Former Chelsea chairman Ken Bates is to sue the club following his departure from Stamford Bridge earlier this month.
In a statement, Chelsea said: “We can confirm that Ken Bates has instituted legal proceedings against Chelsea Village plc (the team’s parent company) and Chelsea Football Club for breach of contract.
“We will be vigorously defending this action as we are satisfied that we have behaved both responsibly and honourably in every way in our dealings with Ken Bates.
“Ken Bates has resigned his position as chairman of Chelsea Football Club and is no longer a director.”
Bates, was reported to be seeking a £2m settlement from Chelsea.
The controversial former chairman lost control of Chelsea before this season got underway in July when he sold the team to Roman Abramovich in a £140m deal.