Sony Music Entertainment is suing former executives of now-shuttered music streaming service Rdio, claiming that the company defrauded Sony for millions in licensing fees in its sale to Pandora.
In November of 2015, Rdio’s assets were purchased out of bankruptcy by Pandora for $75 million. Sony claims that Rdio executives were deceitful when discussing plans for the then-struggling music service, with Sony granting an extension on licensing payments without being provided information that Rdio was in the process of putting its assets on the market, according to The Hollywood Reporter.
Sony established its content agreement with Rdio in 2010, which allowed the service to stream big name artists like Michael Jackson, Bob Dylan, and Beyonce, among many others.
According to Sony Music, Rdio’s executives told the company that it was working on raising new funding, but did not disclose its negotiations to sell all assets to Pandora — for which former Rdio CEO Anthony Bay and two other senior executives received big payouts.
“Unbeknownst to Sony Music Entertainment, at the same time that Rdio was negotiating the amendment to its Content Agreement with Sony Music Entertainment, it was simultaneously negotiating its deal with Pandora — under which Rdio would file for bankruptcy,” reads the court filing, “Pandora would buy Rdio’s assets out of bankruptcy; defendant Bay (as part-owner, executive officer, and director of Rdio’s secured creditor) would expect to be first in line to receive proceeds of the Pandora deal; and SME (as an unsecured creditor) would receive pennies on the dollar for the amounts owed to it.”
At the time that Rdio filed for bankruptcy, the company owed creditors millions. Filings from the company indicated that Rdio owed Sony Music alone $2.4 million at the time, but the recent lawsuit indicates that Sony believes it was owed $5.5 million.
After Rdio went under, Pandora hired a number of its former employees to help start up a forthcoming on demand music service.
Sony Music’s wishes are simple: The company wants Bay and the two other former Rdio executives to give back their payouts from the sale of assets to Pandora.
“It would be against equity and good conscience to permit Defendants to retain any benefits that they obtained as a result of their fraudulent conduct,” the complaint reads.