INV Accelerator, LLC v. Vested Interest Co.

Background

INV Accelerator, LLC operated a startup accelerator program in which Vested Interest Co., doing business as GoldBean, participated for six months beginning in April 2016. The parties signed a Participation Agreement under which GoldBean agreed to issue INV a simple agreement for future equity, commonly called a SAFE, for $500,000 on reasonable and customary terms.

The parties disputed whether GoldBean accepted the SAFE that INV later provided. INV alleged that GoldBean assented to terms based on an industry-standard model and that the SAFE entitled INV to payment or equity if GoldBean experienced a qualifying financing, sale, merger, change of control, or dissolution. GoldBean and Barratt alleged that INV offered the SAFE in August 2016, that its terms were not reasonable and customary, and that they rejected it and did not sign it.

INV alleged that MX planned to acquire GoldBean in 2018, that Barratt sent INV a draft announcement of the transaction, and that INV then elected to receive payment or equity under the SAFE. INV further alleged that GoldBean and MX purported to cancel the acquisition, that MX hired Barratt, and that GoldBean’s assets were transferred to MX, leaving GoldBean a defunct shell. INV claimed that MX and Barratt structured the transaction to prevent INV from receiving payment or equity.

GoldBean and Barratt alleged a different account. They said GoldBean shut down because it was not viable; that MX agreed to acquire GoldBean’s assets in exchange for future MX stock for certain GoldBean investors; and that Barratt separately entered an at-will employment agreement with MX. They claimed INV’s CEO sent a letter to MX personnel asserting INV’s rights under the SAFE, and that MX then abandoned its planned agreement with GoldBean.

Claims and Motions

INV asserted claims against MX for unjust enrichment and tortious interference with contract. GoldBean and Barratt asserted counterclaims against INV seeking declarations that the SAFE was invalid and unenforceable, as well as claims for tortious interference with contract, tortious interference with prospective business advantage, and unfair and deceptive business practices under New York General Business Law § 349.

MX moved to dismiss INV’s claims against it under Rule 12(b)(6), which tests whether the pleaded facts plausibly state a legal claim. INV moved to dismiss the amended counterclaims. The court treated the factual allegations as true for purposes of deciding these motions, but explained that conclusory assertions were not enough.

Court’s Analysis

Claims Against MX

The court dismissed INV’s unjust-enrichment claim against MX. Under New York law, an unjust-enrichment claim requires, among other things, a sufficiently close relationship between the plaintiff and defendant. The court held that the complaint alleged relationships between INV and GoldBean and Barratt, and between GoldBean and Barratt and MX, but did not allege sufficiently close dealings between INV and MX. The court concluded that INV’s contact with MX consisted only of sending MX a copy of INV’s notice to GoldBean, which was not enough.

The court also dismissed INV’s tortious-interference-with-contract claim against MX. The court held that INV did not adequately allege that MX intentionally caused GoldBean to breach the Participation Agreement or explain how the alleged restructuring caused a breach. The court found that INV’s allegations that MX acted solely to prevent payment were conclusory. It also noted that, under INV’s own theory, the restructured transaction still qualified as a liquidity event, and that the complaint alleged facts suggesting a public and apparent breach rather than a concealed one.

Counterclaims

The court dismissed GoldBean’s declaratory counterclaim. GoldBean sought a declaration that the SAFE was invalid and that GoldBean had no payment obligations under it. The court held that the same issues would necessarily be resolved by INV’s breach-of-contract claim, making GoldBean’s declaratory claim duplicative.

The court denied INV’s motion to dismiss Barratt’s declaratory counterclaim. Because INV’s contract claim was asserted against GoldBean rather than Barratt, a ruling on that claim would not resolve potential contract disputes between INV and Barratt. The court concluded that Barratt’s declaratory claim could prevent redundant litigation and therefore served a useful purpose.

The court dismissed Barratt’s tortious-interference-with-contract counterclaim. The amended counterclaims did not adequately allege an actual breach of Barratt’s employment agreement, and the allegations that MX modified or breached that agreement were conclusory and somewhat contradictory.

The court denied INV’s motion to dismiss GoldBean’s tortious-interference-with-prospective-business-advantage counterclaim. GoldBean adequately alleged that it had a prospective business relationship with MX, that INV interfered with it, that INV used allegedly fraudulent or otherwise wrongful means, and that the relationship was injured when MX decided not to proceed with the proposed agreement.

The court dismissed Barratt’s tortious-interference-with-prospective-business-advantage counterclaim. Barratt did not adequately allege that she personally suffered an injury. The court explained that the alleged benefits to GoldBean or its investors could not be attributed to Barratt, and that the debt arrangements she identified represented obligations she avoided rather than lost prospective business advantages.

The court dismissed GoldBean’s and Barratt’s claims under New York General Business Law § 349. Those claims failed because the alleged conduct was not shown to be consumer-oriented. The alleged harms involved startups and entrepreneurs participating in INV’s program, not consumers purchasing goods or services for personal, family, or household use.

Disposition

The court granted MX’s motion to dismiss. It granted INV’s motion to dismiss the amended counterclaims with respect to GoldBean’s declaratory counterclaim, Barratt’s tortious-interference-with-contract counterclaim, Barratt’s tortious-interference-with-prospective-business-advantage counterclaim, and GoldBean’s and Barratt’s § 349 claims. It denied INV’s motion with respect to Barratt’s declaratory counterclaim and GoldBean’s tortious-interference-with-prospective-business-advantage counterclaim. The court stated that all dismissals were with prejudice. INV’s earlier motion to dismiss the counterclaims was denied as moot. Judge Alison J. Nathan stated that the order resolved docket entries 36, 45, and 60.