Bankrupt Lair dev sued by employees - Report

Factor 5 staff claim management attempted to shield assets, dodge debt by fraudulently transferring Star Wars: Rogue Squadron Wii source code to new studio.

Factor 5's fiscal woes were first revealed in December. Upon returning from an extended leave, an animator with the studio behind Lair blogged of the company's tenuous financial position, saying employees had not been paid since November. Shortly thereafter, reports surfaced that Factor 5 had laid off a number of employees at its San Rafael, California-based offices and that the company was considering legal action against the affronted animator.

So, about that new Rogue Squadron game...

Now, though, Factor 5's employees are bringing the fight back to the now-bankrupt studio. The Marin Independent Journal reports this week that former Factor 5 employees have filed suit against the developer due to fraudulent business practices leading up to Factor 5's closure last month.

Marin IJ reports that prior to liquidating its assets under the Chapter 7 bankruptcy law, management transferred the studio's intellectual property to another company to avoid paying unpaid employee wages and outstanding debts to creditors. According to James Smith, attorney for the plaintiffs, that work included a new version of Star Wars: Rogue Squadron for the Nintendo Wii.

The suit notes that upon filing for bankruptcy, Factor 5 had assets of only $50,000 to $100,000, with debts totaling between $1 million and $10 million and unpaid wages of more than $900,000 due to 69 employees. Factor 5's largest outstanding creditor is LucasArts, which loaned the studio $4 million in 2003.

"We allege in the suit that Factor 5 and its three founders fraudulently transferred assets, including source code and other intellectual property to Blue Harvest, which is now known as White Harvest," Smith told Marin IJ. As noted by Smith, Blue Harvest is steeped in Star Wars history, having been the code name for LucasArts' Star Wars Episode VI: Return of the Jedi, and it was also the working title of Factor 5's in-development Rogue Squadron Wii project.

"We believe and have alleged in the complaint that Factor 5 and White Harvest are essentially the same company, being run by the same people, being represented by the same sets of lawyers, with all the same management and ownership and control, performing all the same work that they were doing at Factor 5, just now with a new name and a new address," Smith went on to tell the Marin IJ.

Smith also alleged further shady financial dealings, particularly by Factor 5 CEO Julian Eggebrecht. The lawyer told the Marin IJ that on November 11, Eggebrecht transferred his stake in a $548,000 San Rafael home to Katja Reitemeyer, Intel Corp.'s director of business development and fellow title holder, for a mere $5,000. Eggebrecht and Reitemeyer reportedly took out an $890,000 second mortgage on the house in January 2007 and then secured a $100,000 home equity line of credit in November 2007.

130 Comments

  • aaronobst

    Posted Jun 22, 2009 7:08 am PT

    Same man, I can't understand why so many people hated it. I mean sure the control method was a LITTLE off but nowhere near as bad as people made it out to be, and as for the rest of the game it was really good... Not the best but still very well done

  • LinusBlue

    Posted Jun 21, 2009 8:38 pm PT

    Poor factor 5. I liked lair.

  • spotlifetv

    Posted Jun 21, 2009 1:47 pm PT

    This is a perfect example of why developing exclusives is not always a good thing! Factor 5 developed Lair for the PS3 and it bombed out of business they go! - Free Radical took a nose dive after developing Haze as a PS3 exclusive... As recently as this week Activision has stated they might opt out of the PS3 development because there in no significant monetary gain. Why do people think Konami opted to multi platform Metal Gear??

  • imperial_agent

    Posted Jun 20, 2009 4:38 pm PT

    @ Riverwolf007

    You won the internet!

  • Blackheath

    Posted Jun 20, 2009 7:06 am PT

    i want a new rogue squadron :-(

  • maverick_76

    Posted Jun 20, 2009 5:44 am PT

    Yeah that Lair game was pretty poor, I can see why this company went belly-up. I'm glad these employees are doing this because if I was in that situation of not getting paid for my work I would be furious.

  • mini_guv

    Posted Jun 20, 2009 12:30 am PT

    Good on the employees, so they should!

  • Gen007

    Posted Jun 19, 2009 11:10 pm PT

    wow thats crazy it seems only yesterday all the cows were hyping lair as the best thing ever. I remember the whole one stage is as big as GTA SA or whatever and now look the company is in shambles and that game was a very large nail in the coffin along with the crooked management of course.

  • MagicOneUp

    Posted Jun 19, 2009 7:48 pm PT

    Lair... what a piece of dragon crap.

