Lexicon Growth LP v. Deniz Tortop

• Court: District Court, N.D. California
• Decided: June 25, 2026
• Docket: 5:26-cv-02230
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 LEXICON GROWTH LP, Case No. 26-cv-02230-SVK

8 Plaintiff, ORDER ON MOTION TO DISMISS 9 v. COMPLAINT

10 DENIZ TORTOP, Re: Dkt. No. 15 11 Defendant.

12 I. INTRODUCTION AND BACKGROUND 13 On or about December 12, 2025, non-party Forge Securities LLC (“Forge”), a broker, 14 arranged a transaction in which Defendant Deniz Tortop (“Tortop”) would sell Plaintiff Lexicon 15 Growth LP (“Lexicon”) 21,500 shares of common stock in non-party Cerebras Systems, Inc. 16 (“Cerebras”) for $41.02 per share. Dkt. 1 (Complaint) ¶ 1 and Ex. A (Forge Transaction 17 Summary). The deal terms were included in a Transaction Summary issued by Forge (Ex. A to 18 Complaint) as well as a Stock Transfer Notice (Ex. B to Complaint). Complaint ¶ 1. The Stock 19 Transfer Notice (the “Notice”) included as an attachment a Stock Transfer Agreement (the 20 “Agreement”). See Ex. B to Complaint. The stock sale transaction was to be settled through the 21 Nasdaq Private Market (“NPM”). Complaint ¶ 1. 22 Cerebras is a privately-held company whose shares are not publicly traded. See Complaint 23 ¶ 11. Cerebras drafted the Notice and the attached Agreement. Id. ¶ 13. Cerebras was a named 24 party to both the Notice and the Agreement, and both documents defined the term “Company” to 25 mean Cerebras. Ex. B to Complaint at PDF pp. 4, 12. The signature page in the Notice also 26 included a signature line for Cerebras. Id. at PDF p. 8. 27 Provisions of the Notice that are relevant to this litigation include the following: 1 (“KYC Form”) and to provide any documentation and information reasonably 2 requested by Cerebras in connection with the KYC Form. Ex. B to Complaint at 3 PDF p. 4 ¶ A. Cerebras “reserve[d] the right, in its sole discretion, to not proceed 4 with the transaction contemplated” in the Notice and Agreement “upon review of 5 [Lexicon’s] completed KYC Form and any related documentation and information 6 provided by [Lexicon].” Id. 7 • Following Cerebras’s review of the KYC Form and any related documentation and 8 information provided by Lexicon, Cerebras would send Lexicon a confirmation via 9 email that the transaction may proceed. Lexicon would then have five (5) business 10 days to wire the necessary payments to Tortop and, if applicable, Cerebras. Id. ¶ B. 11 • The signature page of the Notice, which had signature lines for Tortop, his spouse, 12 Lexicon, and Cerebras, provided that “[t]he Parties hereby accept all terms, 13 conditions, and representations of the Stock Transfer Notice and the Stock Transfer 14 Agreement, without any modification to the form provided by the Company.” 15 Id. at PDF p. 8. 16 17 The Agreement was attached as Attachment B to the Notice and contains the following 18 provisions that are relevant to this litigation: 19 • “On the Effective Date and subject to the terms and conditions of this Agreement,” 20 Tortop hereby sells to Lexicon the specified shares at the specified purchase price, 21 and Cerebras “hereby consents to such transfer and to the extent the Company has a 22 right of first refusal, it waives its right of first refusal with respect to such transfer, 23 it being expressly understood that such rights, if any, shall continue to be applicable 24 to other proposed transfers of the Shares hereafter.” Ex. B to Complaint at PDF 25 p. 12 ¶ 1. 26 • Lexicon “shall have completed and delivered to [Cerebras] a Know Your Customer 27 Form,” a copy of which was attached. Id. at PDF p. 13 ¶ 2.2(b). 1 [Lexicon] and [Tortop], and [Cerebras] makes no representation or warranty as to 2 the advisability or the legality of the transfer of the Shares hereunder.” Id. at PDF 3 p. 15 ¶ 3.9; see also id. at PDF p. 17 ¶ 4.8. 4 • “All consents, approvals, authorizations and orders required for the execution and 5 delivery of this Agreement and the transfer of the Shares under this Agreement 6 have been obtained and are in full force and effect.” Id. at PDF p. 16 ¶ 4.5. 7 • “This Agreement and the documents referred to herein constitute the entire 8 agreement and understanding of the parties with respect to the subject matter of this 9 Agreement, and supersede all prior understandings and agreements… This 10 Agreement shall not be effective until signed by all parties hereto, including the 11 Company.” Id. at PDF p. 21 § 9.7. 