Discovery Plan for ChromaDex/Elysium
Nothing big or unexpected here, but there are a few details of interest for those following closely. The Federal Rules of Civil Procedure require the parties to file a joint discovery plan, which is how they plan to gather evidence.
You can read their FRCP 26(f) report here. The report, among other things, lists all the things the parties wish to learn from each other. 95% of cases settle, and this dispute is not a good candidate for actually going to trial. Nonetheless, here is a brief summary of the plan:
2. ChromaDex wishes to begin discovery on the contract claims immediately, whereas Elysium hopes to delay discovery on the contract claims until after the competing motions to dismiss the fraud claims are resolved. Similarly, ChromaDex has offered to immediately submit the case to private mediation, whereas Elysium believes that mediation is premature. Both of these positions, it seems to me, suggest that ChromaDex (correctly) believes that has the upper hand and desires to proceed aggressively.
The parties’ arrangement was unremarkable until 2016. In the second quarter of 2016, large growth in Elysium’s sales and corresponding purchases of NIAGEN, caused the parties to question whether a most favored nation pricing provision in the NIAGEN Supply Agreement now applied to Elysium’s orders. ChromaDex discussed the issue with Elysium and believed it had been resolved. It became clear that was not the case when, on June 28, 2016, Elysium, without any sort of prior notice, submitted purchase orders for more than double the amount of product than all of Elysium’s past orders combined, at less than half the parties’ agreed price.
ChromaDex initiated a discussion with Elysium concerning its orders. On a June 30, 2016 phone call, Elysium’s principals made a number of false statements to ChromaDex with the intent of (1) inducing ChromaDex to fill the unreasonably disproportionate orders (2) at a price materially lower than the parties agreed-upon price, and (3) to never pay for the product in order to exploit the financial pressure such nonpayment would cause in any dispute between the two companies. Relying on these representations, ChromaDex filled the extraordinarily large orders, and discounted the price of NIAGEN. ChromaDex estimates that Elysium owes it $5,234,586.79, including interest, for its breaches of contract and fraud.
The day after the last product shipped, Elysium made clear its intent not to pay until ChromaDex caved to Elysium’s demands regarding alleged breaches of the NIAGEN Supply Agreement. The same day, Ryan Dellinger, ChromaDex’s Director of Scientific Affairs, resigned effective immediately. ChromaDex later learned that Mr. Dellinger went to work for Elysium—joining Mark Morris, ChromaDex’s former Vice President of Business Development, who had also abruptly resigned less than a month earlier. ChromaDex’s investigation revealed that these two employees’ relationship with Elysium during their employ with ChromaDex was far cozier than either had let on and that, in violation of their confidentiality agreements, the employees had transmitted ChromaDex trade secrets and confidential information to Elysium without ChromaDex’s knowledge or consent.
ChromaDex filed its Complaint against Elysium in December 2016 for breach of contract and fraud, and later supplemented its allegations with a trade secret misappropriation claim in a First Amended Complaint. Elysium currently owes ChromaDex over $4 million on the breach of contract claims alone. In response, Elysium filed a Counterclaim and then a First Amended Counterclaim that essentially disputes the amount owed to ChromaDex under the contracts and adds claims for fraud, unfair competition, and patent misuse. ChromaDex denies Elysium’s allegations and has moved to dismiss the specious causes of actions, including Elysium’s fraud and unfair competition claims, which are an attempt to rewrite the parties’ negotiated agreements, and its claim for patent misuse, which is not a valid cause of action. Elysium has moved to dismiss ChromaDex’s fraud and trade secret misappropriation claims.