Wang v. Ehang Holdings Limited

Background

Gary Wang alleged that EHang GZ employed him as general manager of its United States office from July 20, 2015, through August 31, 2016. His signed employment offer letter identified the employer as EHang Intelligent Technology. Wang alleged that he was told EHang GZ was a wholly owned subsidiary of EHang Holdings and that he was promised shares representing 0.6% of EHang Holdings’ capital stock, subject to annual vesting.

Wang alleged that company representatives later told him the stock plan had not been approved and that he needed to wait before receiving the shares. He also alleged that he repeatedly asked the company either to issue a stock certificate or buy back his vested shares. After learning in November 2019 from EHang Holdings’ filing for a Nasdaq listing that restricted share units had been issued under a 2015 plan, Wang again requested the stock certificate but received no response.

Wang asserted four claims: breach of contract against EHang GZ and EHang Holdings; fraud against all defendants; unpaid wages under California Labor Code sections 201 and 203; and unfair competition under California Business and Professions Code section 17200. The defendants asked the court to dismiss all four claims under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint adequately states a legally plausible claim.

Court’s analysis

Breach of contract. The court held that Wang had not pleaded enough facts to establish a contract between him and EHang Holdings or EHang GZ because the offer letter identified EHang Intelligent Technology as the employer. The court granted the motion to dismiss this claim with leave to amend. It said Wang could amend to clarify the relationship among the entities, explain why EHang Holdings was a necessary party if it was not his employer, and provide more facts if he intended to rely on an agency theory. Merely alleging that EHang GZ was EHang Holdings’ wholly owned subsidiary and that the entities shared offices and certain executives was insufficient for that theory.

Unpaid wages. The court held that Wang had not sufficiently alleged an employee-employer relationship with EHang GZ or EHang Holdings. It granted the motion to dismiss the unpaid-wages claim with leave to amend.

Fraud. The defendants argued that the fraud claim was barred by the statute of limitations, asserting that Wang should have discovered the alleged wrongdoing by December 2016. Wang argued that he discovered it in November 2019 when he read EHang Holdings’ filing, or, at the earliest, on February 23, 2017, when he sent an email requesting the shares or a buyback. Because statute-of-limitations questions generally involve factual issues and the court accepted Wang’s properly pleaded allegations about when he discovered the alleged wrongdoing, it denied the motion to dismiss the fraud claim.

Unfair competition. The court denied the motion to dismiss to the extent Wang’s unfair-competition claim depended on the fraud claim. It granted the motion to dismiss with leave to amend to the extent that claim depended on the breach-of-contract or unpaid-wages claims.

Disposition

The court ordered that the defendants’ motion to dismiss was granted with leave to amend as to the breach-of-contract and unpaid-wages claims, denied as to the fraud claim, and granted with leave to amend in part and denied in part as to the unfair-competition claims. Wang was ordered to file an amended complaint by October 16, 2020. Because this was a Rule 12(b)(6) pleading ruling rather than a decision on the ultimate merits, the opinion is classified as a procedural order.