THR, ESQ

Court might need superpowers to untangle Lee's latest legal issue

This is the story of a comic book hero whose greatest enemy lies within. mWell, not exactly. But it does share his name. In a twist worthy of an "Incredible Hulk" serial, 85-year-old fanboy legend Stan Lee is escalating his battle against the shareholders of Stan Lee Media, the company he co-founded with an unsavory character and has spent the better part of a decade trying to escape.

In an amended complaint filed quietly this week, Lee, the forefather of Iron Man and X-Men, claims the eponymous company has hijacked his name and image and is thwarting his effort to develop such new properties as "The Accuser," "The Drifter," "Stan's Evil Clone" and others via his first-look deals with Disney and Virgin Comics. Lee is asking for more than $50 million on his various claims — a massive sum, sure, but a pittance compared with the billions his former company thinks it is owed by Marvel Entertainment.

The complex litigation, as much as the fracas between Fox and Warner Bros. over the "Watchmen" film, illustrates just how valuable superhero properties have become and how high the stakes are in the battle to control them.

It's easy to forget that a decade ago the high-flying Marvel was broke. In bankruptcy it off-loaded expenses like the $1 million-a-year salary paid to Lee, who it re-signed on a nonexclusive basis. This allowed Lee to hook up with his friend Peter Paul, a twice-convicted felon who had an idea to create a new company based around Lee's intellectual property rights.

Exactly what Lee handed over to Stan Lee Media in 1998 remains in dispute. The company's stock soared before plunging into bankruptcy only two years later. Paul later was accused of fraudulently inflating the stock and fled to Brazil; he was extradited back to the U.S., pleaded guilty in 2005 and now awaits sentencing.

In the meantime, Lee moved to rescue some of his new projects from the Stan Lee Media bankruptcy. Several years later, a team of new investors assumed control of the struggling company — with Paul pulling the strings behind the scenes, Lee claims. The group, which includes distressed asset specialist James Nesfield, brought a lawsuit in Colorado to have the company resurrected under their control, and they targeted Marvel and Lee for the superhero assets.

The investors claim the language in Lee's 1998 deal with Stan Lee Media had granted it rights to all characters Lee owned, including those created during the decades he was employed at Marvel. Both Marvel and Lee disagree, pointing to general work-for-hire law and several employment agreements with Lee stating clearly that his characters were property of Marvel. But Stan Lee Media says those agreements were discharged in Marvel's bankruptcy.

Marvel's lawyers won't comment on that case, which is pending in New York. But Lee's attorneys argue that the investors' theory doesn't make any sense. If Stan Lee Media had an interest in Lee's billion-dollar characters, why weren't Spider-Man and Hulk listed as assets when the company entered bankruptcy? It's hard to believe that bankruptcy would have even been necessary with these golden properties in its portfolio. "Plus, that contract (with Stan Lee Media) was signed after Stan signed his contract with Marvel," argues Mark Williams, Lee's lead attorney, who says he recently uncovered several smoking-gun documents showing that Lee's deal with Stan Lee Media was still being negotiated when Marvel re-signed Lee. "These guys are just trying to exploit Stan."

Confused yet? It gets even more complicated. The Stan Lee Media investors also claim that Lee can't own the projects he thought he got fair and square out of the bankruptcy because the judge authorized the transfer of assets to a company Lee never created. Instead, he transferred the characters to a company called QED, which transferred them to Lee's POW! Entertainment, where they reside today.

"They had to go get bankruptcy court approval to do this, and they never did," argues Jack Ciarl, an attorney for Nesfield and others.

All of which leads to Lee's new 89-page complaint. His lawyers say the specter of litigation with Stan Lee Media made Disney and Virgin squeamish about developing any properties Lee created between 1998, when he became involved in Stan Lee Media, and 2005, when California's seven-year limitation on personal services contracts would have expired. POW! has set up other projects such as "Nick Ratchet" and "Tigress," but that dead time has cost Lee millions, he says. He wants cash, and he wants the court to declare his character transfers valid. It's clear there's also something more personal going on.

"Stan is one of the nicest people you'll ever meet," Williams says. "Part of this is he wants his name back."

Matthew Belloni can be reached at matthew.belloni@THR.com.
comments powered by Disqus