AlSayer v. omniX Labs, Inc.

Background

Muthla AlSayer sued OmniX Labs, Inc. over a loan from the Kuwaiti National Fund for Small and Medium Enterprise Development, referred to as the KNF. Her claims were for breach of an oral agreement, breach of an implied agreement, unjust enrichment, indemnity, and declaratory relief.

AlSayer and Anoop Kanthan formed the Delaware corporation that later became OmniX. Because the KNF loan program required a Kuwaiti company with Kuwaiti ownership, AlSayer created a Kuwaiti sole proprietorship, Tags Lab General Trading Company, to obtain the loan. The KNF loan agreement provided for 400,000 Kuwaiti dinars in financing, which the opinion states was then about $1.3 million. The funds were deposited into an account controlled by AlSayer and were used to pay expenses connected to developing and operating OmniX’s business.

The court found that Tags Lab had no independent business apart from obtaining and administering the loan. OmniX and its representatives described the company as having received KNF funding, used the funds to pay OmniX-related invoices, and helped prepare financial reports for the KNF. OmniX’s corporate records did not list the KNF loan as a liability. After AlSayer left the company, OmniX denied responsibility for the loan. OmniX was later acquired by EverWash, and AlSayer continued to receive notices from the KNF threatening legal action if reporting requirements were not met.

Claims and Legal Standards

The court applied New York law to the contract claims. A contract implied in fact is an agreement inferred from the parties’ conduct rather than stated in words. It requires the same basic elements as an express contract, including mutual assent, consideration, and sufficiently definite terms.

The court rejected the oral-agreement claim. AlSayer testified that she and Kanthan agreed that the loan was a business loan and that they would “figure out” how to repay it. The court held that these statements did not establish that OmniX agreed to repay the loan. The phrase “figure out” was, at most, an unenforceable agreement to reach an agreement later, and it was unclear whom the word “we” referred to.

The court nevertheless found an implied agreement. It concluded that the parties’ conduct showed that AlSayer would obtain and sign for the loan through a Kuwaiti entity, while OmniX would ultimately be responsible for repayment. OmniX accepted the benefit of the loan by allowing the funds to pay its expenses, representing to investors that it had received KNF funding, and having its employees help manage the loan’s reporting obligations. The court also found no credible evidence that AlSayer intended the loan to be a gift to OmniX or that Tags Lab was expected to repay it independently.

Statute of Frauds

OmniX argued that the implied agreement was unenforceable under New York’s statute of frauds, which generally requires a writing for certain agreements. The court rejected that argument for two reasons.

First, the agreement could have been fully performed within one year because the KNF loan could be repaid early. The fact that repayment was expected to occur over a longer period did not bring the agreement within the statute of frauds.

Second, the agreement was not a promise to pay the debt of another person within the relevant statute-of-frauds provision. The promise was made to AlSayer, who was a party to the agreement, rather than directly to the KNF as creditor. The court therefore held that the implied agreement was enforceable without a writing.

Declaratory Relief

AlSayer had not repaid the KNF loan and did not seek a money judgment. She sought a declaration that OmniX was responsible for her obligations connected to the loan.

The court held that there was a sufficiently immediate and real dispute because OmniX had denied responsibility, AlSayer had a current obligation to the KNF, and the KNF had sent multiple warnings threatening legal action. The court stated that declaratory relief may resolve the parties’ legal obligations before the plaintiff has paid damages or faced a completed collection action.

The court therefore declared that OmniX is liable for AlSayer’s obligations to the KNF under the loan agreement and associated surety agreement. The opinion noted that the parties had not fully developed under Kuwaiti law whether AlSayer was independently liable for Tags Lab’s debts, but found that issue immaterial because AlSayer had also signed as a surety and was personally liable in that capacity.

Additional Claims

The court dismissed the unjust-enrichment claim because an enforceable implied contract governed the same subject matter.

The court also dismissed the indemnification claim. It held that the Delaware corporate statute and OmniX’s bylaws provisions concerning corporate loan guarantees did not require OmniX to indemnify AlSayer for the KNF loan. Those provisions did not establish a right to indemnification for the loan obligation, which was instead governed by the implied agreement. The court further held that the bylaws’ provisions concerning litigation expenses did not apply to the loan and did not require OmniX to reimburse AlSayer for pursuing this action.

Disposition

The court awarded a declaratory judgment for AlSayer on her breach-of-implied-agreement claim and declared that OmniX is liable for her obligations under the KNF loan agreement and associated surety agreement. The Clerk of Court was directed to enter judgment for AlSayer and close the case. Judge Liman signed the Opinion and Order on January 15, 2025.