The Walt Disney Co. must pay $10.3 million in damages to European publishing and licensing firm Marsu, a U.S. District Court judge ruled Friday. The record award — to which attorneys fees will be added — ends three years of litigation between the companies stemming from Disney’s failure to produce animated programs using the character Marsupilami.
The court also found that execs at Disney, including chairman Michael Eisner and consumer products exec Steve McBeth, engaged in “fraudulent concealment” by failing to tell Marsu execs that Disney was unable to devote the necessary resources to the project.
But the court rejected the charge that Disney acted with malice when it breached its agreement with Marsu, and chose not to award punitive damages.
Justice has been done
“We are extremely pleased with this result,” Marsu attorney Patricia Glaser told Daily Variety. “It was an extremely well reasoned opinion and we think justice has been done.” She tried the case on behalf of Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro in repping Marsu during the eight-day trial.
Glaser received the judgment in the mail Friday, two months after U.S. District Court Judge Edward Rafeedie took the matter under submission on July 22 at the conclusion of the trial.
The judgment was based on a finding by Rafeedie that Marsu lost $8.1 million in profits, $431,000 in waived guarantees and should earn $1.8 million in prejudgment interest.
Marsu sued Disney in 1994 for alleged breach of contract, breach of implied covenant of good faith, fraudulent inducement and fraudulent concealment.
The court found in favor of Marsu on all counts except the fraudulent inducement claim.
Under the terms of the Disney agreement, inked in August 1990, the studio was to “produce at least 13 half-hour ‘Disney high-quality’ television programs, suitable for network showing.” Disney also agreed to “secure an order and renewals thereof, from one of the major U.S. television networks.”
The Mouse House was to exploit the character through licensed merchandising pacts and promotional tie-in agreements, which the court found it did.
But the court found Disney didn’t fulfill its obligations under the contract to get web interest, did not get a Marsupilami show on the air, and used “junior employees with minimal or no prior experience in merchandising.
“Disney did not use its best efforts to obtain a commitment from any television network,” Rafeedie said in his 22-page opinion. “The trial testimony proves that Disney never asked the networks to broadcast half-hour Marsupilami shows as required under the contract.”
Rafeedie also noted that “Disney decided that it would not devote the necessary resources to the Marsupilami project, yet concealed this fact from Marsu.” He pointed to an October 26, 1992, memo from McBeth to Disney execs and Eisner in which McBeth said “Marsu had less Disney weight behind it” than “Aladdin.”
“If we didn’t have the killer film properties, the reception would be different,” McBeth wrote. “We have lots of other Disney priorities, more important both financially and strategically.”
Rafeedie noted that, “rather than notify Marsu of this state of affairs, Disney chose to devote insufficient resources.” He also determined that “Disney knowingly and in bad faith failed to perform its contractual duties to market Marsu.”
As a result, Rafeedie found that “Marsu has proven two instances of fraudulent concealment” by Disney.
“Disney concealed its unwillingness to invest the necessary time and resources (and) had decided by October 1992 to deprioritize Marsupilami, yet did not give notice of intent to terminate the contract until December 1993.”
Henry BenZvi of Proskauer, Rose, Goetz, & Mendelsohn, who represented Disney, declined comment.
A spokesman for Disney said, “We believe we fulfilled our obligations to (Marsu) and are disappointed with the ruling. We intend to appeal.”
Typically, in order to file an appeal, Disney will have to post an appeal bond with the trial court to the tune of 150% of the judgment, unless counsel for Marsu waives that requirement.