A developer is entitled to due compensation for their contributions to any project; so why would two terminated employees have to sue to get paid?
A little over a month ago Jason West and Vince Zampella, two of the lead developers at Infinity Ward, were terminated by Activision. Several weeks later Jason West and Vince Zampella filed a complaint against Activision for breach of contract, alleging that Activision terminated West and Zampella to deprive them of royalties, bonuses other compensation based on MW2 sales.
According to reports, Activision fired West and Zampella on suspicion of insubordination and breach of contract. The complaint and Activision’s recent SEC filing supports the claim that this may have been the basis for the termination, although according to the complaint those charges were either totally fabricated or greatly exaggerated. West and Zampella are suing Activision under theories of breach of contract and breach of the implied covenant of good faith and fair dealing. According to West and Zampella, they are owed significant compensation in the form of bonuses and shares in addition to creative control over any Call of Duty project taking place after the Vietnam era.
No one but the parties have seen the Employment Contracts or the Memorandum of Understanding at issue; the complaint requests that the Court keep those documents sealed. However, the complaint does stipulate that the first royalty payments in question are due at the end of March and Activision terminated West and Zampella to avoid paying those royalties.
While Activision certainly has an interest in holding on to its money, it also owes a duty to its shareholders. This means retaining top talent and acting in the company’s best interest. So why fire two incredibly successful developers who created Activision’s strongest console franchise without good reason, and why fail to pay when doing so is a clear breach of contract?
This matter has many tongues wagging. On the one hand, many want to side with West and Zampella. As the heads of Infinity Ward they put Call of Duty on the map and redefined the FPS genre. There is little doubt that morally and ethically they have earned every penny owed under their respective employment agreements. The problem is whether the courts (and their contracts) will agree.
An analysis of the complaint could provide some insight. According to the complaint, Activision refused to confirm payment of bonuses and additional compensation under the contract, due March 31st of this year. This led to the complaint’s allegation that Activision was trying to “avoid payment of the significant compensation Activision owes West and Zampella and the other employees at Infinity Ward.”
This is an interesting allegation for several reasons. We can’t see the contract and no one knows all of the facts, so confirming this allegation will be impossible until March 31, when the payment is due; and for all we know West and Zampella really were engaged in talks with EA. We have no clear definition of insubordination or breach of contract under the agreement, so we have no idea if the termination was indeed wrongful. And unfortunately the complaint does little to adequately shield West and Zampella from Activision’s claims of insubordination or breach. If the typical legal definition applies, insubordination means refusing to follow directions. Those directions may be implied (e.g., company policy or otherwise acting in the company’s best interest) or express (oral or written direction from a senior executive).
Certain facts relevant and necessary in a wrongful termination suit are absent in the complaint, including an assertion that Zampella and West did not actually engage in conduct constituting grounds for termination. In fact the complaint admits that Activision may have relied on information obtained “a year before”.
This section of the complaint bears quoting and is worded in a manner that arguably suggests that West and Zampella may not be able to deny at least some wrong-doing:
“It contained charges that were disproved in the investigation; included events that West or Zampella were never even asked about during the investigation; identified conduct that other Activision executives engages in with impunity; and cited ‘insubordination’ and alleged conduct from over a year ago, while they were working on Modern Warfare 2, and that never led Activision to either investigate, or discipline them, or terminate them….”
Specifically, “conduct that other Activision executives engaged in with impunity” and “insubordination from a year ago” may be all too defensible from Activision’s standpoint; what is appropriate conduct for an executive of Activision may not be appropriate conduct for an executive of a wholly-owned but otherwise self-contained and self-controlled subsidiary. For instance, what might be seen as information-gathering by an executive of Activision might be perceived as an act of mutiny by a wholly-owned subsidiary (e.g., specific communications with a rival company).
As for conduct from over a year ago, refusing to act on that conduct immediately may be due to justifiable delay on the part of Activision; interfering with Infinity Ward in the middle of a development cycle would come at a huge expense to Activision, while waiting to act on wrongful conduct until the release-dust has settled would allow for a smoother transition for everyone involved.
It may be that Activision truly is acting in bad faith; while no one can speak for the rest of Infinity Ward, West and Zampella certainly fear that they won’t be compensated. If this is Activision’s method of handling even its top talent, every studio and studio executive under their control should take a look at their current contracts and review their termination clauses; specifically, employees and executives should negotiate hard to ensure that they’re paid for their past contributions irrespective of grounds for termination.
Much in the complaint suggests that payment of the bonuses and compensation may be contingent on continued employment and/or termination without cause. The heavy reliance on claims of bad faith and wrongful termination suggest that the compensation in question, including bonuses, stock options, and future royalties, rely on how termination is affected. This is a dangerous proposition and may encourage employers to fabricate grounds for termination as opposed to paying large severances. However, without seeing the contract there’s no way to confirm this assumption.
Unfortunately showing wrongful termination in a case like this will prove difficult. With hope West and Zampella will settle this matter quickly and be fairly compensated so they can move on with their lives and careers; unfortunately, it is just as likely that Activision will be forced to fight if only to defend itself in the court of public opinion.
“As for conduct from over a year ago, refusing to act on that conduct immediately may be due to justifiable delay on the part of Activision; interfering with Infinity Ward in the middle of a development cycle would come at a huge expense to Activision, while waiting to act on wrongful conduct until the release-dust has settled would allow for a smoother transition for everyone involved.”
On the other hand, we have estoppel if Activision sat on their rights to wait until it would be profitable to fire West and Zampella.
Estoppel’s an interesting argument, although I think generally it comes up in wrongful termination in the form of waiver. There is such a thing as a waiver by the employer, but generally that can be contracted away. There may also be a laches defense, but in either case Activision would argue that it becomes a balancing test that’s offset by Activision’s certain LOSS of money if they impeded the development cycle (bear in mind, they’d already put up a substantial investment in the project).
And once again, we don’t have the contract. California is an at-will employment state and we don’t know if Activision agreed that they would not terminate West and Zampella without cause. We also don’t know if contingent compensation is based on continued employment, without cause termination, or what.
California DOES have strict laws concerning when an employer must pay its employees; there is, however, a question of whether this only applies to salary/wages or if this includes contingent compensation. It doesn’t look like Activision has held back on salary at all, so if we’re assuming the former the statutes may not apply. However, there is also a strong public policy in California that employees be paid. If firing is based solely on avoidance of payment or if the reasons for termination are merely pretextual in order to avoid payment, West and Zampella have a very strong case. But unfortunately Activision is doing a good job of making it seem like they at least had a good faith belief that West and Zampella were engaged in acts of insubordination by engaging in improper communications with a competitor.