Ca' 32:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 1 of 27 SIMKE..CHODOS. &, SASAKI JUDITH M. SASAKI (State Bar NO.1 19442) DAVID A. PASH (State Bar NO.1 1 1124) 1880 Century Park East, Suite 1511 Los Angeles, CA 90067 Telephone: (310) 203-3888 10 Fax: (310) 203-3866 1 0 'DONNELL & ASSOCIATES PIERCE O'DONNELL (State Bar No. 081298) 2 JACK G. CAIRL (State Bar No. 105335) 550 South H02e Street, Suite 1000 3 Los Angeles, CA 90071 Telephone: (213) 347-0290 4 Fax: (213) 347-0299 5 Attorneys for Defendants JAMES NESFIELD, A.F. GALLOWAY 6 DOUGLAS C. COGAN 7 8 9 11 Attorneys for Defendants 12 CHRISTOPHER BELLAND and JOHN PETROVITZ 13 14 15 16 17 18 19 QED PRODUCTIONS, LLC, a Delaware limited liability company; 20 POW! ENTERTAINMENT, INC., a Delaware corporation; STAN LEE, an 21 individual, UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CASE NO. CV 07-00225 SVW (SSx) (Related Case No. CV 07-4438 SVW (SSx)J 22 23 24 Plaintiffs, MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT v. 25 JAMES NESFIELD, an individual; et aI, 26 (Fed. R. Civ. P. 56J Defendants. 27 STAN LEE MEDIA, INC., a Colorado Hearing Date: January 5, 2009 28 Corporation, Time: 1 :30 p.m.
Transcript
Ca' 32:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 1 of 27
SIMKE..CHODOS. &, SASAKIJUDITH M. SASAKI (State Bar NO.1 19442)DAVID A. PASH (State Bar NO.1 1 1124)1880 Century Park East, Suite 1511Los Angeles, CA 90067Telephone: (310) 203-3888
10 Fax: (310) 203-3866
1 0 'DONNELL & ASSOCIATESPIERCE O'DONNELL (State Bar No. 081298)
2 JACK G. CAIRL (State Bar No. 105335)550 South H02e Street, Suite 1000
3 Los Angeles, CA 90071Telephone: (213) 347-0290
4 Fax: (213) 347-0299
5 Attorneys for DefendantsJAMES NESFIELD, A.F. GALLOWAY
6 DOUGLAS C. COGAN
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8
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11Attorneys for Defendants
12 CHRISTOPHER BELLANDand JOHN PETROVITZ
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19 QED PRODUCTIONS, LLC, aDelaware limited liability company;
20 POW! ENTERTAINMENT, INC., aDelaware corporation; STAN LEE, an
21 individual,
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CASE NO. CV 07-00225 SVW (SSx)(Related Case No. CV 07-4438 SVW(SSx)J
22
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24
Plaintiffs, MEMORANDUM OF POINTS ANDAUTHORITIES IN OPPOSITIONTO PLAINTIFFS' MOTION FORSUMMARY JUDGMENT
v.
25 JAMES NESFIELD, an individual; etaI,
26(Fed. R. Civ. P. 56J
Defendants.27 STAN LEE MEDIA, INC., a Colorado Hearing Date: January 5, 2009
28 Corporation, Time: 1 :30 p.m.
Ca 2:07 -cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 2 of 27
os m
Documentl
Plaintiff,
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v.
STAN LEE, an individual, et aI.,
Defendants.
Courtroom of the Han.Stephen V. Wilson
rDefendants' Statement ofUncontroverted Facts and Conclusionsof Law and Exhibits filed concurrentlyherewithJ
Place:
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1
2 TABLE OF CONTENTS3
4 i. INTRODUCTION 5
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6 II. STATEMENT OF FACTS 6
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8 A. The Bankruptcy Case 6
9 B. The 4/11/2002 Order and Plaintiffs'
10 Fraudulent Violations of the Order 7
11 C. Plaintiffs' Sham Allegations
12 Regarding the 4/11/2002 Order 11
13 D. Plaintiffs' Perjured Representations
14 to the Bankruptcy Court 14
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16 III. ARGUMENT 16
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18 A. Plaintìffs' InLorrect Legal Standard 16
19 B. Plaintiffs Wil Not Be Able To Prove
20 That They Are The Legal and Rightful
21 Owners Of The Properties and Rights
22 Asserted and Therefore Have No Standing 18
23 1. Plaintiffs Have Burden of Proving
24 Ownership of the Properties 18
25 2. Plaintiffs' Violations of the 4/11/02
26 Order Voids Any Ownership of the Properties 20
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C. The Claims Relating to Stan Lee's Name
And Likeness Have No Merit For the
Same Reasons 22
CONCLUSION 25
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17 Prosser, Law of Torts § 117 804-07 (4th ed.1971) 1918
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2 MEMORANDUM OF POINTS AND AUTHORITIES3
4 i. INTRODUCTION
5 Plaintiffs Stan Lee, QED Productions, LLC and POW! Entertainment, Inc.
6 ("Plaintiffs") lack standing to bring any claim asserted in the Second Amended
7 Complaint (hereinafter "SAC") because none of the Plaintiffs is the legal owner of
8 the rights and/or properties that are the subject of this action (the "Properties").
9 Plaintiffs base their claim to ownership of the Properties solely upon an April 11,
10 2002 Order of the Bankrptcy Court (the "4/11/2002 Order), which Order
11 expressly prohibits the Plaintiffs from owning the assets, and further makes any
12 transfer of the assets to Plaintiffs void ab inito under the automatic stay provisions
13 of U.S. Bankrptcy law.
