Stan Lee Media V Stan Lee Motion For Summary Judgment Detailing Lee's Bankruptcy Frauds

THE ANDERSEN FIRM SEAN P. SHEPPARD (admitted Pro Hac Vice) 1200 Plantation Island Dr. S, Ste. 220 St. Augustine, FL 32080 Telephone: (904) 471-5040 Fax: (904) 461-9312 O’DONNELL & ASSOCIATES PIERCE O’DONNELL (State Bar No. 081298) JACK G. CAIRL (State Bar No. 105335) 550 South Hope Street, Suite 1000 Los Angeles, CA 90071 Telephone: (213) 347-0290 Fax: (213) 347-0299 Attorneys for Defendants JAMES NESFIELD, A.F. GALLOWAY DOUGLAS C. COGAN UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA QED PRODUCTIONS, LLC, et al., Plaintiffs, v. JAMES NESFIELD, et al., Defendants.

CASE NO. CV 07-00225 SVW (SSx) [Hon. Stephen V. Wilson] DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT OR SUMMARY ADJUDICATION [Fed. R. Civ. P. 56] [Defendants’ Memorandum of Points and Authorities, Statement of Genuine Issues; Supporting Declarations, and Compendium of Exhibits filed concurrently herewith]

I.

INTRODUCTION

The defendants are entitled to summary judgment on two (2) bases; (1) plaintiffs do not have standing to bring any claim asserted in the First Amended Complaint (hereinafter “FAC”) due to the fact that none of the plaintiffs is the legal owner of the rights and/or properties being sued upon; and (2) with regard to any claims brought derivatively by plaintiff, Gill Champion, purportedly on behalf of Stan Lee Media, Inc., a Colorado corporation (hereinafter “SLM”), said plaintiff has not properly and adequately pled any causes of action upon which relief may be granted, and cannot fairly and adequately represent the interests of SLM shareholders due to the fact that he is also the acting President and Chief Operating Officer of plaintiff, POW! Entertainment, Inc. (hereinafter “POW!”), which is the parent company of plaintiff, QED Productions, LLC (hereinafter “QED”). II.

THE PLEADINGS

The plaintiffs have filed an eight (8) count complaint against the defendants. The plaintiffs admit in their FAC that (1) SLM, by and through its predecessor in interest, Stan Lee Entertainment, Inc., was founded in 1998 for the purpose of acquiring certain of those assets at issue in this pending action,1 (2) that SLM was formed through a reverse merger in 1999 and acquired the assets of its predecessor, Stan Lee Entertainment, Inc.,2 (3) that when SLM was formed through a reverse merger in 1999 and acquired the assets of its predecessor, Stan Lee Entertainment, Inc., those assets . . . did include ownership and copyright of any super-hero characters or other intellectual properties created and developed by Stan Lee thereafter, in connection with this employment at SLM,3 (4) that on February 16, 2001, SLM filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court, Central District of California, Case No. SV-01-11329-KL, jointly 1

Plaintiffs’ FAC at ¶ 15. Id. at ¶ 19. 3 Id. at ¶ 19. 2

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administered with Case No. SV-01-11331-KL (hereinafter referred to as the “Bankruptcy Case”),4 (5) that the plaintiff, Stan Lee, on behalf of SLC, LLC, entered into an agreement with SLM, debtors-in-possession in the Bankruptcy Case, to acquire all rights to certain intellectual properties and produced entertainment projects, including properties known as The Accuser, The Drifter and Stan’s Evil Clone a/k/a Evil Clone (hereinafter referred to as the “Properties”),5 and (6) that the aforementioned agreement between Stan Lee (on behalf of SLC, LLC) and SLM was approved by Order of the Court in the Bankruptcy Case on or about April 11, 2002 (April 11, 2002 Order incorporating the agreement hereinafter collectively referred to as “April 11, 2002 Order” or “Judge Lax’s Order”).6 This Court should also consider the fact that in the initial complaint on file with this Court, the plaintiffs first falsely alleged that “SLC, LLC” purchased the Properties from the Debtors, and that “SLC, LLC” thereafter assigned all rights to the properties to Plaintiff, QED.7 As a point of fact and of record with the State of California Division of Corporations, “SLC, LLC” was never formed by Stan Lee.8 Instead, it was formed by defendant, Douglas Cogan (hereinafter “Cogan”) in December of 2006 to both highlight the fact that plaintiff, Stan Lee, had never done so and to preempt any effort by said plaintiff to attempt to create SLC, LLC after the fact.9 The U.S. Copyright Office records regarding The Drifter and The Accuser copyrights clearly show that these assets were never conveyed by the Debtors to “SLC, LLC” as plaintiffs alleged in the original complaint, and that said Properties 4 5

Id. at ¶ 20. Id. at ¶ 21.

