Judge okays 38 Studios lawsuit

Judge okays 38 Studios lawsuit
Seth Tipps

By Seth Tipps

August 28th 2013 at 10:33PM

Rhode Island EDC is cleared to pursue claims, but has to wait for full $75m

The Rhode Island Economic Development Corporation has cleared the first hurdle in its bid to sue 38 studios founder Curt Schilling, a number of the bankrupt company's executives, and former members of the EDC.

The suit alleges that 38 Studios knowingly misled state representatives into approving $75 million in guaranteed loans that brought the Kingdoms of Amalur developer from neighboring Massachusetts.

The company defaulted on the loans last year, leaving Rhode Island on the hook for as much as $112 million.

The EDC filed suit against 14 defendants, including nine of its former employees, later in the year alleging fraud, negligence, breach of fiduciary duty, racketeering, and conspiracy.

Now ESPN reports that a superior court judge, Michael Silverstein, has given the case the go-ahead with the caveat that the state can't immediately sue for the full $75 million because it hasn't yet lost that much.

In the future the EDC could press for further losses if the General Assembly approves the payments, and could also pursue fees and salaries paid to the defendants and recompense for damage done to its reputation and credit.

The Judge batted down all attempts by defense lawyers to have the case thrown out, and overruled a motion seeking to find former EDC executive director Keith Stokes and former deputy director Michael Saul immune from liability on the grounds that they were public officials acting in accordance with their jobs.

Governor Lincoln Chafee, also the EDC board chairman, said he was gratified by the ruling as it allowed claims to proceed that could help recover “the taxpayer's losses”.

Schilling's lawyers have declined to comment on the ruling, but the studio founder and former Red Sox pitcher has said in the past he believes the lawsuit has political motivations.

A federal investigation last year found 38 Studios had committed no crime under Federal Law.