ABOUT RIGHT OF ASSEMBLY

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

DISCLOSURE

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. 

Cookies

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

  • Shelly Albaum

NY Court Denies Elysium's Motion for Reconsideration


Elysium's campaign to agitate the federal judiciary took a big step forward yesterday when Chief Judge Colleen McMahon issued an opinion that could be described as "bristling" and "scathing," and accused Elysium of "linguistic sleight of hand" and of relying on outdated authority. You can read the opinion here:

Order Denying Elysium's Motion for Reconsideration

It must have been a tough day over at Baker Hostetler yesterday.

I predicted that Elysium's motion would be denied -- that wasn't too hard a call -- but I did not predict the amount of negative energy Elysium would conjure with its law-and-motion antics.

I hoped that Judge McMahon would write an opinion clarifying her argument so that we did not get tied up in endless appeals before the Second Circuit, but I dared not hope that that Judge McMahon would rain down upon Elysium's arguments lightning bolts and fireballs.

I have been consistently critical of how Elysium has conducted its half of this litigation, and perhaps the federal judiciary is at least partly sharing this view.

We'll take a look at the arguments in a moment, but the most important news might be that discovery is no longer stayed in the New York case.

Judge Caproni had issued a discovery stay pending mediation, but mediation failed a year ago. Judge McMahon says,

In my courtroom, the stay of discovery would have been deemed over at that point, because it was entered only to facilitate the mediation, which failed. I do not know if Judge Caproni would have felt the same. But at a minimum, the parties were required to obtain clarification from Judge Caproni about the continued existence of the stay. They did not. Nor did they raise the issue with me until Elysium filed its opposition to ChromaDex's motion for summary judgment...

I wouldn't blame the attorneys too much for assuming that discovery was still stayed, given that cross-motions to dismiss were pending before both judges. However, those motions to dismiss are fully resolved now, so we are in discovery in New York, which is good news for ChromaDex.

Denial of Reconsideration Motion

Here is an excerpt of Judge McMahon's argument:

Elysium assigns three reasons why the court's decision should be reconsidered.

First, Elysium argues that the decision to award summary judgment to ChromaDex contravenes the Second Circuit's holding in Landmarks Holding Corp. v. Bermant, 664 F.2d 891 (2d Cir. 1981), which it describes as "controlling authority." Landmarks, Elysium submits, stands for the proposition that courts must look to the totality of the circumstances in determining whether conduct is "objectively baseless" within the meaning of Noerr-Pennington's sham exception.

As Plaintiff well knows, Landmarks was superseded by a subsequent decision of the United States Supreme Court, Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus. ("PRE"), 508 U.S. 49 (1993). Since it was decided, PRE is the case that articulates, for all circuits (including the Second Circuit), the standard for assessing Noerr-Pennington's sham exception in the context of a single anti-competitive action. Id. at 56.

Moreover, to the extent that anything is left of Landmarks' purported "totality of the circumstances" test, the Court rejects Plaintiff's contention that it did not consider the totality of the circumstances. The Court in fact considered all circumstances that are relevant to a decision.

As a result, Elysium's first assigned basis for reconsideration is entirely unpersuasive.

Second, Elysium argues that the Court improperly resolved three disputed factual issues when it found (i) that the Citizen Petition caused Elysium to remove toluene from Basis; (ii) that removal of toluene was an outcome that ChromaDex sought; and (iii) that ChromaDex believed toluene to be unsafe at the levels it claimed to have found in Basis.

Elysium is incorrect.

The Court did not resolve the first issue so much as to say, on the basis of the record evidence, no genuine issue of material fact was raised because no reasonable trier of fact could conclude that the decision to remove toluene from Basis -- which was made approximately four months after the Citizen Petition was filed, with no intervening event identified in the record -- did not come about at least in part in response to the filing of the Citizen Petition...

