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Game maker Fundex files for bankruptcy reorganization

September 11, 2012
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Fundex CEO Chip Voigt plays Alfredo's Food Fight. (IBJ photo)

The once high-flying Fundex Games Ltd. is seeking to reorganize its assets under the protection of bankruptcy as lawsuits against the Plainfield-based company continue to pile up.

Fundex filed for Chapter 11 on Friday, listing assets of nearly $1.5 million and liabilities of $8.9 million.

“Debtor urgently needs working capital to continue such business operations, and is unable to obtain post-petition financing from any source other than the use of cash collateral,” it said in a filing with the U.S. Bankruptcy Court in Indianapolis.

The company sought the protection just three days before game giant Hasbro Inc. brought a complaint against Fundex in Marion Superior Court. The suit, filed Monday, claims Fundex owes it $141,515 in licensing royalties for its popular Scrabble word-search game.

Pawtucket, R.I.-based Hasbro’s suit against Fundex is the latest in a slew of litigation facing the company as it struggles to pay its debts. In Marion Superior Court alone, at least two companies, including Hasbro, and two game inventors have sued the company since March, seeking to collect on the debts they claim they are owed.

“Clearly, Fundex has shown that it can’t manage its own company,” said Jane Ruemmele, a Marion County public defender and one of the game inventors suing Fundex, in an interview with IBJ.

Debts listed in Fundex’s bankruptcy filing include $2.2 million to Suntech Trading Co. in Hong King and $484,138 to the Indiana Department of Revenue for unpaid taxes.

In addition, the company owes hundreds of thousands of dollars to packaging and graphics companies.

Neither Fundex’s attorney, nor its CEO, Carl “Chip” Voigt IV, returned phone calls seeking comment about the bankruptcy. Chip Voigt founded the company in 1986 along with his father, Carl "Pete" Voigt III.

But the court proceedings represent a steep fall for the company that once had 50 employees, offices in Hong Kong and New York, and was the sole distributor of the industry’s second-most-popular card game, Phase 10.

Fundex's other popular products include Gnip Gnop and What’s in Ned’s Head? What's in Ned's Head, which lets children pull items like moldy cheese, fake vomit and a rat from a stuffed head’s orifices, won a slew of awards and helped make Fundex a growing player in the game industry.

Just two years ago, Fundex boasted annual revenue of $25.8 million, according to court documents. The amount, however, fell by nearly half, to $13.3 million in 2011, and so far this year the company has recorded a paltry $2.6 million in sales.

Some of the drop likely can be attributed to its loss of Phase 10, whose owner is still trying to collect on royalties as part of a settlement agreement it signed with Fundex in October 2010.

The battle over the rummy variation began in December 2008 when Michigan inventor Kenneth Johnson accused Fundex of copyright infringement, trademark dilution, fraud, conversion and theft in a case filed in U.S. District Court in Indianapolis.

Phase 10, now distributed by Mattel, was a cash cow for Fundex, selling more than 3 million copies per year, second only to Uno.

Johnson claimed Fundex withheld royalties, granted sub-licenses without his consent, failed to include Johnson’s copyright notice on card games, and registered the Phase 10 mark for itself in the United Kingdom and France.

The parties agreed to settle the case in October 2010, with Fundex agreeing to pay Johnson $700,000, according to court documents.

But Johnson sued Fundex again, in May of this year, claiming he’s still owed $289,429 from the settlement. A Marion Superior Court judge granted judgment in his favor in July and a “notice of garnishment” was served on Fundex on Aug. 29.

The other game inventor, Ruemmele, also dragged Fundex back into court in May after previously settling with the company in February 2011.

Ruemmele alleged in her original lawsuit that Fundex sold numerous copies of her Chronology game but hadn’t provided any royalty statements or payments since October 2008. She also alleged that the company continued to sell the game after its licensing agreement expired in March 2008.

Ruemmele said the company has paid her $50,000 but still owes her a portion of a $38,000 settlement amount. Fundex’s bankruptcy filing lists the amount at $19,000.

In Chronology, players try to place historical events and inventions in their proper place in time. The first player to accumulate 10 cards in calendar sequence wins.

“It’s not a game that’s going to get huge, huge,” Ruemmele said. “It’s always had moderate sales, but nothing outrageous.”

The game now is distributed in the United States and Canada by Buffalo, N.Y.-based Buffalo Games, and Ruemmele said she is contracting with The Egmont Group in Denmark to have the game distributed in Sweden and Denmark.
 

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