Dr Dre and Jimmy Iovine sued by former partner over ‘sham’ Beats deal

Monster CEO Noel Lee claims he was unfairly cut out of partnership

Dr Dre and Jimmy lovine are being sued by a former partner over accusations of fraud while operating their headphones company Beats Electronics.

Noel Lee, the founder of audio cable producer Monster, has alleged that he was duped into terminating his contract with Beats shortly before the company was purchased by Apple for $3bn (£1.9bn). Monster is believed to have helped develop the original Beats By Dr Dre headphones under a partnership that began in 2008.

The lawsuit, filed in California, claims Dre and Iovine “fraudulently acquired” the headphone line from Monster after a “sham transaction” with HTC in 2011 that effectively ended their partnership.

Lee, who had held a five per cent stake in the company, argued that the deal forced him to cut his stake to 1.25 per cent. He said he later sold his holdings for $5.5m (£3.6m) in late 2013 after he was told there were no plans to sell Beats for several years. Lee has since maintained that had he still held his 1.25 per cent stake he would have received over $30m (£19.8m) from the Apple deal, and that his original five per cent stake would have earned him around $150m (£99m).

The lawsuit is the second to be filed against Beats Electronics after the company was sold to Apple. Bose Corporation settled a dispute with the firm – under undisclosed terms in October – over patented technology for cancelling noise in earphones. The company is also being sued by David Hyman, who sold his music streaming service MOG to Beats in 2012, for bad faith.

Last month, Dr Dre was named as the world’s highest-paid musician by Forbes magazine after he earned $620m (£395m) in 2014 alone. The hip-hop mogul is yet to respond to fraud allegations.