A US federal judge has refused to dismiss a lawsuit accusing Capitol Christian Music Group (Capitol CMG), a Universal Music Group imprint, of improperly abandoning a done deal to acquire Christian hip-hop label Reach Records at the last minute. Judge Waverly Crenshaw ruled on Tuesday that Reach's claims, if proven, could indeed expose Capitol CMG to legal liability, allowing the case to proceed to discovery. The dispute centres on whether the two sides had genuinely agreed a final purchase price, with the outcome likely to hinge on how courts treat letters of intent in acquisition negotiations.

Reach Records, co-founded by rapper Lecrae in 2004, alleges Capitol CMG approached it about a buyout amid a recent surge in Christian music's popularity, partly driven by TikTok, but then pulled out "on the eve of closing" after senior management decided the agreed price was too high. The letter of intent reportedly stated the price would not be subject to renegotiation barring "material adverse findings", and the judge found this sufficient to let the breach claim proceed despite Capitol CMG's argument that no binding contract existed. The purchase price was described only as "multi-million dollar", with Reach saying it had already restructured parts of its business in preparation for the merger before the deal collapsed. Neither company commented on Wednesday's ruling.