Belland Adv Qed Memo Of Points Authorities Op Msj_

Ca' 32:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 1 of 27

1 0 'DONNELL & ASSOCIATES PIERCE O'DONNELL (State Bar No. 081298)

2 JACK G. CAIRL (State Bar No. 105335) 550 South H02e Street, Suite 1000

3 Los Angeles, CA 90071

Telephone: (213) 347-0290

4 Fax: (213) 347-0299 5 Attorneys for Defendants

JAMES NESFIELD, A.F. GALLOWAY 6 DOUGLAS C. COGAN

8

SIMKE..CHODOS. &, SASAKI JUDITH M. SASAKI (State Bar NO.1 19442) DAVID A. PASH (State Bar NO.1 1 1124)

9

Los Angeles, CA 90067

7

1880 Century Park East, Suite 1511

Telephone: (310) 203-3888

10 Fax: (310) 203-3866 11

Attorneys for Defendants 12 CHRISTOPHER BELLAND and JOHN PETROVITZ 13

14 15

UNITED STATES DISTRICT COURT

16

CENTRAL DISTRICT OF CALIFORNIA

17 18

19 QED PRODUCTIONS, LLC, a Delaware limited liability company; 20 POW! ENTERTAINMENT, INC., a Delaware corporation; STAN LEE, an

CASE NO. CV 07-00225 SVW (SSx) (Related Case No. CV 07-4438 SVW (SSx)J

21 individual, 22

Plaintiffs,

23

v.

24

MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

25 JAMES NESFIELD, an individual; et aI,

26

(Fed. R. Civ. P. 56J

Defendants.

27 STAN LEE MEDIA, INC., a Colorado Hearing Date: January 5, 2009

28 Corporation, Time: 1 :30 p.m.

Ca 2:07 -cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 2 of 27

Plaintiff, 2

Place:

the Han. Stephen V. Wilson

Courtroom of

v. rDefendants' Statement of

3

4 5

6 7 8

9 10 11

12 13

14 15

16 17 18

19

20 21

22 23

24 25

26 27 28

os m Documentl

STAN LEE, an individual, et aI., Defendants.

Uncontroverted Facts and Conclusions of Law and Exhibits filed concurrently herewithJ

Ca 2:07 -cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 3 of 27

1

TABLE OF CONTENTS

2 3

i.

INTRODUCTION

5

II.

STATEMENT OF FACTS

6

8

A. The Bankruptcy Case

6

9

B. The 4/11/2002 Order and Plaintiffs'

10

Fraudulent Violations of the Order

4 5

6 7

7

C. Plaintiffs' Sham Allegations

11

Regarding the 4/11/2002 Order

12

11

D. Plaintiffs' Perjured Representations

13

to the Bankruptcy Court

14

14

15

16

III.

ARGUMENT

16

17 18

A.

Plaintìffs' InLorrect Legal Standard

19

B.

Plaintiffs Wil Not Be Able To Prove

20

That They Are The Legal and Rightful

21

Owners Of The Properties and Rights

22

Asserted and Therefore Have No Standing

23

1.

2.

26

Order Voids Any Ownership of the Properties

28

18

Plaintiffs' Violations of the 4/11/02

25

27

18

Plaintiffs Have Burden of Proving Ownership of the Properties

24

16

20

,

Ca 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 4 of 27

C. The Claims Relating to Stan Lee's Name

1

2

And Likeness Have No Merit For the

3

Same Reasons

22

4 5

iv.

CONCLUSION

25

6 7 8

9 10 11

12 13

14 15

16 17 18 19

20 21

22 23

24 25

26 27 28

2

Ca 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 5 of 27

TABLE OF AUTHORITIES

1

2 3 A

Ll

5

6 7 8

9

10

CASES Alaska Wildltfe Allance v. Jensen, 108 F.3d 1065 (9th Cir. 1997)

16

Cavalier v. Random House, Inc.,

18

297 F.3d 815, 822 (9th Cir. 2002) Clark v. City of Lakewood, 259 F.3d 996 (9th Cir. 2001) Celotex Corp. v. Catrett, 477 U.S. 317 (1986)

16 5

CRST Van Expedited, Inc. v. Werner Enterprises, Inc.,

479 F.3d 1099,1107-8 (9th Cir. 2007)

19

11

12 13

14 15

D'Lil v. Best Western Encina Lodge & Suites, 538 F.3d 1031 (9th Cir. 2008)

17

Fleet v. CBS, Inc., 50CaI.App.4th 1911

19

f¡ re Schwart::, 954 F.2d 569 (9th Cir. 1992)

21

16

In re Shamblin, 890 F.2d 123 (9th Cir. 1989)

22

17

In re Stringer, 847 F.2d 549 (9th Cir. 1 988)

22

18

In re Willams, 124 B.R. 31 1 (Bankr.C.D.Cal.199 1)

21

19

Jesinger v. Nevada Federal Credit Union,

20

24 F.3d 1127 (9th Cir. 1994)

21

22

Korea Supply v. Lockheed Martin Company, 29 CaL. 4th 1134, 1153 (2003)

23

Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992)

24

Miller v. Glenn Miler Productions, Inc.

25

454 F.3d 975 (9thCir. 2006)

26

16

19 16, 17

5

Pacifc Gas & Electric Co. v. Bear Stearns & Co.,

27

50 CaI.3d 1118,791 P.2d 587 (CaL. 1990)

19

28

Shaw v. Lindheim, 919 F.2d 1353, 1356 (9th Cir. 1990)

18

3

"

Ca 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 6 of 27

1 Virtual Works, Inc. v. Volkswagen of Am., Inc.,

2 238 F.3d 264,267 (4th Cir. 2001) 19 3 Wendt v. Host Intern., Inc., 1 17 F .3d 1427 (9th Cir. 1997) 19 4 5

6 STATUTES

7 California Civil Code §3344 19

9 Fed. R. Civ. P: 56(c) 5 8

10 Fed. R. Civ. P. 56(e) 5 11

12 1 1 U.S.c. §54 7(b) 6, 24

13 11 U.S.c. § 362 2 14 15 U.S.c. § 1125(a)(1 )(A) and (B) 18 15

16 OTHER

17 Prosser, Law of Torts § 117 804-07 (4th ed.1971) 19 18

19

20 , ,

21

22 23

24 25

26 27 28

4

Ca 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 7 of 27

1

2 MEMORANDUM OF POINTS AND AUTHORITIES 3

4 i. INTRODUCTION 5 Plaintiffs Stan Lee, QED Productions, LLC and POW! Entertainment, Inc.

