illumina at the time of litigation. Prior to that he worked at Molecular Dynamics with Mr. Flatley. Mr. Flatley first contacted him about the CSO position on February 4, 2000; after interviewing for the position and being offered the job, he had to make a decision about the job offer quickly because Mr. Flatley’s goal was to have him help with the IPO process.
Dr. Barker testified that he thought it was important to establish a good relationship with Dr. Czarnik and found him to be helpful and cooperative when it came to advice on what the chemistry department was doing. He testified that there was conflict between the molecular biology team and chemistry team but denied that Dr. Chee blamed Dr. Czarnik for that. Upon review of his deposition testimony, Dr. Barker conceded that Dr. Chee told him that Dr. Czarnik contributed to the conflict; however, he further testified that he never observed Dr. Czarnik contribute to the conflict.
Dr. Barker testified about his supervision of Dr. Czarnik and Dr. Czarnik’s goals. He indicated that he was Dr. Czarnik’s supervisor before it was changed so that Dr. Czarnik reported directly to Mr. Flatley. Dr. Barker, Dr. Czarnik, and Mr. Flatley met to discuss Dr. Czarnik’s goals sometime in mid-April 2000 while Dr. Barker was still his supervisor. Some time prior to May 4, around the time that Dr. Czarnik filed his complaint with the state, the goals were revised to ensure they were measurable and doable; this was done in part because of the possibility of a dispute with Dr. Czarnik. Dr. Barker testified that he did not think Dr. Czarnik was given some of the assistance—specifically a consultant—that he had asked for to help complete one of the goals. Regarding Dr. Czarnik’s goal for binary oligo encoding, Dr. Barker thought that it was challenging and difficult but that Dr. Czarnik could make good progress if he applied himself. He indicated that Mr. Flatley said it would be unlikely for Dr. Czarnik to meet the goals, given his work ethic and previous work. On cross-examination Dr. Barker testified that Mr. Flatley typically set aggressive goals, meaning trying to stretch employees to do as much as possible to further the aims of the company.
Dr. Barker discussed the roadshow. He said the roadshow team anticipated getting questions about decoding but did not get any. During the roadshow, Dr. Chee sent him a slide with updated information on the company’s decoding progress, but the team decided not to use it during the roadshow.
Dr. Barker discussed the problem with the dye. Kevin Gunderson was the principal scientist on the 768 decode experiment and discussed the issue with Dr. Barker. Dr. Barker indicated that the mislabeling would make him question the reliability of the results; however, on cross-examination he said that looking back on the experiment, after repeating it he does not question the experiment’s reliability. Dr. Barker indicated that a CSO could have quality checked the dyes himself—or have someone else do it for him—if he had wanted to. On re-direct examination, he conceded that at the time the dye problem was brought to his attention he did not know that the experiment would be successfully repeated.
On cross-examination Dr. Barker discussed Dr. Czarnik’s work ethic. He said Dr. Czarnik used to take long lunches and sometimes take the entire department out for lunches. He thought that did not set a good example for diligent work.
Mark Chee
Dr. Chee indicated that at that time of litigation he was employed as a research fellow at Illumina. He had joined Illumina as Vice President of Genomics in June 1998, which was a position he held for four years, until he became a research fellow.
Dr. Chee discussed the meeting on April 6, 1999, where Dr. Czarnik had his breakdown. He described it as a very short meeting. He indicated that based on what he observed at the meeting, he had concerns about Dr. Czarnik’s health and his ability to continue to function as CSO. He indicated that he did have some concerns about the fate of the company based on what happened and Dr. Czarnik’s ability to recover from the incident. On cross-examination Dr. Chee indicated that he thought Dr. Czarnik had begun crying “fairly shortly into the meeting.” He testified that Dr. Stuelpnagel did not yell during the meeting and did not stop him from speaking. He also denied that Dr. Stuelpnagel said Dr. Czarnik should leave the company, despite Dr. Czarnik making an offer to do so. He described Dr. Stuelpnagel’s demeanor as calm and sympathetic.
He indicated that he learned of Dr. Czarnik’s depression some time a few days after the incident. He went on a trip with Dr. Stuelpnagel on April 11, 1999, and had a discussion with him about whether they should contemplate replacing Dr. Czarnik as CSO. They ultimately decided they wanted to give Dr. Czarnik every opportunity to be successful.
Dr. Chee discussed the goals assigned to Dr. Czarnik as a research fellow. He said he participated in discussions about setting those goals with Mr. Flatley, Dr. Stuelpnagel, and Dr. Barker. He did not recall who came up with idea to add the grant application writing goal to the third goal assigned to Dr. Czarnik. On cross-examination he testified about the goal related to binary oligo decoding, saying he thought if Dr. Czarnik applied himself that his work would be of business value to the company.
Dr. Chee discussed the 768 decode experiment. As had been testified by others, he indicated that Dr. Gunderson was the principal scientist on the project. He indicated that he sent the results to the roadshow team while they were on the road. He said he sent some PowerPoint slides related to the results because he thought they might be useful to the roadshow team for answering questions related to decoding. He discussed the mislabeled dye, indicating that the experiment did not go quite as expected but that the results were as expected. He conceded that when he and Dr. Gunderson knew there was something wrong with the experiment that they thought the mislabeled dye was the reason. Dr. Chee testified that he was in charge of the company while Mr. Flatley was on the roadshow and did not recall Dr. Czarnik coming to him with concerns about the mislabeled dye. On cross-examination Dr. Chee said that decoding does not depend on having exactly the right colors but rather being able to tell the colors apart; he indicated that even with the mislabeled dye they could still tell the colors apart. He indicated that Dr. Czarnik emailed him about the dye on the day he was terminated but said he did not remember Dr. Czarnik ever bringing up the issue to him before that. Dr. Chee did not recall if employees had referred to the 768 decode experiment as the “roadshow experiment”.
On cross-examination Dr. Chee discussed a number of performance issues related to Dr. Czarnik. Regarding Dr. Czarnik’s contributions to the business plan, Dr. Chee characterized his participation as superficial and reluctant. He also characterized Dr. Czarnik as not having a strong work ethic. He talked about a discussion he and Dr. Stuelpnagel had with Dr. Czarnik during the summer of 1998 regarding Dr. Czarnik’s performance. He said it was clear Dr. Stuelpnagel was concerned about Dr. Czarnik’s performance, not just his occasional absence. Dr. Chee discussed when Dr. Czarnik had offered him the CSO position prior to the April 6 incident. He said Dr. Czarnik was not comfortable in the CSO role and offered it to him. Dr. Chee responded by telling him that he thought he should remain CSO. Dr. Chee also discussed the SAB meetings, describing Dr. Czarnik’s management of the meetings as “haphazard”.
