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  • Shelly Albaum

Elysium's Motion to Dismiss the BIG Complaint


You will recall that ChromaDex filed a $200M complaint in New York federal district court a few weeks ago. Elysium has now moved to dismiss the big complaint without answering it. Here is Elysium's Motion to Dismiss:

Elysium's Motion to Dismiss the $200M Complaint

ChromaDex's complaint includes five claims:

  • False Advertising

  • Unfair Competition

  • Deceptive Trade Practices Twice (§349 & §350)

  • Tortious Interference with Prospective Economic Advantage

I believe that the Tortious Interference claim that is the really important one - that's the "You tried to run us out of business" claim upon which the big prayer is predicated.

Elysium's Motion to Dismiss, however, spends almost all of its time on the first four claims -- just three of the 32 pages address Tortious Interference. But we'll get to that last.

Alternative Reality Pleading

As usual, I don't recognize the world that Elysium describes in its factual recitations. This purports to be a motion to dismiss ChromaDex's claims for trade torts, but Elysium frames the ChromaDex's complaint as a "retaliatory lawsuit" following a "campaign of disparagement slandering Elysium's sole product." Anyone who has been watching this litigation knows that Elysium is the aggressor, using the legal system as a sword not a shield.

Elysium then appeals to its soon-to-be-dismissed FDA complaint and rearticulates its allegations of a "sham petition" to suggest that "purported low levels of toluene in Basis and Basis's alleged regulatory status" do not render Basis unsafe, and therefore Elysium's advertising is not misleading. I don't see the relevance of the FDA complaint for this motion.

Here is another example of Alternate Reality Pleading:

Elysium differentiates itself with a dedication to scientific research and rigor sorely lacking in the nutritional supplement industry, evident in its Scientific Advisory Board, a group including numerous Nobel Laureates that "advise[] the Elysium team on product identification and development, clinical studies and ongoing research" (Compl. Ex. P); its research partnerships with prestigious institutions such as Harvard and Oxford (Compl. ¶ 68); and its own scientific publication featuring articles on advances in aging and health-related research (see, e.g., Compl. ¶ 50 & Ex. J). Its website describes a multi-stage R&D process for new products under development that includes a review of scientific literature, various stages of development, and safety testing conducted for regulatory submissions. (Compl. Ex. K.)

It is difficult, for me at least, to take seriously these assertions, when there is only one product in the product line, even after several years, and ChromaDex is the one that did the research and development. It's not a bad thing to just be a marketing company, but it is a bad thing to suggest to the court that you are cleaning up the supplement industry when you are not. And if you only have one supplement, and it came from somewhere else, then you are not cleaning up the supplement industry. I don't know whether Elysium is delusional or dissembling when they describe their impressive product development operation, but year-after-year it appears to be just hot air: There is still only one product, and that one product was invented and developed elsewhere.

False Advertising

Elysium says that ChromaDex cannot recover for false advertising under the Lanham Act because ChromaDex has not identified any false statement. Looking back at the ChromaDex's complaint, I see this:

Specifically, Elysium’s marketing, advertising and promotional statements and activities are false and misleading misrepresentations of fact and confuse consumers in New York and across the country into believing that its current Basis product (a) is manufactured subject to an NDIN, (b) has been approved by the FDA, (c) is the result of extensive scientific research and development conducted by Elysium, (d) has been clinically tested for safety, (e) is manufactured at facilities that meet FDA requirements, and, (f) has been endorsed by a multitude of renowned scientists and academic institutions. None of the foregoing is true, and consumers are likely to rely upon those false, misleading and deceptive statements, all to their detriment and the detriment of ChromaDex and its NIAGEN® and TRU NIAGENTM products.

So Elysium's claim is that we did not unambiguously say those things. Further, says Elysium,

ChromaDex's gripe that Basis was preceded by Niagen and pTeroPure—ingredients, not consumer products, (see Compl. ¶ 30)—and is thus not the "first" product "informed by genomics" (id. ¶ 45), relies on inactionable "puffing," particularly because ChromaDex makes no effort to allege facts to support that its two ingredients were "informed by genomics" (or indeed what that vague phrase means.)

