Former West Ham chairman Eggert Magnusson has sued the Premier League club and its owner Bjorgolfur Gudmundsson for breach of contract, Icelandic state television reported.
Magnusson is demanding 200 million Icelandic crowns (£1.1 million) for an alleged violation of his severance settlement. The case was registered at Reykjavik Municipal Court on Thursday.
Magnusson became chairman of West Ham in 2006 after Gudmundsson bought the majority shareholding in the club.
Gudmundsson dismissed Magnusson from his post in September 2007 and the two concluded a severance settlement in which Gudmundsson bought Magnusson's West Ham stake, which was held by a company in Luxembourg.
According to court papers, Gudmundsson had also agreed that he and the club would pay Magnusson one million Euros and 200,000 pounds in two equal instalments -- the equivalent of three months' full salary following the dismissal.
The court papers said these payments had not been made, apart from 100,000 pounds paid to Magnusson by Gudmundsson in February this year.
Gudmundsson would not comment on the case when he was asked about the issue by state television.
Hansa, the holding company through which Gudmundsson owns West Ham, is technically bankrupt. On March 6, the company was given exactly one year to sort out its finances.
Gudmundsson, who led an 85 million-pound buyout of West Ham two years ago, has emerged as a high-profile victim of the global financial crisis.
The tycoon and his family were major shareholders in Icelandic bank Landsbanki, which the Icelandic government seized in October following the near collapse of the country's financial system.
On Wednesday, West Ham vice president Asgeir Fridgeirsson told Reuters that confidentiality agreements had been signed with several potential buyers of the club.
The day before, Hansa's lawyers valued the club to approximately 250 million pounds in court papers.
