Lawsuit: Supplement Contract Manufacturer Stole Confidential Information
by Josh Long - June 3, 2014
Kaeng Raeng Inc., a developer and marketer of dietary supplements, claims in a lawsuit that a contract manufacturer it hired launched a competing product after stealing confidential and proprietary information.
Founded in 2009 by Lindsay Reinsmith out of her one-bedroom apartment in Palo Alto, Calif., Kaeng Raeng retained Multivitamin Direct, Inc. to make various supplements under a private label. The companies entered into a non-disclosure agreement in which Multivitamin Direct agreed not to disclose Kaeng Raeng’s confidential information, according to the May 30 lawsuit that was filed in Santa Clara County Superior Court.
After sharing details in 2011 with Multivitamin Direct about a greens-based detox cleanse product, Kaeng Raeng suffered delays in production of its existing products and “became strained financially while waiting for Defendant MDI to produce inventory reports and finished inventory," the lawsuit declared through Kaeng Raeng’s attorney Steven Kroll of the Los Angeles firm, Bent Caryl & Kroll, LLP.
Kaeng Raeng claimed it later discovered Multivitamin Direct and its executives had secretly formed another company, Raw Green Organics, in order to sell a daily greens product based on the confidential and proprietary information it had acquired from Kaeng Raeng.
“There’s a presumed level of trust between brands and contract manufacturers. Without this trust, conflicts of interest arise and business relationships are undermined," Reinsmith said in a news release that announced the lawsuit.
Asked by Reinsmith about their relationship with Raw Green Organics, Multivitamin Direct and its executives Paul Huang and Viola Lee responded that the company was a Multivitamin Direct “client" and that Kaeng Raeng’s confidential information had not been disclosed, according to the lawsuit.
Kaeng Raeng said it was later forced to begin the search for a new contract manufacturer, which “eventually resulted in the unnecessary disposal of valuable raw materials."
The lawsuit names as defendants Raw Green Organics, Multivitamin Direct and its executives Lee, Huang and Alisia Cheuk.
Multivitamin Direct did not return a phone call seeking comment on the suit while Raw Green Organics said it was aware of the complaint.
“The suit lacks merit and we look forward to vigorously and successfully defending against it," the company said in an email.
Kaeng Raeng is seeking an injunction against the defendants that would prevent them from disclosing and using confidential information, as well as damages, court costs and attorney’s fees. Kaeng Raeng has asserted claims against the defendants for breach of written contract, breach of fiduciary duty of confidentiality, breach of fiduciary duty of undivided loyalty, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, fraud and deceit, and unfair competition under Business & Professions Code §17200.