12 13 Lexicon signed and returned the Transaction Summary to Forge on or about December 11, 14 2025. Complaint ¶ 12 and Ex. A. Lexicon alleges on information and belief that Tortop signed 15 and returned a mirror image Transaction Summary to Forge. Id. On or about December 13, 2025, 16 Lexicon and Tortop executed the Stock Transfer Notice. Id. ¶ 13 and Ex. B. On or about 17 December 16, 2025, Forge submitted the Stock Transfer Notice to Cerebras. Complaint ¶ 18. 18 Cerebras ultimately signed the Notice on or about January 16, 2026. Id. ¶ 23. Before 19 Cerebras did so, however, Tortop informed Forge and the NPM that he wanted to cancel the stock 20 sale. In a January 5, 2026 email to Forge and the NPM, Tortop stated that he “would like to back 21 out of this transaction” because he “no longer want[s] to sell at this price point.” Id. ¶ 20 and 22 Ex. C. In a follow-up email on January 12, 2026, Tortop reiterated his request to cancel the 23 transaction and took the position that because Cerebras had not yet signed the Notice, he had the 24 right to cancel the sale. Complaint ¶ 21 and Ex. C. 25 Lexicon tendered the full transfer price to the NPM on January 20, 2026. Complaint ¶ 24. 26 Tortop sent an email to the NPM on the same day, providing “final notice that I have withdrawn 27 my offer to sell 21,500 shares of Cerebras Systems Inc. … to Lexicon Growth” and stating that 1 January 12, 2026.” Id. ¶ 25 and Ex. D. 2 In a January 29, 2026 email, Cerebras informed Tortop and Lexicon that “Cerebras’ 3 interest in these secondary stock transactions is limited to our right of first refusal (ROFR) and 4 review of the KYC form.” Complaint ¶ 26 and Ex. E. Cerebras stated that “[s]ince the ROFR 5 period has expired, the transaction will proceed as set forth in the mutually executed transfer 6 agreement.” Id. Cerebras characterized the stock sale as a “private transaction between the buyer 7 and seller.” Id. 8 On January 23, 2026 and February 9, 2026, an attorney representing Lexicon sent Tortop 9 letters demanding that he perform the Agreement. Complaint ¶ 27 and Ex. F. Counsel for Tortop 10 stated that Tortop refused to proceed with the trade at the price of $41.02 per share. Complaint 11 ¶ 28. 12 Lexicon filed this lawsuit on March 13, 2026. The Complaint, which names Tortop as the 13 sole Defendant, contains causes of action for breach of contract and breach of the implied 14 covenant of good faith and fair dealing. 15 Now before the Court is Tortop’s motion to dismiss the Complaint for failure to state a 16 claim. Dkt. 15. All Parties have consented to the jurisdiction of a magistrate judge. Dkt. 8, 14. 17 This matter is suitable for determination without a hearing. Civ. L.R. 7-1(b). 18 For the reasons that follow, Tortop’s motion to dismiss is GRANTED. The first cause of 19 action is DISMISSED WITHOUT LEAVE TO AMEND, and the second cause of action is 20 DISMISSED WITH LEAVE TO AMEND. 21 II. LEGAL STANDARD 22 Federal Rule of Civil Procedure 12(b)(6) authorizes a district court to dismiss a complaint 23 if it fails to state a claim upon which relief can be granted. In ruling on a motion to dismiss, courts 24 may consider only “the complaint, materials incorporated into the complaint by reference, and 25 matters of which the court may take judicial notice.” Metzler Inv. GmbH v. Corinthian Colls., 26 Inc., 540 F.3d 1049, 1061 (9th Cir. 2008). In deciding whether the plaintiff has stated a claim, the 27 court must presume the plaintiff’s allegations are true and draw all reasonable inferences in the 1 not required to accept as true “allegations that are merely conclusory, unwarranted deductions of 2 fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 3 2008) (citation omitted). 4 To survive a motion to dismiss, the plaintiff must allege “enough facts to state a claim to 5 relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This 6 “facial plausibility” standard requires the plaintiff to allege facts that add up to “more than a sheer 7 possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 8 If a motion to dismiss is granted, the court must grant leave to amend unless it is clear that the 9 complaint’s deficiencies cannot be cured by amendment. Eminence Capital, LLC v. Aspeon, Inc., 10 316 F.3d 1048, 1052 (9th Cir. 2003). 