ADOR, a label under HYBE, could have sought up to 100 billion won in penalty and damages from NewJeans member Danielle, who notified ADOR of terminating her exclusive contract. However, ADOR filed suit for one-third of that amount after considering the revenue Danielle could generate if she remains active and the likelihood of the claim being recognized by the court.
On the 9th, according to the entertainment industry, ADOR filed a lawsuit against Danielle seeking 33.1 billion won in penalties and damages. It demanded 30 billion won as a penalty and 3.1 billion won in damages for halting activities and failing to carry out ad shoots. ADOR also filed a 10 billion won damages suit against Danielle's mother and former ADOR CEO Min Hee-jin, holding them responsible for NewJeans' departure and delayed return.
A penalty is a sanction for breach of contract, an amount the breaching party must pay the other party. It is different from liquidated damages, which function as compensation.
The exclusive contract between ADOR and the NewJeans members reportedly states that the penalty is calculated as "the average monthly revenue for the two years immediately preceding the contract termination date × the number of remaining months in the contract." It is based on the government's "standard exclusive contract for popular culture artists."
As of Nov. 29, 2024, when Danielle notified ADOR of the termination, ADOR posted revenue of about 110.3 billion won in 2023 and about 111.2 billion won last year for the two prior years. Its only affiliated artists are NewJeans.
Dividing the average revenue of the prior two years, in the 110 billion won range, by the five members yields about 22 billion won in annual revenue per person. Converted monthly, Danielle generated about 1.8 billion won in revenue each month. Applying the roughly 56 months remaining on the NewJeans members' contracts, the penalty amounts to 100 billion won.
Arithmetically, the penalty is around 100 billion won, but whether the court will accept it as is is another matter. ADOR appears to have considered this and reduced the actual claim to one-third. Unlike liquidated damages, the Supreme Court precedent holds that a penalty cannot be reduced by the court if it respects the parties' intent. However, if it violates public order considering the circumstances and terms of the contract, the court may deem part of the clause "invalid."
The entertainment and legal industries say this is a strategy to reduce the duration of the lawsuit and the burden of proof. Some also argue that the size of the penalty ADOR is seeking is not excessive.
Attorney An Seul-a of Daejin LLC said, "There have been cases where courts did not accept the penalty clause as is and deemed part of it invalid after considering various factors," adding, "The 30 billion won level is a reasonable judgment that maintains the clause's effect while increasing the likelihood of the court granting it."
Attorney Kim Yeon-su of One LLC's media and entertainment team said, "If you claim the arithmetically maximum amount, parts of the penalty clause could be found invalid," adding, "They adjusted the claim to a level that can be viewed as reasonable considering the actual revenue structure, contribution to activities, and remaining contract term."
ADOR also filed a 10 billion won damages suit against Danielle's mother and former CEO Min, seeking compensation for losses ADOR suffered due to NewJeans' departure and suspension of activities. Danielle is said to have tried to sign ad contracts or appeared in content without consulting ADOR, even though the exclusive contract had not been terminated.
An entertainment industry source said, "Typically, penalty disputes arise when an artist claims a justified termination of an exclusive contract due to unfulfilled settlements or a breakdown of trust, but in this case, the conclusion is that the ADOR–Danielle exclusive contract is valid."
The source added, "If the contract is valid yet ad contracts were attempted or outside activities took place without consultation, that would be a factor increasing the agency's business risk," and "whether ADOR can prove the amount of damage will also be key."