Motion to Dismiss Suit by Electronic Arts Denied, Contract Interference Claim Continues
When Activision launched the record-setting "Call of Duty: Modern Warfare 3" to a $400 million opening-day release in the U.S. and U.K. on Nov. 8, 2011, it was already embroiled in a $400 million lawsuit with rival Electronic Arts.
The lawsuit, filed in March of 2010, alleges that EA aided and abetted two top executives for the Infinity Ward development studio in breaching their fiduciary duty to Activision. Infinity Ward is the game developer which created several of the Call of Duty games for the game publisher Activision. Activision claims that despite an exclusive, long-term employment agreement the two executives had with Activision, they conspired with EA to set up an independent company comprised of key Call of Duty game developers within the company.
After Activision fired the two executives, Jason West and Vince Zampella, in March of 2010 for insubordination, they founded Respawn Entertainment, which currently has an agreement with EA to publish and distribute its games.
According to The Wall Street Journal, Call of Duty games account for one-third of Activision's annual $4 billion in revenue. The complaint alleges that EA has suffered billions of dollars in losses the last several years as Activision surpassed it as the industry leader in both revenue and game quality. In response to its success, Activision alleges EA used West and Zampella to "destabilize, disrupt and to attempt to destroy Infinity Ward."
EA filed a motion for summary judgment to dismiss the case, but California Superior Court Judge Elihu Berle ruled on Dec. 20 that Activision had provided enough evidence to bring the lawsuit to a jury.
The $400 million in damages sought by Activision includes actual and punitive damages. Activision is also seeking attorneys' fees.
The billion dollar gaming industry, while intensely competitive, certainly is not the only industry involving high-stakes maneuvering and competition for talent. Claims for tortious interference and unfair competition encompass a variety of industries and businesses, from multinational corporations to small businesses and startups.
Generally, a claim for contract interference requires:
- A contract between the plaintiff (the person or business suing) and a third party
- Knowledge by the defendant (the person who allegedly interfered) of the contract between the plaintiff and the third party
- Intentional and improper interference by the defendant
- Actual damages suffered by the plaintiff because of that interference
Not all interference by a third party between two contractually obligated parties results in a viable claim for contract interference. Rather, it depends on the type of interference involved. Among the factors a jury considers when determining improper interference are the defendant's type of conduct, motive, interests and relationship between all parties.
Claims for contract interference are a nuanced area of the law. Those who are potentially involved in contract interference or other unfair competition claims should discuss their situation with an experienced business litigation attorney.