432 F.Supp.3d 326
S.D.N.Y.2020Background
- Alpha Capital Anstalt (Liechtenstein investor) purchased a Senior Convertible Note from Shiftpixy, Inc. on March 12, 2019 for $1,266,667 that permitted conversion into common stock.
- Alpha successfully converted portions of the Note on several prior occasions; on June 20, 2019 Alpha submitted a conversion notice to convert $310,000 into 1,000,000 shares, which Shiftpixy did not deliver.
- On June 27, 2019 Shiftpixy filed an 8‑K stating it would cease honoring conversions of 2018 and 2019 notes, effectively refusing future conversions under the Note.
- Alpha sued for breach of contract and anticipatory repudiation, sought specific performance (delivery of 1,000,000 shares and future compliance) and, alternatively, damages; an earlier motion for a preliminary injunction was denied.
- Magistrate Judge Lehrburger recommended granting summary judgment to Alpha on breach and anticipatory repudiation, awarding $500,000 in damages plus 18% contractual interest, granting summary judgment on Shiftpixy’s counterclaim, and denying injunctive relief; the district court adopted the R&R in full and entered judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach for failure to honor June 20 conversion | Alpha: submitted proper conversion notice; Shiftpixy failed to deliver shares | Shiftpixy: did not contest liability in opposition | Court: Breach proven; summary judgment for Alpha |
| Anticipatory repudiation for ceasing future conversions | Alpha: 8‑K announcement constitutes anticipatory breach | Shiftpixy: did not contest repudiation | Court: Anticipatory breach established; summary judgment for Alpha |
| Request for injunctive relief / specific performance (delivery of shares and future compliance) | Alpha: contract permits injunctive relief and irreparable harm; seeks delivery and ongoing relief | Shiftpixy: argued against injunctive relief; no showing of insolvency or inability to obtain shares elsewhere | Court: Denied permanent injunction; monetary damages adequate and Alpha failed to show irreparable harm or insolvency justification |
| Shiftpixy’s counterclaims (breach / unjust enrichment) | N/A | Shiftpixy asserted breach/unjust enrichment related to prior share receipt/sales | Court: Shiftpixy abandoned counterclaims by failing to substantively defend; summary judgment for Alpha on counterclaims |
Key Cases Cited
- DeLeon v. Strack, 234 F.3d 84 (2d Cir. 2000) (failure to timely object to a magistrate judge's R&R generally waives appellate review)
- Small v. Secretary of Health & Human Servs., 892 F.2d 15 (2d Cir. 1989) (party's failure to timely object to R&R waives review)
- McCarthy v. Manson, 714 F.2d 234 (2d Cir. 1983) (same waiver principle applied to magistrate recommendations)