  • Pwnd56

    Posted Jun 19, 2009 5:46 pm PT

    Lair sucked eternally, I remember it at best buy, and for the whole day, no one played at all. A lesson for everyone.

  • wahyudil

    Posted Jun 19, 2009 4:42 pm PT

    roque squadron for wii will be a blast ... and now its fate is almost a blast too ...

  • Riverwolf007

    Posted Jun 19, 2009 11:51 am PT

    yes...that's how bad Lair was...it literally ruined peoples lives

  • blackace

    Posted Jun 19, 2009 10:07 am PT

    I'd sue them as well. The chances of the employees getting their money is slim. LucasArts will probably never work with them again. They still owe them $4 million. Instead of buying a $548,000 home, Egghead should have paid LucasArts and all their creditors. Even though they filed for bankruptcy, those 3 founders could lose their house and lots of other assets if the courts side with the employees in the case. Goodbye Factor 5.

  • zeniftan

    Posted Jun 19, 2009 5:23 am PT

    @grand17: It's a hard truth to face, and I'm glad someone(you) realise's this truth.

    I guess all I hope is that a crazy billionaire shows up and pays the employee's wages, out of sympathy.
    We all know in truth though that will this never happen.
    Good luck to the employee's. I hope they get gobbled up and integrated into another good gaming company. Or at the very least get the ownership rights to this particular IP, since they probably aren't going to get there money back, and finish the game themselves, then become there own games making company. and make millions. MAYBE... We'll just have to watch and see.

  • hannify

    Posted Jun 18, 2009 2:03 pm PT

    wow - yeah sue the hell out of them!

  • lock2121

    Posted Jun 18, 2009 12:25 pm PT

    Disgraceful.

  • Tylendal

    Posted Jun 18, 2009 12:04 pm PT

    Ouch. Factor 5 were a good dev for the most part. Still, I guess this puts paid to the rumours of Factor 5 and Ninty working together on Icarus.

  • SalarianChemist

    Posted Jun 18, 2009 11:29 am PT

    Lair was one of the best first-party PS3 games released during the first couple years the PS3 was on the market.

    It's a shame that this type of legal nonsense has to take place in the videogame industry, too.

  • Zaatin

    Posted Jun 18, 2009 10:10 am PT

    I hope they get there pay, regardless of the value of there work they worked and tried to produce a game...which just happened to not come out as planned :/.

  • Balo_the_Gamer

    Posted Jun 18, 2009 9:58 am PT

    I wish someone would make movie or a book on the shady dealings of the videogame industry.

  • Lord_Regnier

    Posted Jun 18, 2009 9:30 am PT

    Thats bloody disgraceful the way they have been treated, good luck to them.

  • Smithers2286

    Posted Jun 18, 2009 8:32 am PT

    Why Rogue Squadron only for Wii? It's been an exclusive Star Wars staple for awhile now. Exactly what potential are you referring to? Better Graphics? Potential realized then... People you need to realize that the Wii is just as next generation as the PS3/360. If it wasn't, then why in the world would Microsoft/Sony be adopting the Wii's ideal for control?

  • Waldkrieger

    Posted Jun 18, 2009 7:54 am PT

    If they would do as all studios should do: Make a good quality game and complete it ironing out all the bugs before release: some of this would have been avoided. Also, why Rogue Squadron for only the Wii? Imagine the potential of it on X360 and PS3, these people really seem to like shooting themselves in the foot.

  • Rottenwood

    Posted Jun 18, 2009 7:33 am PT

    They should know not to mess around. Upgraydd gonna get his money no matter what.

  • kaziechameleon

    Posted Jun 18, 2009 7:18 am PT

    intel involved in shady back room dealings, no way! ^_^

  • khariss

    Posted Jun 18, 2009 6:23 am PT

    man i hope they nail that ceo to the wall

  • CamiKitten

    Posted Jun 18, 2009 6:16 am PT

    Wow, I was aware that Lair didn't do so well, but to come to this? The unhappy employers should be financially reimbursed and then some even their hard work was for naught.

  • Janpieterzun

    Posted Jun 18, 2009 5:42 am PT

    And i thought only wallstreet brokers were this crooked.

  • nappan

    Posted Jun 18, 2009 5:01 am PT

    @bourne2live: At first it demanded the use of motion control... that made it essentially unplayable. Beyond that it was an OK game, but nothing amazing. Graphics were impressive and totally overwhelmed by the fact that it was unplayable. So... yeah, it was that pathetic.


    That said, salaried workers should be paid their legal due. There's a REASON people weigh the risk/reward of taking money on the front or back end, and it's not a viable business model to insist that all workers tie their own fortunes to that of their produt.

