Jakubiak v. QuantumScape Corporation et al

Filing 132

OPINION AND ORDER re: 115 MOTION for Partial Summary Judgment with respect to waiver and date of breach. filed by Michael Assante, Brian Walsh, Headwaters Holdings LLC, BJI Financial Group, Jeffrey Jakubiak, 111 MOTION f or Partial Summary Judgment . filed by QuantumScape Corporation. For the foregoing reasons, both motions are GRANTED in part and DENIED in part. Defendant's motion for oral argument is DENIED as moot. Defendant's objection to th e Osborn Declaration is DENIED without prejudice to renewal prior to trial as a motion in limine, as it was not relied on in this decision. For clarity, the surviving claims are common law fraud, federal securities fraud, breach of contract based on waiver and breach of contract based on amendment. For the surviving contract claims, the date and time of breach is December 31, 2020, at 4:00 P.M. The Clerk of Court is respectfully directed to close the motions at Dkts. 111 and 115. (Signed by Judge Lorna G. Schofield on 9/28/2023) (tg)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------ X
:
JEFFREY JAKUBIAK, et al.,
:
Plaintiffs, :
:
:
-against:
:
QUANTUMSCAPE CORPORATION,
Defendant. :
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20 Civ. 10842 (LGS)
OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge:
This action centers around a dispute over the correct commencement date for the exercise
of warrants issued by Defendant QuantumScape Corporation (“QuantumScape”). Plaintiffs
Jeffrey Jakubiak, BJI Financial Group Inc., Brian Walsh, Michael Assante and Headwaters
Holdings LLC are investors who purchased the warrants. The Consolidated Amended Complaint
(the “Complaint”) alleges (1) breach of contract in three counts based on theories of waiver,
amendment and promissory estoppel, (2) common law fraud and (3) federal securities fraud in
violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule
10b-5. The parties cross-move for partial summary judgment. For the reasons below, both
motions are granted in part and denied in part.
I.

BACKGROUND
The following undisputed facts are drawn from the parties’ statements pursuant to

Federal Rule of Civil Procedure 56.1 and other submissions on these motions. The facts are
undisputed except as noted.
A.

The Parties
Plaintiffs are all investors who purchased QuantumScape warrants. Defendant

QuantumScape is a California technology company that develops lithium-metal solid-state

battery technology for use in electric vehicles. Kensington Capital Acquisition Corporation
(“Kensington”) is a Delaware corporation and special purpose acquisition company (“SPAC”)
that was created for the purpose of effecting a merger or other business combination and that
ultimately combined with QuantumScape.
In connection with the relevant events, Kensington was represented by the law firm of
Hughes Hubbard & Reed (“Hughes Hubbard”), and QuantumScape was represented by the law
firm of Wilson Sonsini Goodrich & Rosati PC (“Wilson Sonsini”).
B.

Warrant Agreement
Through an initial public offering (“IPO”) on June 30, 2020, Kensington registered and

sold stock and warrants to raise money to purchase and combine with one or more businesses in
the automotive sector. Kensington raised $230 million in its IPO, issuing units that consisted of
one share of common stock and one-half warrant, at $10 per unit. One warrant entitled the
holder to purchase one share of common stock for $11.50.
On the same day as its IPO, Kensington publicly filed a Form 8-K with the SEC that
attached a June 25, 2020, warrant agreement between Kensington and its warrant agent,
Continental Stock Transfer & Trust Company (“Continental”) (the “Warrant Agreement”). The
Warrant Agreement states that the warrants may be exercised during the period commencing on
“the later of: (i) the date that is thirty (30) days after the first date on which the Company
completes a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or
similar business combination, involving the Company and one or more businesses (a ‘Business
Combination’), and (ii) the date that is twelve (12) months from the date of the closing of the
Offering.” In other words, the Warrant Agreement states that the warrants may be exercised
starting on the later of the date that is (1) thirty days after the completion of a merger (which
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ultimately was December 25, 2020) or (2) twelve months from Kensington’s IPO (June 30,
2021).
C.