14 Moreover, as shown in mOre detail below, Plaintiffs have submitted to this
15 Court a "smoking gun" document which demonstrates that in 2001 Plaintiffs
16 knowingly committed a fraud on the Bankruptcy Court, the Bankruptcy Trustee,
17 the Creditors' Committee, and the shareholders of Stan Lee Media, Inc. by
18 deliberately planning to abscond with the debtors' valuable assets and give nothing
19 in return to either the creditors or Stan Lee Media's shareholders.
20 Fed. R. Civ. P. 56( c) mandates the entry of summary judgment against a
21 party who fails to make a showing sufficient to establish the existence of an
22 element essential to that part's case as to which that party wil bear the burden of
23 proof at triaL. See Miller v. Glenn Miler Productions, Inc. 454 F.3d 975, 987 (9th
24 Cir. 2006) citing Celotex Corp. v. Catrett, 477 U.S. 317, 324,106 S. Ct. 2548
25 (1986) Plaintiffs have the burden of showing that they own the Properties, and
26 Plaintiffs have utterly failed to meet their burden of establishing this element.
27 Accordingly, summary judgment should be granted in favor of Defendants in this
28 action with regard to all claims based on Federal law.
5
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1 The remaining claims that Plaintiffs have appended to their Second
2 Amended Complaint arising from Stan Lee's "name and likeness" are all based on
3 State Law, and are not subject to this Court's Federal Question jurisdiction. In any
4 event, Stan Lee Media, Inc. clearly holds the rights at issue pursuant to a 1998
5 Agreement with Stan Lee. Since those rights were expressly not transferred
6 pursuant to the 4111/2002 Order, the rights remain with Stan Lee Media, Inc. Stan
7 Lee cannot bring an action based upon those rights until he establishes his
8 ownership through an action to rescind the 1998 agreement, which action Stan Lee
9 has pointedly refused to bring.
10 Instead, Stan Lee asserts that the agreement was "void" as afait accompli
11 because a letter that he wrote to himself less than ninety days before Stan Lee
12 Media, Inc. fied for bankruptcy. Such a self-serving arrangement is a "voidable
13 preference" under 11 U.S.c. §547(b), and Stan Lee cannot meet his burden of
14 showing ownership in his name and likeness rights through such a transparent
15 device to deprive Stan Lee Media, Inc. of its assets and in defraud of Stan Lee
16 Media, Inc.' s creditors.
17 Accordingly, this Court should exercise its discretion and dismiss all claims
18 for Plaintiffs' lack of standing. In the alternative, this Court may dismiss the
19 Federal Question claims for lack of standing, and then dismiss the remaining State
20 Law claims for lack of subject matter jurisdiction. Simply put, the instant action
21 does not belong in the Central District of Cali fomia.
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II. STATEMENT OF FACTS
A. The Bankruptcy Case
Plaintiffs contend that they own the Properties pursuant to an April 11, 2002
Order (the "4/11/02 Order") in the Central District of California Bankrptcy Court
Case Nos. SV -0 1-11329-KL and SV -01 -11 331-KL (the "Bankrptcy Case").
The Order sets forth strict requirements for the Properties - which are owned by
6
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1 the Debtor Stan Lee Media, Inc. ("Stan Lee Media, Inc."!) - to be conveyed free
2 and clear of liens and encumbrances for the benefit of Stan Lee Media, Inc.'s
3 creditors. The Properties include the copyrights of super-hero characters or other
4 properties created and developed by Stan Lee in connection with his employment
5 at Stan Lee Media, Inc. (the "Properties,,).2
6 The Bankrptcy Case that arose out of Stan Lee Media, Inc.' s 2116/ 2001
7 filing of a Chapter 1 1 Petition in the Central District of California Bankrptcy
8 Court.3 The Bankrptcy Case lasted over five years and nine months until it was
9 dismissed on December 6,2006.4 (It should be noted that the dismissal of the
10 Bankrptcy Case did not end Stan Lee Media, Inc.' s existence. On the contrary,
11 defendants are informed that Stan Lee Media, Inc. is a valid Colorado corporation
12 which is scheduled to have a shareholders' meeting later this month.
13 B. The 4/11/2002 Order and Plaintiffs' Fraudulent Violations of the
14 Order15 In April of 2002, in what the Bankruptcy Court, the Trustee, the Creditors
i 6 and Stan Lee Media, Inc.'s shareholders all believed was a legitimate settlement of
i 7 the creditors' claims in the Bankrptcy Case, the Bankruptcy Court entered the
18 4111/2002 Order pursuant to a motion (Plaintiffs' Ex. 3) brought by Stan Lee in his
19
i Stan Lee Media, Inc. is the critical corporate entity in this action, and has valid
and superior claims to all of the Properties. Stan Lee Media, Inc. has been
previously referred to in this action as "SLM," "SLMI," and other acronyms. It22 now appears that Plaintiffs have attempted to foster confusion in their pleadings by
their profuse use of capitalized initials, obfuscating the status of the sham "SLC,LLC" company, which Plaintiffs fraudulently contend is an actual entity.
24 Accordingly, Stan Lee Media, Inc. wil be referred to by its full name, and SLC,LLC wil be referred to as the "Sham LLC."2 Plaintiffs' Second Amended Complaint ("SAC") ii 22.3 Plaintiffs' Exhibits 1 and 2.
