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  • Writer's pictureShelly Albaum

Discovery Dispute in New York

We have our first discovery dispute in New York, and it is a doozy.

ChromaDex filed a letter motion yesterday with Judge Liman asking His Honor to order Elysium to comply with its discovery obligations. You can read the whole thing here:

We have suspected that discovery has been busy in New York the last few months, and that turns out to be true.

We have learned from a half-dozen prior discovery disputes in California that we can get interesting glimpses of discovery documents, and that proves true.

We were taught in law school, and have seen previously, that the good stuff is in the footnotes, and that proves true.

ChromaDex asserts three objections to Elysium's behavior in this discovery dispute.

First, Elysium is not producing advertisements at issue. Elysium says that the ads ChromaDex is requesting are publicly available, so they need not be produced. But ChromaDex says they are requesting discontinued web ads that are not publicly available.

Second, ChromaDex says it is not getting customer communications from Elysiums Zendesk database.

Third, ChromaDex says that Elysium is not producing everything it has. For example (this from footnote 3), when ChromaDex asked for emails to or from Elysium's VP of Marketing, Elysium produced 182 such emails. But when they asked the same question to third parties, they received 705 such emails.

As an example of the kind of thing that Elysium is allegedly not producing but that ChromaDex is getting from third parties, ChromaDex attaches Exhibit N, which includes instructions from Elysium to its manufacturer to reduce the purity of its product so substantially below the purity of ChromaDex's competing product. You can read Exhibit N here:

Unfortunately, most of the documents in Exhibit N are completely redacted. We can only hope that Judge Liman will deny the motion to redact. In the meantime here is some of what we can see in Exhibit N: "We are requesting AMPAC to lower the specification for the purity of NR from greater than or equal to 95% to greater than or equal to 85%. We are confident that given the consistent delivery of NR at greater than or equal to 95% purity, that the team will continually deliver on this high purity NR. However, we also want to give ourselves the flexibility to use other lots of NR that may have a lower purity profile, while the pre-established levels of residual solvents continue to be met...

And here is a lengthy excerpt from ChromaDex's letter: _______________________________

Dear Judge Liman,

We write on behalf of Plaintiff ChromaDex, Inc., pursuant to Your Honor’s Individual Practices and FRCP 37(a), to raise a discovery dispute. The parties have engaged in extensive meet-andconfer efforts, but are at an impasse as to the three core document production issues below.1

I. Advertising Containing At-Issue Messages

The Second Amended Complaint (“SAC”), ECF No. 139, alleges that Elysium disseminated false or misleading messages regarding its Basis product and identifies exemplars of advertising that contained those messages. In its First Set of Requests For Documents, ChromaDex sought documents relating to Elysium’s advertising, marketing, and/or promotional materials. Ex. A (Requests 11-20).2 Elysium initially objected to these requests primarily as overbroad. Id.

ChromaDex explained that these requests seek documents central to its claims and defenses, but agreed to narrow the scope of these requests to only published or draft advertising, marketing, or promotional materials (and related documents and communications) that contain the same or similar messages as advertising attached to the SAC. Ex. B at 2-3; Ex. D at 5. Nonetheless, Elysium has taken the position that it “will not produce any documents that are publicly available,” a limitation Elysium extends even to discontinued advertisements, incorrectly asserting that ChromaDex has “access to such materials . . . .” Ex. C at 9; Ex. E at 3. ChromaDex explained why this limitation is unjustified, but Elysium has largely repeated its position, stating it will not produce documents related to discontinued advertising because they were supposedly “publicly available to ChromaDex.” Ex. H at 3-4. Elysium has recently also stated that it does “not have a readily available means to search for publicly available statements that have been discontinued, such as historical social media posts that no longer exist.” Ex. J at 2.

First, Elysium predominantly—if not exclusively—advertises via Internet webpages and social media targeted to specific audiences. Thus, although Elysium advertisements are disseminated publicly, such advertisements are not readily accessible to ChromaDex. Additionally, unlike advertisements in newspapers or magazines, which may be accessed by reviewing copies in wide circulation, Elysium alone has information about the sites in which it advertises. The problem is compounded for discontinued advertisements, which Elysium also refuses to produce, because once an online advertisement is removed, it is no longer publicly accessible. For example, Facebook permits advertisers to maintain copies of all active and inactive advertising published on a Facebook platform (i.e., Facebook, Instagram, Audience Network, and Messenger) in an Ads Manager. See Ex. K. However, the public is only allowed access to active advertising and inactive advertising that is related to social issues, elections, or politics in Facebook’s “Ad Library.” See, e.g., Ex. L. ChromaDex cannot access inactive or deleted Elysium advertising. Nor is it reasonable to require ChromaDex to scour the Internet to identify advertising in current circulation when the information is in Elysium’s possession.

