Objection! #8: The Case of the Corporate Rivalry

Analysis

Now, the amendment doesn't really change most of what Activision is alleging with regard to West and Zampella (you can read all about that in Objection! #1), but it alleges some new causes of action against EA, and I'm going to do my standard bit here. I'll go through them, tell you what they mean, and then in the next section, give you my two cents about how much water I think they hold.

1. Intentional Interference with Contract (IIWC). Often just called "tortious interference," IIWC a perennially interesting cause of action for law students, because it's a tort (a wrong you can sue somebody for) that directly involves contract law (typically an area of the law that is separate and often incompatible with tort regimes). Like all torts, it requires some level of intentionality or negligence on the part of the defendant to have any force, and, as its name suggests, IIWC requires actual, affirmative intent by the defendant to screw up a contract between the plaintiff and another party. Usually, the defendant also has to receive some benefit from this interference, but not necessarily. Damage to the plaintiff, however, is necessary.

In this case, Activision argues that it had what's called a Memorandum of Understanding (MOU) with West and Zampella, which bound them not to compete, abet competitors, or generally siphon away resources and employees from Activision during their employment period. Typically, MOU's are not considered valid contracts, but in this pleading, Activision alleges that the MOU was a valid contract and, more importantly, that EA knew of its existence and terms for the entirety of their dealings with West and Zampella.

To understand how IIWC works, you basically want to think of any situation in which you have an agreement in place with somebody else, and then a third party comes along and undercuts you -- and you'll quickly see how annoying that is, and why some people made this into a law. One colorful (and legally enforceable, believe it or not) example is that of a marriage engagement. In the old days, and engagement (or marriage itself) was considered a contract between the two people about to get married. If a third person, say some rakish gentleman with dark hair, were to sweep one of the soon-to-be-newlyweds off his or her feet, that person could well be sued by the remaining would-be newlywed for IIWC. While the rakish gentleman clearly did not break any contractual obligation on his own, he did cause someone else to break their contractual obligation, and that can fall under IIWC.


That's just an example, of course, but the key takeaways are that a contract need exist, and the defendant has to have intentionally (i.e., with knowledge of the contract and a desire to mess it up) interfered with it. How likely this one is to go through depends a lot upon the facts. As a rule, it's difficult to prove torts that require proof of actual beforehand knowledge of a preexisting state (that is, that a contract existed), because nearly all of the evidence that would tend to prove this is going to be circumstantial. Not that circumstantial evidence is any less valid; it's just usually less persuasive to juries. That said, maybe Activision has an e-mail from EA to West and Zampella saying: "Hey, we know you dudes have a memorandum of understanding with your current employer, but we're totally going to make you a deal that will make you want to violate the terms of it. Score!" But I doubt that.

The other issue is that an MOU may not even constitute an actual contract. In practice, they usually don't -- they're just both sides clearing the air about what they intend to do going forward, to gain a mutual understanding. In point of fact, they're usually used to get both sides to agree without a contract because neither wants to enter into one in the first place.

My guess is that this one gets a "not guilty" from the jury.

2. Aiding and Abetting a Breach of Fiduciary Duty. So, this one isn't so much a new cause of action as it is an attachment of EA to another cause of action involving, more directly, West and Zampella. Breach of fiduciary duty occurs when you have an implied or explicit loyalty relationship between two parties. Frequently, this is an employer-employee relationship, but it could be just about anything from teammates on a sports team to your relationship with your stockbroker.

The bottom line here, really, is going to be whether the jury decides that West and Zampella, themselves, breached (or even had) a fiduciary duty to Activision as employees of an affiliate corporation. The air is very cloudy on that, from where I'm standing. If they breached that duty, then I would think EA is in some trouble here. They've got EA-affiliated personnel meeting with (and providing a meeting space to) West and Zampella, they've also -- after the fact -- clearly provided West and Zampella with the wherewithal to start a new, competing video game studio. Again, all of this is circumstantial... but it doesn't look good for EA.

My guess is that if West and Zampella are found to have breached a fiduciary duty, EA will be found to have abetted.

The best part about this section of the complaint is that Activision asks for "400 hundred million dollars" in damages. Four-hundred hundred million, that's what, like $40 billion? Aw yeah, proofreading for the win.

3. Violation of California Business and Professions Code, Section 17200 -- Unfair Competition. This is a sort of catch-all statutory complaint that I'm guessing Activision simply forgot to file in its original pleading, and wants to add now. They've added this cause of action as pertains to all of the defendants -- not just EA -- so my sense is some junior associate in Activision's law firm did some research, and suggested they add this in on a sort of "why not?" thinking.

Section 17200 is probably the most widely sued-over section in the California B&P Code, and that's because it's extremely general in its language. The entirety of the statue reads: "As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code." Basically, this means anything unlawful, fraudulent, or "unfair" with regard to competitors in business can be contemplated by this statute. For that reason, it's almost always included in business competition cases -- and for that same reason, it rarely has any teeth.


Honestly, this one is hard as hell to call, partly because I'm not an expert on this particular section of the California B&P Code, and partly because I've seen it go both ways in court so often. With the facts of this case, too, it really could go both ways. Some of the text messages that went back and forth among Infinity Ward employees (especially those concerning the intentional submarining of an affiliate games manufacturer) are really pretty damning, as is the involvement of a CAA agent in the mix. That said, who is to say what level of competitiveness by EA is "unfair?" California does not enforce, for example, non-competition agreements with regard to employees -- if I work for ACME Hardware, I can go down the street to Ace Hardware the next day and work for them instead. So, my guess is that this one is going to come down to a jury's sense of right and wrong about the facts they hear in this case (keep in mind, they may not hear all the facts that we've heard due to clever attorney-ing, too).

Conclusion

In all, this stuff isn't really anything that anyone should be surprised about, at least in a general sense. Yeah, some of the revelations in the discovery and the new causes of action are interesting (and, in some cases, rather disturbing), but we all knew EA was going to get involved in this thing one way or another. They've just got too many tentacles leading back to them.

Which is not to say that EA did anything illegal. A lot of this stuff may sit poorly with us holier-than-thou types, but business is business, and immoral is not illegal. Activision has its fanboys, as does EA, and both sides will doubtless face off in one of the great Internet conflagrations of all time. But the truth, from where I'm standing, is that Activision has a fairly strong legal case here, and will probably recover in some fashion, even if it's a settlement.


Then again, with the American court system, you never can tell.



Years ago, Eric Neigher went into law school, and started writing about games on the side. These days, he splits his time between pwning noobs on the Internet and pwning noobs in the justice system. His column, Objection!, was the 2010 recipient of the Neigher award for his own works.