6 ("Plaintiffs") lack standing to bring any claim asserted in the Second Amended 7 Complaint (hereinafter "SAC") because none of the Plaintiffs is the legal owner of 8 the rights and/or properties that are the subject of this action (the "Properties"). 9 Plaintiffs base their claim to ownership of the Properties solely upon an April 11, 10 2002 Order of

the Bankrptcy Court (the "4/11/2002 Order), which Order

11 expressly prohibits the Plaintiffs from owning the assets, and further makes any 12 transfer of

13 of

the assets to Plaintiffs void ab inito under the automatic stay provisions

U.S. Bankrptcy law.

14 Moreover, as shown in mOre detail below, Plaintiffs have submitted to this 15 Court a "smoking gun" document which demonstrates that in 2001 Plaintiffs

16 knowingly committed a fraud on the Bankruptcy Court, the Bankruptcy Trustee,

17 the Creditors' Committee, and the shareholders of Stan Lee Media, Inc. by 18 deliberately planning to abscond with the debtors' valuable assets and give nothing

19 in return to either the creditors or Stan Lee Media's shareholders. 20 Fed. R. Civ. P. 56( c) mandates the entry of summary judgment against a

21 party who fails to make a showing sufficient to establish the existence of an 22 element essential to that part's case as to which that party wil bear the burden of

23 proof at triaL. See Miller v. Glenn Miler Productions, Inc. 454 F.3d 975, 987 (9th

24 Cir. 2006) citing Celotex Corp. v. Catrett, 477 U.S. 317, 324,106 S. Ct. 2548 25 (1986) Plaintiffs have the burden of showing that they own the Properties, and 26 Plaintiffs have utterly failed to meet their burden of establishing this element. Defendants in this

27 Accordingly, summary judgment should be granted in favor of

28 action with regard to all claims based on Federal law. 5

Ca 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 8 of 27

1 The remaining claims that Plaintiffs have appended to their Second

2 Amended Complaint arising from Stan Lee's "name and likeness" are all based on 3 State Law, and are not subject to this Court's Federal Question jurisdiction. In any 4 event, Stan Lee Media, Inc. clearly holds the rights at issue pursuant to a 1998

5 Agreement with Stan Lee. Since those rights were expressly not transferred 6 pursuant to the 4111/2002 Order, the rights remain with Stan Lee Media, Inc. Stan

7 Lee cannot bring an action based upon those rights until he establishes his 8 ownership through an action to rescind the 1998 agreement, which action Stan Lee 9 has pointedly refused to bring.

10 Instead, Stan Lee asserts that the agreement was "void" as afait accompli 11 because a letter that he wrote to himself less than ninety days before Stan Lee

12 Media, Inc. fied for bankruptcy. Such a self-serving arrangement is a "voidable 13 preference" under 11 U.S.c. §547(b), and Stan Lee cannot meet his burden of 14 showing ownership in his name and likeness rights through such a transparent 15 device to deprive Stan Lee Media, Inc. of its assets and in defraud of Stan Lee

16 Media, Inc.' s creditors.

17 Accordingly, this Court should exercise its discretion and dismiss all claims

18 for Plaintiffs' lack of standing. In the alternative, this Court may dismiss the 19 Federal Question claims for lack of standing, and then dismiss the remaining State

20 Law claims for lack of subject matter jurisdiction. Simply put, the instant action 21 does not belong in the Central District of Cali fomia. 22 23

24

II.

STATEMENT OF FACTS

A. The Bankruptcy Case

25

Plaintiffs contend that they own the Properties pursuant to an April 11, 2002

26

Order (the "4/11/02 Order") in the Central District of California Bankrptcy Court

27

Case Nos. SV -0 1-11329-KL and SV -01 -11 331-KL (the "Bankrptcy Case").

28

The Order sets forth strict requirements for the Properties - which are owned by 6

Ca 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 9 of 27

1 the Debtor Stan Lee Media, Inc. ("Stan Lee Media, Inc."!) - to be conveyed free 2 and clear of liens and encumbrances for the benefit of Stan Lee Media, Inc.'s 3 creditors. The Properties include the copyrights of super-hero characters or other

4 properties created and developed by Stan Lee in connection with his employment

5 at Stan Lee Media, Inc. (the "Properties,,).2

6 The Bankrptcy Case that arose out of Stan Lee Media, Inc.' s 2116/ 2001 7 filing of a Chapter 1 1 Petition in the Central District of California Bankrptcy

8 Court.3 The Bankrptcy Case lasted over five years and nine months until it was 9 dismissed on December 6,2006.4 (It should be noted that the dismissal of the

10 Bankrptcy Case did not end Stan Lee Media, Inc.' s existence. On the contrary, 11 defendants are informed that Stan Lee Media, Inc. is a valid Colorado corporation

12 which is scheduled to have a shareholders' meeting later this month.

13 B. The 4/11/2002 Order and Plaintiffs' Fraudulent Violations of the

14 Order 15 In April of 2002, in what the Bankruptcy Court, the Trustee, the Creditors

i 6 and Stan Lee Media, Inc.'s shareholders all believed was a legitimate settlement of

i 7 the creditors' claims in the Bankrptcy Case, the Bankruptcy Court entered the 18 4111/2002 Order pursuant to a motion (Plaintiffs' Ex. 3) brought by Stan Lee in his 19

20 21

i Stan Lee Media, Inc. is the critical corporate entity in this action, and has valid and superior claims to all of the Properties. Stan Lee Media, Inc. has been

previously referred to in this action as "SLM," "SLMI," and other acronyms. It 22 now appears that Plaintiffs have attempted to foster confusion in their pleadings by their profuse use of capitalized initials, obfuscating the status of the sham "SLC,

23

LLC" company, which Plaintiffs fraudulently contend is an actual entity.

