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Judge refuses to dismiss latest Monster v Beats legal battle

By | Published on Wednesday 21 March 2018

Beats by Dre

A judge in California has refused to dismiss the latest legal dispute between Beats Electronics and its former business partner Monster LLC. The judge said that the complicated contractual dispute would require proper scrutiny in court.

Talk of Beats and Monster facing off in court will likely create some déjà vu. The now Apple-owned Beats collaborated with Monster when it was first developing its ‘stick-a-by-Dre-label-on-the-side-and-hike-up-the-price’ headphones business. But the partnership ended in something of a messy divorce in 2012, two years before Apple bought the Beats company in a $3 billion deal in 2014.

Legal action followed the Apple acquisition. Monster and its founder Noel Lee sued Beats over allegations it had misled its former partner about its future plans, leading to Lee selling his stake in the Beats company in 2013 for considerably less money than he would have got had he waited for the big Apple deal a year later. Beats ultimately won that legal battle, and also a subsequent court scuffle over whether or not Monster should pay Beats’ legal fees.

The case in court this week is a new lawsuit that was filed last September. This relates to the two companies’ 2012 divorce and each side’s contractual obligations to the other when they stopped working together. Beats reckons that Monster still owes it $95 million relating to the two firms’ old distribution agreement. Monster counters that it is owed $100 million from Beats, partly due to the companies’ termination agreement, and partly because of allegations Beats violated the aforementioned distribution agreement.

Part of the dispute centres on an audit undertaken as the two companies stopped working together by accountants PricewaterhouseCoopers. It’s that audit that concluded Monster owes Beats $95 million. But Monster claims that, while earlier agreements did confirm PWC as the auditor, Beats put pressure on the accountants to rework their calculations so that the outcome favoured them instead of their former business partner.

According to Law360, a legal rep for Beats, seeking to have the case dismissed this week, argued that Monster’s claim in relation to the termination agreement couldn’t be pursued because of the statute of limitations. They added that its claims over the distribution agreement and PWC’s audit were basically just sour grapes, because Monster didn’t like the outcome of said audit and is trying to use the courts to force the accountants to do the work anew.

However, Monster’s attorney countered that PWC’s preliminary audit had found that Monster was owed over $2 million, but that Beats then pressured the auditors to change its legal position, resulting in new maths and the conclusion Beats was owned $95 million.

The complexities of the dispute and the contracts behind it, the judge concluded, meant that he couldn’t dismiss the case at this stage. He also knocked back efforts by Beats to have some of Monster’s claims declared irrelevant to the case.

All of which means this latest Monster v Beats adventure will continue, with court time now scheduled in for November. Though both sides may pursue mediation in the meantime, which might mean a deal will be reached before that court date comes round.



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