In June 2000 Dr. Chee had another discussion with Dr. Czarnik. Dr. Chee brought up that he had heard Dr. Czarnik had hired a lawyer and was taking some legal action against Illumina. He told Dr. Czarnik to think carefully about his actions and the impact on morale it could have. Dr. Czarnik told Dr. Chee that he was not going to sue Illumina and that it was just part of negotiations with Mr. Flatley.
Kevin Gunderson
Dr. Gunderson indicated that he was a principal scientist at Illumina, where he started working in October 1998. He worked under Dr. Chee at his previous company and worked under him for most of his career at Illumina up to that point.
He led the decoding effort on the 768 decoding experiment. The first experiment was in spring of 2000 and did not work; they did not get any data upon which they could rely from the results. They began planning for a second experiment in June 2000. They planned to do four-color decoding but ultimately settled on three; there was a period of time when they discussed doing two-color decoding. The three colors used were blue, green, and red. In a memorandum summarizing the experiment written a year later, Dr. Gunderson wrote that the quality and accuracy of the data may have been compromised by the dye mislabeling. He did not question the overall conclusions of the experiment but questioned the accuracy and robustness of the data. When the company found out about the mislabeled dye, the team started planning to redo the experiment but ultimately reworked additional aspects of the experiment process. On cross-examination he indicated that Dr. Czarnik helped him get a refund from the supplier; Dr. Czarnik never mentioned any concerns about the data being fraudulently used to induce investors to buy Illumina stock. Dr. Gunderson also indicated that if someone from the chemistry team wanted to test the dyes that he or she could have done it; there was no physical or security restrictions on the dyes. He indicated that on the date of the IPO, Dr. Czarnik did not look concerned and was leading the celebration.
Dr. Gunderson discussed the slides from the roadshow. He indicated Dr. Chee asked him to make a couple PowerPoint slides. The purpose of the slides was to show visually that one could see different colors on beads as a result of the decoding process.
Dr. Gunderson discussed his interactions with Dr. Czarnik at Illumina. Dr. Czarnik oversaw the chemistry division, and Dr. Gunderson was in the molecular biology division; they interacted when the two collaborated. He indicated Dr. Czarnik would challenge the molecular biology group on experiments but indicated he never made negative or derogatory comments about other scientists. He found Dr. Czarnik to be cordial and said he got along with the other scientists. Dr. Gunderson said Dr. Chee was more serious and strongly opinionated, which caused some friction.
Steven Barnard
Dr. Barnard indicated that he had worked at Illumina since April 1998 as a senior scientist; at the time of the trial, he was the Director of Array Chemistry. He reported to Dr. Czarnik as a senior scientist, a position he held for 2.5 years; at that time, he became associate director and still reported to Dr. Czarnik until Dr. Czarnik became a research fellow. He then reported to Dr. Barker.
Dr. Barnard talked about working under Dr. Czarnik. He said he was a good mentor but did not think he had good management skills. He explained that Dr. Czarnik is a renowned expert in combinatorial chemistry; he used to discuss chemistry with the team often and made himself available when the team needed mentoring. In terms of his management style, Dr. Barnard said Dr. Czarnik had no strategic plan or vision for the team. On cross-examination Dr. Barnard testified that there was a clear distinction between the work ethic of Dr. Stuelpnagel, Dr. Chee, Dr. Czarnik, and himself; Dr. Czarnik usually worked from 9:00 A.M. to 5:00 P.M., while others worked from 7:30 A.M. to 7:00 P.M. On recross-examination, Dr. Barnard testified that in March 2000 he was concerned about Dr. Czarnik’s status at the company due to his lack of productivity; he viewed him as a friend.
On cross-examination he talked more about Dr. Czarnik’s role. He said that Dr. Czarnik was an expert in combinatorial chemistry and did not know much about genomics, which was the direction in which Illumina was heading. He said Dr. Czarnik admitted that he was not a fighter and really did not fight for the chemistry department. When Dr. Czarnik left the CSO position, he told Dr. Barnard that he stepped down as CSO because he thought it was a good idea because Dr. Barker was an expert in genomics. Dr. Czarnik never said he stepped down because of any medical condition discrimination. He never knew Dr. Czarnik had a disability but did say he was a procrastinator. He said Dr. Czarnik enlisted him to help with the grant Dr. Czarnik needed to prepare; in Dr. Barnard’s opinion Dr. Czarnik was starting the project later than he should have.
Dr. Barnard also discussed the January 2000 SAB meeting. Dr. Barnard brought up a concern to Dr. Czarnik about the agenda going out late; Dr. Czarnik responded by saying he was going to “wing it” at the next meeting.
Todd Dickinson
Dr. Todd Dickinson testified that he joined Illumina in September 1998 as a scientist; he was ultimately promoted to a scientific program manager at the time of the litigation, and he reported to Dr. Czarnik the entire time he was at Illumina until Dr. Czarnik became a research fellow. He then reported to Dr. Barker and Bob Kain, Vice President of Engineering.
He discussed his interactions with Dr. Czarnik. He said Dr. Czarnik was a good manager on a personal level, but on a technical level—planning and vision—he could have done better. He indicated Dr. Czarnik was a good mentor as a chemist. He acknowledged there was a schism between biology and chemistry and said that Dr. Czarnik did not do much to improve communications between the two groups. On cross-examination Dr. Dickinson said he liked Dr. Czarnik’s hands-off management style. Dr. Czarnik enlisted him to help prepare the grant application, and Dr. Dickinson said Dr. Czarnik had procrastinated in starting on the application—asking for his help fairly late.
Dr. Dickinson discussed Dr. Czarnik’s interactions with Dr. Stuelpnagel. He said that in 2000 he could tell that some of Dr. Czarnik’s compliments to Dr. Stuelpnagel were not sincere. Dr. Czarnik and Dr. Dickinson discussed the amount of stress that Dr. Stuelpnagel caused Dr. Czarnik. Dr. Dickinson said it was not until close to his termination that Dr. Czarnik ever raised the issue of discrimination to him.
