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Plaintiff,
02 Civ. 8945 (RWS)
- against -
O P I N I O N
MARVEL ENTERPRISES, INC. and
MARVEL CHARACTERS, INC.,
Defendants.
----------------------------------------X
A P P E A R A N C E S:
1
Sweet, D.J.,
profits do not result from a fee for licensing. For the reasons
Hulk, the X-Men, and the Fantastic Four. Marvel has subsequently
expanded the use of its characters into movies, television, and
merchandising. Lee had a contract with Marvel that permitted him
2
emerged from bankruptcy with new leadership, it entered into a
new contract with Lee (the "Agreement"). It is paragraph 4(f) of
November, 1998.
1
One commentator has provided the following description of
the typical provisions of a "Hollywood accounting" deal:
3
all profits -- including gross profits or gross proceeds --
derived from contingent payments to Marvel in connection with the
parties.
Prior Proceedings
pay him amounts owed pursuant to the Agreement and to provide him
2
On September 18, 2003, Lee and Marvel entered into a
stipulation dismissing the action with prejudice with respect to
Characters. The stipulation was so-ordered by the Court on October
16, 2003.
5
In discovery, Lee propounded various document requests
and interrogatories to Marvel in which Lee requested that Marvel
productions.
The Parties
6
Spider-Man. Lee’s various roles at Marvel have included editor,
art director, head writer, and publisher. In 1980, Lee moved
morning.
7
continued its efforts to license such characters to third parties
for use in connection with television and movie productions.
Marvel stated to Lee that this sum "represent[ed] your 10% of the
profits." (Cohen Aff. Ex. 23.) The executory portion of this
8
In addition to paragraph 4(f), the Agreement contains
other relevant provisions. Under paragraph 2, Lee is required to
valuable stock options which Lee has already exercised for a net
¶ 4(c).)
9
destinations. Merchandising has generated hundreds of millions
of dollars in revenue to Marvel during this period.
interpreted "to mean that you will never see anything -- you will
never see -- the company would not see any revenues from the
10
annual report, Marvel advised that its new movie venture
agreements were either "gross profit participation 'dollar one,'"
high margin revenue and are a major departure from the past when
[Marvel] made little or no money for such projects." (Id.)
the time, the largest domestic opening of all time) and more than
11
As set forth in its 2002 annual report, Marvel's toy division
alone reported over $100 million in sales of Spider-Man: The
Movie toys. (Id. Ex. 3.) Marvel’s 2003 results were similarly
strong, driven by the popularity of the films X-Men 2, Daredevil,
22).
12
Marvel has leveraged its characters' universal
awareness and appeal to position them as highly sought-
after franchises within Hollywood, much like movie
stars who can "open" a film and therefore command
profit participation.
(Id.)
at 12.)
3
Arad stated that Lee should not participate in Marvel's
participation in Spider-Man because it was a gross participation
13
noted that Arad is listed as a presenter at the November 18, 2003
presentation to analysts where the term "gross profit
(Id. at 126-27.)
15
he had no idea how that change had come about. (Id. at 109.)
After the deposition’s lunch break, he characterized his usage
16
is able to recoup its production and distribution costs from gross
proceeds) . . . ." (Johnson Decl. ¶ 3.)
Ross Bengel & Bruce Ikawa, Where’s the Profit? accounting for net
17
Marvel reported in its 2003 form 10-K financial
disclosure that it received as its share of LP's profits $10.9
not contributed to the LP and has reserved for itself the right to
manufacture and sell movie and series-related toys, with the LP
expressly licensing to Marvel such rights as are necessary for
ToyBiz division (id. Ex. 6 at 11.) For 2002 alone, ToyBiz had
$100 million in sales of Spider-Man: The Movie toys. (Id. Ex. 3).
Marvel's CFO West confirmed that these sales do not represent fees
August 31, 2003, Marvel had received almost $2,000,000 from this
arrangement. (Id., Ex. 32.)
