Multiple Energy Technologies v. Casden — CEO Salary Is Not Disgorgeable Profit Under the Lanham Act

Background

Multiple Energy Technologies and Hologenix compete in bioceramic materials used in athletic textiles. After MET accused Hologenix of falsely advertising its Celliant product as FDA-approved, the companies settled. Hologenix agreed to pay $2.5 million and stop making specified FDA-related claims, but filed for bankruptcy before completing the payments.

MET then sued Hologenix CEO Seth Casden. It alleged that he induced Hologenix to breach the settlement and personally participated in false advertising. A jury found a Lanham Act violation and awarded one dollar in nominal damages. The district court separately imposed $2.5 million for tortious interference, treated nearly $1 million in Casden’s salary as disgorgeable profits, trebled it, and awarded almost $600,000 in attorney fees.

The Court’s Holding

The Ninth Circuit reversed the tortious-interference judgment because California’s corporate-agent immunity rule ordinarily prevents treating an officer as a stranger who interferes with the corporation’s own contract. An officer does not lose that protection merely because company success may increase a bonus or otherwise advance personal interests. The relevant question is objective: whether the officer acted for the company or instead acted outside the agency relationship for personal benefit at the company’s expense. The district court applied the wrong test, so the issue was remanded.

The court also vacated the Lanham Act disgorgement award. Section 1117(a) permits recovery of a defendant’s profits, but salary paid for services is compensation, not profit from the false advertising. Calling Casden’s compensation “ill-gotten gains” could not replace the statutory measure, and trebling an improper base award did not cure the defect.

The attorney-fee award survived. The jury found Casden’s FDA representations deliberately or intentionally false, and the district court was entitled to treat that conduct as making the case exceptional even though the damages award was nominal.

Key Takeaways

• A corporate officer does not lose California agent immunity simply because corporate conduct also serves the officer’s financial interests.
• Immunity may disappear when an officer acts outside the agency relationship or benefits personally at the corporation’s expense.
• A salary is not automatically a defendant’s profit for Lanham Act disgorgement.
• Intentional false advertising can support exceptional-case attorney fees even when the plaintiff proves only nominal damages.

Why It Matters

The ruling narrows two routes to large recoveries against individual executives. Plaintiffs must distinguish an officer’s self-dealing from ordinary, compensated corporate decision-making, and they must connect disgorgement to actual profits rather than compensation. But the preserved fee award also shows that knowingly false regulatory claims can remain costly even where conventional damages are difficult to prove.