Beats music service sued by former executive amid possible sale to Apple

Fri May 16, 2014 9:32pm EDT

Colombia's track cyclist Edwin Alcibiades Avila Vanegas uses a pair of Beats by Dr. Dre headphones at the Velodrome during the London 2012 Olympic Games August 3, 2012. REUTERS/Stefano Rellandini

Colombia's track cyclist Edwin Alcibiades Avila Vanegas uses a pair of Beats by Dr. Dre headphones at the Velodrome during the London 2012 Olympic Games August 3, 2012.

Credit: Reuters/Stefano Rellandini

(Reuters) - Beats Electronics, which is close to being sold to Apple Inc for $3.2 billion, has been sued by the founder of a music service Beats bought two years ago claiming he has been cheated out of his share of the company.

David Hyman, the founder of the music subscription service MOG Inc, filed a lawsuit on Wednesday in Los Angeles superior court claiming he was purposely terminated so that Beats could avoid granting him his equity stake in the company.

Hyman claims that as part of the agreement Beats made to buy MOG in 2012, he would have been granted, over a period of time, 2.5 percent of the outstanding equity interest in Beats if the company reached a market value of $500 million or more. But Hyman was terminated less than a year after the deal, which prevented him from "receiving the fruits and benefits" of the transaction, according to the lawsuit.

The lawsuit, which makes claims for breach of contract, is seeking $20 million in damages.

A Beats spokeswoman had no comment.

Rapper Dr. Dre and legendary music producer Jimmy Iovine, the founders of Beats Electronics, were not named in the lawsuit.

(Reporting by Andrew Longstreth in New York; Additional reporting by Lisa Richwine)

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