Jury verdict tilts toward Elysium Health in dispute with ChromaDex, court records showJury verdict tilts toward Elysium Health in dispute with ChromaDex, court records show
Jurors swept aside ChromaDex claims of trade secret theft, and bought Elysium’s narrative that there was fraud behind the supplier-customer agreements between the two
September 29, 2021
Supplement maker Elysium Health celebrated a jury verdict returned this week in federal district court in California, after a long-running dispute with its former ingredient supplier ChromaDex.
ChromaDex had sued Elysium for breaching their contract and not paying for a sizable 2016 order of nicotinamide riboside (NR) and pterostilbene, for its supplement product Basis. As the case unfolded, ChromaDex filed additional claims of insider sabotage and theft of trade secrets. Elysium countered with claims that centered on trademark and royalty agreements and that it was overcharged for the ingredients.
As a result of the mixed jury verdict returned Monday, Elysium Health will be required to essentially pay the balance of its bill from 2016 plus interest, almost $3 million, but Elysium Health will also get back $1.9 million from ChromaDex. The jury found ChromaDex breached a provision in the supply agreement between the two and also fraudulently induced Elysium to enter into their trademark license and royalty agreement.
In a press release, Elysium said it was “thrilled” with the jury’s verdict, and Elysium Health CEO Eric Marcotulli was quoted as saying, “We have always had faith that the truth would prevail in our dispute with ChromaDex, and we are grateful to the members of the jury for their service and willingness to focus on the facts.”
In an email, a ChromaDex spokesperson said the company was “pleased the jury ruled that Elysium owed ChromaDex its unpaid bill from 2016 plus interest. Business principles matter. ChromaDex prides itself on conducting business with integrity and setting an example for the rest of our industry.”
Jurors seemingly dismissed the narrative from ChromaDex lawyers that the actions of Mark Morris—a former executive at ChromaDex who helped coordinate the original ingredients sale in 2016, and then joined the Elysium team—were damaging to the company. Morris was named as an additional defendant in ChromaDex’s claim, after text messages and other evidence pointed to his revealing pricing and customer information as well as disparaging messages about ChromaDex while he was still employed there.
(See related story, “The long, drawn-out war over star anti-aging ingredient.”)
Jurors, however, found Morris did breach a confidentiality agreement with his then-employer ChromaDex, but ordered him only to pay back roughly $17,000 in previous compensation, well short of the $688,000 ChromaDex had been seeking from him. The jury rejected a breach of fiduciary duty claim against Morris as well as punitive damages requests by ChromaDex related to the charges of trade secret theft.
Elysium lawyers successfully argued ChromaDex overcharged Elysium by $625,000, which was a violation of a “most-favored-nation” provision in the supply agreement between the two for NIAGEN, the brand name for ChromaDex’s NR. At trial, Elysium presented evidence of a deal between ChromaDex and Healthspan Research, LLC—a company founded by current ChromaDex CEO Rob Fried—in which NR was sold to Healthspan at a substantially lower price than that afforded to Elysium. ChromaDex later bought Healthspan from Fried for $1.1 million.
Jurors on Monday also awarded Elysium $250,000 related to royalty overpayment, and $1,025,000 in punitive damages as a result of the fraud it found on ChromaDex’s part.
In a filing with the Securities and Exchange Commission after the verdict, ChromaDex said it "expects a net result in which Elysium and Mark Morris will be required to pay ChromaDex approximately $2.25 to $2.50 million in damages and interest. The Company does not plan to appeal the decision."
According to coverage of the trial by Law.com (subscription required), some jurors said evidence presented about a coercive attempt to buy out Elysium in 2015, from a group led by billionaire pharmaceutical investor Phil Frost, was particularly resonant.
Lawyers were also clear winners in the nearly five-year dispute between the two companies; the original complaint lodged by ChromaDex was filed in December 2016 and the case heard by Judge Cormac J. Carney (U.S. District Court, Central District of California, Southern Division, Case No. 8:16-cv-02277-CJC-DFM, requires log-in) included more than 500 filings over its course.
A dispute between the two companies remains active in the Southern District of New York. And, earlier this month, a U.S. district judge in Delaware delivered another win for Elysium when he essentially invalidated two patents for NR that are held by ChromaDex and Dartmouth College.
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