News Column

Former 38 Studios executives fight to keep documents private

May 22, 2014

By Paul Grimaldi, The Providence Journal, R.I.

May 22--PROVIDENCE -- The four top executives of 38 Studios are fighting in federal court to keep a lid on more than a half-million documents tied to the defunct Providence video-game company.

Company founder Curt Schilling, Jennifer MacLean, its one-time chief executive officer, former chief financial officer Richard Wester and 38 Studios board director Thomas Zaccagnino claim that "privileged communications between 38 Studios and its attorneys had been released to the [R.I. Economic Development Corporation] ... might number in the tens of thousands," according to federal court papers.

The complex legal issues involving 38 Studios currently are divided between two courts -- the U.S. Bankruptcy Court in Delaware and R.I. Superior Court.

On June 7, 2012, 38 Studios filed for bankruptcy protection in that Delaware court. Most, but not all, of the case subsequently was transferred to Superior Court, where it was converted to a state receivership case -- roughly equivalent to the federal case.

In November 2012, the EDC separately filed a Superior Court lawsuit against the four 38 Studios executives and 10 other people or entities, seeking money to pay the bonds sold to fund the $75-million loan guarantee that enticed Schilling to move his company from Massachusetts to Providence.

The defendants' lawyers have argued in Superior Court that Rhode Island officials have not been forthcoming about documents held by the state that are related to the case. They have made the opposite argument in Delaware.

People working on the cases found about 550,000 documents related to the company. The documents were transferred to 50 computer discs, including 28 discs of documents just from 38 Studios.

Communications between the executives and their lawyers, which are normally private, may be among those documents.

"The procedure for screening out those documents was flawed," the 38 Studios' lawyers assert.

The lawyers are concerned EDC's lawyers could use those private documents to win the lawsuit.

They've asked a federal judge for permission to "claw back" those specific materials.

Jeoffrey L. Burtch, the Wilmington, Del., lawyer appointed by a federal judge to oversee 38 Studios holdings in the bankruptcy case, has objected to those assertions.

The executives' case has "fatal flaws," among them being that they have not identified specific documents subject to attorney-client privilege, Burtch said.

As Burtch looks to clear access by the EDC to those documents, he has been chipping away at the bills left behind by the company. He's reached a series of tiny settlements with vendors to 38 Studios, getting back a total of $31,100 from four of them.

However, Verizon is looking for about $42,000 for telecommunications service it provided to 38 Studios -- potentially wiping out those small gains.


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Source: Providence Journal (RI)

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