Disney Appeals $319 Million 'Millionaire' Verdict; How It Hopes to Overturn the Ruling (Analysis)

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Last July, The Walt Disney Co. experienced a $270 million calamity when a California jury ruled that the company had cheated Who Wants To Be A Millionaire producer Celador International out of profits. Disney's pain then got worse when a judge upped that amount to $319 million, including pre-trial interest, refusing to re-hear the case after six years of protracted litigation. 

Now Disney is appealing. Can the company escape paying Celador such a whopping figure? On Tuesday, its lawyers offered five reasons why the Ninth Circuit Court of Appeals should overturn the verdict.

The Millionaire case was a watershed moment in Hollywood, a public indictment of the way Disney accounted for profits on a hit show. In the lawsuit, Celador claimed that Disney and its susidiaries ABC and Buena Vista Television brokered sweetheart deals amongst themselves, thus operating a "shell game" whereby millions of dollars in revenue were hidden from Celador's grasp. A month-long trial featured a who's who of Hollywood on the witness stand, including Disney CEO Robert Iger and some of the top television agents in the business.

In opening its 96-page brief to the Ninth Circuit, Disney calls the $319 judgment "astonishing not only because of its size, but also because of how it came about: The district court committed a cascading series of errors that yielded a verdict that radically transformed the parties’ carefully negotiated allocation of risks and reward."

Specifically, Disney has five arguments -- dare we say, lifelines -- why the Ninth Circuit should reverse the decision. Here they are:

  • The case should have never gotten to a jury in the first place: Disney believes that a judge should have accepted the "plain text of the contract," which it says only entitled Celador to take 50% of BTV's profits, not half of both BTV and ABC's profits. The judge allowed Celador to present to a jury a broader interpretation of the deal instead of relying upon the contractual language and the word of the William Morrris agents who brokered it. Disney believes it should have been decided on summary judgment that Celador shouldn't get any piece of ABC's action on the Millionaire success.
  • The trial judge wrongfully excluded evidence: Speaking of those then-William Morris agents (Greg Lipstone and Ben Silverman), Disney says they agree with its viewpoint about what the deal meant, and that they all agreed early on. Disney argues that it's a miscarriage of justice that a jury never got to see purported documented proof of that. In other words, if a jury had seen those documents, Disney argues, there would have been no doubt that Celador never should have expected any more from the agreement it had made with BTV. Disney also adds there were documents excluded that would have shown "the parties’ bargain was more favorable to Celador Productions than Plaintiff led the jury to believe."
  • The trial judge erroneously allowed testimony on an inflated damages assessment: Disney points out that Celador called two different experts to the stand. One calculated damages prospectively from the viewpoint of a license fee negotiated after the show became a hit. The other calculated damages retroactively back to the first episode. The cumulative result was an inflated estimate of total damages based on higher fees had the package been renegotiated at the show's inception, something that Disney believes is in error and against the usual protocol of figuring these things out.
  • The trial judge should have taken more responsibility in interpreting the contract as a matter of law and precluded one of the claims: In the pretrial phase of this case, a number of Celador's claims were thrown out, but not all. Disney is upset that the judge allowed Celador to pursue allegations that BTV violated its contract by improperly deducting merchandising expenses. Disney points to knowledge by Celador's agents of what was in the deal and to a court's conclusion that there was no "bad faith" involved. It believes the plaintiff didn't have enough to establish a reasonable claim on this point.
  • It was sued by the wrong entity: Disney points out that the lawsuit was filed by Celador International over a contract made by Celador Productions. The plaintiff claimed to be a "successor-in-interest," but Disney is disputing this fact, saying that Celador International is a "separate corporate entity now under distinct ownership."

The brief was filed on Disney's behalf by Seth Waxman at Wilmer Cutler Pickering Hale and Dorr.

Celador's response is expected to come before the end of September.

E-mail: eriqgardner@yahoo.com

Twitter: @eriqgardner