27 4 12/6/2006 Order of Bankruptcy Court, Ex. D to the Declaration of Sean P.
28 Sheppard (the "Sheppard DecI.") in support of Defendants' pending Motion forSummary Judgment filed herein on August 2007.
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1 capacity as Debtor in Possession for an Order to confirm an Asset Purchase
2 Agreement (the "APA"). Under the AP A, Stan Lee Media, Inc. would transfer the
3 Properties free and clear to an independent "bankruptcy remote" company, and
4 then - with Stan Lee's assistance - that independent company would exploit the
5 assets for the benefit of Stan Lee Media, Inc.' s creditors and shareholders.
6 lTnbeknownst to all but the Plaintiffs, however, the AP A was a fraud
7 because "independent" company that was to receive the Properties under the AP A
8 did not exist. The company that should have received the Properties was -
9 according to the APA - named "SLC, LLC," and Stan Lee himself represented that
I 0 the company actually existed and purported to sign the APA on behalf of that
1 i company. In reality, Stan Lee never fomied SLC, LLC. Rather, Plaintiffs had
12 secretly created another company to receive the Properties - Plaintiff QED
13 Productions, LLC, a Delaware limited liability company ("QED"), which -
14 contrary to the express provisions of the 4/11/2002 Order - was totally owned and
15 controlled by the Debtor's insiders.
16 Thus, Plaintiffs effectively stole the Properties and utilized them for their
17 own benefit in flagrant violation of the 4/11/2002 Order. (To avoid any
1 g implicanon that "SLC, LLC ever existed, Defendants shall hereinafter refer to that
19 company as the "Sham LLC." - See footnote 1, supra).
20 QED was not subject to the AP A, nor any of the procedures set forth in the
21 4/11/2002 Order for protecting and exploiting the Properties and paying the
22 proceeds of that exploitation to Stan Lee Media, Inc's creditors and shareholders.
23 Indeed, Plaintiffs further violated the provisions of 4/1 i /2002 Order prohibiting a
24 transfer of the assets from the acquiring entity by having QED convey the
25 Properties to another entity - Plaintiff POW! Entertainment, Inc., a Delaware
26 corporation, which was also owned and controlled by the Debtor's insiders.
27 The identity of QED's officers demonstrates Plaintiffs' fraudulent scheme as
28 the chart below shows:
8
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Position at POW! as ofNovember 2001
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Name ofOffcer
Position at Stan LeeMedia
Chief Creative Officer &Chairman
Stan Lee Chief Creative Officer &Chairman
President & Chief OperatingOfficer
Gil Champion Chief Operating Officer
Chief Financial OfficerJunkoKobayashi
Controller, Debtor inPossessionRepresentative
9 In addition, plaintiff POW!, published and continues to publish on its
10 website the following information:
11 "Gil Champion, President. . . Prior to joining the Company (POW!J, he
12 was COO of (Stan Lee Media, Inc.J from July 1999 until it terminated operation in
13 about June of2001. (Stan Lee Media, Inc.J filed for bankrptcy protection in
14 about January 2001, and has since ceased all operations. From about June of 2001
15 until the formal creation of (POW!J in November 2001 Mr. Champion worked to
form (POW!J and to start the development of various (POW!) projects."s
"Stan Lee, Founder, Chairman and Chief Creative Officer of POW!
16
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18Entertainment. . . During 2001, Stan formed POW! (Purveyors of Wonder)
19 Entertainment, with producer Gill Champion and attorney Arthur Lieberman. A
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company unrelated to Marvel which has been active in creating a number of new
projects that are in various stages of development.',6
"Junko Kobayashi, CFO, . . . Prior to joining POW! Entertainment, she
23
24
255 Copy of the website material published by POW! on its official website at
26 powentertainment.com is attached as Exhibit G to the Sheppard Dec!. This
27 information is also contained in Exhibit H to Sheppard Dec!, which is a POW!'sRule 15c-2-11 SEC disclosure.6 Id.
was controller of SÚû Lee Media, Inc. from January 2000 until it terminated
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1 operations in June 2001 where she was in charge of preparing financial
2 information for SEC purposes.',7
3 In an attempt to sweep their misfeasance under the rug, Plaintiffs contend
4 that they have fully complied with all of the provisions, terms and conditions of the
5 4/11/2002 Order. On the i:ontrary, aside from authorizing a sale of the Properties
6 to a specific entity, the 4/111 2002 Order also requires that payments for the
7 transfer are to be made first to Stan Lee Media, Inc.'s creditors and thereafter to
8 Stan Lee Media, Inc.8 In this regard, Plaintiffs fail to provide any evidence that
9 QED paid anything to either the creditors or Stan Lee Media, Inc.
i 0 The Order further prohibits the entity that received the Properties from
11 assigning the Properties to any other person or entit/, or conducting any other
12 business except exploiting the Properties for the benefit of the creditors and Stan
13 Lee Media, Inc.10 Plaintiffs have provided no evidence that QED or POW!
14 comport with that provision of the Order, and cannot since the purpose of QED
15 and POW! is to enrich those who absconded with the Properties.
16 To the extent that QED and/or POW! attempt to rely upon the purported
17 assignment of copyrights executed by Junko Kobayashi dated July 31, 2006
18 (Plaintiffs' Ex. 7J, such assignments were likewise executed and recorded without
19 any authority of the Bankrptcy Court. As she admits in her declaration dated
20 September 10, 2007, Ms. Kobayashi was the appointed "authorized
21 representative" of Stan Lee Media, Inc., during the bankruptcy proceedings.
