Starting with the dispute between group NewJeans and ADOR (HYBE), the entertainment industry is moving to reexamine the standards and responsibility of "trust relations." It is an attempt to find a balance between an agency's managerial control, contractual obligations, and an artist's autonomy. As cases over terminating exclusive contracts pile up, some say a benchmark is emerging to gauge a breakdown in trust relations.
According to the entertainment industry on the 6th, after the NewJeans-ADOR lawsuit, agencies are reviewing internal management standards and contract clauses. An official at a major agency said, "The courts interpreted the 'breakdown of trust' standard narrowly, and the sentiment is that unless there are serious legal violations, they do not see it as a breakdown in trust relations."
Earlier, NewJeans notified ADOR of contract termination, citing reasons including: ▲ breach of management obligations due to the ouster of former ADOR CEO Min Hee-jin ▲ leaks of videos from members' trainee days and disparaging remarks by HYBE employees ▲ damage to brand distinctiveness through content imitation ▲ harassment by employees of other affiliates. ADOR filed a lawsuit claiming the exclusive contract remains valid.
On the 30th of last month, the court did not accept all of NewJeans' claims. It found that the exclusive contract did not stipulate that Min, the former CEO, must handle NewJeans' management duties, and judged that the group was receiving favorable treatment, including a high-priced residence and a dedicated choreography practice studio provided by ADOR. In particular, when videos from members' trainee days were leaked, a request to stop posting was made through HYBE, and the court found no grounds to acknowledge concept copying or harassment by affiliate employees.
Cases in which exclusive contracts between artists and agencies were terminated for "breakdown of trust" have been recognized mostly only when there were serious circumstances such as failure to settle accounts or significant violations of personality rights.
A representative case involved an agency CEO's younger brother being indicted for raping a signed singer, yet being made to drive singer Song So-hee, who was a minor at the time. Song So-hee's side requested that the staffer be removed from duties, but the agency CEO refused, claiming the younger brother's innocence. The CEO's brother was later sentenced to prison. The court ruled that the series of incidents violated Song So-hee's personality rights and found that the parties' trust relationship had been broken, deeming the exclusive contract termination lawful.
The dispute between TV personality Chuu and her former agency centered on failure to settle accounts. An exclusive contract is structured so that an agency manages an entertainer's revenue-generating activities and distributes that revenue according to contract terms. Transparent settlements and provision of materials are the foundation of trust.
At the time, the agency did not provide Chuu with settlement payments or related documents. Chuu filed a lawsuit to invalidate the exclusive contract, and the court sided with Chuu, saying, "Failure to fulfill settlement obligations and an unreasonable settlement structure constitute a material breach that collapses the trust foundation of an exclusive contract."
Compared with the cases that serve as legal grounds, the NewJeans case is different in character. NewJeans received not only a residence and practice studio but also settlement payments of about 5.2 billion won per person. Even after the conflict became apparent and without NewJeans' cooperation, ADOR prepared for an album release and provided opportunities for fan meetings, events, and ad shoots. It also carried out work to verify alleged harassment by employees of other affiliates.
The industry expects the ADOR–NewJeans case to serve as a new barometer for exclusive contract disputes. To claim a breakdown of trust, one must specifically prove substantive breaches of contractual obligations, such as settlements or personality rights.
Attorney Kim Yeon-su of law firm One's media and entertainment team said, "If new evidence emerges on appeal that can support NewJeans' claims, the situation could change, but the bench has so far found most of NewJeans' assertions to lack basis or not constitute grounds for termination, and concluded that emotional antipathy or discomfort alone cannot be used to claim a breakdown in trust relations."
Kim added, "These determinations could become a precedent that provides criteria for when 'breakdown of trust relations' can be recognized as grounds for terminating an exclusive contract in similar disputes going forward."