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  • Shelly Albaum

Elysium's Reply Brief (MTD 5AC)


Elysium has barfed up for Judge Carney's consideration another bit of snarling contempt mixed with legal argument.

Attorneys are notoriously unhappy, depressed, and even suicidal. It is briefs like this that show you why. Who would want to make their living crafting this kind of vitriolic sophistry? You can read it here:

Elysium's Reply Brief

What I find unprofessional -- even if it has become a hallmark of Darth Sacca's style -- are statements like this:

* "Setting aside the lunacy of that position..."

* "Elysium looks forward to the day when the fantastical stories in ChromaDex's one-sided screed are held up against reality," and

* "ChromaDex offers what it calls an 'exercise in logic' by positing a grand unified theory of the directionality of acts of misappropriation..."

This is obnoxious behavior. It is not necessary or helpful in explicating or resolving the dispute, and brings dishonor to the legal system as a rational dispute resolution mechanism.

Also pernicious is Darth Sacca's second round of cheating the page limits.

I complained last July that Elysium's briefs were evading the page limits by violating the rule requiring that footnotes be single-spaced, and instead squeezing the footnote text together enough to significantly impair readability. Both the page limit rule and the line spacing rule are there for a reason.

This time the footnote spacing in Elysium's brief is normal, but I knew right away when I saw the section headings smooshed together that Baker & Hostetler must be using every inch of page 15, and it turns out to be so.

You can see below that the footnotes are permissibly spaced, but the section headings are jammed together throughout to manufacture an unfair advantage at the expense of readability.

This is high school behavior, and badly overestimates the value of each apparently indispensable word.

Magnify. Enhance.

In order to get the dots over the i's to touch the underlining above in Times New Roman I had to drop all the way from single spacing to .8 spacing.

Obviously that's not the worse thing Elysium has allegedly done in the past few years, but it's cheating, and we don't have to wait until trial to find out what the facts are -- they are right there before our eyes -- during the litigation of a matter in which Elysium's willingness to cheat is one of the key questions.

Elysium's Arguments

But enough about bad form; let's get on to bad substance.

Elysium's first argument in rebuttal to ChromaDex's opposition brief is that although a consideration may be presumed from a written agreement, that is NOT so if the face of the complaint demonstrates a lack of consideration (citing a case from 1858, thus one-upping ChromaDex's 1893 authority).

The law appears to be thus, but I think Elysium is mis-applying it.

The cases Elysium cites say, "when a litigant includes allegations that foreclose the asserted claim, it has pleaded itself out of court," and the only example Elysium offers through its cases is one in which the plaintiff' "alleged in his own verified complaint that the promised $105,000 was in exchange for ... past work, which is, as a matter of law, inadequate consideration.”

From this, Elysium concludes that "ChromaDex has pled itself out of court" because "the allegations in the FAC affirmatively show that the New Hire Agreement is unsupported by consideration."

But that's not right. The allegations in the complaint perhaps allow an argument that the contract is unsupported by consideration, and Elysium will no doubt argue that at summary judgment or at trial, but the allegations do not affirmatively show a lack of consideration.

On the contrary, ChromaDex has explained why there may be consideration, and it did not have to contradict its allegations to do so. The situation here is very different from the one Elysium cites, in which the complaint asserted that the promise was in exchange for past work. That's exactly what ChromaDex's complaint does NOT do.

Elysium also makes a lot of the the fact that the alleged contract was labeled "For New Employees." Since neither side thought Morris was a "new employee," the label is not going to be determinative of the parties' intentions, and I can't think of any principle of contract law that negates the binding nature of a contract if you call it something other than what it is.

We believe that poor labeling of contracts is a chronic bad habit for ChromaDex, because as we have proposed at length elsewhere, the Trademark License and Royalty Agreement that the parties signed is not in fact a Trademark-License-in-Exchange-for-Royalty Agreement, and although Elysium has pounced on the ambiguity, as it now does with the Morris contract, the title of the document is not going to determine its substance or legal effect in either instance.

Elysium also raises a very technical issue about when a corporate officer's fiduciary duty ends. Elysium twice uses the phrase "on his way out the door" to characterize when Morris signed the contract in question, claiming explicitly that Morris "had already resigned, and thus lacked any fiduciary duty toward ChromaDex". Elysium then cites the following case law:

The law in California is clear that 'the fiduciary relationship between a corporation and an officer or director terminates when the person ceases to act as such because of resignation or removal.'

There is a gap, though, between what Elysium said and what the Court said.

The Court did NOT say that the fiduciary duty terminates at the moment of resignation.

It seems to me unlikely that if someone gives two weeks notice, or one day's notice, that they are free to harm the business before they actually leave the company or leave the building.

If Morris was still in the building taking direction and signing documents, it doesn't seem to me that he has yet shed his duties.

If there is law on what happens during transition periods, Elysium did not cite it. But it seems to me at least counter-intuitive that someone in a position of trust could so quickly and one-sidedly disclaim that obligation and betray that trust -- even in the same instant -- and have a Court nod approvingly.

We noted last time with approval ChromaDex's clear and self-evident statement that:

Morris was perfectly capable of both stealing ChromaDex documents and information for Elysium’s benefit and breaching his fiduciary duty to ChromaDex, and the FAC alleges that he did both. Defendants may not conflate those separate strands of Morris’s unlawful behavior simply to escape liability.

So it was surprising to see Elysium attempt to refute it.

Elysium says that all of Morris's alleged actions that look independent of the trade secrets theft are in fact really just actions in orbit around trade secrets theft. If you squint, they can all be conflated, because there is "extreme overlap" between (e.g.,) (1) Morris's alleged lies and omissions, (2) Morris's failure to tell ChromaDex that Elysium would not pay for the orders, and (3) Morris's recruitment of Dellinger, because these were all merely aspects of a strategy to harm ChromaDex by wrongfully giving Elysium information.

I guess there is a factual question as to whether those alleged fiduciary duty breaches were ONLY aspects of a strategy to harm Chromadex by wrongfully giving Elysium information, or whether they were ALSO independent fiduciary duty breaches that caused their own harm irrespective of whether there were also trade secret thefts.

It seems obvious to me that ChromaDex would have an actionable claim against Morris for breach of fiduciary duty if Morris were in fact working as Elysium's inside agent and dissuading ChromaDex from acting in its own best interest EVEN IF ChromaDex were unable to plead a trade secret theft, either because no theft occurred or because whatever was stolen was not a trade secret. That factual possibility, which is not precluded by the pleadings or anything else, would seem to me sufficient to get past a motion to dismiss on CUTSA preemption, but we shall see.

One Final Note

After Elysium is done attacking ChromaDex's pleadings for not saying it just right -- for example, for not adequately distinguishing its fiduciary duty and trade secret claims -- Elysium preemptively asks the court to deny ChromaDex leave to amend, on the ground that ChromaDex has had "multiple opportunities to plead its claims."

Contrary to what Elysium implies, these are the first claims against Morris, and as Magistrate Judge McCormick might agree, after having twice granted motions to compel production against Elysium, it is somewhat shameless for Elysium to make this argument, given Elysium's apparent delay in producing the information necessary to make the claims.

But, as I suggested at the beginning of this article, the argument in this brief does not make me proud of my profession.

#CDXC #ChromaDex #ElysiumHealth #Litigation

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