1 I In
22 that capacity, Ms. Kobayashi had full knowledge of the 4/11/ 2002 Order and
23
24 7 Id.
25 8 AP A, Plaintiffs' EX.69 APA, Plaintiffs' Ex.6, Article 7, Sections 7.6 and 7.926 10 APA, Article 3, i13.1
27 i i Declaration of Junko Kobayashi dated September 10, 2007 (Exhibit 20 to
Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 13 of 27
1 further owed fiduciary obligations to Stan Lee Media, Inc., the Bankruptcy Court,
2 the bankrptcy trustee, the creditors committee and Stan Lee Media, Inc.'s
3 shareholders.
4 Nevertheless, while the Bankrptcy Case was stil pending, Ms. Kobayashi
5 became the Chief Financial Officer of POW! Entertainment, Inc., the parent
6 company of QED Productions, LLC. 12 In addition, during the pendency of the
7 Bankrptcy Case, Ms. Kobayashi had no authority to contravene the 4/11/2002
8 Order, which specifically authorizes only one transfer of the Properties - from Stan
9 Lee Media, Inc to the Sham LLC. Thus, the unlawful transfer of the Properties
10 occurred while the Bankrptcy Court, the creditors, the Trustee, and Stan Lee
11 Media, Inc.'s shareholders were relying on a sworn declaration that no transfer of
12 the Properties would benefit insiders. Furthermore, all of the transactions occurred
13 while Stan Lee Media, Inc. was under bankruptcy protection and thus violated the
14 automatic stay.
15 C. Plaintiffs' Sham Allegations Regarding the 4/11/2002 Order
16 Revealingly, in their initial complaint in this action, Plaintiffs alleged that
17 the Sham LLC purchased the Properties from Stan Lee Media, Inc., and that the
i 8 Sham LLC thereafter assigned all rights to the properties to Plaintiff QED.13 This
19 was obviously false. The Sham LLC was never formed by Stan Lee. 14 Instead,
20 soon after Plaintiffs' misconduct was discovered, the company was formed by
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12 Copy of the website material published by POW! on its official website atpowentertainment.com is attached as Exhibit G to the Sheppard Decl. Thisinformation is also contained in Exhibit H to the Sheppard Decl, which is POW!'sRule 15c-2-1 1 SEC disclosure.13 Plainttff's Original Complaint at ~ 14.14 Copies of the Statc of California Division of Corporations records on SLC, LLC,
a California limited liability company have been previously fied with this Court asExhibit A to the Declaration of Sean P. Sheppard (the "Sheppard Decl.") insupport of Defendants' pending Motion for Summary Judgment filed herein onAugust 2007.
11
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1 Defendant Douglas Cogan in December of 2006 in order to highlight Plaintiff s
2 fraudulent represent7,tions to the Bankrptcy Court.
15
3 Thus, Plaintiffs radically amended their initial complaint to allege that Stan
4 Lee Media, Inc. directly assigned the Properties to QED. However, Plaintiffs fail
5 to explain or even note that this assignment occurred on July 31, 2006 (Plaintiffs'
6 Ex. 7) - over four years after the deadline for the transfer to the Sham LLC under
7 the 4/11/2002 Order. (Plaintiffs have yet to explain why they waited four years to
8 make this transfer, perhaps because the obvious reason is that Plaintiffs wanted
9 everyone to forget about the 4/11/2002 Order before they violated it.)
i 0 Plaintiffs further completely changed their averments regarding the Sham
11 LLC so that they now allege that Plaintiff Stan Lee himself, purportedly acting on
12 behalf of a limited liability company that he "anticipated" forming, entered into the
i 3 AP A. Plaintiffs then use the passive voice in averring as follows in paragraph 51
14 of the SAC:
15 It was subsequently decided that the company purchasing the assets
16 would not be named SLC, LLC (i.e., the Sham LLCJ, as Stan Lee's
17 name was already associated with Stan Lee Media, Inc., a company
18 which was then in bankruptcy and had been the subject of many
i 9 unfavorable media articles because of the wrongful and criminal acts
20 committed by Peter Paul and others which resulted in losses of many
2 i millions of dollars by numerous people and companies.
22 Consequently, Stan Lee did not want his name or persona to be
23 directly associated with the company that would be purchasing those
24 properties from Stan Lee Media, Inc., so it was decided that a
25 different name would be used, not a corporate name using Stan Lee's
26 name or initials, such as the Sham LLC. Instead, Plaintiff QED, a
27
28 15Id.
12
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I wholly-owned subsidiary of POW!, acquired the Properties from
2 (Stan Lee Media, Inc.)
3 (emphasis added)
4 Defendants have previously demonstrated that Plaintiffs' liberal use of the
5 passive voice and their fanciful story about their unauthorized decision to drop the
6 Sham LLC are inherently implausible because: (a) as Plaintiffs themselves
7 repeatedly assert in virtally every paper they file with this Court and in non
8 sequitur statements in oral argument in response to this Court's questions, an
9 important aspect of the APA is that Stan Lee's name become associated with the
10 Properties; and (b) no ordinary person would associate the initials "SLC, LLC"
11 with Stan Lee.
