Rhode Island and 38 Studios move closer to a settlement

The messy and complicated legal battle between Curt Schilling’s now defunct 38 Studios and the state of Rhode Island may be moving closer to a settlement. Rhode Island lawmakers are fast-tracking a bill that would make it easier for the Economic Development Corp., the group that sued 38 Studios on behalf of Rhode Island, to settle the case, according to a report from Boston.com.

The law may help to finally put an end to the long and convoluted story that began back when former professional baseball player Curt Schilling accepted a $75 million loan from the state of Rhode Island on behalf of his 38 Studios. The studio was lured to Rhode Island by the loan, and in return 38 Studios agreed to hire and maintain 450 jobs in the state.

After taking the loan, 38 Studios released its sole AAA game, Kingdoms of Amalur: Reckoning. The game sold relatively well, but not well enough to mask what Rhode Island later claimed to be massive mismanagement on the part of 38 Studios, prompting an investigation. The parties agreed on a payment schedule, but the dev was not able to keep up. Soon after, several top execs  left the company, including the CEO and SVP, and the studio began to fall apart. In May 2012, 38 Studios filed for bankruptcy, leaving the state of Rhode Island with a $112.6 million bill, including the principle load and the unpaid interest.

The state then took possession of 38 Studios properties, including the rights to Amalur and an unreleased MMORPG with the codename Copernicus, but no one bought either property. The group behind the sales will continue to look for buyers. 

The investigation found that 38 Studios was never able to meet its hiring goal, and Schilling himself used $4 million of that loan to repay his own investments in the company. More damning though: Rhode Island claimed that Schilling accepted the loan knowing that the development would cost at least $20 million more, which could legally be considered fraud. Schilling later claimed that the closure of the studio could personally end up costing him as much as $50 million

The case eventually drew the attention of the Securities Exchange Commission. As a rule, the SEC does not comment on ongoing investigations until they have concluded, so it’s unclear what the status of that is.

The proposed bill would shield any group that settles a lawsuit with the state. If approved, once a party settles, they would be protected from further lawsuits from other co-defendants claiming damages. This potentially means that a settlement with 38 Studios would yield the largest payout back to the state.

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