Form S-4s and Form 10-Q
On September 2, 2020, Kensington and QuantumScape entered into a business

combination agreement. Under this agreement, the two companies would merge; all of
Kensington’s shares would become QuantumScape’s shares, and Kensington would change its
name to QuantumScape. On September 21, 2020, Kensington filed a Form S-4 with the SEC.
The Form S-4 contains a “Proxy Statement/Prospectus/Information Statement,” which describes
the business combination and Kensington’s securities, including the warrants. The Form S-4
states in two places that the warrants would become exercisable thirty days after the closing of
the combination. In an introductory section of the Form S-4, titled “Questions and Answers
About the Business Combination,” one answer states, “The Kensington Warrants will become
exercisable 30 days after the consummation of the Business Combination . . . .” The
“Description of Kensington’s Securities” near the end of the Form S-4, states, “Each Kensington
Warrant entitles the registered holder to purchase one share of Kensington Class A Common
Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time
commencing 30 days after the consummation of the initial business combination.”
In contrast, the “later of” language -- in substance, that the warrants may be exercised
starting on the later of (1) thirty days after the completion of a merger and (2) twelve months
from Kensington’s IPO (emphasis added) -- appears twice in Kensington’s financial statements
section of the S-4. Prior to filing, drafts of the Form S-4 were circulated among Hughes
Hubbard, Wilson Sonsini, Kensington, QuantumScape and others. None of these parties made
revisions that changed the language regarding the initial exercise of the warrants.
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Kensington later filed four amendments to the Form S-4. Similar variations of the “30day” and “later of” language -- two statements each -- appear in Kensington’s first, third and
fourth amendments to the Form S-4 filed on October 23, 2020, November 9, 2020, and
November 10, 2020, respectively. The second amendment was created for an unrelated purpose
and did not include any relevant language. Each of the Form S-4s, including the second
amendment, identify the Warrant Agreement as an exhibit and provide a link to it.
On November 16, 2020, Kensington filed a Form 10-Q with the SEC that uses only the
“30-day” language.
D.

Investor Inquiries
On November 16, 2020, Dan Huber, Kensington’s chief financial officer, received an

email inquiry about the discrepancy between the “later of” provision in the Warrant Agreement
and the “30-day” language in the fourth amendment to the Form S-4. Minutes later, Mr. Huber
forwarded the email to Charles Samuelson of Hughes Hubbard, Kensington’s attorneys. Mr.
Samuelson discussed the email with Mr. Huber on November 16, 2020. Within days, Mr.
Samuelson discussed the email with QuantumScape’s attorneys at Wilson Sonsini as well.
Hughes Hubbard and Wilson Sonsini decided not to change the 30-day language in the Form S-4
until the December 2, 2020, Form 8-K, which would be filed after closing. In making this
decision, Mr. Samuelson consulted with Kensington management. After the closing,
QuantumScape continued to receive investor inquiries about the commencement of the warrant
exercise period, including from Plaintiff Jakubiak.
E.

Kensington’s Merger with QuantumScape
Kensington merged with QuantumScape on November 25, 2020. As a SPAC,

Kensington was required to obtain approval for the business combination from a majority of its
4

public shareholders. On November 25, 2020, after the Kensington shareholders voted to
approve the business combination, the merger between Kensington and QuantumScape closed.
Upon closing of the merger, Kensington changed its name to QuantumScape, and Kensington’s
common stock and warrants became common stock and warrants of QuantumScape.
QuantumScape stock and warrants began trading on the New York Stock Exchange on
November 27, 2020. On or about the same day, QuantumScape published a frequently asked
questions page on its website stating that the warrants would be exercisable on June 30, 2021,
approximately seven months later.
On December 30, 2020, Defendant filed a registration statement, including a prospectus,
covering the shares of common stock to be issued upon the exercise of the QuantumScape
warrants. Pursuant to QuantumScape’s request, the SEC declared the registration statement
effective as of December 31, 2020, at 4:00 P.M.
On February 13, 2021, QuantumScape and Continental executed a written amendment to
the Warrant Agreement that provided that the exercise date would be accelerated from June 30,
2021, to March 5, 2021.
II.

