Cases of accepting part of an application for a provisional disposition suspending validity of an artist exclusive agreement, the contract term of which and excessive liquidated damages clause, etc.

In a case where an artist applied for a provisional disposition suspending the validity of an exclusive entertainment contract against his/her entertainment planner, the case holding that the above exclusive entertainment contract, the main contents of which are a long-term contract term and excessive liquidated damages clause, is prohibited from negotiating and concluding contracts with a third party regarding entertainment activities against the applicant's will, and prohibiting the applicant from interfering with the applicant's independent entertainment activities by using the market power, on the grounds that the entertainment planner exercises undue control and unfairly imposes undue burdens, and it excessively infringes on his/her economic freedom and fundamental rights, and it is reasonable to deem that the whole or part of the contract contents is null and void or the validity of the contract is extinguished on the grounds of the intention of reasonable duration.

Article 300(2) of the Civil Execution Act, Article 103 of the Civil Act

Kim Jae-Jon et al. (Law Firm Sejong, Attorneys Park Jong-soo et al., Counsel for the plaintiff-appellant)

S.M. Entertainment Co., Ltd. (LLC, Kim & Lee LLC, Attorneys Han-soo et al., Counsel for the defendant-appellant)

1. Until the main decision is rendered by the Claimant and the Respondent on the condition that the Claimant deposits each one billion won for the Respondent or submits a payment guarantee entrustment contract contract contract with the above amount as the insured amount:

The respondent shall:

(a) not negotiate or conclude a contract with a third party regarding entertainment activities, such as the applicant’s contribution to broadcasting and film, participation in performance, music record, participation in various entertainment events, against the applicant’s will;

(b) No person shall interfere with the applicants’ entertainment activities by raising an objection to the applicants’ entertainment activities that the respondent did not participate in by a third party, such as broadcasting company, music record producer, performance planning company, etc., or demanding the suspension of relation with the applicants.

2. The applicant's remaining claims are dismissed.

3. 1/3 of the costs of lawsuit shall be borne by the Respondent, and the remainder by the Respondent, respectively.

1. Until a judgment on the merits of the claim for confirmation of existence of the validity of the exclusive agreement between the petitioner and the respondent is rendered, the validity of the exclusive agreement entered in the separate sheet signed by the petitioner and the respondent shall be

2. With respect to entertainment activities, such as the applicant’s broadcast and film contribution, participation in performance such as concerts, music record, participation in various entertainment events, etc., the respondent:

(a) negotiate or enter into all contracts with third parties, such as broadcasting stations, music record producers, performance planning agencies, advertising agency and advertising planning agencies;

(b) demanded entertainment activities individually or jointly to the applicant against the applicant’s will;

(c)an act of raising an objection to, or requesting the prohibition of, the applicants’ entertainment activities against third parties, such as broadcasting companies, music record producers, performance planning companies, advertising agencies, advertising planning agencies;

(d)do not commit any act interfering with the applicants’ free entertainment activities on the premise that the exclusive entertainment contract in the separate sheet is in force.

3. Where the respondent violates the order under paragraph (2), 10,000,000 won per case of the violation shall be paid to the applicant.

1. Case summary

According to the purport of the whole records and examinations, the following facts are substantiated.

A. The applicant is a member of five male group "Dongbregrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrg

B. Since the mid-1980s, as the size of domestic entertainment industry has been expanded, the respondent directly discovered and promoted promising owners through long-term investment and planning beyond simple assistance activities, such as management of artist's schedule and brokerage of contribution contract, and has been in charge of the production and distribution of works such as music records, and has introduced a specialized management system that forms and maintains the human body of affiliated entertainers in Korea through active publicity and management. Group's "Dongbregrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrgrg

C. On May 14, 2003, the applicant Kim Jae-han entered into an initial exclusive agreement with the respondent on February 12, 2000, the applicant Park Jong-cheon entered into the agreement with the respondent on June 30, 2003, and since then the applicant Park Jong-cheon entered into the initial exclusive agreement with the respondent on five occasions as shown in the following table (a total of more than the initial contract and attached agreements referred to as the "instant agreement"), and the content of the instant agreement and its major modifications applied between the applicant and the respondent are listed in the attached sheet.

본문내 포함된 표 ？ 최초계약 1차 부속합의 2차 부속합의 3차 부속합의 4차 부속합의 5차 부속합의 신청인 김재중 2003. 5. 14. 2003. 12. 3. 2007. 2. 16. 2007. 12. 2008. 10. 29. 2009. 2. 6. 신청인 김준수 2000. 2. 12. 2003. 12. 3. 신청인 박유천 2003. 6. 30. 2004. 1. 12.

2. Determination on the right to be preserved

A. A juristic act with a content contrary to good morals and other social order is null and void (Article 103 of the Civil Act). The principle of freedom of contract, which is a means of realization of private autonomy, is recognized only to the extent permitted by legal order.

B. The following circumstances are substantiated according to the overall purport of the record and examination, including the above basic facts.

