Bruce Isaacs, Esq. (SB# 100926), bisaacs@wymanisaacs.

com

2 Robert Wyman, Esq., (SB# 116975), bwyman@wymani~NFORMED COpy

WYMAN & ISAACS LLP OF ORIGINAL RLED

5757 Wilshire Blvd., Suite 475 Los Angeles Superior Court

Los Angeles, CA 90036 4 Tel: (323) 648-4141

5 Fax: (323) 648-4133

1

Defendants.

3

CON

RM

JUL 08 2010

John A Clarke, UtCutilie Qfticer/Clerk

6 Attorneys for Plaintiffs Members of the

7 Infinity Ward Employee Group

8 9

SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF LOS ANGELES - WEST DISTRICT

11

Case No.: SCI07757

[Assigned to the Hon. Linda K. Lefkowitz, in Dept. "M"]

FIRST AMENDED COMPLAINT BY THE INFINITY WARD EMPLOYEE GROUP AGAINST ACTIVISION FOR:

10 TODD ALDERMAN, FRANK GIGLIOTTI, )

ROGER ABRAHAMSSON, BRAD ALLEN, ) MOHAMMAD ALA VI, RICHARD BAKER, )

12 CHAD BARB, KEITH BELL, CHRIS )

CHERUBINI, TAIHOON WILLIAM CHO, )

13 KRISTIN COTTERELL, JON DAVIS, CHRIS ) 14 DIONNE, JOEL EMSLIE, ROBERT FIELD, )

STEVE FUKUDA, ROBERT GAINES, )

15 CHANCE GLASCO, PRESTON GLENN, ) (1)

JOEL GOMPERT, CHAD GRENIER, MARK ) (2) 16 GRIGSBY, JOHN HAGGERTY, EARL )

17 HAMMOND, JACOB MICHAEL KEATING, )

CHRIS LAMBERT, RYAN LASTIMOSA, ) (3)

18 WLIAN LUO, FAIRFAX S. MCCANDLISH ) (4)

IV, JASON MCCORD, BRENT MCLEOD, ) (5)

19 JOHNPAULMESSERLY,STEPHEN )

20 MILLER, MARIO PEREZ, ZIED RIEKE, JON) (6)

SHIRING, JOHN SLAYBACK, RICHARD )

SMITH, GEOFFREY SMITH, JIESANG ) (7)

22 SONG, TODD SUE, RA YME C. VINSON, ) (8)

CHARLIE WIEDERHOLD and LEI YANG, )

) ) ) ) ) 26 ACTIVISION PUBLISHING, INC., a Delaware)

corporation; ACTIVISION BLIZZARD, INC. )

27 and Does 1 - 100; inclusive, )

) )

21

23

Plaintiffs,

24

25

vs.

28

BIIlWEG v. ACl1VISIONIFAC FINAL 7-7·10

BREACH OF CONTRACT; BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING; CONVERSION;

AN ACCOUNTING;

UNJUST ENRICHMENT AND RESTITUTION;

VIOLATION OF CALIFORNIA LABOR CODE; DECLARATORY RELIEF; AND CONSTRUCTIVE TRUST.

FmSTAMENDEDCONWLAThIT

1 TODD ALDERMAN, FRANK GIGLIOTTI, ROGER ABRAHAMSSON, BRAD ALLEN,

2 MOHAMMAD ALAVI, RICHARD BAKER, CHAD BARB, KEITH BELL, CHRIS

3 CHERUBINI, TAIHOON WILLIAM CHO, KRISTIN COTTERELL, JON DAVIS, CHRIS

4 DIONNE, JOEL EMSLIE, ROBERT FIELD, STEVE FUKUDA, ROBERT GAINES, CHANCE 5 GLASCO, PRESTON GLENN, JOEL GOMPERT, CHAD GRENIER, MARK GRIGSBY, EARL 6 HAMMOND, JOHN HAGGERTY, JACOB MICHAEL KEATING, CHRIS LAMBERT, RYAN 7 LASTIMOSA, JULIAN LUO, FAIRFAX S. MCCANDLISH IV, JASON MCCORD, BRENT

8 MCLEOD, JOHN PAUL MESSERLY, STEPHEN MILLER, MARIO PEREZ, ALEX

9 ROYCEWICZ, ZIED RIEKE, JON SHIRING, JOHN SLAYBACK, RICHARD SMITH, 10 GEOFFREY SMITH, JIESANG SONG, TODD SUE, RA YME C. VINSON, CHARLIE

11 WIEDERHOLD and LEI YANG (collectively, the "Infinity Ward Employee Group") hereby allege 12 against ACTIVISION PUBLISHING, INC., a Delaware corporation, and ACTIVISION

13 BLIZZARD, INC., a corporation, (collectively, "Activision") as follows:

14

15 SUMMARY OF THE CLAIMS AND NATURE OF THE DISPUTE:

1.

The Infinity Ward Employee Group consists of a significant portion of the

BlilWEG v. ACTIVISIONIFAC fINAL 7·7·10

2

FIRST AMENDED COMPLAINT

16

17 members of the creative team which, under the leadership of Jason West ("West") and Vince 18 Zampella ("Zampella"), former employees of Infinity Ward who were recently fired by

19 Activision, designed, developed and delivered to Activision a video game entitled Call of Duty: 20 Modern Warfare 2 ("Modern Warfare 2").

