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  • Shelly Albaum

Elysium's Personal Conduct: CDXC Opposition Brief


TL;DR: We still don't know what's in the secret text messages, but ChromaDex makes clear just how damning and how relevant they are:

"Both Marcotulli and Alminana brazenly lied under oath at their depositions in an effort to conceal what they knew was highly damaging evidence for Elysium. [REDACTED's] lies, and his disdain for the judicial process, are so shameless and incredible that they must be seen to be fully appreciated. For that reason, ChromaDex has lodged with the Court a video file with clips of his testimony to allow the Court to directly observe his unapologetic attitude and demeanor and hear his perjurious answers." (emphasis in original)

ChromaDex makes a strong case that the jury must see this evidence.

______________________________

Last week the parties filed a number of motions to exclude evidence. The most interesting or provocative of those motions was Elysium's motion to exclude evidence of the "personal conduct" of Elysium personnel.

We first learned of the existence of this "personal conduct" evidence a few months ago when Elysium failed to get it all clawed back from ChromaDex after having "inadvertently" produced it.

ChromaDex told the Court,

The production is a cornucopia of smoking gun communications in which Elysium’s principals discuss—often in colorful and salty language—their conspiracy to drive ChromaDex out of business. The communications also contain relevant messages between Elysium principals that are likely to be personally embarrassing to them. But the salient fact remains: none of the messages involve a lawyer or legal advice, and none of them are privileged.

The Court agreed, and denied Elysium's claw-back motion.

But we still didn't know exactly what was there, or why it was relevant.

Then last week Elysium moved to exclude all that evidence on the grounds that it was "obviously highly prejudicial," and not relevant. Elysium said,

The admission of these texts or any use of their contents at trial would be highly prejudicial to Elysium

That doesn't sound like the texts would be easy to explain away, and we can probably take Elysium at its word that the texts would be highly prejudicial.

But I wasn't convinced by Elysium's summary conclusion that the evidence wasn't relevant:

The personal conduct reflected in these messages has nothing to do with the merits of this commercial litigation over alleged breach of contract and misappropriation of trade secrets.

I said that the highly prejudicial text messages might also be highly relevant if they contradicted Elysium's theory of the case.

Now we have ChromaDex's Opposition Brief and supporting Exhibits:

ChromaDex's Opposition Brief on Elysium's Personal Conduct

Exhibits 1-6

Exhibits 7-14

Let me just say, It. Is. A. Doozy.

ChromaDex offers a number of theories as to why these personal conduct messages are relevant. One is that Elysium’s defenses rely heavily on the word of Marcotulli and Alminana against both the word of ChromaDex witnesses and contemporaneous documents. So evidence that Alminana and Marcotulli are untrustworthy, and indeed evidence from their own mouths that contradicts their sworn assertions, would be highly relevant.

The essence of ChromaDex's argument is this:

Marcotulli's and Alminana's bald-faced lies under oath about [REDACTED] bear directly on their truthfulness, especially when the case will tum on whether and how much the jury trusts their testimony. And while this evidence -- the only of its kind and import in this case -- is certainly devastating for Defendants' claims and defenses, it is not unfairly prejudicial. What would be unfair is for Elysium to present Marcotulli and Alminana as truthful witnesses and corporate executives with nothing to hide, while depriving ChromaDex of the opportunity to expose their lies.

I urge you to read the motion itself. Here is the meat of what ChromaDex says:

Displaying a gift for understated euphemism, Defendants seek exclusion of "Personal Conduct Evidence" directly relevant to the credibility, memory, perception, and bias of two trial witnesses whose testimony they have made essential to their claims and defenses: Eric Marcotulli (Elysium's CEO) and Dan Alminana (Elysium's COO). In their Motion, Defendants elide that this evidence -- in the form of text messages that Elysium willingly produced during this litigation from the mobile phones of both Marcotulli and Alminana -- unambiguously shows [REDACTED].

The relevance of this evidence is plain: [REDACTED]. On or around specific and critical dates, conversations, and events where the facts about what was said or what actually happened are fiercely disputed, and for which the jury will be required to decide between [REDACTED] word and the word of ChromaDex witnesses. Evidence showing that [REACTED] ability to observe, remember, and narrate key events was impaired is vital for the jury to understand and consider.

