Rhode Island Senate Passes 38 Studios Lawsuit Bill

[Andy Chalk]

Rhode Island Senate Passes 38 Studios Lawsuit Bill

The Rhode Island Senate has approved legislation to encourage settlements of 38 Studios lawsuits, but some lawmakers are still trying to force the state to default on its debt.

Earlier this month, Rhode Island proposed a law [http://www.escapistmagazine.com/news/view/131169-Rhode-Island-Proposes-38-Studios-Law-for-Settlements] that would protect defendants who settle lawsuits related to 38 Studios from separate lawsuits filed by other defendants who are found liable for damages. Simplistically, it encourages settlements - and thus a resolution of the whole ugly mess - by letting people pony up and get out, without fear of being pulled back in.

The fast-tracked bill received unanimous approval from the state Senate yesterday, a couple of days after a lawyer for the Rhode Island Commerce Corp., formerly the Rhode Island Economic Development Corp., told a House committee that many defendants in the case have "cannibalizing" insurance policies that will reduce the amount of money the state can recover as the legal bills increase. "Any settlement in this case is going to be a benefit to the taxpayers," he said. The Rhode Island House is looking at similar legislation, but hasn't yet scheduled a vote.

Meanwhile, a separate bill introduced yesterday by Democractic Rep. Karen MacBeth seeks to force the state to default on the debt by prohibiting the Commerce Corp. from making payments on it. A first payment of $2.5 million was approved last year [http://www.escapistmagazine.com/news/view/125194-Rhode-Island-Honors-38-Studios-Debt] but the next one is $12.5 million and some state legislators say taxpayers shouldn't be forced to cover the state's bad investments. Governor Lincoln Chafee, however, has stated that defaulting on the debt would damage the state's reputation and drive up borrowing costs.

The Rhode Island EDC approved a $75 million loan guarantee to attract Curt Schilling's 38 Studios to the state back in 2010, but found itself holding the bag when the studio went under less than two years later.

Sources: Providence Journal [http://www.ledger-enquirer.com/2014/01/30/2925969/ri-senate-to-vote-on-38-studios.html]


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[Weaver]

I know hindsight is 20/20, but maybe putting up a $75 million honey pot in what was basically a ploy to move some technology jobs to your state was kind of the states fault and maybe not the best use of tax money.

 

[BrotherRool]

I don't know much about this sort of thing, but is it okay for a political body to make laws specifically about one case they're involved in? Could they technically do this sort of thing for any settlement dispute they choose to?

 

[Andy Chalk]

I don't know much about this sort of thing, but is it okay for a political body to make laws specifically about one case they're involved in? Could they technically do this sort of thing for any settlement dispute they choose to?

Yes, Rhode Island has actually done this twice previously, once after a 90s banking crisis and then again following a massive nightclub fire than killed 100 people. I'm not really a fan of case-by-case legislation but these all relate to civil matters (as far as I know), which is somewhat more palatable.

 

[FEichinger]

Let's all not forget that 38 Studios went under because part of the loan guarantee wasn't actually honoured when requested. There was definitely some mismanagement on 38S's end, but RI very much pushed them over the edge, causing this scenario in the first place.

 

[AzrealMaximillion]

I don't know much about this sort of thing, but is it okay for a political body to make laws specifically about one case they're involved in? Could they technically do this sort of thing for any settlement dispute they choose to?

Yes, Rhode Island has actually done this twice previously, once after a 90s banking crisis and then again following a massive nightclub fire than killed 100 people. I'm not really a fan of case-by-case legislation but these all relate to civil matters (as far as I know), which is somewhat more palatable.

Similarity Silicon Knights was given taxpayer money to create certain games. Both provincially and federally, and over around a decade. This was of course before they got decimated in court.

I, Azreal Maximillion, am sincerly sorry that my Canadian government used my tax dollars to create X-Men: Destiny. I am also sincerely disappointed that money was not used to help something that mattered.

 

[Crimsonmonkeywar]

With laws passed, trials and investigations held, and forced summonings, I wonder how much the state spent on that alone. Must be a pretty penny.

 

[Andy Chalk]

Let's all not forget that 38 Studios went under because part of the loan guarantee wasn't actually honoured when requested. There was definitely some mismanagement on 38S's end, but RI very much pushed them over the edge, causing this scenario in the first place.

After 38 Studios missed a payment, then bounced a cheque for another payment. Based on what I've read, the studio was in dire straits long before RI started pushing, and the state ultimately felt that it had no choice but to attempt to extricate itself. I'm not sure how this particular result is a benefit, unless 38 Studios was asking for more money above the original $75 million (and again, based on what I've read that would've become necessary fairly quickly) but I don't think it can reasonably be claimed that Rhode Island, and not 38 Studios itself, bears primary responsibility for its downfall.

The real blame at the state level lies with the administration that offered the loan guarantee in the first place. How supposedly intelligent and knowledgeable business and government leaders allowed that to happen, I will never know.