Dr. Dickinson accompanied Dr. Czarnik to Dow Chemical to give a presentation to try to get Dow to invest in the company. When they got to the board room, Dr. Czarnik handed him some transparencies that were out of order and said, “Why don’t you give the talk?” Dr. Dickinson thought he was joking, but then Dr. Czarnik indicted his throat was dry and that he wanted Dr. Dickinson to give the talk. After the presentation, Dr. Dickinson expressed his anger and disappointment to Dr. Czarnik, indicating that he would have liked to have been more prepared to give the presentation. He told Dr. Czarnik, “Please don’t ever do that again”, after the meeting.
Dr. Dickinson also described Dr. Czarnik’s personal goals assigned to him by Mr. Flatley as “tough”.
Bahram Kermani
Dr. Bahram Kermani joined Illumina in January 2000 as a senior scientist in bioinformatics. He did some work with the 768 decoding experiment. Although he did not independently recall the first run of that experiment, his review of a file on Illumina’s computer archive led him to believe that it had not worked. He said that although the second experiment was not perfect—and that no experiment is—it did have better quality than the first.
Diping Che
Dr. Diping Che joined Illumina as a senior scientist, which was the position he held in the summer of 2000; at the time of the litigation, he was an associate director in the engineering department. He developed imaging systems used to detect if fluorescent signals were coming out of fiber optic bundles.
Regarding the 768 decode experiment, Dr. Che indicated that tests led him to believe that there were only two colors used; he later learned there were three, but two of the dyes were very close. The experiment data led to a conclusion that there was a possible mislabeling of the dyes. He indicated again that using the imaging system, one could essentially only see two colors instead of three—due to the mislabeling of the dye. On cross-examination he indicated that the data where he saw only two colors was only on one of the experiments and that there were several other experiments.
Jay Flatley
Mr. Flatley indicated that he is the president, CEO, and a director of Illumina. He had been with Illumina since October 1999.
He testified about his interactions with Dr. Czarnik when he joined the company. He indicated that he did not join the company with any preconceptions about Dr. Czarnik; he denied that Dr. Stuelpnagel gave him any background about the skills, experience, or abilities of the senior staff members. Mr. Flatley did not review the personnel files of the senior management team when he joined the company. He indicated that he had no intentions of replacing members of the senior management team but knew that it needed to be expanded. Mr. Flatley denied having only one 45-minute meeting with Dr. Czarnik when he first came to Illumina, testifying that he had many meetings with him; Dr. Czarnik was the only one he had scheduled one-on-one meetings with, and that was because Dr. Czarnik had requested them.
Mr. Flatley discussed the lunch meeting he had with Dr. Czarnik about 10 days after he started. Dr. Czarnik had requested the lunch, and he told Mr. Flatley that he could be cynical at times. Mr. Flatley denied responding with, “Are you sure it isn’t more than that?” He indicated that they discussed the word cynical and the difference between a cynic and a skeptic.
Dr. Czarnik and Mr. Flatley eventually agreed that weekly one-on-one meetings were not necessary. Mr. Flatley indicated that early in their meetings Dr. Czarnik tried to solicit feedback from Mr. Flatley about his performance. Dr. Czarnik asked if he did not hear from him that he could assume he was doing a good job, and Mr. Flatley agreed.
The first problem Mr. Flatley raised with Dr. Czarnik was in late November or December 1999. He said over the next few months, his impression of Dr. Czarnik became increasingly negative.
Mr. Flatley discussed the presentation to a venture capital firm that listed only Dr. Stuelpnagel and Dr. Chee as founders. He admitted that this was an error on his part and that he should have included Dr. Czarnik. He had not known that Dr. Czarnik had status as a founder. He testified that Dr. Stuelpnagel did not point out the error; he did not learn of the error until Dr. Czarnik brought it to his attention.
Mr. Flatley denied taking away responsibilities from Dr. Czarnik in January 2000 other than making routine reassignments.
Mr. Flatley discussed the goals assigned to Dr. Czarnik. He indicated it was included in the agenda for the February 2000 board meeting, along with other individuals’ goals, but did not remember it being specifically discussed.
Mr. Flatley indicated that he had a dinner meeting with Dr. Czarnik in February 2000 but disputed that he specifically asked him about his depression. He further denied that he knew he had depression at that time. He indicated he asked Dr. Czarnik if he was willing to give up his CSO position. Dr. Czarnik brought up his desire to be involved in the search for a new CSO; Mr. Flatley did not tell Dr. Czarnik that he had already spoken to Dr. Barker about possibly coming to Illumina. On cross-examination he explained that the reason for this was he had only discussed with Dr. Barker whether he was interested in coming to Illumina; he denied having engaged in negotiations with Dr. Barker at that point. Mr. Flatley denied that the topics of depression or medication ever came up at the dinner meeting.
On March 1, 2000, Mr. Flatley told Dr. Czarnik he was no longer CSO. He told him that Dr. Barker was scheduled to interview for the position and asked Dr. Czarnik to coordinate interviews. Mr. Flatley also told Dr. Czarnik he was reducing his salary and stock. The company lawyers told him that that a reduction in stock needed to be mutual, so Mr. Flatley had an agreement drafted, but Dr. Czarnik refused to sign it. On cross-examination Mr. Flatley testified that when he initially told Dr. Czarnik about the stock reduction that he did not express any opposition to it.
On April 3, 2000, Dr. Czarnik sent Mr. Flatley an email saying that he considered the reductions to be discriminatory and punitive. Mr. Flatley testified that he did not know he was talking about discrimination based on a medical condition. In an email on April 5, Dr. Czarnik made reference to discrimination based on his medical condition.
On May 17, 2000, Dr. Czarnik emailed Mr. Flatley to tell him he was going to the DFEH for an interview; Mr. Flatley indicated he did not directly know it was about alleged discrimination. The company filed a response with DFEH, noting that Dr. Czarnik did not follow internal Illumina complaint procedures, as he had not voiced a complaint of discrimination to the human resources department or lodged an internal complaint in a manner that would have afforded Illumina the chance to address his concerns. He indicated that he provided some input and reviewed the response prior to it being sent to DFEH. On cross-examination Mr. Flatley indicated that Dr. Czarnik’s allegation in the complaint that he was demoted to research fellow was incorrect, as Dr. Czarnik had proposed the change to research fellow.
Mr. Flatley discussed the goals assigned to Dr. Czarnik. He said that there was a point in early May 2000 when the two reached an impasse in severance negotiations, and this was before they revised his goals. Dr. Czarnik’s ultimate goals as a research fellow were primarily scientific; initially he reported to Dr. Barker for this reason. On cross-examination Mr. Flatley acknowledged that the goals were aggressive. He also denied that the addition of the goal related to a grant was added to be malicious, hurtful, or harmful.
