Justin Baker-Rhett v. S. Carter Enterprises, LLC et al
Filing
117
MEMORANDUM OPINION AND ORDER re: 96 MOTION to Dismiss [Refiled]. filed by Aspiro AB, 99 MOTION to Dismiss Plaintiff's Second Amended Class Action Complaint [Refiled] filed by Kanye West.For the reasons stated above , the defendant's motions to dismiss are GRANTED in part and DENIED in part: The plaintiff's claims arising under Sections 349 and 350 of New York's General Business Law are dismissed without prejudice. The plaintiff's fraudule nt inducement claim against Aspiro predicated on Aspiro's February 14 Tweet or alleged fraudulent concealment is dismissed without prejudice. The plaintiff's claim against Aspiro may proceed to the extent that it is predicated upon the alleged misrepresentation in Mr. West's February 15 Tweet. The Clerk of Court is directed to terminate the motions pending at ECF Nos. 96 and 99. (Signed by Judge Gregory H. Woods on 6/22/2018) (tro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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JUSTIN BAKER-RHETT, individually and
:
on behalf of others similarly situated,
:
:
Plaintiff, :
:
-against:
:
ASPIRO AB, a Norwegian limited liability
:
company, and KANYE WEST, an
:
individual, together d/b/a/ TIDAL,
:
:
Defendants. :
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USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: 6/22/2018
1:16-cv-5801-GHW
MEMORANDUM OPINION
AND ORDER
GREGORY H. WOODS, United States District Judge:
On 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.
Unless otherwise noted, the facts are taken from the complaint and are accepted as true for the purposes of this
motion. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). However, “the tenet that a court must accept
as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009).
1
2
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
3
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.
4
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 you and Supplier about or involving the Service, by using the Service, you
expressly agree to submit to the exclusive personal jurisdiction of the state and
federal courts sitting in the State of New York, County of New York.
5
ECF No. 52-2 at 12.
Aspiro’s memorandum of law in support of its motion analyzed the application of this
governing law provision under California law. First Aspiro Mem. of Law (ECF No. 50) (“First
Aspiro Mem.”), at 8. In the first step of the analysis, Aspiro asserted that the claims contained in the
complaint fell within the scope of the contractual governing law provision when analyzed under
California law. Aspiro wrote that “California courts take a liberal approach to governing law
provisions in agreements. Unlike in New York, California courts do not require contracting parties to
explicitly state that the governing law provision will apply to claims tangential to the agreement, as
well as those pertaining to the contract itself.” Id. (emphasis added). Aspiro argued that, as a result
of the governing law clause “any claims relating to the service, including his relationship with the
service provider, would be governed by New York state laws.” Id. at 7. Aspiro claimed that “[t]his
choice of law provision further encompasses ‘any dispute between you and [Aspiro] about or
involving the Service.’” Id. at 9.2 The Court highlights the fact that Aspiro’s argument was expressly
tethered to California law, and stated that the result would be different if analyzed under New York
law.
In the second step of its analysis of the governing law clause applying California law, Aspiro
argued that New York bore a substantial relationship to the plaintiff’s claims. Id. at 10. As part of
its argument, Aspiro asserted that “While Aspiro itself and all aspects of the sign-up process for
Tidal are managed outside the United States, the individuals that approve the sending of Tweets
from Tidal’s Twitter account, including the Tweet referenced in paragraph 30 of the Complaint,
are based in New York.” Id. (citing Tibon Decl. (ECF No. 51) ¶ 3).
2
Aspiro’s argument here arguably misquotes the text of the choice of law provision. The quoted language in Aspiro’s
argument is found in the second sentence of the provision, which relates to choice of venue. The parties agree to venue
in New York for any dispute related to the services under the agreement. The choice of law provision contained in the
first sentence of the provision is narrower—New York law is stated to govern the “Agreement,” not all disputes related
to the services.
6
The plaintiff decided not to oppose Aspiro’s motion to dismiss the first amended complaint.
Instead, the plaintiff entered into a stipulation to dismiss the California claims and amend the
complaint. Stipulation Regarding Dismissal and Proposed Second Am. Class Action Compl. (ECF
No. 58) (“Stipulation of Dismissal”). In the Stipulation of Dismissal, the plaintiff wrote that “After
reviewing the arguments and authorities in Aspiro’s dismissal papers, Plaintiff has concluded that, in
the interests of justice and efficiency, his claims should properly be asserted under New York law.”