21 2. Pursuant to the November 1, 2003 employment agreements between Activision, on

22 the one hand, and Jason West and Vince Zampella, on the other, and the Internal Project Bonus PI 23 attached thereto (collectively, the "Employment Agreement") and Amendment No.1 to the

24 Employment Agreement, dated April 9, 2008, and the Operational Structure and Compensation 25 Memorandum of Understanding Dated as of March 13,2008, attached thereto the ("MOU")

26 (collectively, the "Bonus / Royalty Agreement"), the members of the Infinity Ward Employee 27 Group were, and are, express intended third party beneficiaries of the Bonus / Royalty

28 Agreement. As express intended third party beneficiaries of the Bonus / Royalty Agreement,

1 the members of the Infmity Ward Employee Group are entitled to their share of the"Call of 2 Duty IP Bonus", the "Technology Bonus", the "Studio Bonus" and the "Modem Warfare 2 Special 3 Performance Bonus", as those terms are defined in the MOD. These bonuses, royalties and other 4 financial participations are to be calculated in accordance with the formula set forth in the

5 Bonus/Royalty Agreement (the "Bonus Pool").

6 3. The only condition precedent which needed to be satisfied in order for the

7 members of the Infmity Ward Employee Group to qualify for their share of the Bonus Pool

8 was the delivery of Modern Warfare 2 to Activision in time for a November 10, 2009 launch 0 9 the video game. The members of the Infinity Ward Employee Group in fact delivered

10 Modern Warfare 2 to Activision in November of 2009 in a timely fashion.

11 4. Between November 10, 2009 and December 31,2009 (and thereafter), Modern

12 Warfare 2 was an enormous success. Activision sold over $1.1 billion of Modem Warfare 2 13 product during the fourth quarter of 2009, the first quarter during which Modern Warfare 2 14 was released to consumers (the "Fourth Quarter of 2009").

15 5. As a result of these Modern Warfare 2 sales during the Fourth Quarter of 2009,

16 Activision made a profit of at least $900 million on Modern Warfare 2.

17 6. Pursuant to the formula set forth in the Bonus / Royalty Agreement, the

18 employees of Infmity Ward (including West and Zampella) are entitled to a Bonus Pool of at 19 least $118 million, if not more, for the Fourth Quarter of 2009 alone ("Infmity Ward's Fourth 20 Quarter of 2009 Bonus Pool"). Assuming Infmity Ward's Fourth Quarter 2009 Bonus Pool is 21 $118 million, and not counting West's and Zampella's share, the employees oflnfmity Ward 22 are currently entitled to at least $82 million.

23 7. The Infmity Ward Employee Group believes that Activision has already paid

24 approximately $28 million of Infmity Ward's Fourth Quarter 2009 Bonus Pool to employees 25 oflnfmity Ward. This means that Activision is withholding, and refusing to pay, $54 million 26 due and owing to employees of Infmity Ward for the Fourth Quarter of 2009 alone, most of 27 which is due and owing to the Infmity Ward Employee Group. Following the Fourth Quarter 28 of 2009, Sales of Modern Warfare 2 have continued and other events, including the sale of

BlIlWEG v. ACTlVlSIONIF AC FINAL 7·7-10

3

FIRST AMENDED COMPLAINT

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

4

additional downloadable content, have also increased the amount of the Bonus Pool that is owed to the Infmity Ward Employee Group.

8. Thus, through this lawsuit, members of the Infinity Ward Employee Group see

to recover between $75 million and $125 million, if not more, in compensatory damages. Specifically, the members of the Infmity Ward Employee Group seek to recover the following:

(a) all unpaid amounts that are due and owing to them for Infmity Ward's Fourth Quarter of 2009 Bonus Pool in the amount of $54 million;

(b) all amounts that are due and owing to them from the Bonus Pool for Modern Warfare 2 for the first quarter of2010 (the "First Quarter of 2010") which, the believe at the present time, is an additional $30 million to $45 million;

(c)

all amounts that are due and owing to them from the Bonus Pool for Modern Warfare 2 for accounting periods beyond the First Quarter of 2010;

all amounts that are due and owing to them for other bonus/royalty/profit participation payments including, but not limited to, amounts due and owing for intellectual property royalties relating to this and other games, technology/game engine royalties relating to this and other games, other special performance bonuses, other studio bonuses or any other bonus/royalty/profit participation payments due and owing to the members of the Infinity Ward Employee Group which, they believe at the present time, is an additional $5 million to $25 million;

the lost value of any and all restricted stock units which Activision promised would vest on the day that Modern Warfare 2 outsold Call of Duty: Modern Warfare 1 ("Modern Warfare 1");

all amounts which are due and owing for bonus/royalty/profit participation payments with respect to Modern Warfare 2's "sister games" including, but not limited to, the bonus/royalty/profit participation to which the Infmity Ward Employee Group will be entitled in connection with Call of Duty: Black Ops ("Black Ops") and in connection with Call of Duty: Modern Warfare 3 ("Moder

(d)

(e)

(t)

BlIlWEGv. AcrMSIONIFAC FINAL 7-7-10

FIRST AMENDED COMPLAINT

1 2 3 4 5 6

7 THE PARTIES

8 9. Todd Alderman, Frank Gigliotti, Roger Abrahamsson, Brad Allen, Mohammad

9 Alavi, Richard Baker, Chad Barb, Keith Bell, Chris Cherubini, Taihoon William Cho Kristin

(g)

Warfare 3") pursuant to the Bonus / Royalty Agreement, if Modern Warfare 3 is ultimately delivered and marketed; and

interest on these sums at the prevailing legal rate of 10% which amounts to $7.5 million to $12.5 million in interest per year or over $20,000 to $35,000 in interes per day.

FIRST AMENDED COMPLAINT

10 Cotterell, Jon Davis" Chris Dionne, Joel Emslie, Robert Field, Steve Fukuda, Robert Gaines,

11 Chance Glasco, Preston Glenn, Joel Gompert, Chad Grenier, Mark Grigsby, Earl Hammond, John 12 Haggerty, Jacob Michael Keating, Chris Lambert, Ryan Lastimosa, Julian Luo, Fairfax S.

13 McCandlish N, Jason McCord, Brent Mcleod, John Paul Messerly, Stephen Miller, Mario Perez, 14 Alex Roycewicz, Zied Rieke, Jon Shiring, John Slayback, Richard Smith, Geoffrey Smith, Jiesang 15 Song, Todd Sue, Rayme C. Vinson, Charlie Wiederhold and Lei Yang are individuals residing and 16 working in Southern California.

17 18

10. 11.

Defendant Activision is a company conducting business in Santa Monica, California. The true names and capacities of Defendants sued as Does 1 through 100, inclusive,

19 are unknown to the Infinity Ward Employee Group at this at this time, who therefore sues these

20 Defendants by such fictitious names. The Infinity Ward Employee Group will seek leave to amend 21 this Complaint to insert the true names and capacities of the fictitiously named Defendants when 22 they are ascertained. The Infinity Ward Employee Group is informed and believes, and based

23 thereon alleges, that each of the Defendants sued as Does 1 through 100 is in some manner

24 responsible or liable for the acts, occurrences and damages alleged in this Complaint.

