Sony Music has filed a lawsuit against senior executives of now-defunct online music service Rdio, alleging that they defrauded the record label of millions of dollars in licensing fees, according to a report by the Hollywood Reporter. The lawsuit alleges that Rdio executives misrepresented their plans for the struggling streaming service in negotiations with Sony, getting an extension on licensing payments while they also were in the process of selling the company.
Pandora announced the acquisition of Rdio’s assets for $75 million last November. As part of that acquisition, Rdio filed for bankruptcy and laid off all of its staff, many of whom were subsequently hired by Pandora to work on the company’s upcoming on-demand streaming service.
One of the reasons for the bankruptcy was that Rdio owed creditors millions of dollars. Some of Rdio’s unsecured creditors included technology companies like Shazam and Roku as well as music industry heavyweights like Sony Music and Warner Music Group. Bankruptcy filings at the time indicated that Rdio owed Sony Music alone $2.4 million, but the lawsuit now alleges that the record label was actually owed $5.5 million total.
Rdio executives allegedly told Sony Music that the company was in the process of raising new funding, asking the record label for a little extra time to pay owed royalties. However, it apparently didn’t disclose its negotiations with Pandora, which included a payout for former Rdio CEO Anthony Bay as well as two other senior executives.
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Sony Music now wants to force Bay to give back his cut to pay out the label, calling the idea that the former CEO would benefit from the deal “against equity and good conscience.”
Variety has reached out to both Sony Music and Bay; we’ll update this post once new information becomes available.