24 Accordingly, Stan Lee Media, Inc. wil be referred to by its full name, and SLC, LLC wil be referred to as the "Sham LLC." 25 2 Plaintiffs' Second Amended Complaint ("SAC") ii 22. 26 3 Plaintiffs' Exhibits 1 and 2. 27 4 12/6/2006 Order of Bankruptcy Court, Ex. D to the Declaration of Sean P.

28 Sheppard (the "Sheppard DecI.") in support of Defendants' pending Motion for

Summary Judgment filed herein on August 2007. 7

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 10 of 27

1 capacity as Debtor in Possession for an Order to confirm an Asset Purchase

2 Agreement (the "APA"). Under the AP A, Stan Lee Media, Inc. would transfer the 3 Properties free and clear to an independent "bankruptcy remote" company, and 4 then - with Stan Lee's assistance - that independent company would exploit the 5 assets for the benefit of Stan Lee Media, Inc.' s creditors and shareholders.

6 lTnbeknownst to all but the Plaintiffs, however, the AP A was a fraud

7 because "independent" company that was to receive the Properties under the AP A 8 did not exist. The company that should have received the Properties was -

represented that

9 according to the APA - named "SLC, LLC," and Stan Lee himself

I 0 the company actually existed and purported to sign the APA on behalf of that 1 i company. In reality, Stan Lee never fomied SLC, LLC. Rather, Plaintiffs had 12 secretly created another company to receive the Properties - Plaintiff QED

13 Productions, LLC, a Delaware limited liability company ("QED"), which 14 contrary to the express provisions of the 4/11/2002 Order - was totally owned and

15 controlled by the Debtor's insiders.

16 Thus, Plaintiffs effectively stole the Properties and utilized them for their 17 own benefit in flagrant violation of

the 4/11/2002 Order. (To avoid any

1 g implicanon that "SLC, LLC ever existed, Defendants shall hereinafter refer to that 19 company as the "Sham LLC." - See footnote 1, supra).

20 QED was not subject to the AP A, nor any of the procedures set forth in the 21 4/11/2002 Order for protecting and exploiting the Properties and paying the 22 proceeds of

that exploitation to Stan Lee Media, Inc's creditors and shareholders.

23 Indeed, Plaintiffs further violated the provisions of 4/1 i /2002 Order prohibiting a 24 transfer of the assets from the acquiring entity by having QED convey the

25 Properties to another entity - Plaintiff POW! Entertainment, Inc., a Delaware 26 corporation, which was also owned and controlled by the Debtor's insiders.

27 The identity of QED's officers demonstrates Plaintiffs' fraudulent scheme as 28 the chart below shows:

8

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 11 of 27

of Offcer

Name

1

Position at Stan Lee Media

Position at POW! as of November 2001

2 3

Stan Lee

Chief Creative Officer & Chairman

Chief Creative Officer & Chairman

Gil Champion

Chief Operating Officer

President & Chief Operating Officer

Junko Kobayashi

Controller, Debtor in

Chief Financial Officer

4 5

6 7 8

9 In addition, plaintiff

Possession Representative

POW!, published and continues to publish on its

10 website the following information:

11 "Gil Champion, President. . . Prior to joining the Company (POW!J, he 12 was COO of (Stan Lee Media, Inc.J from July 1999 until it terminated operation in

13 about June of2001. (Stan Lee Media, Inc.J filed for bankrptcy protection in

14 about January 2001, and has since ceased all operations. From about June of 2001 15

until the formal creation of (POW!J in November 2001 Mr. Champion worked to

16

form (POW!J and to start the development of various (POW!) projects."s

17

18

"Stan Lee, Founder, Chairman and Chief Creative Officer of POW! Wonder)

Entertainment. . . During 2001, Stan formed POW! (Purveyors of

19 Entertainment, with producer Gill Champion and attorney Arthur Lieberman. A 20

company unrelated to Marvel which has been active in creating a number of new

21

projects that are in various stages of development.',6

22 23

"Junko Kobayashi, CFO, . . . Prior to joining POW! Entertainment, she

was controller of SÚû Lee Media, Inc. from January 2000 until it terminated

24 25 5 Copy of

the website material published by POW! on its official website at

26 powentertainment.com is attached as Exhibit G to the Sheppard Dec!. This

27 information is also contained in Exhibit H to Sheppard Dec!, which is a POW!'s Rule 15c-2-11 SEC disclosure. 28 6 Id.

9

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 12 of 27

1 operations in June 2001 where she was in charge of preparing financial 2 information for SEC purposes.',7

3 In an attempt to sweep their misfeasance under the rug, Plaintiffs contend

4 that they have fully complied with all of the provisions, terms and conditions of the the Properties

5 4/11/2002 Order. On the i:ontrary, aside from authorizing a sale of

6 to a specific entity, the 4/111 2002 Order also requires that payments for the

7 transfer are to be made first to Stan Lee Media, Inc.'s creditors and thereafter to

8 Stan Lee Media, Inc.8 In this regard, Plaintiffs fail to provide any evidence that 9 QED paid anything to either the creditors or Stan Lee Media, Inc. i 0 The Order further prohibits the entity that received the Properties from

11 assigning the Properties to any other person or entit/, or conducting any other

the creditors and Stan

12 business except exploiting the Properties for the benefit of

13 Lee Media, Inc.10 Plaintiffs have provided no evidence that QED or POW! 14 comport with that provision of

the Order, and cannot since the purpose of

QED

15 and POW! is to enrich those who absconded with the Properties.