STANDARD
Summary judgment is appropriate where the record establishes that “there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). “An issue of fact is genuine if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Frost v. N.Y.C. Police Dep’t, 980 F.3d 231, 242 (2d
Cir. 2020). 1 “The burden of showing that no genuine factual dispute exists rests on the party

1

Unless otherwise indicated, in quoting cases, all internal quotation marks, alterations,
emphases, footnotes and citations are omitted.
5

seeking summary judgment, and in assessing the record to determine whether there is a genuine
issue as to a material fact, the court is required to resolve all ambiguities and draw all permissible
factual inferences in favor of the party against whom summary judgment is sought.” Id. When
parties cross-move for summary judgment, the Court analyzes the motions separately, “in each
case construing the evidence in the light most favorable to the non-moving party.” Schwebel v.
Crandall, 967 F.3d 96, 102 (2d Cir. 2020).
New York law applies to the state law claims because the parties cite New York cases or
federal cases applying New York law, and “such implied consent is sufficient to establish the
applicable choice of law.” Trikona Advisers Ltd. v. Chugh, 846 F.3d 22, 31 (2d Cir. 2017).
III.

DISCUSSION
Both sides have filed motions for summary judgment in support of their view of the

correct commencement date of the warrant exercise period. Defendant argues the “later of”
language controls and that the correct commencement date -- before Defendant voluntarily
moved the date up to March 5, 2021, through a written amendment -- was June 30, 2021.
Plaintiffs argue the “30-day” language controls and that the correct commencement date was
December 31, 2020.
A.

Defendant’s Motion for Partial Summary Judgment
Defendant moves for summary judgment and dismissal of the Complaint’s fraud claims

(Counts IV and V) and breach of contract claims based on amendment and promissory estoppel
(Counts II and III). Defendant does not move on the breach of contract claim based on waiver
(Count I). For the reasons below, Defendant’s motion for partial summary judgment is denied
with respect to Plaintiffs’ common law fraud, federal securities fraud and breach of amended
contract claims and granted with respect to Plaintiffs’ promissory estoppel claim.
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a. Common Law Fraud and Securities Fraud (Counts IV and V)
Defendant’s motion for summary judgment is denied with respect to the common law and
federal securities fraud claims. First, as to the common law fraud claim, under New York law,
“a fraud claim may not be used as a means of restating what is, in substance, a claim for breach
of contract.” Wall v. CSX Transp., Inc., 471 F.3d 410, 416 (2d Cir. 2006); accord FPP, LLC v.
Xaxis US, LLC, 764 F. App’x 92, 93-94 (2d Cir. 2019) (summary order). However, New York
recognizes three exceptions to the rule against duplicative claims: “where a claim for fraud is
based on facts underlying breach of contract, the plaintiff must either: (i) demonstrate a legal
duty separate from the duty to perform under the contract; or (ii) demonstrate a fraudulent
misrepresentation collateral or extraneous to the contract; or (iii) seek special damages that are
caused by the misrepresentation and unrecoverable as contract damages.” Negrete v. Citibank,
N.A., 759 F. App’x 42, 48 (2d Cir. 2019) (summary order) (New York law, citing
Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13, 20 (2d Cir. 1996)).
Here, QuantumScape owed Plaintiffs a legal duty independent of the duty to perform
under the contract. The disclosure obligation under the Securities Act of 1933 and the obligation
to make accurate statements under the Exchange Act establish an independent duty to make
accurate disclosures to prospective investors about the key features of the warrants, including the
exercise date. Regulation S-K requires, “If the securities described are to be offered pursuant to
warrants or rights state: . . . [t]he period during which and the price at which the warrants or
rights are exercisable.” 17 C.F.R. § 229.202(c)(2). Section 10(b) of the Exchange Act makes it
illegal to “use or employ, in connection with the purchase or sale of any security . . . any
manipulative or deceptive device or contrivance in contravention of such rules and regulations as
the Commission may prescribe.” 15 U.S.C. § 78j(b). Rule 10b-5, adopted by the SEC pursuant
7