After about six weeks, Mr. Flatley changed who Dr. Czarnik was reporting to, having Dr. Czarnik report to him on May 4, 2000; Mr. Flatley indicated he did have other scientists reporting to him at that time. Dr. Czarnik was not invited to and did not attend meetings with the senior staff, because his position was not one that related to topics of senior staff meetings. Mr. Flatley also gave him a counseling memo the same day; Mr. Flatley believed this was the first documented criticism of his performance in written form, as prior counseling sessions had been verbal. One issue addressed was Dr. Czarnik leaving the facility when Dr. Stuelpnagel and Mr. Flatley were absent; Mr. Flatley testified that Ms. Flamino and Constance Brick had brought this to his attention.
Mr. Flatley gave Dr. Czarnik his written goals on May 19, 2000, the day after he went to DFEH. He testified that Dr. Stuelpnagel, Dr. Chee, and Dr. Barker all had input on the goals. He denied knowing that Dr. Czarnik would not be able to meet the goals and denied having formed an intention to terminate him as of May 19. His objective was to do everything possible to make Dr. Czarnik a productive employee. He conceded that the goal related to binary oligo encoding had never been done at Illumina but noted that a goal would be unnecessary if it had already been done. At the point the goals were given, Illumina could actually decode between 50 and 300 beads, depending on the experiment. On cross-examination Mr. Flatley brought up that the meeting was originally scheduled for May 18; on May 17 Dr. Czarnik emailed him to let him know he might be late because he was going to DFEH, but Dr. Czarnik did not come in for the meeting on May 18. Mr. Flatley testified that the goals were not given on May 19 to retaliate for him going to DFEH; the goals had already been prepared, and he was ready to give them to Dr. Czarnik on May 18.
On July 10, 2000, Dr. Czarnik emailed Mr. Flatley to discuss how their reporting relationship could go forward “following my learning that you told the board in April that I would not be successful in achieving my goals.” Mr. Flatley said he did not respond to it, because “it was an outright lie”. On cross-examination Mr. Flatley discussed the April 2000 board meeting. At that meeting he brought up the fact that he anticipated Dr. Czarnik was going to leave the company and that they were in severance negotiations. He denied saying that Dr. Czarnik would be given goals he would not be able to achieve.
Mr. Flatley discussed the S1 registration statement. He indicated that Dr. Czarnik was not included in the meetings regarding reviewing and drafting because there was no need to include him.
Mr. Flatley discussed the roadshow. He had received the email from Dr. Chee about the 768 decoding experiment while on the roadshow but did not remember if he read the entire email. He did not remember any specific conversation with Dr. Chee or Dr. Barker about the experiment. He indicated that the company needed to fix the problem with the mislabeled dye and redo the experiment. On cross-examination Mr. Flatley indicated that he did not use the information from Dr. Chee on the roadshow. He explained that there is no material that a company can add to a roadshow during the roadshow, because legally the company does not want to give investors different information. He denied ever hearing the experiment referred to as “the roadshow experiment”. He indicated that Dr. Czarnik’s only concern expressed to him regarding the dye was getting the money back, not misleading data having been shown to investors.
Mr. Flatley testified that Dr. Czarnik resigned in late March. He said it was not an offer to just give up a job title but a flat-out resignation. He told Dr. Stuelpnagel, but he was unsure if he told Ms. Flamino and conceded that he should have done so. After reviewing his deposition testimony, he realized he had told Ms. Flamino. When Mr. Flatley talked to Dr. Czarnik, he did not have a transition plan but wanted to take all of his stock; Mr. Flatley told him to think about it overnight and come up with specifics for his departure. Dr. Czarnik and the company then entered severance negotiations. When they reached an impasse, Dr. Czarnik withdrew his resignation.
Mr. Flatley discussed his termination of Dr. Czarnik. He testified that he decided to do so on August 29, 2000. On cross-examination he explained that this was due to a progress meeting he had with Dr. Czarnik and that there had been no progress; for 100 days of work there were only six pages of entries in his lab notebook. He met with Dr. Czarnik on September 5, 2000, to terminate him. Just before the meeting, Dr. Czarnik emailed him expressing concern about data the company had gathered and disseminated publicly. Mr. Flatley’s notes in advance of his meeting with Dr. Czarnik addressed these concerns that Dr. Czarnik had raised; his notes read in part, “I understand you have expressed some strong opinions in the last few days about the state of decoding.” Mr. Flatley indicated that he reminded Dr. Czarnik about his duty to hold information about the company confidential and that if he did not, the company would pursue all of its remedies. He denied discussing decoding specifically, saying it was irrelevant to him and the termination, since there were topics in addition to decoding that were also confidential. The reason he gave for terminating him was failure to meet the goals and failure to put in effort to meet the goals. Mr. Flatley also gave Dr. Czarnik a written memo fully laying out the reasons for his termination.
On cross-examination Mr. Flatley indicated that during one of his early meetings with Dr. Czarnik, Dr. Czarnik told him that he had put in place a standing offer to step down as CSO due to the company’s focus on genomics. He said that at that time he had no reason to take him up on that offer. He indicated that it did not take long to notice that Dr. Czarnik was not acting or functioning in a CSO role.
Mr. Flatley discussed a senior management team meeting the company held toward the end of his first month at the company. He assigned Dr. Czarnik to lead a discussion on one topic, and he was dissatisfied with Dr. Czarnik’s preparation; he claimed Dr. Czarnik did not prepare any written materials or any slides. Dr. Czarnik did not make any concrete contributions or suggestions during the discussion on the topic. Over the next few weeks. Mr. Flatley discussed with Dr. Czarnik his lack of preparedness; he also mentioned that he talked with Dr. Czarnik about the fact that he was late to the meeting. Since this was the first tangible performance issue, Mr. Flatley did not feel a need to document it with a formal warning in his personnel file.
Mr. Flatley discussed the January 2000 SAB meeting. The meeting was on a Friday, and on Tuesday Mr. Flatley emailed him concerning the lack of an agenda. Dr. Czarnik replied, indicating there was no agenda yet. He denied that he instructed Dr. Czarnik to get approval of the agenda from Dr. Stuelpnagel or Dr. Chee. He further testified that he had no problem with discussing technical problems at SAB meetings, indicating that was one of the purposes of the meetings. He received the agenda late the night before the meeting. Mr. Flatley indicated he was very disappointed and embarrassed by the way Dr. Czarnik was unprepared. Mr. Flatley met with Dr. Walt, who essentially corroborated his views about the SAB meeting.
