Tuesday, January 27, 2009

Martin Garbus, Esq. filed a shareholder derivative suit Monday against Marvel Entertainment and its Chief Executive Officer Isaac Perlmutter, as well as Stan Lee, the creator of Marvel superhero characters, and Lee’s wife and former Marvel Studios head, Avi Arad. The suit is for more than US$750 million (£528M) — about half of the estimated proceeds from Marvel’s movies.

Plaintiff Stan Lee Media (SLM) has four shareholders who live in Florida, California and Canada, and include Jose Abadin and Nelson Thall. The company is suing for recovery of civil damages representing one-half of film and book earnings from such blockbuster films as Spider-Man, Iron Man, X-Men, Hulk, and Fantastic Four franchises.

Defendants are accused of copyright violations over both the Marvel superhero characters and intellectual properties created by Stan Lee. Spider-Man’s three cinematic outings, starring Tobey Maguire, earned more than $1bn (£702m). “Most of Marvel’s financial success, including from the films, comes out of assets created by Stan Lee that are the subject of this suit,” the complaint states.

Lee, 86, has denied the allegations and has previously filed his own $50 million counter lawsuit against SLM, claiming the company has destroyed his name and reputation and prevented his effort to develop such properties as “The Accuser” and “The Drifter” and others via his first-look deals with Disney and Virgin Comics. Lee also co-created Daredevil, Doctor Strange and Thor.

Former dot-com company STM further alleges that it has agreed to pay Lee a $250,000 annual salary plus $100 million in company stock in exchange for the rights to the superhero characters. “That money should have gone to the corporation,” said Garbus. Lee’s counsel, Mark Williams, replied: “We look forward to a positive resolution for Stan Lee and his family.” Marvel has said the court pleadings, which were filed in U.S. District Court in Manhattan, are filled with “ridiculous claims”.

SLM ran out of operating capital during the dot-com meltdown in December 2000, closing operations entirely by December 19 of that year. The company was placed into Chapter 11 Reorganization in Bankruptcy by Stan Lee in 2001. During the insolvency proceedings, Lee assigned the major character franchises he had created to his new public company, POW! Entertainment, without the bankruptcy court’s approval.

Two multi-billion dollar lawsuits for damages were filed against Lee, his new company, his new partner Arthur Lieberman and Marvel Entertainment for cybersquatting and failure to disclose the existence and value of the Rights Assignment Lee made to the company when he founded it.

The company remained under bankruptcy protection until the US Trustee for the Central District of California moved to dismiss the bankruptcy proceedings for failure of the company as debtor in possession to comply with basic requirements of filing monthly reports and paying quarterly fees to the Trustee. SLM was taken back by the shareholders after its dismissal from bankruptcy and hired a legal and accounting forensic consultant to review all transactions that occurred during bankruptcy.

By November 2006, all of the officers and directors of the company had resigned or abandoned their positions and the company’s lawyers for the debtors in possession attempted to obtain court authorization to destroy or dispose of the company’s books and records. This initiated a long-running legal battle between shareholders and the company’s founder, Lee.

The plaintiffs in this most recent suit contend that Lee, Perlmutter, Arthur Lieberman and Avi Arad conspired in bad faith to conceal and misappropriate financial interests in Lee’s creations assigned to Stan Lee Media in 1998. SLM’s meltdown involved its former President Peter F. Paul fleeing to Brazil, contributions made to Bill and Hillary Clinton, Paul’s extradition and more. In 2007, SLM filed a $5 billion lawsuit in which it claimed co-ownership of all of Stan Lee’s creations for Marvel.