The lawyer representing Rhode Island in its suit against 38 Studios told state lawmakers that legislation would enhance the prospects of a settlement.
"I don't think there's any doubt in my mind that this would be beneficial. I took this case on a contingency basis and that speaks to how strongly I feel. We wouldn't be here if it weren't potentially a big settlement," Max Wistow, a principal at Providence, R.I., firm Wistow, Barylick, Sheehan & Loveley PC, told the House Judiciary Committee late Tuesday.
Wistow is representing the Rhode Island Economic Development Corp. - subsequently renamed Rhode Island Commerce Corp. after it filed the lawsuit - against 38 Studios LLC, the failed video game maker owned by former Boston Red Sox pitcher Curt Schilling, over a failed $75 million investment. The suit seeks repayment plus extra compensation for damages.
The U.S. Securities and Exchange Commission is investigating the deal, the EDC confirmed in September.
The bill, initiated by Gov. Lincoln Chafee's staff, would apply only to the 38 Studios case. It would basically protect any party that settles with the state from other defendants seeking compensation for damages.
"I would not like to see this case delayed," said Wistow. "There are a lot of vested issues here. Defense lawyers would like long, drawn-out cases."
Wistow said the state settled similarly in 2001 when Fleet Financial Group agreed to pay the Depositors Economic Protection Corp. $15.5 million amid allegations that it deceived regulators and triggered an early 1990s banking crisis, and similarly in the case of the $176 million settlement in 2009 with defendants in The Station nightclub fire in West Warwick that six years earlier killed 100 people.
"We hear that Rhode Island is an outlier, but three times? We have to take tort reform very, very seriously," said Rep. Michael Marcello, D-Scituate.
The EDC in 2010 loaned 38 Studios $75 million, backed by the state's moral obligation, to entice Schilling to move the company to downtown Providence from Maynard, Mass. Former Gov. Donald Carcieri and then-EDC chairman Keith Stokes championed the deal.
The video-game company in 2012 released its one title, "Kingdoms of Amalur: Reckoning," but shut down later that year and filed for Chapter 7 liquidation, leaving its next planned game, "Project Copernicus," unfinished.
Heated debate over repayment of the moral obligation debt generated nationwide headlines and widespread attention in the capital markets. State lawmakers last year approved an initial $2.5 million payment for the bonds in June after Moody's Investors Service threatened to lower Rhode Island's general obligation bond rating.
Chafee proposed a further $12.5 million payment in his proposed budget for fiscal 2015. Under a plan Chafee introduced last year, Rhode Island would pay roughly $12.5 million annually through 2020. Those payments, plus $15.4 million available through capitalized interest and the capital reserve fund, would total $104.6 million, budget officials estimate.
