DOVER, Del. — A Delaware judge has dismissed a shareholder lawsuit against financial technology company Block Inc. over its 2021 acquisition of majority ownership in Tidal, the music streaming service partly owned by rapper Jay-Z.
A pension fund shareholder alleged that Block SQ founder and CEO Jack Dorsey and the company’s board of directors breached their fiduciary duties in agreeing to pay roughly $300 million to take control of Tidal as it was failing financially and the target of an ongoing criminal investigation. “It seemed, by all accounts, a terrible business decision,” the judge said of Block’s acquisition of Tidal. “Under Delaware law, however, a board comprised of a majority of disinterested and independent directors is free to make a terrible business decision without any meaningful threat of liability, so long as the directors approve the action in good faith.”
A management report to the transaction committee in October 2020 raised several red flags. They included Tidal’s difficulties in attracting subscribers in a market dominated by Spotify SPOT , with most of the remaining market share captured by Apple AAPL and Amazon AMZN . The report also noted the Norwegian criminal probe and a federal lawsuit by performing artists who said Tidal was withholding royalties they were owed.