[Asia Approach] How Was Kang Daniel's Rapid Comeback Possible?

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Daniel Kang Reveals Dispute with Agency on SNS

Seven Months After Injunction Application in March, Both Parties Reach Agreement

Court Finds It Difficult to Recognize Joint Business Contract and Rules Third-Party Transfer as Breach of Contract

[Asia Economy, Kyungho Lee, Editorial Planning Team Leader] Popular idol Daniel Kang posted on his social media on February 3, 2019, revealing that he was in a dispute with his agency. Daniel Kang's legal representative, Yulchon LLC, filed an injunction application to suspend the exclusive contract against his agency LM Entertainment (hereinafter LM) at the Seoul Central District Court on March 21. After about seven months, on September 27, 2019, LM and Daniel Kang's agency Connect Entertainment issued a press release stating "both parties withdraw all lawsuits," signaling the end of the exclusive contract dispute. The agreement was reached through mediation and arbitration by the Korea Entertainment Management Association. Daniel Kang is currently actively promoting.

The reason Daniel Kang was able to return quickly was that he filed an injunction for 'suspension of effect' of the exclusive contract rather than 'confirmation of non-existence of effect (termination).' Since injunctions are generally decided within about one to two months, if the injunction is granted, Daniel Kang can immediately engage in independent entertainment activities.

Let's take a closer look at the case. The key issues in the injunction application filed by Yulchon LLC were ▲ whether the joint business contract LM signed with a third party based on the exclusive contract with Daniel Kang legally constituted a 'transfer of rights under the exclusive contract,' and ▲ if so, whether Daniel Kang's prior consent, which must be obtained under the exclusive contract, was given.

Regarding this, the court judged that the joint business contract signed on January 28, 2019, between the agency and a third party was a contract in which LM transferred most of its rights under the exclusive contract with Daniel Kang to the third party. The court also found it difficult to recognize that Daniel Kang had 'implicitly consented in advance.' Furthermore, the court ruled that concluding a joint business contract transferring most of the rights under the exclusive contract to a third party without Daniel Kang's prior consent was not only a 'breach of the exclusive contract' but also an act that 'destroyed the trust relationship underlying the exclusive contract,' making it 'difficult to maintain the exclusive contract relationship as it was,' thus siding with Daniel Kang.

Manager Exclusion Request by Song Sohee, Agency Insists on Innocence

Key Issues: Whether There Was a Material Breach and Duty Performance

Supreme Court Sets Standard That Contract Continuation Is Difficult When Trust Is Broken

The Supreme Court ruling on the dispute between Song Sohee, famous as the 'Gugak Girl,' and her agency on September 10, 2019, also draws attention. Reviewing the lower court rulings, Song Sohee requested the exclusion of a manager accused of sexual crimes against agency singers from work. However, the agency insisted on the manager's innocence and continued to have the manager drive Song Sohee's vehicle. The agency was found to have breached the exclusive contract obligations, and Song Sohee claimed contract termination due to the breakdown of trust between the parties. The agency argued that this was not a material breach and that it had faithfully fulfilled its obligations under the exclusive contract. Regarding these facts, the Supreme Court ruled that 'the trust relationship between the parties was broken,' and in such cases, 'contract termination is possible even without a material breach of contract.'

Attorney Yongpyo Yeom of Yulchon LLC analyzed the Daniel Kang and Song Sohee cases as significant examples of exclusive contract disputes involving entertainers in his article 'Recent Trends in Exclusive Contract Disputes' published in the winter issue of the Korea Legislation Research Institute's 'Law Research.' According to Attorney Yeom, when an entertainment agency files an injunction against its artist to prevent them from signing exclusive contracts with third parties and engaging in entertainment activities, such requests are rarely accepted because the agency can seek monetary compensation after the trust relationship is destroyed. On the other hand, cases where artists file injunctions to suspend the effect of exclusive contracts due to breaches by the agency are increasingly being granted.

Attorney Yeom evaluated, "In the Song Sohee case, the Supreme Court set an important standard regarding exclusive contract termination by ruling that even if there is no material reason that makes it impossible to expect the continuation of the contract, the contract can be terminated if the trust relationship is broken." He also advised, "Given the nature of exclusive contract disputes, when disputes arise between entertainers and agencies, it is very important to seek expert advice to promptly and effectively correct mistakes, and to respond comprehensively and systematically by accurately informing the issues based on objective facts to avoid damage caused by inaccurate information."

Arbitration Through Arbitration Institute vs. Civil Litigation, Main Dispute Resolution Methods

Arbitration Offers Speed and Confidentiality Advantageous for Entertainment Disputes

Entertainment Cases Filed at Arbitration Institute Surge by 100 in Five Years

Methods to resolve disputes between entertainers and agencies include pre-litigation or post-litigation settlements, but generally, parties can choose between 'arbitration by the Korean Commercial Arbitration Board (KCAB) established under the Arbitration Act' and 'litigation in courts under the Civil Procedure Act.' According to Attorney Yeom, entertainment arbitration cases have been increasing recently, partly because the Fair Trade Commission's 'Standard Exclusive Contract' includes an arbitration clause. Unlike general litigation (which has three levels of appeal), arbitration is a single-instance process and is preferred for entertainment-related disputes due to its speed and confidentiality. While civil litigation can take two to three years to reach a final judgment, arbitration typically resolves disputes within six months, and entertainment cases often conclude in about three months on average.

According to Seungjae Choi, arbitrator at the Korean Commercial Arbitration Board (lawyer, Ph.D. in law), in his article 'Disputes and Arbitration in the Entertainment Industry' published in the KCAB's 'Arbitration Review,' the KCAB has received 143 entertainment-related cases, with over 100 cases filed in the past five years, showing a sharp increase. As introduced earlier, arbitration through the KCAB offers not only speed but also confidentiality, which is crucial for entertainers whose image is their livelihood. Attorney Choi said, "In the case of actress Hanna Kang, all procedures and details were kept confidential until the contract validity was confirmed, and the case became known only through the agency's press release after the case was closed." He added, "Considering the losses both parties would suffer if the progress of disputes between agencies and entertainers were disclosed daily, dispute resolution through confidential arbitration is clearly advantageous compared to court procedures, which are based on public trials."

Attorney Choi also cited 'dispute resolution by specialized arbitrators who are well-versed in the entertainment industry and its customs and practices' as an advantage of arbitration. He explained, "Even the arbitrators, who are legal professionals, are strictly appointed by the KCAB and are experts in related fields. Since these expert arbitrators make judgments, there is a higher probability of reaching a reasonable decision satisfactory to both parties, which is another advantage of arbitration." As of October 2019, the KCAB has 37 specialized arbitrators for the entertainment sector.