Intellectual Property Law

Midway's Rollercoaster Continues - Creditors Sue Board Members

By Chris Bennett, Tudor Carsten, Michael R. Coburn, Sarah Dale-Harris, Pablo Guzman, Danielle (Dani) Lemon, Chris Metcalfe and David Spratley

On May 12, 2009, Midway creditors filed suit against former and current members of Midway's board, former major stakeholder Sumner Redstone, his daughter and former chairperson, Shari Redstone and current owner Mark Thomas, among others.

The suit alleges that the defendants were engaged in wrongdoing, including unjust enrichment, breach of fiduciary duty and corporate waste, while Midway's board members (many of whom have direct ties to Sumner Redstone) watched from the sidelines.

Creditors claim that Sumner Redstone secretly sold Midway to Thomas for a nominal amount which created over $700 million in tax losses for Redstone and his holding company, enabling them to obtain a huge tax refund. Creditors have asked the court to annul the sale of Midway as fraudulent. Creditors have also asked that the $90 million Redstone invested in the failing gaming company and characterised as "debt" be re-characterised as equity because it was issued as such.

Coverage atGameDaily.com, Gamasutra, LA Times Blogs

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Full post as published by Video Game Law Blog on May 25, 2009 (boomark / email).