Management dispute with former head of acquired drama studio

Artist Company says founder blocked its control

Court finds breach of contract

Actor Lee Jung-jae. [Newsis]
Actor Lee Jung-jae. [Newsis]

Artist Company, the talent agency whose largest shareholder is actor Lee Jung-jae, has won its appeal in a damages suit against the founder and former chief executive of a drama production company it acquired in 2024.

According to legal sources, the Seoul High Court's Civil Division 16-2, presided over by Judges Kim Seon-hee, Lee Won-seok and Jeong Jae-o, ruled partly in favor of Artist Company and Lee in their damages suit against Kim Dong-rae, former chief executive of Raemong Raein — now Artist Studio — upholding the first-instance verdict.

The court ordered Kim to pay 2.78 billion won to Artist Company, 749 million won to Lee and a combined 899 million won to two other plaintiffs.

All plaintiffs were investors in Raemong Raein. The ruling leaves Kim liable for a total of 4.4 billion won ($3.29 million) in damages.

Artist Company became Raemong Raein's largest shareholder in March 2024 through a paid-in capital increase. A management dispute with Kim, the drama studio's founder, followed over the direction of the company.

In June of that year, Artist Company filed the damages suit, alleging that Kim had refused to comply with investor demands and was blocking their participation in management.

Kim rebuffed the claims, arguing that Artist Company had sought to use the investment funds for purposes other than those originally agreed upon — including an attempt to acquire a listed entertainment company whose shares had been suspended from trading.

The first-instance court found that Kim had violated an investment contract clause requiring him to have all registered directors and auditors of Raemong Raein resign and to manage existing business operations to the best of his ability until new directors were appointed. It acknowledged his liability for breach of contract.

During the trial, Kim's side argued there was no evidence that the use of investment funds had been restricted at the time the contract was signed, or that the parties had reached even an implicit agreement on the matter, but the court rejected the argument. The court held that Kim was required to pay the plaintiffs penalty damages and reimbursement of litigation costs.

On appeal, Kim's side again argued that the contractual obligation to have existing directors and auditors resign was no more than an ancillary duty and that he bore no liability for breach of contract in that regard — but the court again rejected the argument.

The appellate court also found that the investment contract explicitly identified the plaintiffs' acquisition of management control over Raemong Raein as the purpose of the agreement, and that the most fundamental means of achieving that purpose was taking control of the board of directors.


notstrong@heraldcorp.com