16 To the extent that QED and/or POW! attempt to rely upon the purported 17 assignment of copyrights executed by Junko Kobayashi dated July 31, 2006

18 (Plaintiffs' Ex. 7J, such assignments were likewise executed and recorded without

19 any authority of the Bankrptcy Court. As she admits in her declaration dated 20 September 10, 2007, Ms. Kobayashi was the appointed "authorized 1 I In 21 representative" of Stan Lee Media, Inc., during the bankruptcy proceedings.

the 4/11/ 2002 Order and

22 that capacity, Ms. Kobayashi had full knowledge of

23

24 7 Id. 25 8 AP A, Plaintiffs' EX.6 9 APA, Plaintiffs' Ex.6, Article 7, Sections 7.6 and 7.9 26

10 APA, Article 3, i13.1

27

i i Declaration of Junko Kobayashi dated September 10, 2007 (Exhibit 20 to 28 Plaintiffs' Motion fry.. Summary Adjudication J , at i1 3 10

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 13 of 27

1 further owed fiduciary obligations to Stan Lee Media, Inc., the Bankruptcy Court,

2 the bankrptcy trustee, the creditors committee and Stan Lee Media, Inc.'s 3 shareholders.

4 Nevertheless, while the Bankrptcy Case was stil pending, Ms. Kobayashi 5 became the Chief

Financial Officer of

POW! Entertainment, Inc., the parent

6 company of QED Productions, LLC. 12 In addition, during the pendency of the

7 Bankrptcy Case, Ms. Kobayashi had no authority to contravene the 4/11/2002 8 Order, which specifically authorizes only one transfer of the Properties - from Stan 9 Lee Media, Inc to the Sham LLC. Thus, the unlawful transfer of the Properties

10 occurred while the Bankrptcy Court, the creditors, the Trustee, and Stan Lee 11 Media, Inc.'s shareholders were relying on a sworn declaration that no transfer of 12 the Properties would benefit insiders. Furthermore, all of the transactions occurred

13 while Stan Lee Media, Inc. was under bankruptcy protection and thus violated the 14 automatic stay.

15 C. Plaintiffs' Sham Allegations Regarding the 4/11/2002 Order 16 Revealingly, in their initial complaint in this action, Plaintiffs alleged that 17 the Sham LLC purchased the Properties from Stan Lee Media, Inc., and that the

i 8 Sham LLC thereafter assigned all rights to the properties to Plaintiff QED.13 This

19 was obviously false. The Sham LLC was never formed by Stan Lee. 14 Instead,

20 soon after Plaintiffs' misconduct was discovered, the company was formed by 21

22 23

24 25

26 27 28

12 Copy of

the website material published by POW! on its official website at powentertainment.com is attached as Exhibit G to the Sheppard Decl. This information is also contained in Exhibit H to the Sheppard Decl, which is POW!'s Rule 15c-2-1 1 SEC disclosure. 13 Plainttff's Original Complaint at ~ 14. 14 Copies of the Statc of California Division of Corporations records on SLC, LLC,

a California limited liability company have been previously fied with this Court as Exhibit A to the Declaration of Sean P. Sheppard (the "Sheppard Decl.") in support of Defendants' pending Motion for Summary Judgment filed herein on August 2007.

11

Cas 2:07 -cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 14 of 27

1 Defendant Douglas Cogan in December of 2006 in order to highlight Plaintiff s 15 2 fraudulent represent7,tions to the Bankrptcy Court.

3 Thus, Plaintiffs radically amended their initial complaint to allege that Stan

4 Lee Media, Inc. directly assigned the Properties to QED. However, Plaintiffs fail 5 to explain or even note that this assignment occurred on July 31, 2006 (Plaintiffs'

6 Ex. 7) - over four years after the deadline for the transfer to the Sham LLC under 7 the 4/11/2002 Order. (Plaintiffs have yet to explain why they waited four years to

8 make this transfer, perhaps because the obvious reason is that Plaintiffs wanted 9 everyone to forget about the 4/11/2002 Order before they violated it.) i 0 Plaintiffs further completely changed their averments regarding the Sham

11 LLC so that they now allege that Plaintiff Stan Lee himself, purportedly acting on

12 behalf of a limited liability company that he "anticipated" forming, entered into the

i 3 AP A. Plaintiffs then use the passive voice in averring as follows in paragraph 51 14 of

the SAC:

15 It was subsequently decided that the company purchasing the assets 16 would not be named SLC, LLC (i.e., the Sham LLCJ, as Stan Lee's

17 name was already associated with Stan Lee Media, Inc., a company 18 which was then in bankruptcy and had been the subject of many i 9 unfavorable media articles because of the wrongful and criminal acts

20 committed by Peter Paul and others which resulted in losses of many 2 i millions of dollars by numerous people and companies.

22 Consequently, Stan Lee did not want his name or persona to be 23 directly associated with the company that would be purchasing those

24 properties from Stan Lee Media, Inc., so it was decided that a

25 different name would be used, not a corporate name using Stan Lee's 26 name or initials, such as the Sham LLC. Instead, Plaintiff QED, a 27

28 15Id. 12

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 15 of 27

I wholly-owned subsidiary of POW!, acquired the Properties from

2 (Stan Lee Media, Inc.) 3 (emphasis added) 4 Defendants have previously demonstrated that Plaintiffs' liberal use of the

5 passive voice and their fanciful story about their unauthorized decision to drop the

6 Sham LLC are inherently implausible because: (a) as Plaintiffs themselves 7 repeatedly assert in virtally every paper they file with this Court and in non

8 sequitur statements in oral argument in response to this Court's questions, an 9 important aspect of

the APA is that Stan Lee's name become associated with the

10 Properties; and (b) no ordinary person would associate the initials "SLC, LLC"

11 with Stan Lee. 12 However, in bringing the instant motion, Plaintiffs themselves have 13 produced the "smoking gun" of their own fraud and intentional misrepresentations i 4 to the Bankruptcy Court and to this Court regarding the Sham LLC and their

15 premeditated theft of Stan Lee Media, Inc.'s Properties. Specifically, Plaintiffs' 16 Exhibit 18 - the Membership Purchase and Employment Agreement dated

17 November of2001 between plaintiffs Stan Lee and POW! (the "MPEA")18 demonstrates that weeks before the motion to confirm the AP A, and months before

19 the 4/11/02 Order, Plaintiffs had planned to breach the Order and betray Stan Lee i

20 Media, Inc.'s creditors and shareholders by transferring the Properties to QED so 21 that Plaintiffs could exploit them for their own benefit.

