Lawsuit Alleges Dr. Dre, Jimmy Iovine Swindled Beats Partner

Rapper Dr. Dre and record producer Jimmy Iovine are being vilified as scam artists in a lawsuit that alleges the duo duped one of their former partners in Beat Electronics before selling the trendy headphone maker to Apple for $3 billion last year.

The complaint filed Tuesday in San Mateo Superior Court accuses Dre and Iovine of double crossing Noel Lee, the founder of video and audio cable maker Monster LLC.

Photo: Andy Kropa/Invision/AP, file
Jimmy Iovine, left, and Dr. Dre, attend the WSJ Magazine 2014 Innovator Awards at MoMA in New York.

Lee once held a 5 percent stake in Beats as part of a partnership between the headphone maker and Monster that ended in 2012. The lawsuit alleges Dre and Iovine orchestrated a “sham” deal with smartphone maker HTC in 2011 that led to the termination of the Monster alliance.

The suit alleges the shady maneuvering prompted Lee to pare his stake in Beats to 1.25 percent before selling his remaining holdings for $5.5 million in the autumn of 2013 after being assured by Beats executives that there were no plans to sell the company for at least several years.

Beats announced its sale to Apple in May, opening the door for Dre and Iovine to become executives at the iPhone and iPad maker. Had he held on to his 1.25 percent stake, Lee would have received more than $30 million in the Apple deal. His original 5 percent stake would have been worth roughly $150 million.

Both Dre, whose real name is Andre Young, and Iovine, a longtime recording industry executive, reaped the biggest jackpots in the Apple deal, though the precise size of their windfalls hasn’t been disclosed.

Lee’s lawsuit says Dre and Iovine each owned 15 percent stakes in the early stages of the Beats partnership.

Apple Inc., which now employs Dre and Iovine, declined to comment on the lawsuit. The Cupertino company isn’t named in the complaint. Besides Dre and Iovine, the lawsuit targets HTC America Holding Ltd. and Paul Wachter, a Beats investor and board member.

Phone messages seeking comment were left for Dre’s attorney and a Beats publicist Tuesday evening.

The bitterness seeping through Lee’s lawsuit contradicts how Lee described the ending of the Beats partnership in a late 2013 interview with The Associated Press. At that time, Lee called it an “amicable” parting and said he was paid “very generously” in royalties.

This isn’t the first time that a former Beats partner has lashed out at Dre and Iovine in court. David Hyman, who sold his music streaming service MOG to Beats in 2012, is suing the two men for bad faith. That action, filed shortly before the Apple deal was sealed, is unfolding in Los Angeles Superior Court.

Lee appears to be interested in recovering the money that he believes he lost through the alleged misconduct of Dre and Iovine. The lawsuit also depicts Lee as the brains behind the Beats By Dre headphones while casting Dre and Iovine as little more than figureheads. One section of the lawsuit likens Lee to two more famous innovators, Apple co-founder Steve Wozniak and sound-system pioneer Ray Dolby.