Weinstein v. Katapult Group, Inc.

Background

Andrew Weinstein brought a contract dispute against Katapult Group, Inc. The dispute concerns an Advisor Agreement under which Weinstein agreed to provide advising services and was entitled to options to purchase 76,435 shares of company stock. The agreement referred to the company’s Stock Option Plan and a Stock Option Agreement, but Weinstein never executed the Stock Option Agreement.

After a later transaction made the company’s stock more valuable, Weinstein contacted Katapult about exercising the options. Katapult responded that the Advisor Agreement had expired and that the options had expired 90 days after the agreement ended. Katapult refused to allow Weinstein to exercise the options. Weinstein’s complaint asserted claims for breach of contract, declaratory relief, and quantum meruit.

Motion to Compel Arbitration

Katapult moved to compel arbitration under the Federal Arbitration Act and asked the court either to dismiss the court case while arbitration proceeded or to stay the case. Katapult relied on an alleged arbitration provision in a document titled the “Cognical, Inc. 2014 Stock Incentive Plan,” which Katapult said was the Stock Option Plan incorporated into the Advisor Agreement.

Weinstein disputed the document’s authenticity and argued that he had never seen it before Katapult filed its motion. He also argued that the Advisor Agreement referred only generally to a Stock Option Plan and that other stock-related documents could have been the document referenced in the agreement.

Authentication

The court concluded that Katapult had not authenticated the 2014 Stock Incentive Plan. Katapult submitted a declaration from Derek Medlin, its Chief Operating Officer since 2017, stating that the plan was the document referenced in the 2015 Advisor Agreement. But Medlin did not identify prior experience with the business before becoming Chief Operating Officer and did not explain how he knew that the 2014 plan was the plan referenced in the agreement.

Because Medlin appeared to lack personal knowledge of which plan was in place when the Advisor Agreement was executed, the court found that his declaration did not establish that the 2014 Stock Incentive Plan was the plan referenced in the agreement. The court also noted discrepancies among the stock-related documents.

Incorporation by Reference and Intent to Arbitrate

The court separately held that, even if the 2014 Stock Incentive Plan had been properly authenticated, it was not incorporated into the Advisor Agreement. The agreement contained no direct indication that the parties intended to arbitrate and referred only to an otherwise unidentified Stock Option Plan.

Applying New York law, which the parties agreed governed whether they had agreed to arbitrate, the court explained that a document incorporated by reference must be identified beyond all reasonable doubt. The court found that the plan was never provided to Weinstein, was not clearly described by Katapult, and could not be identified with sufficient certainty. Therefore, the plan could not establish an agreement to arbitrate the dispute.

The parties also disputed whether the question of arbitrability itself should be decided by an arbitrator under the JAMS Rules. The court did not reach that issue because Katapult had not shown clear intent to arbitrate in the first place.

Disposition

The court DENIED WITHOUT PREJUDICE Katapult’s motion to compel the action to arbitration. Katapult may renew the motion if discovery reveals additional evidence of the parties’ intent to arbitrate. The court also GRANTED Katapult’s request for leave to file a Rule 12 motion, requiring that motion or another responsive pleading to be filed within 28 days of the order.