Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Earn-Out Payments In <i>Rock Band</i> Video Game at Issue in Delaware Case

By Jeff Mordock
August 02, 2013

Attorneys for Viacom International Inc. told the Delaware Supreme Court in oral arguments in July that their client did not breach the implied covenant of good faith and fair dealing when it failed to renegotiate an agreement with Electronic Arts Inc. (EA) to distribute the video game Rock Band , thereby reducing the earn-out payments to shareholders of the game's developer, Harmonix Music Systems Inc., which merged with the Viacom entertainment conglomerate in 2006. Viacom's attorneys presented their case to the high court after Harmonix's shareholders appealed a Delaware Court of Chancery decision that dismissed their claims that Viacom purposely sought to reduce Harmonix's earn-out payments.

As the state supreme court mulls the parties' arguments in Winshall v. Viacom, in a separate, but related development in July it affirmed the chancery court's decision to uphold an arbitrator's $298.8 million award to shareholders who claimed they were shortchanged out of the earn-out payments in 2008. Viacom International Inc. v. Winshall, 513. Viacom contended the award should only be $191 million because it should be permitted to write down the cost of unsold games.

In upholding the chancery court's decision, the Delaware Supreme Court decided that BDO USA LLP, which arbitrated the earn-out dispute, was correct when it refused to consider evidence presented by Viacom. “If the subject matter to be arbitrated is the calculation of an earn-out ' all issues as to what financial or other information should be considered in performing the calculation are decided by the arbitrator,” said Justice Carolyn Berger.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Removing Restrictive Covenants In New York Image

In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?

Fresh Filings Image

Notable recent court filings in entertainment law.