Baker-Rhett v. Aspiro AB

• Decision Date: 22 June 2018
• Docket Number: 1:16-cv-5801-GHW
• Parties: Justin BAKER-RHETT, individually and on behalf of others similarly situated, Plaintiff, v. ASPIRO AB, a Norwegian limited liability company, and Kanye West, an individual, together d/b/a/ Tidal, Defendants.
• Court: U.S. District Court — Southern District of New York

324 F.Supp.3d 407

Justin BAKER-RHETT, individually and on behalf of others similarly situated, Plaintiff,

v.ASPIRO AB, a Norwegian limited liability company, and Kanye West, an individual, together d/b/a/ Tidal, Defendants.

1:16-cv-5801-GHW

United States District Court, S.D. New York.

Signed June 22, 2018

Benjamin H. Richman, Pro Hac Vice, Sydney M. Janzen, Pro Hac Vice, Edelson PC, Chicago, IL, Todd Logan, Edelson PC, San Francisco, CA, Fred David Weinstein, Kurzman Eisenberg Corbin Lever & Goodman, LLP, White Plains, NY, for Plaintiff.

Andrew Harrison Bart, Ava U. McAlpin, Jenner & Block LLP, Casey Devin Laffey, Jordan W. Siev, Pamela Lauren Schoenberg, Reed Smith LLP, New York, NY, Kenneth K. Lee, Christina Avedissian Aryafar, Christina Avedissian, Jenner and Block LLP, Los Angeles, CA, Ashley Lynn Shively, Pro Hac Vice, Robert D. Phillips, Jr., Thomas A. Evans, Reed Smith LLP, San Francisco, CA, for Defendants.

MEMORANDUM OPINION AND ORDER

GREGORY H. WOODS, United States District JudgeOn February 15, 2016, Kanye West tweeted that his new album—The Life of Pablo —"will never never never be on Apple. And it will never be for sale ... You can only get it on Tidal." Six weeks later, the album was on Apple, and was for sale on sites other than Tidal, the online streaming service operated by defendant Aspiro AB ("Aspiro"). The plaintiff, Mr. Baker-Rhett, on behalf of himself and a putative class, claims that statements by Aspiro and Mr. West were deceptive—and that they fraudulently induced him to pay for Tidal's services in order to obtain access to its purportedly exclusive content. Mr. West's allegedly false Tweet provides adequate support for the plaintiff's common law fraudulent inducement claims. However, because Mr. Baker-Rhett viewed the allegedly false representations and subscribed to Tidal outside of New York, he does not satisfy the territoriality requirement for the claims he asserts under Sections 349 and 350 of New York's General Business law. For those, and the other reasons set forth below, the defendants' motions to dismiss are GRANTED in part and DENIED in part.

I. BACKGROUND¹

A. Aspiro Struggles

Aspiro launched Tidal—a high fidelity music streaming site—in 2014. Second Am. Compl. (ECF No. 59) ¶ 20. Shortly thereafter, Aspiro was acquired by rap impresario Sean Carter—known to the world as Jay-Z—and a holding company controlled by him. Id. ¶ 21. Mr. Carter announced to the world that Tidal would be "the streaming home" for artists like himself and other bold faced names in the music industry. Id. ¶ 22. Tidal was marketed as the first "artist-owned" streaming service, and a number of musicians, including defendant Kanye West, were offered 3% stakes in the company "in exchange for creating Tidal exclusive content to drive consumers to the subscription only streaming site." Id. ¶¶ 22-23.

The artist-owners of Tidal leveraged their massive presence on social media to promote Tidal. Id. ¶ 24. For example, in February 2015, Mr. West tweeted his millions of Twitter followers: "Please to all my friends fans and music lovers. Sign up to Tidal now." Id.

Despite the sizzle created by the marketing efforts of Tidal's owner-artists, the service itself soon fizzled. Id. ¶ 25. Indeed, Tidal's "inability to generate revenue led many in the music industry to believe the media platform faced almost imminent doom." Id. Tidal admitted in early 2015 that the company had insufficient funds to last for another year; and conceded that it would "have to achieve an extreme and unprecedented growth in number of subscribers simply to survive." Id.

B. Pablo to the Rescue

In the midst of Tidal's struggles, Mr. West announced that his next album—The Life of Pablo —would be released exclusively on the streaming platform. According to the complaint, Mr. West is a "musical paragon." Id. ¶ 27. There is no doubting Mr. West's success as a musician; among his other accomplishments, he has twenty-one Grammy awards. Id. He has a robust following on social media. With over 26 million followers, "his Twitter feed is regularly at the center of a maelstrom of discussion and scrutiny by both the media and public at large." Id. ¶ 28. "Despite Mr. West's wild success and popularity, and his personal claim as the most influential person in the world, he has been plagued with an extraordinary amount of debt...." Id. ¶ 29. It was against this backdrop of financial struggle, by both Tidal and Mr. West himself, that Mr. West announced the release of his album on Tidal in early 2016. Id. "It quickly became one of the most anticipated albums of 2016." Id.

