Louis Armstrong's heirs are in line to share the payout

The stars and their heirs allege they are owed millions of dollars after the record company under-reported sales figures and over-charged them for services such as album packaging.

Among the names listed in the Los Angeles Superior Court case are Louis Armstrong, Billie Holiday, Patsy Cline, Ella Fitzgerald and Bill Haley and the Comets.

Lee's lawyers claim Universal short-changed the artists by paying royalties based on incorrect prices.

The plaintiffs are stars who recorded with Decca Records before 1 January 1962.

Bill Haley and the Comets had hits in the 1950s

Their contracts transferred to Universal, owned by media giant Vivendi Universal, through a series of company mergers and acquisitions.

Many of the artists signed contract amendments in the 1980s for the sale of CDs as the format took off, but the court papers say Universal did not keep to the terms of those agreements.

Court papers also say the record company under-paid royalties on record club sales and charged artists too much for album packaging and other services.

Judge Victoria Gerrard Chaney gave preliminary approval of the settlement on Monday. A hearing in early May should finalise it.

Potential plaintiffs have until 8 March to join the action.

Questionable practices

Other stars and their heirs, such as country singer Loretta Lynn and the families of the late Bing Crosby and Buddy Holly are pursuing individual cases against the record company.

The heirs of Bing Crosby have also launched their own legal action against Universal, seeking $16m (�11.2m).

Other artists, including Courtney Love and Don Henley, have filed lawsuits alleging similar questionable accounting practices.

Peggy Lee was awarded $2.3m (�1.6m) back royalties in 1991 for video sales of Disney's 1955 film The Lady and the Tramp, which featured her songs.

She has been in ill-health after suffering a stroke in 1998.