John Carmack launches lawsuit against ZeniMax for $22 million

If this seems confusing to you, don’t worry. For what feels like forever now, ZeniMax Media, the parent company for the likes of Bethesda, have been in the court trenches with Oculus. Their battle reached a new milestone a few weeks ago, as a jury leniently fined Oculus but failed to find them guilty of anything too serious. ZeniMax aren’t letting it end there, but now they have a new front to fight with. And this time it’s Oculus’ John Carmack, formerly from id Software, that is coming for them.

The iD co-founder claims in a new lawsuit against the company that ZeniMax is refusing to pay him a sum owed after they purchased id back in 2009. According to the documents, Carmack received a series of shares as part of the deal, which he’s been seeking to turn into cash for years. ZeniMax are reportedly not willing to play ball, dragging their feet in payment due to “sour grapes” between the two parties, according to Carmack’s legal team.

This is just the last payment in a series of them that have been on-going since 2009, with the final one due in June of this year. But Carmack’s team claim ZeniMax are in no way preparing to make the payment, as is clear in the opening paragraph of the court document.

Defendant ZeniMax Media Inc. will soon be obligated to pay Plaintiff John Carmack more than $45 million in cash under the terms of the Asset Purchase Agreement and a Convertible Promissory Note by which ZeniMax bought the assets of id Software, Inc. in 2009. Mr. Carmack’s right to receive that money ripens no later than June 23, 2017, the eighth anniversary of id Software’s sale to ZeniMax. It is the final payment due to Mr. Carmack for the sale of id Software, the world-famous video game studio he founded and led for more than 20 years.

But ZeniMax clearly doesn’t want to pay. And while Mr. Carmack awaits ZeniMax’s seemingly inevitable refusal to honor its obligation to pay the remainder of the purchase price, ZeniMax is already in breach of the Asset Purchase Agreement and Convertible Promissory Note. Pursuant to those contracts, Mr. Carmack has the absolute right “to convert all or any portion of the Unpaid Principal Balance solely into shares of ZeniMax’s CommonStock . . . .” All of those shares are subject to a $45 per share put option that will mature no later than June 23, 2017.

ZeniMax also don’t seem to refute that, with Carmack’s team claiming that correspondence with them made it clear that not only is ZeniMax unwilling to go through with the share conversion in a timely fashion, they aren’t doing so under the obligations of the shareholders’ agreement.

On March 2, 2017, ZeniMax’s general counsel responded to Mr. Carmack’s conversion notice and sale offer. By that letter, ZeniMax made it clear that the company would not voluntarily comply on a timely basis with the conversion notice. The content and tone of the letter also made it clear that ZeniMax was unlikely to comply with its obligations under the shareholders’ agreement by either buying the offered shares or notifying the other shareholders of their right to purchase them.

The full document is available to read here if you’re so inclined, but the gist of it seems simple. ZeniMax, in its pursuit of Oculus, don’t seem to want to play ball with Carmack. How this ties into the grander legal schemes at play should be interesting to watch unfold.

Last Updated: March 10, 2017