Dr. Walt met with Dr. Czarnik to discuss these concerns. Afterward, Mr. Flatley indicated he was concerned that Dr. Czarnik lacked the self-awareness to recognize the problems he had raised.
On cross-examination Mr. Flatley testified about email conversations he had with Dr. Czarnik in April 2000. This was when Dr. Czarnik first brought up discrimination; originally, Mr. Flatley thought Dr. Czarnik was using “discriminatory” to mean unfair, as opposed to its legal context. After Dr. Czarnik brought up discrimination on the basis of a medical condition, Mr. Flatley went to talk to Dr. Stuelpnagel, who was head of the human resources group, and Dr. Stuelpnagel told him about the events regarding the April 6, 1999, meeting and that Dr. Czarnik suffered from depression. Mr. Flatley explained that no formal internal investigation was done regarding Dr. Czarnik’s complaint because he felt it was related to the severance negotiations and there was no one to investigate, since he was the only one who participated in those negotiations. He indicated that he did not view Dr. Czarnik’s allegations of discrimination to be a genuine complaint of discrimination. He also alleged that Dr. Czarnik did not accomplish any work between when he resigned, March 22 or 23, and early May; the goals were created to get him working again.
Mr. Flatley testified about meetings he had with Dr. Czarnik to discuss his goals. In the meeting targeted for the 30-day review, Dr. Czarnik came in without any paper, pencil, or a copy of the goals; he asked for another copy of the goals. Mr. Flatley said Dr. Czarnik had not done anything on the goals and that it seemed like Dr. Czarnik did not remember that he had goals. He testified that Dr. Czarnik was late providing deliverables on the goals. At the 60-day meeting, some of the 30-day goals were still not done; it was Mr. Flatley’s opinion that Dr. Czarnik was not putting any effort into making the goals. In a memo written to Dr. Czarnik on August 8, 2000, Mr. Flatley expressed concern about his lack of progress and informed him that failure to make significant progress would result in a reevaluation of his role at Illumina and could lead to termination. Mr. Flatley was not expecting Dr. Czarnik to finish every goal successfully but rather to put in tremendous effort.
Deborah Flamino
Ms. Flamino was the human resources manager at Illumina; she had joined the company in December 1998. She originally reported to Dr. Stuelpnagel and took over some human resources responsibilities when she joined; she became human resources manager in March 2000. Dr. Stuelpnagel was still above her, as Vice President of Human Resources.
She indicated that Illumina had a zero-tolerance policy regarding discrimination. The company policy was to immediately perform an investigation if there was an allegation of discrimination; she would have performed the investigation.
Regarding Dr. Czarnik, she did not know he was alleging discrimination until Illumina was served with the lawsuit. The policy when a supervisor learned that an employee was alleging discrimination was to inform human resources. On re-direct examination, she indicated that it may not have been incorrect for Mr. Flatley to not bring Dr. Czarnik’s allegation of discrimination to her, since Dr. Czarnik was a member of the senior management team and she would not expect to be involved with issues related to a senior manager. She would have elected an outside investigator where the company president is involved with alleged discrimination.
She indicated that she had mentioned Dr. Czarnik’s hours to Mr. Flatley, indicating that he left for several hours when Dr. Stuelpnagel or Mr. Flatley were absent. This contradicted Ms. Flamino’s deposition testimony, where she denied ever talking to Mr. Flatley about Dr. Czarnik’s absence or a perceived lack of work ethic. On cross-examination she indicated that she had talked to Dr. Stuelpnagel about Dr. Czarnik’s absence.
After Dr. Czarnik’s meeting on May 4, 2000, with Mr. Flatley, Dr. Czarnik sent Ms. Flamino an email asking about his personnel file. Ms. Flamino replied encouraging Dr. Czarnik to consider the severance offer of nine months salary and stock instead of pushing for 12 months of each. She denied knowing that Mr. Flatley was considering firing Dr. Czarnik at that point.
She denied ever hearing from Mr. Flatley or anyone else that Dr. Czarnik had resigned his employment. She indicated she was never consulted regarding the decision to make Dr. Czarnik a research fellow, to assign him his goals, or to terminate him; however, she did attend the termination meeting.
Ms. Flamino discussed Dr. Czarnik’s work ethic. She said he would come in late, and she often observed him on his computer doing non-work-related tasks. She said he did do a fair number of things to improve morale at the company, including taking people to lunch and making popcorn for everybody.
Jonathan BenDor
Jonathan BenDor had been a senior scientist at Illumina and was responsible for software development and system administration. He worked on the imaging processing software used for decoding the fiber optic bundles.
Mr. BenDor testified about Dr. Czarnik’s work ethic. He said he seemed to be there most of the time. He said that everyone he saw work with Dr. Czarnik seemed to be pleased working with him and that Dr. Czarnik gave them scientific guidance. He said he never saw Dr. Czarnik be divisive; on the contrary, he gave Illumina a warm feeling.
Mr. BenDor discussed the roadshow. There was a meeting where Mr. Flatley discussed what they were going to tell investors in terms of the number of beads they could decode. The claim Mr. Flatley thought they needed to make was 2,000 beads, but Mr. BenDor did not feel they had sufficient scientific data to support that claim. Some people, including Dr. Chee, felt like they had enough data to support the claim; however, others felt that they did not. Mr. BenDor indicated on cross-examination that he did not attend the roadshow and did not know what was told to potential investors.
Chanfeng Zhao
Dr. Chanfeng Zhao joined Illumina in February 1999 as a scientist; she was then promoted to senior scientist. She reported to Dr. Czarnik until he stepped down as CSO. She described him as a good mentor and a hard worker.
Defense Witnesses
David Walt
Dr. Walt explained his educational background—a Bachelor of Science in chemistry from the University of Michigan, a PhD from the State University of New York, and two years of post-doctoral experience at the Massachusetts Institute of Technology. For the past 21 years he had been an endowed chair of chemistry at Tufts University. His area of expertise was in the field of chemical sensors and overlapped substantially with Dr. Czarnik’s.
Dr. Walt testified that he first met Dr. Czarnik when he was giving a lecture at Tufts University; over the years he saw him occasionally at professional gatherings. He indicated he had recommended Dr. Czarnik to Dr. Stuelpnagel and Mr. Bock as a potential hire for Illumina but conceded that he did not know about his ability to manage scientists or his business strategy abilities.
