## Facts

- Outdoor Partners LLC (Outdoor) entered into a developer agreement with Rabbit Hole Interactive Corp. (Rabbit) under which Rabbit would develop video games intended to pass Nintendo of America’s approval process, and Outdoor would pay royalties.
- The developer agreement allowed Outdoor to terminate for cause, or to terminate without cause if it paid a termination fee.
- Rabbit delivered a game that failed Nintendo’s approval process four times, and Outdoor claimed it incurred hundreds of thousands of dollars in losses.
- Outdoor terminated the developer agreement under the termination-for-cause provisions, and the parties disputed what amounts (including any termination fee and royalties) remained due.
- Outdoor sued Rabbit for breach of the developer agreement, but the parties later entered into a settlement agreement.
- Under the settlement agreement, Outdoor agreed to (i) make a series of royalty-advance payments to Rabbit and (ii) place a larger deposit into a trust account tied to later testing results.
- After the deposit was made, Rabbit would submit the games for testing. If the games passed, the deposited funds would be released to Rabbit; if the games failed, Rabbit could correct and resubmit. If the games failed twice, Outdoor would receive its deposit back.
- The settlement agreement included (i) a cure period (five days after notice) for late royalty-advance payments and (ii) a clause stating that if either party terminated the settlement before Rabbit received the full advances and the deposit, the parties could pursue litigation and would not be bound by the remainder of the settlement terms.
- Outdoor made royalty-advance payments late; Rabbit gave notice; and Outdoor paid within the five-day cure period, while also notifying Rabbit that Outdoor wanted to terminate the settlement agreement.
- Outdoor did not fund the trust deposit and filed the present action asserting breach of the developer agreement and tort claims for conversion and replevin seeking possession or control of game-related property.
- Rabbit counterclaimed, alleging Outdoor breached (i) the developer agreement by failing to pay the full royalties and termination fee Rabbit claimed were due, and (ii) the settlement agreement by failing to make the required trust deposit after paying the royalty advances.
- Rabbit moved for summary judgment on its counterclaims and sought dismissal of Outdoor’s contract and tort claims.

## Issues

1. Whether Rabbit was entitled to summary judgment on its counterclaims for breach of the developer agreement (royalties/termination fee) and breach of the settlement agreement (failure to fund the trust deposit).
2. Whether Outdoor’s breach-of-contract claim under the developer agreement could be dismissed at summary judgment.
3. Whether Outdoor’s conversion and replevin claims were viable tort claims or instead duplicated the parties’ contract dispute over rights to the game-related property.

## Decision

- The court denied summary judgment on Rabbit’s counterclaim for breach of the developer agreement because material factual disputes remained concerning performance, termination, and payment obligations.
- The court denied summary judgment on Rabbit’s counterclaim for breach of the settlement agreement because factual disputes remained about the effect of Outdoor’s cure, termination notice, and the settlement’s termination/litigation clause.
- The court denied dismissal of Outdoor’s breach-of-contract claim under the developer agreement, leaving the competing contract claims for resolution on a fuller factual record.
- The court granted summary judgment dismissing Outdoor’s conversion and replevin claims because the asserted possessory rights stemmed from the contracts and were not based on a separate tort duty.

## Legal Principles

- Summary judgment is improper where genuine disputes of material fact exist regarding contractual performance, termination, the meaning of contractual provisions, or the parties’ compliance with notice-and-cure requirements.
- When a settlement agreement contains both a cure provision for late payment and a termination clause addressing litigation consequences, disputes about how those provisions interact can present fact questions that cannot be resolved as a matter of law on the existing record.
- Under New York law, conversion and replevin require a superior right to possession that is not merely a restated claim for contractual nonperformance; tort claims that mirror a contract dispute over control of property are subject to dismissal.

## Conclusion

The court allowed both sides’ contract claims to proceed because the record presented disputed questions about whether Rabbit met its development obligations, whether Outdoor properly terminated the developer agreement, and how the settlement agreement’s cure and termination/litigation provisions applied after Outdoor cured late advances but refused to fund the trust deposit; however, the court dismissed Outdoor’s conversion and replevin claims because Outdoor’s claimed rights to the game-related materials were defined by contract rather than a separate tort obligation.


Outdoor Partners LLC v. Rabbit Hole Interactive Corp., 2013 WL 6503525 (2013)