Background
Multiple Energy Technologies and Hologenix compete in performance-textile materials. MET claimed Hologenix CEO Seth Casden induced his company to breach a contract and made intentionally false advertising claims about its product. A district court found liability, treated Casden’s salary as profits subject to disgorgement, trebled the amount, and awarded attorney fees.
The appeal asked when a corporate officer becomes a stranger to the corporation’s contract and what counts as the officer’s profits under the Lanham Act.
The Court’s Holding
The Ninth Circuit held that the district court applied the wrong California agent-immunity standard. An officer ordinarily cannot be liable for inducing the corporation’s breach while acting within the agency. Personal motivation, such as earning a larger bonus, does not destroy immunity when the officer is also advancing corporate interests. Immunity is lost when the officer acts outside the agency, such as for personal benefit at the principal’s expense.
The panel also reversed disgorgement because salary is compensation, not the defendant’s profits from false advertising. It left the Lanham Act attorney-fee award intact because the jury’s finding of deliberate falsity supported treating the case as exceptional.
Key Takeaways
- A corporate officer’s self-interest does not alone make the officer a stranger to the company’s contract.
- The key immunity question is whether the officer acted outside the agency or against the principal’s interests.
- Salary cannot simply be relabeled as profits for Lanham Act disgorgement.
- An exceptional-case attorney-fee award may survive even when the damages remedy is reversed.
Why It Matters
The ruling narrows a common attempt to add individual officers to California contract disputes. Plaintiffs need evidence that the officer departed from the corporate role and acted at the company’s expense, not merely that the officer expected compensation or personal advantage.
It also sharpens proof requirements for false-advertising remedies. Businesses seeking disgorgement must trace profits attributable to the violation, while defendants remain exposed to substantial fee awards when the underlying conduct is deliberately false.
Read the full opinion (PDF) · Court docket