Elysium Can’t Avoid False-Ad Settlement Despite Winning Judgment

Diet supplement maker Elysium Health Inc. can’t back out of a $2.5 million settlement with Chromadex Inc. after winning summary judgment—hours after email confirmation of the deal—from a district court that didn’t know about the agreement, a federal appeals court affirmed Thursday.

The district court properly deemed that Elysium’s agreement to pay Chromadex $2.5 million, reached by phone negotiations and confirmed by email, was enforceable, despite the later court decision, the US Court of Appeals for the Second Circuit said in an unpublished summary order.

The disputed settlement came in false-ad litigation between Elysium and Chromadex in the US District Court for the Southern District of New York.

In-house attorneys for both companies discussed a possible settlement in a Feb. 2, 2022, phone call, the appeals court said. ChromaDex’s lawyer said that if Elysium agreed to the terms proposed by ChromaDex, the parties would have a deal, the court said.

According to the court, in a Feb. 3, 2022, email, Elysium’s counsel wrote, “we can accept the additional terms you proposed yesterday,” listed the terms of the agreement, and then stated, “I understand that now that we have an agreement you will begin work on documentation.”

Elysium agreed to pay Chromadex $2.5 million to resolve the outstanding litigation in the New York district court as well as another dispute before a federal court in California.

A couple of hours after Elysium’s email agreeing to the terms proposed by ChromaDex, the district court, unaware of the settlement, issued a decision that dismissed ChromaDex’s complaint in full and allowed some of Elysium’s counterclaims to proceed, the Second Circuit said.

Elysium then told ChromaDex that the parties hadn’t reached a deal. ChromaDex filed a motion to enforce the settlement agreement, which the district court granted. Elysium appealed.

There was a meeting of the minds and mutual assent to form a binding settlement agreement, the Second Circuit affirmed.

ChromaDex laid out all the material terms of the offer on the Feb. 2 call, which Elysium then accepted in the email the following day, the appeals court said. That email restated the terms of the offer and then said unequivocally: “now . . . we have an agreement,” the appeals court said.

The district court properly found the agreement was enforceable, the appeals court said.

Judges Pierre N. Leval, Barrington D. Parker, and William J. Nardini served on the panel.

Frankfurt Kurnit Klein & Selz PC represented Elysium Health. LTL Attorneys LLP represented ChromaDex.

The case is Elysium Health, Inc. v. Chromadex, Inc., 2d Cir., No. 22-01059, unpublished 10/26/23.