Second, Elysium’s claim that it does not have a “readily available” means for searching discontinued advertisements is without merit. Elysium has had an obligation to preserve all documents related to at-issue advertising messaging at least since the initiation of this suit in 2017. If it failed to appropriately preserve documents, that raises serious concerns about spoliation. Further, Elysium offers no explanation for why it cannot search for at-issue messages in: (1) its Facebook Ads Manager or equivalent social media accounts; (2) emails of marketing employees; or (3) shared drive folders and archives. If Elysium has truly made discontinued advertisements inaccessible, ChromaDex is entitled to an appropriate adverse inference.

Third, contrary to Elysium’s characterization, this is not a fishing expedition. As Elysium readily acknowledges, ChromaDex has asserted discrete, identifiable “allegedly actionable misstatements or assertions,” which Elysium refers to as the “Pleaded Misstatements.” Ex. J at 1. “Pleaded Misstatements” can of course appear in multiple advertisements. As just one example, the SAC identifies Elysium’s false statement that “Basis is revolutionary because it’s the first product to come out of really good aging research.” SAC ¶ 63(b)(iv); id., Ex. I. Through Internet searches, ChromaDex identified another advertisement with slightly different graphics that contains the exact same message that has since been deleted from Facebook. Ex. M. Yet, Elysium has not produced the latter or documents related thereto. Far from being a fishing expedition, the scope and prevalence of advertising containing at-issue messaging is relevant to causation and damages. Thus, Elysium must produce responsive advertisements and documents related thereto.

II. Customer Communications (Zendesk)

Elysium uses a customer communications database called Zendesk to store “[a]ll emails to and/or from, Facebook messages, and text messages to Elysium’s customer service number (888-220-6436).” Ex. E at 1. Elysium agreed to produce Zendesk records, id., but has failed to do so.

ChromaDex raised this deficiency in March 2020. Ex. F at 4. During a subsequent telephonic conference, Elysium’s counsel stated that Zendesk records were collected, but Elysium was unable to process them, and that Elysium was in the process of evaluating time and cost to produce. See Ex. G at 2. Around one month later, Elysium stated that its e-discovery vendor “may require direct access to the ZenDesk software.” Ex. H at 4. ChromaDex again inquired about the status of Zendesk records on July 15, 2020. Ex. I at 2. Elysium responded that because its vendor cannot physically access Elysium’s New York City office to retrieve the data due to COVID-19 restrictions, such data would be produced when “it is readily accessible consistent with official regulations and public health guidelines.” Ex. J at 2.

Elysium has failed to explain its failure to collect Zendesk records before the parties’ initial production of documents in February 2020, prior to the implementation of any COVID-19 restrictions. Given the October 11, 2020 deadline to complete fact discovery, Elysium’s response is inadequate and inappropriately seeks to shift the burden to ChromaDex. This case involves claims of false advertising and deceptive acts and practices directed at consumers. Responsive communications between Elysium and customers are critical because they are potentially probative of the effect on the marketplace resulting from Elysium’s conduct.

III. Elysium’s Deficient Search and Production of Custodian Records

After Elysium’s initial document production, ChromaDex informed Elysium that only a negligible number of records were produced for the majority of its agreed-upon custodians (individuals who are central to this case), indicating a shortcoming in Elysium’s compliance with its discovery obligations. Ex. F at 1-4. Likewise, ChromaDex noted its similar concern with respect to the lack of documents and communications involving third-party marketing and advertising entities. Id. at 4. It strains credulity to believe that Elysium employed third-party marketers and advertisers, but did not correspond with them by email. Elysium stated that it “was not surprised [] by the quantity of responsive documents connected to these individuals and entities,” but nonetheless agreed to make a supplemental production. Ex. H at 2. However, the supplemental production failed to address ChromaDex’s concerns. The deficiencies in Elysium’s search and production protocols have now been confirmed by records received from third-party marketing and manufacturing entities pursuant to subpoenas. Not only do the number of emails produced by these relatively few third-parties far exceed the number of emails in Elysium’s own productions for numerous custodians,3 we have identified several examples of highly-relevant and responsive documents that go to the heart of the case that are missing from Elysium’s productions. As just a few examples, which are attached hereto as Exhibit N, Elysium failed to produce: (1) instructions to its manufacturer to reduce the purity of its product (to substantially below the purity of ChromaDex’s competing product); (2) communications about [REDACTED]; and (3) communications about [REDACTED] 4 These communications are undoubtedly relevant to Pleaded Misstatements, including Elysium’s claims touting the purity of its product and the supposedly extensive clinical studies supporting its products and claims. Critically, although third-party productions highlight the deficiencies in Elysium’s compliance with its discovery obligations, ChromaDex has no way of accessing Elysium’s internal communications or all third-party communications relevant to these topics. ChromaDex requests that the Court order Elysium to produce all non-privileged internal and external communications by agreed-upon custodians that relate to the Pleaded Misstatements.

We'll see how Elysium responds.

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