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Disney Pooh-Poohs Family's Claims

25 Jan, 2002 By: Holly J. Wagner

Lawyers for the Walt Disney Co. and a family-owned company that owns the merchandising rights to A.A. Milne's Winnie The Pooh characters have been slugging it out in court over millions in royalties for videocassettes, DVDs and computer games based on the Pooh characters.

New York literary agent Stephen Slesinger bought the rights from author A.A. Milne in 1929. While Slesinger died many years ago, his wife and daughter sued Disney in 1991, alleging the Mouse House has erroneously excluded packaged media from royalties paid under a licensing deal forged in 1961, according to court papers.

"The major issue in the case is, what commercial uses of Pooh does Disney have to pay us royalties on,:" said Bonnie Eskenazi, cocounsel for the Slesinger heirs. "We say that's ‘every time you make money, we make money.' That means video, computer software, theme parks, all that stuff." At stake, she said, is "hundreds of millions of dollars."

Disney attorney Daniel Petrocelli has contended the rights only cover merchandise like clothing and accessories and that Disney has made the Slesingers rich by marketing the Pooh characters to a wider audience than they would otherwise have reached. He says video is outside the scope of an agreement negotiated in 1983 with then-Disney attorney Vincent Jefferds, who died in 1992.

For several years after that the lawsuit languished in the files of the Los Angeles Superior Court, for reasons that are unclear even to the lawyers in the case.

"We [Eskenazi and lead plaintiffs' counsel Bertram Fields] have only been in the case for the past year and a half," Eskenazi said.

The next hearing in the case is expected to be about whether documents Disney has managed so far to keep sealed should remain so. Petrocelli has argued that the documents contain trade secrets and other proprietary information that could harm Disney's business if disclosed.

Petrocelli did not immediately return phone calls seeking comment on Disney's behalf.

Judge Ernest Hiroshige fined Disney $90,000 in August for shredding boxes of documents related to the disputed agreement. As part of the same sanction, the judge ruled it would treat as fact the plaintiffs' contentions that Jefferds assured the Slesinger heirs the videos were covered under the agreement.

"Part of how we figured out that they destroyed documents is that there was correspondence between Mrs. Laswell and Vince Jefferds," Eskenazi said. "We have a letter about a royalty statement in which she writes ‘I'm assuming that video is being paid in this category.' He wrote back saying he thought so, but he would send a note to the accounting department to verify it."

Meanwhile, Hiroshige has yet to rule on arguments made last year that Disney underpaid the Slesinger family for the merchandise it did pay royalties on. Fields has sought to have the court appoint a forensic accountant to comb the books regarding those payments to determine whether Disney paid all it was supposed to.

"The accounting deals with the T-shirts and stuffed Pooh bears and things like that," Eskenazi said.. "That claim is the minor part, the pennies that have fallen off this case. That is worth $35 million."

Beyond that, Eskenazi noted, Pooh licensing continues and the case may extend to items newly added.

"We haven't been paid on those new Pooh juices," Eskenazi said. "Now we've got to quantify all that, once we've determined what's in the basket we have to determine its value."

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