Monster sues Beats Audio over allegations of fraud

Monster LLC which helped kick start the Beats line of headphones back in 2008 has now sued the Apple owned Beats by Dr. Dre brand over allegations of a “sham” transaction. The company has filed an official complaint at the Superior Court in San Mateo County, California. Apple hasn’t yet been named in the suit filed by Monster as the issue pertains to the change in ownership of Beats since it was partially acquired by HTC in 2011.

The suit claims that Beats bought back 25.5% of its stake from HTC shortly a month after it was acquired, indicating foul play. The acquisition by HTC effectively meant the end of Monster and Beats’ relationship due to the change-of-ownership clause mentioned in the original contract. This, according to Monster, cost the company millions in revenue.

Beyond this, Beats bought back its remaining shares which were owned by HTC, thus severing ties with the Taiwanese manufacturer. Beats was then acquired by Apple in a landmark $3.2 billion deal in May 2014.

Further, Monster CEO Noel Lee was allegedly tricked into selling his shares in Beats in September 2013 (8 months before Beats was acquired by Apple) after one of the board members (name not disclosed) mentioned that there would be no “liquidity event” for the next two years. These shares, according to Lee, could have been worth more than $100 million in value today were they not sold.

As is usually the case with courtroom battles, this one could take some time before seeing a resolution. Beats or HTC haven’t commented on the matter yet.

Source: WSJ

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