Contrary to Elysium's contention, the Court did not "resolve" the second and third issues, because it did not need to. Whether ChroimaDex really wanted its competitor driven out of the market, and whether it really believed that the level of toluene in Basis was unsafe, are simply not relevant to the objective prong of Noerr-Pennington's sham exception... (emphasis added)

Judge McMahon then goes on to actually strengthen her original opinion by correcting some "loose language," replacing this original sentence:

ChromaDex achieved the very outcome it petitioned for -- the removal of toluene from a dietery supplement sold to consumer that it believed rendered the product potentially 'injurious' to public safety

with this new, corrected sentence:

Whether ChromaDex achieved the very outcome that motivated it to file the Citizen Petition, it obtained an outcome that any objective filer of this particular petition would have to view as 'favorable' -- namely the removal of toluene, a toxin alleged to be potentially injurious to public safety, from a dietary supplement sold directly to consumers."

Judge McMahon also rejected Elysium's contention that the Court should not have converted ChromaDex's Motion to Dismiss into a Motion for Summary Judgment. Judge McMahon says that conversion of an MTD to an MSJ is proper when the motion raises matters outside the pleadings, if the parties have sufficient notice and an opportunity to respond, which they did, and that conversion was "particularly appropriate" in this case, since the summary judgment was limited to a single, discrete issue (Noerr-Pennington immunity).

Even more interesting, the Court's discussion casts some light on the competing interpretations of the Certificates of Analysis that were submitted before summary judgment and which allegedly showed or did not show toluene in pterostilbene a long time ago.

You will recall that Elysium said there was once toluene in ChromaDex's pterostilbene, so ChromaDex was a hypocrite (which in any case is NOT relevant under the objective prong of Noerr-Pennington). ChromaDex then submitted 19 Certificates of Analysis showing that there was never any toluene in pterostilbene. Elysium then attacked that showing because two of nineteen arguably showed trace amounts of toluene.

I characterized Elysium's attack as "puerile sophistry." I said,

The thing we are trying to track is whether ChromaDex did the same thing that it alleged Elysium to have done.

Elysium is alleged to have included toluene at about 100 ppm in its consumer product.

ChromaDex has submitted 19 reports. Seventeen of the 19 show no detectible toluene. One of the reports shows detectible toluene, but seems to put the amount as 0.0000%, which I think is less than one part per million. Another report shows toluene detected at 5 ppm.

If 17 out of 19 reports are showing none, and the remaining two are showing exceedingly tiny amounts -- 1/20th of what Elysium is alleged to have done -- then a normal rational person would say, "That is about as close to zero as you can get: 90% of the time it's an actual zero, and the remaining two times it is very close to zero. If you add them all up and average them, it's zero. If you take the single very worst example, Elysium's alleged behavior is 20 times worse than that.

But that's not what Elysium says. Elysium says that what a normal person might assume were trace contaminants in the two outlier tests "demolish" ChromaDex's argument, and cast doubt on the other 17 tests.

Here is what Judge McMahon saw in the the parties CoA discussion:

ChromaDex's chemical testing established that Elysium's Basis contained levels of toluene ranging from 96-144 parts per million when it was being sold to retail consumers with ingredients sourced from a mystery supplier. This stood in stark contrast to the zero detectable levels of toluene that ChromaDex found when it tested older versions of Basis that were sourced its its own ingredients. Those ingredients may have once contained trace amounts of toluene (at levels far below Basis') in their original forms, but any amounts of toluene dissipated to negligible levels below detection in the course of the manufacturing process...None of the above facts is in dispute. (emphasis added)

As for Elysium's alleged need for discovery into ChromaDex's intent or whether ChromaDex "genuinely believed" that Basis was unsafe, Judge McMahon says,

Once again, this argument wrongly conflates the sham exception's objective and subjective prongs...Indeed, Elysium's use of the word "genuine" is telling...Elysium is engaging in the sort of linguistic sleight of hand that the Supreme Court warned against. As should be readily clear to the parties, there was ample evidence from which the Court could conclude -- and, indeed, no evidence to the contrary -- that ChromaDex could hold the "genuine" belief that the Citizen Petition was reasonably calculated to elicit a favorable outcome. (emphasis added)

CONCLUSION

I don't think Elysium will appeal to the Second Circuit. And maybe -- just maybe -- Elysium will reconsider whether its approach to this litigation, or even its overall litigation strategy, is going anywhere good.

#CDXC #ChromaDex #ElysiumHealth #Litigation

0 views