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  • Writer's pictureShelly Albaum

Joint Summary of the CA Litigation

Earlier this week Judge McMahon in New York directed the parties to get her up to speed on the California litigation including all discovery. We expected that the parties would interpret "this week" to mean by Friday, and indeed they submitted a joint statement this evening. You can read it here:

This letter represents no legal development at all; it's just a regurgitation of what everyone knows -- everyone but US that is. So we were hoping that the parties would spill a few interesting details that did not make it to the docket, and so they did.

The first type of new information we get is status information -- what's going on behind the scenes.

The second type of information is strategic -- the parties' most recent characterization of their own stories, shaped by new information and calculated to impress the judge.

Let's start with status information.

Twenty Depositions!

We learn that we are in the middle of a deposition storm, and the April 5 discovery is likely to go longer than scheduled. In addition, Magistrate Judge McCormick isn't done with discovery disputes:

Under the operative scheduling order, all discovery is scheduled to close on April 5, 2019. However, some fact discovery remains, and will likely not be completed until at least mid-May, and expert discovery has not yet commenced.

* Document discovery is largely complete. The parties are actively engaged in the meet-and-confer process, and will likely soon bring the remaining disagreements to the Court in California.

* As of this date, ChromaDex has taken seven depositions. Three depositions remain to be taken, two of which have been scheduled. ChromaDex’s 30(b)(6) deposition of Elysium is yet to be scheduled.

* As of this date, Elysium has taken three depositions. Seven depositions remain to be taken, six of which have been scheduled. Elysium’s 30(b)(6) deposition of ChromaDex is yet to be scheduled.

* The remaining depositions which have been scheduled will take place during April and May. The latest-scheduled deposition is set for May 13, 2019.

* The parties have not yet agreed on a schedule for expert reports and depositions.

I'd say the July 9 trial date is in jeopardy -- I better cancel my hotel reservations.

Framing of the Dispute

Here is ChromaDex's framing of the dispute. Elysium allegedly,

...recruited two ChromaDex employees, Mark Morris and Ryan Dellinger, to secretly steal ChromaDex’s trade secrets and proprietary information in furtherance of a plot to create a competing product, financially weaken ChromaDex, and take complete control of the NR market.

Elysium strung ChromaDex along by engaging in bad-faith discussions while it used ChromaDex’s documents to develop competing sources for its ingredients...Elysium’s unlawful conduct allowed it to do in nine months what it took ChromaDex several years to do, and for a fraction of the cost...

The present litigation in the Southern District of New York describes how Elysium also stole ChromaDex’s pedigree with respect to NR, in addition to its personnel, proprietary information, and products, through false and deceptive advertisements of its competing product, Basis. Elysium’s deceptive advertisements, which started when Elysium still utilized ChromaDex’s NR in Basis, and continue today, includes statements that Basis is the first product of its kind, that Elysium was materially involved in the research and science behind NR, and that Elysium has a patent for NR—all of which is true of ChromaDex and its product but false when said about Elysium and Basis.

That's pretty interesting, because it still includes a plot to financially weaken ChromaDex and take complete control of the NR market, using illegal means (e.g., trade secret theft). That's serious business, and ChromaDex even quantifies some of the harm.

Elysium tells it different. Elysium starts by reciting their breach of contract claims, which to me are a big so-what, because damages seem (to me) to be negligible, minimal, or non-existent, depending on the claim. But then it gets interesting. Elysium says,

Over time, the reason for ChromaDex’s poor treatment of Elysium became apparent. ChromaDex proved interested in supplying Elysium only long enough for Elysium to build a market for NR among consumers, something that ChromaDex, having failed in its only prior effort to build a direct-to-consumer brand, recognized its inability to do on its own. ChromaDex schemed to usurp the market created by Elysium by planning to cut off Elysium’s supply of NR, which, it hoped, would permit its own nascent direct-to-consumer subsidiary – a business it acquired from one of its own directors – to step into the void it planned to create by eliminating Elysium.

Or at least, that WOULD be interesting, if there were a good punchline. If I were writing a punchline, it would go like this: "...Which was PERFECTLY LEGAL because Elysium only negotiated a three-year license, which was legally terminated at the three-year mark, so Elysium suffered no legal harm, even though it suffered grave business harm."

But that's not the punchline Elysium writes. They write,

ChromaDex did not, however, succeed in eliminating Elysium, and...Elysium’s current counterclaims before this Court seek remedy for ChromaDex’s false and misleading advertising claims that (1) ChromaDex discovered NR, (2) ChromaDex is the only seller of NR, (3) the United States Food and Drug Administration has rigorously reviewed the efficacy and safety of ChromaDex’s NR, (4) ChromaDex’s NR produces certain results, without adequate disclosure that the promised results would require four times the recommended daily intake, and (5) ChromaDex’s NR prevents and cures certain diseases.

Those claims strike me, like the breach of contract claims, as ticky-tacky, or quibbling, or not-resulting-damages, or untrue. In any case, ChromaDex's claims look to me a lot bigger and more serious than Elysium's claims. But I guess we'll see.

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