Current and Ex-Infinity Ward Employees Sue Activision for $125 Million

By Brian Leahy, Apr 27, 2010 3:10pm PDT The Infinity Ward drama thickens, once again. The LA Times reports that 38 current and ex-Infinity Ward staff members, have filed a suit against Call of Duty: Modern Warfare 2 publisher Activision claiming that the employees are owed between $78 and $125 million in royalties in addition to potential damages.

Of the 38 employees filing the lawsuit, 17 still work at Infinity Ward. The 38 employees also represent around 40% of the Modern Warfare 2 team.

"Activision engaged in this inappropriate course of conduct in an attempt to force employees of Infinity Ward to continue to work at a job that many of them did not want just so Activision could force them to complete the development, production and delivery of Modern Warfare 3," the suit says.

The plaintiffs in this new suit have argued that the suit should be consolidated with ex-Infinity Ward heads Jason West and Vince Zampella's own lawsuit against Activision.

Among the allegations in this new lawsuit is the claim that Activision told Infinity Ward staffers that if West and Zampella had not been fired, the bonuses would have been around 2.5 larger than the ones paid out at the end of March. This was perhaps intended to place fault at the feet of West and Zampella, but I would speculate that it had the opposite effect.

"Activision believes the action is without merit," responded an Activision representative. "Activision retains the discretion to determine the amount and the schedule of bonus payments for MW2 and has acted consistent with its rights and the law at all times. We look forward to getting judicial confirmation that our position is right."

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  • And just as a refresher, the section from Activision's 10-K form (page F-50), filed March 1, 2010, which basically publicized the termination of employment of West and Zampella:

    In November 2009, the Company released Call of Duty: Modern Warfare 2, a game developed by one of the Company's wholly-owned studios, Infinity Ward. As noted above, Modern Warfare 2 was the best selling console title in the U.S. and Europe in 2009. Consistent with past practice, the Company intends to release a Call of Duty game in 2010 developed by another wholly-owned studio. The Company is concluding an internal human resources inquiry into breaches of contract and insubordination by two senior employees at Infinity Ward. This matter is expected to involve the departure of key personnel and litigation. At present, the Company does not expect this matter to have a material impact on the Company.

    In addition, we are party to other routine claims and suits brought by us and against us in the ordinary course of business, including disputes arising over the ownership of intellectual property rights, contractual claims, employment laws, regulations and relationships, and collection matters. In the opinion of management, after consultation with legal counsel, the outcome of such routine claims and lawsuits will not have a material adverse effect on our business, financial condition, results of operations, or liquidity.

    Note the phrasing, and the context of the "catch-all" paragraph after the one relating to West and Zampella. "Will it have a material impact on the Company? Well... we don't know. We don't expect that it will." Activision's stock closed down 14 cents today, at 11.44, but it was at 11.42 on November 10, 2009 (MW2's release).

    Also, EA made 494th on the Fortune 500: Activision isn't even on that list; they were 705th on the Fortune 1000 last year.