The bankruptcy case of video game company 38 Studios LLC will move to Rhode Island Superior Court, after the Rhode Island Economic Development Commission and bond trustee Bank of New York Mellon Trust Co. received court approval to seize its assets.
Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware in Wilmington agreed to the move Wednesday. Walrath had granted the seizure motion by the EDC and BNY Mellon “after due diligence.”
BNY Mellon is the trustee for the $75 million loan the EDC made in 2010 through a bond sale, backed by Rhode Island’s moral obligation, to entice 38 Studios to move to downtown Providence from Maynard, Mass.
On Thursday, Rhode Island Gov. Lincoln Chafee named attorney Richard Land receiver for 38 Studios.
38 Studios, owned by former Boston Red Sox pitcher Curt Schilling, filed for Chapter 7 liquidation on June 7 after laying off its employees. Court documents revealed 38 Studios owing Rhode Island $116 million among its $151 million in liabilities.
The trustee and the EDC had petitioned the Rhode Island court for a receiver to coordinate asset sales. In his filing, William Parsons, the EDC’s managing director for business and community development, cited “the complexity of the issues and the non-routine nature of this matter.”
According to the EDC, a valuable portion of the assets consists of intellectual property on computers and technological equipment in the company’s former headquarters at One Empire Plaza in downtown Providence.
“We will be aggressive in working to maximize the recovery for the benefit of the taxpayers of this state,” Thomas Carlotto, a partner at Pawtucket, R.I., firm Shechtman Halperin Savage LLP and one of the state’s lawyers, said in a statement. The move to Rhode Island, he added, will help the state curb legal costs.
Land is a partner at Providence firm Winograd Shine Land & Finkle PC and has worked on complex bankruptcy cases.
38 Studios is incorporated in Delaware, which has become a popular bankruptcy venue for large debtors.
Government agencies including the Rhode Island State Police, the U.S. attorney in Rhode Island and the Federal Bureau of Investigation are examining 38 Studios.