12 However, in bringing the instant motion, Plaintiffs themselves have
13 produced the "smoking gun" of their own fraud and intentional misrepresentations
i 4 to the Bankruptcy Court and to this Court regarding the Sham LLC and their
15 premeditated theft of Stan Lee Media, Inc.'s Properties. Specifically, Plaintiffs'
16 Exhibit 18 - the Membership Purchase and Employment Agreement dated
17 November of2001 between plaintiffs Stan Lee and POW! (the "MPEA")-
18 demonstrates that weeks before the motion to confirm the AP A, and months before
19 the 4/11/02 Order, Plaintiffs had planned to breach the Order and betray Stan Leei
20 Media, Inc.'s creditors and shareholders by transferring the Properties to QED so
21 that Plaintiffs could exploit them for their own benefit.
22 The MPEA - executed in November of2001- shamelessly identifies QED
23 as an entity "formed to receive the intellectual property from Stan Lee Media, Inc."
24 (p. 42 of 44 of Plaintiffs' Ex. i 8) Moreover, the MPEA delineated how Stan Lee
25 himself would be handsomely rewarded with a generous salary of what appears to
26 be at least $1,250,000 per year for life, and five milion units of ownership in
27 QED, ifhe obtained the Properties for QED free and clear of the Creditors' claims
28 and the rights of Stan Lee Media, Inc.' s shareholders. (Id., p. 41-42 of 44) In
13
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1 addition, under the MPEA, Stan Lee granted to plaintiff POW! "all right title and
2 interest that Stan Lee may have in any income arising from the ownership of a
3 Membership interest in QED Productions LLC ("QED")." Thus, Plaintiffs had
4 long planned on creating POW! as the ultimate recipient of the Properties - despite
5 the strict prohibition in the 4/11/2002 Order against any assignment of the
6 Properties to any other person or entity. See APA, Art. 3, iJ3. 1, Plaintiffs Exh.6,
7 which is Exhibit A to the 4/11/2002 Order (Plaintiffs Exhibit 5).
8 The MPEA further demonstrates that Plaintiffs intentionally violated the
9 provisions in the 4/11/02 Order requiring that the Properties be conveyed to a
10 special purpose California limited liability company which would be remote from
11 Stan Lee Media, Inc.'s officers and directors, and would exploit the assets for the
12 benefit of the creditors and shareholders. (Plaintiff s Exhibit i 8) The MPEA shows
13 that the Properties would be transferred from QED to POW!, and would be
14 exploited for the benefits of Stan Lee, Stan Lee's personal attorney Arthur
15 Lieberman, Gil Champion - a previous plaintiff in this action, and other
16 "investors" in POW! Nothing is provided for Stan Lee Media, Inc.'s creditors or
17 shareholders.
18 Accordingly, Plainti ffs' averments that they transferred the Properties to
19 QED because "it was decided" after the 4/1 1/02 Order that the Sham LLC was not
20 a good "name" for a company are revealed as complete fabrications. The truth is
21 that Stan Lee and his cohorts perpetrated a detailed fraudulent scheme to obtain the
22 Properties from Stan Lee Media, Inc. and the company's creditors free and clear of
23 the creditors' claims. The plan would have succeeded without detection, but for
24 the diligence of a fe',v of Stan Lee Media, Inc.'s shareholders, whom Plaintiffs now
25 attempt to vilify with vitriolic and scandalous allegations.
26 D. Plaintiffs' Perjured Representations to the Bankruptcy Court
27 Three weeks after Stan Lee executed the MPEA, Stan Lee - on behalf of the
28 Debtor in Possession - filed in the Bankruptcy Court a motion for an Order to
14
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I Approve Sale of Assets and to confirm the AP A. That motion represented to the
2 Bankruptcy Court that the Properties were to be conveyed to the Sham LLC, even
3 though Stan Lee knew that he would cause the assets to be conveyed to QED and
4 then to POW!.
5 Specifically, the Motion stated that "the Debtors shall transfer the Creative
6 Assets tb the ShamI:LC (the "Purchaser")." Thus, the APA identified the Sham
7 LLC as the "Purchaser" throughout, and Plaintiffs' attempts to make Stan Lee the
8 "purchaser" are mere obfuscation, if not outright dissembling. In fact, the entire
9. AP A - as negotiated with Stan Lee Media, Inc.' s creditors and set forth in the
i 0 4/11/2002 Order - is grounded upon the purchaser of Stan Lee Media, Inc.'s assets
11 being the Sham LLC. Moreover, on page six of the AP A, Stan Lee specifically
12 (and falsely) warranted and represented to the Bankruptcy Court that the Sham
i 3 LLC "is a duly fonned limited liability company organized under the laws of
14 California." (emphasis added) This statement is nothing less than a direct
15 misrepresentation to the Bankruptcy Court that the Sham LLC had already been
16 formed as of the date of his signing of the APA, January 20, 2002.
17 Further, the last paragraph of a supporting declaration attached to the motion
18 made the following representations and warranties to the Bankrptcy Court:
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(TJhe proposed sale confers no special or undisclosed benefit uponany insider of the Debtors, other than Stan Lee's income from thecontinued exploitation of the Creative Assets by Stan Lee through thePurchaser. There is no distribution of any kind whatsoever to anyequity holder, officer or Director of the Debtors which is made part ofthe proposed sale to Purchaser. No insider of the Debtors wil receive
any special treatment in connection with the proposed sale. Finally,there is no fraud involving the Purchaser or the Debtors and nocollusion between purchaser and any other purchasers or the Debtors.
