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MOG Founder Sues Beats For More Than $20 Million (Report)

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David Hyman, the founder of streaming music service MOG, has sued Beats Electronics for more than $20 million, claiming that Beats fired him to avoid giving him an equity payout, according to a report from Courthouse News Service.

News of the suit arrives as Apple is reportedly closing in on a deal to acquire Beats for $3.2 billion. Best known for its headphone and portable speaker business, Beats also operates streaming music service Beats Music, which stems from its acquisition of MOG in 2012.

MOG creator David Hyman, a serial entrepreneur who was also once CEO of Gracenote, claims in the suit that Beats dismissed him in bad faith, knowing that he would receive 2.5% of the company under an incentive plan based on the duration of his employment, according to the report. The suit names Daisy LLC as a co-defendant, the report said; Beats Music was code-named Project Daisy before its launch in January.

The first 1% was to arrive on his first anniversary as CEO, according to the report. Hyman’s LinkedIn profile says he was employed by Beats for seven months, from May to November 2012. He has since revealed that he was interim CEO of Pono, the high-quality audio project of Neil Young, for four months before becoming chief executive at stealth start-upChosen.fm last September.

Instead of retaining him until he received his equity stake, Beats reportedly fired Hyman for attempting to terminate a problematic employee. But Hyman claims Beats was intentionally depriving him of his fair equity compensation in the process, according to the report.

Hyman’s departure from Beats was considered a surprise at the time. Beats hired former Topspin CEO Ian Rogers to replace Hyman in January 2013.

It’s not yet clear how Hyman arrived at the $20 million-plus figure he’s reportedly seeking as compensatory damages. The suit says he would be due 25% of the company’s shares if it reached a fair market value of $500 million, the report said.

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