North Carolina Lawyers Weekly
Comedian and actor Kevin Hart will avoid liability in a suit brought by former business partners who claimed that their video game launch was torpedoed by Hart’s admission of an extramarital affair, following a decision from the 4th U.S. Circuit Court of Appeals.
The court affirmed the ruling of a federal judge in Virginia, who tossed out a lawsuit seeking $7.2 million in damages stemming from breaches of fiduciary and contract duties. Stand Up Digital, a Virginia-based mobile game developer, said Hart’s actions undermined sales prospects for a video game called “Gold Ambush,” featuring Hart and his family as main characters.
The developer’s suit was based on a classic example of bad timing, according to court documents and news reports. Just as the game was about to launch, Hart was confronted with an extortion attempt. An anonymous blackmailer was threatening to release video purporting to show Hart cavorting with a stripper in Las Vegas. Hart defused the extortion demand by publicly apologizing to his wife and children.
An expert for the developer said Hart’s admission of wrongdoing and his decision then to “go dark” on social media for 11 days meant Gold Ambush was “dead on arrival” when it was launched. Apple reportedly decided not to feature the game on its app store. Promoters allegedly backed away from the game.
But a Virginia statute that provides a “safe harbor” in the absence of bad faith undermined the developer’s fiduciary duty claim, and other facts belied the breach of contract allegation, the 4th Circuit decided.
The court’s unpublished, Dec. 10 opinion is Stand Up Digital Inc. v. Hart.
Stand Up approached Hart in 2016 with a proposal to develop and market a mobile game app designed to be “family-friendly and low-violence” according to facts summarized in a lower court decision.
Hart allowed his name and image to be used and agreed to help promote the game, according to a 2019 ruling by U.S. District Judge Claude M. Hilton dismissing the lawsuit. A shareholder agreement gave Hart a seat on the board and 20 percent of the developer’s stock. Rollout was scheduled for Sept. 18, 2017.
Two days before the launch, however, Hart posted a one-minute video on Instagram apologizing to his family for having done “something wrong.” It was widely speculated at the time that Hart was admitting to having an affair, Hilton said.
News media reported on Hart’s alleged dalliance in Las Vegas and the extortion demand. Hart claimed “disbelief” when police in 2018 arrested a longtime friend and charged him with being the anonymous would-be blackmailer.
The developer claimed the resulting bad publicity undercut the marketing of the game. Stand Up said Hart violated his fiduciary duties under the Virginia corporate code and common law duties of care and loyalty.
The 4th Circuit disposed of Stand Up’s appeal in a six-page, per curiam opinion. The fiduciary claims are limited by Virginia’s safe harbor for “good faith business judgment” decisions, the court said.
“While SUD contends that Hart did not make any decisions, he in fact made several,” the opinion reads. “Hart chose to have an affair and did not disclose the affair to SUD. Someone then attempted to extort Hart regarding the affair, and Hart did not disclose the extortion attempt to SUD. Hart posted on Instagram, disclosing the affair and apologizing for his conduct in an attempt to thwart the extortion attempt, and he did so without informing SUD. SUD’s claim is premised on Hart’s failure to disclose this series of events to it.”
But Stand Up fell short on evidence of bad faith, the court said.
“Hart’s disclosure of the affair and extortion attempt on Instagram prior to any other reporting on the matter was a reasonable attempt to manage the scandal. Moreover, Hart’s representatives discussed the matter with SUD shortly after the Instagram post, and two SUD executives themselves saw a potential marketing opportunity by attempting to leverage Gold Ambush’s family-friendly gameplay with Hart’s apology for his conduct.”
The court also agreed that Stand Up failed to prove a lack of “best efforts” by Hart to promote the game.
Hart told Stand Up he was “going dark” on social media given the negative publicity, then posted on Instagram 11 days after the launch to promote the game. Although Stand Up faulted Hart for using the “Stories” feature, in which posts are deleted after 24 hours, the contract didn’t specify what particular methods Hart should use to promote the game, the court reasoned.
“And while Hart failed to participate in a promotion at an Apple Store, SUD does not dispute the evidence that Apple did not guarantee a feature in the App Store in return for Hart’s appearance. Moreover, the district court correctly noted that Hart’s involvement helped SUD raise over $1 million in funding and he participated in promotional opportunities prior to the game’s launch.”