to Section 10(b), prohibits any person from “mak[ing] any untrue statement of a material fact . . .
in connection with the purchase or sale of any security.” 17 C.F.R. § 240.10b-5(b). Defendant
argues that the Complaint does not adequately allege this duty, but the Complaint cites the
relevant regulation when it describes this disclosure requirement, and this duty exists regardless
of whether the Complaint pleads it.
“A legal duty independent of contractual obligations may be imposed by law as an
incident to the parties’ relationship . . . [when public] policy, not the parties’ contract . . . gives
rise to a duty of due care.” Sommer v. Fed. Signal Corp., 593 N.E.2d 1365, 1369 (N.Y. 1992).
“The Exchange Act was intended . . . to impose regular reporting requirements on companies
whose stock is listed on national securities exchanges. A fundamental purpose, common to these
statutes, was to substitute a philosophy of full disclosure for the philosophy of caveat emptor and
thus to achieve a high standard of business ethics in the securities industry.” In re Initial Pub.
Offering Sec. Litig., 241 F. Supp. 2d 281, 299 (S.D.N.Y. 2003). The Exchange Act protects the
integrity of public securities markets so that prospective investors can rely on the public
disclosures about offered securities in deciding whether and how to trade in that security. See
Chadbourne & Parke LLP v. Troice, 571 U.S. 377, 390 (2014) (“The basic purpose of the
[Exchange Act] is to insure honest securities markets and thereby promote investor
confidence.”).
The cases Defendant cites that find fraud claims duplicative of contract claims of nonperformance are distinguishable because in this case, the fraud claims are based on allegedly
false statements in public SEC filings, and Defendant had an independent duty under the
securities laws to make accurate public disclosures about the material features of the warrants in
these filings. See, e.g., Bridgestone/Firestone, Inc., 98 F.3d at 15 (no securities law claim); CSI
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Inv. Partners II, L.P. v. Cendant Corp., 507 F. Supp. 2d 384, 426-28 (S.D.N.Y. 2007)
(dismissing securities and common law fraud claims where the fraud claims were based on oral
representations and assurances during the negotiation of a deal), subsequently aff’d, 328 F.
App’x 56 (2d Cir. 2009). For all of these reasons, Defendant is denied summary judgment on the
state common law fraud claim.
Whether the federal securities fraud claim should be dismissed as duplicative is governed
by federal law. Defendant cites no federal law regarding dismissal of this claim, and the Court
has not found any to support the idea that a federal securities fraud claim for making a
misstatement about a characteristic of a security can or should be dismissed as duplicative of a
breach of contract claim based on the the same characteristic. Because Defendant had an
independent duty under the securities laws to make accurate public disclosures about the
proposed combination in the Form S-4s, Defendant’s motion for summary judgment on the
federal securities law claim is denied.
b. Breach of Contract -- As Amended (Count II)
Defendant’s motion for summary judgment is denied with respect to Count II of
the Complaint, titled “Breach of Contract -- As Amended.” Genuine issues of fact exist
as to whether Kensington assented to amend its contract with the warrant holders through
its conduct, such that Kensington’s conduct modified the “later of” condition in the
Warrant Agreement to allow earlier exercise of the warrants in December 2020, thirty
days after closing. Section 9.8 of the Warrant Agreement provides: “[t]his Agreement
may be amended by the parties hereto without the consent of any Registered Holder for
the purpose of curing any ambiguity, or curing, correcting or supplementing any
defective provision contained herein or adding or changing any other provisions with
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respect to matters or questions arising under this Agreement as the parties may deem
necessary or desirable and that the parties deem shall not adversely affect the interest of
the Registered Holders. . . .” (emphasis added).
An agreement can be modified by the parties’ conduct. CT Chems. (U.S.A.), Inc. v.
Vinmar Impex, Inc., 613 N.E.2d 159, 162 (N.Y. 1993) (“Once a contract is formed, the parties
may of course change their agreement by another agreement, by course of performance, or by
conduct amounting to a waiver or estoppel.”); accord Axginc Corp. v. Plaza Automall, Ltd., 759
F. App’x 26, 28 (2d Cir. 2018) (summary order); Dall. Aerospace, Inc. v. CIS Air Corp., 352
F.3d 775, 783 (2d Cir. 2003) (quoting CT Chems., 613 N.E.2d at 162). Waiver must be done
“knowingly, voluntarily and intentionally.” Fundamental Portfolio Advisors, Inc. v. Tocqueville
Asset Mgmt., L.P., 850 N.E.2d 653, 658 (N.Y. 2006). “[E]stoppel is imposed by law in the
interest of fairness to prevent the enforcement of rights which would work fraud or injustice
upon the person against whom enforcement is sought and who, in justifiable reliance upon the
opposing party’s words or conduct, has been misled into acting upon the belief that such
enforcement would not be sought.” Id. at 659. Estoppel requires “evidence that a party was
misled by another’s conduct” and “that the party significantly and justifiably relied on that
conduct to its disadvantage.” Id.
After Kensington entered into the Warrant Agreement, Kensington filed four SEC
disclosure documents -- the September 21, 2020, Form S-4 registration statement and three
amendments throughout October and November 2020 -- that used the “later of” language in two
places and the “30-day” language in two places. Kensington’s potential amendment through this
conduct is supported by several ratifications of this understanding by Continental, Kensington’s
warrant agent. For example, Kensington provided Continental a copy of the Form S-4 to review
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on October 16, 2020. On November 24, 2020, Continental informed an inquiring investor that
the warrants could be exercised 30 days after the closing of the business combination. Ana Gois,
the Continental officer who signed the Warrant Agreement, also initially understood -- as late as
December 4, 2020 -- that the warrants could be exercised 30 days after closing. Based on this
evidence, a reasonable jury could conclude that Kensington’s conduct amounted to a waiver or
estoppel, such that the earlier exercise of the warrants should be permitted.
Contrary to Defendant’s argument, the Warrant Agreement does not specify the exclusive
ways in which it can be amended. Section 9.8 simply states that the Warrant Agreement may be
amended by the parties -- most relevant here, Kensington -- without the consent of the warrant
holders when such an amendment would not adversely affect the interests of warrant holders.
There is no requirement that such an amendment be made in writing or signed by both parties,
unlike the contracts at issue in Defendant’s cited cases. See, e.g., Golden Archer Invs., LLC v.
Skynet Fin. Sys., 908 F. Supp. 2d 526, 532 (S.D.N.Y. 2012) (agreement explicitly states it could
only be amended in writing and signed by both parties); BNP Paribas Mortg. Corp. v. Bank of
Am., N.A., 778 F. Supp. 2d 375, 411 (S.D.N.Y. 2011) (same); Deutsche Bank AG v. JPMorgan
Chase Bank, No. 4 Civ. 7192, 2007 WL 2823129, at *23 (S.D.N.Y. Sept. 27, 2007) (same),
aff’d, 331 F. App’x 39 (2d Cir. 2009). That QuantumScape and Continental later executed a
written amendment to the Warrant Agreement that accelerated the exercise date from June 30,
2021, to March 5, 2021, does not mean amendment by writing was the only allowed method.
Consideration was not required for an amendment to the Warrant Agreement because
New York law provides that “[a]n agreement, promise or undertaking to change or modify . . .
any contract . . . shall not be invalid because of the absence of consideration, provided that the
agreement, promise or undertaking changing, modifying, or discharging such contract . . . shall
11