1) At the time of the applicant’s disposal of the estate, the domestic entertainment planning company had a specialized management system, such as the respondent, and had been led by the number of persons belonging to a large number of entertainment planning companies with a market share. These entertainment planning companies, through an early discovery of promising owners through recreation, etc., and have commercial success based on the planning ability to realize an image meeting the desire of the address-oriented class for the public culture through a long-term training and preparation process, or to lead direct prevalence, as the case has increased, since the applicant’s performance is not personal quality, there has been a critical variable whose marketing ability such as the reputation, planning power, or public relations power of the affiliated company, and as such, the settlement of the specialized management system as above, has been gradually strengthened the market control power of the large entertainment planning company. Meanwhile, from the standpoint of the entertainment planning company’s view, the entertainment planning company’s execution of the contract for the promotion and management of entertainment and the development of risks, etc., as well as the development of the management of the entertainment company’s exclusive management activities.

Due to the nature of the background and role structure of this contract, the position of an entertainment planning company in the specialized management system environment is a general phenomenon that is more structural superior than the number of affiliated entertainers(a) who are the other party to the exclusive contract.

In addition, in the process of the remaining annexed agreements that have been concluded after the establishment of a location as a virtual tree, the respondent still has not been able to secure equal negotiating power and negotiating power with the respondent, and the respondent has accepted the amendment unilaterally presented as a trial beneficiary by reflecting the corrective measures of the Fair Trade Commission or the court ruling in the related litigation or taking into account the applicant's location (Therefore, in the process of the above annexed agreements, the respondent's assertion that the respondent was a negotiating entity with equal or superior negotiating power with the respondent shall not be accepted).

2) Examining the validity period of the instant contract (Article 2), the period of the initial contract is 13 years from the date of the initial contract, which was 10 years from the date of the initial contract, through the first attached agreement, which was concluded on January 14, 2004 immediately before the date of the initial contract (for applicants who have made an effort for the long-term rental housing, the negotiation power seems to have been the lowest point of time). The contract date is the maximum of January 13, 2017 (for the applicants’ personal affairs and their personal affairs, the contract date may be extended more than that of the applicants, taking into account their military service period, etc.). The contract period of the 13-year exclusive contract is very likely that the applicants and the respondent will have no choice but to be the maximum of 15 years prior to the initial contract period (for the applicants who have made an effort for the long-term rental housing, the period of which is the most similar to the applicants’ prior entertainment period, in light of the possibility that the applicants and the respondent will have no longer come into a new entertainment period.

3) In addition, the instant contract does not discuss the applicant’s right to terminate the contract or right to choose one’s own right to terminate the contract against the respondent’s breach, and even when the respondent terminates the agreement with the respondent, the respondent is obliged to pay a large amount of damages or penalty as seen below (Article 11(3)). This is clearly compared with the fact that the respondent may transfer and use all or part of the terms and conditions of the contract to another company (Article 3(10). The respondent may delegate the management of the applicants to another company (Article 4). (Article 4) The applicant may suspend its activities and seek compensation for damages or terminate the contract without compensation (Article 11(1) and (3)).

4) Meanwhile, in accordance with Article 11(2) and (3) of the contract of this case, when the applicants intend to terminate the contract, they shall compensate the respondent for three times the total amount of investment (in any form, public relations expenses and all other expenses paid or used) and two times the actual profit during the remaining contract period as compensation for damages. This is not only subjective or variable, but also subjective or variable concept of "total amount of investment" or "actual profit", which is the basis for calculating excessive scale itself, but also subjective or variable concept of "total amount of investment" or "actual profit", which is the basis for calculation, can be used as a means to prevent the deviation from the contract of this case more thoroughly by expanding the amount of compensation as an artist who is economically successful with the applicant, such as the applicant, with a normal level of skills, and thereby expanding the amount of compensation. On the other hand, there is no provision on the estimated amount of compensation or the penalty for violation of the contract. Ultimately, it is difficult for the respondent to permit the applicant to escape from the contract of this case for more than one year prior to the contract period of this case.

5) As to this, it is inevitable for the respondent to set the exclusive contract period and enforce it through an estimate of damages in order to facilitate the discovery and investment of new persons due to the characteristics of the industry with high investment risk, and to prevent the free landing of competitors. In particular, in the case of a group of the “Dong Dong Dong Dongggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggggg

However, given the characteristics of the entertainment industry, the long-term contract period and excessive liquidated damages under the contract in this case can be justified solely on the ground that investment risk is high as only a small number of people have commercialized success in the entertainment industry. Investment risk elements appear to be able to apply the management techniques on the creation of financial resources and risk distribution, taking into account the characteristics of the entertainment industry, so that considerable diversification and mitigation can be made by applying the management techniques on the creation of financial resources and risk distribution, and it seems possible to have concluded contracts that can divide the responsibility and authority on the distribution of profits and losses with a balanced choice opportunity between the contracting parties, by reflecting the stages of the development of affiliated entrepreneurs, the popular figures, and the profitability outlook. Furthermore, in light of the main structure of the domestic virtual market as seen earlier, the long-term exclusive relationship, such as the contract in this case, as the contract in this case, functions as entry barriers to prevent the participation of the competitor, rather than preventing the participation of the competitor, it would be more likely to publicly announce the market power of the new business entity like the respondent.

