Judge says 38 Studios settlement is constitutional
A judge on Tuesday approved the first settlement in the lawsuit brought by the state's economic development agency over the collapsed video game company founded by former Red Sox pitcher Curt Schilling.
In a 35-page ruling, Rhode Island Superior Court Judge Michael Silverstein approved a $4.4 million settlement between the agency formerly known as the Economic Development Corp. and lawyer Antonio Afonso Jr. and his firm, Moses Afonso Ryan. Several parties to the suit had objected.
Afonso and the firm were among the 14 defendants named in the EDC's complaint, which alleges fraud, negligence and breach of fiduciary duty, among other things. The EDC's board in 2010 approved a $75 million loan guarantee for 38 Studios, which later filed for bankruptcy.
Moses Afonso worked on the sale of the bonds that financed that deal.
The state remains responsible for some $89 million related to the transaction.
In the same ruling, Silverstein also dismissed a separate lawsuit brought by the EDC's former deputy director, Michael Saul, alleging legal malpractice. That suit named Afonso and his firm as well as Robert Stolzman and his firm, Adler Pollock & Sheehan, which served as EDC's general counsel at the time. Stolzman and Adler Pollock are also named in the EDC's suit.
Saul's suit claimed that he had been sued by the EDC "because of the acts or failure to act" of the lawyers and their firms in the run-up to the 38 Studios transaction, including failing to provide Saul warning of his potential liability.
The settlement between Moses Afonso and the EDC - now known as the Commerce Corp. - is the first in the case, but there could be others. EDC lead attorney Max Wistow has said previously he was having discussions with multiple defendants, though he would not comment further.
Several parties, including Saul and former EDC Executive Director Keith Stokes, had objected to this settlement. They contended it violated due process rights and that the new statute under which it was struck is unconstitutional.
The judge ruled Tuesday that the law holds up.
The General Assembly passed the 38 Studios Settlement Act during the 2014 legislative session as a way to encourage settlements. The statute aims to shield any defendant that settles in the case from lawsuits from co-defendants over damages for which that defendant is found liable.