    Should the people who made Psychonauts suffer because tons of people didn't know a good game when it bit them? Nope... and the people who made Lair according to specs demanded by their company (sixaxis wasn't THEIR mistake after all) deserve their salary.

    That said, this will never go all the way... too expensive for too little return. This will settle out of court because the execs won't want any more egg on their face and don't want their new company risked. The employees will settle because for them it's the most advantageous route outside of major damages they'll never get.

  • holyghost87

    Posted Jun 18, 2009 4:57 am PT

    Initially have high hopes, but.. turns out suks...

  • bourne2live

    Posted Jun 18, 2009 4:50 am PT

    Lair was THAT pathetic ?!?!!

  • uglypinkmoose

    Posted Jun 18, 2009 1:56 am PT

    lol i don't know what old time your talking about because there has always been lawsuits n stuff in the gaming industry
    even back on the atari 2600

  • Twilito

    Posted Jun 18, 2009 1:44 am PT

    @ BK-Sleeper
    You're right. I suddenly have a feeling of nolstagia at your words. Back then, gaming wasn't the core of lawsuits and stuff like that. Unlike now, look at that Halo Killer, the teenager who killed his parents over restricting gameplay time. The judge's reason for it - Gaming addiction.. Weird isn't it?

  • BK-Sleeper

    Posted Jun 18, 2009 1:19 am PT

    What happened to the good ol' days when 'game' and 'lawsuit' were never seen in the same sentence?

  • c02z

    Posted Jun 18, 2009 1:11 am PT

    bad game = out of business
    good game = profit risky business

  • raghraghragh

    Posted Jun 18, 2009 1:01 am PT

    It's a bit of a shame that Lair didn't come with analogue controls as well as the sixaxis controls. The game was fairly good. Sure, it wasn't perfect even after the update - far from it - but seriously that game gets whipped hard. People, check the game out. You won't be blown away at any point, but if you can get it cheap, the patch makes the game pretty fun.

  • bennae66

    Posted Jun 18, 2009 1:01 am PT

    by the way i own a ps3, im not sony bashing.

  • bennae66

    Posted Jun 18, 2009 12:55 am PT

    thats what happens when you make a substandard and well overhyped game for launch for what was then a drastically overpriced system at the time. had they done a good job, sony not tarted it up too much prior to launch, they would have money and a viable franchise. bad business decisions lead to financial turmoil. the premise for lair couldnt have been cooler. how could they stuff it up? sony is as much to blame as factor 5 id say

  • DarthVillainous

    Posted Jun 17, 2009 11:06 pm PT

    Completely agree with you, green dominator.

  • Padrepride

    Posted Jun 17, 2009 10:52 pm PT

    rogue squadron for wii would be awesome

  • green_dominator

    Posted Jun 17, 2009 10:07 pm PT

    If everything this story says is true then I hope the Justice System throws the book at these scumbags. I'm so freaking sick of CEO's doing whatever they want not caring who they hurt with their petty ploys of innocence......

  • grand17

    Posted Jun 17, 2009 9:49 pm PT

    to wwonka666, lucas arts is already owed $4 mill that they most likely wont get back, nobody in their right mind would pay off the staff of someone elses business for no reason. Rich people got rich by investing properly and being stingy, not by handing out money where they dont need to

  • Lightningdisk

    Posted Jun 17, 2009 9:46 pm PT

    I hate to put it this way, but just take a look at all the companies that makes "good" games (as in games that get good ratings and reviews) like Ubisoft, still doing well during this crappy economy. You either make a good game, or you don't. SImple as that.

  • grand17

    Posted Jun 17, 2009 9:45 pm PT

    the workers should get paid according to the games success...well in future, for these guys they should be paid as agreed

  • electro57

    Posted Jun 17, 2009 9:09 pm PT

    Had there been analog control in Lair from the beginning, this wouldnt have been a problem.

  • sparkypants

    Posted Jun 17, 2009 8:55 pm PT

    better games=more money...I dont know what else to say except this sucks.

  • Merl57

    Posted Jun 17, 2009 8:52 pm PT

    ouch

  • petee677

    Posted Jun 17, 2009 8:33 pm PT

    Wait, the Lair developer went BANKRUPT?! After creating the best game this generation? Why am I always the last one to find out about these things?

  • chimpanchu

    Posted Jun 17, 2009 8:26 pm PT

    The company executives spent nearly 1 million worth of company's asset on their own home while their employees worked unpaid!

    That's just wrong!

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