Vol. 12, No. 2,856W - The American Reporter - March 18, 2006

by Joe Shea
American Reporter Correspondent
Los Angeles, Calif.

LOS ANGELES, Jan. 10, 2002 -- A lawyer for the Walt Disney Co. said Thursday there is no way the owners of the U.S. and Canadian commercial rights to Winnie The Pooh can get their lucrative rights back under their 1983 contract without paying a fortune -- in money, not honey -- to the studio.

Disney and heirs to the Pooh rights have battled in Los Angeles Superior Court since Feb. 27, 1991 -- 11 years next month -- in a case that has been conducted almost entirely in secret.

That will end today when Disney says it will open "the lion's share" of the 85,000 documents in the case to public view under a court order unsealing the case.

Attorney Daniel Petrocelli of O'Melveny & Myers told The American Reporter that the heirs of Stephen Slesinger have not asked for rescission of the contract - which would require them to pay back "tens of millions" of dollars in royalties they've received - and cannot terminate the contract, which the heirs have asked a Superior Court judge for the right to do, since they have no further obligations under the contract to terminate.

"All they do is receive money in the mail," said Petrocelli, who gained fame as a plaintiff's lawyer representing the families of Ron Goldman and Nicole Brown Simpson in the aftermath of the 1995 O.J. Simpson murder trial when he won, but never collected, a $35 million judgment against the Heisman Triophy winner and NFL great accused in the murder of his wife and aspiring actor Ron Goldman.

Disney's stock dropped a dollar yesterday after Los Angeles Daily Journal columnist Garry Abrams, who was one of the first to cover the case, quoted Slesinger's famed Hollywood attorney, Bert Fields, as saying the Slesingers want to break the contract with Disney. Petrocelli said he had received calls from a number of reporters afterwards.

"One of the things we asked for in the [third amended] complaint is cancellation of the license," Abrams quoted Fields as saying.

"The plaintiff has no legal right whatsoever to rescind, cancel or terminate its agreement with Disney," Petrocelli said, and noted that in a third amended complaint, they have not asked to rescind it, which would treat the contract as though it never existed. The Slesingers would have to show that a grievous breach of their contract had occured before there could be a rescission, an attorney familiar with the issue said.

"The bottom line is no matter how this case comes out, they cannot get their rights back," he said. According to the Daily Journal article, the rights earned Disney some $3.3 billion in 1999, and have increased substantially in value since.

"One reason is that [Stephen Slesinger Inc.] would have to return the tens of millions of dollars it received over the years," Petrocelli said. "In addition, even if it wanted rescission, it couldn't get it."

As The American Reporter revealed last year, a decision by Superior Court Judge Ernest Hiroshige on whether to allow the complaint to be amended a third time addressed the issue of termination, saying that a finding of fraud at trial would permit the plaintiffs to get out of its 1983 agreement. This paper also first revealed Fields' stance on termination last August.

That decision is under seal and will remain so at least until tomorrow, when a hearing is scheduled to consider a list of documents Disney wants to keep under seal to protect "trade secrets."

Petrocelli indicated Thursday that the "lion's share" of the estimated 80,000 documents, including most of the orders and opinions in the case, will probably not be challenged, but the list was not yet complete, he said.

"They are asking for [termination] in the third amended complaint," Petrocelli acknowledged. But, he said, "The plaintiff has no right to terminate the agreement, either. They do nothing under their contract -- all they do is is sit back and receive money in the mail, so there is nothing they do that they can terminate," he said.

In an indication that the dispute has perhaps become a bitter one, Petrocelli added, "All they can ask for is money, which is all they want. They have received more money than they ever dreamed of, and all of it is due to Disney's efforts. They have been paid all the money they're owed, and in our view, they are entitled to nothing more."

Petrocelli spoke to The American Reporter after Michelle Bergman, Disney's director of corporate communications, called to say the famed attorney would be available to speak on background today. But Petrocelli agreed to be quoted on the matters of termination and the destroyed evidence.

Disney had earlier been reluctant to discuss most of the issues that have arisen since the case was filed under seal in January 1991, and today's conversations suggest that strategy is changing amid growing concern that the case may be difficult to win at trial due to the issues sanctions. Literary agent Stephen Slesinger bought the exclusive U.S. and Canadian rights to commercialize Pooh from his creator, British author A.A. Milne, in 1929, and created phonograph records, cartoons and a line of children's clothing based on them before licensing the rights to the studio's founder, Walt Disney, in 1961. The agreement was redrawn in 1983.

Currently, Slesinger's widow, Shirley Slesinger Lasswell, earns $12 million a year in Pooh royalties, attorneys in the case have indicated.

The Slesingers say they are only seeking what they are owed, which Disney says is nothing. Disney characterized the amount sought as "hundreds of millions of dollars" in its Nov. 7 petition for a writ.

Knowledgeable sources believe that Pooh sales now account for almost 20 percent of Disney's annual $25 billion in revenues.

Disney's law firm for the first 10 years of the case was the nation's largest, Skadden, Arps, Slate, Meagher & Flom, which withdrew from the case last year when they were about to be called as witnesses for the plaintiffs in the destruction of 40 boxes of documents that Slesinger heirs say might have helped prove their case.

Petrocelli said it was a "gross misreading" of Judge Hiroshige's order granting heavy monetary, evidence and issue sanctions aganst Disney to conclude that the destroyed documents had "anything of value" to the plaintiff's case.

Petrocelli noted that Disney had produced an indexof the documents which showed none of the documents were related to the case. Another box of documents marked "Winnie the Pooh - legal problems," was destroyed by a Disney licensee called Canasa, which apparently manufactured Pooh merchandise in Korea.

All of the destruction was "routine," he added, and was explained in detail in the studio's petition for a writ suspending the sanctions order. The appellate court denied the petition, saying no "extraordinary circumstances" existed that required a ruling before the case has been heard. [An earlier article in The American Reporter erroneously said the petition had been filed after a normal period provided by law. It can be filed at any time. The matter can be heard on appeal if Disney loses the case at trial, an attorney familiar with the issue said.]

Attorneys for Slesinger's heirs could not be reached for comment Thursday.

A spokesmen for the family, told of Petrocelli's comment that it could not escape from the contract, said only, "They would say that."

Copyright 2006 Joe Shea The American Reporter. All Rights Reserved.

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