(Ex. 3, pp. 49-50 of 69; emphasis added)
15
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Nowhere in the Motion, the supplement to the Motion, the APA or the
several amendments to the APA do the plaintiffs ever mention QED or POW! -
even though Plaintiffs planned from the onset that those companies would obtain
Stan Lee Media, Inc.'s treasured Properties.
1
2
3
4
5
6 III. ARGUMENT
7 A. Plaintiffs' Incorrect Legal Standard8 In evaluating any motion for summary judgment, the Court should
9 determine, viewing the evidence in the light most favorable to the nonmoving
10 party, whether there are any genuine issues of material fact. Jesinger v. Nevada
11 Federal Credit UniC!.n, 24 F.3d 1127, 1130 (9th Cir. 1994) "Summary judgment is
12 appropriate if, viewing the evidence in the light most favorable to the nonmoving
13 part, (a) 'the district court correctly applie(sJ the relevant substantive law' and (b)
14 there are no genuine issues of material fact in dispute." Clark v. City of Lakewood,
15 259 F.3d 996,1004 (9th Cir. 2001).
16 Plaintiffs repeatedly make the odd contention that, under Alaska Wildltfe
17 Allance v. Jensen, i 08 F.3d 1065, 1068-69 (9th Cir. 1997), Plaintiffs need not
i 8 provide evidence to support their bare factual allegations at the summary judgment
19 stage. Not surprisingly, this bizarre statement of the law of standing - which goes
20 to the essence of a federal court's subject matter jurisdiction - has never been cited
21 by the Ninth Circuit. Moreover, the Ninth Circuit based the dicta in Alaska
22 Wildlife the Supreme Court case of Lujan v. Defenders of Wildlife, 504 U.S. 555,
23 560-61 (1992), which holds the exact opposite. Specifically, the Supreme Court
24 in Lujan states that as follows:
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26
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The party invoking federal jurisdiction bears the burden of
establishing these elements. (citations omittedJ Since they are not
mere pleading requirements but rather an indispensable part of the
16
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plaintiffs case, each element must be supported in the same way as
any other matter on which the plaintiff bears the burden of proof, i.e.,
with the manner and degree of evidence required at the successive
stages of the. Ftigation. (citations omittedJ At the pleading stage,
general factual allegations of injury resulting from the defendant's
conduct may suffice, for on a motion to dismiss we "presum( e J that
general allegations embrace those specific facts that are necessary to
support the claim." (citation omittedJ In response to a summary
judgment motion, however, the plaintiff can no longer rest on such
"mere allegations," but must "set foiih" by affidavit or other evidence
"specific facts," Fed.Rule Civ.Proc. 56(e), which for purposes of the
summary judgment motion will be taken to be true. And at the final
stage, those facts (if controverted) must be "supported adequately by
the evidence adduced at triaL." (Citation omittedJ
(emphasis added)
Thus, the dictum in Alaska Wildlife is not good law. Indeed, the Ninth
Circuit recently followed Lujan in D'Lil v. Best Western Encina Lodge & Suites,
538 F.3d 1031,1036 (9th Cir. 2008), stating as follows:
A party invoking federal jurisdiction has the burden of
establishing that it has satisfied the "case-or-controversy" requirement
of Article III of the Constitution; standing is a "core component" of
that requirement. Lujan, 504 U.S. at 560, 112 S.Ct. 2130. In order to
meet its burden of establishing standing, a party must show three
things:
First, (itJ must have suffered an injury in fact-an invasion of a
legally protected interest which is (a) concrete and particularized, and
(b) actual or I!lminent, not conjectural or hypotheticaL. Second, there
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1 must be a causal connection between the injury and the conduct
2 complained of... Third, it must be likely, as opposed to merely
3 speculative, that the injury wil be redressed by a favorable decision.
4 Thus, under established law, Plaintiffs as the parties invoking federal
5 jurisdiction bear the burden of establishing the following elements: (1) that
6 Plaintiffs have suffered an injury in fact-an invasion of a legally protected interest
7 which is (a) concrete and particularized; and (b) actual or imminent, not
8 conjectural or hypothetical; (2) that there is a causal connection between the injury
9 and the conduct complained of; and (3) that it is likely the injury can be redressed
10 by a favorable decision.
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As shown above, Plaintiffs utterly fail to meet their burden on the first
element. Moreover, Plaintiffs cannot satisfy the third element, which requires that
they show that it is likely that they will prevail on the merits. Thus, all of their
claims must be dismissed for lack of standing.
B. Plaintiffs Wil Not Be Able To Prove That They Are The Legal
and Rightful Owners Of The Properties and Rights Asserted, and
Therefore Have No Standing
1. Plaintiffs Have Burden of Proving Ownership of the Properties
Plaintiffs' ownership of the Properties constitutes an essential element of all
of Plaintiffs' claims, and Plaintiffs' Federal Question claims for relief in particular.16 Thus, Plaintiffs must prove as an element of each of their causes of action that
16 E.g., First Claim for Relief-Copyright Infringement (in order to succeed in a
copyright infringement claim, "a plaintiff must show that he or she owns thecopyright and that defendant copied protected elements of the work." Cavalier v.