11 III. DISCUSSION 12 A. First Cause of Action: Breach of Contract 13 Lexicon’s first cause of action alleges breach of the Notice. See Complaint ¶ 35 14 (“Defendant has breached and repudiated the Stock Transfer Notice by refusing to proceed with 15 the trade and refusing to accept the transfer price”); see also Complaint ¶¶ 30-36. The Parties 16 agree on the chronology of events outlined above but disagree about whether Cerebras’ execution 17 of the Notice was a condition precedent to formation of the stock sale contract or a condition 18 precedent to performance of the contract. If Cerebras’ execution of the Notice was a condition 19 precedent to formation of the contract, Tortop’s revocation of his offer to sell shares to Lexicon 20 was effective because it occurred before Cerebras executed the contract. See Los Angeles Rams 21 Football Club v. Cannon, 185 F. Supp. 717, 724 (S.D. Cal. 1960). If Cerebras’ execution of the 22 Notice was a condition precedent to performance of the contract, the contract was formed when 23 Tortop and Lexicon signed it, and Tortop’s attempt to revoke his offer was not effective. See id. 24 A threshold issue is what law governs these contract questions. The Agreement states that 25 it will be governed by and construed in accordance with California law. Ex. B to Complaint at 26 PDF p. 20 ¶ 9.2 If no contract was formed, however, that choice of law provision would not 27 apply. See Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1175 (9th Cir. 2014) (stating that 1 in the first place). Nevertheless, the Parties have briefed the issues under California law, they 2 have not argued that the result would vary depending on what law applies, and the Ninth Circuit 3 has recognized that the “[f]undamental precepts of contract interpretation under California law” 4 are “not unique to California.” Int’l Bhd. of Teamsters v. NASA Servs., Inc., 957 F.3d 1038, 1042 5 (9th Cir. 2020). 6 Turning to the contract issues, “[t]here are two species of conditions precedent: conditions 7 precedent to formation and conditions precedent to performance.” Int’l Bhd. of Teamsters, 957 8 F.3d at 1043 (quoting Jacobs v. Freeman, 104 Cal. App. 3d 177, 189–190 (1980) (emphasis in 9 original)). “[W]here a condition precedent to formation is not satisfied, the proposed bargain 10 between the parties does not become a binding contract.” Int’l Bhd. of Teamsters, 957 F.3d at 11 1043 (citations omitted; emphasis added). “Conversely, if a condition precedent to performance 12 fails, the parties still have a contract, but they lose the right to enforce at least some of its terms.” 13 Id. (citation omitted; emphasis added). 14 “[P]arties may make the creation of a contract subject to a condition precedent[,]” which is 15 “an uncertain event that must happen before the contractual right accrues or the contractual duty 16 arises.” Id. (quoting Taylor Bus Serv., Inc. v. San Diego Bd. of Educ., 195 Cal. App. 3d 1331, 17 1345 (1987) and Platt Pac., Inc. v. Adelson, 6 Cal. 4th 307, 313 (1993)). “The existence of a 18 condition precedent normally depends upon the intent of the parties as determined from the words 19 they have employed in the contract.” Int’l Bhd. of Teamsters, 957 F.3d at 1043 (quoting Realmuto 20 v. Gagnard, 110 Cal. App. 4th 193, 199, 1 Cal.Rptr.3d 569 (2003)). Conditions precedent must be 21 expressed in plain, clear, and unambiguous language, but parties need not invoke any “required 22 magical incantation.” Id. (quoting Roth v. Garcia Marquez, 942 F.2d 617, 626 (9th Cir. 1991)). 23 Although a contract provision “will be considered ambiguous when it is capable of two or more 24 constructions, both of which are reasonable,” the “language in a contract must be interpreted as a 25 whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract.” 26 Int’l Bhd. of Teamsters, 957 F.3d at 1044 (citations omitted). Unless “reasonable persons would 27 have understood that the agreement would not be effective when originally signed,” approval is a 1 the contract. Jacobs, 104 Cal. App. 3d at 187, 189–190. 2 Here, the dispute as to whether Tortop’s attempt to revoke his offer to sell shares was 3 effective centers on language in the Agreement attached to the Notice stating that it “shall not be 4 effective until signed by all parties hereto, including the Company.” Dkt. 1-1 at PDF p. 21 § 9.7 5 (emphasis added); see also Dkt. 15 at 5; Dkt. 16 at 14; Dkt. 17 at 3-4. Situations where a third 6 party’s approval has been found to be essential to the formation of the contract include where “the 7 terms of the document make it so.” Cannon, 185 F. Supp. at 721. In Cannon, a football team 8 sued a player who had signed agreements to play for the team in 1960, 1961, and 1962 and then 9 attempted to revoke any offer he may have made to play for the team. Id. at 718-20. Each written 10 agreement between the parties contained a clause that stated: “This agreement shall become valid 11 and binding upon each party hereto only when, as and if it shall be approved by the [National 12 Football League] Commissioner.” Id. at 721. The NFL Commissioner signed the 1960 contract 13 before the player tried to revoke it, but he did not sign the 1961 and 1962 contracts before the 14 player’s revocation. The court held that “until approved” by the Commissioner, “these 15 instruments are, at most, only offers” and that the offers pertaining to 1961 and 1962 were 16 “unquestionably revoked.” Id. at 723. The court explained that “[a]pproval by the Commissioner 17 is essential to the formation of a contract here and this is so because the terms of the document 18 make it so.” Id. at 721-22. The court reasoned that the clause requiring the Commissioner's 19 approval:

