CEO Noel Lee of Monster filed a legal complaint against Dr. Dre and Jimmy Iovine for deceiving him into ending their partnership when the company had been negotiating with Apple for an acquisition deal all along.
The deal, which cost Apple $3 billion in May 2014, could have cost Lee a fortune worth $150 million since he had been tricked into selling his company stake of 5 percent.
Lee further claims that Dr. Dre and Jimmy Iovine had entered into a "sham" deal with HTC in 2011. The deal eventually led to the termination of the contract between Monster and Beats.
"The HTC deal was a sham transaction to exclude Monster and Lee from future profits from the sale of the Beats by Dr. Dre product line and, ultimately, the sale of Beats as a company to Apple,'' alleges the lawsuit.
Beats sold 51 percent of company shares to HTC in 2011. The deal resulted in a change of control which had required Lee to turn over the intellectual property and research and development of Monster together with the data on its marketing and distribution. Monster partnered with Beats at its launch in 2008.
Later on, Beats repurchased the stake from HTC and allegedly deceived Lee by convincing him to sell his 5 percent stake in Beats. Lee alleges that the deals had caused him to reduce his stake to 1.25 percent. In the autumn of 2013, Lee sold his stake holdings for $5.5 million after he was told that there were no plans to sell the company at least for several years.
In May 2014, Apple acquired the company for $3 billion, which made Lee realized that he had been duped. Lee said Apple's acquisition of Beats cost him a fortune of as much as $150 million, the amount he would have gotten if he kept his company share of 5 percent.
Lee describes Iovine in the suit as "a respected but ruthless music mogul." When it comes to Dre, Lee says, "Other than his celebrity status as a rapper, Dre's primary contribution was to bless Monster's headphones when he exclaimed: 'That's the shit!' "
Compared with Beats, Monster is a smaller company which has a small single-digit percentage of the premium headphone market share in the U.S. Beats has around 60 percent of the premium headphone market. In 2014, the headphone market had reached around $2 billion, with half of it attributed to premium products such as the Apple-owned Beats.
Monster is now trying to strike back at Beats and is attempting to gain a bigger market share.