22 The MPEA - executed in November of2001- shamelessly identifies QED 23 as an entity "formed to receive the intellectual property from Stan Lee Media, Inc." 24 (p. 42 of 44 of

Plaintiffs' Ex. i 8) Moreover, the MPEA delineated how Stan Lee

25 himself would be handsomely rewarded with a generous salary of what appears to 26 be at least $1,250,000 per year for life, and five milion units of ownership in

the Creditors' claims

27 QED, ifhe obtained the Properties for QED free and clear of

28 and the rights of Stan Lee Media, Inc.' s shareholders. (Id., p. 41-42 of 44) In

13

Cas 2:07 -cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 16 of 27

POW! "all right title and

1 addition, under the MPEA, Stan Lee granted to plaintiff

2 interest that Stan Lee may have in any income arising from the ownership of a

3 Membership interest in QED Productions LLC ("QED")." Thus, Plaintiffs had the Properties - despite

4 long planned on creating POW! as the ultimate recipient of

5 the strict prohibition in the 4/11/2002 Order against any assignment of the

6 Properties to any other person or entity. See APA, Art. 3, iJ3. 1, Plaintiffs Exh.6,

7 which is Exhibit A to the 4/11/2002 Order (Plaintiffs Exhibit 5).

8 The MPEA further demonstrates that Plaintiffs intentionally violated the 9 provisions in the 4/11/02 Order requiring that the Properties be conveyed to a

10 special purpose California limited liability company which would be remote from 11 Stan Lee Media, Inc.'s officers and directors, and would exploit the assets for the

12 benefit of the creditors and shareholders. (Plaintiff s Exhibit i 8) The MPEA shows 13 that the Properties would be transferred from QED to POW!, and would be

14 exploited for the benefits of Stan Lee, Stan Lee's personal attorney Arthur

15 Lieberman, Gil Champion - a previous plaintiff in this action, and other 16 "investors" in POW! Nothing is provided for Stan Lee Media, Inc.'s creditors or

17 shareholders. 18 Accordingly, Plainti ffs' averments that they transferred the Properties to

19 QED because "it was decided" after the 4/1 1/02 Order that the Sham LLC was not 20 a good "name" for a company are revealed as complete fabrications. The truth is

21 that Stan Lee and his cohorts perpetrated a detailed fraudulent scheme to obtain the 22 Properties from Stan Lee Media, Inc. and the company's creditors free and clear of

23 the creditors' claims. The plan would have succeeded without detection, but for 24 the diligence of a fe',v of Stan Lee Media, Inc.'s shareholders, whom Plaintiffs now

25 attempt to vilify with vitriolic and scandalous allegations.

26 D. Plaintiffs' Perjured Representations to the Bankruptcy Court 27 Three weeks after Stan Lee executed the MPEA, Stan Lee - on behalf of the 28 Debtor in Possession - filed in the Bankruptcy Court a motion for an Order to

14

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 17 of 27

I Approve Sale of Assets and to confirm the AP A. That motion represented to the 2 Bankruptcy Court that the Properties were to be conveyed to the Sham LLC, even 3 though Stan Lee knew that he would cause the assets to be conveyed to QED and 4 then to POW!. 5 Specifically, the Motion stated that "the Debtors shall transfer the Creative

6 Assets tb the ShamI:LC (the "Purchaser")." Thus, the APA identified the Sham

7 LLC as the "Purchaser" throughout, and Plaintiffs' attempts to make Stan Lee the 8 "purchaser" are mere obfuscation, if not outright dissembling. In fact, the entire

9. AP A - as negotiated with Stan Lee Media, Inc.' s creditors and set forth in the

i 0 4/11/2002 Order - is grounded upon the purchaser of Stan Lee Media, Inc.'s assets 11 being the Sham LLC. Moreover, on page six of the AP A, Stan Lee specifically

12 (and falsely) warranted and represented to the Bankruptcy Court that the Sham

i 3 LLC "is a duly fonned limited liability company organized under the laws of

14 California." (emphasis added) This statement is nothing less than a direct 15 misrepresentation to the Bankruptcy Court that the Sham LLC had already been 16 formed as of

the date of

his signing of

the APA, January 20, 2002.

17 Further, the last paragraph of a supporting declaration attached to the motion 18 made the following representations and warranties to the Bankrptcy Court: 19

20 21

22 23

24 25

26 27

(TJhe proposed sale confers no special or undisclosed benefit upon any insider of the Debtors, other than Stan Lee's income from the continued exploitation of the Creative Assets by Stan Lee through the Purchaser. There is no distribution of any kind whatsoever to any equity holder, officer or Director of the Debtors which is made part of the Debtors wil receive

the proposed sale to Purchaser. No insider of

any special treatment in connection with the proposed sale. Finally, there is no fraud involving the Purchaser or the Debtors and no collusion between purchaser and any other purchasers or the Debtors. (Ex. 3, pp. 49-50 of 69; emphasis added)

28

15

Cas 2:07 -cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 18 of 27

1

Nowhere in the Motion, the supplement to the Motion, the APA or the

2

several amendments to the APA do the plaintiffs ever mention QED or POW! -

3

even though Plaintiffs planned from the onset that those companies would obtain

4

Stan Lee Media, Inc.'s treasured Properties.

5

6 III. ARGUMENT

7 A. Plaintiffs' Incorrect Legal Standard 8 In evaluating any motion for summary judgment, the Court should 9 determine, viewing the evidence in the light most favorable to the nonmoving

material fact. Jesinger v. Nevada

10 party, whether there are any genuine issues of

11 Federal Credit UniC!.n, 24 F.3d 1127, 1130 (9th Cir. 1994) "Summary judgment is

12 appropriate if, viewing the evidence in the light most favorable to the nonmoving 13 part, (a) 'the district court correctly applie(sJ the relevant substantive law' and (b)

14 there are no genuine issues of material fact in dispute." Clark v. City of Lakewood,

15 259 F.3d 996,1004 (9th Cir. 2001).

