June 20th, 2017

Sega sues THQ for obscene amounts of money

Company of Heroes 2 - E3 2013 - 5
An artist’s interpretation of THQ and their creditors. THQ are in the burning building.

Look, I’m not going to pretend I understand how money or accounts or any of those things work, but I nonetheless find the news that Sega is suing the bankrupt THQ for just over $940,000 a little odd.

Sega bought Company of Heroes 2 and developer Relic from THQ for $26 million USD. According to Eurogamer, Sega has now filed a lawsuit with the Delaware US Bankruptcy Court, claiming that THQ owes them $941,710.93 – the amount Valve paid THQ for Company of Heroes 2 pre-orders between September 2012 and January 2013.

The maths works like this: 20,755 pre-orders for CoH2 equates to around $1.35 million USD. Valve takes a 30% cut, leaving $940k for the devs and publishers, which Sega believe they’re entitled to. Sega also reckons that $508,877.95 of this is “entitled to priority” on the basis that Valve paid it to THQ after THQ filed for bankruptcy.

If I understand correctly (and there are no guarantees of that when it comes to finances) this means that this amount should be paid to them as a priority, as opposed to using it to repay other creditors, because it came in after bankruptcy was filed. If you know for sure what that means, though, feel free to comment below.

Anyone think Sega is likely to get this money? Is this claim legitimate? Can you buy things from someone because they went bankrupt, then sue them for money related to those things which you could only buy because they went bankrupt? Ugh, I’m so confused. Finances are rubbish.

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  • Tim McDonald

    Tim has been playing PC games for longer than he’s willing to admit. He’s written for a number of publications, but has been with PC Invasion – in all its various incarnations – for over a decade. When not writing things about games, Tim can occasionally be found speedrunning some really terrible ones, making people angry in Dota 2, or playing something obscure and random. He’s also weirdly proud of his status as (probably) the Isle of Man’s only professional games journalist.

    • CG

      In CH11, Wells Fargo through Cleartake is in control and THQ goes through restructuring giving them time to structure debt and re-emerge as a new (and healthy) business. In CH7, liquidation happens and most assets are paid to these creditors. THQ files a CH11.

      Transaction began prior to filing bankruptcy and therefore it’s supervision of the trustee who is overseeing restructuring, because the sales were complete prior to bankruptcy and simply not returned to THQ. Sega is arguing that regardless of whether the sale completed prior, the transaction “officially” completes when Valve gave the funds to THQ (after the bankruptcy was filed.) Regardless Sega purchased Company of Heros 2 after this final transaction occurred, and therefore the funds are truly managed by the Wells Fargo trustee even while in THQ accounts.

      Sega is essentially fighting an uphill battle unless they can legally contradict the Valve > THQ transaction through a contractual clause, where THQ may of agreed to transfer pre-order sales to Sega as part of a larger deal where Sega purchases Company of Heros 2 IP.

      • Tim McDonald

        And that explanation is about a hundred times more comprehensive than the gibberish I wrote. Thanks!