25 12. The Infinity Ward Employee Group is informed and believes, and based thereon

26 alleges, that at all times relevant to this Complaint, the above-named Defendants, including the Doe 27 Defendants, and each of them, were the agents, employees, partners, members, officers, directors, 28 shareholders, successors-in-interest, predecessors-in-interest, co-venturers, co-conspirators or aiders

BIIlWEG v. ACfMSIONIF Ae FINAL 7-1-10

5

1 and abettors of the remaining co-Defendants, or guarantors or co-obligors of the amounts due and 2 owing to the Infinity Ward Employee Group and, in doing the acts alleged herein, each was acting 3 within the course and scope of such agency, service, employment, partnership, company or

4 corporate capacity, interest, venture, conspiracy, guarantor or co-obligor capacity with the

5 authorization, ratification, approval andlor agreement of their principals or the remaining co- 6 Defendants.

7

8 FIRST CAUSE OF ACTION

9 (For Breach of Contract Against Activision and Does 1 through 100)

10 13. The Infinity Ward Employee Group incorporates by reference paragraphs 1 through

11 12 above as though fully set forth herein.

12 14. The members of the Infinity Ward Employee Group are express intended

13 beneficiaries of the Bonus / Royalty Agreement. The Infinity Ward Employee Group hereby 14 incorporates the Bonus / Royalty Agreement herein by reference, in full, and will file a copy of 15 these agreements with the Court at the appropriate time. Activision, of course, has a full and 16 complete copy of the Bonus / Royalty Agreement and is familiar with its terms, contents and 17 meaning. Activision produced the Bonus / Royalty Agreement to the Infinity Ward Employee 18 Group in late May of201 0 as a "Confidential" document and, therefore, the Infinity Ward

19 Employee Group does not attach it to this pleading. There are numerous instances in the

20 BonuslRoyalty Agreement in which Activision makes it clear that the Bonus/Royalty Agreement 21 was entered into for the benefit of Infinity Ward ("IW") and the IW employees, in addition to

22 Infinity Ward Management - which was defined to be Jason West and Vince Zampella. For

23 example, the BonuslRoyalty Agreement makes it clear that the employees of Infinity Ward are 24 express intended third party beneficiaries because:

25 14(a) The Internal Project Bonus Plan recites that is specifically for the benefit of the 26 Infinity Ward product development team working on Call of Duty and other current and future 27 Activision projects.

28

B1IIWEGv. ACTIVISIONIFAC FINAL 7-'-10

6

FIRST AMENDED COMPLAINT

1 14(b) The goal of the bonus plan is to give each Infinity Ward team member a more direct

2 and quantifiable connection between their bonus compensation and success of the games they

3 develop.

4 14(c) The Infinity Ward employees are entitled to a bonus on the titles they develop,

5 produce, complete and deliver - with no upside limit.

6 14(d) The Infinity Ward team is granted a guaranteed bonus payment form the Bonus Pool 7 for the quarter during which the title was released - even ifhe or she is no longer with the company 8 at the time the payment is to be made.

9 14(e) The MOU is entered into between Activision, on the one hand, and IW and IW

10 Management, on the other.

11 14(f) The Performance and Incentive Compensation of the MOU is entered into for the

12 express benefit of IW and the IW employees.

13 14(g) The Performance Participation of the MOU, including but not limited to the Call of

14 Duty IP Bonus, the Technology Bonus, the Studio Bonus and the Modern Warfare 2 Special

15 Performance Bonus, as those terms are defined in the Bonus/Royalty Agreement, is entered into for 16 the express benefit of IW and the IW employees.

17 14(h) The MOU likewise specifically makes reference to IW and the IW employee.

18 14(i) In addition, Plaintiff is informed and believes, and based thereon alleges, that there

19 were numerous oral conversations in which the parties expressed their mutual intent that the

20 BonuslRoyalty Agreement was entered into for the benefit of the IW employees, in particular the 21 IW employees who developed, created, produced, completed and delivered Modern Warfare 2. 22 Therefore, the Bonus / Royalty Agreement has a material affect on the legal rights of the Infinity 23 Ward Employee Group. Starting in early March of2010, the members of the Infinity Ward

24 Employee Group requested, orally and in writing, that Activision provide copies of the Bonus / 25 Royalty Agreement to them. However, despite this reasonable request, Activision failed and

26 refused to do so. It was not until late May of 2010 that Acti vision finally provided a copy of the 27 Bonus / Royalty Agreement to the attorneys for the Infinity Ward Employee Group. Because they 28 are express intended third party beneficiaries of the Bonus / Royalty Agreement, the members ofth

BIllWEGv. AcrMSIONIfAC FINAL 7-7-10

7

FIRST AMENDED COMPLAINT

1 Infinity Ward Employee Group are entitled to receive their unpaid share of Infinity Ward's Fourth 2 Quarter of 2009 Bonus Pool, plus other payments as set forth herein. In addition, Activision

3 promised to vest the restricted stock units of the members of the Infinity Ward Employee Group at 4 such time as the sales of Modem Warfare 2 exceeded the sales of Modem Warfare 1 (the "Stock

5 Vesting Agreement") which has long ago occurred. The essential and material terms of the Bonus / 6 Royalty Agreement are as follows:

7 14(j) The Bonus / Royalty Agreement applies to Call of Duty games and as well as future

8 Activision projects.

9 14(k) The Bonus / Royalty Agreement provides that the Infinity Ward Employee Group is

10 entitled to a bonus based on the P & L profitability of each of their games that they develop,

11 produce and deliver -with no upside limit.

12 14(1) Assuming that Activision had not breached, the Bonus / Royalty Agreement provides

13 that everyone within the Infinity Ward Employee Group who successfully completes hislher

14 obligations to the project in development at the time is guaranteed a bonus for the quarter during 15 which the video game was initially released to the public (the "Launch Quarter"), even if that

16 individual is no longer working for Infinity Ward or Activision at the time the bonus payment is 17 made. The members of the Infinity Ward Employee Group, all of whom successfully completed 18 their obligations on Modem Warfare 2, are not limited to the guaranteed payment for the Launch 19 Quarter because of Activision's material breach and hostile work environment as alleged in more 20 detail below.