Id. ¶ 5. The parties went on to agree that the plaintiff would dismiss his claims under California
statutory law with prejudice as to himself, but without prejudice as to the putative class. Id. ¶¶ A, B.
The plaintiff specifically reserved his right to bring analogous claims under New York law. Id. The
plaintiff also agreed to dismiss his fraudulent inducement and unjust enrichment claims—the latter
with prejudice as to himself, but not as to any putative class. Id. ¶¶ C, D. The Stipulation of
Dismissal set a deadline for the submission of a proposed Second Amended Complaint. Id. ¶ E.
The Court “So Ordered” the parties’ Stipulation of Dismissal on October 17, 2016. Id. at 5.
The plaintiff filed his Second Amended Complaint on October 18, 2016. ECF No. 59. In
it, for the first time, the plaintiff asserted claims under Sections 349 and 350 of New York State’s
General Business Law, and for fraudulent inducement. Id. at 17-23. Both Aspiro and Mr. West filed
motions to dismiss the claims brought in that complaint. ECF Nos. 96, 99. Those motions are the
subject of this opinion.
II.
LEGAL STANDARD
The defendants seek dismissal under both Federal Rules of Civil Procedure 12(b)(1) and
12(b)(6). To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “a
complaint must allege sufficient facts, taken as true, to state a plausible claim for relief.” Johnson v.
Priceline.com, Inc., 711 F.3d 271, 275 (2d Cir. 2013) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 55556 (2007)). To determine plausibility, courts follow a “two-pronged approach.” Ashcroft v. Iqbal, 556
7
U.S. 662, 679 (2009). “First, although a court must accept as true all of the allegations contained in a
complaint, that tenet is inapplicable to legal conclusions, and threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice.” Harris v. Mills, 572 F.3d
66, 72 (2d Cir. 2009) (alterations and internal quotation marks omitted) (quoting Iqbal, 556 U.S. at
678). Second, a court determines “whether the ‘well-pleaded factual allegations,’ assumed to be true,
‘plausibly give rise to an entitlement to relief.’” Hayden v. Paterson, 594 F.3d 150, 161 (2d Cir. 2010)
(quoting Iqbal, 556 U.S. at 679). Determining whether a complaint states a plausible claim is a
“context-specific task that requires the reviewing court to draw on its judicial experience and
common sense.” Iqbal, 556 U.S. at 679.
Claims sounding in fraud are subject to the heightened pleading requirements of Federal
Rule of Civil Procedure 9(b). Ganino v. Citizens Utils. Co., 228 F.3d 154, 168 (2d Cir. 2000). Rule 9(b)
requires that the complaint “state with particularity the circumstances constituting fraud.” Fed. R.
Civ. P. 9(b). To satisfy that requirement, the complaint must “(1) specify the statements that the
plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements
were made, and (4) explain why the statements were fraudulent.” ATSI Commc’ns, Inc. v. Shaar Fund,
Ltd., 493 F.3d 87, 99 (2d Cir. 2007) (citing Novak v. Kasaks, 216 F.3d 300, 306 (2d Cir. 2000)).
In resolving a motion to dismiss under Rule 12(b)(6), courts generally may not consider
materials extrinsic to the complaint. Fed. R. Civ. P. 12(d). However, that rule is not absolute. In
addition to the facts alleged in the complaint, courts “may consider any written instrument attached
to the complaint, statements or documents incorporated into the complaint by reference, legally
required public disclosure documents filed with the SEC, and documents possessed by or known to
the plaintiff and upon which it relied in bringing the suit.” ATSI, 493 F.3d at 98. Courts may also
consider “matters of which judicial notice may be taken,” Goel v. Bunge, Ltd., 820 F.3d 554, 559 (2d
Cir. 2016) (citation omitted).
