In re Elysium Health-Chromadex Litig.

Citation: 354 F. Supp. 3d 330Docket: 17 Civ. 7394 (CM)

Court: District Court, S.D. Illinois; January 2, 2019; Federal District Court

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On September 27, 2017, Elysium Health, Inc. filed a complaint against Chromadex, Inc. alleging violations of the Lanham Act, trade libel, deceptive business practices under New York law, and tortious interference with economic relations. Chromadex sought summary judgment based on immunity under the Noerr-Pennington doctrine, which the Court granted. The case's background includes Elysium's product, Basis, an anti-aging dietary supplement comprised of pterostilbene and nicotinamide riboside (NR), previously supplied by Chromadex, which ended their business relationship in 2016. Following this, Chromadex launched its own NR product, TruNiagen. 

In August 2017, Elysium began producing a new version of Basis with NR and pterostilbene from an unidentified supplier. Chromadex conducted tests revealing that Elysium's new ingredients were chemically different from its NIAGEN® and pTeroPure, and that Basis contained toluene, an industrial solvent posing health risks. Consequently, Chromadex submitted a Citizen Petition to the FDA, asserting that Elysium’s Basis was adulterated due to the undeclared toluene and the lack of a New Dietary Ingredient Notification for its new dietary ingredient. The petition requested that the FDA take enforcement actions against Elysium, including halting distribution of Basis.

In response, Elysium claimed the Citizen Petition was false and made to harm its business, arguing that the toluene levels reported by Chromadex were compliant with International Conference on Harmonisation standards, which the FDA acknowledges for dietary supplements in the absence of specific regulations.

Elysium argued that CMDX's pTeroPure® product contains similar toluene levels as indicated by Certificates of Analysis (COAs), suggesting CMDX could not have genuinely believed that Elysium's Basis was unsafe or that its Citizen Petition would succeed. Elysium asserted that CMDX had no expectation of FDA approval for the petition, knowing that the FDA typically does not grant petitions aimed at initiating enforcement actions. CMDX moved to dismiss Elysium's Complaint under Fed. R. Civ. P. 12(b)(6), claiming protection under the Noerr-Pennington doctrine, which safeguards the right to petition the government. Elysium countered that CMDX's actions fell under the "sham exception" of this doctrine, which applies when attempts to influence government action are merely a cover for interfering with a competitor's business. Subsequently, CMDX filed a Supplemental Petition with the FDA asking for clarity regarding dietary supplement safety and guidance. Elysium responded by informing the FDA that it had removed toluene from Basis, emphasizing its commitment to product quality. On September 27, 2018, the Court partially denied CMDX's motion to dismiss, converting the issue of Noerr-Pennington immunity to a motion for summary judgment, as it required consideration of evidence beyond the pleadings. The key issue for the Court is whether CMDX's Citizen Petition is "objectively baseless," which would invoke the sham exception to the Noerr-Pennington immunity. Elysium contends that summary judgment is inappropriate, arguing that CMDX has not proven there are no genuine material facts regarding the petition's objective basis.

Summary judgment is applicable when there is no "genuine issue of material fact" and the moving party is entitled to judgment as a matter of law, as specified in Federal Rule of Civil Procedure 56(c) and reinforced by Supreme Court precedent. CMDX, the moving party, must initially demonstrate the absence of disputed material facts. A genuine issue exists if a reasonable jury could side with the nonmoving party based on the evidence presented. Elysium, the party opposing the summary judgment, is entitled to favorable inferences and must have the evidence viewed in the light most favorable to it. However, Elysium must provide specific facts beyond mere conjecture to show a genuine issue for trial, as conclusory or speculative evidence is insufficient.

In the context of the Noerr-Pennington doctrine, CMDX has the burden to prove no disputed material facts affect the applicability of this immunity, which protects attempts to influence government action under the First Amendment. Notably, the doctrine has been recognized in various civil actions beyond antitrust cases, including those involving citizen petitions to regulatory agencies like the FDA. Despite its strong protective nature, Noerr-Pennington immunity does not apply if the petitioning activity is merely a sham intended to mask violations of federal law.