21 14(m) The Bonus / Royalty Agreement provides for new equity grants to the members of

22 the Infinity Ward Employee Group and equity grants which vested.

23 14(n) The Bonus / Royalty Agreement provides for the payment of bonuses to the Infinity

24 Ward Employee with respect to Modem Warfare 1.

25 14(0) The Bonus / Royalty Agreement provides for the payment of bonuses to the Infinity

26 Ward Employee with respect to Modem Warfare 2 and other Activision titles including, but not

27 limited to, the "Call of Duty IP Bonus", the "Technology Bonus", the "Studio Bonus" and the

28 "Modern Warfare 2 Special Performance Bonus", as those terms are defined in the MOU, which are

BIllWEGv. AcrMSIONIFAC FINAL 7-7-10

8

FIRST AMENDED COMPLAINT

15.

The Infinity Ward Employee Group has performed all of the covenants and

1 to be calculated in accordance with the formula set forth in the MOU, although certain of the terms 2 and definitions of the Employment Agreement remain in full force and effect and apply to the bonus 3 calculations.

4

5 conditions required to be performed by them pursuant to the Bonus / Royalty Agreement and the 6 Stock Vesting Agreement, except those waived, prevented, excused or rendered unnecessary by 7 virtue of Activision's breach. In particular, because of Activision's March 26, 2010 breach by

8 failing to pay the $54 million in bonus compensation from Modem Warfare 2 for the Fourth Quarte 9 of2009, the members of the Infinity Ward Employee Group were legally excused from performing

10 further obligations under the Bonus / Royalty Agreement including, but to limited to, the purported 11 obligation to wait an additional 90 days for payment, the purported obligation to remain employed 12 to earn additional bonus for further accounting periods beyond the first Quarter of2010 and the

13 purported obligation to complete additional tasks on other games such as Black Ops and Modem 14 Warfare 3.

15 16. Activision has breached the Bonus / Royalty Agreement and the Stock Vesting

16 Agreement in the following ways, among others:

17 (a) by failing to pay the members of the Infinity Ward Employee Group the unpaid

18 amounts that are due and owing to them for Infinity Ward's Fourth Quarter of 2009

19 20 21 22 23 24 25 26 27 28

(b)

(c)

(d)

Bonus Pool in the amount of $54 million;

by failing to pay the members of the Infinity Ward Employee Group all amounts that are due and owing to them from the Bonus Pool for Modem Warfare 2 for the First Quarter of201 0 which, they believe at the present time, is an additional $30 million to $45 million;

by failing to pay the members of the Infinity Ward Employee Group all amounts that are due and owing to them from the Bonus Pool for Modem Warfare 2 for accounting periods beyond the First Quarter of 20 1 0;

by failing to pay the members of the Infinity Ward Employee Group all amounts that are due and owing to them for other bonus/royalty/profit participation payments

9

BlIlWEGv. ACTMSIONIFAC FINAL 1-7-10

FIRST AMENDED COMPLAINT

BlIlWEG v. ACTMSIONIFAC fINAL 7·7·10

10

FIRST AMENDED COMPLAINT

11 17. As a direct and proximate result of Activision's breach of contract, the Infinity Ward 12 Employee Group has been damaged in an amount according to proof at the time of trial, but at least 13 in the amount between $75 million to $125 million, together with interest thereon at the maximum 14 allowable legal rate, which amounts to $7.5 million to $12.5 million in interest per year or between 15 $20,000 and $35,000 in interest per day.

16

17 SECOND CAUSE OF ACTION

18 (For Breach of the Implied Covenant of Good Faith and Fair Dealing Against Activision and

19 Does 1 through 100)

(e)

including, but not limited to, amounts due and owing for intellectual property royalties relating to this and other games, technology/game engine royalties relating to this and other games, other special performance bonuses, other studio bonuses or any other bonus/royalty/profit participation payments due and owing to the members of the Infinity Ward Employee Group, such as Black Ops, which, they believe at the present time, is an additional $5 million to $25 million, as well as Modem Warfare 3 which is specifically addressed below; and

by failing to vest the restricted stock units of the Infinity Ward Employee Group as of the day that the sales of Modem Warfare 2 surpassed the sales of Modem Warfare

1.

1 2 3 4 5 6 7 8 9

10

20

18.

The Infinity Ward Employee Group incorporates by reference paragraphs 1 through

21 17 above as though fully set forth herein.

22 19. Both the Bonus / Royalty Agreement and the Stock Vesting Agreement contain an

23 implied covenant that the Activision will, at all times, act in good faith and deal fairly with the 24 Infinity Ward Employee Group and will refrain from any acts which would prevent the Infinity

25 Ward Employee Group from realizing the intended benefits of the Bonus / Royalty Agreement and 26 the Stock Vesting Agreement.

27 20. In March of2010, Activision made a partial payment of the Modem Warfare 2 bonu

28 money due and owing to the Infinity Ward Employee Group for the Fourth Quarter of2009, but

1 maliciously withheld the balance of the money due. Instead, Activision demanded that the Infinity 2 Ward Employee Group develop, produce, complete and deliver Modern Warfare 3 and thereby get 3 paid the bonus money from Modern Warfare 2 which they had already earned, which was already 4 vested and which was already due and owing to them. While withholding monies earned by and

5 due to the Infinity Ward employees and blatantly disregarding its obligations under the Bonus /

6 Royalty Agreement, Activision further destroyed any remaining hope of a working relationship wi 7 the members of the Infinity Ward Employee Group by creating an intolerable, hostile work

8 environment.

21.

Activision tactically and wrongfully terminated Jason West and Vince Zampella, the

III1lWEGv.ACTMSIONIFAC FINAL 7-7-10

11

FIRST AMENDED COMPLAINT

9

10 studio heads of Infinity Ward. Both before and after Jason West's and Vince Zampella's

11 termination, Activision forced the Infinity Ward employees to submit to secret interrogations and 12 instructed the Infinity Ward employees not to consult attorneys or discuss the secret interrogations 13 with their departments or co-employees. Activision further intimidated the Infinity Ward

14 employees by bringing security personnel to man the office exits.

