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Curt Schilling, founder of defunct game developer 38 Studios, and three co-defendants have agreed to a preliminary settlement in litigation with Rhode Island over the company’s bankruptcy, the state announced earlier this week.
Under the terms of the agreement, which was filed in Rhode Island Superior Court on Sept. 19 and is subject to approval by that court, the Rhode Island Commerce Corp. will receive $2.5 million from the defendants. The four defendants — Schilling and three other 38 Studios officials — will not be personally liable for the settlement; instead, the funds will come from the company’s insurer, Starr Indemnity and Liability Co., reports the Boston Globe.
The Rhode Island Commerce Corp. asked the court to approve the settlement after its lawyers conducted a "comprehensive and detailed analysis of the assets of the individual defendants," and determined that even if the organization won its case against the defendants, it could not expect to recover more than $2.5 million in a judgment against 38 Studios.
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"This is a highly unusual case in which it makes no economic sense whatsoever for the parties to proceed to trial rather than proceed with the proposed settlement," both sides said in court filings. In the settlement agreement, the defendants continued to deny liability, and under the terms of the deal, settling does not constitute an admission of wrongdoing by the defendants.
If the court signs off on the settlement, the Commerce Corp. will have secured settlements totaling approximately $45 million in litigation against 38 Studios. The organization is still engaged in one lawsuit as a result of the company’s demise: a suit against First Southwest Co., which served as a financial adviser to the studio. Earlier this year, Rhode Island authorities decided not to file criminal charges against 38 Studios after a four-year investigation.
38 Studios was founded in 2006 in Maynard, Massachusetts, as Green Monster Games. The company was rebranded the following year as 38 Studios, after Schilling’s jersey number, and entered into a deal with Rhode Island in 2010 to move to the state in exchange for a $75 million loan. The funds came from the Rhode Island Economic Development Corp., a quasi-public agency that is now known as the Commerce Corp.
Earlier that year, 38 Studios had announced a publishing deal with Electronic Arts for its first game, Kingdoms of Amalur: Reckoning, which ended up launching in February 2012. Four months later, the studio went bankrupt, leaving Rhode Island taxpayers on the hook for the entire loan.
Under the agreement announced this week, about $2 million of the settlement will go toward paying back the bonds in the original 38 Studios deal. According to the Commerce Corp., the state’s taxpayers still owe about $28.2 million.
