In a victory for rich and powerful friends sitting on beaches everywhere, a Delaware judge has dismissed a lawsuit against Jack Dorsey and his mobile payment company Block, saying the board was within its rights to buy Jay-Z’s music streaming service Tidal, even if the decision was objectively “terrible” and a result of Dorsey summering with the Carters in the Hamptons.Block had faced a shareholder suit from a pension fund as a result of the $300 million deal to acquire a majority stake in Tidal, which came as the streaming company was “failing financially” and facing a criminal investigation in Norway related to inflated streaming numbers.At particular issue was Dorsey’s burgeoning friendship with Jay-Z, and whether Dorsey and Block's board was within its right to make a major acquisition in part because of that friendship even if the business reasoning did not make sense. The judge notes that the idea to buy Tidal had come to Dorsey while he was “summering” with Jay-Z’s family in the Hamptons. Dorsey had, in fact, suggested Block, then called Square, acquire Tidal during a videoconference meeting he took from the Hamptons in 2020. “It seemed, by all accounts, a terrible business decision,” the judge stated in his ruling Tuesday. The plaintiffs said that a "transaction committee" at Block met to discuss the Tidal acquisition for only 35 minutes in September 2020. At a follow-up meeting the next month, the transaction committee discussed Tidal's low subscriber numbers, the fact it "had recorded multimillion-dollar losses in each of its previous ten quarters," Spotify's dominance in the streaming space, and "potential risks,” like the Norwegian criminal probe and U.S. federal lawsuit brought against Tidal by artists who said they were owed royalties. During the process, the transaction committee also discovered that Dorsey was “the sole Block management member in support of the acquisition.” But the deal moved forward anyway in March 2021. The court decision details Dorsey and Carter’s friendship in hilarious detail, noting they “share interests in cryptocurrency and philanthropy” and were “spotted vacationing together in Hawaii” just days after Block formally started the process of acquiring Tidal. Dorsey had additionally donated $10 million to Carter’s nonprofit in May 2020, and the pair created and funded an endowment the next year dedicated to “bitcoin development in India and Africa.” The judge dryly stated Tuesday that a “commonsense” interpretation of the situation was that Dorsey effectively used Block’s “corporate coffers” to further “bolster his relationship” with one of the greatest rappers alive. But, she added, the law is the law, and under Delaware law, “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.”Yes, the judge said, Dorsey might have been “incapable of impartially” considering the acquisition due to his burgeoning relationship with the writer of “Big Pimpin,’” it was harder to say that most of Block’s board had acted in 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,” the judge wrote.The suit has allowed insight into how at least some $300 million business deals happen—that is, as a result of two friends enjoying a nice talk in the Hamptons.Correction: A previous version of this article incorrectly referred to the judge in the case, Chancellor Kathaleen St. J. McCormick, using male pronouns.
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