Red Ant hit with suit

Delicious Vinyl has filed a $25 million lawsuit against Red Ant Entertainment, claiming it has never been paid for establishing a joint record company with Red Ant and is owed more than $1.5 million including $600,000 in expenses.

It also seeks a court determination allowing Delicious Vinyl to rescind an agreement to merge with Red Ant because parent Alliance Entertainment failed to provide financing.

A statement from Delicious said execs at the label have “concluded that it can no longer tolerate the ongoing dysfunctional arrangement with Red Ant. (Delicious) has terminated the joint venture agreement and is seeking other distribution arrangements for its artists immediately.”

In a complaint filed Thursday in L.A. Superior Court, Delicious Vinyl claims that Red Ant in February agreed to provide financing, record manufacturing, marketing and distribution for a new company to be called Delicious Vinyl Llc.

Delicious Vinyl was to contribute by supplying recording artists and all masters it owned. Each company was to own half of the new company.

Delicious said it agreed to the deal after Red Ant, through its chairman Al Teller, claimed it had a “war chest” of $100 million in financing through investment bankers Wasserstein Perella & Co. and would provide “worldwide, first-class, major distribution” of Delicious Vinyl’s records.

According to the complaint, Red Ant, however, did not have that war chest and failed to reveal that parent Alliance was “in a precarious financial position.”

“Delicious Vinyl is sorely disappointed to have been forced to take this action,” said Michael Ross, CEO of Delicious Vinyl. “However, we must look out for the best interests of our artists and our company. The current situation with Red Ant does not further those interests.”

Red Ant allegedly has not reimbursed Delicious for $600,000 in costs or paid the $500,000 due for its share of the new company.

Alliance, which filed for bankruptcy protection on July 14, has announced it is trying to sell Red Ant along with Delicious Vinyl Llc.

The lawsuit also claims Red Ant is not paying Delicious Vinyl’s bills in order to devalue the company’s assets and force Delicious to give them up “for no consideration.”

Red Ant has also not provided distribution according to the terms of the agreement, the suit says.

The complaint seeks at least $25 million in compensatory damages and unspecified punitive damages in addition to the rescission.

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