Bassist Karges and drummer Frazier allege their ex-bandmate bashed them on Twitter.com and prevented them from rejoining the band.
In legal papers obtained by Courthouse News Service, the plaintiffs state, "Not content to simply misappropriate the Sugar Ray trademark by licensing it to a newly created shell corporation or unlawfully divert an additional 48 per cent of the band's revenues into his own pocket, MCGrath spent the last year engaging in a bitter campaign to destroy the personal and professional reputations of Frazier and Karges."
According to the lawsuit, MCGrath would fly first class on airlines while his bandmates sat in economy, and he demanded at least $10,000 (£6,700) for each live performance.
Karges and Frazier also claim that MCGrath locked them out of recording sessions for the band's sixth album and reworked the project with new producers.
He then allegedly dismissed their efforts in the band with tweets suggesting Sugar Ray had become a "world class band" since "those 2 left".