9th Cir. Finds No Error in Dismissal of Action In Conan the Barbarian Ownership Dispute

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By Anandashankar Mazumdar

Oct. 22 —There was no error in a federal district court's dismissal of an action seeking to overturn a 10-year-old bankruptcy settlement involving the ownership of intellectual property rights to Conan the Barbarian, the U.S. Court of Appeals for the Ninth Circuit ruled Oct. 21 in an opinion designated as non-precedential and not for publication (Stan Lee Media, Inc. v. Conan Sales Co., 9th Cir., No. 12-55405, unpublished opinion 10/21/13).

This is the second loss in the space of two months on the part of Stan Lee Media Inc. to try to claim ownership of popular fictional characters. In another proceeding in September, a federal district court thwarted the company's attempt to wrest control over a series of Marvel Comics characters from the Walt Disney Co. 

Conan's Ownership in Dispute

This case involved Conan the Barbarian, a fictional character created by Robert E. Howard (1906-1936) and first appearing in a series of stories published in periodicals starting in 1932. Since then, Conan has appeared in numerous media, including novels, comic books and movies.

Ownership of Conan and related copyrights eventually ended up in the possession of Stan Lee Entertainment Inc., which was founded by Stan Lee (born Stanley Martin Lieber in 1922), who is well-known for creating numerous popular comic book characters for Marvel Comics.

Stan Lee assigned his rights in Marvel characters to Stan Lee Entertainment Inc. in 1998. The next year, Stan Lee Entertainment was merged into Stan Lee Media Inc. of Denver. At some point, Stan Lee severed his relationship with Stan Lee Media Inc. and purported to reassign the IP rights to Marvel Entertainment Group Inc.

In 2000, Stan Lee Media entered into a stock purchase agreement transferring ownership of the Conan properties to Conan Sales Co. In 2001, Stan Lee Media entered into bankruptcy proceedings before the U.S. Bankruptcy Court for the Central District of California and Conan Sales asserted that Stan Lee Media had defaulted on its obligations under the stock purchase agreement.

Because of the existence of the bankruptcy proceeding, Conan Sales could not foreclose. Eventually, Conan Sales was able to reach an agreement with the unsecured creditors through which Conan Sales would get ownership of the Conan properties in exchange for $275,000. Stan Lee Media moved for approval of the settlement and in March 2002 the bankruptcy court issued an order approving it.

The bankruptcy proceeding was dismissed in 2006 and Stan Lee Media's shareholders then initiated a dispute alleging that Stan Lee, along with Stan Lee Media's officers Arthur M. Lieberman, Junko Kobayashi and Gill Champion had illegitimately exerted dominance over Stan Lee Media in order to transfer all its IP assets to a different entity.

In 2010, with a new board of directors, Stan Lee Media sued several entities and individuals, including Conan Sales, Kobayashi and Champion.

Stan Lee Media sought to have the bankruptcy settlement approval order set aside as void pursuant to Fed. R. Civ. P. 60. Judge Stephen V. Wilson of the U.S. District Court for the Central District of California dismissed the action. Stan Lee Media appealed. 

No Error on Lower Court's Part

In a per curiam opinion, the court reviewed the matter de novo and found that the settlement order was not void. Stan Lee Media had not produced sufficient evidence to establish that Kobayashi or Lieberman had acted with adverse domination. Furthermore, the court found that Kobayashi had been duly authorized to act for Stan Lee Media.

The court also found that the notice of the settlement had been adequate and that, furthermore, the settlement did not constitute a disguised sale. Thus, the court said, the shareholders of Stan Lee Media had not been entitled to notice.

Finally, the court found no abuse of discretion on the part of the district court. The court thus affirmed dismissal.

The appellate panel comprised Judge Harry Pregerson, Judge Kim McLane Wardlaw, and Judge Richard C. Tallman.

Stan Lee Media was represented by Christopher F. Graham of McKenna Long & Aldridge LLP, New York. Conan Sales was represented by Sacha V. Emanuel of Los Angeles.

To contact the reporter on this story: Anandashankar Mazumdar in Washington at amazumdar@bna.com

To contact the editor responsible for this story: Naresh Sritharan at nsritharan@bna.com

Text is available at http://www.bloomberglaw.com/public/document/Stan_Lee_Media_Inc_v_Conan_Sales_Co_LLC_et_al_Docket_No_1255405_9/1.

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