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Officials sue to stop first settlement in ongoing 38 Studios crisis

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Two former employees of the beleaguered Rhode Island Economic Development company have sued to stop the first settlement as the state attempts to recover some portion of the $75 million loan it guaranteed for the failed 38 Studios.

The proposed $4.37 million settlement comes from a lawyer who advised the EDC — now called the Rhode Island Commerce Corporation — on making the loan. The amount would be paid by his law firm's malpractice insurance policy.

Rhode Island's governor and legislature, angry and embarrassed over the high profile failure of a studio helmed by a celebrity — the all-star pitcher Curt Schilling — passed a law this spring that effectively shields anyone who settles with the state, for his or her role in the guarantee, from any civil lawsuit brought by someone else in the matter.

The former executive director and deputy director of the R.I. EDC have called that law unconstitutional and "fundamentally unfair." The two former officials say the law pushes them to settle but they do not have the insurance policies that are available to lawyers connected to the case.

38 Studios went bust in 2012, two years after the $75 million loan guarantee. The aftermath has become a political scandal in the state, particularly for its connections to video gaming and a celebrity athlete who pitched for the area's favorite team. The state filed suit against the R.I. EDC, Schilling and others in the studio in late 2012, claiming it was not aware of the loan guarantee's risks.

38 Studios subsidiary Big Huge Games developed 2012's Kingdoms of Amalur: Reckoning, which reviewed well but sold under expectations. 38 Studios itself was working on an MMO based on the Amalur canon when it failed.

You can follow along with the continuing developments between former members of 38 Studios, the RICC and Rhode Island in Polygon's StoryStream.