The courts have reaffirmed big tech businesses’ rights to be incredibly bullheaded, braindead, erroneous, and just plain old dumb, as long as they at least think they’re making the right move. That’s good news for Jack Dorsey and his fintech company Block, which managed to fight off a shareholder lawsuit for its 2021 decision to buy Jay-Z fronted music streaming App Tidal, a decision that even to a chancery court judge’s eye was “terrible.”
Back in 2021, Block, then still called Square, bought a majority stake in Tidal for $306 million. At the time, Dorsey told users that he wanted to support artists’ work, adding “Making the economy work for artists is similar to what Square has done for sellers.” The purchase also had Jay-Z, AKA Shawn Carter, briefly join Square’s board of directors.
In January, shareholders from the Coral Springs Police Officers’ Pension Plan tried to sue Dorsey and Block for the purchase in Delaware Chancery court. The cops pension fund claimed Dorsey was the sole board member pushing to purchase Tidal, having already loaned Jay-Z $50 million to help the struggling brand. On Tuesday, a chancery judge dismissed the case.
According to the final decision issued by Chancellor Kathaleen McCormick, CEO Dorsey’s decision to buy Tidal “seemed, by all accounts, a terrible business decision.” Yet at the same time, “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.”
Gizmodo reached out to Block for comment, but we did not immediately hear back. We also reached out to the Florida-based police pension fund, and we will update this story if we hear back.
According to McCormick, the Block board members weren’t self-interested when it decided to buy Tidal, nor were they being lied to or corralled by Dorsey. According to the court documents, Block’s board knew that Tidal “operated under semi-formal or expired arrangements” with music labels that were also partial owners of the streaming app. Kanye West, who now goes by Ye, had also already broken away from his exclusive streaming arrangement with the platform. By late 2020, Tidal was hemoraging money and valued the platforms “intangible” artist relationships at $231 million while owing $127 million in part to record labels for streaming fees.
Dorsey and Jay-Z were friends, and had been talking about this move for months before Block pushed the “buy” button. Court documents claim that Dorsey made his final decision after summering with the rapper in the Hamptons in 2020. At that point, the artist-owned streaming service had been fighting uphill against the likes of Spotify and Apple Music while being investigated for allegedly pumping up the streaming numbers of Beyoncé and Ye by Norwegian authorities. By the middle of 2020, the platform had only gained 2.1 million subscribers and had burned through multiple CEOs.
That’s not to say that past Tidal is the same as today’s streaming service. After acquiring the company, Block tried to make Tidal more akin to services like Spotify with offline streaming and a free subscription tier. The service now has some edge over competitors with HiFi audio and some features like live-sharing a playlist through the recently-added Live feature, though friends still can’t react directly in-app to your questionable music choices.