In re Vital Pharmaceuticals, Inc. (VPX Liquidating Trust v.
Owoc), 2026 WL 822473, No. 22-17842-PDR, Adv. Pro. No. 24-01009-PDR (Bkrcy.
S.D. Fla. Mar. 24, 2026)

This is an interesting case about false advertising and
individual officer liability in bankruptcy. The court begins:

Corporate officers who breach their
fiduciary duties do not become immune from accountability simply because they
are also the only stockholders. Florida law imposes fiduciary obligations on
directors and officers for the protection of the corporation itself—not for the
benefit of any particular class of shareholders, and not subject to waiver by a
sole owner who later finds it convenient to argue that no one was harmed but
himself. When those obligations are breached and the corporation is driven into
bankruptcy, the right to enforce them passes to the trustee or liquidating
trust.

Owoc was VPX’s founder, sole shareholder, sole director, and
CEO. A jury found that his and VPX’s false advertising of energy drinks was willful
and deliberate, resulting in a judgment approaching $300 million.

At its peak, VPK generated over $1 billion in annual revenue,
but its commercial success was based on claims about a proprietary ingredient that
Owoc called “Super Creatine.” VPX falsely advertised that it offered
significant physical and mental health benefits. VPX had “no corporate will
separate from Mr. Owoc’s own.”

Because the jury was instructed that “VPX and/or Mr. Owoc
acted willfully if they knew that their advertising was false or misleading or
if they acted with indifference to whether their advertising was false or
misleading,” its willfulness finding “necessarily encompassed a determination
that Mr. Owoc either knew that the advertising was false or acted with
indifference to whether it was.”

The judgment was one of the principal reasons for VPX’s
bankruptcy filing; the resulting trust sought to hold Owoc liable for breach of
fiduciary duty arising from the false advertising.

This claim requires: (1) the existence of a fiduciary duty;
(2) a breach of that duty; and (3) damages proximately caused by the breach.
Collateral estoppel applied to prevent Owoc from relitigating whether he
willfully and deliberately engaged in false advertising of Super Creatine.

As VPX’s sole director and CEO, Owoc owed VPX fiduciary
duties of care, loyalty, and good faith. A breach under Florida law requires at
least gross negligence, which is “synonymous with engaging in an irrational
decision making process.” The false advertising jury’s findings were
preclusive: “A director who causes the corporation to engage in a years-long
false advertising campaign that he knew was false, or acted with indifference
to whether it was false, is the precise ‘knowing and deliberate indifference to
the potential risk of harm to the Company’ that … breaches the fiduciary duty
of care.” The damages were the judgment entered against VPX. Thus, there was
liability (quantification of damages was for later).

The court rejected Owoc’s arguments, including that VPX was in
pari delicto (equal fault) with him and thus barred from making the breach
claim. The court disagreed: the doctrine “is not a tool for the powerful to
insulate themselves from the consequences of their own misconduct.” It was
designed for situations when two parties were independently at fault,
voluntarily engaged in the same wrongdoing, and then fought about their
relative entitlements arising from that shared wrongdoing. “In that situation,
a court steps back and says: we will not sort this out.” It follows that, “when
the parties were not independently at fault, when the plaintiff was not a
voluntary wrongdoer, or when the very nature of the claim is that the defendant
wronged the plaintiff rather than that both wronged each other,” the doctrine
doesn’t apply. That was the case here.

While a bankruptcy trustee cannot sue third parties for
their role in wrongdoing if the corporation itself was an equal participant
(given that corporations can’t act without individual humans so the humans’ wrongdoing
is attributed to the corporation), “an agent’s misconduct is not imputed to the
principal if the agent was acting entirely in his own interest and adversely to
the interest of the corporation.” “VPX’s liability in the Monster False
Advertising Litigation was the legal consequence of Mr. Owoc’s own conduct
being attributed to the entity he wholly controlled. The jury’s finding of
willfulness against VPX reflects Mr. Owoc’s willfulness, not some independent
institutional decision by VPX to deceive.”

Allowing Owoc to point to the fact that the law attributed
his acts to VPX as a shield against accountability to VPX would be “to let
fiduciaries immunize themselves through their own wrongful, disloyal acts—a
“transparently silly result.” And if Owoc could do it here, so could every sole
owner-operator, which would “systematically immunize the most powerful actors
in closely held corporations from the most fundamental obligations corporate
law imposes on them.”

Nor did the business judgment rule protect Owoc because of
the breach of fiduciary duty. “This is not a case of a business judgment gone
wrong — a risky but good-faith marketing strategy that backfired. It is a case
of a director who caused his corporation to make claims he knew were false or
misleading, or acted with indifference to whether they were false or
misleading. The rule was not designed to shield such behavior.”

from Blogger https://tushnet.blogspot.com/2026/04/ceosole-owner-is-liable-to-bankruptcy.html