Rhode Island vs 38 Studios lawsuit given the greenlight

A judge has given the go ahead on a lawsuit accusing Kingdoms of Amalur developer 38 Studios of "fraud, negligence, breach of fiduciary duty, racketeering and conspiracy" as well as misleading Rhode Island's economic development agency can go ahead.

An Associated Press report confirms Superior Court Judge Michael Silverstein ruled the suit valid on Wednesday.

Rhode Island forked over a $75 million loan guarantee to 38 Studios in 2010, which went bankrupt in 2012 leaving debts of $112 million. The suit claims 38 Studios management knew the company would run out of money but did not disclose this to the EDC board. It also alleges mismanagement of the company.

The suit, which was filed in November, names four defendants, including four former 38 Studios executives and its insurer. The defendants had moved to dismiss all or part of the suit but were unsuccessful, and may now be liable for unspecified damages. Silverstein noted that the state cannot sue for the full $75 million as it hasn't actually lost that full amount yet, as the bonds are being repaid over time - but that it may be able to claim future losses and other costs.

Rhode Island Governor Lincoln Chafee, an outspoken opponent of the deal which brought 38 Studios to the state and the EDC's current chairman, was unsurprisingly pleased by the judge's decision.

"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," he said in a statement.

38 Studios representatives did not comment on the ruling, but have said in the past that Rhode Island, and especially Chaffee, are not entirely without blame. Founder Curt Shilling was "devastated" by the closure.

Rhode Island recently chose to honour 38 Studios' debts.

The next hearing in the case is scheduled for September 13.

Thanks, Develop.