16 Plaintiffs repeatedly make the odd contention that, under Alaska Wildltfe

17 Allance v. Jensen, i 08 F.3d 1065, 1068-69 (9th Cir. 1997), Plaintiffs need not i 8 provide evidence to support their bare factual allegations at the summary judgment 19 stage. Not surprisingly, this bizarre statement of the law of standing - which goes 20 to the essence of a federal court's subject matter jurisdiction - has never been cited

21 by the Ninth Circuit. Moreover, the Ninth Circuit based the dicta in Alaska 22 Wildlife the Supreme Court case of Lujan v. Defenders of Wildlife, 504 U.S. 555, 23 560-61 (1992), which holds the exact opposite. Specifically, the Supreme Court

24 in Lujan states that as follows: 25

26 27

The party invoking federal jurisdiction bears the burden of

establishing these elements. (citations omittedJ Since they are not mere pleading requirements but rather an indispensable part of the

28

16

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 19 of 27

1

plaintiffs case, each element must be supported in the same way as

2

any other matter on which the plaintiff

3

with the manner and degree of evidence required at the successive

4

stages of the.

5

general factual allegations of injury resulting from the defendant's

6

conduct may suffice, for on a motion to dismiss we "presum( e J that

7

general allegations embrace those specific facts that are necessary to

8

support the claim." (citation omittedJ In response to a summary

9

judgment motion, however, the plaintiff can no longer rest on such

bears the burden of

proof,

i.e.,

Ftigation. (citations omittedJ At the pleading stage,

10

"mere allegations," but must "set foiih" by affidavit or other evidence

11

"specific facts," Fed.Rule Civ.Proc. 56(e), which for purposes of

12

summary judgment motion will be taken to be true. And at the final

13

stage, those facts (if controverted) must be "supported adequately by

14

the evidence adduced at triaL." (Citation omittedJ

15

16

the

(emphasis added)

Thus, the dictum in Alaska Wildlife is not good law. Indeed, the Ninth

17

Circuit recently followed Lujan in D'Lil v. Best Western Encina Lodge & Suites,

18

538 F.3d 1031,1036 (9th Cir. 2008), stating as follows:

19

20 21

22 23

24 25

26

A party invoking federal jurisdiction has the burden of establishing that it has satisfied the "case-or-controversy" requirement

of Article III of the Constitution; standing is a "core component" of that requirement. Lujan, 504 U.S. at 560, 112 S.Ct. 2130. In order to

meet its burden of establishing standing, a party must show three things:

First, (itJ must have suffered an injury in fact-an invasion of a

legally protected interest which is (a) concrete and particularized, and

27 28

(b) actual or I!lminent, not conjectural or hypotheticaL. Second, there

17

Cas 2:07 -cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 20 of 27

1 must be a causal connection between the injury and the conduct 2 complained of... Third, it must be likely, as opposed to merely 3 speculative, that the injury wil be redressed by a favorable decision. 4 Thus, under established law, Plaintiffs as the parties invoking federal 5 jurisdiction bear the burden of establishing the following elements: (1) that 6 Plaintiffs have suffered an injury in fact-an invasion of a legally protected interest

7 which is (a) concrete and particularized; and (b) actual or imminent, not 8 conjectural or hypothetical; (2) that there is a causal connection between the injury

9 and the conduct complained of; and (3) that it is likely the injury can be redressed

10 by a favorable decision. 11

As shown above, Plaintiffs utterly fail to meet their burden on the first

12

element. Moreover, Plaintiffs cannot satisfy the third element, which requires that

13

they show that it is likely that they will prevail on the merits. Thus, all of their

14

claims must be dismissed for lack of standing.

15

B.

Plaintiffs Wil Not Be Able To Prove That They Are The Legal

16

and Rightful Owners Of The Properties and Rights Asserted, and

17

Therefore Have No Standing

18

19

20 21

1.

Plaintiffs Have Burden of Proving Ownership of the Properties

Plaintiffs' ownership of the Properties constitutes an essential element of all of Plaintiffs' claims, and Plaintiffs' Federal Question claims for relief in particular. their causes of action that

16 Thus, Plaintiffs must prove as an element of each of

22 23

24 25

16 E.g., First Claim for Relief-Copyright Infringement (in order to succeed in a copyright infringement claim, "a plaintiff must show that he or she owns the the work." Cavalier v.

copyright and that defendant copied protected elements of

26 Random House, Inc., 297 F.3d 815, 822 (9th Cir. 2002) (citing Shaw v. Lindheim,

919 F.2d 1353,1356 (9th Cir. 1990))); Second Third and Fourth Claims for

27

Relief - Trademark Infringement (15 U.S.c. § 1125(a)(l )(A) and (B) requires that

28

plaintiffs are likely to be damaged by the alleged infringement); Fifth Claim for Relief-Cybersquatting The "deliberate, bad-faith, and abusive registration of 18

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 21 of 27

1 they are the actual owners of the Properties and the other assets at issue, rather than 2 mere hypothetical owners; and that they are likely to prevail on their claims. 17 3 .1

5

6 Internet domain names in violation of the rights of trademark owners." Virtual 7 Works, Inc. v. Volkswagen of Am., Inc., 238 F.3d 264,267 (4th Cir. 2001) (quoting 8 of

S.Rep. No. 106-140, at 4 (1999))); Sixth Claim for Relief-Common Law Right Publicity (Wendt v. Host Intern., Inc., 117 F.3d 1427 (9th Cir. 1997), stating that a common law cause of action for appropriation of name or likeness may be

