Morrison Cohen Comes Through Strong, Obtains Dismissal of Claims Arising From Sale of Vitamin World

Business Litigation Partner and Vice-Chair Latisha V. Thompson, along with Senior Counsel Michael Mix, recently obtained a significant appellate victory in the New York Supreme Court, Appellate Division, First Department, which, in a decision dated April 13, 2021, affirmed the complete dismissal of a complaint brought by a disgruntled investment firm that, after receiving a poor return on its investment in Vitamin World, sought to blame Vitamin World’s former equity owners for the losses.

Plaintiffs in this matter are sophisticated investors who acquired Vitamin World from defendant The Nature’s Bounty Co., a household name synonymous with vitamins and nutritional supplements across a variety of wellness brands. As part of the deal, co-defendant NBTY Manufacturing, LLC agreed to supply product to Vitamin World.  

Following the acquisition, Vitamin World’s poor performance eventually caused it to file for bankruptcy. Plaintiffs then instituted an action alleging that defendants made material misrepresentations regarding future supply levels in order to fraudulently induce the investors to enter into the Vitamin World acquisition. Morrison Cohen, on behalf of defendants, moved swiftly to dismiss the complaint which asserted claims for fraud and other torts.

In a decision entered with the New York County Clerk on April 29, 2020, Justice O. Peter Sherwood dismissed plaintiffs’ claims in their entirety, finding that a broadly-worded prior settlement agreement and release was binding on plaintiffs – even though they were not a signatory – and encompassed the same supply issues of which plaintiffs now complained.  Justice Sherwood also found that because plaintiffs, again all sophisticated investors, had explicitly disclaimed reliance on any misrepresentations, they could not state a cause of action. Plaintiffs subsequently appealed Justice Sherwood’s decision to the First Department.

The First Department ultimately agreed with Morrison Cohen that Justice Sherwood’s decision dismissing the complaint should be affirmed. The First Department found that plaintiffs’ claims were barred by the prior settlement agreement, and were “vitiated by the extensive and detailed disclaimers of representations and warranties contained in the transaction documents, which preclude any claim of justifiable reliance.”  It also held that plaintiffs could not state a claim for unjust enrichment because there was nothing wrong about the transaction that would require equity to intervene.

The case is Centre Lane Partners III, L.P., et al. v. The Nature’s Bounty Co., et al., Index No. 656486/18, Case No. 2020-02660.