Background
Multiple Energy Technologies LLC (MET) and Hologenix competed in the market for bioceramic textile materials. MET alleged in a 2019 suit that Hologenix falsely advertised its product, Celliant, as FDA-approved. The companies settled: Hologenix agreed to pay $2.5 million in installments and not represent that Celliant was FDA-approved or that the FDA had determined it offered health benefits.
After Hologenix filed for bankruptcy before completing its payments, MET sued its CEO, co-founder, and majority shareholder, Seth Casden. MET alleged that Casden caused Hologenix to continue prohibited marketing representations and interfered with Hologenix’s settlement obligations, including by voting to put the company into bankruptcy. The district court entered judgment as a matter of law for MET on tortious interference and awarded $2.5 million. A jury found Casden liable for Lanham Act false advertising and awarded $1 in nominal damages; the district court then ordered disgorgement of Casden’s 2020-23 salary, trebled it, and awarded nearly $600,000 in attorney’s fees.
The Court’s Holding
The Ninth Circuit reversed and remanded the tortious-interference judgment. Under California law, a corporate officer acting for and on behalf of the corporation ordinarily has immunity from liability for inducing the corporation’s breach of contract. An officer does not lose that immunity merely because he had a personal financial incentive, such as a performance-based bonus, while acting in the company’s interest. Immunity may be lost if the officer acted outside the scope of agency, including by acting for personal benefit at the corporation’s expense. The district court applied the wrong standard because it relied on Casden’s supposed “individual advantage” without finding that he acted against Hologenix’s interests.
The court also reversed the Lanham Act disgorgement award. Section 1117(a) permits recovery of the defendant’s profits, but Casden’s CEO salary was not his profits. MET did not establish that Casden himself had sales from which profits could be calculated; Hologenix’s sales could not be attributed to Casden for that purpose. The panel affirmed the attorney’s-fee award because the jury found that Casden’s false representations were deliberate or intentional, supporting the district court’s exceptional-case determination under the Lanham Act.
Key Takeaways
- A corporate officer’s personal incentive does not alone strip the officer of California agency immunity for alleged interference with the corporation’s contract.
- The relevant inquiry is whether the officer acted for the company or outside the agency relationship, such as for personal gain at the company’s expense.
- Lanham Act profit disgorgement must be based on profits attributable to the defendant, not the defendant’s salary.
- Deliberate or intentional false advertising can support a Lanham Act attorney’s-fee award in an exceptional case.
Why It Matters
The decision clarifies that California’s agent-immunity rule turns on the officer’s conduct and relationship to the corporation, not simply on mixed or self-interested motives. Plaintiffs pursuing interference claims against corporate officers must show more than an incentive for the officer to benefit personally.
For Lanham Act remedies, the ruling reinforces that an individual defendant’s compensation cannot be treated as statutory profits without evidence of that defendant’s own sales and resulting profits. The underlying false-advertising verdict and attorney’s-fee award remain intact.