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Judge tosses key claims in Monster lawsuit against Beats

A California superior court judge on Monday threw out key claims in a lawsuit alleging Beats cofounders Jimmy Iovine and Dr. Dre swindled audio company Monster out of its investment in the Beats by Dre headphone brand just prior to Apple's acquisition in 2014.




Los Angeles Superior Court Judge William Fahey handed down a summary judgment dismissing claims that Monster and its CEO Noel Lee were duped out of a 5 percent share of the Beats by Dre brand, a move orchestrated through Beats' "sham" sale to HTC, the Associated Press reports.

Leveled early last year, the lawsuit asserts Iovine and Dre, whose real name is Andre Young, obfuscated the design, manufacturing and marketing contributions Monster and Lee put in to the Beats by Dre headphone lineup when the brand was sold to HTC for $300 million in 2011. The sale triggered a change of control clause that allowed Beats to completely sever ties with Monster.

Shortly after Monster was out of the picture, Iovine and Dre repurchased a 25.5 percent share in Beats as Lee drew down his stake to 1.25 percent. The lawsuit alleges misrepresentations about Beats' future plans ultimately prompted Lee to relinquished his remaining stake in the company in 2013 for a $5.5 million.

Eight months after Lee withdrew, Apple purchased the Beats brand for $3 billion. Had Lee kept his 1.25 percent share, it would have been worth more than $30 million.

Fahey in his ruling decided Beats was within its rights under existing contracts, adding that Lee and Monster entered into the agreement as sophisticated investors, according to the report. Further, Fahey cleared HTC and Beats investor and board member Paul Wachter of any wrongdoing

The case is scheduled to go to trial next week, but with the core of Monster's argument gutted, the focus now turns to Beats' plea to recoup attorney fees and associated costs.