6

Id. See Plaintiff’s Complaint [Original Complaint] at ¶ 14. 8 Copies of the State of California Division of Corporations records on SLC, LLC, a California limited liability company have been submitted to this court for consideration on this motion as exhibits to the Declaration of Sean P. Sheppard. 9 Id. 7

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were never conveyed by “SLC, LLC” to QED.10 Instead, these assets are now alleged to have been assigned by SLM directly to QED on August 7, 2006.11 Notice should be taken of the fact that the conveyance is dated more than four (4) years after the date upon which such conveyance was ordered by Judge Lax to be effectuated to SLC, LLC.12 In their FAC, the plaintiffs have now completely changed their factual allegations and now allege that: “In or about February 2002, during the pendency of the Bankruptcy Case, plaintiff, Stan Lee, acting on behalf of a limited liability company that he anticipated forming, which at that time was tentatively referred to as SLC, LLC (that is, “Stan Lee Company”), entered into an agreement, as amended, to acquire from SLM, debtor-in-possession in the Bankruptcy Case, all rights to certain intellectual properties and produced entertainment projects, including properties known as The Accuser, The Drifter and Stan’s Evil Clone aka Evil Clone (sometimes referred to as “the Properties”), which were to be developed by a limited liability company with which Stan lee would be associated. . . . The Agreement regarding the sale by SLM of the Properties was approved by Order of the Court in the Bankruptcy Case on or about April 11, 2002.”13 Plaintiffs’ FAC then states as follows: “It was subsequently decided that the company purchasing the assets would not be named SLC, LLC, as Stan Lee’s name was already associated with Stan Lee Media, Inc., a company which was then in bankruptcy and had been the subject of many unfavorable media articles because of the wrongful and criminal acts committed by Peter Paul and others which resulted in losses of many millions of dollars by numerous people and companies. 10

Copies of the U.S. Copyright Office records on the purported assignment of copyrights from SLM to QED have been submitted to this court for consideration on this motion as exhibits to the Declaration of Sean P. Sheppard. 11 Id. 12 Id. 13 See Plaintiffs’ FAC at ¶ 21. -4-

Consequently, Stan Lee did not want his name or persona to be directly associated with the company that would be purchasing those properties from SLM, so it was decided that a different name would be used, not a corporate name using Stan Lee’s name or initials, such as SLC, LLC.

Instead, Plaintiff QED, a wholly-owned

subsidiary of POW!, acquired the Properties from SLM. The change of the name of the company acquiring the assets did not change any of the terms of the Agreement, as amended. On information and belief, the creditors of SLM knew of and did not object to the use of a different name of the company acquiring the assets.”14 Defendants have set forth ten separate and distinct affirmative defenses to which no reply or matters in avoidance have been filed by the plaintiffs. III.

STATEMENT OF FACTS A.

General Additional Facts

In addition to those facts admitted by the plaintiffs in their FAC, the following facts are not in dispute: On or about October 15, 1998, Stan Lee executed a general assignment in favor of SLM’s predecessor in interest, Stan Lee Entertainment, Inc., thereby effectively assigning to SLM all of Stan Lee’s right, title and interest, forever, in all of his creations, his name, his likeness, and other creative rights of any kind and from any source (hereinafter referred to as the “October 15, 1998 Assignment”). SLM operated a business and was publicly traded for a period of time. On or about February 16, 2001, SLM filed for bankruptcy protection pursuant to Chapter 11 in the Central District of California.15 The SLM bankruptcy was pending between February 16, 2001 and November 14, 2006, a period of almost five (5) years and nine (9) months.16 During the entirety of the bankruptcy proceedings, Stan Lee and Junko Kobayashi were the purported “representatives” and “fiduciaries” of SLM. In fact, plaintiffs allege that Junko 14

Id. at ¶ 22. Plaintiffs’ FAC at ¶ 20. 16 See Declaration of Sean P. Sheppard. 15

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Kobayashi was appointed by SLM’s board of directors to serve as “the authorized representative of SLM during the Bankruptcy Case.”17 B.