be in writing and signed by the party against whom it is sought to enforce the change,
modification or discharge, or by his agent.” See N.Y. Gen. Oblig. Law § 5-1103. Here, the
Form S-4 and amendments to the Form S-4 constitute such writings signed by Kensington, the
party against whom the change is sought to be enforced.
“[C]onstruing the evidence in the light most favorable to the non-moving party,” a
reasonable juror could find that Kensington’s conduct modified the “later of” condition in the
Warrant Agreement to allow earlier exercise. See Schwebel, 967 F.3d at 102. Defendant’s
motion for summary judgment is denied with respect to Plaintiffs’ amendment claim.
c. Breach of Contract -- Promissory Estoppel (Count III)
Defendant’s motion for summary judgment is granted with respect to Plaintiffs’
promissory estoppel claim. In New York, a quasi-contract claim like promissory estoppel is “an
obligation the law creates in the absence of any agreement.” Goldman v. Metro. Life Ins. Co.,
841 N.E.2d 742, 746 (N.Y. 2005); accord Exch. Listing, LLC v. Inspira Techs., Ltd., No. 22 Civ.
1889, 2023 WL 2403223, at *11 (S.D.N.Y. Mar. 8, 2023). “The existence of a valid and
enforceable written contract governing a particular subject matter ordinarily precludes recovery
in quasi contract for events arising out of the same subject matter.” Clark-Fitzpatrick, Inc. v.
Long Island Rail Rd. Co., 516 N.E.2d 190, 193 (N.Y. 1987); accord Beth Israel Med. Ctr. v.
Horizon Blue Cross & Blue Shield of N.J., Inc., 448 F.3d 573, 587 (2d Cir. 2006) (New York
law); Exch. Listing, 2023 WL 2403223, at *11.
The promissory estoppel claim is dismissed because Defendant does not dispute the
existence or validity of a contract between Defendant and Plaintiffs. All parties agree that the
Warrant Agreement establishes the contractual rights of the warrant holders.

