Judge winnows Winnie

Disney hails ruling in Pooh case

A judge on Friday set aside much of this summer’s tentative ruling in the Winnie the Pooh case, which will further delay the already 12-year-old trial.

The new ruling was hailed by Disney, which gets another shot at opposing millions of dollars in royalty payments to the Slesinger family, which licenses the Pooh characters to Disney.

Friday’s order by L.A. Superior Court Judge Ernest Hiroshige stays his June order in which he accepted the Slesingers’ proposed accounting methods and decreed that 12.5% of Disney’s merchandise sales since 1983 in various categories would be assumed to come from Pooh products.

However, after complaints by Disney that 12.5% would cost $200 million dollars, Hiroshige ruled that the matter should be approached with deliberate judgment rather than haste, and new auditors — when they are appointed — will submit a new report.

As is typical in this acrimonious case, the two sides disputed the importance of the ruling. “We view it as a significant victory,” Dan Petrocelli, Disney’s attorney, said. “The judge realized his ruling would result in an astronomical payment by Disney. The new auditors will look at everything and come up with a new report.”

Bert Fields, the Slesingers’ attorney, said, “It’s very understandable that the judge would want to get the recommendation of new accountants when hundreds of millions of dollars are at stake.” Fields’ partner Bonnie Eskenazi said Friday’s decision did not mean that new auditors would start over, but rather would use Hiroshige’s June ruling as a starting point. “The judge reconfirmed that the prior accounting was biased,” Eskenazi said.

Hiroshige let stand the portion of the order that threw out an earlier report by a court-appointed auditor that favored Disney on royalties owed on such Pooh merchandise as stuffed toys and lunchboxes. On Friday, Hiroshige affirmed the removal of the original auditors and reiterated that Disney would not be permitted to confer with the auditors without a Slesinger representative present, a long-standing complaint by the Slesingers.

The accounting involves only a portion of the disputed royalty payments. Disney concedes it is required to pay on merchandise such as stuffed animals, but the amount is in dispute. The Slesingers also claim they are entitled to payments on video sales and computer games, categories Disney claims are not included in the license agreement. The accounting involves the smaller part of the multimillion claim.

The ruling will further delay a case that has moved at a glacial pace. Shirley Slesinger Lasswell — who is now 80 — filed suit in 1991 seeking an accounting under a 1983 license agreement. The accounting began in 1995, and a report was issued in 1998. After a hearing in 2001, the tentative ruling was issued in June 2002, and the new order was issued Friday. A March 2003 trial date had been set.

The case also spawned a shareholder suit after Disney acknowledged in public filings that the Slesingers were seeking to terminate the Pooh license. Losing the character could cost the company hundreds of millions of dollars.

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