On April 21, 2025, Justice Chan of the New York County Commercial Division issued a decision in Quinn Emanuel Urquhart & Sullivan, LLP v Desktop Metal, Inc., 2025 NY Slip Op 31402(U), holding that the anticipatory repudiation doctrine only applies in in limited circumstances, explaining:
As explained in Norean, the doctrine of adequate assurance stems from UCC § 2·609, which allows a party to a contract for the sale of goods to demand assurance of future performance from the other party when reasonable grounds for insecurity exists. When adequate assurance is not forthcoming, repudiation is deemed confirmed, and the nonbreaching party is allowed to take reasonable actions as though a repudiation had occurred. Several states have imported the doctrine of adequate assurance to common-law categories of contract law because it has been found so effective.
New York, however, has not adopted adequate assurance wholesale. The Court of Appeals in Norean cautioned courts to proceed warily in extending this UCC doctrine to the common law of this State. After Norean, there are three situations in which a party can ask for adequate assurance: (1) where the contract is governed by the UCC; (2) where one party is insolvent; and (3) where the contract at issue is similar to the type of contract at issue in Norean.
As most relevant here, the First Department ruled that Norean stands for the proposition that the doctrine of adequate assurance should be imported only to cases analogous to a sales contract. Clearly the UCC does not apply to the Engagement Letter. And the Engagement Letter is not similar to a contract for the sale of goods in Norean.
Quinn’s main response is the case Mishcon de Reya New York LLP v Grail Semiconductor, Inc., which applied the doctrine of adequate assurance to an attorney engagement agreement. However, there was no dispute that the client in Mishcon was insolvent, and therefore the case did not involve an application of Norean. This court is not aware of any cases applying Norean and the doctrine of adequate assurance to an attorney engagement agreement where the defendant is solvent.
Whether Desktop is solvent is unclear given the Delaware Chancery Court’s finding that Desktop was not literally in bankruptcy but was extremely cash strapped. Nonetheless, this court defers to the Chancery Court’s finding that Desktop is not insolvent.
(Internal quotations and citations omitted).