RI Senate OKs 38 Studios settlement bill
Legislation designed to encourage out-of-court settlements in the litigation surrounding the collapse of Curt Schilling's video game company won easy approval Tuesday in the Rhode Island Senate.
The bill was placed on a legislative fast-track after an attorney for the state's economic development agency said it could increase the amount of money the state can recoup from the failed investment in 38 Studios, the now-bankrupt company founded by the former Red Sox pitcher.
The Economic Development Corp., which has been renamed the Rhode Island Commerce Corp., approved a $75 million loan guarantee for 38 Studios in 2010. The agency sued the former Red Sox pitcher and 13 others after the company went bankrupt last year, claiming the EDC board was misled into signing off on the transaction. Schilling and the other defendants deny the charges.
The legislation, which would apply only to the 38 Studios case, would shield any party that settles with the Commerce Corp. from a lawsuit filed by a co-defendant over damages that co-defendant is ultimately found liable for.
Thursday's Senate vote was unanimous. Similar legal mechanisms were used to encourage settlements in the litigation stemming from the 2003 West Warwick nightclub fire and the state's banking crisis in the early 1990s.
The House is already considering similar legislation. A vote in that chamber has not yet been scheduled.
Max Wistow, the lawyer for the Commerce Corp., told a House committee this week that many of the defendants in the case have so-called cannibalizing insurance policies that pay defense costs out of the policy limits. As those legal bills mount, the amount the state could recover diminishes.
"Any settlement in this case is going to be a benefit to the taxpayers," Wistow told the House Judiciary Committee.
The former Economic Development Corp. sued Schilling and 13 others after 38 Studios went bankrupt in 2012. The EDC board approved a $75 million loan guarantee for the company in 2010 as a way to lure it to Providence from Massachusetts.
The state now is on the hook for some $90 million related to the transaction.