15 22. Despite these hostile tactics, in early March of2010, the CEO of Activision, Bobby

16 Kotick, attended a group meeting at Infinity Ward during which he promised the Infinity Ward

17 employees that they would receive the full amount of their bonus/royalty/profit participation on

18 time and in full at the end of March of2010. In particular, Bobby Kotick told the Infinity Ward

19 employees that "nothing will change" insofar as their bonus/royalty/profit compensation was

20 concerned. Later in March of2010, and despite Bobby Kotick's oral statements to the employees 0 21 Infinity Ward to the contrary, Activision made a tactical and calculated decision to withhold $54 22 million of earned and vested bonus compensation from the Infinity Ward employees. At the same 23 time, Activision breached its prior written promise that Modem Warfare 3 would not be the next 24 game to be developed, produced and delivered by Infinity Ward. Activision held the $54 million 25 hostage in order to force the Infinity Ward employees to work on Modem Warfare 3 so as to enrich 26 Activision, to the detriment of the Infinity Ward employees, and contrary to Activision's express 27 written agreement in favor of Jason West, Vince Zampella and the Infinity Ward employees

28 themselves as set forth in the Bonus / Royalty Agreement.

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

12

23. Starting in March of 20 10, the employees of Infinity Ward began to complain to

Activision management about the failure to pay the full amount of the bonus compensation due and owing to them. Then, in a meeting with Thomas Tippl in April of2010, the employees of Infinity Ward specifically asked for a copy of Jason West's and Vince Zampella's IIMOU" (which Activision refused to provide until after the litigation was filed) and insisted that the full amount of the Modern Warfare 2 bonus pool for fourth quarter 2009 be paid. Tippl callously responded: "Get over it" -an unambiguous indication that Activision had no intention of paying the bonus compensation due and owing to the employees ofInfinity Ward.

24. After exercising dominion and control over the $54 million due and owing to the

employees of Infinity Ward, after lying to the Infinity Ward employees about their bonus compensation and after lying about the next game to be developed, produced and delivered by Infinity Ward, Activision constructively terminated Plaintiff as set forth herein. To the further detriment of the members of the Infinity Ward Employee Group, Activision constructively terminated the members of the Infinity Ward Employee Group their pay/wages/compensation and by offering continued employment to them on terms that were worse than their then-present employment arrangements.

25. Had Activision not wrongfully terminated Jason West and Vince Zampella, had

Activision paid the Infinity Ward employees their $54 million due and owing, had Activision not held hostage the bonus compensation of the Infinity Ward employees, had Activision told the truth about the change in the bonus compensation, had Activision told the truth about the next game to be developed, produced and delivered by Infinity Ward after Modern Warfare 2, had Activision not conducted surreptitious interrogations, had Activision not sent in security teams, had Activision not created a "police state" - like atmosphere, had Activision not attempted to intimidate the employees of Infinity Ward, had Activision not created this hostile work environment, the members of the Infinity Ward Employee Group would have remained employed at Infinity Ward and would have earned and received all of the compensation and other financial benefits set forth in the Bonus/Royalty Agreement.

BIIIWEG v, ACTMSI0NIF AC FINAL 7-7-10

FIRST AMENDED COMPLAINT

1

26.

In this respect, Activision's material breach of the Bonus / Royalty Agreement and

Bl/lWEGv. ACTlVlS10NIFAC FlNAL,1-1·IO

13

FIRST AMENDED COMPLAINT

2 Activision's improper tactics and conduct as alleged above constitutes a breach of the implied 3 covenant of good faith and fair dealing by Activision.

4 27. As a direct and proximate result of Defendants' breach of the implied covenant of

5 good faith and fair dealing, the Infinity Ward Employee Group has been damaged in an amount 6 according to proof at the time of trial, but at least in the amount between $75 million to $125

7 million, together with interest thereon at the maximum allowable legal rate, which amounts between 8 $7.5 million to $12.5 million in interest per year or over $20,000 to $35,000 in interest per day.

9

10 THIRD CAUSE OF ACTION

11 (For Conversion Against Activision and Does 1 through 100)

12 28. The Infinity Ward Employee Group incorporates by reference paragraphs 1 through

13 27 above as though fully set forth herein.

14 29. Activision has exercised dominion, ownership and control and actual interference

15 over property owned by another, in this case a specifically identifiable sum of money owned by the 16 Infinity Ward Employee Group to which they have all rights of possession. In particular, Activision 17 has exercised dominion, ownership and control over Infinity Ward's Fourth Quarter of2009 Bonus 18 Payment by virtue of the wrongful acts alleged herein. Activision has appropriated Infinity Ward's 19 Fourth Quarter of2009 Bonus Payment and improperly withheld this specifically identifiable sum 20 of money from the members of the Infinity Ward Employee Group in order to force them to keep

21 working for Activision so that Activision could receive delivery of Modem Warfare 3. In fact, on 22 March 26,2010, at the time that Activision made a partial payment ofInfinity Ward's Fourth

23 Quarter of 2009 Bonus Payment, Infinity Ward employees asked Activision how much their

24 payments would have been had Activision not fired West and Zampella. Activision responded by 25 stating that the members of the Infinity Ward Employee Group would have received approximately 26 2.5 times the amount that they were paid on March 26, 2010.

27 30. Moreover, Activision readily knew the exact amount that should have been paid to

28 the members of the Infinity Ward Employee Group which shows that Activision had already

1 calculated the proper amount, but had made a conscious decision to withhold the money due and 2 owing to the Infinity Ward Employee Group. Activision made a calculated, purposeful and

3 malicious decision to withhold the property of the Infinity Ward Employee Group, in this case a

4 specifically identifiable sum of money, in order to coerce the Infinity Ward employees to remain at 5 their jobs with Activision, even though many of them did not want to do so. Activision engaged in 6 this inappropriate course of conduct in an attempt to force employees of Infinity Ward to continue 7 to work at ajob that many of them did not want just so Activision could force them to complete the 8 development, production and delivery of Modem Warfare 3.

