Yanker v. Zoomcar, Inc.

Background

Randall Yanker alleged that he entered into a Consulting Agreement with Zoomcar, Inc., effective May 1, 2020, and signed October 16, 2020. The agreement provided that Yanker could receive a performance bonus, consisting of cash and Zoomcar stock warrants, in connection with a defined “Corporate Transaction.” It also stated that Zoomcar could terminate his services at any time, subject to his continuing right to any performance bonus.

Yanker alleged that he helped Zoomcar with two transactions. The first was an unregistered securities offering agreed to in April 2021 and closed in November 2021. He alleged that the offering raised $100 million and that his performance bonus was worth $5.625 million. The second was a merger entered into on October 13, 2022, after Zoomcar terminated the Consulting Agreement in writing on January 7, 2022. Yanker alleged that this transaction entitled him to $10.26 million under the agreement’s formula.

Yanker brought four causes of action: breach of contract concerning the 2021 transaction, breach of contract concerning the 2022 transaction, anticipatory breach of contract based on Zoomcar’s termination letter, and declaratory judgment concerning his continuing right to payment. Zoomcar moved to dismiss all four claims.

First Cause of Action: 2021 Corporate Transaction

The Consulting Agreement defined a Corporate Transaction to include several types of transactions, including an issuance of equity or debt securities, but excluded transactions “primarily for capital-raising purposes.” Zoomcar argued that the 2021 securities offering was excluded because the complaint stated that it raised $100 million.

The court rejected that argument at the pleading stage. The relevant question was not whether the offering raised capital, which was uncontested, but whether it was primarily for capital-raising purposes. The court held that this was a factual question that could not be resolved from the pleadings. The court therefore denied dismissal of the first cause of action on that ground.

Zoomcar alternatively argued that Yanker could not enforce the agreement because he was not a registered broker with the Securities and Exchange Commission. The court explained that a contract is not unenforceable for illegality at this stage unless it requires the unregistered person, on its face, to perform broker services. Although the agreement required Yanker to seek and negotiate strategic and corporate transactions, it did not require him to perform broker services. The court therefore rejected this alternative basis for dismissal.

Second Cause of Action: 2022 Corporate Transaction

The agreement included mergers and reorganizations in its definition of Corporate Transactions. Zoomcar argued that it had terminated the agreement before the merger occurred and therefore did not owe Yanker a bonus.

The court found an apparent conflict between the agreement’s at-will termination provision and its statement that termination was subject to Yanker’s continuing right to performance bonuses. Because that conflict could not be resolved from the face of the agreement and required discovery, the court denied Zoomcar’s motion to dismiss the second cause of action.

Third Cause of Action: Anticipatory Breach

Yanker alleged that Zoomcar’s termination letter unequivocally repudiated its contractual obligations. Zoomcar argued that this claim duplicated the two breach-of-contract claims.

The court agreed with Zoomcar and granted the motion as to the third cause of action. The court concluded that the second cause of action already sought the full performance bonus for the 2022 transaction, including both the non-cash portion paid upon execution and the cash portion paid upon closing. The court therefore dismissed the anticipatory-breach claim as duplicative.

Fourth Cause of Action: Declaratory Judgment

Yanker sought a declaration that he had a continuing right to payment under the Consulting Agreement. The court explained that the Declaratory Judgment Act gives federal courts discretion to decide whether to issue such a declaration when an actual controversy exists.

Applying the relevant factors, the court declined to exercise jurisdiction over this claim. It concluded that the requested declaration was functionally duplicative of the second breach-of-contract claim, which already required deciding whether Yanker had a continuing right to performance bonuses for a transaction occurring after termination. The court also concluded that the second cause of action was a more effective remedy and that declining the declaratory claim better served judicial efficiency. The court granted the motion as to the fourth cause of action and dismissed it.

Disposition

The court denied Zoomcar’s motion to dismiss as to the first and second causes of action for breach of contract. It granted the motion as to the third cause of action for anticipatory repudiation and the fourth cause of action for declaratory judgment. The opinion did not resolve whether Yanker was ultimately entitled to either performance bonus.