Disney loses appeal on ‘Millionaire’ lawsuit

Appeals panel upholds $269 million award over profits to hit gameshow

A federal appellate panel refused the Walt Disney Company’s effort to reverse a jury’s $269 million award to British production company Celador Intl. in a dispute over profits from “Who Wants to Be a Millionaire.”

A three-judge panel of the 9th Circuit Court of Appeals, in a decision issued Monday, did not find fault in the way that contract questions were submitted to the jury, or in U.S. District Court Judge Viriginia Phillips’ decision not to grant Disney a new trial.

The appellate panel also upheld the damages award, saying that the means to calculate the damages was not “inherently improbable.”

An ABC spokesman said in a statement, “We are extremely disappointed with the decision, as ABC and Buena Vista Television continue to believe that they fully adhered to the ‘Millionaire’ agreement.”

Disney could ask for a rehearing, ask the Ninth Circuit for an en banc review or petition to the Supreme Court. The decision was unpublished, meaning that it does not have precedential value.

Roman Silberfeld of Robins, Kaplan, Miller & Ciresi, who represented Celador, said, “What the court did today was really affirm a trial judge and jury who took an exceptionally close and careful look at this case two and a half years ago in a five-week trial.”

Celador claimed that ABC, Buena Vista Television and Valleycrest Productions breached their 1998 agreement for the rights to “Millionaire.” The U.K. company contended that Disney’s affiliates failed to include half of ABC’s profits in Celador’s compensation, and that they improperly deducted merchandising distribution expenses. The suit was familiar to other production entities that have taken on studios, as it dealt with self-dealing among different units of the same company, including the calculation of the license fee for the show as the same as the cost to produce it.

While Celador’s legal team cast Disney as a corporate Goliath, the size of the jury’s award did come as something of a surprise.

Disney appealed the verdict, finding fault not just with the amount of the damages but the way in which the jury was instructed on how to render a judgment, as well as in decisions made on evidence.

Yet the three appellate judges stated in an eight-page memorandum, “The district court did not abuse its discretion in excluding as either irrelevant or unduly prejudicial an assignment agreement between Celador and an affiliated company, a spreadsheet purportedly calculating profits under the contract, evidence of the benefits Celador derived from the foreign rights to the game show, or evidence of the show’s performance in syndication.”

After three days, the jury returned with a verdict that ordered Disney to pay Celador $260.2 million in damages for breach of contract in relation to the license fee that ABC paid for the show, and another $9.2 million in damages related to merchandise sales, including a top-selling CD-ROM game.

The appellate panel did not find fault with the way the damages were calculated. They wrote, “The court reasonably concluded that the jury was entitled to consider the failure to renegotiate as context to determine whether the license fee arrangement between ABC and BVT breached the implied covenant of good faith and fair dealing, and the absence of this instruction did not taint the damages verdict.”

In late 2010, Phillips turned down Disney’s motion for a new trial, and added $50 million in prejudgment interest to the damages.

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