Dr. Walt discussed his role with Illumina. He explained the technology he invented that was the basis for Illumina’s work; this description did not deviate significantly in substance than that given by Dr. Czarnik. He also described his responsibilities as a member of the board of directors and the SAB.
Dr. Walt testified about interacting with Dr. Czarnik at SAB meetings, describing them as being planned at the last minute, disorganized, and not particularly productive. In contrast, Dr. Walt indicated that the meetings run by Dr. Barker had been well organized and productive. With regard to the January 2000 SAB meeting, Dr. Walt indicated that he did not receive the agenda for it until the night before the meeting. On cross-examination Dr. Walt indicated that he did not believe that Dr. Czarnik had ever placed as an agenda item on the January 2000 SAB meeting anything about discussing scientific problems, but he was not sure.
Dr. Walt testified about Dr. Czarnik’s attitude and depression. He indicated that he had never seen the word “depression” used in connection with Dr. Czarnik until he read the depositions related to the case the previous day. He did, however, indicate that he observed a lack of commitment or luster in Dr. Czarnik at times later in his time at Illumina. On cross-examination Dr. Walt indicated he thought this started sometime around January 2000.
Dr. Walt testified about the board meeting on April 24, 2000. He indicated that he attended the meeting in person and verified that Dr. Czarnik had been brought up by Mr. Flatley. Mr. Flatley explained that he wanted to discuss a severance package for Dr. Czarnik so that he could be compensated appropriately and then have the company break its ties with him. The board debated what a proper severance package was, and Dr. Walt volunteered to call Dr. Czarnik to present the offer—thinking that since he was a friend without a hidden agenda, Dr. Czarnik might listen to him. Dr. Walt denied that Mr. Flatley ever said he intended to fire Dr. Czarnik or mentioned discrimination at the board meeting. He also denied that Mr. Flatley ever said anything about giving Dr. Czarnik performance goals he would be unable to meet. On cross-examination Dr. Walt indicated that he thought the first time he heard Dr. Czarnik was claiming discrimination was August 2000.
Dr. Walt indicated that he talked to Dr. Czarnik about the proposal and that Dr. Czarnik said it was not acceptable. He indicated that he conveyed to Dr. Czarnik that the board was trying to make it as painless as possible for everyone.
Dr. Walt discussed the period of time when Illumina was getting ready to go public. He indicated that he attended a roadshow meeting but did not do anything at any of the roadshow presentations other than stand when he board of directors was introduced. Dr. Walt indicated that Mr. Flatley gave a presentation but did not mention anything about the 768 decoding experiment, saying that that would have been too technical for the presentation. Dr. Walt indicated that, as far as he knew, there were no issues with decoding in the summer of 2000; rather, the decoding group was well ahead of their goals. Dr. Walt testified about an email Dr. Czarnik sent in August 2000 with concerns about the decoding experiment. In that email, Dr. Czarnik expressly brought up an allegation that Mr. Flatley had talked about his depression at the April board meeting. Dr. Walt indicated that he may not have read that paragraph of Dr. Czarnik’s email, because he remembered that whenever someone discussed Dr. Czarnik’s issues, it was always very vague in order to protect confidentiality; he remembered it being described as a health issue. On cross-examination, Mr. Pantoni highlighted that Dr. Walt had testified that the first time he had seen the word “depression” used in connection with Dr. Czarnik was the day before he testified. Dr. Walt then indicated he thought he may have stopped reading after just the first paragraph of Dr. Czarnik’s email.
Dr. Walt discussed the June 2000 board meeting. He indicated that there was a discussion of goals but that Mr. Flatley never said he thought Dr. Czarnik would not be able to meet the goals. Dr. Walt gave a scientific explanation of some of the goals and indicated that he thought the goals were reasonable. Mr. Pantoni cross-examined Dr. Walt at length about the feasibility of the goals; for the most part, Dr. Walt indicated he was not involved in the day-to-day operations of the company; however, with respect to one goal, Dr. Walt specifically testified that in order to complete that goal, Dr. Czarnik could have delegated some of the synthesis to other scientists at Illumina who would have done that aspect of the work for him, enabling him to demonstrate that he could perform the decoding.
Robert Nelson
Robert Nelson indicated he worked for a venture capital firm and was on Illumina’s board of directors; he had been on the board since it was formed. He also served on the compensation committee, which determined executives’ compensation and general compensation philosophy for the company.
He testified about his impression of Dr. Czarnik as CSO, describing him as having “peaked early”. He indicated that Dr. Czarnik did not play a primary role in the rounds of financing but indicated that he did raise awareness of the company through publications.
Dr. Nelson testified about recruiting Mr. Flatley to join as CEO. He indicated that no one on the board told Mr. Flatley about performance problems with Dr. Czarnik or Dr. Pytelewski. He indicated that at the time Mr. Flatley came to Illumina no one on the board knew Dr. Czarnik suffered from depression.
He discussed Mr. Bock contacting him about communications he had with Dr. Czarnik regarding severance negotiations. Dr. Nelson attended the April 2000 board meeting, and the topic of severance negotiations came up. Dr. Czarnik’s goals were brought up, and the board wanted to make sure that any goals set were fair to Dr. Czarnik. He said that Mr. Flatley and Dr. Stuelpnagel seemed to be thinking ahead about ensuring the goals were fair—even before the board stressed it. He said Mr. Flatley was always trying to assign Dr. Czarnik reasonable and achievable goals and help him achieve them. Dr. Nelson thought some of Dr. Czarnik’s severance demands were unreasonable, and the board asked Dr. Walt to talk to Dr. Czarnik to reach a resolution.
Sometime around or at the June 2000 board meeting is when Dr. Nelson learned Dr. Czarnik was alleging discrimination against the company. The board again stressed the importance of making Dr. Czarnik’s goals fair, and Mr. Flatley stressed that he was taking initiative and trying to make sure Dr. Czarnik succeeded instead of failing.
Constance Brick
Ms. Brick was the director of finance; she joined Illumina in March 1999 as a controller and reported to Dr. Stuelpnagel.
