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Klehr Harrison Guides Client to Victory in Multi-Million Dollar English Lawsuit

10.24.02

Electronics Boutique, one of the world’s largest video game retailers, headquartered in West Chester, PA, has successfully defended itself in a suit initiated in the Chancery Division of the High Court of Justice in the United Kingdom.   

In 1995, Electronics Boutique, commonly known as EB,  entered into a minimum ten-year services contract with a struggling English Company, who took on the American company’s name and know-how in return for a fee of 1% of annual revenues.  The contract, which was governed by English law,  stated that a change of control in either company would be grounds for termination.  In the case of EB, the change of control had to be determined by reference to relevant U.S. law. 

After turning itself around and paying $6 million dollars to EB in fees in 2001 alone, the English Company took on the name The Game Group. and filed suit in March 2002 to terminate the contract, claiming that a corporate restructuring and secondary offering by EB resulted in a change of control.   

Electronics Boutique hired Klehr, Harrison, already their corporate law firm, to defend the suit.  According to Michael Coran, Co-Chair of the firm’s Litigation Department and the litigator in charge of the case, “they hired us to mastermind the defense and achieve their goals, even though the case was in a foreign setting.  We developed strategies, partnered with our English counsel, found experts on U.S. law, and managed the case through trial.”  Klehr, Harrison worked with the London firm of Fladgate Fiedler as solicitors and Michael Todd, QC, as barrister. 

Leonard Klehr, a founder of the firm, participated in the trial in London, working with English counsel to determine how English law and procedure fit into the case.  According to Mr. Klehr, “We were gratified that our client trusted us enough to handle for them in a foreign country the biggest piece of litigation they have ever had.  It was a thrill to learn how to navigate in a foreign legal system and to apply our experience as American lawyers to find a way to win.” 

Based largely on the testimony of expert witnesses William Clark at Drinker Biddle & Reath and  A. Gilchrist Sparks at Morris, Nichols, Arsht & Tunnell in Wilmington, English Justice Peter Smith ruled in favor of Electronics Boutique, finding that there had been no change of control and therefore there was no basis for the termination of the contract, which does not expire until at least 2006.  Based on recent performance, the ruling preserves a future income stream to EB of between $10 and $30 million. 

Although Game Group has already indicated it will appeal the decision, they have been ordered to pay attorneys’ fees.