8
Pursuant to Rule 12(b)(1), a court must dismiss a claim if, among other things, it determines
that the plaintiff lacks standing to prosecute it. Bldg. & Constr. Trades Council v. Downtown Dev., Inc.,
448 F.3d 138, 144 (2d Cir. 2006). When a Rule 12(b)(1) challenge is brought on the basis of the
pleadings, a court is required to accept as true “all material allegations of the complaint, and must
construe the complaint in favor of the complaining party.” Id. However, the burden remains with
the party asserting jurisdiction to allege facts demonstrating standing. See, e.g., Johnson v. Bryson, 851
F. Supp. 2d 688, 699 (S.D.N.Y. 2012). The Court may, if necessary, rely on evidence outside the
pleadings in deciding a Rule 12(b)(1) motion. Cortlandt St. Recovery Corp. v. Hellas Telecomm., S.à.r.l, 790
F.3d 411, 417 (2d Cir. 2015).
Since this case is brought as a putative class action, it should be highlighted that Article III
“[s]tanding cannot be acquired through the back door of a class action.” Wallace v. Ahearn, No. 13
Civ. 2520, 2014 WL 4659307, at *9 (E.D.N.Y. July 15, 2014) (quoting Allee v. Medrano, 416 U.S. 802,
829 (1974) (Burger, C.J., concurring in part and dissenting in part)). Rather, “the named class
plaintiffs must allege and show that they personally have been injured, not that the injury has been
suffered by other, unidentified members of the class to which they belong and which they purport to
represent.” Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck–Medco Managed Care, LLC,
433 F.3d 181, 199 (2d Cir. 2005) (quotation marks and citations omitted). Thus, “‘for every named
defendant there must be at least one named plaintiff who can assert a claim directly against that
defendant, and at that point standing is satisfied and only then will the inquiry shift to a class action
analysis.’” Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck–Medco Managed Care, LLC, 504
F.3d 229, 241 (2d Cir. 2007) (quoting 1 Alba Conte & Herbert B. Newberg, Newberg on Class
Actions § 2:6 n.3 (4th ed. 2002)).
III.
DISCUSSION
The plaintiff has brought claims against the defendants for (1) violations of Sections 349 and
9
350 of New York State’s General Business Law, and (2) fraudulent inducement. The defendants
claim that plaintiff lacks standing to assert his New York statutory claims, and that the Tweets at
issue cannot form the basis for a claim of fraudulent inducement because they were true at the time
made. The Court analyzes each of those arguments in turn below.
A. Mr. Baker-Rhett Lacks Standing to Sue Under the NY GBL
Mr. Baker-Rhett lacks standing to sue under Sections 349 and 350 of the New York General
Business Law in connection with the alleged transactions. Section 349 prohibits “[d]eceptive acts or
practices in the conduct of any business, trade or commerce or in the furnishing of any service in
this state.” N.Y. Gen. Bus. Law § 349(a). Section 350 prohibits “[f]alse advertising in the conduct
of any business, trade or commerce or in the furnishing of any service in this state.” Id. § 350. To
establish a claim under either Section 349 or Section 350, “a plaintiff must allege that a defendant
has engaged in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff
suffered injury as a result of the allegedly deceptive act or practice.” City of New York v. Smokes–
Spirits.Com, Inc., 12 N.Y.3d 616, 621 (2009) (citation omitted); see also Koch v. Acker, Merrall & Condit
Co., 18 N.Y.3d 940, 941 (2012).
“Sections 349 and 350 contain a ‘territoriality’ requirement: to state a claim under either
provision, the deception of consumers must occur in New York.” 4 K & D Corp. v. Concierge
Auctions, LLC, 2 F. Supp. 3d 525, 547 (S.D.N.Y. 2014) (citing Goshen v. Mut. Life Ins. Co. of N.Y., 98
N.Y.2d 314, 325 (2002); Cruz v. FXDirectDealer, LLC, 720 F.3d 115, 124 (2d Cir. 2013)). “[T]o state
a claim under either Section 349 or Section 350, the plaintiffs must show, at the very least, that the
deceptive transaction occurred in New York in order to satisfy the territorial requirement.” Id.; see
also Cline v. TouchTunes Music Corp., 211 F. Supp. 3d 628, 631-33 (S.D.N.Y. 2016).
There are no allegations that the alleged deceptive transaction involving Mr. Baker-Rhett
occurred in New York. It is not alleged that Mr. Baker-Rhett viewed the allegedly deceptive Tweets
10
in New York, or that he subscribed to the Tidal service in New York—it may be that he did so in
California where he resides and where he first brought this suit. The only link that Mr. Baker-Rhett
can point to in order to establish a link to New York is the choice of law and venue provision in the
“Terms and Conditions” that he agreed to when he signed up for the service.
