Outdoor Partners LLC v. Rabbit Hole Interactive Corp.

Outdoor Partners LLC (Outdoor) (plaintiff) entered into a developer agreement with Rabbit Hole Interactive Corporation (Rabbit) (defendant). In exchange for royalties, Rabbit agreed to develop video games for Outdoor that could pass the approval process for Nintendo of America (Nintendo). The developer agreement permitted Outdoor to terminate for cause or to terminate without cause if it paid a termination fee. Rabbit developed a game that failed Nintendo’s approval process four times, costing Outdoor several hundred thousand dollars. Outdoor terminated the agreement in accordance with the termination-for-cause provisions, but Outdoor and Rabbit argued about the termination fee. Outdoor proceeded to sue Rabbit for breach of contract, but the parties reconciled and entered into a settlement agreement. Under the agreement, Outdoor would pay a series of advance payments, royalty advances, to Rabbit and place a larger deposit in trust. After the deposit was made, Rabbit would then send its games to be tested. If the games passed, the deposited sum would be delivered to Rabbit. If the games did not pass, Rabbit could fix the issues and resubmit for testing. If the games failed a second time, Outdoor was entitled to its deposit back. The settlement agreement stated that if either party terminated the agreement before Rabbit received the full payment of advances and the deposit, each party was entitled to seek litigation and was not bound by the rest of the agreement. Outdoor failed to pay the royalty advances on time and was notified by Rabbit of its failure. The settlement agreement provided Outdoor five days to pay the late advances or risk owing the full amount of the advances and its deposit. Outdoor notified Rabbit that it would pay but also that it wanted to terminate the agreement. Outdoor timely paid the advances. Outdoor filed suit against Rabbit, alleging breach of the developer agreement and tort claims for conversion and replevin regarding the games in development. Rabbit filed counterclaims alleging that Outdoor breached the developer agreement by failing to pay the full royalty amount and termination fee and breached the settlement agreement by failing to make the large deposit after paying the advancements. Rabbit filed for summary judgment on its counterclaims and moved to dismiss Outdoor’s breach and tort claims.