GT Files Suit Against Midway

GT Interactive flexed some serious muscle over the past 24 hours. Not only did it slap business partner Midway Games with a Grade A lawsuit - seeking millions in damages for allegedly sabotaging GT's efforts at marketing Midway titles overseas - but it also made waves on PC Data's best-seller list.

The good news for GT is that its mighty entry into the hunting sim camp has retained its lock on the top slot of best selling games as tallied by PC Data. Deer Hunter II was the top-selling PC title during the month of December - a position the game has held for three consecutive months.

The lawsuit, filed Monday morning in New York State Supreme Court by GT Interactive Software Corp. (GTIS), accuses Midway Games Inc. of "breach of contract, breach of the implied covenant of good faith and fair dealing, tortious interference with prospective business relations, and defamation."

According to GT Interactive, the lawsuit stems from a contract GT and Midway entered into on March 22, 1995. In it, GT states that the parties agreed that GT Interactive would distribute Midways games internationally through March 31, 1998. (Over the years, modifications were made to extend the distribution agreement to March 31, 2000.) For these rights, GT Interactive says it paid Midway Games US$35 million.

The conflict arises because, according to GT, the agreement states that GT would retain those rights to distribute Midway product only if certain sales goals were met. In effect, GT is claiming that Midway intentionally threw up various roadblocks that thwarted the potential success of GT's international efforts, thereby reducing the chance that GT would retain these lucrative international rights.

In the suit, GT Interactive accuses Midway of "repeated failure to give timely notice of new products, provide game development schedules, deliver usable, 'bug'-free master game disks, provide artwork, advertising materials and packaging materials, and obtain required third-party approvals."

The documents filed with the court charge that Midway "systematically and illegally frustrated the ability of GTIS to reap the expected benefits of the distribution contracts," and specifically that Midway Games' chairman and CEO Neil Nicastro "publicly and falsely disparaged the management of GTIS, ridiculed GTIS's ability to meet future performance goals, and hinted that there were ominous undisclosed 'facts' that 'investors' should know about the performance of GTIS," and that these comments by Nicastro "constituted malicious and intentional false statements, and were unprivileged communications to third parties."

Midway Games' vp and general counsel Orrin Edidin told GameSpot News that he viewed GT's allegations as being "completely without merit" and that Midway will file a response with the court shortly. When contacted, Midway CEO Neil Nicastro chose to refrain from commenting on the case.

In addition to Midway Games, GT Interactive names Midway Home Entertainment, Inc., Midway Manufacturing Company, WMS Industries, Inc., Williams Electronic Games, Inc., Williams Entertainment Inc., Williams Interactive, Inc., and Atari Games Corporation as defendants.

GT Interactive is seeking damages in the tens of millions of dollars.