south park thestickoftruth6

THQ’s continuing financial troubles has led to lots of legal maneuvering by the publisher, the creditors it owes money to, and the companies it has development agreements with. Thankfully, I’ve seen every episode of Night Court, so I think I know how to break down all these lawyerin’ documents.

One objection came from South Park Digital Studios, who has a “deal memo” (contract) with THQ to publish the South Park: The Stick of Truth role-playing game from developer Obsidian Entertainment. The objection that the company filed with the Bankruptcy Court of the District of Delaware claims that THQ is attempting to auction off the contract it has with South Park Digital Studios as part of the court-ordered sale of its assets.

South Park Digital Studios claims that THQ does not have the right to auction off the agreement. The company listed the following reasons (we’ve put the legalese into plainer language):

  • The contract cannot be assumed or assigned without South Park Digital Studios’ consent according to certain California laws and clauses within the contract itself.
  • Even if THQ could auction off the contract, the publisher would first have to pay, or prove it will quickly pay, the $2.275 million it owes South Park Digital Studios.
  • If THQ sold the deal agreement to another publisher, that publisher would have to provide adequate assurance that it will do right by the contract.
  • The contract provides South Park Digital Studios the opportunity to purchase everything THQ did for the game as long as the South Park company pays the publisher the actual costs of that work.

THQ filed a response with the court. The publisher first states that it will continue to work toward an amicable solution to this objection, but it claims it does have the right to assign the deal memo to another company.

THQ replied to each South Park Digital Studios assertion with the following arguments:

  • Bankruptcy law does allow THQ to auction off the contract as long no other law excuses the agreement. 
  • South Park Digital Studios only cited a 1936 case that does not fully apply in this case.
  • THQ does not owe South Park Digital Studios $2.275 million. The publisher is evaluating any debts to the South Park company and will resolve any outstanding payment.
  • THQ fully intends to auction off the agreement to a company that will provide an assurance that it will honor the contract.
  • South Park Digital Studios may exercise its right to acquire all elements of the game if THQ breaches the agreement. THQ doesn’t believe it has violated the agreement.

Read South Park Digital Studios’ complaint here and THQ’s reply here.

THQ is set to auction off its assets today. GamesBeat will update with any development on this and related stories.

[via @thekevindent]