Ms. Brick discussed Dr. Czarnik’s work ethic. She said Dr. Stuelpnagel, Dr. Chee, and Dr. Pytelewski (the other three senior managers) were putting in a lot of hours and working really hard; Dr. Czarnik seemed to be more about having fun and creating a fun work environment. She said Dr. Czarnik would sometimes be gone for a couple hours in the middle of the day, not necessarily at lunch time; he told her it was to go swimming. He also did not seem to stay as late at night as others. She denied seeing any of the vice presidents being disrespectful toward Dr. Czarnik. She had the impression that Dr. Czarnik was not working as hard as other members of the staff.
Ms. Brick worked on grants for the company, providing financial information. She had worked on a grant with Dr. Chee, and he planned very far ahead. When she worked on the grant with Dr. Czarnik, she described it as last minute and rushed.
Ms. Brick testified about the preparation of the S1 document. She indicated that she omitted Dr. Czarnik from the table of officers and directors because he was not an officer; had she listed him, she would have also had to list his compensation, which would have then been publicly available.
Diping Che
Dr. Che clarified that he did not participate in the 768 decode experiment; he only developed the imaging systems. He was testing the dyes in order to test one of the imaging systems. He indicated that Dr. Czarnik had not told him to do this test; he did it on his own and found that one of the dyes was mislabeled. He clarified that he had been speculating that only two colors had been used in the 768 decode experiment; however, on cross-examination he indicated that based on his observation of the data it looked like there were only two dyes.
Mark Chee
Dr. Chee discussed the results of the 768 decode experiment. He indicated that the results of the second experiment showed very good specificity. He testified that there was no doubt in his mind that the experiment used three colors and not two. He indicated that in July 2000 when the issue of the mislabeled dyes came up, Dr. Czarnik never asked questions about the experiment or called a meeting of the scientists to investigate the impact of the mislabeled dye.
Allan Mallinger
Dr. Allan Mallinger was Dr. Czarnik’s psychiatrist; he specialized in adult outpatient psychiatry.
He indicated that he created handwritten notes during individual therapy sessions with Dr. Czarnik. The first date Dr. Mallinger saw Dr. Czarnik was April 23, 1999. His notes indicated that Dr. Czarnik told him that one of the people at Illumina was “too perfect”, a reference to Dr. Mallinger’s book; as Dr. Czarnik was unable to meet his expectations, he was angry with this individual. The notes also referenced a proposed medication change. On May 7, 1999, Dr. Czarnik told Dr. Mallinger that he was terrified of his boss; he indicated that “John” had been unhappy with his performance for the last six months. On June 1, 1999, Dr. Czarnik told him that things at work were getting better but that he would still be consumed by fear that he would fail; these thoughts often involved “John”. He indicated that John had told him his efforts were insufficient in November—indirectly in a discussion about the company not progressing as he wanted. He also indicated that John’s first choice would be for him to work hard and be successful.
As of July 2, 1999, Dr. Czarnik had reported that his work life was significantly better. By July 23 Dr. Czarnik felt that he was not pulling his share of the load at work. He felt he was doing better by the next week but was still anxious about John getting angry at him.
At his session on August 20, 1999, Dr. Czarnik indicated he was doing a good job of handling the pressure of life. He continued to feel better through August. Dr. Czarnik felt that he did not need further individual sessions until September.
At a session on July 7, 2000, Dr. Czarnik told him that it was not easy to walk away from Illumina. He indicated he liked being viewed as a founder, wanted to continue vesting stock, and liked the people there.
Dr. Mallinger indicated that he believed Dr. Czarnik was honest with him during their sessions. He did not feel like Dr. Czarnik tried to manipulate his opinion of him. He indicated that he does not write everything down in his notes; sometimes unimportant things are written down, and just because something is not written down does not mean the patient did not say it.
Defense counsel asked Dr. Mallinger questions about group therapy sessions, but Dr. Mallinger did not remember if Dr. Czarnik made various statements. Notes from the sessions did not refresh his recollection. The court instructed the jury that the questions posed by defense counsel themselves were not evidence and that there was no evidence of the statements made by defense counsel, since Dr. Mallinger was unable to refresh his recollection.
Expert Witnesses
Plaintiff Called Brian Brinig
Brian Brinig was a licensed Certified Public Accountant (CPA) who specialized in business valuation and economic damages analysis. He testified about the value of the stock lost by Dr. Czarnik as a result of his termination. After discussing his credentials, the court qualified him as an expert to testify regarding economic damage; Illumina stipulated to the qualification.
Mr. Brinig reached economic loss conclusions under two different scenarios. Scenario 1 calculated the loss in an ongoing basis based on the trading price of the stock since Dr. Czarnik’s termination; Scenario 2 calculated the value as of September 5, 2000, the date Dr. Czarnik was terminated. Since Dr. Czarnik bought shares at different times, he had to analyze three different blocks of stock. He also testified about restrictions Dr. Czarnik would have had on when he could trade some of his stock. The stock price at the time of Dr. Czarnik’s termination was significantly higher than it was at the time of litigation. Under Scenario 1, the total economic loss was $2,423,000; under Scenario 2, the total economic loss was $7,965,000. On cross-examination he indicated that both scenarios calculated the totals based on an assumption that Dr. Czarnik would have stayed for the entire vesting period; the calculations also did not factor in the fact that Dr. Czarnik had the opportunity to purchase shares from his new employer, which he would not have been able to do had he stayed at Illumina.
Defendant Called Michael Ward
Dr. Michael Ward had a PhD in economics from the University of Chicago. He testified about the potential economic damages that may have been experienced by Dr. Czarnik as a result of his departure from Illumina. After discussing his credentials, the court qualified him as an expert in his field.
Dr. Ward challenged Mr. Brinig’s use of a marketability discount. Dr. Ward testified that the shares at issue were not in full possession of Dr. Czarnik. He also contended that there were other flaws in Mr. Brinig’s methodology. Dr. Ward prepared an alternate analysis, without acknowledging that Illumina owed anything; that analysis assumed Dr. Czarnik would have stayed at Illumina for another six months. Under that analysis the total economic loss was around $2,000,000. On cross-examination Dr. Ward conceded that Dr. Czarnik’s new employer was a private company, so there was no way he could accurately calculate the value of that company’s stock.
Rebuttal Testimony from Anthony Czarnik
Dr. Czarnik denied telling Dr. Stuelpnagel that he was glad Illumina made him an offer because he was looking to leave IRORI.
Dr. Czarnik indicated he had never made a discrimination complaint before this and denied that he did so as a negotiating tactic.
