Court Dismisses Midway Lawsuit Against Sumner Redstone

| 8 Feb 2010 10:38

A lawsuit filed against Sumner Redstone and others by creditors of the bankrupt Midway Games has been dismissed, although the judge in the case made it very clear he wasn't happy about doing it.

The long-troubled Midway Games filed for Chapter 11 bankruptcy in early 2009, soon after tycoon Sumner Redstone sold his 87 percent interest in the company to the previously unknown Mark Thomas for the paltry sum of $100,000. The deal smelled all kinds of fishy to all kinds of people, leading to allegations of insider trading and, eventually, a lawsuit against Redstone, Thomas and others, claiming fraudulent transfers, breach of fiduciary duty and other such arcane financial whaddayacallits.

That suit has now been dismissed by a U.S. bankruptcy court, which declared that Redstone and the Midway board of directors did not breach its duties to stakeholders or engage in other illegal activities. The judge in the case did, however, make a point of noting that while the Midway executives didn't break the law, they certainly don't deserve any kudos for their behavior.

"The decision is not an endorsement of any of the defendants' actions," Judge Kevin Gross wrote in his ruling. "The defendants oversaw the ruin of a once highly successful company, only to hide behind the protective skirt of Delaware law, which the court is bound to apply."

Some claims against Redstone's National Amusements company, which holds controlling interests in entities like CBS Corporation and Viacom, were allowed to stand, including one that "seeks to demote the remaining $20 million unsecured portion of the loans not sold to Thomas to the level of equity." None of it will have any impact on Midway itself, though; the fate of the once-great gaming company was decided last summer, when Warner purchased "substantially all" of Midway's assets for $33 million.

Source: BusinessWeek

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