General Assembly Space v. Social Finance Career Impact Bond General Assembly LLC

Background

General Assembly Space, Inc., an education provider, sued Social Finance, Inc. and its subsidiary, Social Finance Career Impact Bond General Assembly LLC (CIB LLC). General Assembly alleged that the defendants breached an agreement requiring CIB LLC to purchase certain payment rights, called receivables, arising from students’ deferred-tuition contracts.

The parties’ Forward Purchase Agreement limited purchases to “Eligible Receivables.” Those receivables had to meet specified conditions, including involving students who agreed to enroll full-time in an “Eligible Program.” The agreement defined eligible programs as certain full-time, on-campus programs offered in specified cities. It also required purchase notices to concern receivables originated during a particular month and provided that amendments or waivers had to be in writing and signed as required by the agreement.

When the COVID-19 pandemic began, General Assembly moved its programs online. It alleged that the parties then used a payment process that differed from the agreement’s formal procedures, and that CIB LLC paid four earlier purchase notices. General Assembly later submitted Purchase Notices 005 and 006, totaling $3,893,401.96, for receivables originated on and after December 1, 2021. CIB LLC refused to pay, asserting in part that the receivables were not eligible because the students attended remote programs.

Claims and Ruling

General Assembly asserted five claims: an action for the price under Section 2-709 of New York’s Uniform Commercial Code, specific performance, incidental damages, breach of the implied covenant of good faith and fair dealing, and promissory estoppel. The first three claims were brought against CIB LLC; the promissory-estoppel claim was brought against both defendants.

The court treated the first three claims, at their core, as a common-law breach-of-contract claim. It held that the claim failed because the agreement unambiguously made CIB LLC’s payment obligation subject to conditions that were not met. The receivables in Purchase Notices 005 and 006 were generally tied to remote programs rather than the contract’s specified on-campus programs, and General Assembly acknowledged that the notices did not technically comply with the agreement’s procedures, including the timing requirement.

The court rejected General Assembly’s argument that the parties’ prior conduct, statements encouraging remote enrollment, or earlier payments effectively amended or waived the agreement. The agreement required written amendments and written waivers. The court also concluded that the agreement’s provision allowing changes to policies and procedures to comply with applicable law did not excuse the other defects in the purchase notices. Accordingly, the court held that CIB LLC was entitled to reject the notices, and the contract claim was dismissed.

The court dismissed the implied-covenant claim because CIB LLC’s rejection of the notices was permitted by the contract and because the claim relied on the same allegations and damages as the contract claim. The court dismissed the promissory-estoppel claim against CIB LLC as duplicative of the contract claim and dismissed the claim against both defendants because General Assembly did not allege a clear and unambiguous promise or an unconscionable injury.

Disposition

The court granted the defendants’ Rule 12(b)(6) motion to dismiss and dismissed the amended complaint in its entirety. Rule 12(b)(6) is the procedure for dismissing claims that do not adequately state a legally sufficient claim. The court declined to grant General Assembly leave to amend, reasoning that the defects were substantive, General Assembly had already amended once, and it had not requested another amendment or identified facts that would cure the problems. Judge Jesse M. Furman directed the Clerk of Court to enter judgment in the defendants’ favor and close the case.