Last month’s bankruptcy filing by 38 Studios, the ill-fated video game company founded by former Boston Red Sox star Curt Schilling that benefited from a $75 million bond offering by Rhode Island’s economic development arm, has implications for several Am Law 200 firms.
Jeoffrey Burtch, a partner at Delaware’s Cooch and Taylor who is serving as the Chapter 7 trustee overseeing the liquidation of 38 Studios, filed papers with the bankruptcy court in Wilmington on Thursday seeking to have his firm serve as general counsel for the debtor and to have Cozen O’Connor named special counsel. Burtch wants to tap Cozen’s intellectual property and media expertise given that most of the 38 Studios’s $21.7 million in remaining assets are tied to the games it created.
The Cozen team seeking entry in the case is being led by Mark Felger, cochair of the firm’s bankruptcy, insolvency, and restructuring practice, and litigation partner Barry Klayman. Both lawyers plan to bill the bankrupt estate $640 an hour for their efforts, according to court filings submitted by Cozen. (Felger, who did not respond to a request for comment, and Klayman, are both alums of WolfBlock, having joined Cozen from the now-defunct firm in 1997 and 2009, respectively.)
Cooch and Taylor lawyers are billing between $250 and $590 an hour in their proposed role as general counsel to Burtch, according to the firm’s court filings. Burtch, who also did not return a phone call Friday, toured the downtown Providence headquarters of 38 Studios late last month to assess the defunct company’s assets ahead of a meeting with creditors in Delaware this week.
Schilling’s company laid off its entire staff on May 24, shortly after the names of its founder and several key executives disappeared from the 38 Studios Web site, which occurred around the same time that the company defaulted on a loan payment to the state of Rhode Island. Many company employees received scant notice before being let go, and 38 Studios filed for bankruptcy in Delaware on June 7. In its filing, the debtor says it has nearly 1,000 creditors to which it owes $150.7 million.
The company’s only secured creditor is Rhode Island’s Economic Development Corporation, which court records show is owed $115.9 million. The state agency lured 38 Studios to Providence in 2010 from its former home in Maynard, Massachusetts, by issuing $75 million in taxable bonds, the proceeds of which were distributed to the company when it hit certain benchmarks. 
The game maker’s failure to circle those bases—and its eventual descent into bankruptcy—has proven costly for the EDC in other ways, with the agency’s former head, Keith Stokes, resigning in May. Stokes’s departure came around the same time that 38 Studios was resisting former EDC legal counsel David Gilden’s efforts to get access to the company’s financial records, according to e-mails obtained this week via a public records request by The Associated Press. (Schilling’s wife Shonda denied last week that the company balked at the EDC’s requests for information.) 
Gilden, who serves as managing partner of Providence-based Partridge Snow & Hahn, was out of the office Friday and unavailable for comment. Last month the EDC replaced Gilden by selecting Jonathan Savage and Thomas Carlotto from local firm  Shechtman Halperin Savage to serve as its outside legal counsel. The firm will advise the EDC in bankruptcy proceedings for 38 Studios.
Several other firms shared in $545,650 in fees related to the 2010 bond offering, according to a May report by The Providence Journal. Among them: Sheppard, Mullin, Hampton & Richter, which, according to the ProJo, received $58,324 as special IP counsel to the EDC.
According to a guaranty security and pledge agreement related to the bond sale, 38 Studios received counsel from Edwards Angell Palmer & Dodge partner Ellen Corneau and Wayne Kazan of Beverly Hills–based Weissmann Wolff Bergman Coleman Grodin. (The latter firm  merged earlier this month with Sacramento’s Weintraub Genshlea Chediak Tobin & Tobin.)
Kazan was out of the office on Friday and unavailable for comment. Corneau left Edwards Wildman last month to join Providence’s Moses & Afonso, a firm that was paid $190,000 for its services as bond counsel to the EDC on the 38 Studios bond offering in 2010. Corneau did not return a call to her office Friday. A spokesman for Edwards Wildman— which was formed via a 2011 merger between Boston-based Edwards Angell and Chicago’s Wildman, Harrold, Allen & Dixon—says that Corneau’s departure was unrelated to 38 Studios.
Last month Rhode Island Governor Lincoln Chafee hired Providence’s Wistow & Barylick to represent the EDC in investigating whether it can recoup some of its investment in Schilling’s company. Max Wistow, a name partner at the firm leading the inquiry, is tasked with probing potential recoveries for the EDC outside of the bankruptcy process. Wistow’s firm is handling the matter on contingency, and stands to reap 16.66 percent of any final recovery, according to the ProJo.
Laura Davis Jones, a name partner at national bankruptcy boutique Pachulski Stang Ziehl & Jones, is serving as lead counsel to the debtor. Court filings by the firm show that it received $36,224 from 38 Studios prior to its bankruptcy filing, and has agreed to accept another $35,000 for legal services during the Chapter 7 case. Davis, who did not return a request for comment, is leading a team from the firm that includes Pachulski Stang partners David Bertenthal and Curtis Hehn.
Creditors gathered in Delaware this week for hearings before U.S. Bankruptcy Judge Mary Walrath. Cooch and Taylor’s Butch and the EDC’s lawyers from Shechtman Halperin Savage, took turns questioning 38 Studios executives about the video game developer’s abrupt demise. Two of those executives, president William Thomas and CFO Richard Wester, told the court that 38 Studios–owned software capable of tracking gamers’ playing habits could fetch more than $3 million from another game developer, while admitting that the company’s sales from its first role-playing game, Kingdoms of Amalur: Reckoning, fell short of projections despite receiving positive reviews from gamers
Another firm with ties to 38 Studios, Foley Hoag, publicly congratulated the company on the release of Kingdoms of Amalur in February. The firm noted that it had represented 38 Studios since 2007, a year after it was founded by Schilling, a six-time All-Star and former World Series MVP. Not surprisingly, Foley Hoag appears on a list of 38 Studios’s largest unsecured creditors, and is listed as being owed $189,916.
Also owed money by 38 Studios are Weissmann Wolff ($35,935), Chicago IP shop Pattishall, McAuliffe, Newbury, Hilliard & Geraldson ($17,000), and Fox Rothschild ($4,334). Edwards Wildman, Greenberg Traurig, and Littler Mendelson also appear on a creditors matrix for 38 Studios, as do smaller firms like Moses & Afonso, Boston-based boutique Shilepsky Hartley Robb Casey Michon, and Boston bankruptcy solo practitioner Timothy Mauser. The company’s largest unsecured creditor is Providence lawyer Michael Corso, founder and principal of the Preservation Credit Fund, which is owed $11.5 million through Corso’s  reported use of film tax credits to obtain an $8.5 million loan for the debtor.
In June, Citizens Bank, represented by Mark Scott of Boston’s Riemer & Braunstein, sued Schilling in state court in Boston for repayment on $2.4 million in loans it made to 38 Studios, according to a report by The Boston Globe. Buchalter Nemer bankruptcy partner Shawn Christianson in San Francisco is representing another 38 Studios creditor in Oracle America.
For his part, Schilling has taken a leave of absence from his job as an analyst for ESPN while he sorts through the 38 Studios wreckage. Schilling has admitted publicly that he put most of his personal fortune into the company, including $5 million in rare gold coins, telling Boston radio station WEEI-FM last month that most of the more than $50 million he made during his 20-year baseball career is now gone. At the time of its bankruptcy filing, 38 Studios was working on its next project, an unreleased game called Project Copernicus.