Judge's ruling allows Rhode Island suit against 38 Studios to proceed

Rhode Island's lawsuit against Curt Schilling and others involved with a $75 million loan guarantee to bankrupt developer 38 Studios can proceed, according to a ruling from Superior Court Judge Michael Silverstein.

"I am gratified by the Court's initial ruling in the 38 Studios case," Rhode Island Governor Lincoln Chafee said in a statement provided to Polygon. "It allows the important claims to proceed and is a significant first step to recovering the taxpayers' losses."

In 2010, the Rhode Island Economic Development corporation backed a $75 million loan guarantee that was designed to bring 38 Studios and 450 jobs to the state. The developer declared bankruptcy in June 2012, having shipped Kingdoms of Amalur: Reckoning in Feb. 2012 but not its unfinished massively multiplayer online game known as Project Copernicus.

The suit, which was filed late last year, alleges that "38 Studios failed because of risks that had not been disclosed to the EDC Board, but were or should have been known by" those with knowledge of the studio's financial situation, among them executives at the developer and EDC employees.

In March 2013, Schilling and the defendants filed a motion to dismiss the lawsuit. Judge Silverstein's ruling denied that dismissal.

A lawyer for the EDC told the Associated Press that he was "quite pleased" with the ruling.

Earlier this month, recently released documents showed that former EDC deputy director J. Michael Saul discussed private funding for the studio during the period in which the $75 million loan guarantee was approved. Saul is also named as one of the defendants in the case. The next hearing in the ongoing legal saga is set for Sept. 13.