In a wild turn for the Subnautica 2 lawsuit, a judge orders Krafton to restore fired Unknown Worlds CEO and gives them 9 more months to earn $250 million bonus

Nine months after Krafton gutted the leadership of Subnautica 2 studio Unknown Worlds, leading to an acrimonious legal dispute, a judge has ordered that former CEO Ted Gill be reinstated, and that control over the game's early access release schedule be returned to him. The judge also extended the $250 million earnout period that was central to the dispute to at least September 15, 2026.

"Krafton breached the EPA [Equity Purchase Agreement] by terminating the key employees without valid cause and by improperly seizing operational control of Unknown Worlds," the ruling states (via Kotaku).

"Edward Gill is hereby reinstated as CEO of Unknown Worlds, and his period of operational control under Section 2.7(f) of the EPA will be extended by the time that elapsed between his wrongful termination and his restoration. The July 1, 2025 Board resolution is declared ineffective to the extent it infringes on Gill's operation control right.

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"Krafton is enjoined from circumventing section 2.7(f) or impeding Gill's authority over the early access launch of Subnautica 2 and must immediately restore his access to the Steam platform. Finally, the base earnout Testing Period is equitably extended by 258 days to September 15, 2026, and Fortis [the law firm representing Unknown Worlds] retains its contractual right to further extend the Testing Period to March 15, 2027."

The judge acknowledged that putting Gill in charge of Unknown Worlds again, and returning control of Subnautica 2, "will cause tension with the parent company given the obvious bad blood between the parties." But that, he continued, "does not excuse a material breach of contract" or override the performance clause agreed to by both parties, and that both Unknown Worlds and Krafton "can—and must—act in good faith to navigate their remaining contractual relationship."

Interestingly, the judge also said Unknown Worlds itself will suffer "palpable" harm if that action isn't taken: "Unknown Worlds is being run by a part-time CEO who manages another studio and had never played Subnautica before his appointment. Key staff members have quit, and the early access release of Subnautica 2 has been put in jeopardy."

Lest there be any ambiguity, the judge declared very clearly that he found that Krafton terminated the Unknown Worlds studio heads specifically to avoid paying out that $250 million bonus that would have been required if Subnautica 2 achieved specific sales targets following its early access launch—essentially agreeing with the central point of argument of the former Unknown Worlds heads.

"When an employer faces a contractual payout it wishes to avoid, it is heavily 'incent[ivized] to go rummaging through the employee’s history to find any reason it can to announce that the termination was really for cause.' That is precisely what happened here. Frustrated by the Key Employees’ refusal to forfeit operational control and facing a nine-figure liability, Krafton went searching for a pretext.

"This court of equity will not permit a party to use the after-acquired evidence doctrine to fabricate Cause where the evidence shows the termination decision was made for different reasons. The doctrine prevents a wrongdoer from profiting from concealed misconduct. It does not grant an employer license to retroactively invent grounds for termination."

The judge ruled that formally ordering the restoration of Gill's fellow Unknown Worlds chiefs, studio co-founder Max McGuire and Subnautica designer and director Charlie Cleveland, was not necessary to remedy the contractual breach because they had "entrusted [their] authority to Gill," and with Gill returned to the CEO role, he has the discretion to bring them back or not as he sees fit.

Other parts of the case are still ongoing, and it's not clear whether Krafton will, or even can, appeal this ruling, but it's clearly a major loss for the company.

"While we respectfully disagree with today’s ruling, we are evaluating our options as we determine our path forward," Krafton said in a statement provided to PC Gamer. "Today’s ruling does not resolve the former executives’ claim for damages or an earnout related to Subnautica 2, with further litigation still pending. In the meantime, Krafton's immediate focus remains unchanged: delivering the best possible game to Subnautica’s fans."