300 Entertainment Settles Lawsuit With Co-Founder Todd Moscowitz

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Todd Moscowitz and Theory Entertainment, the corporate name for 300 Entertainment, have settled their long-gestating lawsuit, according to paperwork filed in Delaware state court Wednesday. The settlement was approved by Vice Chancellor Morgan Zurn the same day and has been dismissed without prejudice, meaning it can’t be refiled.

The suit, originally filed in September 2019, had been brought by Moscowitz — a cofounder of the company alongside veteran music executives Lyor Cohen, Kevin Liles and Roger Gold — and alleged a breach of contract over Moscowitz’s resignation from the company in 2016. It sought a declaratory judgment that would have granted Moscowitz millions of dollars in stock options and preferred pricing that he otherwise would have forfeited.

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The dispute dates back to the fall of 2016, when 300’s CEO and largest initial investor, Cohen, announced that he would be leaving the company to take on his current role as global head of music at YouTube. Moscowitz, according to court documents, had told Cohen for months by this point that he had wanted to leave the company, and reiterated in September that Cohen’s announcement didn’t change his stance. In early November 2016, Moscowitz sent a letter to 300 stating his intention to resign immediately; days later, he announced his new label venture with Universal Music Group, the now-named Alamo Records.

The problem, however, was that by stating his intention to resign immediately, Moscowitz triggered a clause in the company’s operating agreement that stated several scenarios under which a person leaving the company would be considered to have done so “for cause.” One of those scenarios was a resignation with immediate effect, whereas a resignation with 90 days’ notice would have not been. The distinction here is significant, and the basis for the lawsuit: if a person left the company under “for cause” circumstances, according to the contract, the company had the right to buy back that person’s equity shares in the company for $0.10 apiece; if the separation was not under “for cause” circumstances, the company would have to pay market rate, or a self-tender price, which here was $1.648 per share.

Moscowitz, after 300’s other investors came aboard, controlled 12% of the company, or some 4 million shares, according to court documents. And upon his resignation, he agreed to sell about 1.5 million shares to 300 at the self-tender price, which netted him around $2.4 million. But two months later, 300 executed its “for cause” right to repurchase Moscowitz’s remaining shares at $0.10 per share, and cut him a check for $283,622.60, excising him from any stake in the company. At the tender price, those shares would have been worth $4.7 million.

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According to court documents, Moscowitz then tried to retract his resignation and re-resign in a manner that did not trigger the “for cause” clauses, which would give him the right to market price of his shares, or to keep them from the repurchase right. The resulting conflict is what led to the lawsuit in the first place.

Last fall, after Theory submitted a motion to dismiss the suit, Zurn issued a judgment dismissing several aspects of Moscowitz’s case and declined the declaratory judgment request, stating that Moscowitz was bound by the terms of the contract he had signed with Theory, and that he had forfeited his right to the preferred pricing due to the manner of his resignation. (Zurn, in a 74-page opinion, likened the situation to “a case of contractor’s remorse.”) But the judge did allow several aspects of Moscowitz’s suit to move forward, saying that “the terms by which Moscowitz actually resigned remain unadjudicated.”

Subsequently, the two parties entered into a period of evidentiary discovery, before filing a joint motion to dismiss the case this week, implying the two sides had reached a settlement. Attorneys and reps for both Theory and Moscowitz did not return requests for comment, and terms of the settlement between the parties were not known as of press time.

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Since leaving 300, Moscowitz has seen a huge measure of success with his new company, Alamo Records, which he initially founded as a joint venture with Universal Music Group in 2016. In June, following breakout records by signees Lil Durk, blackbear and Rod Wave, Sony Music Entertainment acquired a majority stake in Alamo for an undisclosed sum. (Moscowitz also manages hip-hop superstar Gucci Mane.)

Meanwhile, 300 has also been on a hot streak, with Megan Thee Stallion, Young Thug and Gunna all topping various Billboard charts over the past few years, and earning Liles the title of Billboard’s Executive of the Year in the 2020 R&B/Hip-Hop Power issue.

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