The language of the governing law provision contained in the “Terms and Conditions”
agreed to by Mr. Baker-Rhett does not extend New York law to all aspects of Mr. Baker-Rhett’s
relationship with Aspiro. Under New York law, “a choice-of-law provision indicating that the
contract will be governed by a certain body of law does not dispositively determine that law which will
govern a claim of fraud arising incident to the contract.” Krock v. Lipsay, 97 F.3d 640, 645 (2d Cir.
1996) (citation omitted). “Under New York law, in order for a choice-of-law provision to apply to
claims for tort arising incident to the contract, the express language of the provision must be
‘sufficiently broad’ as to encompass the entire relationship between the contracting parties.” Id.
(citation omitted). The governing law clause at issue here is not so broad. It states only that the
“Agreement is governed by the internal substantive laws of the State of New York.” The parties’
contractual agreement is governed by New York law, but the governing law clause does not override
the territorial constraints contained in Sections 349 and 350 of the General Business Law.
The choice of venue provision in the “Terms and Conditions” is also insufficient to establish
that Mr. Baker-Rhett can bring claims under the New York statute. “[T]he mere fact that parties
agreed to be bound by New York law and to resolve their disputes in courts in New York does not,
in itself, provide any indication as to where a transaction occurred.” 4 K & D Corp. v. Concierge
Auctions, LLC, 2 F. Supp. 3d at 547-548.
The doctrine of judicial estoppel does not save Mr. Baker-Rhett’s statutory claims. The
plaintiff, understandably perturbed by the defendants’ apparent volte-face, argues that the doctrine of
judicial estoppel prohibits the defendants from arguing that Mr. Baker-Rhett cannot bring claims
11
under New York law, given that they had argued in the First Aspiro Memorandum of Law that the
governing law clause in the “Terms and Conditions” precluded him from bringing analogous claims
under California law.
The doctrine of judicial estoppel does not apply here, however, because the Court took no
action on the basis of Aspiro’s arguments. “The purpose of judicial estoppel ‘is to protect the
integrity of the judicial process by prohibiting parties from deliberately changing positions according
to the exigencies of the moment.’ It prevents a party from asserting a ‘factual position . . . clearly
inconsistent’ with a position previously advanced by that party and ‘adopted by . . . the court in
some manner.’” Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 397 (2d Cir. 2011) (internal
citations omitted).
In New Hampshire v. Maine, 532 U.S. 742 (2001), the Supreme Court identified “several
factors” that “typically inform the decision whether to apply the doctrine in a particular case”:
First, a party’s later position must be clearly inconsistent with its earlier
position. Second, courts regularly inquire whether the party has succeeded in
persuading a court to accept that party’s earlier position, so that judicial acceptance
of an inconsistent position in a later proceeding would create the perception that
either the first or the second court was misled. . . . A third consideration is whether
the party seeking to assert an inconsistent position would derive an unfair advantage
or impose an unfair detriment on the opposing party if not estopped.
Id. at 750-51 (internal quotation marks and citations omitted). The Second Circuit “has consistently
limited the application of judicial estoppel to ‘situations where a party both takes a position that is
inconsistent with one taken in a prior proceeding, and has had that earlier position adopted by the
tribunal to which it was advanced.’” Uzdavines v. Weeks Marine, Inc., 418 F.3d 138, 148 (2d Cir. 2005)
(quoting Stichting v. Schreiber, 407 F.3d 34, 45 (2d Cir. 2005)). In particular, an agreement between
parties to settle a prior action does not satisfy the second of those two requirements: a “settlement
neither requires nor implies any judicial endorsement of either party’s claims or theories, and thus a
settlement does not provide the prior success necessary for judicial estoppel.” Bates v. Long Island
12
R.R. Co., 997 F.2d 1028, 1038 (2d Cir. 1993) (internal citation and quotations omitted).
