Electronic Arts is preparing for court once again. On Tuesday, law firm Robbins, Geller, Rudman and Dowd filed a class action lawsuit against the publisher on behalf of investors who bought stock in the company between 24 July and 3 December.
The suit alleges that EA violated the Securities Exchange Act of 1934 by allegedly providing "materially false and misleading statements" about military shooter, Battlefield 4. Before the release of the game, Electronic Arts issued strong fiscal guidance to investors, based on the "purported" strength of the latest Battlefield title. "The price of Electronic Arts’ stock steadily climbed on these statements," reads the law firm's statement, "reaching a Class Period high of $28.13 per share by August 23, 2013 and allowing certain of Electronic Arts’ senior executives to sell their Electronic Arts stock at artificially inflated prices."
However, after the launch of the game on 29 October – but most obviously following the arrival of the PlayStation 4 version on 15 November – there have been numerous problems with the software, especially its online multiplayer component. Hundreds of players hit game forums and news sites complaining that they were unable to connect or were being continually booted from servers. Earlier this month developer EA DICE announced that it would put all other development projects on hold until the issues with Battlefield 4 had been resolved.
The lawsuit goes on to point out that after EA's announcement stock value fell, closing at $21.01 on 5 December, "sending the share price down more than 28% from its Class Period high".
The allegation, then, is that Electronic Arts executives raised expectations about Battlefield 4 in October knowing that the game was "riddled with bugs and multiple other problems".
The lawsuit alleges: "With an inflated share value, senior execs were then able to offload shares, selling more than $13.2m of stock at fraud-inflated prices."
"Meritless action"
In a statement issued to US games site Polygon, Electronic Arts has said: "We believe these claims are meritless. We intend to aggressively defend ourselves, and we're confident the court will dismiss the complaint in due course."
So is this a meritless case? "Robbins, Geller, Rudman and Dowd handled the Enron class action," says Alex Tutty from UK law firm Sheridans. "They are a securities law firm, this is what they do. The firm obviously believes there is a case to answer, and in order to take it forward they need to find a plaintiff – someone who has suffered financial harm in this period due to purchasing shares on the basis of the statements made.
"This is a problematic case, and it doesn't look good for EA, simply from a PR point of view. Looking at the fact as presented by Robbins, Geller, Rudman and Dowd, there does seem to be a case to answer. However, we've only seen one side of the argument. Companies do give this sort of guidance, and it is important to be accurate, but it is just guidance based on what they know at the time. You'd have to prove that they knowingly gave false information, and it would be difficult to know about all the bugs that would crop up on the PlayStation 4 version. EA can probably produce a lot of evidence to suggest they didn't perceive the extent of the problem, or didn't have sight of it until after launch."
Robbins, Geller, Rudman and Dowd now has until February to find a lead plaintiff – if it succeeds, court beckons. In the background, Battlefield 4 has not performed as well as its predecessor at retail – according to industry news site, MCV, UK sales are down 69% compared to Battlefield 3. However, several Triple A franchises, including Assassin's Creed and Battlefield's rival Call of Duty have found the transition from current consoles to the next-gen machines difficult, with sales down across the board.
Whatever the case, this lawsuit has the potential to set an interesting precedent in terms of publisher culpability for problematic launch software. Several major titles have similarly suffered from bugs, glitches and server failures this year, including Diablo III and GTA Online, the multiplayer component of Grand Theft Auto V.
This is not the first potentially expensive legal action EA has had to contend with. Earlier this year, the publisher settled on a lawsuit filed against Zynga for copyright infringement concerning the latter's game, The Ville. And in 2012, EA also settled on a complicated lawsuit with Activision over the departure of game developers Jason West and Vincent Zampella from the Activision-owned Infinity Ward to the EA-published Respawn Studios.
