Texas Lawyer Notes Haynes and Boone $7.3 Million Award Dismissal Will Lead to 5th Circuit Showdown


Texas Lawyer
has highlighted the firm's successful representation of Timegate Studios, Inc., which led to a federal judge's decision to vacate a $7.3 million arbitration award. The decision sets up a crucial question for the 5th U.S. Circuit Court of Appeals: How far can an arbitrator go to resolve a dispute in a way not contemplated in a contract between parties?

"Lynne Liberato, who represents the plaintiff in Timegate Studios Inc. v. Southpeak Interactive, et al., a vacatur proceeding, says the question is fundamental for the 5th Circuit because 'if the vacatur isn't affirmed, then virtually no vacatur can be affirmed.'

Liberato and Timegate Studios co-counsel Mark Trachtenberg are partners in Haynes and Boone in Houston. West Short, who represents the defendants in the case, agrees that the case raises a crucial question for the 5th Circuit. 'How much leeway are we going to give arbitrators to remedy situations that are not contemplated by the contract?' asks Short of Georgetown's West Short and Associates.

In his March 20 memorandum and order in Timegate Studios, U.S. District Judge Keith Ellison vacated a $7.3 million defense win. According to his order, Timegate Studios (TGS), a video game developer, had a contract with a video game publisher, Gamecock Media Group, that governed the marketing and distribution of a first-person shooter game called "Section 8."

In 2008, Southpeak acquired Gamecock and assumed Gamecock's rights and responsibilities under the contract. A dispute over the game arose between TGS and Southpeak, Ellison wrote: Among other things, TGS alleged Southpeak was misreporting sales figures, which Southpeak disputes, and Southpeak alleged the game "was a flop" and TGS failed to hold up its part of the contract, which TGS disputes.

TGS terminated the contract with Southpeak, then filed a complaint in the U.S. District Court for the Southern District in Houston against Southpeak and others alleging violations of the parties' contract. Southpeak responded and filed a counterclaim, alleging fraud, that the suit was a means to release TGS from a contract related to an unprofitable game and that TGS breached the contract by unilaterally withdrawing from it, among other things, Ellison wrote."

Excerpted from Texas Lawyer, April 2, 2012. To view the full article, click here.

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