Take-Two and Rockstar Games v Leslie Benzies

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------------x TAKE-TWO INTERACTIVE SOFTWARE, INC., : and ROCKSTAR GAMES, INC., : : Plaintiffs, : : -against: : LESLIE BENZIES, : : Defendant. : ---------------------------------------------------------------x

Case No. _________ COMPLAINT FOR DECLARATORY JUDGMENT

Plaintiffs Take-Two Interactive Software, Inc. (“Take-Two”) and Rockstar Games, Inc. (“Rockstar Games”) (collectively, “Plaintiffs”), by and through their undersigned attorneys, for their Complaint against Defendant Leslie Benzies (“Benzies”), state as follows on knowledge as to themselves and their own acts and on information and belief as to all other matters, which will likely have evidentiary support after a reasonable opportunity for discovery: INTRODUCTION 1.

This is an action for a declaratory judgment and breach of contract arising out of an

actual controversy between Take-Two, Rockstar Games, and Benzies concerning the parties’ rights and obligations under the 2009 Royalty Plan (the “Royalty Plan”), which, along with the other documents relevant to this action, Plaintiffs will attach to an amended complaint as soon as they can obtain an appropriate order allowing those confidential materials to be filed under seal. Plaintiffs seek a judgment that will clarify that Plaintiffs have no further financial obligations to Benzies under the Royalty Plan, notwithstanding Benzies’ repeated demands made in breach of that agreement. 2.

The Royalty Plan is a comprehensive bonus plan pursuant to which Rockstar

Games rewarded and incentivized, among others, Sam Houser and Dan Houser, the co-founders

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of Rockstar Games, and Benzies, the former president of Rockstar North, Ltd. (“Rockstar North”), a Take-Two subsidiary. 3.

On March 23, 2015, Benzies, who had been on sabbatical since September 1, 2014,

sent a letter to Take-Two demanding “exact financial parity with his co-Principals, prospectively and retroactively as of the Effective Date of the 2009 Royalty Plan.” 4.

By letter dated April 2, 2015, Benzies provided notice of termination of his

employment relationship with Rockstar North. Benzies asserted that he was terminating his employment for “Good Reason” or, alternatively, that he had been terminated by Plaintiffs “without Cause,” terms that also are defined in Benzies Amended and Restated Employment Agreement, dated September 12, 2012 (“Employment Agreement”). 5.

In his April 2, 2015 letter, Benzies again claimed that he is entitled to receive

bonuses under the Royalty Plan equal to those paid to Sam Houser and Dan Houser. By letter dated April 13, 2015, Benzies repeated his demand for “full parity” in royalty payments. 6.

Since receipt of these demands, Plaintiffs have been in ongoing discussions with

Benzies regarding the terms of his separation from Rockstar North. Plaintiffs deny that Benzies had Good Reason to terminate his employment. 7.

Benzies, however, continues to demand parity with respect to pre-termination

royalty payments and post-termination royalty payments. The parties to this action have sought unsuccessfully to resolve this issue through mediation and now seek judicial clarification that would resolve this controversy. 8.

Under the Royalty Plan, decisions regarding pre-termination bonus allocations are

made by majority vote of the members of an Allocation Committee (the “Committee”). The Royalty Plan further precludes the persons covered by it from making any claim against Take-

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Two, Rockstar or any other party on account of his or its eligibility or ineligibility to receive royalties or his allocable share of any royalties. 9.

The Royalty Plan provides that since Benzies resigned without Good Reason, he is

not entitled to any post-termination royalties. The Royalty Plan further provides that had Benzies been terminated without Cause, or had he voluntarily terminated his own employment for Good Reason, he remained eligible to receive post-termination royalties for three years, but in an amount determined solely by Sam Houser, the President of Rockstar Games. 10.

The Royalty Plan thus sets forth, in clear and unambiguous terms, the manner in

which royalty allocations are to be made. Nowhere does the Royalty Plan provide that Benzies is entitled to parity or, indeed, to any minimum royalty allocation, either before or after termination. 11.

By this action, Plaintiffs seek a judgment that will finalize the controversy and offer

the parties relief from uncertainty. Plaintiffs ask this Court for a judicial declaration that: the Royalty Plan does not establish any minimum allocations or financial parity with the other Rockstar Principals (as defined below) and instead provides the Allocation Committee complete discretion not to award pre-termination bonuses to Benzies; and (2) Benzies did not have Good Reason to terminate his employment but that even if he did have Good Reason (which Plaintiffs deny) Sam Houser would have the sole authority to determine what, if any, royalty percentage should be allocated to Benzies. PARTIES 12.

Take-Two is a multinational publisher, developer, and distributor of video games

and video game peripherals. Take-Two is a Delaware corporation with its principal place of business at 622 Broadway, New York, New York 10012.

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13.

Rockstar Games is a multinational video game developer and publisher and a

subsidiary of Take-Two. Rockstar Games is a Delaware corporation with its principal place of business at 622 Broadway, New York, New York 10012. 14.

