West and Zampella, former heads of Call of Duty development studio (and Activision subsidiary) Infinity Ward, were fired early last month, according to Activision, for “breaches of contract and insubordination.” Activision subsequently spun the franchise into its own business unit, and created a second studio, Sledgehammer Games, to develop an action-adventure game based on the franchise. West and Zampella quickly followed up by filing suit against Activision for over $36 million in royalties and damages, alleging they were wrongfully terminated and their contacts breached.

In their complaint, filed on March 4, West and Zampella claim that Activision “refused to honor the terms of its agreements,” was “intentionally flouting the public policy of [California] that employers must pay their employees what they have rightfully earned,” and that Activision hoped to either “[get] away with not having to pay them anything or maximiz[e] its leverage to reduce that pay.”

Activision’s response in a 23 page countersuit filed Thursday in Los Angeles calls West and Zampella “self-serving schemers” and states it fired the pair because of “an unlawful pattern and practice of conduct,” including an attempt to “steal” the Infinity Ward development studio.

In an email, Zampella and West’s attorney responded on Thursday, calling Activision’s claims “false and outrageous” and accusing the company of stalling to avoid paying the pair “the millions of dollars they all earned and that Activision owes them.”

Follow the bouncing decimal point? With millions (or more) on the line, the reputation of a multi-billions franchise interlinked, the next game due out this fall, and rhetoric like Activision’s already comfortably slinging, this could get uglier than it already reads in short order.

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Zampella had served as CEO at Infinity Ward, and West as chief technology officer, among other titles.

Activision also said it plans to form a new business unit around the “Call of Duty” franchise, focusing on online content and expanding the brand.

The shake-up comes a day after Activision said it was looking into breaches of contract and insubordination by two senior employees at its Infinity Ward studio.

Activision did not name West and Zampella in Monday’s regulatory filing. But the filing said the company expected the “departure of key personnel” as a result.

Infinity Ward did not make every “Call of Duty” title. But it was behind the original game and the latest installment, “Call of Duty: Modern Warfare 2,” which broke entertainment records last fall when it made $550 million in worldwide sales during its first five days. By January, it crossed the $1 billion mark.

Activision said Tuesday it plans to release a “Call of Duty” game developed by Treyarch this fall. That studio had been behind less successful games in the franchise.

The company also plans a new “Call of Duty” for 2011 from another studio.

Philip Earl, who currently runs Activision Publishing’s Asia Pacific region, will head the Call of Duty business unit.

Activision Publishing executives Steve Pearce, chief technology officer and Steve Ackrich, head of production, will lead Infinity Ward on an interim basis, the company added.

Shawn Milne, an analyst with Janney Capital Markets, said while having the top developers leave the company is “a new risk.”

“A greater risk would be whether or not the two heads end up taking more talent away from (Activision), or the whole team leaves,” he said in a note to investors.

Still, he said that given Activision’s compensation model — based on a franchise’s profitability — “we would believe there would be no shortage of top development talent looking to work on such a valuable brand.”

Shares of Santa Monica, Calif.-based Activision slid 2 cents to $10.79 in after-hours trading.

Original source: http://www.newsvine.com/_news/2010/03/02/3970703-infinity-ward-execs-leave-activision

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