top of page


Right of Assembly is my personal blog. All opinions are my own. You can read more about me here.


I am a ChromaDex shareholder, and an affiliate marketer. As a result, I will sometimes mention or recommend products that I endorse. I may earn a small commission from qualifying purchases if you were referred directly from this site and completed a purchase. [Thank you!] You can read more about our advertising, privacy, and data collection policies here. 


This site uses cookies. Cookies are not required for site functionality. You can read more about how to opt-out of cookies here.

  • Writer's pictureShelly Albaum

Elysium's Motion to Dismiss

Elysium moved to dismiss ChromaDex's non-contract claims a month ago, but I missed it because their brief was attached to a minute order on something else. So my reporting on this part of the litigation is late (and Skadden must feel unloved because of it). With apologies to all, here is my analysis, better late than never.

Before we get to Elysium's argument, though, I would like to address a persistent confusion about the proceedings. Non-lawyers look at the filings and tend to find that both sides seem to have done bad things, and thus are inclined to call it a draw.

The law does not look at it that way, though. Breaches of contract and business intrigue happen every single day, and the purpose of our legal system is to deal with that, so despite the parties' feigned outrage and actual mudslinging, this may still be a fairly one-sided dispute.

Let's take a look at it in slow motion, and I'll show you what I mean:

We don't know for sure what happened because there hasn't been any sworn testimony yet. But the parties' competing allegations are fairly consistent as to the underlying facts -- the dispute is about the implications of what happened. So let's just assume the allegations are all roughly true, and let's have a look.

The contract between the parties provided some sort of assurance that Elysium would get as good a price on ChromaDex ingredients as anybody else. This is called a "Most Favored Nation" clause, and they come in all shapes and sizes.

We know that last June Elysium got wind of some evidence that ChromaDex was not in compliance with the Most Favored Nation clause -- apparently one or more suppliers appeared to be getting a lower price. Without knowing the full details of the MFN clause and the terms of the deal another supplier was getting, we can't know for sure whether this was a big breach, a small breach, or no breach, or what.

But let's assume that Elysium is right, and a material breach occurred.

Elysium's discovery of this material breach is the key moment in the entire dispute, and it had a big decision to make.

If Elysium had counsel and asked their attorney what to do, their attorney would have told them that discovering this breach was very good news and that he law gave their business three new and interesting options:

First, they could now walk away from the contract without any further obligation.

Second, they could now renegotiate the agreement.

Third, they could sue for damages, and the legal system would help them recover what they were owed -- although it would take some time, and the resolution would not occur until there there was a lot more clarity about what they were in fact owed.

Now we can pretty safely bet that Elysium did NOT consult their attorney, and there are three reasons why I suggest that this is true:

First, Elysium did not choose one of the three options available through the legal system, but instead invented their own clever response, a kind of counter-breach with hot sauce.

Second, Elysium does not seem to have had an attorney close at hand. You can see from this posting on LinkedIn last week that Elysium does not have in-house counsel. But apparently someone has recently convinced them that they need WAY more legal advice than they are getting, so they are recruiting to launch an in-house legal department.

Third, if you check out LinkedIn for Elysium's CEO, Eric Marcotulli, it appears that he is a finance guy who went to Harvard Business School, and then started Elysium. But he has no apparent legal background, and this appears to be his first CEO job. There's a good chance that he picked up more strategy than law at HBS.

Contrast Eric Marcotulli's background with Elysium's Board of Directors, which includes Steve Black (attorney from a big NY law firm with a long career as general counsel and in management, including public companies), Bob Fried (variety of senior executive positions), Kurt Gustafson (CFO of a public company), Jeff Baxter (CEO of a public company since 2009), and Steve Rubin (another general counsel with executive experience). And if you want an apples-to-apples comparison, ChromaDex CEO Frank Jaksch has been running this company for 16 years, and has been in business for 23 years. These guys have all learned how the law works.

Had Elysium chosen one of the three options offered by the legal system, they would have been in a strong position to insist that any wrongs were righted, and the legal system would have thrown its weight behind Elysium if necessary.