9 31. In addition, Steve Ackrich and Steve Pearce of Activision showed Plaintiff Todd

10 Alderman, formally of Infinity Ward, a document which demonstrated that the Modem Warfare

11 Studio Bonus due and owing to the Infinity Ward employees based on 2009 sales was in the amount 12 of $118 million, a specifically identifiable amount which Activision had already calculated. Todd 13 Alderman asked Steve Ackrich and Steve Pearce what Todd Alderman would have been paid in

14 March of2010 for his Modem Warfare 2 bonus had Activision not fired Jason West and Vince

15 Zampella. Steve Ackrich and Steve Pearce told Todd Alderman that Activision only paid out about 16 40% of the bonus Activision had already calculated was due and owing to the employees of Infinity 17 Ward based on 2009 sales. As Bobby Kotick told Todd Alderman and as Ann Weiser told the

18 "Leads", if Activision paid out the full amount of this specifically identifiable bonus pool that it had 19 calculated was due and owing, Activision was afraid that the employees of Infinity Ward would

20 leave the company and Activision would not be able to get Modem Warfare 3 to market by

21 November of2011 - so, Activision stated, Activision "had" to withhold the bonus payments due 22 and owing.

23 32. In short, Activision withheld the property of the Infinity Ward Employee Group in

24 an attempt to keep the employees hostage so that Activision could reap the benefit of the

25 completion of Modem Warfare 3.

26 33. This conduct as alleged above constitutes conversion because the profit pool from

27 Modem Warfare 2 for the Fourth Quarter of2009 had already been specifically identified by

28 Activision, had already been specifically calculated by Activision - and therefore Activision knew

BlIIWEG v. ACTMSIONIF AC FINAL 7-7-10

14

FIRST AMENDED COMPLAINT

1 the exact amount of this profit pool but would not share this information with the employees of 2 Infinity Ward -- and had already been specifically segregated, reserved and/or earmarked by

3 Activision for payment to, and the benefit of, the employees of Infinity Ward.

4 34. In this respect, Activision had already segregated the bonus pool from Modem

5 Warfare 2 for the Fourth Quarter of 2009 for the employees of Infinity Ward, but exercised

6 dominion and control over this earned and vested property owned by the employees of Infinity 7 Ward in order to attempt to assert inappropriate leverage over them.

8 35. As a direct and proximate result of Activision's conversion, the Infinity Ward

9 Employee Group has been damaged in an amount according to proof at the time of trial, but at least 10 in the amount of $54 million, together with interest thereon at the maximum allowable legal rate.

11 36. The Infinity Ward Employee Group is informed and believes, and based thereon

12 alleges, that Activision's acts of conversion, as alleged above, were undertaken with a conscious 13 decision of their rights, in an attempt to take away their legal right as "at will" employees and in 14 order to coerce them to complete delivery of Modem Warfare 3, a project which the employees 15 were not obligated to deliver. In addition, the Infinity Ward Employee Group is informed and 16 believes, and based thereon alleges, that Activision specifically identified, calculated and

17 segregated, reserved and/or ear marked the bonus pool from Modem Warfare 2 for the Fourth

18 Quarter of 2009 for the benefit of the Infinity Ward employees, but then intentionally withheld this 19 money from the employees of Infinity Ward in order to force them to do additional "free" work on 20 Modem Warfare 3 just to receive the money which they had already earned, and which was already 21 vested, with respect to Modem Warfare 2. In so doing, Activision acted intentionally and with

22 malice and oppression toward the Infinity Ward Employee Group, justifying an award of punitive 23 damages, in an amount reasonably related to the amount in controversy and Activision's net worth, 24 but at least in the additional amount of $54 million to $216 million as an award for punitive

25 damages.

26

27

28

BlIlWEG v. ACTMSIONIFAC FINAL 7-7-10

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FIRST AMENDED COMPLAINT

BlIIWEGv. ACTlVlSIONIFAC FINAL 1-1-10

16

FIRST AMENDED COMPLAINT

1 FOURTH CAUSE OF ACTION

2 (For An Accounting Against Activision and Does 1 through 100)

3 37. The Infinity Ward Employee Group incorporates by reference paragraphs 1 through

4 36 above as though fully set forth herein.

5 38. By virtue of their status as express intended third party beneficiaries of the Bonus /

6 Royalty Agreement, and by virtue of their status as direct beneficiaries of the Stock Vesting

7 Agreement, the members of the Infinity Ward Employee Group are entitled to a full and complete 8 accounting.

9

39.

In particular, the members of the Infinity Ward Employee Group are entitled, at a

10 minimum, to an accounting of the gross receipts generated by Modem Warfare 2 and the deductible 11 expenses related thereto so that they can calculate their share of the Bonus Pool pursuant to the

12 formula set forth in the Bonus / Royalty Agreement.

13 40. The members of the Infinity Ward Employee Group contend that a full exercise of

14 their audit, inspection and accounting rights will demonstrate that they are entitled to recover

15 damages in an amount according to proof at the time of trial, but at least in the amount between $75 16 million to $125 million, together with interest thereon at the maximum allowable legal rate which 17 amounts to at least $7.5 million to $12.5 million in interest per year or over $20,000 to $35,000 in 18 interest per day.

19

20 FIFTH CAUSE OF ACTION

21 (For Unjust Enrichment and Restitution Against Activision and Does 1 through 100)

22 41. The Infinity Ward Employee Group incorporates by reference paragraphs 1 through

23 40 above as though fully set forth herein.

24 42. By virtue of the conduct referred to above, Activision has been unjustly enriched at 25 the expense of the Infinity Ward Employee Group in that they have failed to pay the Infinity Ward 26 Employee Group their share of the Bonus Pool pursuant to the Bonus / Royalty Agreement and they 27 have appropriated restricted stock units which should have vested pursuant to the Stock Vesting

28 Agreement. In this respect, Activision has unjustly retained financial benefits at the expense of the

1 Infinity Ward Employee Group which constitutes unjust enrichment and entitles the Infinity Ward 2 Employee Group to full rights of restitution.

3 43. As a direct and proximate result of Defendants' unjust enrichment, the Infinity Ward 4 Employee Group has been damaged in an amount according to proof at the time of trial, but at least 5 in the amount between $75 million to $125 million, together with interest thereon at the maximum 6 allowable legal rate which amounts to at least $7.5 million to $12.5 million in interest per year or

7 over $20,000 to $35,000 in interest per day.