But that is not all. When ChromaDex rightfully inquired into the possible effect that [REDACTED], both Marcotulli and Alminana brazenly lied under oath at their depositions in an effort to conceal what they knew was highly damaging evidence for Elysium. [REDACTED's] lies, and his disdain for the judicial process, are so shameless and incredible that they must be seen to be fully appreciated. For that reason, ChromaDex has lodged with the Court a video file with clips of his testimony to allow the Court to directly observe his unapologetic attitude and demeanor and hear his perjurious answers.

Furthermore [REDACTED] a sworn declaration attached to Defendants' application to seal the Motion. In his declaration, [REDACTED] finally admits that, contrary to his repeated denials at his deposition, those text messages do show [REDACTED]. [REDACTED] has admitted the same. There can be no question that Marcotulli's and Alminana's perjury is relevant in this case "because the jury, as finder of fact and weigher of credibility, has historically been entitled to assess all evidence which might bear on the accuracy and truth of a witness' testimony." United States v. Abel 469 U.S. 45, 52 (1984).

The import of this evidence is clear. [REDACTED] at the times when he was involved in highly relevant communications and meetings with ChromaDex's principals. When faced with difficult questions [REDACTED] by lying under oath to conceal information that is damaging to Elysium and to him. As this Court held in Englebrick v. Worthington Industries, Inc. , when witnesses "lie[] over and over again in deposition and discovery about their [drug] use and addiction," and the "deception [is] directly related to the parties' controversy," it becomes "impossible for the Court now to believe a word they say." 944 F. Supp. 2d 899, 910-11 (C.D. Cal. 2013) (Camey, J.). Given that Elysium (and its co-defendant, Morris) intend to call Marcotulli and Alminana at trial, the jury is entitled to hear and weigh this evidence accordingly, and come to the same logical conclusion in this case.

II. RELEVANT BACKGROUND

Marcotulli’s and Alminana’s testimony is central to Elysium’s and Morris’s defenses and counterclaims. But hundreds of thousands of text messages produced by Elysium from their phones demonstrate that they have serious credibility problems for abundant reasons. Worsening their predicament was their decision to lie under oath with remarkable frequency at their depositions in order to conceal those problems.

A. Elysium Relies on Marcotulli and Alminana

ChromaDex filed this lawsuit in December 2016, (Dkt. 1), and, through discovery, uncovered more and more evidence of the cavalier misconduct by Elysium and its agents, as alleged in more detail in ChromaDex’s Fifth Amended Complaint (“FAC”), (Dkt. 153). From the very beginning of this case, Elysium’s defenses to those claims have relied heavily on the word of Marcotulli and Alminana against both the word of ChromaDex witnesses and contemporaneous documents. For example, ChromaDex alleges that Elysium ordered huge shipments of ingredients at the end of June 2016, and plotted with Morris to induce ChromaDex to fulfill those orders, with no intent to pay for them. (See, e.g., FAC ¶¶ 39–62.) Defendants’ plan culminated with a phone call between Marcotulli, Alminana, and two ChromaDex executives on June 30, 2016 (“the June 30 Call”), during which ChromaDex alleges that Elysium made false promises to purchase large quantities of ingredients later in 2016. (Id. ¶¶ 54–56.) Marcotulli’s and Alminana’s understandings of what was said on the June 30 Call differ wildly from ChromaDex’s. (See, e.g., Dkt. 103, Elysium’s Third Amended Counterclaims (“TACC”), ¶¶ 18, 79–81.) Elysium also deploys Marcotulli’s and Alminana’s version of the June30 Call to bolster its counterclaim under the “most favored nation” pricing provision of the parties’ supply agreement (“the MFN Provision”). (Id. ¶ 79.) Evidence and testimony about what was said on that crucial June 30 Call, as well as the events that occurred before and after the call, will feature prominently at trial.

