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Analysis: Can West And Zampella Win?
by Mona Ibrahim [PC, Console/PC]
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March 19, 2010
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[Attorney Mona Ibrahim looks at the ousted Infinity Ward heads' dispute with Activision, analyzing West and Zampella's complaint to find a few sticking points that might challenge the pair's fight.]
If a developer is entitled to due compensation for their contributions to any project, why would two terminated employees have to sue to get paid?
A little over a month ago Jason West and Vince Zampella, two of the lead developers at Infinity Ward and creators of the Call of Duty: Modern Warfare franchise, were terminated by Activision. Several weeks later Jason West and Vince Zampella filed a complaint against the publisher.
The complaint alleges Activision’s breach of contract and wrongful termination in order to deprive West and Zampella of royalties, bonuses other compensation based on CoD: MW2 sales. They also assert that they are owed creative control over any Call of Duty project taking place after the Vietnam era and have requested an injunction to that effect.
According to reports, Activision fired West and Zampella on suspicion of insubordination and breach of contract. The complaint and Activision’s recent SEC filing supports this possibility. However, according to the complaint, those charges were either fabricated or exaggerated.
No one but the parties has seen the Employment Contracts or the Memorandum of Understanding at issue; the complaint requests that the Court keep those documents sealed. West and Zampella probably don’t want the contents of their contracts publicly disclosed if they plan on moving to a new studio or publisher; it may harm their bargaining position.
The complaint does stipulate that the first royalty payments in question are due at the end of March and Activision terminated West and Zampella to avoid paying those royalties.
While Activision certainly has an interest in holding on to its money, it also owes a duty to its shareholders. This duty can be expressed in many ways, but ostensibly includes retaining top talent. So why fire two incredibly successful developers who created Activision’s strongest console franchise, and why fail to pay when doing so is a clear breach of contract?
This matter has many tongues wagging. On the one hand, many want to side with West and Zampella. As the heads of Infinity Ward they put Call of Duty on the map and redefined the FPS genre. Many believe that morally and ethically, West and Zampella have earned every penny owed under their respective employment agreements.
The Call of Duty and Modern Warfare franchises are probably Activision’s most successful, and the publisher purchased Infinity Ward for a song; it stands to reason that the people responsible for the franchise should be appropriately compensated for their hard work. Unfortunately the courts (and their contracts) may not completely agree.
According to the complaint, Activision refused to confirm payment of bonuses and additional compensation under the contract, due March 31st of this year. This led to the complaint’s allegation that Activision was trying to “avoid payment of the significant compensation Activision owes West and Zampella and the other employees at Infinity Ward.”
This is an interesting allegation. We can’t see the contract and no one knows all of the facts, so confirming this allegation will be impossible until March 31, when the payment is due; and for all we know West and Zampella really were engaged in talks with EA as some of the rumors suggest.
We have no clear definition of insubordination or breach of contract under the agreement, so we have no idea if the termination was indeed wrongful. And unfortunately the complaint does little to adequately shield West and Zampella from Activision’s claims of insubordination or breach. If the typical legal definition applies, insubordination means refusing to follow directions.
Those directions may be implied (e.g., company policy or otherwise acting in the company’s best interest) or express (oral or written direction from a senior executive). Certain facts relevant and necessary in a wrongful termination suit are absent in the complaint, including an assertion that Zampella and West did not actually engage in conduct constituting grounds for termination. In fact, the complaint admits that Activision may have relied on information obtained “a year before”.
This section of the complaint bears quoting and is worded in a manner that arguably suggests that West and Zampella may not be able to deny at least some wrongdoing:
“It contained charges that were disproved in the investigation; included events that West or Zampella were never even asked about during the investigation; identified conduct that other Activision executives engages in with impunity; and cited ‘insubordination’ and alleged conduct from over a year ago, while they were working on Modern Warfare 2, and that never led Activision to either investigate, or discipline them, or terminate them….”
Specifically, “conduct that other Activision executives engaged in with impunity” and “insubordination from a year ago” may be all too defensible from Activision’s standpoint; what is appropriate conduct for an executive of Activision may not be appropriate conduct for an executive of a wholly-owned but otherwise self-contained and self-controlled subsidiary.
For instance, what might be seen as information-gathering by an executive of Activision might be perceived as an act of mutiny by a wholly-owned subsidiary (e.g., specific communications with a rival company).
As for conduct from over a year ago, refusing to act on that conduct immediately may be due to justifiable delay on the part of Activision; interfering with Infinity Ward in the middle of a development cycle would come at a huge expense to Activision, while waiting to act on wrongful conduct until post-release allows for a smoother transition for everyone involved.
