Shelly Albaum
Mar 6, 2019
ChromaDex today filed an amended Answer in California. You can read it here:
ChromaDex's Amended Answer - March 2019
The only difference between this and ChromaDex's prior answer is the addition of two affirmative defenses. But let's start at the beginning:
In its Third Amended Counterclaims, Elysium added a breach of contract claim based on ChromaDex's alleged failure to comply with the FDAs cGMP, or Current Good Manufacturing Practices.
Section 3.7 of the Niagen Supply Agreement says, "ChromaDex warrants that the Niagen sold under this agreement shall be manufactured in accordance with cGMP..."
Elysium's Third Amended Counterclaims say, "By selling to Elysium nicotinamide riboside that was not manufactured in according with Pharmaceutical cGMPs, ChromaDex has materially breached the NR Supply Agreement and denied Elysium the benefit of its bargain."
ChromaDex's new affirmative defenses say, (1) even if that were true, Elysium waived any claim under the breach of warranty provision, and/or (2) that the parties did not agree on what was meant by cGMP:
Waiver. ChromaDex's first defense, Waiver, is very easy to understand when you read the fully text of section 3.7. The contract says, "All claims made with respect to the product shall be deemed waived by Elysium Health unless made in writing and received by ChromaDex within Thirty (30) days of delivery...Elysium Health irrevocably waives and releases all claims that are not properly made within the said period."
That's ChromaDex's waiver argument, and it is obviously very strong, supported by explicit language in all caps. Of course a Court might choose not to enforce the waiver provision if it were unconscionable, or if ChromaDex had somehow prevented Elysium from testing the materials. However, it does not strike me as unreasonable to require that a party receiving goods must assert quality complaints within a particular period of time. That is a common commercial practice, so I doubt Elysium will get past the waiver argument.
Mistake. I don't know what is meant by the Mutual Mistake argument in ChromaDex's new 10th Affirmative Defense, but I can't help but notice that in its complaint Elysium twice used the phrase "Pharmaceutical cGMPs" whereas the contract itself only refers to "cGMPs."
In New York the parties disagreed about whether pharmaceutical purity standards governed health supplements, with Elysium asserting that they did. Elysium might be attempting the same maneuver in California. If so, that would explain ChromaDex's suggestion that the parties did not reach a meeting of the minds on what constituted current good manufacturing processes.
Conclusion
I haven't been paying much attention to the cGMP warranty claims, in part because the total amount in controversy is far less than the parties have spent litigating the issue, and in part because I can't see how Elysium was damaged by any breach, since they sold all the allegedly non-conforming goods at full price.
But now that ChromaDex has brought to our attention the clear contractual waiver language, it would seem that one more exit has been slammed in Elysium's face, making it that much more likely that Elysium will be one day forced to pay for the goods that it purchased, received, and re-sold, but never paid for.