Other of ChromaDex’s affirmative claims are contested by Elysium on the ground that Marcotulli and Alminana dispute certain facts. For example, in response to ChromaDex’s claims against Elysium for trade secret misappropriation, breach of confidentiality obligations, and aiding-and-abetting Morris’s breach of fiduciary duty, both Elysium witnesses have stated (despite documents to the contrary) that they do not recall receiving or using ChromaDex information or communicating with Morris about Elysium’s plans. (See, e.g., Ex. 2 at 237:25–238:9, 249:140–252:21; Ex. 3 at 130:15– 132:10.)4 In particular, Marcotulli claims that he never saw ChromaDex’s “Ingredient Sales Spreadsheet,” a highly confidential compilation that tracked the detailed purchasing history and forecast the future purchases of all of ChromaDex’s customers. (Ex. 2 at 205:13–206:24.) However, metadata produced by Elysium along with the Ingredient Sales Spreadsheet demonstrates that it was downloaded to Elysium’s computer servers on July 18, 2016—the same day that Morris arrived to work at Elysium—and that Marcotulli is the custodian. (Ex. 4.) Whether Marcotulli actually saw and used the ChromaDex trade secrets in the Spreadsheet may come down to his word against a computer record. There are many more examples of Defendants relying exclusively on Marcotulli’s and Alminana’s testimony to rebut ChromaDex’s claims.

Elysium also relies on Marcotulli and Alminana to establish significant facts underlying its counterclaims. The events surrounding the June 30 Call are central to Elysium’s MFN Provision counterclaim, as discussed above. Elysium’s fraudulent inducement counterclaim also rests entirely on Marcotulli’s and Alminana’s memory of certain oral representations; specifically, Elysium alleges that “[d]uring negotiations [of the parties’ supply agreement], ChromaDex falsely represented to Elysium that it required all of its customers who signed nicotinamide riboside supply agreements also to execute license and royalty agreements.” (TACC ¶ 164.)5 Elysium’s patent misuse and unjust enrichment counterclaims depend on the same supposed oral representations. (TACC ¶¶ 52, 55.) No contemporaneous documents exist to confirm any of Elysium’s allegations about those oral representations, and the only two people involved in the supply agreement negotiations from Elysium’s side were Marcotulli and Alminana. (Ex. 2 at 88:13–20, 112:24–113:5.)

Further, Elysium asserts that ChromaDex breached a clause of an amendment to the supply agreement called the “Exclusivity Provision,” an allegation which also rests in large part on Marcotulli’s and Alminana’s testimony. That counterclaim is based on ChromaDex purportedly “acknowledg[ing]” during negotiations that the Exclusivity Provision applies to consumer products made not just with the ingredient expressly identified in the Provision (pterostilbene), but also products made with a n entiurely different ingredient that is nowhere identified in the agreement (resveratrol). (TACC ¶ 85.) Again, no contemporaneous documents exist to confirm Elysium’s allegations and, again, the only two people involved in the negotiations from Elysium’s side were Marcotulli and Alminana. (Ex. 3 at 76:15–77:4.)

B. Elysium Produces the Text Messages in Discovery

One particularly important source of evidence about Defendants’ wrongdoing are text messages from the phones of Marcotulli and Alminana, including those from files produced by Elysium on December 18, 2018. (Dkt. 188-1 at 7.) Among other things, those files show that Morris texted with Marcotulli and Alminana hundreds of times and shared with them numerous ChromaDex trade secrets and other confidential information. (Ex. 5; Ex. 6.)

The files contain something else: thousands of text messages between [REDACTED] during the time periods in which he was also dealing and engaging with (and against) ChromaDex. There is no gray area and no ambiguity illustrated by this excerpted exchange that occurred between [REDACTED] and a close personal confidant from 3:00 to 3:25 AM on January 17, 2016: [REDACTED].

[Then, too many redactions for me to sensibly characterize, but do read for yourself]

The messages further show that [REDACTED] throughout the time period during which ChromaDex alleges that Elysium plotted to undermine ChromaDex's critical relationships with its patent licensor (Dartmouth College) and contract manufacturer (W.R. Grace & Co. ("Grace")), all in an effort to use ChromaDex's own trade secrets and confidential information to "get rid of the scumbags holding this magnificent technology" and thereby "destroy" ChromaDex and "make their worst nightmares come true!" There are many examples of the overlap with these key dates:

Next comes a number of partially redacted examples from a list that ChromaDex says, "goes on and on." You should click through to read them, but one specific example I will highlight here:

Earlier that day, [REDACTED] excitedly texted Morris that "Dartmouth is revoking the patent!!" and that "they don't want cdxc declaring chapter 11" and "tying it up." (Ex. 10 at 668-69.) When Morris commented that he thought Dartmouth "would so much rather work directly with EH!", [REDACTED] agreed and replied that he had his "[f]ingers crossed." (Id.)