12

Contrary to Plaintiffs’ argument, the exception that plaintiffs may alternatively plead a
quasi-contract claim alongside a breach of contract claim where there is a dispute over the
“scope or enforceability of the putative contract” does not apply here. Defendant disputes the
term of the contract that defines the exercise period, but does not dispute the scope or
enforceability of the agreement. See Goldman, 841 N.E.2d at 746-47; CUnet, LLC v. Quad
Partners, LLC, No. 16 Civ. 6327, 2017 WL 945937, at *7 (S.D.N.Y. Mar. 7, 2017). Plaintiffs
also argue that a party to a contract may claim that “it reasonably relied upon promises made
after the contract,” citing Icebox-Scoops, Inc. v. Finanz St. Honoré, B.V., 676 F. Supp. 2d 100,
115 (E.D.N.Y. 2009) (New York law). Icebox-Scoops is distinguishable because the promises
there related to “issues on which the Agreement is silent,” see id. at 113, while here, Plaintiffs’
promissory estoppel claim is based on the argument that the statements in the Form S-4s
contradicted language in the Warrant Agreement.
While the Complaint does not state a claim for promissory estoppel, the facts alleged may
state a claim for equitable estoppel. In contrast to promissory estoppel, equitable estoppel may
result in the modification of an existing contract. See Eujoy Realty Corp. v. Van Wagner
Commc’ns, LLC, 4 N.E.3d 336, 344 (N.Y. 2013). But the Complaint does not assert a claim for
equitable estoppel, and Plaintiffs’ attempt in effect to amend the Complaint to assert such a claim
is denied as procedurally improper. “A complaint cannot be amended merely by raising new
facts and theories in plaintiffs’ opposition papers, and hence such new allegations and claims
should not be considered in resolving the motion.” Com. Tenant Servs., Inc. v. Penske Bus.
Media, LLC, No. 20 Civ. 9756, 2022 WL 4292971, at *5 (S.D.N.Y. Sept. 16, 2022). Discovery
concluded in this case on August 19, 2022. If Plaintiffs seek to bring an equitable estoppel

13

claim, Plaintiffs shall file a letter motion seeking leave to do so under Federal Rule of Civil
Procedure 15, as set forth below.
B.

Plaintiffs’ Motion for Partial Summary Judgment
Plaintiffs move for partial summary judgment declaring, as a matter of law, that

(1) Defendant’s statement in its Form S-4 that its warrants “will become exerciseable 30 days
after the Closing” is an express waiver of the “later of” condition to exercise in the Warrant
Agreement and (2) the date and time of breach for purposes of determining expectation damages
on the contract claims is December 31, 2020, at 4:00 P.M. For the reasons below, Plaintiffs’
motion for partial summary judgment is denied with respect to the waiver argument and granted
as to the date of breach argument.
a. Waiver
Plaintiffs in effect seek summary judgment on Count I, which is “For Breach of Contract
-- Waiver of Condition.” Their motion for a declaration on the merits of this claim is denied
because genuine issues of fact exist as to whether Kensington waived the “later of”
commencement date for exercise of the warrants. “Contractual rights may be waived if they are
knowingly, voluntarily and intentionally abandoned.” Fundamental Portfolio Advisors, 850
N.E.2d at 658. “Such abandonment may be established by affirmative conduct or by failure to
act so as to evince an intent not to claim a purported advantage.” Id. “However, waiver should
not be lightly presumed and must be based on a clear manifestation of intent to relinquish a
contractual protection. Id. “Generally, the existence of an intent to forgo such a right is a
question of fact.” Id. “Negligence, oversight, or thoughtlessness does not” create waiver.
Alsens Am. Portland Cement Works v. Degnon Contracting Co., 118 N.E. 210, 210 (N.Y. 1917);

