The Pooh Papers
DISNEY PRESSURED N.Y. POST TO FIRE REPORTER, LAWYERS SAY
by Joe Shea
American Reporter Correspondent
LOS ANGELES, March 20, 2002 -- Even as lawyers in Los Angeles Superior Court heard their trial in the bitter clash over royalties for Winnie the Pooh set for Feb. 5, 2003 - some 12 years after the case was filed - lawyers for a New York freelancer whose stories on the case enraged Disney executives headed to court in New York Cty to sue Disney and the New York Post after editors at the Post allegedly caved in to pressure from Disney to fire her for her articles on the case.
The writer is also suing the Post's parent company, News Corp., the worldwide media firm controlled by Rupert Murdoch that owns the Post, 20th Century Fox and the Fox television network.
According to a story in today's Village Voice, "rumor has it that Disney CEO Michael Eisner personally raged to Murdoch" about the stories, including a front page headline that featured a color picture of Mickey Mouse and a headline that declared "Disney Caught in Shredding Scandal."
At issue in her firing is the amount of money Pooh represents for Disney, and what will happen to the studio if the owners of U.S. and Canadian commercial rights to the bear are allowed to break their contract with the studio. Lawyers for the heirs of Stephen Slesinger, the New York branding pioneer who bought commercial rights to Pooh in 1932, say court pleadings support everything in Finke's articles. The American Reporter published much of the same information weeks before the New York Post stories.
In a letter to the Post, Disney lawyers claim freelance writer Nikki Finke got it badly wrong when she reported that Disney stands to lose up to 25 percent of its revenues if Pooh's owners break away from the studio. The Voice story indicated that a televised appearance by Disney attorney Daniel J. Petrocelli of O'Melveny & Myers may have been the coup de grace for Finke. Petrocelli has called her story "recklessly inaccurate" - even though Eisner and Disney president Robert Iger have said publicly that the bear earns between $3.3 and $4 billion for the studio, and appeared on Fox New Channel's "O'Reilly Factor" talk show to deliver what was apparently the killing blow.
Finke was fired the next day.
The problem Disney faces is that if Eisner and Iger were telling the truth, their statements would back the plaintiffs' claim to an additional $30 to 40 million per yearin past-due royalties since 1998 or 1999.
Only incidentally would it also mean that between 12 to 16 percent of the studio's revenues are generated by the little bear from the Hundred-Acre Wood, far more than Petrocelli estimated but much less than Finke believes.
"It's about 3 or 4 percent [of Disney's corporate revenues], which comes to about $1 billion a year," Petrocelli told the Murdoch-owned Fox News Channel's Bill O'Reilly about Pooh revenues. He repeated the claim a few seconds later.
In a Village Voice exclusive published this morning, "Press Clips" columnist Cynthia Cotts says Finke's lawyers say the paper's editors resisted pressure to fire her for about two weeks after the stories appeared, but then fired her the day after Petrocelli's appearance for what Petrocelli called ""recklessly inaccurate" reporting.
"After the stories appeared, sources say, the Post received angry calls from Disney execs.
One rumor has it that Disney CEO Michael Eisner personally raged to Murdoch," Cotts says in her story.
The two men are acquainted - Disney bought Fox Family Worldwide from Murdoch and Saban Entertainment for about $6 billion last summer. It is not clear that Petrocelli, Eisner, or Iger were lying, or if the Merrill Lynch analyst was being overly generous in her estimate of the Pooh-related revenues.
What is clear is that none of their estimates appear to account for the revenues the plaintiffs now receive on a set of merchandise categories that Disney says represents only some of the Pooh merchandise it sells in theme parks, online, and at Disney stores around the world.
Plush bears in theme parks are covered by the Slesingers' contract, for instance, but according to Disney, sales of DVDs and videocassettes and other items are not. What is and is not covered will be a major issue at any trial. But the plaintiffs say they received about one percent of a billion dollars, or $13 million last year, and say that billions more in revenues were not accounted for in their royalty statements or those of the estate of Pooh creator A.A. Milne (Disney bought the Milne estate's rights for about $350 million last year). Based on the figures offered by Eisner and Iger, the plaintiffs could claim a multiple of that $13 million, or an additional $30 to 40 million for each recent year of the contract.
In other developments, Judge Ernest Hiroshige may rule soon on an accounting issue that was heard last summer and involves a small portion of the disputed royalties on items that Disney does acknowledge it must pay for, an attorney for the heirs of Slesinger said, The Slesinger lawyers have filed an objection to the latest discovery referee's report and its recommendations.
The plaintiffs have also relinquished $90,000 in monetary damages Disney was ordered to pay. Slesinger attorney Bert Fields, of the well-known Hollywood firm of Greenberg, Glusker, Claman, Fields, & Machtinger, explained that monetary sanctions of more than $5,000 are automatically appellable, and would have required a stay of the case at the trial court until a lengthy appeal was heard.
Fields also said an appeal would probably have involved the far tougher evidence sanctions the plaintiffs won after the studio admitted destroying boxes of possible evidence in the case, including one labeled, "Winnie the Pooh - Legal problems." The larger case, for which the trial date was set today, will concern royalties on Pooh videocassette and computer software sales, as well as DVDs and other lucrative items.
Disney says it does not owe royalties to the Slesingers on those categories of merchandise. The case was filed on February 27, 1991. The studio is facing an uphill battle on the rights iszsue, observers say, because a 1967 Roy Disney memo unearthed in the voluminous archives of the case - filed in 1991 and now the longest-running on the Los Angeles County docket, according to Petrocelli - observes that the Slesingers' rights are far broader than the studio once thought.
In evidence sanctions that were also levied against the studio, it is prevented from arguing that consumer merchandising executive Vince Jeffords did not promise to pay the Slesingers royalties on videocassettes and computer software. The jury can also be instructed that Disney willfully destroyed evidence that might have shed light on the plaintiffs' claims, the judge ruled.
Hiroshige said in a separate ruling that if breach of contract or fraud was proven at trial, the Slesingers would be free to terminate the contract and seek a home elsewhere for Winnie the Pooh.