A judge has dismissed a shareholder lawsuit against Block over its “terrible business decision” to purchase a majority stake in the Tidal music service.
Block purchased a majority stake in Tidal in March 2021, spending some $297 million to seal the deal. According to AP News, a pension group shareholder took issue with the deal, claiming that Block’s board of directors, as well as founder and CEO Jack Dorsey, were irresponsible and breached their fiduciary duty. A major factor in the lawsuit is the fact that Tidal was essentially a failing business, and one under criminal investigation.
The outlet reports that Chancellor Kathaleen St. J. McCormick, while sympathetic to the shareholders’ view of the deal, nonetheless ruled that it did not breach Delaware law.
“It seemed, by all accounts, a terrible business decision,” the judge said of the deal. “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.”
The judge did find irregularities surrounding the deal, not the least of which was Dorsey’s personal friendship with Jay-Z, whose real name is Shawn Carter.
“It is reasonably conceivable that Dorsey used corporate coffers to bolster his relationship with Carter,” wrote McCormick.
Nonetheless, Judge McCormick ruled that the plaintiffs did not sufficiently prove bad faith.
“Plaintiff has alleged sufficient facts to make a reasonable person question the business wisdom of the Tidal acquisition, but plaintiff has failed to plead that the committee defendants acted in bad faith and thus faced a substantial likelihood of liability for that decision,” she wrote.