In addition, it is difficult to conclude that the respondent has a reason to justify the contract period of this case 13 years, inasmuch as there is no particular explanation as to the point of conclusion, period, etc. of the contract with the entertainment company, which is cited by the respondent. In addition, even if it is necessary to secure the stable activity period in the domestic entertainment industry to lead the success of the domestic entertainment industry to the overseas market as alleged by the respondent, it cannot be deemed that the respondent unilaterally has discretion to operate the contract relationship with the first 13 years prior to the commencement of the contract period, as in this case, with the discretion to operate the overseas entertainment industry unilaterally for the Respondent only for the 13 years prior to the commencement of the contract period. Generally, considering that the relationship between the above Respondent and the entertainment industry has no choice but to entail considerable constraints on the freedom of individual artist's activities due to the nature of the entertainment contract, the Respondent's obligation to enter into the overseas entertainment contract itself can be deemed to be justified not only by the Respondent's obligation to manage the contract, but also by the Respondent's obligation to notify and explain of the content of the contract.

6) In addition, the Respondent partially improved the terms and conditions of profit distribution in consideration of the applicant’s location while maintaining a unilateral structure of the initial long-term exclusive agreement concluded by taking advantage of the respondent’s superior position, the defect in the content of the instant contract cannot be deemed to be cured, as long as the structure of the first long-term exclusive agreement was maintained.

C. In full view of the circumstances above, the main framework of the contract of this case is to exercise unfair control by taking advantage of the superior position of the respondent and to erase excessive economic freedom and burden on the applicants and to excessively infringe on their fundamental rights, and it is reasonable to deem that all or part of the terms of the contract to be null and void or its validity has become null and void on the grounds of the intention of reasonable duration.

Therefore, under the premise that the respondent continues to have an exclusive relationship under the terms of the contract of this case, the applicants demanded to suspend the act of entering into a contract with a third party, such as performance, contribution and other entertainment activities, regardless of the applicants' intent, and further, the applicants have the right to be preserved to seek the prohibition of objection or other interference with the entertainment activities, which are separate without the involvement or intervention of the respondent.

3. Determination on the necessity of preservation

A. The provisional disposition to determine a temporary position as stipulated in Article 300(2) of the Civil Execution Act is an urgent and provisional disposition that is allowed only when the disputed relation of right is determined in order to avoid significant damages or prevent imminent danger to the person having the right to a provisional disposition until the lawsuit on the merits is finalized, or where there are other necessary reasons. Whether such provisional disposition is necessary or not shall be determined on a concurrent basis by taking into account the relationship between the parties’ interests based on whether to accept the application for provisional disposition in question or not, the forecast of future success and failure in the lawsuit on the merits, and all other circumstances.

B. In the case of this case, an artist's exclusive entertainment contract is maintained on the premise of a high level of trust between the parties. In light of the conflict factors and the response methods and behaviors of both parties before and after the application of this case, which are explained by the overall purport of records and examination, it is judged that the basic trust relationship between the applicant and the respondent, which serves as the basis of the human management contract, has already been collapsed and it is difficult to maintain a normal exclusive entertainment relationship between the two parties before discussing the validity of the contract of this case. In addition, considering the influence of the respondent in the domestic entertainment market, if the judgment of this case is long-term, it is anticipated that the applicant's independent entertainment activity will be considerably restricted during that long-term period, and this might result in serious infringement factors on fundamental constitutional rights such as the applicant's freedom of choosing occupation and freedom of activities beyond the mere economic aspect of the contract relationship. On the other hand, the respondent's assertion on whether or not the provisional disposition of this case occurred in the event of the acceptance of the provisional disposition of this case is lacking.

Therefore, it is also explained that the necessity to preserve the temporary position that the applicant is allowed to perform his/her own entertainment activities before the dispute over the legal relationship in the merits lawsuit is finally settled.

C. However, regarding the specific scope of acceptance of the application in this case, entertainment activities, which are the main duty of applicants under the contract in this case, cannot be replaced by others as a continuous act liability. Thus, even before the invalidity or invalidity of the contract in this case becomes final and conclusive, the respondent does not have any way to seek compulsory performance in addition to claiming damages, etc. against the applicants. Even if the applicants refuse to perform the contract in this case, there may be cases where the applicants and the respondent have an interest in each case even though the exclusive relationship under the contract in this case does not exist, it cannot be ruled out that the possibility of continuing group activities such as the present time through such individual negotiation can not be determined. Some of the provisions of the contract in this case, such as the ratio of profit sharing from the past activities, can not be concluded as invalid in the provisional disposition stage, and it is difficult to determine that the respondent's order to suspend the necessary settlement process in the future or to prevent the applicants from entering into a contract against the applicants' intent in this case or to prevent the applicants' independent acts of interference with entertainment activities beyond the scope of the applicant's right protection.

4. Conclusion

Therefore, the application of this case is accepted within the scope of Paragraph (1) of this Article as the condition of providing security, and the remainder is dismissed as it is without merit. It is so decided as per Disposition.

Judges Parkdae-dae (Presiding Judge)