Attorneys for Viacom International Inc. told the Delaware Supreme Court last week that their client did not breach the implied covenant of good faith and fair dealing when it failed to renegotiate an agreement with Electronic Arts Inc. to distribute the video game Rock Band, thereby reducing the earn-out payments to shareholders of the game's developer, Harmonix Music Systems Inc., which merged with the entertainment conglomerate in 2006. Viacom's attorneys presented their case to the high court after Harmonix's shareholders appealed a Delaware Court of Chancery decision that dismissed their claims that Viacom purposely sought to reduce Harmonix's earn-out payments.
As the Supreme Court mulls the parties' arguments in Winshall v. Viacom International, in a separate, but related development, the Supreme Court affirmed late Tuesday the Chancery Court's decision to uphold an arbitrator's $298.8 million award to shareholders who claimed they were shortchanged out of the earn-out payments in 2008. Viacom contended the award should only be $191 million because it should be permitted to write down the cost of unsold games.
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