Upon information and belief, Benzies is resident of the State of California. Benzies

is a former employee of Rockstar North, a subsidiary of Take-Two and a video game development company based in Edinburgh, Scotland. JURISDICTION AND VENUE 15.

This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.

§ 1332(a). There is complete diversity of citizenship between Plaintiffs and Defendant, and the matter in controversy exceeds $75,000, exclusive of interest and costs. 16.

This Court has personal jurisdiction over Defendant under C.P.L.R. §§ 301 and

302(a). Defendant has consented to the personal jurisdiction of this Court pursuant to the Royalty Plan, and this action arises out of the transaction of business in New York. 17.

Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b) and (c). A

substantial part of the events or omissions giving rise to the claims occurred in this district, and Defendant has consented to the exclusive personal jurisdiction of the state and federal courts of New York County pursuant to the Royalty Plan and his Employment Agreement. 18.

This Court has jurisdiction to grant the requested relief pursuant to 28 U.S.C.

§§ 2201(a) and 2202. STATEMENT OF FACTS The 2009 Royalty Plan 19.

On December 8, 2008, Benzies entered into the Royalty Plan with Take-Two,

Rockstar Games, Sam Houser, and Dan Houser.

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20.

The governing law provision of the Royalty Plan states: “This Agreement shall be

construed under the laws of the State of New York, as applied to agreements between New York residents entered into and to be performed entirely within the State of New York.” 21.

The Royalty Plan is a comprehensive plan pursuant to which Take-Two and

Rockstar Games provide bonus compensation to certain Rockstar Principals and Eligible Employees by paying royalties relating to Rockstar Products. 22.

Sam Houser, Dan Houser, and Benzies are defined as the Rockstar Principals under

the Royalty Plan. 23.

The Royalty Plan provides that a three-member Committee has exclusive and

binding decision-making authority over royalty allocations. 24.

Nowhere does the Royalty Plan provide that Benzies is entitled to a minimum

allocation or require equal allocations among Benzies and any other person. 25.

The Royalty Plan further provides that the Committee’s determinations are final

and binding, and precludes any person covered by it from making any claim against the Company or any other party on account of his or its eligibility or ineligibility to receive royalties or his allocable share of any royalties. 26.

The Royalty Plan also contains Termination of Employment provisions which

govern royalties payable in the event that a Rockstar Principal’s employment is terminated, depending upon the circumstances of termination. 27.

Benzies resigned without Good Reason, and the Royalty Plan therefore provides

that he is not entitled to any royalties not already accrued and payable to him prior to termination. 28.

Even had Benzies been terminated without Cause or for Good Reason, the Royalty

Plan provides that any amounts payable to Benzies would be awarded, if at all, in the sole

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discretion of Sam Houser, who could determine, as was his right under the Royalty Plan, not to allocate royalties to Benzies. 29.

Accordingly, regardless of how Benzies’ termination might be characterized under

the Royalty Plan, Benzies is not entitled to any allocation, much less to parity with any other person. Benzies’ Sabbatical, the Termination of Benzies’ Employment Relationship, and Benzies’ Demands for Royalties 30.

By letter agreement dated August 15, 2014 (“Letter Agreement”), Rockstar North

and Benzies agreed that he would take a sabbatical from September 1, 2014 to March 31, 2015. 31.

The Letter Agreement provided that while on sabbatical, Benzies would remain a

Rockstar North employee, his Employment Agreement would remain in effect except as expressly stated in the Letter Agreement, and Benzies would continue to receive his full salary. 32.

The Letter Agreement further stated that during the sabbatical term, Benzies would

“continue to be eligible for any bonus, incentive compensation, other discretionary payments, or restricted equity awards from the Company in accordance with the Company’s standard policies and any applicable agreement(s) between you and the Company.” (Emphasis Added). 33.

In December 2014, the Committee determined not to allocate royalties to Benzies.

34.

On March 23, 2015, Benzies sent a letter to Take-Two demanding royalty

payments. Benzies claimed that he is entitled to “exact financial parity with his co-Principals, prospectively and retroactively as of the Effective Date of the 2009 Royalty Plan.” 35.

On April 2, 2015, Benzies sent a letter to Take-Two purportedly providing notice

of termination for Good Reason or, in the alternative, notice of constructive discharge without Cause.

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36.

Plaintiffs deny that Benzies either had Good Reason for his termination or that he

was constructively discharged. Rather, Benzies resigned without Good Reason and Plaintiffs have paid Benzies all amounts required under his Employment Agreement and other related agreements. 37.

In his April 2, 2015 letter, Benzies claimed that he is entitled to receive bonuses

under the Royalty Plan equal to those paid to Sam Houser and Dan Houser and further asserted that the determination by the Committee in December 2014 awarding him no bonus constitutes a breach of the Royalty Plan. 38.

By letter dated April 13, 2015, Benzies repeated his demand for royalty payments

equal to those paid to Sam Houser and Dan Houser. 39.

Benzies has repeatedly threatened litigation and demanded “parity based on what

has been paid to the other two Rockstar Principals, and future parity.” 40.