The Supreme Court's decision in PRE established a two-part test to identify sham activities under the Noerr-Pennington doctrine. First, a lawsuit must be objectively baseless, meaning no reasonable litigant would expect success on its merits. If a reasonable litigant could anticipate a favorable outcome, the lawsuit is protected under Noerr, and claims of sham must be dismissed. Only if litigation is deemed objectively meritless can a court then consider the litigant's subjective intent. Additionally, mere evidence of anticompetitive motive does not convert legitimate actions into a sham. The sham exception is to be interpreted narrowly to protect the right to petition under the First Amendment, with the burden of proof resting on the party asserting the sham exception.

In the case at hand, CMDX contended that its Citizen Petition was not objectively baseless for two reasons: it was reasonably calculated to achieve a favorable outcome and it sought legally viable determinations from the FDA. The court found CMDX's first argument compelling. According to PRE, a lawsuit is not sham if it is a reasonable attempt at petitioning for redress. CMDX successfully prompted the removal of toluene from a product, which aligns with its objective to enhance consumer safety. This favorable outcome means the Citizen Petition cannot be deemed objectively baseless, as it achieved the intended result of addressing public safety concerns.

Three guiding principles inform the court's decision regarding the application of Noerr-Pennington immunity. First, petitioning activities that result in favorable outcomes are inherently indicative of efforts to elicit such outcomes, thus qualifying for immunity. A relevant case, EDF Renewable Dev. Inc. v. Tritec Real Estate Co. Inc., illustrates this principle, where a defendant successfully lobbied officials to delay building permits for a plaintiff’s solar project, leading the court to uphold the defendant's Noerr-Pennington immunity despite clear anti-competitive motives. The court noted that the success of the defendant's lobbying negated claims that it constituted a "sham."

Second, a favorable outcome does not need to arise directly from government action to qualify for Noerr-Pennington protection. Established case law indicates that achieving a settlement in an objectively baseless lawsuit can also be deemed a favorable outcome, thus shielding the petitioning activity from the sham exception. 

In the current matter, the Citizen Petition clearly aimed to remove a hazardous product from the market, and its success—evidenced by Elysium's removal of the harmful ingredient—supports CMDX's position. While Elysium does not explicitly link its decision to the Citizen Petition, denying a connection is unreasonable. Consequently, CMDX's actions cannot be considered a sham, and the court finds that the actual favorable outcome of the Citizen Petition suffices to affirm its legitimacy under Noerr-Pennington principles.

In the legal analysis, several cases are referenced to illustrate the application of the Noerr-Pennington doctrine, which grants immunity to parties from liability for petitioning the government, even if the petitions are deemed "sham." Notably, in *In re Terazosin Hydrochloride Antitrust Litig.*, the court found that the defendant's numerous patent infringement lawsuits, aimed at maintaining market exclusivity against generic manufacturers, were not objectively baseless because some resulted in favorable outcomes, such as obtaining information or prompting changes in the generic manufacturers' processes. The court determined that success does not solely depend on a favorable court verdict, emphasizing that a plaintiff can be considered to have "won" if they achieved the relief sought through their petitions. 

The discussion also addresses the argument against Noerr-Pennington immunity, noting that a plaintiff's claim that outcomes were not favorable because they did not come from a court was rejected. The court reiterated that the focus of the Noerr-Pennington doctrine is on the outcome rather than the means used to achieve that outcome. In the context of CMDX's Citizen Petition, the court concluded that Elysium's actions, which were in response to this petition, were significant enough to be viewed as a win for CMDX, regardless of whether the FDA could grant all relief sought. Elysium's assertion that CMDX's petition was objectively baseless, due to the nature of the requested relief, was countered by the principle that the objective of petitioning activity is what matters in determining its legitimacy.

CMDX's tactics in pursuing relief through a citizen petition, which may have been questionable, do not negate its eligibility for Noerr-Pennington protection. The Supreme Court clarifies that a "sham" situation is characterized by a lack of genuine intent to secure favorable government action, rather than the use of improper means to achieve valid goals. The key issue is whether CMDX's efforts were genuinely aimed at obtaining the desired outcome, independent of the FDA's authority to grant such relief. Elysium failed to demonstrate any genuine material fact indicating that CMDX's actions were solely intended to harm Elysium without a legitimate interest in addressing toluene in Basis, rendering the sham exception inapplicable. Consequently, CMDX's Motion for Summary Judgment is granted. The Clerk of Court is instructed to reopen the previously converted motion for summary judgment and enter the appropriate order.