No matter who wins, are STO fans the real losers?

by Jeff "Ethec" Woleslagle

Please note: The following is a Ten Ton Hammer editorial. The views contained herein are not necessarily those of the Ten Ton Hammer network or its management and do not constitute an informed legal position on the facts of the pending case.

December 11, 2007 - While we'll leave it to actual lawyers, pundits, and, of course, the renowned jurisprudence of forum posters the Internet wide to do most of the speculating on the possible fallout from Kohnke v. Perpetual, just about everyone knew that, less Gods & Heroes, the Star Trek Online license and a handful of proven developers were all that Perpetual had to bank on.

And, though we haven't heard Perpetual's side of things, it certainly seems like Kohnke has a case. Glancing through the material sub-section of the California Uniform Fraudulent Transfers Act, it's almost laughable to see how well Kohnke's case, if proven as stated, matches up:

3439.04. (a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor… (legalese omitted) if the debtor made the transfer or incurred the obligation as follows:

• With actual intent to hinder, delay, or defraud any creditor of the debtor (check)
• Without receiving a reasonably equivalent value in exchange for the transfer or obligation (check)

(b) In determining actual intent under paragraph (1), consideration may be given to any or all of the following:

• Whether the transfer or obligation was to an insider (check)
• Whether the debtor retained possession or control of the property transferred after the transfer. (check)
• Whether the transfer or obligation was disclosed or concealed. (check)
• Whether before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit. (no check, so far as we know)
• Whether the transfer was of substantially all the debtor's assets. (check)
• Whether the debtor absconded. (meaning "left quickly" – no check, though we haven't seen a quote from the usually vocal McKibbin since late October)
• Whether the debtor removed or concealed assets. (check)
• Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred. (no check –it couldn't have been close, or else Perpetual could pay Kohnke , right?)
• Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred. (check)
• Whether the transfer occurred shortly before or shortly after a substantial debt was incurred. (no check, the damage was done)
• Whether the debtor transferred the essential assets of the business to a lienholder who transferred the assets to an insider of the debtor. (no check, it seems they weren't even that clever)

With such a seemingly strong case (given that Keene seems to have admitted the timing of the ABC and P2 transfer to Kohnke's counsel, and also given that McKibbin and Keene own as much of P2 as Kohnke believes), one has to wonder if Perpetual went forward with its incredibly flagrant scheme either in a complete vacuum of legal counsel or, more likely, with the idea that the risk was worth the potential rewards. That is, that losing a few 10Gs in court could mean continuing development on Star Trek Online, business as usual. After all, the lack of co-litigants on Kohnke's side seems to mean that Perpetual kept its list of creditors fairly short.

But in today's world, $80k just isn't a lot of money – firing a few poor cubicle dwellers means keeping the dream alive, right? As I see it, the real danger to Perpetual, P2, etc. as a going concern is the risk of punitive damages against such a seemingly flagrant abuse of corporate privilege. How far could Perpetual et al. afford to tip the balance before the Star Trek license goes up on the auction block (and Perpetual along with it)? Only Perpetual knows, and perhaps the folks behind this seeming shenanigan are simply fighting for the sake of saying they've fought it out to the end, at this point.

But any financial setback for STO's license holder will mean costly delays to the game's release in an industry that cruelly punishes days, let alone months, with lost dollars. And just who might purchase STO in a fire sale? SOE may still have a bad taste in their collective mouth after the Platform Publishing deal with Gods & Heroes fell through, and the other big players in the Trekkie-enthused North American market – NCSoft, Blizzard, Cheyenne Mountain – all (admittedly or unadmittedly) have sci-fi themed MMORPGs in the offing.

The real losers of Kohnke v. Perpetual – despite the outcome of the case - may just be the Star Trek Online fans.

Discuss it in the Ten Ton Hammer forums!