8

9 SIXTH CAUSE OF ACTION

10 (For Violation of the California Labor Code Against Activision and Does 1 through 100)

11 44. The Infinity Ward Employee Group incorporates by reference paragraphs 1 through

12 35 above as though fully set forth herein.

13 45. Pursuant to Sections 201,202,203 and 216 the California Labor Code and the public

14 policy of the State of California, Activision has a duty to pay all of the members of the Infinity

15 Ward Employee Group all of the money they are owed including, but not limited to Infinity Ward's 16 Fourth Quarter 2009 Bonus Pool, within 72 hours of the termination of their employment.

17 Activision, however, has willfully failed to do so and this willful failure is particularly egregious 18 given that Activision specifically identified, calculated and segregated reserved and/or ear marked 19 the amount of the bonus pool from Modem Warfare 2 for the Fourth Quarter of2009 for the

20 employees ofInfinity Ward and specifically told some members of the Infinity Ward Employee

21 Group that although Activision had completed this precise calculation, Activision would not pay the 22 money due and owing in any event because, if Activision paid the amount that it acknowledged was 23 due and owing, employees might leave Activision and Activision would not get them to work on th 24 next sequel, Modem Warfare 3, for free.

25 46. As a direct and proximate result of Activision's breach of the California Labor Code,

26 the Infinity Ward Employee Group has been damaged in an amount according to proof at the time 27 of trial, but at least in the amount between $75 million to $125 million, together with interest

28 thereon at the maximum allowable legal rate which amounts to at least $7.5 million to $12.5 million

Bl1IWEGv"ACTMSIONIFAC FINAL 7-7-10

17

FIRST AMENDED COMPLAINT

1 in interest per year or over $20,000 to $35,000 in interest per day, plus waiting time penalties 2 pursuant to the California law.

3

SEVENTH CAUSE OF ACTION

(For Declaratory Relief Against Activision and Does 1-100)

The Infinity Ward Employee Group incorporates by reference paragraphs 1 through

BJIlWEGv. ACTMSIONIFAC FINAL 7-7-10

18

FIRST AMENDED COMPLAINT

4 5 6

47.

7 38 above as though fully set forth herein.

8 48. The Infmity Ward Employee Group contends as follows:

9

49.

The Bonus / Royalty Agreement entitles the members of the Infinity Ward Employee

10 Group to a continuing profit participation and royalty in Modem Warfare 2.

11 50. The Bonus / Royalty Agreement extends to "sister games" of Modem Warfare 2,

12 which includes Black Ops and Modem Warfare 3.

13 51. The Bonus I Royalty Agreement grants the members of the Infinity Ward Employee

14 Group, at a minimum, a bonus with respect to "sister-games" for the first quarter post launch and, 15 therefore, the members of the Infinity Ward Employee Group are entitled, at a minimum, to a bonus 16 as to Black Ops, Modem Warfare 3 and other Infinity Ward projects, for the first quarter post

17 launch, based on the same formula as set forth in the Bonus I Royalty Agreement.

18 52. Activision was obligated to pay the full amount of the Modem Warfare 2 Studio 19 Bonus based on 2009 sales as of March 26, 2010, but Activision failed to pay the Infinity Ward 20 Employee Group an amount specifically know to, identified by and previously calculated by

21 Activision, in the amount of $54 million, and therefore Activision materially breached the

22 Bonus/Royalty Agreement. The members of the Infinity Ward Employee group contend that, once 23 Activision materially breached the Bonus / Royalty Agreement, their obligations to further perform 24 under the Bonus / Royalty Agreement were excused and they were no longer required to

25 successfully complete their obligations with respect to other projects, including but not limited to 26 Black Ops or Modem Warfare 3, if any, or the purported obligation to remain employed with

27 Infinity Ward for an extra 90 days, or at all, to receive future bonus payments, and because of

28 Activision's material breach, the members of the Infinity Ward Employee Group are entitled to

1 receive any and all benefits and income streams as set forth in the Bonus / Royalty Agreement 2 including, but not limited to, their share of the Studio Bonus with respect to all video games

3 developed by Infinity Ward and/or "sister games" for the quarter in which these various games are 4 released (the "Launch Quarter"), and thereafter, including, but not limited to, Black Ops and

5 Modern Warfare 3, as well as the IP Bonus, the Technology Bonus and other

6 bonus/royalties/participations set forth in the BonuslRoyalty Agreement and including the Studio

7 Bonus on Modern Warfare 2 for the first quarter of2010, and thereafter. In this respect, because of 8 Activision's material breach of the BonuslRoyalty Agreement, if and when Modern Warfare 3 is

9 released to the public, the members of the Infinity Ward Employee Group are entitled to their share 10 of the Studio Bonus for at least the Launch Quarter currently scheduled for the fourth quarter of

11 2011, and for financial quarters beyond that as well.

12 53. The Infinity Ward Employee Group is informed and believes, and based thereon

13 alleges, that Activision denies and disputes the Infinity Ward Employee Group's contentions and 14 allegations as set forth above.

15 54. In this respect, there is an actual and existing controversy between The Infinity Ward

16 Employee Group, on the one hand, and Activision on the other, concerning their respective rights 17 relating to the bonus/royalty/profit participation with respect to Modern Warfare 2 and with respect 18 to Modern Warfare 3, a game which is not yet released. This controversy is the proper subject for 19 declaratory relief. A judicial declaration is necessary and appropriate at the present time so that the 20 parties may ascertain their respective rights, duties and obligations with respect thereto.

21

22 EIGHTH CAUSE OF ACTION

23 (For Constructive Trust Against Activision and Does 1-100)

24 55. The Infinity Ward Employee Group incorporates by reference paragraphs 1 through 42

25 above as though fully set forth herein.

26 56. By virtue of the conduct alleged above, any payments made pursuant to the Bonus /

27 Royalty Agreement, whether Infinity Ward's Fourth Quarter 2009 Bonus Pool, payments relating to 28 the First Quarter of2010, payments relating to Modern Warfare 3 or otherwise, should be held by

BlIIWEGv. ACTMSIONIFAC FINAL 7·1·10

19

FIRST AMENDED COMPLAINT

14 15 16

3. 4.

