The Ninth Circuit Court of Appeals has issued a significant ruling regarding corporate liability, particularly focusing on the actions of corporate officers in the case of Multiple Energy Technologies, LLC v. Seth Casden (Docket No. 24-4691). The court's decision, filed on July 30, 2026, addresses the boundaries of tortious interference claims against corporate officers and the interpretation of false advertising under the Lanham Act. This ruling impacts how corporate executives can be held accountable for their actions and statements made on behalf of their companies.
The case revolves around Multiple Energy Technologies (MET), a company that produces a bioceramic material for athletic wear, and Hologenix, which produces a competing product called Celliant. MET accused Hologenix of falsely advertising that Celliant was approved by the FDA, leading to a lawsuit that initially resulted in a settlement. However, after Hologenix filed for bankruptcy before fulfilling its settlement obligations, MET pursued legal action against Hologenix's CEO, Seth Casden, alleging he interfered with the settlement agreement and continued to misrepresent Celliant's FDA status.
This case is vital as it not only highlights the legal responsibilities of corporate officers but also examines the implications of false advertising claims under federal law. The Ninth Circuit's ruling clarifies the extent to which corporate officers can be held liable for their actions that may lead to breaches of contract or misrepresentations, especially in competitive business environments.
Background
Multiple Energy Technologies, LLC is a company that competes in the athletic-wear market by producing a bioceramic material called Redwave. Hologenix, led by CEO Seth Casden, produces a similar product named Celliant. In 2019, MET filed a lawsuit against Hologenix, claiming that the company falsely advertised Celliant as having FDA approval. The two companies reached a settlement, wherein Hologenix agreed to pay MET $2.5 million and stop making claims about FDA approval.
However, Hologenix filed for bankruptcy before completing its payment obligations. Following this, MET filed a new lawsuit against Casden, claiming he had violated the settlement agreement by continuing to promote Celliant as FDA-approved. The case was heard in the Central District of California, where the jury found in favor of MET on several claims, including tortious interference and false advertising under the Lanham Act.
The Ruling
The Ninth Circuit Court reviewed the lower court's decisions, affirming some aspects while reversing others. The court ruled that the district court had erred in denying Casden immunity from the tortious interference claim. The panel stated, "An agent acting on behalf of a principal is immune from tortious interference claims unless he acts outside the scope of his agency to benefit himself at the expense of the principal." This clarification is crucial as it sets a precedent regarding the liability of corporate officers in similar cases.
Additionally, the court reversed the district court's award of damages related to the false advertising claim under the Lanham Act. The panel concluded that Casden's salary could not be considered profits for the purpose of disgorgement under the Act. The court stated, "Casden's salary is not his profits," emphasizing the distinction between salary as a business cost and profits as earnings from sales.
Impact
This ruling has significant implications for corporate governance and liability. It clarifies that corporate officers can only be held liable for tortious interference if they act against the interests of their corporation. This decision may encourage executives to act in their company's best interests without fear of personal liability, as long as their actions align with corporate goals.
Moreover, the court's interpretation of the Lanham Act reinforces the importance of distinguishing between an executive's salary and the profits generated by their actions. This distinction may affect how damages are calculated in future false advertising cases, potentially limiting the financial repercussions for corporate officers.
What's Next
The case may still have further proceedings in the lower court regarding the tortious interference claim, as the Ninth Circuit has remanded the case for reevaluation under the clarified legal standards. Additionally, there may be related cases pending that could further explore the implications of corporate officer liability and false advertising claims.