9 pleaded by alleging 1) the defendant's use of the plaintiffs identity; 2) the 10 11

appropriation of plaintiffs name or likeness to defendant's advantage, commercially or otherwise; 3) lack of consent; and 4) resulting injury; Id. (citing Torts § 117 804-07 (4th ed. 1 97 1 )); Seventh Claim for Relief Civil Code §3344 (in addition to the elements for a common law cause of action for misappropriation of name and likeness, Civil Code §3344 requires knowing

Prosser, Law of

12 13

misappropriation. Fleet v. CBS, Inc., 50 CaI.AppAth 1911,58 CaI.Rptr.2d 645

14 (1996)); Eighth Claim for Relief-Intentional Interference with Contractual Relations (Pacifc Gas & Electric Co. v. Bear Stearns & Co., 50 CaI.3d 1118, 79 i

15

must plead to state a cause of action for intentional interference with contractual relations are (1) a

P.2d 587 (CaL. 1990)(finding that the elements which a plaintiff

16

17 valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption 18

of

the contractual

the contractual relationship; (4) actual breach or disruption of

19 relationship; and (5) resulting damage. Ninth Claim for Relief-Intentional

Interference with Prospective Economic Relations (CRST Van Expedited, Inc. v. 20 Werner Enterprises, Inc., 479 F.3d 1099,1107-8 (9th Cir. 2007)(stating that the 21

elements of interference with prospective economic advantage resemble those of intentional interference with contract. They are: "(1) an economic relationship

22 between the plaintiff and some third party, with the probability of future economic

benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) 24 actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant." Korea Supply v. Lockheed

23

25

Martin Company, 29 CaL. 4th 1134,1153 (2003) (citation and internal quotation

26 marks omitted)). 27 17 Defendants Belland and Petrovitz have submitted their Motion To Dismiss raising the same standing issues, among other defects in the SAC. Their Motion to 28 Dismiss is also scheduled for hearing on January 5, 2009. 19

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 22 of 27

1

2 2. Plaintiffs' Violations of the 4/11/02 Order Voids Any Ownership of

3 the Properties 4 Plaintiffs' only claim to ownership of the Properties is the 4/1 1/02 Order.

5 However, under the express terms of the Order, Plaintiffs cannot own the 6 Properties unless specifically permitted by the Bankruptcy Court and Plaintiffs do

7 not have this permission. In the face of the legal impossibility of their ownership 8 claims, Plaintiffs have alleged (after making entirely different averments in the

9 initial complaint) that they can violate the provisions of the 4/11/2002 Order

10 because the only "real" difference between the Sham LLC and QED is the name of i i the two companies.18 Plaintiffs further contend that the only material requirement

12 for the Sham LLC is that it be controlled by Stan Lee himself.

13 As shown above, Plaintiffs' contentions are false. The 4/11/02 Order 14 required that the entity that received the Properties be a restricted purpose 15 company that would exploit the Properties solely for the benefit of Stan Lee

16 Media, Inc.'s creditors and shareholders, and that no insider of Stan Lee Media,

i 7 Inc. could be connected with the company. Neither QED - which first unlawfully 18 acquired the Properties - nor POW! - which received the Properties from QED

19 with no obligation to exploit the properties for anyone's benefit but POW!'s 20 owners - could acquire the Properties without obtaining Bankrptcy Court 21 approval, and approval from all interested parties.

22 By failing to obtain this authorization, and by using the Properties for 23 themselves without conferring any benefit upon Stan Lee Media's creditors and the debtor's assets

24 shareholders, Plaintiffs' actions are no different than a theft of

the

25 during pending bankrptcy proceedings. Thus, the Plaintiffs' transfers of

26 Properties are void. Moreover, as now revealed by the MPEA, Plaintiffs' 27

28 IS Id. at p. 9, ii 23, lines 24-26.

20

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 23 of 27

1 proffered justifications for their ilegal acts constitute a continuing

..1 '¡,-.

2 misrepresentation to this Court.

3 Under the 4/11/2002 Order and the AP A, the express and exclusive purpose

4 of the Sham LLC was for Stan Lee to use his good faith best efforts to exploit the 5 Properties and generate revenues to pay for the Properties within an 18 month 6 period, pursuant to detailed benchmarks, all of which the Plaintiffs completely

7 circumvented. Moreover, the 4/11/2002 Order granted Stan Lee Media, Inc.'s 8 creditors and the Stan Lee Media, Inc. itself certain reconveyance rights that were

9 to be made part of the closing documents and the security agreements. 19 i 0 Accordingly, Plainti ffs' purported transfer of the Properties from a debtor-

i 1 in-possession, during a pending Bankruptcy Case was still pending, without any 12 authority to do so, is an involuntary and unauthorized transfer. Involuntary 13 transfers of assets, particularly those which are effectuated by persons having full

14 knowledge ofajudge's order to the contrary, are governed by 11 U.S.c. § 362, 15 which specifically states that the fiing of a bankrptcy petition, as in the case of

16 Stan Lee Media, Inc. "operates as a stay, . . . , of - any act to obtain possession of 17 property of the estate or of property from the estate or to exercise control over 18 property of

assets in violation of 11 U.S.c. §

the estate.',20 Involuntary transfers of

law, any purported assignment of

19 362 are void ab inito.21 Thus, as a matter of

the

20 21

19 Id.

20 See 1 i U.S.c. § 362.

22

21 11 U.S.c. § 362 states, in pertinent part, as follows: "(a) (eJxcept as provided in

23

subsection (b) of this section, a petition fied under section 30 i, 302, or 303 of this the Securities Investor

title, or an application fied under section 5(a)(3) of

24 25

Protection Act of 1970, operates as a stay, applicable to all entities, of-- . . . (3) any act to obtain possession of property of the estate or of property from the estate or the estate; see In re Schwartz, 954 F.2d 569,

26 to exerclse control o,rer property of

570 (9th Cir. 1992) (holding that "(0 Jur decision today clarifies this area of the law

27 by making clear that violations of the automatic stay are void, not voidable." 28 (citing see In re Wiliams, 124 B.R. 311,316-18 (Bankr.C.D.CaI.I991). In re Schwartz also states that the Ninth Circuit has stated generally that violations of 21

Cas 2:07 -cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 24 of 27

1 assets without Bankrptcy Court approval was void from its inception and had no

2 legal effect. As a result, Stan Lee Media, Inc. continues to own all rights, interest 3 and copyrights in and to the Properties and Plaintiffs have absolutely no standing

4 to be bring suit on those rights. 5

C.