Regarding his hours and work ethic, Dr. Czarnik indicated he worked hard at Illumina. He also indicated no one had ever accused him of not working hard prior to the lawsuit. He indicated that Illumina had a magnetic card reader and that they could have easily calculated his work hours to prove how little he worked if the allegations were actually true; yet they did not do so in the litigation. On cross-examination he was questioned about whether the card readers noted when someone left the building; he testified that he believed they did.
Regarding the grant application, Dr. Czarnik denied starting too late. He indicated he went to a meeting in January and another trip to a government agency in March related to the grant. He started writing two weeks out, which was plenty of time based on his prior grant writing experience. He indicated he asked some employees for figures they had created for other purposes to use in the grant but that he wrote the scientific part of the grant himself.
Dr. Czarnik indicated he had only offered to step down as CSO twice. Once was a week after his breakdown, to Dr. Stuelpnagel. The other was to Mr. Flatley in January 2000 when Mr. Flatley had not been using him as a CSO. He denied ever resigning his employment from Illumina.
Regarding the activities he was involved with before and after his disclosure of depression, Dr. Czarnik acknowledged that he was not in every business meeting before his breakdown and was not excluded from every such meeting after his disclosure of depression. After his disclosure, the transition was very obvious, and he was cut out of the major decisions of what the company was working on—genomics.
He indicated that he had told Dr. Mallinger that things were better with Dr. Stuelpnagel in June 1999 because they were. He said they stayed roughly better until Mr. Flatley became CEO.
Dr. Czarnik discussed the goals given to him on May 19, 2000. He said he tried to achieve the goals. Regarding the goal related to immunocoding, he wrote the research plan, purchased the reagents, placed the first set of reagents on the beads, and did the first set of experiments to see if the company could do decoding that way. He said it worked really well and showed that antibodies could be used for decoding. He denied that the binary oligo encoding was just an extension of decoding that had already been done at the company. He also submitted the grant application that was part of his third goal but did not know if it was funded, because he was terminated before he found out. He indicated that the reason he asked for a copy of his goals in one meeting was because they had been removed from his desk where he kept them.
Dr. Czarnik discussed the email he sent to Dr. Walt in August 2000. He indicated that people who should have been paying attention to the concerns he was raising about the dyes were not listening and were not responding. He contacted Dr. Walt because he was the founder of the company and a friend, and he wanted him to know about the problem.
Regarding his termination, Dr. Czarnik indicated he had no doubt that Mr. Flatley made a reference specifically to decoding.
Jury Instructions
The parties stipulated that Dr. Czarnik suffers from chronic major depression and that this constitutes a disability for the purposes of state discrimination law.
Verdict
- The jury found 9-3 that Illumina terminated Dr. Czarnik’s employment in whole or in part because of his disability.
- The jury found 0-12 that Illumina denied Dr. Czarnik a stock grant in connection with the closing of Illumina’s collaboration with Applied Biosystems, Incorporated in whole or in part because of his disability.
- The jury found 9-3 that Illumina took other adverse employment action against Dr. Czarnik during his employment in whole or in part because of his disability.
- The jury found 10-2 that Illumina terminated Dr. Czarnik’s employment in whole or in part because he complained about discrimination.
- The jury found 10-2 that Illumina took other adverse employment action against Dr. Czarnik during his employment in whole or in part because he complained about discrimination.
- The jury found 11-1 that Dr. Czarnik had a reasonable belief that Illumina used or was planning to use information or conclusions derived from the 768 decoding experiment in its roadshow presentation to potential investors in a manner that would be misleading to such potential investors.
- The jury found 9-3 that Dr. Czarnik raised concerns to anyone at Illumina about what he reasonably believed to be Illumina’s use or planned use of information or conclusions derived from the 768 decode experiment in its roadshow presentation to potential investors.
- The jury found 12-0 that the persons making the decision to terminate Dr. Czarnik’s employment were aware that Dr. Czarnik had raised concerns about the use or planned use of information or conclusions derived from the 768 decoding experiment and in its roadshow presentation to potential investors.
- The jury found 9-3 that Illumina terminated Dr. Czarnik’s employment in whole or in part because he raised concerns that Illumina used or was planning to use information or conclusions derived from the 768 decoding experiment in a misleading manner in its roadshow presentation to potential investors.
- In a 12-0 vote the jury awarded Dr. Czarnik $1,696,935 to reasonably compensate him for the economic damages that he lost or incurred as a result of Illumina’s conduct.
- In an 11-1 vote the jury awarded Dr. Czarnik $500,000 to reasonably compensate him for noneconomic damages such as pain, suffering, and mental or emotional distress that he suffered as a result of Illumina’s conduct.
- The jury found 12-0 by clear and convincing evidence that Illumina acted with malice, fraud, or oppression towards Dr. Czarnik.
Punitive Damages Phase
Illumina had requested that the issue of punitive damages be separated from the rest of the trial.
Plaintiff Called Timothy Kish
Timothy Kish was a CPA and was vice president and Chief Financial Officer at Illumina; he joined Illumina in May 2000.
He testified about Illumina’s most recent 10-Q report, which is filed with the SEC. It contained Illumina’s balance sheet, which showed current liquid assets of $87 million and a net worth of $99.131 million. It also contained a section regarding legal proceedings, which are required to be disclosed; it characterized Dr. Czarnik’s lawsuit as without merit, and Mr. Kish indicated that in every public filing the lawsuit has been described as without merit. As of the date of his testimony, the total liquid assets were about $80 million, and the net worth was $92.4 million.
On cross-examination he testified that after removing the building and equipment, the amount available to support the company was roughly $67 million. At that point, Illumina was not profitable, having lost $25 million the previous year; he testified that that is typical for high tech start-ups. At that time the company had enough capital to operate for another 21 months. He testified that the $2.2 million verdict was roughly equivalent to the salaries of 15% of the company’s employees.
On redirect examination Mr. Kish conceded that Mr. Flatley stated in the last annual report that Illumina has a strong financial position.
Jury Instruction
The court instructed the jury that they were to consider (1) the reprehensibility of the conduct of Illumina, (2) the amount of punitive damages that would have a deterrent effect on Illumina in light of its financial condition, and (3) that the punitive damages must be reasonably related to the injury, harm, or damage actually suffered by Dr. Czarnik.
Verdict
In a 9-3 vote the jury awarded Dr. Czarnik $5 million as punitive damages against Illumina for the sake of example and by way of punishment.
-Nathan D. Inks, Esq.
The full trial transcript is available here. (Note – Best viewed with Adobe Acrobat)