Oct 27, 2023 2 min read

Latest payment delays at Utopia lead to new SourceAudio lawsuit

Utopia has been sued for a second time by an LA-based rights management platform that it originally planned to buy

Latest payment delays at Utopia lead to new SourceAudio lawsuit

Utopia Music has been sued for a second time by an LA-based company that it had originally planned to acquire.

In its new lawsuit, rights management and licensing platform SourceAudio claims that Utopia settled its previous lawsuit but then failed to make good on the commitments in that settlement.

So much so, SourceAudio is now alleging that the settlement was, in fact, a "ruse" to buy Utopia time and get the legal dispute out of the public forum. The firm's lawyers state in their new legal filing: "Utopia’s gameplaying must come to an end".

In its original lawsuit, filed with the courts in Delaware earlier this year, SourceAudio said that Utopia agreed a deal to buy the company in March 2022. The two companies signed a ‘membership interest purchase agreement’ - essentially a deal for Utopia to purchase SourceAudio’s shares to acquire the business - on 14 Mar 2022.

Utopia was set to pay a total of $26.5 million for the rights management platform, paying a $3 million deposit on signing the deal with the aim of completing the transaction in May last year. However, the deadline for completion - and paying the bulk of the purchase price - then kept getting pushed back. It was as a result of this that SourceAudio filed their original lawsuit against the company.

CMU has since obtained documents that show that Utopia has now paid $6,830,000 to SourceAudio. We’ve further established that a settlement agreement was reached between the two companies in “mid-September”, which was formally accepted by SourceAudio earlier this month.

As part of this settlement agreement, SourceAudio withdrew its lawsuit and Utopia agreed to pay another $400,000. The day the agreement was signed - believed to be 16 Oct - an immediate payment of $50,000 was made by Utopia. The next day - 17 Oct - Utopia was meant to pay $200,000 and a final $150,000 is due to be paid today, 27 Oct.

Sources close to that deal have told CMU that the company was unable to pay the $200,000 due the day after the settlement agreement was fully signed “due to funds that had been earmarked for this purpose being delayed”. Sources have also indicated that today’s deadline for the payment of $150,000 will be missed.

Hence the new lawsuit. According to Billboard, that new legal filing states: "Desperate to get the Delaware litigation out of the public eye, Utopia negotiated an agreement … in exchange for a full release and dismissal of the lawsuit. But as with the underlying contract, Utopia has refused to pay what it owes".

Indeed, the lawsuit goes on, Utopia failed to fulfil its commitments under the settlement within days. “It now appears that the settlement was simply a ruse by Utopia to buy time and avoid paying its debts”, the lawsuit states.

It then concludes: “SourceAudio brings this action to collect what it is owed [or] to rescind the fraudulently procured settlement agreement. Utopia’s gameplaying must come to an end".

Responding to questions about the new litigation, Utopia’s Chairman of the Board Mattias Hjelmstedt told CMU: “The payment delay is not in any way some sort of ‘gameplaying’”.

“We have paid all but $350,000 of our agreed debt to SourceAudio but have unfortunately experienced delays in several incoming payments which has led to an unfortunate chain reaction and delayed the last two payments that were due 17 and 27 Oct - these represent approximately 5% of the total amount we settled on”.

He concluded: “We are working on resolving this as fast as possible”.

Utopia recently appointed a new CEO charged with the task of moving the company beyond what has been a very challenging year.

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