Starz Loses $1.4 Million of 'U.N.C.L.E.' Legal Victory

Lindsay Dunlap, the woman who three years ago was found to have tricked Starz' Anchor Bay Entertainment into putting up $625,000 for exclusive licensing rights to master recordings of the classic TV series, Man From U.N.C.L.E., has gotten some appellate relief. She might even be able to stay in her Malibu home.

As we previously reported, Dunlap made a deal with the the DVD distribution company then known as Anchor Bay in 2005, and all was OK until Warner Bros. came forward with news that rights to the 1960s TV show about international espionage didn't actually belong to Dunlap.

Thereafter, Anchor Bay sued, and after a trial in 2010, a jury awarded the plaintiff nearly $1.5 million in compensatory damages for "out of pocket expenses" and "lost profits," and an additional $1.4 million in punitive damages. For three years, Starz has been going after that money and even eyeing a Malibu property that Dunlap purported to "quitclaim" to a family trust run by her ex-husband.

On Monday, a California appeals court denied Dunlap's attempt to challenge the verdict on grounds that it happened in the wrong forum and as a result of improper jury instructions, but Dunlap was successful in overturning the punitive damages awarded.

Dunlap made the appeal over the part of her contract that said that disputes would be handled in New York, not California. During the case, Anchor Bay said that the forum selection clause was inserted accidentally, and a judge agreed that it shouldn't be an issue because the parties had no "reasonable contacts" with New York.

"The evidence in the record supports the court‘s conclusion that New York was an unreasonable forum, and none of the arguments made by Dunlap below or before this court undermine that conclusion," writes California justice Fred Woods.

The justice also waives away Dunlap's objections over jury instructions, finding that any errors in the questions put to the jury were jointly prepared by the parties or otherwise harmless.

But Dunlap got a victory that will save her $1.4 million anyway because the appeals court concludes that the evidence didn't support an award of punitive damages.

Dunlap argued that Starz had to offer evidence of her financial condition so that punitive damages could be determined, and while the plaintiff pointed to evidence she purchased the $3 million Malibu home and another in Pacific Palisades for $1 million, plus drove a Jaguar and hung out with Steven Spielberg and James Cameron, Justice Woods says "the evidence was superficial and of limited relevance to the punitive damage determination."

The evidence was presented in the context of proving that a company that Dunlap had run was an alter ego -- that it was used as a personal bank account -- not on her ability to pay a punitive damages award. "It has minimal probative value to the issue of Dunlap‘s overall financial condition," says the ruling (which can be read in full here).

So the appeals court reverses the punitive damages and says a retrial here is not warranted.

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