Judicial estoppel does not apply here because the Court did not adopt the argument
advanced by Aspiro in its motion to dismiss the first amended complaint. The plaintiff decided to
enter into the Stipulation of Dismissal based on his analysis of the arguments raised in Aspiro’s
motion. Stipulation of Dismissal ¶ 5. The Court “So Ordered” the stipulation to which the parties
voluntary agreed, but never evaluated or adopted the arguments by Aspiro that persuaded the
plaintiff to do so.3 The parties’ agreed Stipulation of Dismissal was the functional equivalent of a
settlement, and does not trigger the application of judicial estoppel.
Because the alleged deceptive transaction involving Mr. Baker-Rhett did not have a sufficient
nexus to New York, the claims by him arising under Sections 349 and 350 of New York’s General
Business Law are dismissed without prejudice.
B. Mr. West’s Tweet Supports Fraudulent Inducement Claim4
The plaintiff has adequately pleaded fraudulent inducement with respect to Mr. West’s
Tweet asserting that The Life of Pablo would “never, never, never” be available on Apple. Proof of
fraudulent inducement under New York law “requires a showing that ‘(1) the defendant made a
material false representation, (2) the defendant intended to defraud the plaintiff thereby, (3) the
3
Because the plaintiff’s argument founders on this point, the Court does not need to consider whether Aspiro’s position
was, indeed, inconsistent. It may not have been: Aspiro clearly noted in its memorandum to dismiss the first amended
complaint that the analysis that it was presenting was based on an application of California law, and that New York law
commanded a different result. The plaintiff may have expected that accepting Aspiro’s argument and entering the
Stipulation of Dismissal would open the door to a nationwide class action lawsuit applying New York statutory law, but
the seed of this motion was planted at the time of Aspiro’s first motion to dismiss, even if it was not yet seen.
Moreover, this is a putative class action. The Court would be hard pressed to extend improperly the protections of New
York’s General Business Law nationwide on the basis of an argument of judicial estoppel.
4
The Court applies New York law for purposes of this analysis. No party has briefed the question of choice of law with
respect to this set of motions, and all parties briefs assume that New York substantive law governs. If “[t]he parties’
briefs assume that New York substantive law governs the issues . . . such implied consent is, of course, sufficient to
establish the applicable choice of law.” Arch Ins. Co. v. Precision Stone, Inc., 584 F.3d 33, 39 (2d Cir. 2009) (quoting Golden
Pac. Bancorp v. FDIC, 273 F.3d 509, 514 n.4 (2d Cir. 2001)); see also Guardian Life Ins. Co. v. Gilmore, 45 F. Supp. 3d 310,
323 (S.D.N.Y. 2014) (collecting cases). While the Court relies on New York law for purposes of evaluating this issue
with respect to this motion, further evaluation of the choice of law question may be warranted with respect to the
fraudulent inducement claims brought on behalf of the plaintiff individually, as well as on behalf of any putative class.
13
plaintiff reasonably relied upon the representation, and (4) the plaintiff suffered damage as a result
of such reliance.’” Wall v. CSX Transp., Inc., 471 F.3d 410, 415-16 (2d Cir. 2006) (quoting
Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13, 19 (2d Cir.1996)); see also Gosmile, Inc.
v. Levine, 915 N.Y.S.2d 521, 524-25 (1st Dep’t 2010); PetEdge, Inc. v. Garg, 234 F. Supp. 3d 477, 49091 (S.D.N.Y. 2017); Perella Weinberg Partners LLC v. Kramer, 58 N.Y.S.3d 384, 389-90 (1st Dep’t
2017).
Mr. West argues that the plaintiff fails to make out a claim for fraudulent inducement
because his Tweet was true when made. Mr. West tweeted that his album would “never, never,
never” be available on Apple Music. Yet The Life of Pablo was released on Apple Music just a month
and a half later. How, then, was the statement true? Mr. West argues that the Life of Pablo was
“updated and remixed numerous times, with different vocals, lyrics, and arrangements,” and that
only those “‘newly updated, remixed and remastered version[s]’ of The Life of Pablo have been made
available for purchase or streaming on platforms other than Tidal.” West Memorandum of Law
(ECF No. 100) (“West Mem.”), at 11-12 (citing Second Am. Compl. ¶ 37 n.32). As a result, Mr.
West claims that his Tweet was not false.
