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Beats beats lawsuit claiming fraud before $3.2B sale to Apple

Summary judgment dismisses claims that Beats co-founders Dr. Dre and Jimmy Iovine duped a former partner into relinquishing control of the line of headphones.

Beats co-founders Dr. Dre and Jimmy Iovine did not conspire to defraud their former partner at Monster, a judge finds.
Beats by Dre

A judge has dismissed the heart of a lawsuit against Apple's Beats Electronics that claimed that the high-end-headphone maker's co-founders conspired to sever the headphone line from Monster before Apple bought the company in 2014 for $3.2 billion.

The summary judgment issued late Monday by Los Angeles Superior Court Judge William Fahey resolves the key charges that claimed Beats co-founders Dr. Dre and Jimmy Iovine duped former partner Noel Lee, founder of video and audio cable maker Monster. The lawsuit, which was filed in January 2015, had been scheduled to go to trial next week. The trial will now focus on forcing Monster to pay its attorney fees and other costs, according to the Associated Press.

The lawsuit claimed that Beats "fraudulently acquired" the line of headphones and its technology with a "change of control" clause when Taiwanese phone maker HTC acquired a 51 percent stake in Beats in 2011, depriving the company of hundreds of millions of dollars. Less than a month after the HTC purchase, Monster alleges that Beats repurchased half the interest HTC had just acquired.

Monster's lawsuit claims that the Brisbane, California-based company lost millions as a result of what it called a "sham" transaction. Lee claimed he was persuaded to reduce his 5 percent stake in the company in 2012 out of lack of transparency concerns related to the HTC deal. Lee was later persuaded to sell his remaining 1.25 percent stake back to Beats for $5.5 million, according to the complaint, which said Lee's original 5 percent stake would have been worth more than $100 million after the Apple acquisition was announced.

But Fahey found that contracts entered into by Lee and Monster allowed Beats' actions, according to the AP.

Apple did not immediately respond to a request for comment, and Philip Gregory, the attorney representing Lee, could not be reached for comment.