Stokes withdraws lawsuit in 38 Studios case

Associated PressJuly 11, 2014 

— The former leader of Rhode Island's economic development agency has voluntarily dismissed a complaint against lawyers who represented the agency in the $75 million 38 Studios loan-guarantee deal, attorneys said Friday.

David Martland, a lawyer for former Economic Development Corp. Executive Director Keith Stokes, filed a dismissal notice this week in Superior Court. Stokes said he dismissed it because he realized it would be a distraction to the main lawsuit.

Stokes and his then-deputy at the EDC, Michael Saul, filed the original complaint last week. It alleged legal malpractice, saying that two lawyers and their firms provided Stokes and Saul poor legal advice that they relied on in 2010 before the EDC board approved the guarantee.

The lawsuit named Antonio Afonso Jr. and his firm, Moses Afonso Ryan, as well as Robert Stolzman and his firm, Adler Pollock & Sheehan.

In a statement to The Associated Press, Stokes said he dismissed it because "it was clear that it was going to be a distraction to the main lawsuit and I cannot devote the very limited resources I have to prosecute the litigation."

"While the personal and financial burden of defending the suit brought by EDC is devastating, I am hopeful that a public trial will allow for the full disclosure of all the facts and persons involved surrounding the 38 Studios transaction," he said.

Stokes said he has devoted his entire career to public service in Rhode Island.

Bruce Gladstone, an attorney for Saul, said his client is going ahead with the complaint.

"I stand alone," he told a judge during a hearing in the 38 Studios case on Friday.

38 Studios, the startup video game company founded by ex-Red Sox pitcher Curt Schilling, ran out of money and filed for bankruptcy in 2012. The EDC filed suit against Schilling and 13 others over the collapse, alleging fraud, negligence and breach of fiduciary duty, among other things.

Afonso, Stolzman and their two firms are also named in the EDC's suit, along with Stokes and Saul.

Afonso and his firm agreed last month to settle with the EDC for $4.4 million, but several parties, including Stokes and Saul, objected. They said the settlement violates due process and is unconstitutional. The judge must approve it.

After Stokes and Saul filed their suit last week, lawyers for Moses Afonso and the EDC claimed it was an attempt to block the settlement — which Stokes and Saul denied.

Moses Afonso worked on the sale of the bonds that financed the loan to 38 Studios, and Adler Pollock served as general counsel for the EDC, which has since been renamed the Commerce Corp.

The state remains on the hook for some $89 million related to the 38 Studios deal.

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