Beyonce has wiggled out of a lawsuit brought by a video game company that sued the musician for allegedly backing away from a deal to create a motion-sensing dance game.

Gate Five filed the lawsuit in New York court in April 2011, claiming that the superstar had acted on “a whim” the previous Christmas with an “extortionate demand” for more compensation for Starpower: Beyonce. The demands drove away a financier and caused Gate Five to lay off 70 people
during the holidays, said the lawsuit.

After saying it spent $6.7 million to develop the project, Gate Five looked to recover the $100 million in estimated profit the game was projected to make. But after a grueling court battle that never got to trial, the two sides have found a way to resolve their differences.

Beyonce’s argument in the case was that she had a valid contractual right to exercise termination provisions after Gate Five was unable to fulfill obligations to obtain $5 million of committed financing for the project.

In opposition, Gate Five contended that it was on the verge of closing a $19.2 million financing contract before Beyonce got antsy.

In late 2011, a New York Superior judge denied Beyonce’s motion to dismiss, and a state appeals court later affirmed the ruling on the basis that Beyonce hadn’t objected to the loan at the time, the unresolved question of whether the non-finalized financing agreements constituted “committed financing” under the contract and the possibility that the singer’s own actions contributed to the collapse of financing.

In recent months before the case was settled, the dispute went deeper.

Gate Five looked to investigate whether Beyonce had dropped Gate Five in the interest of scoring a better deal with a competitor. The company sought all sorts of documents including a possible audit conducted by Beyonce’s law firm on the management company run by her father. Beyonce’s attorneys called it a “fishing expedition” and a breach of attorney-client privilege.

There won’t be any trial. Last week, the parties submitted papers in court that discontinue the claims. An attorney for Gate Five couldn’t be reached but has been quoted as saying that the lawsuit was settled amicably on confidential terms. [Billboard.biz]