NEW: Chafee Supports Initial Ruling in 38 Studios Case
Wednesday, August 28, 2013
A Rhode Island judged has ruled that Rhode Island's Economic Development Corporation may proceed with most of its lawsuit against former Red Sox pitcher Curt Schilling and former associates at 38 Studios after defaulting on a $75 million loan guarantee when the video game company went bankrupt last year.
Several former EDC officials are also cited in the suit—including former Executive Director Keith Stokes and former Deputy Director Michael Saul.
The judge's ruling
Superior Court Judge Michael Silverstein’s 99-page ruling dismisses several charges against the defendants, but does give the EDC the chance to recoup some money in relation to the defaulted loan.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTAccording to the ruling, “The EDC cannot recover for a $75 million loss from the Defendants because it did not lose $75 million in the transaction.”
The ruling does, however, state “The EDC may recover for its liability for the General Assembly’s appropriation of funds; injury to its reputation and credit; and the fees and salaries paid to the Defendants.”
Chafee's response
“I am gratified by the Court’s initial ruling in the 38 Studios case. It allows the important claims to proceed and is a significant first step to recovering the taxpayers’ losses,” said Governor Lincoln Chafee, who was not in office when the loan was approved.
The Defendants' take
Attorneys for Stokes and Saul said that they should be immune from liability due to the "public duty" doctrine, arguing that they were doing their jobs as public officials and following orders. Judge Silverstein dismissed the defandant's assertion citing that it doesn't apply in cases where employers sue employees.
38 Studios filed for chapter 7 liquidation in June of last year, leaving the state on the hook for over $112 million related to the original loan.
The next hearing in the case is set for September 13.