August 25, 2020

Beats Electronics and Its Founders Win Affirmance of Summary Judgment Against Monster Inc. and its CEO

Following victories on demurrer for Beats founders Andre “Dr. Dre” Young and Jimmy Iovine, and summary judgment for Beats founder Paul D. Watcher, Munger, Tolles & Olson won affirmance in the California Court of Appeal on Aug. 25, 2020, confirming that there was no merit to billion-dollar fraud claims brought by plaintiffs Monster Inc. and its CEO Noel Lee against Beats, its principals or co-defendant HTC.

After Apple acquired Beats, Monster CEO Noel Lee prepared an internal strategy memorandum, explaining Monster’s plan to create a “story” that would “scuttle the Apple Beats deal” by suing Beats and “positioning Monster as a victim of fraud.” In January 2015, Monster and Lee brought that suit. In their complaint, Plaintiffs lied about the contents of a conversation Lee had with Beats principal Paul Wachter—a conversation that Lee had surreptitiously recorded while Monster’s general counsel eavesdropped.

After Munger Tolles won dismissals for Dr. Dre and Iovine, summary judgment for Wachter, and attorneys’ fees for all three, Monster and Lee appealed. On Aug. 25, 2020, the California Court of Appeal affirmed. Among other things, the Court explained that, “without revealing the covert recording,” Lee and Monster falsely described the conversation with Wachter, claiming that Lee had been misled by “unequivocal, affirmative misrepresentations” from Wachter.

However, their “secret recording of the September 13 conversation, ultimately disclosed to Beats and Wachter and provided to the trial court before argument on the summary judgment motions, confirmed Wachter had not made the emphatic statement described” in the complaint. Further, Lee had disclaimed any reliance on anything said by Wachter, and, “under governing Delaware law, Beats and Wachter were entitled to enforce this provision.” The Court of Appeals affirmed and awarded Wachter, Beats, and HTC their costs on appeal.