Marcotulli and Alminana Commit Perjury at Their Depositions

ChromaDex, aware that Elysium's claims and defenses rest in large part on the testimony and credibility of [REDACTED] sought to test his memory and perception of key events in the case during his deposition on [REDACTED].

The next part is difficult to make out due to redactions, but ChromaDex says that someone's testimony was "astounding," denying knowledge of what a word meant in his own text messages, and using some form of the phrase "I do not recall" over 600 times in his deposition. And there are many more fully and partial redactions.

Argument

Marcotulli and Alminana are at the center of this case. Their credibility, memory, perception, and bias will be critical for the jury to understand in order for it to properly weigh their testimony and fulfill its truth-seeking function. [REDACTED] over the time period at issue, and on specific dates when Elysium interacted with ChromaDex, are relevant to his memory and perception of disputed facts. Further, Marcotulli's and Alminana's bald-faced lies under oath about [REDACTED] bear directly on their truthfulness, especially when the case will tum on whether and how much the jury trusts their testimony. And while this evidence -- the only of its kind and import in this case -- is certainly devastating for Defendants' claims and defenses, it is not unfairly prejudicial. What would be unfair is for Elysium to present Marcotulli and Alminana as truthful witnesses and corporate executives with nothing to hide, while depriving ChromaDex o f the opportunity to expose their lies. Because no other reason

exists to exclude this evidence, it should be allowed to go to the jury.

The Evidence Is Relevant

Evidence of [REDACTED] is relevant under Rule 401 because it makes numerous facts of consequence in this case more or less probable. That is true because that evidence tends to (1) call into serious doubt [REDACTED's] inability(?) to perceive and recall the events about which he will be called to testify; (2) show that Marcotulli and Alminana are willing to lie, even under oath, when faced with tough questions the answers to which would harm Elysium; and (3) unveil a powerful source of bias for Marcotulli and Alminana to favor Elysium that is not adequately explained by mere financial incentives. The evidence is admissible for any of these reasons.

What comes next is a thorough and powerful analysis of the various reasons why the proposed text messages are in fact relevant and admissible -- e.g., as prior inconsistent statements, and as evidence of bias. The law appears to be on ChromaDex's side.

Here is an interesting tidbit with respect to bias:

Their extreme efforts to protect Elysium reveal an entirely different type of bias, one with a source and strength that runs far deeper than just money...Evidence of Marcotulli's and Alminana's "more substantial relationship" is thus relevant and admissible to demonstrate to the jury the potency of their bias toward Elysium.

And this final footnote:

It should not go unremarked that, without a hint of irony, Defendants cite Lawrence v. Texas, 539 U.S. 558 (2003)—a landmark Supreme Court ruling decriminalizing the intimate relationships of same-sex couples—to support their Motion that seeks, among other things, to exclude text messages containing blatantly homophobic and bigoted language.

CONCLUSION

Without seeing every text message in question it is impossible to evaluate whether every single message is relevant and whether that message's probative value is not substantially outweighed by its prejudicial value.

But it seems like ChromaDex has made a very strong case that the evidence in question is relevant and has to be admitted. Indeed, as ChromaDex has said,

What would be unfair is for Elysium to present Marcotulli and Alminana as truthful witnesses and corporate executives with nothing to hide, while depriving ChromaDex of the opportunity to expose their lies.

I guess the price of saying, "I don't recall" 600 times is that it justifies the admission of evidence suggesting that maybe you could recall.

So It's an easy prediction that most or all of this evidence is going to go to the jury.

Elysium made a weak argument for its exclusion by failing to explain not only why it was highly prejudicial, but also why the prejudice substantially outweighed the probative value. Elysium just said it had no probative value, which was unlikely on its face (as I remarked last week), and is now powerfully refuted by ChromaDex.

And if the evidence is as damning as it seems to be from the tidbits and characterizations that we have, I would think that the pressure on Elysium to settle this -- at any cost -- before trial might be quite strong. We'll see.

#CDXC #ChromaDex #ElysiumHealth #Litigation

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