CEO/sole owner is liable to bankruptcy estate for deliberate false advertising campaign that ended in bankruptcy

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.”