20 is too definite to be ignored. It jumps out at you. The words employed are too strong to 21 permit of ambiguity. Their selection was obviously made with great care so that there would be no dispute about their meaning, and this court attaches to them the only meaning 22 it can— that is, that the agreement shall only become valid and binding if, as and when approved by the Commissioner. 23 Id. at 722. 24 In Roth v. Garcia Marquez, the Ninth Circuit analyzed a letter operating as an option 25 contract, with a clause stating that the option “shall commence upon signature by Gabriel Garcia 26 Marquez to the formal agreement and the return of said signed agreement to me or Richard Roth, 27 at which time the option payment shall be made to you as agent for Gabriel Garcia Marquez.” 1 942 F.2d at 619. The court concluded that “Garcia Marquez’ signature was required for the 2 contract to be binding” and therefore operated as a “clear condition precedent” to the formation of 3 a contract. Id. at 626-27. The court rejected the argument that the same words found in the 4 contract in Cannon—“only when, as and if”—were necessary to create a condition precedent to 5 formation, because those words “are not a required magical incantation.” Id. at 626. 6 The contract at issue in Energy Monster, Inc. v. Monster Energy Co., stated that the 7 contract “is effective only after it has been signed” by two parties and “is effective as of the last 8 date listed in the signature block below (the ‘Effective Date’).” 2022 WL 3137729, at *5 (C.D. 9 Cal. May 19, 2022). The court stated that “[c]ourts have found that similar provisions condition 10 contract formation on execution” and concluded likewise. Id. at *5, 7. In concluding that this 11 language was a condition precedent to contract formation, the court rejected an argument by one 12 party, TEM, that the contract was distinguishable from cases like Cannon and Roth due to use of 13 the term “effective.” Id. at *5. “TEM fails to explain how an ineffective, or non-operative, 14 agreement is still enforceable [, n]or does it cite case law or proffer evidence from the parties’ 15 negotiations to support this interpretation of ‘effective.’” Id. “Courts often determine contract 16 formation with when an agreement becomes ‘effective.’” Id. (citations omitted). “Therefore, the 17 most straightforward reading of the phrase, ‘This Agreement is effective only after it has been 18 signed,’ is that the parties intended to create a binding contract only after both parties had signed 19 the Agreement.” Id. It is “inconsequential” that the provision states “effective,” rather than 20 “valid” or “binding.” Id. 21 The contract at issue in this case, specifically the Notice with its attachments, which 22 include the Agreement, unambiguously states that it “shall not be effective until signed by all 23 parties hereto, including the Company.” Ex. B to Complaint at PDF p. 21 ¶ 9.7. In light of this 24 language and under the legal authority discussed above, Cerebras’ signature on the document was 25 a condition precedent to contract formation because “the terms of the document make it so.” 26 See Cannon, 185 F. Supp. at 721. Accordingly, Tortop’s revocation of his offer to sell shares to 27 Lexicon was effective because the Parties agree that the revocation occurred before Cerebras 1 effective, dismissal of Lexicon’s claim for breach of contract is appropriate. See Roth, 942 F.2d at 2 628 (affirming order granting motion to dismiss where as a matter of law a condition precedent 3 was unfulfilled).1 4 Although district courts should grant leave to amend liberally, it is appropriate to deny 5 leave to amend where amendment would be futile. See id. (affirming order dismissing complaint 6 without leave to amend). Here, because the Parties agree on the contents of the contract 7 documents and the chronology of events, the Court concludes that it would be futile for Lexicon to 8 attempt to overcome by amendment the finding that, as a matter of law, Cerebras’ execution of the 9 Agreement was a condition precedent to contract formation. Accordingly, the first cause of action 10 is DISMISSED WITHOUT LEAVE TO AMEND. 