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  • Shelly Albaum

Elysium Gets to Amend Its Complaint But Doesn't Get to Redact It


I don't think that anybody is surprised that Judge Carney today granted Elysium's request to amend its counterclaims, although His Honor also rejected Elysium's request to redact portions of the amended complaint.

As a result of the latter ruling, we now have access to unredacted versions of Elysium's counterclaims and Elysium's briefs requesting permission to amend the counterclaims.

In addition, Judge Carney issued an amended scheduling order with the following dates:

Discovery Complete: September 13, 2018

Private Mediation Complete: October 2, 2018

Motions Complete: November 5, 2018

Trial Begins: December 11, 2018

You can read them all here:

PRELIMINARY MATTERS

1. Brief in Support of Motion to Amend

This is actually the first we have seen of Elysium's "Unredacted Motion to Amend."

When I covered the proposed amendments here, I just downloaded the proposed amendments. I didn't notice the Brief in Support of the Motion to Amend.

Skadden probably thought that my failure to summarize their brief was a sign of bias, or disaffection, but it wasn't; it was a sign of incompetence, or excessive haste, or over-concern about PACER charges, which is different.

Anyway, we get to read it now, but it's mostly just civil procedure hell. I'm sure that if they had said on the first day of Civil Procedure class that I would have to deeply engage with the standards for amending pleadings, I would have run screaming from the law school and never looked back.

2. New Claims

When I covered the proposed amendments here, I focused mostly on the substantive new claims that Elysium was asserting, but Elysium is also filling out the details of its story, too.

Elysium does not quite come out and say it in new paragraphs 107-113, but the gist of the story -- I THINK -- if we combine it with some other elements from ChromaDex's complaint -- is supposed to go something like this:

[This is me reading between the lines of the pleadings:]

ChromaDex had a way of making Niagen that had some toluene residue in it, although it was not supposed. Elysium then poached a couple employees who knew what the process was. After those employees left, ChromaDex CHANGED its production process, but Elysium did not know that. So Elysium was caught flat-footed when the Mystery NR that Elysium produced using what it THOUGHT was the same process that ChromaDex was using resulted in a slightly different product. And so now Elysium is mad that they got double-crossed and fell into ChromaDex's toluene trap after ChromaDex, which is WHY Elysium is acting so upset about whatever was or was not ChromaDex's original production process that was or wasn't cGMP compliant.

However, in order to have a viable complaint based on those facts, Elysium has to engage in crazy-talk like (Counterclaims Paragraph 152):

By selling to Elysium nicotinamide riboside that was not manufactured in accordance with Pharmaceutical cGMPs, ChromaDex has...denied Elysium the benefit of its bargain (emphasis added)

and (Counterclaims Paragraph 113):

had Elysium known that ChromaDex was not complying with...the cGMP Provision...it would not have agreed to purchase nicotinamide riboside from ChromaDex under the terms of the NR Supply Agreement (emphasis added)

Who can stand to look at those crocodile tears from Elysium, which took millions of dollars worth of product, did not pay a penny for it, sold every single kilogram of it, and with a straight face and weepy eyes tells us they did not get the benefit of their bargain, instead of getting, through improper self-help, FAR more than they bargained for.

JUMPING RIGHT TO THE CONCLUSION

The legal drama of these amended pleadings is all sound and fury, signifying nothing.

1. Amending the Pleadings

First, Judge Carney does a nice job describing the actual question before him. Without the outrage and indignation kabuki ("diatribe" is the word Judge Carney used), it's a pretty simple paragraph:

Elysium seeks leave to file Third Amended Counterclaims and a First Amended Answer to add allegations, facts, and one affirmative defense related to ChromaDex’s breach of the NR Supply Agreement. First, Elysium seeks to add facts alleging that ChromaDex offered nicotinamide riboside to other customers at less than half the price offered to Elysium. Second, Elysium seeks to add allegations claiming that ChromaDex sold nicotinamide riboside that was not in compliance with good manufacturing practices, and therefore breached another provision in the NR Supply Agreement, “the cGMP Provision.” Third, Elysium seeks to add allegations that ChromaDex failed to inform Elysium of critical information relating to its nicotinamide riboside, and therefore breached yet another provision, “the Product Purity Provision.” Finally, in light of ChromaDex’s failure to inform, in violation of the Product Purity Provision, Elysium seeks to amend its Answer to add the affirmative defense of unclean hands. Elysium indicates that these proposed amendments provide additional facts related to its breach of contract counterclaim and incorporates new information that Elysium learned through discovery. (Citations to pleadings omitted.)

Then Judge Carney dispenses with every argument in three short paragraphs, which mostly boil down to a single sentence:

Because leave to amend should be granted with extreme liberality, the Court will grant Elysium’s motion.

My complaint in general with the way this litigation has unfolded is that the Court ought to not indulge facially spurious claims refuted on the face of judicially noticeable documents.

In the case of this particular motion, that would be to take seriously ChromaDex's assertion that (1) Elysium's allegations are factually untrue, and (2) precluded in any case by the terms of the contract (which terms are judicially noticeable). Of these points, Judge Carney says,

"These arguments...are more appropriately raised in a dispositive motion."

The CFOs at Skadden and Cooley could not be happier to hear that the litigation is being managed in the absolutely most appropriate manner. And for ChromaDex and Elysium, remember: It's only money.

2. Redacting the Pleadings

On the face of it, it looks like Elysium lost the redaction motion, but don't be fooled. The purpose of the redactions were to protect ChromaDex, and so Elysium's motion was half-hearted at best.

Here is how Judge Carney describes it:

Elysium’s applications merely state that the documents “summarize or reflect information” that ChromaDex produced in discovery and designated as “Confidential” or “Highly Confidential – Attorney’s Eyes Only” pursuant to a protective order. Elysium states that it “takes no position on the appropriateness of ChromaDex’s designations,” but indicates, in cursory fashion, that the documents should be filed under seal “to the extent they contain information that constitutes ChromaDex’s protected trade secret and/or confidential business information.”...In short, Elysium does not even attempt to make a “particularized showing” of good cause. Elysium’s generalized references to the parties’ protective order is not a sufficient basis to deny public access to the documents. (citations to pleadings omitted, emphasis added)

3. So What Was Redacted That Now We Get to Read?

Precious little. I was expecting that we would at least discover the identify of the "regulated substance" but it wasn't in there at all, not even redacted. Just maybe some details about sales, customers, and pricing.

Much ado about nothing.

#CDXC #ChromaDex #ElysiumHealth #Litigation

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