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Video Game Cyberpunk 2077's Launch Bust Leads To Investor Litigation

It could be a complicated case for the plaintiff.

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A video game developer is being sued by a disgruntled investor after a publicly traded stock tied to the developer went from $31 on December 4 to $18.35 on December 24. The investor, who seeks to turn the case into a class action, claims that the stock was fraudulently inflated based on known false statements made in public documents, conference calls, and announcements.

The main defendant is CD Project S.A., which has a history of developing video games that include The Witcher series. Its most anticipated release to date was supposed to be an open-world, narrative-driven, role-playing game named Cyberpunk 2077, which was held back for many months in 2020. The intention was to release the game for play on consoles such as Sony’s Playstation 5 and Microsoft’s Xbox X.

Originally, the game was set to be released on April 17, 2020. The plaintiff says that the false statements surrounding the delay began a few months prior to that, on January 16, when the developer stated that the game was complete and playable, but that more time to “finish playtesting, fixing and polishing” was needed. A new release date of September 7, 2020, was established by way of that communication.

The developer published a press release three days prior to the newly established release date. It stated, in part, that it was preparing for the final certification of Cyberpunk 2077; however, the release date was once again tabled, this time to November 19, 2020.

There was yet another delay, announced on October 28, 2020. The newest release date for Cyberpunk 2077 would be three weeks later because the developer said it needed to fix issues with the then current-generation console versions. A statement made by Michael Nowakowski, CD Project S.A. vice president of business development, who is also named as a defendant in the action, could prove important for the plaintiff. He stated,

I wouldn’t say there is a “problem” because there’s nothing wrong with
Xbox or PS4 versions –there is optimization to be handled, also because
of how we were approaching things from the get-go in terms of
development; so –there is no problem with Xbox or PlayStation 4, to
be honest.

On November 25, 2020, Adam Michal Kicinski, CD Project S.A.’s joint executive officer, who is a named defendant as well, said, “we believe that the game is performing great on every platform.. He mentioned that the team was aware of bugs in Cyperpunk 2077, “but we believe that the level will be as low as to let gamers not see them.”

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Under a section of the complaint titled, “The Truth Emerges,” the plaintiff says that consumers soon discovered, after Cyberpunk 2077 was launched on December 10, 2020, that the current-generation console versions of the game were full of errors and made the game difficult to play. A writer at IGN wrote that the game:

[F]ails to hit even the lowest bar of technical quality one should expect even when playing on lower-end hardware. It performs so poorly that it makes combat, driving, and what is otherwise a master craft of storytelling legitimately difficult to look at. It is not an exaggeration to say that I’ve felt nauseated after playing because of the terrible frame rate. It really is that bad, and it’s very suspicious that CD Projekt Red refused to provide console review copies ahead of launch.”

Four days after the game’s launch, Kicinski admitted that the team underestimated the scale and complexity of the issues and ignored signals about the need for more time to refine the game. Four days after Kicinski’s admission, Sony told its customers that it would offer a full refund for all users who purchased Cyberpunk 2077 and would remove the game from the Playstation Store. Microsoft also announced that it would offer refunds for Xbox customers.

The two-count complaint for violation of Section 10(b) of The Exchange Act and Rule 10b-5 on one hand and violation of Section 20(a) of The Exchange Act on the other, is premised on a finding that the defendants actually disseminated or approved false statements, which they knew to be misleading.

It could be a complicated case for the plaintiff in that the game developer acknowledged for quite some time that there were bugs that needed to be addressed and its acts of continuously delaying the release of Cyberpunk 2077, which it certainly would not have done if it was deemed to be unnecessary, truthfully advised prospective investors of the risks in investing. The public statements are telling on this point. Kicinski, on November 25, 2020, outright stated that the game had bugs, that the game cannot be bug-free, and that the team believes that the level would be low enough to let gamers not see them.

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Obviously, Kicinski was wrong. The bugs were so large that it caused the console manufacturers to refund payments to individuals who purchased the game. However, the key question is whether Kicinski and his team were intentionally wrong. Did they know that the game was not ready to be launched and that the bugs were more severe than what was reported? That is where discovery will come into play if this case progresses.

The case is Trampe v. CD Project S.A., et al. pending in the Central District of California. Counsel for the plaintiff is Laurence M. Rosen, Esq. of The Rosen Law Firm, P.A.

Darren Heitner is the founder of Heitner Legal. He is the author of How to Play the Game: What Every Sports Attorney Needs to Know, published by the American Bar Association, and is an adjunct professor at the University of Florida Levin College of Law. You can reach him by email at heitner@gmail.com and follow him on Twitter at @DarrenHeitner.

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