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Video game mogul Kotick loses fight with top Hollywood litigator

August 2, 2010 |  8:30 am
Kotick1 One of Hollywood's most powerful chief executives has lost a legal battle against one of its toughest attorneys.

The brawl between Bobby Kotick, chief executive of Santa Monica-based video game giant Activision Blizzard Inc., and Patricia Glaser, once described by California Lawyer magazine as "one of the fiercest litigators in Los Angeles,” has its origins in a 2007 sexual harassment lawsuit that ultimately led to an epic dispute.

On the surface, the entire affair sounds like the makings of a bad joke involving a lawyer, a pilot, a flight attendant, a CEO and an investment banker.

At the end of the day, however, the amount of money at stake was no laughing matter.

On July 6, a three-judge panel in the California Court of Appeal sided with Glaser, who alleged that Kotick had stiffed her firm out of more than $1 million in legal fees.

According to court records, the unhappy tale began in 2007, when a flight attendant named Cynthia Madvig filed a lawsuit in Los Angeles County Superior Court against Kotick, Andrew Gordon, the head of Goldman Sachs & Co.’s investment banking division in Los Angeles, and Cove Management, a company the two created to manage a Gulfstream III private jet they jointly owned. The suit also named Phil Berg, a pilot employed by Cove.

Madvig, who worked as a flight attendant on the jet, claimed that Berg had pressured her in 2006 to be his “arm candy” by accompanying him to dinners and outings during layovers. When she refused, Berg “set out to make life miserable for Madvig,” she alleged. The lawsuit said that Berg compelled her to clean the plane’s toilets repeatedly while “leering” at her.

Madvig claimed that she reported the incidents to Gordon, but did not get a response. Two months later, Kotick fired her. By way of explanation, Kotick allegedly told Madvig, “The guys are unhappy with the hostile environment.”

She filed suit two months later in January 2007 for sexual harassment, wrongful termination, failure to prevent sexual harassment and retaliating against her when she reported the harassment, among other things. The suit did not name Activision Blizzard, the publisher of such hit games as Call of Duty and World of Warcraft.

Kotick, Gordon and Berg denied all the allegations in a response filed in February by their original attorneys at Sullivan & Cromwell.

Kotick, who led the defense efforts, according to court records, switched attorneys in April 2007 and hired Glaser’s firm, then known as Christensen, Glaser, Fink, Jacobs, Weil & Shapiro. Soon after she was hired, her firm advised Kotick that the Madvig case could be settled for $200,000 to $400,000, but “Mr. Kotick believed no sexual harassment or retaliation had taken place and it was important to vindicate the principle even if it would be very expensive in terms of legal fees,” according to court records.

In September 2007, Glaser and Kotick discussed what he and Gordon, who were paying the legal bills, owed the law firm, according to a court filing. The next month, Kotick sent a check for $200,000 along with a letter that said it was full settlement of the firm’s fees and costs. Glaser disagreed, claiming that the total owed was slightly more than $1 million.

By December of that year, Glaser’s firm stopped working with Kotick and his co-defendants, who brought on the firm Bingham McCutcheon and then, in April, another: Gibson Dunn & Crutcher.

Kotick, Gordon, Cove and Berg ultimately settled the case with Madvig in April 2008 by paying her $200,000, plus $475,000 in legal fees.

The dispute over what Kotick and his fellow defendants owed Glaser’s firm, meanwhile, went into arbitration. The arbitrator took testimony from 11 people, including Kotick, Gordon, Glaser, and her associate Nabil Abu-Assal, who also worked on the case.

In March 2009, the arbitrator issued a final award in Christensen, Glaser’s favor. He awarded the firm $938,458, along with $479,898 in legal fees and costs incurred in the arbitration, for a total of $1.42 million. (plus 10% interest).

“Cove Management believes that the billings from Christensen Glaser were excessive and inappropriate given the nature of the case,” said Anthony Glassman, an attorney who represents Kotick and Gordon’s firm Cove.

In his ruling the arbitrator described Kotick’s approach to the Madvig case as a “scorched earth defense” and cited numerous statements allegedly made by the Activision CEO during his dispute with the former flight attendant.

Describing a May 2007 meeting with Abu-Assal and Cove’s chief financial officer, the arbitrator wrote that “Mr. Kotick wanted to destroy the other side and not to pay Ms. Madvig anything.... Mr. Kotick realized this was not a good business proposition, but said ‘that he was worth one-half billion dollars and he didn’t mind spending some of it on attorneys’ fees.’”

At a settlement negotiation with Madvig and her attorneys later that month, as described by the arbitrator, “Mr. Kotick said ‘he would not be extorted and that he would ruin the Plaintiff and her attorney and see to it that Ms. Madvig would never work again.’”

Glassman disputed the veracity of the arbitrator’s description: “Both the final award and appellate opinion contain numerous second-hand accounts of three-year-old private conversations and statements made during attorney-client meetings that Mr. Kotick did not make and therefore are inaccurate, highly inflammatory and taken out of context.”

Glaser declined to provide a statement and Gordon could not be reached for comment.

Records of the testimony given to the arbitrator were not available. According to Jason Feazell, a case manager for arbitration firm JAMS, all documents are destroyed 30 days after a case is closed as a matter of policy.

When Glaser’s firm sought to confirm the award in a California trial court, Kotick’s attorneys asked that the award be reduced by $111,753. The court denied the request and granted Glaser’s firm the full amount in April 2009. Kotick and his fellow defendants appealed the case to the California Court of Appeal.

On July 6, 2010, a three-judge panel affirmed the lower court’s ruling.

Asked whether there would be another appeal, Glassman said that his client “is reviewing his options.”

Regardless of whether the case drags on, it’s clear that Kotick and Gordon spent a good deal of money – far more than if they had opted to settle with Madvig at the outset.

In an e-mail to The Times, Glassman noted a particular statement in the arbitrator’s summary that referred to Kotick: “'Like many successful businessmen, the principle was more important [to him] than the economics.’”

--Alex Pham and Ben Fritz

Related:

Activision's modern warfare

Photo: Bobby Kotick. Credit: Nancy Pastor for The Times.

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