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I'd say you definitely have cause for legal action, problem is that is very expensive to pursue these things. Copyright violations can bring fines of up to $100,000 (I believe this is the right number) per occurence though, so it might be worth throwing a few bucks down that hole. $100,000 per record album cover. That's a lot of change.
It's also likely that it wasn't the record company itself that hijacked the image but rather their advertising agency.
I'm not an attorney so my real advice to you would be to consult one ASAP. Then you can make an educated decision and not one based on the results of an internet message board.
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