14

accord Luitpold Pharms., Inc. v. Ed. Geistlich Söhne A.G. Für Chemische Industrie, 784 F.3d
78, 95 (2d Cir. 2015).
Construing the evidence in the light most favorable to Defendant, a reasonable juror
could find that Kensington’s use of the “later of” language in the Form S-4s was unintentional,
the result of oversight and therefore not a waiver. In depositions, QuantumScape’s chief
financial officer, chief legal officer and corporate counsel at Wilson Sonsini all testified that the
“30-day” language was a mistake. Counsel from Hughes Hubbard, Kensington’s lawyers,
testified that some of the language from the Form S-4 was likely taken from a Form S-4 for
another company. Whenever the “30-day” language appears in a Form S-4, the “later of”
language also appears (in the financial statements). Each Form S-4 also identifies as an exhibit
the Warrant Agreement, which uses the “later of” language. See Consedine v. Portville Cent.
Sch. Dist., 907 N.E.2d 684, 689 (N.Y. 2009) (“A contract should be read as a whole to ensure
that undue emphasis is not placed upon particular words and phrases.”). In addition, after all of
the Form S-4s had been filed on November 10, 2020, but before the business combination
occurred on November 25, 2020, Kensington used the “later of” language in a Form 10-Q filed
on November 16, 2020.
Plaintiffs argue that the “30-day” language constitutes an “express waiver” that can be
determined as a matter of law. See Alsens, 118 N.E. at 210 (defining an express waiver as one
that “is proved by the express declaration of the party, or by his undisputed acts or language so
inconsistent with his purpose to stand upon his rights as to leave no opportunity for a reasonable
inference to the contrary”). The evidence outlined above prevents such a determination in this
case. Plaintiffs’ cited cases involving situations with unambiguous contractual language are
inapposite. See, e.g., W.W.W. Assocs., Inc. v. Giancontieri, 566 N.E.2d 639, 642 (N.Y. 1990)
15