It may be that Activision truly is acting in bad faith and seeks to maintain complete control over the CoD intellectual property without further interference from Infinity Ward; the complaint alleges considerable wrong-doing on Activision’s part, including “Orwellian” investigation tactics and cruel interrogation methods that caused significant emotional distress to employees at Infinity Ward.
While we can’t speak for the rest of Infinity Ward, West and Zampella seem to fear that they won't be compensated and were forced out without cause. If this is Activision’s method of handling even its top talent, every studio and studio executive under their control should take a look at their current contracts and review their termination clauses.
But this goes for any employee of any studio anywhere. Employees and executives should negotiate hard to ensure that they’re paid for their past contributions irrespective of grounds for termination.
Much in the complaint suggests that payment of the bonuses and compensation may be contingent on continued employment and/or termination without cause. The heavy reliance on claims of bad faith and wrongful termination suggest that the compensation in question, including bonuses, stock options, and future royalties, rely on how termination is affected.
This is a dangerous proposition and may encourage employers to fabricate grounds for termination as opposed to paying large severances. However, without seeing the contract there’s no way to confirm this assumption.
Unfortunately, showing wrongful termination in a case like this will be difficult. With hope West and Zampella will settle this matter quickly and be fairly compensated so they can move on with their lives and careers; unfortunately, it is just as likely that Activision will be forced to fight if only to defend itself in the court of public opinion.
[Mona Ibrahim is a Trademark, Entertainment & Media law attorney based in Seattle, WA. She is Of Counsel with Imua Legal Advisors and her practice emphasizes copyright and trademark dispute resolution, IP registration, entertainment & media transactions, general business transactions and employment law. Mona is an avid gamer and is dedicated to serving the gaming and game development communities by providing education, helpful strategy, and legal assistance when necessary.
THE INFORMATION IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY. The content of this article is not legal advice. It only constitutes commentary on legal issues, and is for educational and informational purposes only. Reading this article, replying to it via comments, or otherwise interacting with this article does not create an attorney-client privilege between you and the author. No information you provide in the comments portion of this article shall be deemed confidential.]
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There would have to be a lot of proof that Jason and Vince were actively engaged, and that will not be easy to prove. These are not stupid guys. Anything is possible, but I find it hard to believe that they knowingly spoke to another publisher about leaving prior to getting their payout.
But West and Zampella already were acquired by a publisher. That's the "holy grail" for game developers. Being acquired. So why aren't they happy then?
Well... they just made a game that made a billion dollars. Being acquired for $5 million doesn't seem so great now, does it?
Film people generally don't mess around too much with trying to control corporations as a way to good compensation. They just get an agent, and then get a good contract for each project. That's all. They might fight for creative control, but they don't mess around for the will-o-wisp of "IP ownership" because IP ownership, in and of itself, is worthless. Compensation for IP is what matters - not owning it. If you own 100% of an IP that does nothing, who cares? But if you sell all your IP but get a 1% residual for gross sales and creative control, fees for sequels and spin-offs, and other terms, not only do you get directly compensated for sales, but you get the freedom to move on to a new projects as fast and frequently as you want while other entities manage the IP. Did Ridley Scott or James Cameron care about owning the IP for the Alien(s) franchise? No. Did it matter? No. They made the films they wanted, and then they moved on to new projects. And they are filthy rich.
Anyway, West and Zampella are now repped by CAA, so they should get better advice now.
If they had done a contract like free agents, and sold all their IP, the following would be true:
1.) They could immediately do whatever new project they wanted. There would be no pressure for them to not be "insubordinate" because they aren't employees. In fact, Activision would now probably be courting them (all other things being equal).
2.) If each of their IP assignment contracts stated a gross residual of a measly 1% (no reason why it couldn't be more, by the way), they would each have made $10 million by now. And that money would continue as long as the title sold. And that isn't including revenues for spin-offs, sequels or other things (if those were included in their contract).
3.) They'd probably get their name up front. It would be as much a West-Zampella game as an IW or Activision one. That registers with the audience and gives them clout for future projects.
Anyway, fighting Activision is probably not the smartest thing to do now. Better to learn your mistakes and move on. But also, in their next deal, get one that sets a precedent for other core game developers to also be taken seriously.
From my experience working in a very tight-knit team, I know it's a pretty rare thing in any industry.
If they got a good team vibe going, I would never blame them for following their 'work family' no matter what studio name it's under. In the end it's all about your family, friends and having fun making great games to the best of your ability.