Tidal marketed that the album was available exclusively on Tidal. Id. In the first of the series of two Tweets that form the principal basis for Plaintiff's claims here, on February 14, 2016, the official Tidal Twitter account issued the following Tweet: "We're bringing @KanyeWests's #TLOP to fans around the globe. It's streaming exclusively on TIDAL.com." Id. The next day, February 15, 2016, Mr. West tweeted from his Twitter account: "My album will never never never be on Apple. And it will never be for sale ... You can only get it on Tidal." Id. ¶ 30. The complaint alleges that Mr. West wrote his Tweet "both as an artist and owner of Tidal," and that he, "as a part owner of Tidal, is an agent of the company and therefore capable of making statements on its behalf." Id.

The press reported on Mr. West's Tweet in stories with headlines like "Kanye West says his new album will be a permanent Tidal exclusive," "Kanye West Says ‘The Life of Pablo’ ‘Will Never Be For Sale’ " and "Kanye West: You can only get The Life of Pablo on TIDAL." Id. ¶ 32. "Customers flocked to Tidal at a frenzied pace after Mr. West declared it would be the exclusive source of his album, and as a result, Tidal's subscription numbers skyrocketed." Id. ¶ 33. Indeed, within the first ten days of the release of The Life of Pablo , Tidal's subscription numbers tripled from 1 million to 3 million. Id. ¶ 34. Mr. West boasted to his Twitter followers about their impact on the increase in Tidal's subscription base. Id.

The Life of Pablo was available exclusively on Tidal for about a month and a half before Mr. West announced that it would be available for free streaming on both Apple Music and Spotify—somewhat less than Mr. West's tweeted "never never never." Id. ¶¶ 37-38. The complaint alleges that the defendants always knew that The Life of Pablo would not be available exclusively on Tidal forever. Id. ¶ 39. "As such, Mr. West and Aspiro deceived customers into believing that The Life of Pablo would only be available through the streaming service, when in fact it [sic] knew that statement to be false." Id. ¶ 40. The complaint claims that the defendants benefited from their alleged fraud as a result of Aspiro's increased subscriber base and subscription revenue.

C. Mr. Baker-Rhett Loses $9.99

The named plaintiff, Mr. Baker-Rhett, lives in California. Id. ¶ 14. He is a fan of Mr. West's music. Id. ¶ 49. Immediately after Mr. West's February 15, 2016 Tweet, Mr. Baker-Rhett signed up for Tidal's streaming service. Id. ¶ 50. As "a result of viewing Tidal's and Mr. West's announcements and representations that The Life of Pablo would only ever be available on Tidal," Mr. Baker-Rhett believed it was the only music platform on which the album would ever be available. Id. ¶ 53 (emphasis added). He began to stream The Life of Pablo that same day. Id. ¶ 51.

The first month of Mr. Baker-Rhett's subscription to Tidal was free. Id. ¶ 50. But before he learned that the album would be available on streaming sites other than Tidal, he was charged $9.99 for his second month. Id. ¶ 54. After learning that the album would be available on Spotify, for which he already had a paid subscription, Mr. Baker-Rhett cancelled his subscription to Tidal. Id. ¶¶ 54-55. The cancellation was effective before he was charged for a second time. Id. ¶ 55. Mr. Baker-Rhett asserts that had he known that Mr. West's album would eventually be made available to stream on platforms other than Tidal, he would never have signed up for the service at all. Id. ¶ 54. As a result of the defendants' allegedly deceptive Tweets, Mr. Baker-Rhett was out $9.99. Id. He launched this lawsuit to get it back.

D. Procedural History

Plaintiff filed this action in the Northern District of California against Mr. West, who resides in California, and S. Carter Enterprises, LLC. ECF No. 1. The factual predicate of the original complaint was very similar to that pleaded in the governing complaint in effect now. Significantly, however, the original complaint asserted claims arising under California state law—particularly California's false advertising law, Cal. Bus. & Prof. Code § 17500, unfair competition law, Cal. Bus. & Prof. Code § 17200, et seq. , and California common law of fraudulent inducement and unjust enrichment. Id. ¶¶ 64-101. The plaintiff amended his complaint on May 9, 2016, replacing defendant S. Carter Enterprises, LLC, with Aspiro, but continuing to assert claims under California law. ECF No. 5. After Aspiro filed a motion to transfer venue of the litigation to the Southern District of New York, the parties entered into a stipulation to transfer the case to this district. ECF No. 23.

Some months after the case was transferred to this district, Aspiro filed a motion to dismiss the first amended complaint, arguing, among other things, that New York substantive law should apply to the plaintiff's claims, and that, as a result, the claims governed by California law should be dismissed. ECF No. 49. The motion relied heavily on the effect of the choice of law provision contained in the "Terms and Conditions" to which Mr. Baker-Rhett and other Tidal subscribers agreed in order to sign up for the service. That provision read as follows:

The Agreement is governed by the internal substantive laws of the State of New York, without respect to its conflict of laws provisions. If there is any dispute between

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