26 Random House, Inc., 297 F.3d 815, 822 (9th Cir. 2002) (citing Shaw v. Lindheim,919 F.2d 1353,1356 (9th Cir. 1990))); Second Third and Fourth Claims forRelief - Trademark Infringement (15 U.S.c. § 1125(a)(l )(A) and (B) requires thatplaintiffs are likely to be damaged by the alleged infringement); Fifth Claim forRelief-Cybersquatting The "deliberate, bad-faith, and abusive registration of
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Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 21 of 27
1 they are the actual owners of the Properties and the other assets at issue, rather than
2 mere hypothetical owners; and that they are likely to prevail on their claims. 17
3
.1
5
6 Internet domain names in violation of the rights of trademark owners." Virtual
7 Works, Inc. v. Volkswagen of Am., Inc., 238 F.3d 264,267 (4th Cir. 2001) (quotingS.Rep. No. 106-140, at 4 (1999))); Sixth Claim for Relief-Common Law Right8 of Publicity (Wendt v. Host Intern., Inc., 117 F.3d 1427 (9th Cir. 1997), stating that
a common law cause of action for appropriation of name or likeness may be9 pleaded by alleging 1) the defendant's use of the plaintiffs identity; 2) the
appropriation of plaintiffs name or likeness to defendant's advantage,commercially or otherwise; 3) lack of consent; and 4) resulting injury; Id. (citingProsser, Law of Torts § 117 804-07 (4th ed. 1 97 1 )); Seventh Claim for Relief -Civil Code §3344 (in addition to the elements for a common law cause of actionfor misappropriation of name and likeness, Civil Code §3344 requires knowingmisappropriation. Fleet v. CBS, Inc., 50 CaI.AppAth 1911,58 CaI.Rptr.2d 645
14 (1996)); Eighth Claim for Relief-Intentional Interference with ContractualRelations (Pacifc Gas & Electric Co. v. Bear Stearns & Co., 50 CaI.3d 1118, 79 iP.2d 587 (CaL. 1990)(finding that the elements which a plaintiff must plead to statea cause of action for intentional interference with contractual relations are (1) a
17 valid contract between plaintiff and a third party; (2) defendant's knowledge of thiscontract; (3) defendant's intentional acts designed to induce a breach or disruptionof the contractual relationship; (4) actual breach or disruption of the contractual
19 relationship; and (5) resulting damage. Ninth Claim for Relief-IntentionalInterference with Prospective Economic Relations (CRST Van Expedited, Inc. v.
20 Werner Enterprises, Inc., 479 F.3d 1099,1107-8 (9th Cir. 2007)(stating that theelements of interference with prospective economic advantage resemble those ofintentional interference with contract. They are: "(1) an economic relationship
22 between the plaintiff and some third party, with the probability of future economicbenefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3)intentional acts on the part of the defendant designed to disrupt the relationship; (4)
24 actual disruption of the relationship; and (5) economic harm to the plaintiffproximately caused by the acts of the defendant." Korea Supply v. LockheedMartin Company, 29 CaL. 4th 1134,1153 (2003) (citation and internal quotation
26 marks omitted)).
27 17 Defendants Belland and Petrovitz have submitted their Motion To Dismissraising the same standing issues, among other defects in the SAC. Their Motion toDismiss is also scheduled for hearing on January 5, 2009.
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1
2 2. Plaintiffs' Violations of the 4/11/02 Order Voids Any Ownership of
3 the Properties
4 Plaintiffs' only claim to ownership of the Properties is the 4/1 1/02 Order.
5 However, under the express terms of the Order, Plaintiffs cannot own the
6 Properties unless specifically permitted by the Bankruptcy Court and Plaintiffs do
7 not have this permission. In the face of the legal impossibility of their ownership
8 claims, Plaintiffs have alleged (after making entirely different averments in the
9 initial complaint) that they can violate the provisions of the 4/11/2002 Order
10 because the only "real" difference between the Sham LLC and QED is the name of
i i the two companies.18 Plaintiffs further contend that the only material requirement
12 for the Sham LLC is that it be controlled by Stan Lee himself.
13 As shown above, Plaintiffs' contentions are false. The 4/11/02 Order
14 required that the entity that received the Properties be a restricted purpose
15 company that would exploit the Properties solely for the benefit of Stan Lee
16 Media, Inc.'s creditors and shareholders, and that no insider of Stan Lee Media,
i 7 Inc. could be connected with the company. Neither QED - which first unlawfully
18 acquired the Properties - nor POW! - which received the Properties from QED
19 with no obligation to exploit the properties for anyone's benefit but POW!'s
20 owners - could acquire the Properties without obtaining Bankrptcy Court
21 approval, and approval from all interested parties.
22 By failing to obtain this authorization, and by using the Properties for
23 themselves without conferring any benefit upon Stan Lee Media's creditors and
24 shareholders, Plaintiffs' actions are no different than a theft of the debtor's assets