(finding “no amibiguity as to the cancellation clause in issue”); Natale v. Ernst, 881 N.Y.S.2d
232, 234 (3d Dep’t 2009) (finding that a “clear manifestation of intent by defendant to relinquish
the protection of the contractual deadline could be reasonably inferred”). The slippery slope
Plaintiffs caution against were courts to consider subjective intent in the creation of corporate
documents is at odds with New York law. See Fundamental Portfolio Advisors, 850 N.E.2d at
658 (requiring intent for waiver); Alsens, 118 N.E. at 210 (waiver “is essentialy a matter of
intention”).
As for Kensington’s failure to change the “later of” condition found in its final Form S-4
amendment, a reasonable juror could find that Defendant did not intend to waive the 30-day
exercise date, but as the evidence suggests, decided that the December 2, 2020, Form 8-K would
be the best place to clarify the commencement date. Plaintiffs point to the large number of
reviewers and the fact that changes were made to the “30-day” language at least four times
during the revision process. However, Defendant has raised a genuine issue of fact with its
explanation that these changes were minor, global conforming changes, like changing
“completion of a business combination” to “consummation of a business combination,” or “a
Business Combination” to “the Business Combination,” such that these changes would not have
been closely reviewed by team members. Plaintiffs also argue that Defendant’s conduct rises to
the level of recklessness so extraordinary as to establish waiver but cites no law to support the
proposition that recklessness is sufficient to establish waiver. New York law requires waiver to
be done “knowingly, voluntarily and intentionally.” Fundamental Portfolio Advisors, 850
N.E.2d at 658; see also Davison v. Klaess, 20 N.E.2d 744, 748 (N.Y. 1939) (“Whether an alleged
waiver is express or implied, it must be intentional.”); Alsens, 118 N.E. at 210 (“The intention to
relinquish the right or advantage must be proved.”).
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Plaintiffs’ motion for summary judgment is denied with respect to their waiver argument.
b. Date and Time of Breach
Plaintiffs’ summary judgment motion is granted for a declaration that the date and time of
any breach of contract should be December 31, 2020, at 4:00 P.M., which was the first day a
warrant holder could exercise the warrant under the 30-day formulation in the Form S-4s.
“Although the amount of recoverable damages is a question of fact, the measure of
damages upon which the factual computation is based is a question of law.” Oscar Gruss & Son,
Inc. v. Hollander, 337 F.3d 186, 196 (2d Cir. 2003); accord Precision Trenchless, LLC v.
Saertex multiCom LP, No. 3:19 Civ. 54, 2022 WL 594096, at *31 (D. Conn. Feb. 28, 2022).
“[D]amages for breach of contract should put the plaintiff in the same economic position he
would have been in had the defendant fulfilled the contract.” Lucente v. Int’l Bus. Machs. Corp.,
310 F.3d 243, 262 (2d Cir. 2002) (New York law); accord LG Cap. Funding, LLC v. ExeLED
Holdings Inc., No. 17 Civ. 4006, 2021 WL 4949173, at *7 (S.D.N.Y. Oct. 25, 2021). “New
York courts are clear that breach of contract damages are to be measured from the date of the
breach.” Lucente, 310 F.3d at 262.
Here, Plaintiffs allege that, under the Form S-4s, the warrant exercise period was to begin
thirty days after the closing. Since the closing occurred on November 25, 2020, thirty days after
the closing would have been December 25, 2020. On that day, the Warrant Agreement would
have permitted a warrant holder to deliver notice and payment for exercise. The Warrant
Agreement conditions QuantumScape’s obligation to issue shares pursuant to the exercise of the
warrants on the existence of an effective registration statement. On December 30, 2020,
QuantumScape filed a registration statement that covered the shares to be issued upon exercise of
the warrants, and the next day, QuantumScape requested that the registration statement be
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declared effective December 31, 2020, at 4:00 P.M. The SEC declared that registration
statement effective at that date and time. Thus, December 31, 2020, at 4:00 P.M. is the date and
time of the alleged breach of contract, as warrant holders would have had an exercisable warrant
at that time if QuantumScape had followed its “30-day” language.
Contrary to Defendant’s arguments, Plaintiffs’ ability to actually exercise their warrants
is irrelevant to a determination of the issue of the date of breach. See LG Cap. Funding, LLC,
2021 WL 4949173, at *7 (“First, it is wholly irrelevant at this stage to consider what Plaintiff
will do with the shares once it receives them. The date of breach is not dependent on when or if
Plaintiff will sell its shares, it is only dependent on when Plaintiff should have received those
shares. Second, selling stock on the open market is not the only way to trade shares or realize
value from them. Plaintiff could have had an agreement in place to privately sell the shares at
11:59:59 PM on the last day it expected to receive its shares.”). Defendant cites cases that are
neither recent nor relevant -- none concerned the ability of the non-breaching party to perform in
determining the date of breach. See Scholle v. Cuban-Venezuelan Oil Voting Tr., 285 F.2d 318,
322 (2d Cir. 1960) (considering plaintiff’s ability to perform in sending case to the jury); 3M
Holding Corp. v. Wagner, 560 N.Y.S.2d 865, 867 (2d Dep’t 1990) (considering plaintiff’s ability
to perform in denying specific performance relief); Saewitz v. Epstein, 6 F. Supp. 2d 151, 157-58
(N.D.N.Y. 1998) (considering plaintiff’s ability to perform in denying anticipatory repudiation
claim).
Thus, as a matter of law, the date and time of any breach is December 31, 2020, at 4:00
P.M.

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IV.

CONCLUSION
For the foregoing reasons, both motions are GRANTED in part and DENIED in part.

Defendant’s motion for oral argument is DENIED as moot. Defendant’s objection to the Osborn
Declaration is DENIED without prejudice to renewal prior to trial as a motion in limine, as it was
not relied on in this decision.
For clarity, the surviving claims are common law fraud, federal securities fraud, breach of
contract based on waiver and breach of contract based on amendment. For the surviving contract
claims, the date and time of breach is December 31, 2020, at 4:00 P.M.
The Clerk of Court is respectfully directed to close the motions at Dkts. 111 and 115.
Dated: September 28, 2023
New York, New York

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