Weinstein v. Katapult Group, Inc.

Background

Andrew Weinstein sued Katapult Group, Inc. The complaint alleged that the parties entered an Advisor Agreement under which Weinstein performed services and, subject to certain conditions, could earn options to purchase 76,435 shares of company stock. The agreement provided for vesting over 36 months and referred to a separate stock-option plan and stock-option agreement, but Weinstein never executed the stock-option agreement.

After a 2020 acquisition 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.

The complaint asserted claims for breach of contract, declaratory relief, and quantum meruit—a claim seeking the reasonable value of services provided when recovery under a contract is unavailable or disputed. Katapult removed the case from California state court based on diversity jurisdiction. After the court denied Katapult’s motion to compel arbitration, Katapult moved to dismiss the complaint for failure to state a claim.

Choice of Law

The Advisor Agreement selected New York law. Applying California’s choice-of-law rules, the court concluded that New York had a substantial relationship to the parties because Katapult’s principal place of business was in New York. The parties did not dispute applying New York contract law, and the court identified no fundamental policy that would prevent its application.

Breach of Contract

Under New York law, a breach-of-contract claim requires an enforceable contract, the plaintiff’s performance, the defendant’s breach, and damages. The parties appeared to agree that Weinstein performed his obligations but disputed whether the agreement was enforceable, whether Katapult breached it, and whether Weinstein was owed damages.

The court held that the Advisor Agreement was insufficiently definite to support the stock-option promise. It did not specify essential terms, including the option term, exercise price, and expiration date. Those terms could not be determined objectively from the complaint and attached agreement without new expressions by the parties. The court therefore dismissed the breach-of-contract claim on that ground, with leave to amend if Weinstein could allege the existence of a stock plan supplying the missing terms.

The court also alternatively dismissed the claim because the agreement was an unenforceable agreement to agree. The agreement contemplated that Weinstein would execute a later stock-option agreement and left material terms for a future agreement.

Quantum Meruit

New York law generally does not permit quantum meruit recovery when an enforceable contract covers the same subject matter. But at the pleading stage, a claimant may plead quantum meruit in the alternative when there is a genuine dispute about the existence, validity, or scope of a contract. Because the parties disputed whether the agreement was valid and enforceable, the court denied dismissal of the quantum meruit claim on this basis.

Declaratory Relief

The court stated that declaratory relief is not an independent cause of action. Because it dismissed the breach-of-contract claim, and Weinstein did not dispute that the declaratory-relief claim should also be dismissed in that circumstance, the court dismissed the declaratory-relief claim.

Disposition

The court granted in part and denied in part Katapult’s motion to dismiss, with leave to amend. Any amended complaint had to be filed within 28 days of the order. The court also barred adding parties or claims without leave of court or Katapult’s stipulation.