But Elysium seems to have pursued an extra-legal option -- specifically, to use the situation to impose its will by pressuring ChromaDex in different ways. At the time of these events (last summer), ChromaDex was indeed experiencing some financial turbulence and could well have been perceived as vulnerable.

Pressuring ChromaDex is not necessarily illegal, depending on how it's done -- call it "business hardball." But the legal system exists PRECISELY so that firms can resolve their disputes in an orderly, non-disruptive way, without roughing each other up. That's why the remedies for breach of contract are enumerated as I said above, and they do notinvolve aggressive moves of the kind that ChromaDex is alleging. And just because ChromaDex (allegedly) lied, does not entitle its business partner to lie back. "He hit me first" does not work in federal court any better than it did with mom when we were kids.

There is actually a fourth reason why we can suspect that Elysium did not consult counsel before it went down the buy-big-but-don't-pay path. Good counsel would have advised Elysium that even if its tactics were legal, launching an attack on your sole supplier carries other risks, too, including not only supply disruption, but also harm to a brand that is almost entirely built on integrity and trust. All this is to say that even if you think that ChromaDex breached the contract, Elysium's post-breach behavior makes it an unsympathetic plaintiff now that it finds itself in court anyway, and that is why I have previously said that although this will probably be reduced to a breach of contract case, ChromaDex's fraud claims are more likely to stick than Elysium's.

Now let's look at Elysium's arguments in favor of its motion to dismiss ChromaDex's fraud claims and see if that still seems true.

Elysium makes pretty strong arguments in its brief that this is all just breach of contract stuff, not fraud, and cites plenty of on-point authority to support that claim. It's a dangerous kind of argument for Elysium, because the same principles apply to its own fraud claims, and so they are pretty much begging for this to become a breach of contract case, which, as I have argued elsewhere, is not going to leave Elysium in a good business position when it is over. Even if they win, they lose. But I think I would withhold judgment on fraudulent misrepresentation until we see ChromaDex's reply. Elysium is basically inviting us to ignore the entire context of their own post-breach behavior. I doubt any of their cited authority describes contract defendants who seemed to be engaging in this kind of business hardball, hiring away key employees, and creating very significant financial difficulties for their target. There seems to be a lot of extra-contractual activity here. Maybe Elysium will be able to whistle past this graveyard, but I can imagine a court concluding that merely looking at the four corners of the agreement misses the bigger plot.

As for the trade secret claims, I have previously expressed some question as to whether ChromaDex has alleged fire or only smoke. Elysium piles on a lot of really strong arguments that ChromaDex hasn't done enough.

I'm not sure I buy all of it. For example, Elysium says, "ChromaDex fails to allege a single act by Elysium – not a phone call, meeting, e-mail or anything else – where Elysium allegedly sought information that was purportedly a trade secret." ChromaDex may reply that hiring key employees who subsequently divulge secret information might constitute such an "act." Elysium seems to be shocked -- shocked! -- that these key employees that Elysium hired away from ChromaDex would provide Elysium with useful information, as if Elysium were not actively stirring up disloyalties.

But even if you grant ChromaDex a shot at showing misappropriation, Elysium has set up very strong arguments around specificity, protectable subject matter, and damages, which ought to be sufficient to defeat these trade secrets claims, I would guess.

In sum, I won't be shocked if ChromaDex's fraudulent deceit claim survives this motion to dismiss, but the most likely outcome remains that both parties' tort claims are entirely dismissed and the case is reduced to a mere contract dispute.

Once that happens, it should settle quickly.

Both companies claim to be interested in public health, and claim to truly believe in the power of Nicotinamide Riboside supplementation to cure a wide variety of ills.

If that's true, then hopefully both parties will choose to demonstrate that commitment. Although Elysium is pretty inept at business strategy (in my opinion), they are actually first rate marketers. If they would stick to marketing, making news, and using their illustrious advisory board properly, Elysium could do a lot to grow the market. We're all better off if Elysium continues in business, including ChromaDex.

Hopefully the parties will start over, pick a new price, play it straight, and stop feeding these INCREDIBLY good attorneys, who do not come cheap.

246 views0 comments

Recent Posts

See All
bottom of page