In August 2015, the Committee again determined not to allocate royalties to

Benzies. 41.

The last royalty allocation made by the Committee to Benzies was on April 28,

2014. Benzies has been paid all royalties accrued and payable to him prior to his Date of Termination. 42.

Plaintiffs have fulfilled all of their obligations to Benzies under the Royalty Plan.

43.

Benzies, however, continues to demand full parity with respect to both pre-

termination royalty payments and post-termination royalty payments. Benzies’ Demands for Pre-Termination Royalties are Inconsistent with and in Breach of the Royalty Plan 44.

Benzies’ demand for “exact financial parity” in pre-termination royalties lacks any

basis in the Royalty Plan, as does any claim to a minimum allocation.

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45.

Moreover, in signing the Royalty Plan, Benzies agreed that he has no right to

contest the royalty allocation determinations of the Committee. 46.

Benzies is in breach of the Royalty Plan because his persistent demands for parity

are expressly barred by that contract. Benzies’ Demand is Inconsistent with the Royalty Plan 47.

In addition to lacking any claim for pre-termination royalties under the Royalty

Allocation provision, the Royalty Plan confirms that Benzies’ resignation without Good Reason renders him ineligible for post-termination royalty payments. 48.

However, even if Benzies did have Good Reason, which Plaintiffs deny, he is also

not entitled to the claimed royalty payments under the post-termination provisions, which leave payments to the sole discretion of Sam Houser. 49.

In sum, under New York law and the unambiguous language of the Royalty Plan,

Benzies is not entitled to any minimum allocation. His demand for full parity with the other Rockstar Principals is inconsistent with the clear terms of the Royalty Plan. 50.

Accordingly, Plaintiffs now seek judicial clarification that would finally settle the

legal issues between the parties and finalize the controversy and offer relief from this uncertainty. CAUSES OF ACTION COUNT I - DECLARATORY RELIEF 51.

Plaintiffs repeat and re-allege Paragraphs 1 through 50 set forth above, as if fully

set forth herein. 52.

An actual controversy has arisen between Plaintiffs and Benzies, in that, as

described above, Benzies is demanding royalties from Plaintiffs in amounts not provided for by the clear language of the Royalty Plan.

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53.

Plaintiffs request a judicial declaration that: (1) the Royalty Plan does not establish

any minimum allocations to Benzies or financial parity with any other person and instead provides the Committee complete discretion over what pre-termination bonuses, if any, to pay to Benzies; and (2) Benzies did not have Good Reason to terminate his employment but that even if he did have Good Reason, which Plaintiffs deny, Sam Houser would have the sole authority to determine any royalty percentage paid to Benzies. 54.

A judicial determination is necessary and appropriate at this time and under these

circumstances for the parties to ascertain their rights and obligations to one another and to avoid the hardship caused on the parties by a protracted dispute, further delay, and potential future actions for breach of the Employment Agreement or the Royalty Plan. COUNT II - BREACH OF CONTRACT 55.

Plaintiffs repeat and re-allege Paragraphs 1 through 54 set forth above, as if fully

set forth herein. 56.

Benzies agreed not to assert the very claim he has threatened to assert.

57.

Benzies has materially breached his contractual obligations, including by making

demands for royalties and seeking to exercise rights that are inconsistent with the terms of the Royalty Plan. 58.

As a direct and proximate result of Benzies’ material breaches, Plaintiffs have

suffered damages in an amount to be determined at trial. PRAYER FOR RELIEF WHEREFORE, Plaintiffs pray for the following relief: A.

A judicial declaration that (1) the Royalty Plan does not establish any minimum

allocations to Benzies or financial parity between Benzies and any other person, and instead provides the Committee complete discretion over what pre-termination bonuses, if any, to pay to 9

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Benzies; and (2) Benzies did not have Good Reason to terminate his employment, and therefore is owed nothing, but that even if he did have Good Reason, which Plaintiffs deny, Sam Houser would have the sole authority to determine any royalty percentage to be allocated to Benzies; B.

Compensatory damages against Benzies in an amount to be determined at trial;

C.

Awarding Plaintiffs their costs, expenses, disbursements, and reasonable counsel

fees in an amount to be determined at trial; and D.

Any and all other relief to which Plaintiffs may be entitled or which this Court

deems just and proper.

Dated: April 11, 2016 New York, New York By:

/s/ Michael C. Lynch KELLY DRYE & WARREN LLP Michael C. Lynch Jeffrey Jacobson Joel Hankin Levi Downing 101 Park Avenue New York, NY 10178 (212) 808-7800 phone (212) 808-7987 fax Attorneys for Plaintiffs Take-Two Interactive Software, Inc. and Rockstar Games, Inc. DONTZIN NAGY & FLEISSIG LLP Matthew S. Dontzin David A. Fleissig Anthony S. Kammer 980 Madison Avenue New York, NY 10075 (212) 717-2900 phone (212) 717-8088 fax Attorneys for Plaintiff Rockstar Games, Inc.

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