Simerman v. MVMT Labs, Inc.

Background

Daniel E. Simerman sued MVMT Labs, Inc. for allegedly breaching a consulting agreement. The agreement required Simerman to provide 20 hours of consulting services per week. In return, MVMT agreed to pay him a $9,000 monthly retainer, 0.4 percent of the cryptocurrency tokens it minted, and up to an additional 0.2 percent based on completed projects. The agreement stated that the tokens would be transferred at MVMT’s token-generation event.

Simerman alleges that MVMT later experienced cash shortages and agreed to reduce his required hours and services in exchange for reducing his cash compensation. MVMT’s cash payments eventually fell to zero, and Simerman reduced his work consistently with the services MVMT requested. He alleges that neither side agreed to reduce his token compensation and that he completed 26 projects. MVMT later purported to terminate his rights under the agreement for alleged nonperformance, shortly before its token-generation event.

MVMT issued 10 billion MOVE tokens at that event. Simerman claims that MVMT’s termination was an advance repudiation and complete breach of the agreement and seeks $55,120,000, representing the alleged value of 0.53 percent of the tokens issued at launch, plus attorneys’ fees.

Motion to Dismiss

MVMT moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), which asks whether the complaint states a legally plausible claim. MVMT argued that its obligation to transfer tokens never became due because Simerman did not complete all required services and had stopped working 20 hours per week.

Simerman responded that the parties had orally modified the agreement by reducing his required hours and services while leaving the token-compensation provision in place. Under Delaware law, the agreement’s chosen governing law, a breach-of-contract claim requires an agreement, a breach of an obligation under that agreement, and resulting damage.

Court’s Analysis

The court held that Simerman plausibly alleged that the parties orally modified the agreement. Although the agreement required modifications and waivers to be in writing, Delaware law permits that requirement to be waived orally or through conduct. Simerman alleged that MVMT reduced his cash payments, required fewer hours and services, accepted his reduced performance without objection, and did not agree to reduce his token compensation.

The court found these allegations sufficient at the motion-to-dismiss stage to support an alleged oral modification and waiver of the written-modification requirement. The court noted that whether the parties actually made and intended such a modification is fact-intensive and generally not resolved from the pleadings alone. The court also stated that the allegations might require more detail to survive a later motion for summary judgment, but were sufficient at this stage.

Because Simerman alleged that he performed all services required under the modified agreement, the court concluded that he adequately pleaded that MVMT breached the agreement by terminating him for nonperformance before the token-generation event and failing to issue the tokens. The court also declined to dismiss his attorneys’ fees claim on the grounds raised by MVMT.

Disposition

Judge Jennifer L. Rochon denied MVMT Labs, Inc.’s motion to dismiss. The court directed the parties to submit updated case-management materials and advise the court about possible mediation or settlement discussions. The clerk was directed to terminate the pending motion.