Mr. West’s argument is tenuous, and certainly does not pass muster in the context of a
motion to dismiss, when the Court is required to draw all inferences in favor of the non-moving
party. After all, Mr. West tweeted that “My album will never never never be on Apple. And it will
never be for sale” Second Am. Compl. ¶ 30 (emphasis added). He did not commit that a particular
version, or mix, or master of his album would not be on Apple—his commitment was that the
“album,” “it,” would not be. And the album was made available on Apple Music shortly after the
Tweet. Regardless of whether or not Mr. West’s argument will persuade a jury at a later stage in the
case, the Court has little difficulty concluding that the complaint plausibly pleads that Mr. West’s
statement that his album would never never never be available on Apple Music or for sale was false.
14
The plaintiff’s claim against Aspiro on the basis of Mr. West’s Tweet is also supported by the
facts pleaded in the complaint. The complaint alleges that Mr. West is an agent of the Aspiro and is
therefore capable of making statements on its behalf. Id. Like Aspiro, the Court accepts the
allegation that Mr. West was Aspiro’s agent for purposes of this motion. Aspiro Reply Mem. of Law
(ECF No. 106), at 6 n.2. Unlike Aspiro, the Court concludes that the complaint adequately pleads
that Mr. West’s statements were within the scope of his agency relationship. The complaint alleges
that Mr. West received his ownership interest “in exchange for creating Tidal exclusive content to
drive consumers to the subscription only streaming platform.” Second Am. Compl. ¶ 23. Mr. West
also committed his social media presence to promoting Tidal. Id. ¶ 24. The specific Tweet issued by
Mr. West is described as a “reaffirmation” of Tidal’s exclusivity statement. Id. ¶ 30. These
allegations, together with the complaint’s description of the business relationship between Mr. West
and Tidal, are sufficient to nudge this claim across the line from conceivable to plausible.
The complaint adequately pleads scienter against both defendants with respect to Mr.
West’s Tweet. Although Rule 9(b) provides that “[m]alice, intent, knowledge, and other conditions
of a person’s mind may be alleged generally,” Fed. R. Civ. P. 9(b), a plaintiff must “allege facts giving
rise to ‘a strong inference of fraudulent intent,’” Novak, 216 F.3d at 307 (quoting Acito v. IMCERA
Grp., Inc., 47 F.3d 47, 52 (2d Cir. 1995)). “The requisite ‘strong inference’ of fraud may be
established either by (a) alleging facts to show that the defendants had both motive and opportunity
to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious
misbehavior or recklessness.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994).
The facts alleged in the complaint provide strong circumstantial evidence of conscious
misbehavior. The complaint describes in detail the dire financial condition of both Aspiro and Mr.
West at the time of the release of his album. Second Am. Compl. ¶¶ 25, 29. It describes the
tangible benefits of an increase in Tidal’s subscriber base for both defendants. See, e.g., id. ¶¶ 23, 34,
15
41-44, 48. Most significantly, the complaint asserts that at the time that Mr. West tweeted that the
album would “never never never” be available on Apple or for sale, both defendants knew that it
soon would. See, e.g., id. ¶¶ 39-40. And a mere six weeks later, it was. Id. ¶¶ 37-38. These
allegations constitute strong circumstantial evidence of conscious misbehavior.
C. Aspiro’s Tweet and Silence Alone Do Not Support Fraudulent Inducement
Claim
The plaintiff’s fraudulent inducement claim against Aspiro on the basis of the content of its
February 14, 2015 Tweet alone is not pleaded adequately. At the outset, the plaintiff does not
sufficiently plead reliance on that Tweet alone. According to the complaint, Mr. Baker-Rhett
subscribed to Tidal “[i]mmediately after viewing Mr. West’s February 15, 2016 announcement. . . .”
Id. ¶ 50. Mr. Baker-Rhett’s decision to sign up for Tidal was “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.” Id. ¶ 53 (emphasis added). All of the press stories touting the exclusivity of Tidal’s platform
focused on the content of Mr. West’s Tweet. Id. ¶ 32. As pleaded, the facts support the contention
that Mr. Baker-Rhett relied on Mr. West’s statement, but not on Tidal’s alone. The lack of a
plausible allegation that the plaintiff relied on Aspiro’s Tweet alone may be explained by the fact that
Tidal’s Tweet did not contain an express commitment that the album would be available exclusively
on Tidal in the future.