I am going to disagree with Elysium here. Puffery is when you say your product is the "best," because that is highly subjective. When you say your product is the "first," that is a factual assertion easily verifiable, and, in this case, falsifiable.

There are many more pages here in which Elysium defends itself from the charge that it has falsely claimed that Basis is safe. I would note, however, that safety is not one of the six false statements that ChromaDex identifies above.

There is quite a bit more, I encourage you to read it, but let's jump to the Tortious Interference:

Tortious Interference

ChromaDex in its complaint states its claim thus:

Elysium knowingly induced ChromaDex to modify and limit – at detriment to ChromaDex – its ability to sell NR and pTeroPure in combination to other customers, two of whom ChromaDex was already selling this combination to and of which Elysium was acutely aware. Those economically advantageous relationships were terminated to satisfy Elysium’s exclusivity demand, which Elysium demanded in bad faith to damage ChromaDex.

Knowing that it would never fulfill its obligations under its large purchase order, and in effort to short ChromaDex of money and resources, Elysium intentionally and improperly took action to end those known relationships, as well as ChromaDex’s ability to form future and maintain current relationships, all the while planning to “short” the system by ordering a huge supply of NR, accepting that supply, and then refusing to pay for it. Elysium’s dissemination of false information directly to investors as well as in the media, after it failed to pay for a final huge order, asserting that ChromaDex was failing damaged additional existing and potential customer relationships.

In its motion to dismiss, Elysium says,

"A claim for tortious interference requires that the defendant 'direct some activities towards the third party and convince the third party not to enter into a business relationship with the plaintiff.' Instead, ChromaDex attempts "to base its tortious interference claim on its own conduct and interactions with Elysium."

I don't think that's right. ChromaDex described the two parties whom it stopped from selling Niagen-PteroPute combinations. We know from the Discovery Dispute in the CDCal litigation that those parties are Life Extension and FIRST Nutrition. ChromaDex does not have to use the parties' proper names in order to state a claim for interference with third party relationships.

Fraud Redux

According to Elysium, ChromaDex is simply trying to "'repackage' its previously-dismissed fraud claim as wrongful conduct constituting tortious interference."

That is a reference to the fraud claim in the Southern District of California that was dismissed by Judge Carney on the grounds that, contrary to California mandatory authority, fraudulent behavior in the context of a contractual relationship is not actionable unless you physically harm the other party. Obviously I do not think that that is a correct statement of California law, but it is essentially what Judge Carney wrote.

I don't know whether Elysium is right that the prospective economic advantage tort is limited to third-party relationships. "Prospective Economic Advantage" seems like a good name for a tort involving an attempt to destroy someone's business by improper means. So if "interference with prospective economic advantage" isn't the name of the tort, then what does Elysium suggest that ChromaDex should have pled instead?

Apparently, "Fraud." But if that's right, then I am not sure that the fraud claim in the SDCal will have the preclusive effect that Elysium hopes, because the facts underlying the claim are quite different. In California, ChromaDex complained that a large order was fraudulent. In New York, ChromaDex complains of:

...a nefariously conceived plan to damage and/or steal ChromaDex’s NR, reputation, employees, goodwill, and stature in the industry, as well as its customer opportunities. Elysium’s marketing falsely “borrows” ChromaDex’s research and regulatory achievements to endorse Elysium’s new product, and Elysium has maliciously targeted ChromaDex, its employees, and its commercial relationships by disseminating falsehoods about ChromaDex and refusing to pay for large orders – all with the intent of undermining ChromaDex’s viability and ability to compete. On information and belief, Elysium falsely disseminated untrue information to investors about ChromaDex’s financial health to further interfere with ChromaDex’s ability to raise money and defend itself against Elysium’s multi-front litigation and deceptive advertising war. And, on further information and belief, Elysium and/or its agents are associated with or responsible for stock “short attacks” intended to drive the share value of ChromaDex down, making it a more accessible take-over target.

That doesn't feel like res judicata to me. It's not the same claim that Judge Carney dismissed. But we'll wait for Cooley's Opposition Brief to learn more.

Conclusion

My general impression here is that Elysium is vigorously attacking the periphery, not the core, of ChromaDex's arguments, which is why I don't think these claims are likely to be dismissed. At least not all of them.

#CDXC #ElysiumHealth #Litigation #ChromaDex

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