Breaching Contracts? Not Cool, Man.

I recently wrote about the importance of contracts in NFT dealings. What I probably should have included was a note on the importance of not breaching those contracts. Today, in one of my NFT group chats, a lawsuit alleging breach of contract against the artist known as Coolman CoffeeDan (“CoffeDan”) was sent around. It has interesting enough allegations that, similar to my Stolen Bored Ape v. Opensea article, I thought I would break the allegations down for non-lawyers. The Complaint, in full, is found here.

It is important to note that I haven’t seen the actual contract in question. Complaints are one-sided, so just because something is alleged doesn’t make it true. It is very possible the contract in question is not as airtight as the Complaint makes it out to be. However, while federal complaints often contain half-truths, they don’t often contain outright lies. Lying in federal court is a good way to subject yourself to sanctions and potentially have your case dismissed. So, without further ado, let’s get into it.

Basic Claims

The lawsuit was filed by a company called DigiART, LLC (“DigiART”) who claims to be an art promotion company that found CoffeeDan and turned him into the digital art success he is today. Essentially, DigiART alleges that it, along with its partner Marcel Katz (“Katz”), agreed to promote CoffeeDan’s art at Art Basel in Miami and assist CoffeeDan in monetizing his physical and digital art. In exchange, CoffeeDan would split proceeds of the sales of that digital art with DigiART 50/50 for the term of the agreement (which was 1 year, beginning in May, 2021).

As everybody in the NFT world knows, after Art Basil, CoffeeDan went on to launch the hugely successful Coolman’s Universe project. Under the agreement, DigiART claims CoffeeDan was required to approach DigiART with all NFT project ideas. So long as DigiART did not reject the idea, DigiART would be entitled to 50% of the proceeds from that project. Allegedly, CoffeeDan did the Coolman’s Universe project on his own and without first obtaining DigiART’s approval (or rejection).

DigiART is now claiming that, under their agreement with CoffeeDan, DigiArt is entitled to 50% of primary proceeds and secondary sale royalties because that NFT project was created and sold during that one year agreed upon term. DigiART alleges that it lived up to its side of the deal by promoting and turning CoffeeDan from an minor and unsuccessful artist into a millionaire, and thus is entitled to the compensation they bargained for in exchange for this promotion. This is after CoffeeDan, in pre-litigation communications, rejected DigiART’s demands for those proceeds because “success breeds litigation.”

Juicy Allegations

As I said in my Bored Apes article, different lawyers have different lawsuit drafting styles. Some stick to bare bones allegations, and some spice it up to tell a compelling story for the judge. These attorneys chose the latter (i.e., woke up and chose violence). There are some pretty juicy allegations for anybody who has been following CoffeeDan and the Coolman’s Universe project.

Sham Purchases

In addition to claiming the famous $1,000 cup of coffee was a sham purchase that Katz had his friends make to drum up buzz for CoffeeDan, DigiART is claiming the FTX auction for some of CoffeeDan’s initial digital pieces were sham purchases as well, made to drum up hype. This type of market manipulation is not uncommon in traditional or digital art, but to lay it out publicly is a big swing by DigiART. They are out for blood.

Not A Cool Cat Knockoff

To all the haters and losers who said Coolman’s Universe was a Cool Cats knockoff- WRONG! Turns out, the use of cute cat imagery was allegedly because Katz (assumedly in large part due to his name) gave CoffeeDan the idea! These are the types of allegations you need to take with a grain of salt and understand who is making them, but I personally thought it was funny after seeing people on Twitter disagree on the degree over which Coolman’s Universe was inspired by Cool Cats.

Emojis in Legal Filings

Very rarely is the practice of law like what you see on TV. In litigation, my job is often much closer to that of a grad student than Harvey Specter. Most of litigation is drafting dry, long, and thoroughly research legal memorandums which virtually nobody will read or care about until that legal research is needed for a filing with the Court.

Having said that, any day in which you can put in the Court’s official record the statement “Stoked [hang loose emoji]” is a good day. I am 100% going to incorporate that emoji into my daily usage now, in case of future lawsuits.

Not Great Back-And-Forth

By including these allegations, DigiART is trying to cut off any claim by CoffeeDan that there was no a firm agreement or a meeting of the minds. These conversations show CoffeeDan read the agreement, knew enough to ask questions about who was in charge of minting under the agreement, and signed off on it verbally and in writing. CoffeeDan’s attorneys can’t love reading these allegations and knowing those texts are out there.

How Does This Effect Coolman Holders?

It shouldn’t. There aren’t sticky intellectual property issues involved, and the only potential outcome is how much of ongoing secondary sales royalties go to CoffeeDan vs. DigiART. There could be some concerns by holders that, if CoffeeDan loses this case, he might move on to a new project where he could keep 100% of the proceeds instead of 50% of the proceeds, but that would depend on the terms of the contract (which I haven’t read) and outcome of litigation.

If I was holding something from the Coolman’s Universe project, there is nothing in the lawsuit which would make me want to dump the project or artist as a whole. The most damning allegation are the sham sales, but nothing in the Complaint alleged CoffeeDan knew about or was involved in those. Simply that his art promoter partner potentially did some shady promotion tactics.

Conclusion

This Complaint, while super interesting and a fun read, is obviously one-sided. There are three sides to every lawsuit: The Plaintiff’s side, the Defendant’s side, and usually somewhere in the middle is the truth. This is a federal lawsuit, so all these filings (should) be publicly available. I am very much looking forward to CoffeeDan’s response after DigiART came out swinging in the Complaint.

If you have any questions, or would like me to cover anything in particular, reach out to me on either of my twitter pages. As always, I am an attorney, I am not your attorney. For legal advice, you should always consult (and pay for) an attorney.