The Pooh Papers
DISNEY PAID $750,000 IN EARLIER DISPUTE
by Joe Shea
American Reporter Correspondent
HOLLYWOOD, Jan. 19, 2002 -- The Walt Disney Co. paid at least $750,000 in 1983 to the widow and her daughter who own the commercial rights to Winnie the Pooh after lawyers accused the company of cheating them on royalty payments and threatened the studio with a lawsuit, newly-opened documents in a 1991 lawsuit revealed Friday. The suit is only now approaching trial.
In more recent years, according to news reports, the studio has been forced to make other payments for past-due royalties in excess of $600,000, bringing its admitted overdue royalty payments to more than $1.3 million dollars. The Milne estate also received $350,000 in the 1983 settlement. The 1982 payment has been kept secret until now, and was not disclosed to Disney shareholders, who have also not been told of the studio's destruction of thousands of pages of documents and its potential liability for hundreds of millions of dollars in the lawsuit, filed in 1991 and still awaiting trial.
The $750,000 - a sum that was later increased, according to the heirs - shows that Disney's behavior as alleged in the current case seeking hundreds of millions in back royalties "is a second offense" in a troubled relationship the heirs have repeatedly threatened to end. The payment was spread over several years.
That was probably the most startling revelation of a treasuretrove of documents opened up by Los Angeles Superior Court Judge Ernest M.Hiroshige after the Los Angeles Times, joined by the American Reporter and other publications, sued in November to have the case unsealed.
The documents also show that Disney paid royalties to the heirsfor 15 years on at least two computer software titles and then claimed ithad done so in error and did not owe royalties for that category of merchandise. The change of heart apparently came as revenue fromcomputer-related products soared with the public's discovery of the Internet.
Thousands of documents that were released Friday - mostly indribs and drabs, as harried court clerks tried unsuccessfully to findboxes containing some of the 45-volume record - trace a long and dauntingly complex relationship back to 1929, when New York literary agent Stephen Slesinger purchased most U.S. and Canadian rights to Pooh from British children's author A.A. Milne, who created the beloved bear as a bedtime tale for his son, Christopher Robin Milne.
In a 1932 letter agreement, Milne and Slesinger expanded theoriginal grant of rights to include live television, radio and puppetshows, as well as phonograph records and devices that would be "analagous"to television in the future.
The meaning of the 1932 agreement is still being disputed byDisney in 2002, which acquired other rights from the Milne estate and hislate wife Dorothy, and all the rights not held by the Slesingers in 2001 for about $350 million.
The relationship between the Slesingers and Milne and his estate, as described in the documents, was a friendly and cooperative one. Milne's mind "was greatly relieved," he wrote, when Slesinger agreed to allow him to develop the property's film rights while Slesinger sought new ways to boost Pooh's sales.
Stephen Slesinger was entitled to revenue for movies using the characters in dramatizations not based on the stories in the original four books, to which Milne retained the rights, according to the document.
Slesinger developed a best-selling set of phonograph recordsfeaturing the characters in the '30s and '40s, oversaw the making of a popular Pooh cartoon, and in the 1950's his widow placed a line of Poohchildren's clothing, toys and novelties at major department stores across the country, including Saks Fifth Avenue in New York City. On getting the license in 1961, Disney almost immediately relicensed the characters to Sears & Roebuck, the 1960's retail giant that dominated the U.S. dry goods market.
But problems began arising when the Slesinger's widow, Shirley Slesinger Lasswell, began to find Pooh items on sale at Sears, Disneyland and elsewhere that were not recorded in her royalty reports. As the number of such items grew with the character's popularity, her lawyers threatened Disney with a "cease and desist" order in 1981 and threatened to terminate the contract unless the disputed payments could be amicably resolved.
The $750,000 "catch up" payment indicates that Disney eventually chose to resolve the dispute, but a long list of Pooh items sold at Disneyland and elsewhere continued to grow. Many of those were listed and illustrated, along with a private detective's notes, in the volumes examined yesterday, which only covered filings between 1998 to the present but contained many earlier papers as exhibits.
The Slesingers, backed up by multiple legal opinions released yesterday and other documents, say that Vince Jefferds, Disney's senior vice-president for merchandise licensing, and Disney attorney Peter Nolan assured them a revised 1983 agreement that incorporated the 1930 contract with Milne, the 1932 letter, and the 1961 agreement and would cover "private" video rentals not made to public institutions such as schools, and also computer software.
An undated page of lawyer's notes say "Jefferds confirmed" thatprivate rentals of video, then a business in its infancy, were not "public" and thus would be subject to royalty payments. The letters, which Petrocelli said he will investigate for their authenticity, support the same claim, he says.
But whether those documents are sufficient to prove the heirs' claim or not may be immaterial, since in an August 2001 ruling on sanctions sought against Disney by the Slesingers for destroying evidence in the case, Judge Hiroshige ordered that Disney will not be able to claim at trial that Jefferds had not promised to pay video royalties.
Disney can claim that Jefferds did not have the authority to make such promises, Judge Hiroshige said, but the late executive's signature ison a number of contracts for merchandise made public yesterday.
The studio appealed the sanctions order to the California Supreme Court on Jan. 10. Earlier, in a Nov. 7 petition for a writ of mandate that would terminate the sanctions, the studio told the California Courtof Appeal that the sanctions were "potentially crippling" and that Hiroshige had given the Slesinger "virtually everything they asked for."
Judge Hiroshige also ordered similar sanctions against Disney on defenses to Slesinger's claims for royalties from computer software, who lesale and retail sales of Pooh dolls and merchandise, and on "promotional" uses of Pooh.
Reporters from the Times, the Hollywood Reporter and the American Reporter spent virtually the entire day examining the documents made available yesterday at the Superior Court courthouse in downtown Los Angeles. Clerks said the entire case will soon be moved to the nearby courthouse archives because there is not sufficient room for them at the main courthouse.
Joe Shea first worked as a courthouse reporter for the Dow Jones-Ottaway chain's Times Herald-Record in Goshen, N.Y., in 1969. He is Editor-in-Chief of the American Reporter and on its behalf won a landmark victory for the First Amendment in the U.S. Supreme Court in 1997.