6

The Claims Relating to Stan Lee's Name And Likeness

7 Have No Merit For The Same Reasons 8 Plaintiffs' purported rights to use the name, likeness, mark and signature of 9 Stan Lee are based entirely upon State Law. The 4/11/ 2002 Order and/or the

10 MPEA, i.e., purported agreement between Stan Lee and POW!/QED. Once again, 11 Plaintiffs' alleged ownership of

the rights to use the name and likeness of Stan Lee the State Law

12 are material allegations änd necessary prirnafacze elements of

13 Claims for Relief.

14 For the same reasons set forth above, plaintiffs are the lawful owners of

i 5 neither the rights to the Properties nor the rights to the name and likeness of Stan 16 Lee.

17 Plaintiffs' have also claimed, as a separate basis for ownership of the name 18 and likeness assets that Stan Lee has entered into an agreement to allow POW! and

19 QED to exploit the Stan Lee trademark, Stan Lee's name and likeness, and Stan

20 Lee signature in connection with the exploitation of certain of the assets at issue.

21 Plaintiffs must be able to prove, as an element of each of these causes of action,

22 that they own the assets at issue. 23

24 25

26 the automatic "void," e.g., proceedings In re Shamblin, 890 F.2d Cir. i 989) forstay the are holding thatciting, "rjJudicial in violation of 123, (the J125 (9th 27

automatic stay are void."); and In re Stringer. 847 F.2d 549, 55 i (9th Cir. i 988)

28

(holding that "(a lny proceedings in violation of the automatic stay in bankruptcy are void.").

22

Cas 2:07 -cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 25 of 27

1 In this regard, on October 15, 1998, Stan Lee executed an assignment

2 conveying to Stan Lee Media, Inc., forever, all right, title and interest Stan Lee had 3 then and into the future, in his name, his likeness, trademarks, symbols, logos and 4 designs. (Plaintiffs' Ex. 9) The October 15, 1998 Assignment was referenced in

5 the 4/11/ 2002 Order by way of the Agreement incorporated therein, which

6 specifically reserved unto Stan Lee Media, Inc. "(aJny property or interests in 7 property no expressly included in Section 1.1.',22 the First

8 Furthermore, Plaintiffs expressly averred in paragraph 5 i of

9 Amended Complaint that, pursuant to the 4/11/2002 Order and the October 15,

10 i 998 Agreement, "POW! and QED have the right to exploit the Stan Lee

11 trademark, Stan Lee's name and likeness, and San Lee's signature in connection

12 with the exploitationof the Properties." Thus, given Plaintiff s violations of the 13 4/11/2002 Order, Stan Lee Media, Inc. retains that right, and Plaintiffs have no

14 standing to bring suit on such rights. Indeed, Stan Lee executed the AP A which 15 was incorporated into the 4111/ 2002 Order, and acknowledged that all things not

16 specifically conveyed to the Sham LLC, were retained by Stan Lee Media, Inc. 17 In addition, Plaintiffs' assertions as to the invalidity of the October 15, 1998 18 Agreement make no sense, and certainly fail to meet Plaintiffs' burden of 19 establishing standing to bring suit on the name and likeness rights. To wit,

20 Plaintiffs contend that a mere few days before Stan Lee Media, Inc. filed for 21 bankruptcy, Stan Lee - at that time the person who exercised absolute control over

22 Stan Lee Media Inc. - declared that the October 15, 1998 Agreement was

23 "terminated."

24 In other words, well within the ninety day period before bankrptcy filing in 25 which virtally all transfers of a debtor's assets are a "voidable preference" under 26 27 28

22 APA, Art. I, Section 1.2 "Excluded Assets," (Plaintiffs' Ex.18)

23

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 26 of 27

1 11 U.S.c. §547(b), Stan Lee causes the Debtor to transfer valuable assets back to 2 him without consideration. 3 It is further interesting to note that Stan Lee does not assert that he declared

4 the Agreement void or rescinded. Thus, the assignments Stan Lee made pursuant 5 to the contract were not voided, and Stan Lee must show he is entitled to rescind 6 those assignments in order to meet his burden of showing standing to sue on the

7 rights. 8 In light of all of the above, the 4/111 2002 Order prohibits any agreement

9 with POW! and/or QED or any other person or entity, to utilize Stan Lee's name, 10 likeness, persona, signature, and/or trademarks, and no authority of any kind exists

11 allowing such a transaction. Thus, any purported claim of ownership based upon 12 agreements by and between the Plaintiffs is without merit. Accordingly, all causes

13 of action related to claims asserted by Plaintiffs and which are based upon 14 Plaintiffs' purported ownership of same similarly lack merit, and summary 15 judgment should be awarded in favor of defendants on all such claims. 16 17 18

19

20 21

22 23

24 25

26 27

28

24

Cas 2:07-cv-00225-SVW-SS Document 118 Filed 12/09/2008 Page 27 of 27

1

2 V. CONCLUSION 3 The Defendants respectfully request that this Court grant summary judgment

4 in their favor and against the Plaintiffs on all claims for relief. 5

6 DATED: December 9, 2008 7 8

O'DONNELL & ASSOCIATES PC PIERCE O'DONNELL JACK G. CAIRL

9

10

By: lsi Jack G. Cairl

11

Attorneys for Defendants JAMES NESFIELD, A.F. GALLOWAY and DOUGLAS C. COGAN

12 13

14 15

16 17 18

SIMKE, CHODOS, & SASAKI JUDITH M. SASAKI DAVID A. P ASH

By: lsi Judith M. Sasaki Attorneys for Defendants CHRISTOPHER BELLAND and JOHN PETROVITZ

19

20 21

22 23

24 25

26 27 28

25