18
Discussion
New York State. The Agreement has a choice of law clause that
provides that New York law governs all issues of contractual
interpretation. (Lipson Decl. Ex. 1 at ¶ 8.)
matter of law. See John Hancock Mutual Life Ins. Co. v. Amerford
Int'l Corp., 22 F.3d 458, 461 (2d Cir. 1994); Bay v. Times Mirror
Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir.
1992) ("When the question is a contract's proper construction,
19
summary judgment may be granted when its words convey a definite
and precise meaning absent any ambiguity"); Chimart Assocs. v.
Paul, 66 N.Y.2d 570, 572, 498 N.Y.S.2d 344, 346, 489 N.E.2d 231,
233 (1986) (stating that the interpretation of an unambiguous
contract provision is a question of law for the court). Summary
1999) (quoting Nycal Corp. v. Inoco PLC, 988 F. Supp. 296, 299
(S.D.N.Y. 1997) (applying New York law), aff'd, 166 F.3d 1201 (2d
Cir.1998)).
v. Marine Trans. Lines, Inc., 861 F.2d 23, 27 (2d Cir. 1988));
20
Compagnie Financiere de CIC v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 232 F.3d 153, 158 (2d Cir. 2000) (stating that
Bancorp, Ltd., 232 F. Supp. 2d 260, 264 (S.D.N.Y. 2002), aff'd sub
nom. Loewenson v. London Market Cos., 351 F.3d 58 (2d Cir. 2003).
115, 122, 752 N.Y.S.2d 259, 264, 782 N.E.2d 55, 60 (2002) (stating
that ambiguity arises only from "what was written so blindly and
21
(S.D.N.Y. 1986) (citing Browning-Ferris Industries of New York,
Inc. v. County of Monroe, 103 A.D.2d 1040, 1041, 478 N.Y.S.2d 428,
430 (4th Dep't 1984), aff'd, 64 N.Y. 2d 1046, 489 N.Y.S.2d 902,
479 N.E.2d 247 (1985)). A chief objective of interpretation is
"to avoid a result which places one party at the mercy of the
other." Id.
Lee’s Rule 56.1 Statement. Moreover, Marvel has come forward with
virtually no evidence to refute the evidence that Lee has
Boston Mkt. Corp., 294 F. Supp. 2d 472, 478 (S.D.N.Y. 2003); Spina
v. Our Lady of Mercy Med. Ctr., No. 97 Civ. 4661 (RCC), 2003 WL
22434143 at 2 n2 (S.D.N.Y. Oct. 22, 2003).
22
B. Profit Participation Pursuant To The First Sentence Of
Paragraph 4(f) Is Not Limited to Net Profit
Participation.
23
In short, the first sentence of paragraph 4(f) is not
ambiguous.4 It provides that Lee is entitled to share in the
present record.
4
Even if the first sentence of paragraph 4(f) were
ambiguous, the extrinsic evidence proffered by Lee would permit
interpretation of the agreement as a matter of law. See Shepley,
174 F.3d at 72 n.5.
24
rights" describes all rights beyond a film/television production’s
initial intended distribution, and that such rights are understood
(Id.)
5
It is appropriate to consider expert testimony of custom
and usage to inform the interpretation of a contractual term.
See, e.g., Am. Nat’l Fire Ins. Co. v. Mirasco, 265 F. Supp. 2d
240, 252 (S.D.N.Y. 2003); see also Int’l Multifoods Corp. v.
Commercial Union Ins. Co., 309 F.3d 76,87 n.4 (2d Cir. 2002)
(citing Morgan Stanley Group Inc. v. New England Ins. Co., 225
F.3d 270, 275 (2d Cir. 2000)).
25
Based on this expert testimony proffered by Lee and
Marvel concerning common usage in the relevant industries, it is
26
Transportation LLC v. Waste Management of Conn., Inc., 211 F.
Supp. 2d 499, 503 (S.D.N.Y. 2002) (stating that when interpreting
adopted.
27
Marvel has conceded that its profits from the
Lee is entitled to share in the profits from the LP and the Hulk
28
from licensing transaction (i.e., revenues in which Lee is
entitled to participate).
Conclusion
other issues.
It is so ordered.
29