11 B. Second Cause of Action: Breach of the Implied Covenant of Good Faith and Fair Dealing 12 Lexicon’s second cause of action for breach of the implied covenant of good faith and fair 13 dealing is dependent upon the existence of a valid contract. See Careau & Co. v. Sec. Pac. Bus. 14 Credit, Inc., 222 Cal. App. 3d 1371, 1391 (1991) (holding that ability to plead implied covenant of 15 good faith and fair dealing “necessarily depends upon the existence of a valid and existing 16 contractual relationship”). In the Complaint, Lexicon bases its claim for breach of the covenant of 17 good faith and fair dealing on the Trade Confirmation issued by Forge rather than on the Notice. 18 Complaint ¶ 38. Lexicon argues in its opposition to the motion to dismiss that “even if the Sales 19 Agreement was not itself a binding agreement … the parties had reached an earlier binding oral 20 agreement to proceed with the trade which was memorialized in the Trade Confirmations executed 21 by both parties memorializing the purchase price and number of shares.” Dkt. 16 at 16 (citing 22 Complaint ¶¶ 38-42). It characterizes its implied covenant claim as an ”alternative” theory to its 23 claim for breach of the Notice. Dkt. 16 at 16. 24 Tortop’s motion to dismiss argued that Lexicon’s implied covenant claim fails because 25 26 1 Lexicon argues in its opposition to the motion to dismiss that Tortop was estopped from 27 revoking his offer because Lexicon detrimentally relied on the offer. Dkt. 16 at 8-9. Lexicon does 1 either (1) the claim for breach of contract claim fails or (2) even if Lexicon has successfully 2 alleged a breach of contract, the implied covenant claim is “superfluous” because it “simply 3 restates” Lexicon’s breach of contract claim. Dkt. 15 at 12. Tortop’s opening brief did not 4 acknowledge or address any distinction between claims based on the Notice and claims based on 5 the Trade Confirmation. Id. 6 Lexicon is correct that Tortop’s opening brief failed to address Lexicon’s “alternative” 7 allegations that the Parties had already reached a binding agreement before they executed the 8 Notice with the attached Agreement. See Dkt. 16 at 17. However, Lexicon’s opposition has 9 muddied the waters by claiming that the Parties entered into an oral agreement. Id. at 16-17. The 10 Complaint itself does not refer to any oral agreement between the Parties. In its reply brief, 11 Tortop offers various arguments as to why an implied covenant claim based on an oral contract 12 would be defective. Dkt. 17 at 8-10. 13 Because of the tension between the allegations in the second cause of action in the 14 Complaint and Lexicon’s characterization of those allegations in its opposition to the motion to 15 dismiss, on the present record the Court cannot readily evaluate the Parties’ arguments as to 16 whether the second cause of action satisfies the applicable pleading standards. “[I]t is axiomatic 17 that the complaint may not be amended by the briefs in opposition to a motion to dismiss.” Cork v. 18 CC-Palo Alto, Inc., 534 F. Supp. 3d 1156, 1183 n.8 (N.D. Cal. 2021) (citation omitted). 19 Accordingly, the Court GRANTS the motion to dismiss the second cause of action on the grounds 20 that it does not adequately articulate Lexicon’s theory of breach of the implied covenant of good 21 faith and fair dealing. Because it is not clear from the present record that an attempt to amend this 22 cause of action would be futile, the second cause of action is DISMISSED WITH LEAVE TO 23 AMEND. 24 IV. CONCLUSION 25 For the foregoing reasons, the Court ORDERS as follows: 26 1. Tortop’s motion to dismiss is GRANTED. The first cause of action for breach of 27 contract based on the Notice is DISMISSED WITHOUT LEAVE TO AMEND. 1 fair dealing is DISMISSED WITH LEAVE TO AMEND. 2 2. If Lexicon wishes to attempt to address the deficiencies identified in this order, it 3 may file a First Amended Complaint (“FAC”) by July 16, 2026. The FAC must 4 address whether this Court has personal jurisdiction over any defendants and 5 whether venue here is proper. 6 3. Following the filing of a FAC, Tortop must file a response by July 30, 2026. 7 4. If Tortop responds by filing a motion to dismiss the FAC, the normal briefing 8 schedule of Civil Local Rule 7-3 will apply. The Court will inform the Parties if a 9 hearing is necessary. 10 5. An Initial Case Management Conference will be held on October 13, 2026 at 11 9:30 a.m. The Joint Case Management Statement is due October 6, 2026. L SO ORDERED. 13 Dated: June 25, 2026

Sess vel SUSAN VAN KEULEN = 16 United States Magistrate Judge 17

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