25 during pending bankrptcy proceedings. Thus, the Plaintiffs' transfers of the
26 Properties are void. Moreover, as now revealed by the MPEA, Plaintiffs'
27
28 IS Id. at p. 9, ii 23, lines 24-26.
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1 proffered justifications for their ilegal acts constitute a continuing
2 misrepresentation to this Court...1 '¡,-.3 Under the 4/11/2002 Order and the AP A, the express and exclusive purpose
4 of the Sham LLC was for Stan Lee to use his good faith best efforts to exploit the
5 Properties and generate revenues to pay for the Properties within an 18 month
6 period, pursuant to detailed benchmarks, all of which the Plaintiffs completely
7 circumvented. Moreover, the 4/11/2002 Order granted Stan Lee Media, Inc.'s
8 creditors and the Stan Lee Media, Inc. itself certain reconveyance rights that were
9 to be made part of the closing documents and the security agreements. 19
i 0 Accordingly, Plainti ffs' purported transfer of the Properties from a debtor-
i 1 in-possession, during a pending Bankruptcy Case was still pending, without any
12 authority to do so, is an involuntary and unauthorized transfer. Involuntary
13 transfers of assets, particularly those which are effectuated by persons having full
14 knowledge ofajudge's order to the contrary, are governed by 11 U.S.c. § 362,
15 which specifically states that the fiing of a bankrptcy petition, as in the case of
16 Stan Lee Media, Inc. "operates as a stay, . . . , of - any act to obtain possession of
17 property of the estate or of property from the estate or to exercise control over
18 property of the estate.',20 Involuntary transfers of assets in violation of 11 U.S.c. §
19 362 are void ab inito.21 Thus, as a matter of law, any purported assignment of the
2019 Id.
20 See 1 i U.S.c. § 362.
21 11 U.S.c. § 362 states, in pertinent part, as follows: "(a) (eJxcept as provided in
subsection (b) of this section, a petition fied under section 30 i, 302, or 303 of thistitle, or an application fied under section 5(a)(3) of the Securities InvestorProtection Act of 1970, operates as a stay, applicable to all entities, of-- . . . (3) anyact to obtain possession of property of the estate or of property from the estate or
26 to exerclse control o,rer property of
the estate; see In re Schwartz, 954 F.2d 569,570 (9th Cir. 1992) (holding that "(0 Jur decision today clarifies this area of the law
27 by making clear that violations of the automatic stay are void, not voidable."
28 (citing see In re Wiliams, 124 B.R. 311,316-18 (Bankr.C.D.CaI.I991). In reSchwartz also states that the Ninth Circuit has stated generally that violations of
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1 assets without Bankrptcy Court approval was void from its inception and had no
2 legal effect. As a result, Stan Lee Media, Inc. continues to own all rights, interest
3 and copyrights in and to the Properties and Plaintiffs have absolutely no standing
4 to be bring suit on those rights.
5
6 C. The Claims Relating to Stan Lee's Name And Likeness
7 Have No Merit For The Same Reasons
8 Plaintiffs' purported rights to use the name, likeness, mark and signature of
9 Stan Lee are based entirely upon State Law. The 4/11/ 2002 Order and/or the
10 MPEA, i.e., purported agreement between Stan Lee and POW!/QED. Once again,
11 Plaintiffs' alleged ownership of the rights to use the name and likeness of Stan Lee
12 are material allegations änd necessary prirnafacze elements of the State Law
13 Claims for Relief.
14 For the same reasons set forth above, plaintiffs are the lawful owners of
i 5 neither the rights to the Properties nor the rights to the name and likeness of Stan
16 Lee.
17 Plaintiffs' have also claimed, as a separate basis for ownership of the name
18 and likeness assets that Stan Lee has entered into an agreement to allow POW! and
19 QED to exploit the Stan Lee trademark, Stan Lee's name and likeness, and Stan
20 Lee signature in connection with the exploitation of certain of the assets at issue.
21 Plaintiffs must be able to prove, as an element of each of these causes of action,
22 that they own the assets at issue.
23
24
25
26 the automatic stay are "void," citing, e.g., In re Shamblin, 890 F.2d 123, 125 (9thCir. i 989) for the holding that "rjJudicial proceedings in violation of (the Jautomatic stay are void."); and In re Stringer. 847 F.2d 549, 55 i (9th Cir. i 988)
(holding that "(a lny proceedings in violation of the automatic stay in bankruptcyare void.").
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1 In this regard, on October 15, 1998, Stan Lee executed an assignment
2 conveying to Stan Lee Media, Inc., forever, all right, title and interest Stan Lee had
3 then and into the future, in his name, his likeness, trademarks, symbols, logos and
4 designs. (Plaintiffs' Ex. 9) The October 15, 1998 Assignment was referenced in
5 the 4/11/ 2002 Order by way of the Agreement incorporated therein, which
6 specifically reserved unto Stan Lee Media, Inc. "(aJny property or interests in
7 property no expressly included in Section 1.1.',22
8 Furthermore, Plaintiffs expressly averred in paragraph 5 i of the First
9 Amended Complaint that, pursuant to the 4/11/2002 Order and the October 15,
10 i 998 Agreement, "POW! and QED have the right to exploit the Stan Lee
11 trademark, Stan Lee's name and likeness, and San Lee's signature in connection
12 with the exploitationof the Properties." Thus, given Plaintiff s violations of the
13 4/11/2002 Order, Stan Lee Media, Inc. retains that right, and Plaintiffs have no
14 standing to bring suit on such rights. Indeed, Stan Lee executed the AP A which
15 was incorporated into the 4111/ 2002 Order, and acknowledged that all things not
16 specifically conveyed to the Sham LLC, were retained by Stan Lee Media, Inc.
17 In addition, Plaintiffs' assertions as to the invalidity of the October 15, 1998
18 Agreement make no sense, and certainly fail to meet Plaintiffs' burden of
19 establishing standing to bring suit on the name and likeness rights. To wit,
20 Plaintiffs contend that a mere few days before Stan Lee Media, Inc. filed for
21 bankruptcy, Stan Lee - at that time the person who exercised absolute control over
22 Stan Lee Media Inc. - declared that the October 15, 1998 Agreement was
23 "terminated."
24 In other words, well within the ninety day period before bankrptcy filing in
25 which virtally all transfers of a debtor's assets are a "voidable preference" under
