Newton-John starred with John Travolta in the 1978 movie version of the Broadway hit.
The breach-of-contract suit was filed Friday in Los Angeles County Superior court. It contends that while Universal did pay some royalties on the album, it failed to make a range of other contractual payments, said John Mason, an attorney for Newton-John.
According to the suit, a recent audit showed Universal owes more than $1 million to Newton-John's company, ON-J Productions, Ltd.
"The lawsuit is without merit and, at the appropriate time, we expect that the court will dismiss it," Universal said in a statement Tuesday.