Although Midway's board of directors "oversaw the ruin" of the now-bankrupt publisher, Delaware law means that creditors' lawsuits against them must be dismissed, a judge has ruled.
According to a Business Week report
, a judge last week dismissed suits filed by creditors over disputed loans. But despite the dismissal, the judge said the company's directors, which included media mogul and majority stakeholder Sumner Redstone and his daughter Shari, weren't innocent of all wrongdoing.
U.S. bankruptcy judge Kevin Gross ruled that the directors neither breached their duties to shareholders nor engaged in fraud, he stressed his decision was not "an endorsement of any of the defendants’ actions."
Said Judge Gross: "The defendants oversaw the ruin of a once highly successful company, only to hide behind the protective skirt of Delaware law, which the court is bound to apply."
In an attempt to keep Midway afloat in 2008, Redstone and Midway's directors negotiated $90 million in loans and $40 million in financing from Redstone's National Amusements -- a move creditors alleged failed the best interests of Midway's stakeholders.
Although the creditors alleged that Midway took on more debt than it could possibly sustain, the judge found that the company's former leadership couldn't be penalized for trying to "prolong the corporation's viability."
The collapse of Midway began late in 2008, when a debt-burdened and credit-crunched Redstone sold his 87 percent stake
in the company for just $100,000 thus triggering a bond buyback obligation -- and therefore debt -- that was insurmountable for the struggling publisher, which had already been facing critical losses and stock market delisting.
The company's former directors have been cleared of wrongdoing
in suits bought by former investors, as the courts found that none among the company's leadership had broken the law or intentionally misled any of the concerned parties.
Ultimately, Warner Bros. acquired what remained of the company and its assets
last summer, closing a deal for $33 million dollars.