1 the Court in constructive trust for the benefit of The Infinity Ward Employee Group to ensure that 2 The Infinity Ward Employee Group receives their share of the Bonus Pool in accordance with the 3 Bonus / Royalty Agreement.

4

5 PRAYER FOR RELIEF

6 WHEREFORE, The Infinity Ward Employee Group hereby prays for relief as follows:

7

8 FIRST, SECOND, FOURTH, FIFTH AND SIXTH CAUSES OF ACTION

9 1. for compensatory damages in an amount according to proof at the time of trial, but at

10 least in the amount between $75 million to $125 million, together with interest thereon at the

11 maximum allowable legal rate, in the amount between $7.5 million to $125 million per year or

12 $20,000 to $35,000 per day;

13 2. for costs of suit;

17

18 THIRD CAUSE OF ACTION

19 1. for compensatory damages in an amount according to proof at the time of trial, but at

20 least in the amount of$54 million, together with interest thereon at the maximum allowable legal

21 rate;

22 23 24 25

for attorney's fees to the extent recoverable pursuant to law or contract; and

for such other and further relief as the Court may deem just and proper including but not limited to waiting time penalties.

2. 3. 4. 5.

for punitive damages in. the additional amount of $54 million to $208 million; for costs of suit;

for attorney's fees to the extent recoverable pursuant to law or contract; and

for such other and further relief as the Court may deem just and proper including but

26 not limited to waiting time penalties. 27

28

20

BlIlWEG v. ACflVlSI0NIFAC fINAL 7-7-10

FIRST AMENDED COMPLAINT

5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

EIGHTH CAUSE OF ACTION

1. for imposition of a constructive trust with respect to any and all payments relating to

the Bonus / Royalty Agreement;

2. for costs of suit;

1 2

BlIlWEG v. ACTlVISIONIFAC FINAL 7·7-10

21

FIRST AMENDED COMPLAINT

1.

SEVENTH CAUSE OF ACTION

for a declaration from this Court regarding the Bonus / Royalty Agreement

3 consistent with the contentions and allegations of The Infinity Ward Employee Group as set forth 4 above;

2. 3. 4.

for costs of suit;

for attorney's fees to the extent recoverable pursuant to law or contract; and for such other and further relief as the Court may deem just and proper.

3. 4.

for attorney's fees to the extent recoverable pursuant to law or contract; and for such other and further relief as the Court may deem just and proper.

/11 III III

1 Dated: July~, 2010
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28 WYMAN & ISAACS LLP

Bruce Isaacs, Esq. Robert A. Wyman, Esq. Attorneys for Plaintiffs

TODD ALDERMAN, FRANK GIGLIOTTI, ROGER ABRAHAMS SON, BRAD ALLEN, MOHAMMAD ALAVI, RICHARD BAKER, CHAD BARB, KEITH BELL, CHRIS CHERUBINI, TAIHOONWILLIAM CHO, KRISTIN COTTERELL, JON DAVIS, CHRIS DIONNE, JOEL EMSLIE, ROBERT FIELD, STEVE FUKUDA, ROBERT GAINES, CHANCE GLASCO, PRESTON GLENN, JOEL GOMPERT, CHAD GRENIER, MARK GRIGSBY, EARL HAMMOND, JOHN HAGGERTY, JACOB MICHAEL KEATING, CHRIS LAMBERT, RYAN LASTIMOSA, JULIAN LUO, FAIRFAX S. MCCANDLISH IV, JASON MCCORD, BRENT MCLEOD, JOHN PAUL MESSERLY, STEPHEN MILLER, MARIO PEREZ, ALEX ROYCEWICZ, ZIED RIEKE, JON SHIRING, JOHN SLAYBACK, RICHARD SMITH, GEOFFREY SMITH, JIESANG SONG, TODD SUE, RA YME C. VINSON, CHARLIE WIEDERHOLD and LEI YANG

22

BlIIWEG v. ACTMSIONll'AC FINAL 7-7-10

FIRST AMENDED COMPLAINT

1 2 3 4 5 6 7 8 9

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PROOF OF SERVICE

STATE OF CALIFORNIA, COUNTY OF LOS ANGELES

I am employed in the County of Los Angeles, State of California. I am over the age of 18 and not a party to the within action; my business address is 5757 Wilshire Blvd., Suite 475, Los Angeles, CA 90036.

On July 8,2010, I served the document described as "NOTICE OF FILING FIRST AMENDED COMPLAINT" upon the interested parties in this action in a sealed envelope addressed as follows:

(By Mail) I am "readily familiar" with the firm's practice of collection and processing correspondence for mailing. Under that practice, it would be deposited with U.S. postal service on that same day with postage thereon fully prepaid at Los Angeles, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after day of deposit for mailing contained in affidavit.

(By Overnight Delivery) I deposited this document in the box or other facility located at 5757 Wilshire Blvd., Suite 475, Los Angeles, CA 90036 regularly maintained by Federal Express, in an envelope designated by Federal Express with delivery fees paid or provided for, addressed to the persons on whom it is to be served, for guaranteed next day delivery.

(By Personal Service) I caused the delivery of such envelope by hand to the offices of the addressee.

(By E-Mail- PDF Format) I caused the foregoing document to be served bye-mail transmission, in PDF Format, to each of the interested parties at the e-mail address shown above.

Executed on July 8,2010, Los Angeles, California.

(State) I declare under penalty of perjury under e laws of the State of Cali fomi a that the above is true and correct.

Lina Pearmain

1 2 3 4 5 6 7 8 9

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ATTACHED PROOF OF SERVICE

Steve Marenberg, Esq. Laura Seigle, Esq.

Irell & Manella LLP 1800 Avenue of the Stars Suite 900

Los Angeles, CA 90067-4276 E-Mail: smarenberg@irell.com

Paul Grossman, Esq. Bradford Newman, Esq.

Paul, Hastings, J anofsky & Walker LLP

515 South Flower Street, Twenty-Fifth Floor Los Angeles, CA 90071

Robert Schwartz, Esq. Victor Jih, Esq.

Kristopher Rossfeld, Esq. O'Melveny & Meyers LLP

1999 Avenue of the Stars, 7th Floor Los Angeles, CA 90067-6035