Jury told how to listen in Beats case opening

The plaintiff in a long-running dispute over headphones told a jury to be ready to block out any peripheral noise that might distract from the issue at hand, while the defendants told them to turn up the volume and listen closely to every single word.

Eleven years after ink dried on the royalties agreement at the heart of the dispute, counsel for Beats Electronics and Steven Lamar -- a former hedge manager who says the company owes him approximately $107 million in delinquent royalty payments -- didn't mince words in opening statements Wednesday. Hinrich & Associates v. Beats Electronics LLC, BC533089 (L.A. Super. Ct., filed Jan. 13, 2014).

Brian Melton, a Susman & Godfrey LLP partner who delivered Lamar's opening statement, warned jurors the defense might make arguments based on Lamar's conduct while working on the Beats headphones project, lies he allegedly told over the course of development, and the amount of work and money he ultimately invested to make the headphones a reality.

Those projected arguments, Melton said, were "noise" that would help the defendants deflect from what the case is really about -- a 2007 settlement agreement in which Beats agreed to pay audio studio Pentagram four percent of royalties for its headphones. From that 4 percent, Melton said, Pentagram would pay Lamar half.

While Lamar received royalties for the original "Studio" line of Beats, Melton said he'd been unfairly denied royalties for future lines based on the original design Lamar helped create. Although the defendants claim all parties understood at the time of the 2007 agreement that it would extend only to the first line of headphones, Melton said the plain language of the contract makes it clear that it was intended to cover future lines.

"A contract is a contract," Melton told the jurors time and again throughout his opening statement.

Arturo J. Gonzalez, a Morrison & Foerster LLP attorney and counsel to Beats, noted during a court recess that he felt Melton's remarks had been overly argumentative for an opening statement. Los Angeles County Superior Court Judge David S. Cunningham III seemed to agree, noting a distinct lack of the phrase "the evidence will show" throughout Melton's remarks.

Exchanging shoulder pats with Melton, Gonzalez said he wasn't trying to get the court to change the course of Melton's opening argument, noting it was more in line with the "Texas style" the Houston-based Melton was accustomed to. Gonzalez said he was merely asking the court to extend the same deference in his own opening statement.

Gonzalez later told the jury they should follow "the exact opposite" of Melton's advice. Rather than block out any noise, he said, they should listen close. And if they did, he said they'd see how little a role Lamar played in the development of Beats, and how clear the language in the agreement had been when it precluded Lamar from earning royalties on future headphone lines.

While Lamar presented himself as a sophisticated investor with connections that funded the Beats project, Gonzalez said Lamar failed to line up finding for the project. Although he claimed to have provided Beats with the technology necessary to produce the headphones, Gonzalez said Lamar had no such technology.

After rifts began to form between Lamar and Beats co-founders Jimmy Iovine and Andre Young, Gonzalez said Beats went out of its way to ensure Lamar's involvement with the project was as limited as possible. The royalties they offered him would only be paid through Pentagram, Gonzalez said, and language was included in the contract stating Lamar had no right to bring claims against Iovine or Young.

Iovine and Young, known more commonly as Dr. Dre, were in the courtroom's front row throughout opening statements. Young is expected to offer testimony next week.

Lamar took the stand after opening statements to offer biographical information about himself and explain his inspiration for a high-end line of headphones, which he later shared with Iovine.

Lamar was expected to take the stand again when trial resumed Thursday.