In re: Elysium Health-Chromadex Litigation

Background

ChromaDex, Inc. sued Elysium Health, Inc. in the Southern District of New York over competing dietary supplements. ChromaDex’s complaint asserted false-advertising and unfair-competition claims under the federal Lanham Act and deceptive-practices claims under New York law. Elysium asserted counterclaims under the same statutes.

The parties were also litigating related disputes in California and Delaware. During January 2022 settlement discussions, they generally agreed on a total payment of $2.5 million from Elysium to ChromaDex but disagreed about whether the payment would be made in one lump sum or two installments.

On February 2, 2022, ChromaDex counsel William Carter offered settlement terms by telephone. The terms included two payments totaling $2.5 million, a stipulated judgment in the California case, interest on the second payment that would be waived if paid on time, possible attorney’s fees for collecting a late payment, no attorney’s fees or costs arising from the California jury claims, no post-trial motions or appeals concerning those claims, and dismissal with prejudice of the New York claims and counterclaims, with each side paying its own fees and costs.

On February 3, Elysium General Counsel Thomas Wilhelm emailed that Elysium accepted the additional terms and stated, “we have an agreement.” The email listed the settlement terms, including two $1.25 million installments, a stipulated judgment in California, and mutual dismissal with prejudice of the New York action. After the court released its summary-judgment decision that day, Wilhelm emailed that settlement discussions were on hold while Elysium reviewed the decision. Elysium later stated that the parties did not have an agreement. ChromaDex then moved to enforce the settlement.

Legal standard

The court applied the four factors from Winston v. Mediafare Entertainment Corp. to determine whether the parties intended to be bound even though they had not signed a formal settlement document. The factors ask whether the parties expressly reserved the right not to be bound without a signed writing, whether either side partly performed, whether they agreed on all material terms, and whether the type of agreement ordinarily should be put in writing.

ChromaDex had the burden of proving that a binding agreement existed.

Court’s analysis

The first factor favored enforcement. The February 2 offer and February 3 acceptance did not say that the parties would be bound only after signing a formal agreement. The court interpreted Wilhelm’s statement that Elysium would begin preparing the “documentation” as referring to documents implementing an agreement already reached, not documents necessary to create the agreement.

The second factor was neutral. Neither party had performed the settlement obligations before Elysium rejected the agreement, and ChromaDex had not yet performed any part of its obligations.

The third factor favored enforcement because the parties agreed on all material terms. These included the $2.5 million amount, the disputes being resolved, the two-installment payment schedule, the treatment of interest and collection fees, the parties’ agreement not to seek certain fees and costs, the California stipulated judgment, and dismissal of the New York action. The court rejected Elysium’s argument that confidentiality, venue, choice of law, enforcement provisions, and an interest rate remained open for negotiation.

The fourth factor also favored enforcement. The court explained that the settlement was confirmed in writing by Elysium, involved a relatively simple payment arrangement rather than an ongoing business relationship, and did not require a formal signed contract merely because the amount was $2.5 million. The court also rejected Elysium’s argument that the statute requiring certain agreements to be in writing prevented enforcement, concluding that the February 3 email satisfied any applicable writing requirement.

Disposition

The court granted ChromaDex’s motion to enforce the settlement. It directed the parties to file a notice of dismissal on the docket, consistent with the settlement terms, by April 26, 2022, and directed the Clerk of Court to close the motion.

The opinion contains one apparent inconsistency: in its analysis, it once describes the proposed New York dismissal as “without prejudice,” while the quoted settlement terms and the court’s discussion elsewhere describe it as “with prejudice.”