After all, on its face, Tidal’s Tweet was true. Tidal wrote the following: “We’re bringing
@KanyeWests’s #TLOP to fans around the globe. It’s streaming exclusively on TIDAL.com.” Id.
¶ 29. A short English primer may be warranted: “It’s” is a contraction of “it is.” Tidal’s statement
describes the world as it was at the time it was issued. The words of Tidal’s Tweet on their own
cannot reasonably be construed to contain a commitment that the album “will be” or “would be”
streaming exclusively on Tidal in the future. There is no allegation that Tidal’s statement was false
16
when made—the album was streaming exclusively on Tidal on February 14, 2016, and would remain
there exclusively for another six weeks.
Aspiro presented substantial arguments to support its position that Aspiro’s Tweet cannot
form the basis for a claim of misrepresentation because the facts asserted in it were true at the time.
See Aspiro Mem. of Law (ECF No. 98), at 12-13; Aspiro Reply Mem. of Law (ECF No. 106), at 12;
see also Gosmile, Inc., 915 N.Y.S.2d at 524-25 (“To state a claim for fraudulent inducement, there must
be a knowing misrepresentation of material present fact . . . .”); Perella Weinberg Partners LLC, 58
N.Y.S.3d at 389-90 (“To fulfill the element of misrepresentation of material fact, the party advancing
the claim must allege a misrepresentation of present fact rather than of future intent.”); GomezJimenez v. N.Y. Law Sch., 956 N.Y.S.2d 54, 60 (1st Dep’t 2012). The plaintiff did not respond.
Instead, the plaintiff pivoted, and argued that his fraudulent inducement claims against Aspiro are
based not on an affirmative fraudulent misrepresentation by the company in the February 14 Tweet,
but on its concealment from the market that the album would not be available forever exclusively on
Tidal. Pl.’s Mem. of Law in Opp’n (ECF No. 105), at 26-27.
As the plaintiff points out, a claim of fraudulent inducement can be based on a material
omission as well as a material misstatement. See, e.g., Comolli v. Huntington Learning Centers, Inc., 117 F.
Supp. 3d 343, 349 (S.D.N.Y. 2015) (describing first element of fraudulent inducement claim as “a
material misrepresentation or omission of fact”) (citing Crigger v. Fahnestock & Co., 443 F.3d 230, 234
(2d Cir. 2006)). However, “[a] cause of action for fraudulent concealment requires . . . an allegation
that the defendant had a duty to disclose material information and that it failed to do so.” GomezJimenez, 956 N.Y.S.2d at 59 (internal quotation marks and citation omitted). And here, the plaintiff
has alleged no special relationship or fiduciary obligation requiring a duty of full and complete
disclosure by Aspiro to its prospective customers. As a result, the plaintiff’s claims against Aspiro
are dismissed to the extent that they rely on a claim of fraudulent concealment of the limited
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duration of the exclusivity period.
IV.
LEAVE TO AMEND
In this circuit, “[i]t is the usual practice upon granting a motion to dismiss to allow leave to
replead.” Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1991); see also Fed. R. Civ. P.
15(a)(2) (“The court should freely give leave [to amend] when justice so requires.”). Accordingly,
the Court grants the plaintiff leave to amend the complaint, solely with respect to those claims that
were dismissed without prejudice, to correct the deficiencies identified in this opinion. Any
amended complaint must be filed no later than 30 days after the date of this order.
V.
CONCLUSION
For the reasons stated above, the defendant’s motions to dismiss are GRANTED in part
and DENIED in part:
The plaintiff’s claims arising under Sections 349 and 350 of New York’s General Business
Law are dismissed without prejudice.
The plaintiff’s fraudulent inducement claim against Aspiro predicated on Aspiro’s February
14 Tweet or alleged fraudulent concealment is dismissed without prejudice. The plaintiff’s claim
against Aspiro may proceed to the extent that it is predicated upon the alleged misrepresentation in
Mr. West’s February 15 Tweet.
The Clerk of Court is directed to terminate the motions pending at ECF Nos. 96 and 99.
SO ORDERED.
Dated: June 22, 2018
New York, New York
_____________________________________
GREGORY H. WOODS
United States District Judge
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