Sandilands and his companies filed a claim in the Federal Court on Friday evening after market close, ARN said in a statement to the ASX on Monday.
The former top-rating host alleges the termination of his contract with ARN and subsidiary Commonwealth Broadcasting Corporation was invalid because there was no act of serious misconduct, the ARN statement said.
ARN said Sandilands is also claiming the termination was in breach of the Australian Consumer Law.
The radio company said it disputes the claims and intends to defend them.
The court documents have not been seen by AAP.
Sandilands had his $100 million contract torn up by ARN after an on-air bust-up with co-host Jackie "Jackie O" Henderson ended their time together on their KIIS FM show.
The Kyle and Jackie O show was a consistent ratings hit in Sydney but had failed to gain much traction in its expansion to Melbourne and Brisbane.
The split came after Sandilands slammed his broadcast partner for looking into former prince Andrew Mountbatten-Windsor's horoscope.
"You're off with the fairies ... every segment, every time you've spoken, you don't even know what's going on," Sandilands said to Henderson during the February 20 broadcast.
ARN said Henderson gave notice she could no longer work with her co-host, triggering an early March decision to terminate her $100 million agreement.
Sandilands was suspended on March 3 and issued a breach notice for serious misconduct.
He has consistently denied breaching the terms of his contract.
The financial impact of the litigation on the already struggling radio company could not be assessed at this early stage, ARN said in its statement.
Share prices in the company have fallen 64 per cent since the 10-year deals with Sandilands and Henderson were signed in November 2023.
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