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It's a Triller -- Maybe? Not Really.

Triller is a social media platform positioned to compete with TikTok in the short video market.  On June 30, Triller HoldCo LLC announced that it had filed a draft registration statement with the SEC for an IPO on Nasdaq.  Also on June 30, of lesser news except, of course, to this article, Triller lost an appeal in its litigation against Carnegie Technologies, LLC.

In August 2017, Carnegie Technologies obtained a controlling interest in Triller through Carnegie’s affiliate, Denali Digital Media, LLC.  In December 2017, Carnegie entered into an Administrative Services Agreement (“ASA”) whereby Triller, Inc., agreed to outsource its tax department, human resources department, IT department, and accounting department, as well as its senior management, to Carnegie Technologies.  [Having read the ASA, I am not sure what was not outsourced to Carnegie.]  According to Carnegie’s pleadings, Triller rarely paid for these services; they were accrued as liabilities.

On October 8, 2019, Triller HoldCo, LLC (“HoldCo”) purchased Denali’s stake in Triller.  The liabilities that had been accrued by Triller, Inc. to Carnegie were reduced to an unsecured $4.8 million promissory note (the “Note”) at 10% interest with a single balloon payment due on October 8, 2021. Triller, Inc. then assigned the Note “in its entirety” to Triller Legacy, LLC (“Legacy”).  Legacy was a minority owner of HoldCo.  Legacy was owned by the original investment group in Triller, Inc., including Carnegie.  Legacy assumed liability for the Note.

Following October 8, 2019, Carnegie continued to provide administrative services to Triller, Inc.  Several months later, Carnegie filed suit against Triller because it was owed money for those ongoing services.  Triller’s default under the ASA triggered a cross-default provision under the Note, and Carnegie accelerated the maturity of the Note.

Triller defended the claim against the Note on the basis that it was absolved from all liability when it assigned the Note to Legacy.  However, Triller could not identify any specific language in any document that extinguished Triller’s liability under the Note.  Neither could the federal court in the Western District of Texas, which found that Triller remained liable under the Note.  On June 30, the Fifth Circuit Court of Appeals agreed and ruled in Carnegie’s favor.  Triller needed to provide clear evidence that the parties intended to extinguish its obligations under the Note but the assignment and assumption agreement was silent on that issue. 

My Take:  Assignments add; releases remove.  I have counseled many clients over the years who thought, as Triller did, that an assignment of its contract (or lease) absolved it from any ongoing responsibility.  The sad news for them is that assignments do not release parties from liability; they only add parties to liability.  To be removed from liability, you must be released.  Unlike other court decisions that came down on June 30th, there was really no new legal ground plowed here.  Remember this legal rule of thumb:

Assignments Add – Releases Remove

May you find joy in what you do and who you are with.