Facts

Plaintiff DCR Workforce, Inc. and defendant Coupa Software, Inc. entered into an asset purchase agreement (agreement) governing the sale, transfer, and assignment of DCR's vendor management systems (VMS) products. VMS is a web-based application that assists businesses to manage and procure staffing services as well as outside contract or contingent labor. The agreement provided that DCR would receive $25 million dollars in cash and up to 668,740 shares of Coupa's common stock subject to the terms of the agreement.

Pursuant to the agreement, DCR was eligible to earn stock if the VMS business met three pre-defined revenue targets covering three eligibility periods: DCR was entitled to the first portion of stock if the VMS products generated $8 million in ARR for any consecutive three-month period from closing through October 2019; it was entitled to the second portion if the VMS products generated $10 million in ARR between November 2019-February 2021; and it remained eligible to earn the third portion if the VMS products generated $16 million in ARR between March 2021 and December 2022. Coupa issued the first portion of stock after the VMS products hit the first revenue target. However, Coupa notified DCR that the VMS products had failed to hit the second revenue milestone. As a result, Coupa did not issue the second portion of common stock for the second period.

PLAINTIFF'S CONTENTIONS: Plaintiff contended that, despite the VMS products achieving an ARR of over $8,00,000.00 in 2018, pursuant to the March 2021 final earnout statement, Defendant represented that the highest pre-defined revenue target computed for the second eligibility period of November 2019-February 2021 was $9,282,528 (or just $717,472 below the second milestone). Plaintiff further contended that Defendants overall revenue increased over a partially overlapping time period, and that the market and consumer demand for the VMS products also increased in that time period due despite the COVID-19 pandemic. Plaintiff also contended that defendant breached multiple provisions of the agreement, including: failure to issue the second portion of common stock; failure to properly calculate the revenue target for the second period; failure to perform contracts set forth in the agreement; failure to enter into and execute sales agreements for VMS products; and failure to deliver plaintiff's holdback cash ($3.75 million held back to cover potential indemnification claims).

DEFENDANT'S CONTENTIONS: Defendant denied all contentions. Defendant contended that this claim should be dismissed because plaintiff's complaint fails to state a claim. Defendant further contended that this claim should be dismissed because plaintiff did not comply with the dispute procedures required by contract for challenges to computation of the agreement. Pursuant to the agreement, plaintiff was required to identify with "reasonable detail" the basis for any discrepancy or disagreement about the items reflected in a final earnout statement for review and final determination by an independent accounting firm.

Result

Defendant's motion to dismiss was granted for failure to plead sufficient facts. The court did not pass judgment on whether plaintiff may bring a different suit seeking documents necessary to employ the dispute resolution process set forth in the agreement.