SLM Bankruptcy—Sale of Assets Order dated April 11, 2002

In proceeding to describe what happened during the SLM bankruptcy proceedings, it is helpful to break up the discussion into two subsections; first, what The Honorable Judge Kathleen T. Lax ordered to be done, and second, what the plaintiffs took it upon themselves to do. As the court will see, these are two very different things. (1)

What Judge Lax Ordered:

During the SLM bankruptcy, and of vital importance to the court’s decision in this case, The Honorable Judge Kathleen T. Lax, United States Bankruptcy Court Judge, Central District of California, San Fernando Valley Division, who was the judge presiding over the SLM bankruptcies, Case No. SV 01-11329 KT, jointly administered with Case No. SV 01-11331 KT, entered an order dated April 11, 2002, which authorized the sale of certain assets of SLM to a company by the name of SLC, LLC.18 The assets authorized to be sold by the April 11, 2002 Order are the same assets at issue in the plaintiffs’ pending FAC. The April 11, 2002 Order was entered as a result of a motion, a supplement to the motion and a notice of hearing, conformed copies of which have all been provided to this Court for consideration on this pending motion for summary judgment.19 As is clear from the motion, the supplement to the motion and the 17

Plaintiffs’ FAC at p. 10, ¶ 24, lines 15-16.

18

See generally copy of April 11, 2002 Order by The Honorable Judge Kathleen T. Lax, United States Bankruptcy Court Judge, Central District of California, San Fernando Valley Division, which was entitled “Order Granting Motion for Order to Approve Sale of Assets Free and Clear of Liens” filed with this court in support of this motion as an exhibit to the Declaration of Sean P. Sheppard. 19 See generally copies of “Notice of Motion and Motion for Order to Approve Sale of Assets Free and Clear of Liens; Memorandum of Points and Authorities; Declaration of Kenneth S. Williams in Support Thereof” dated November 27, 2001; “Notice of Hearing on Motion for Order to Approve Sale of Assets Free and Clear of Liens dated November 27, 2001; “Supplement in Support of Motion for Order to Approve Sale of Assets Free and Clear of Liens” dated January 21, 2002; all of which have been filed with this court in support of this motion as exhibits to the -6-

notice of hearing on the motion to approve the sale of the assets, all interested parties, as well as Judge Lax, were considering and ultimately approved the sale of the assets to SLC, LLC, a California limited liability company. Although the April 11, 2002 Order speaks for itself, there are several provisions worth highlighting for purposes of this motion. Specifically, the April 11, 2002 Order (1) authorized the agreement between Stan Lee, on behalf of “SLC, LLC”, and SLM, debtor-inpossession to be consummated; (2) authorized the sale of certain of SLM’s assets to an entity by the name of “SLC, LLC”, which entity was specifically represented by Stan Lee to be a California limited liability company;20 (3) involved not only Stan Lee, on behalf of SLC, LLC, but also involved the secured creditor by the name of Wild Brain, Inc. and the Official Committee of Unsecured Creditors; (4) not only limited the type of assets authorized to be sold, but also specifically designated the entity to purchase the assets; that being SLC, LLC, a California limited liability company;21 (5) required that the articles of organization reflect that SLC, LLC be a special purpose entity thereby expressly restricting the business of SLC, LLC to only the exploitation of the specific assets being sold and specifically prohibiting SLC, LLC from conducting any other business;22 (6) prohibited SLC, LLC from assigning, conveying, encumbering, or otherwise transferring the assets to anyone without the express written consent of SLM;23 (7) required that any purported assignment or transfer of the assets at issue be approved by the bankruptcy court. It is clear from the very specific instructions contained within Judge Lax’s Order, that the requirements of Stan Lee were not optional, and that Stan Lee did not have any authority whatsoever to unilaterally change Judge Lax’s Order and substitute his Declaration of Sean P. Sheppard. 20 April 11, 2002 Order, Agreement Article 3, ¶ 3.2, which has been filed with this court in support of this motion as exhibit to the Declaration of Sean P. Sheppard. 21 Id. 22 Id. at Agreement, Article 3, ¶ 3.1. 23 Id. at Agreement, Article 7, ¶ 7.9] -7-

own judgment based upon what he believed to be more convenient or more feasible. It goes without saying that the purpose behind seeking approval and authorization to sell assets during any bankruptcy is to ensure that no insider or equity holder of the debtor-in-possession wrongfully benefits from a particular transaction to the detriment of the creditors and the shareholders of the debtor-inpossession. In fact, in Judge Lax’s Order she specifically references findings, which are required in any such situation, whereby she found that (1) “the terms and conditions of the Sale Agreement is in the best interest of the Debtors and their estates”;24 “the terms of the sale of the Assets to Buyer [SLC, LLC] are the result of good faith and arm’s length negotiations between the Debtors, the Official Committee of Unsecured Creditors (the “Committee”), Wild Brain and Buyer, and the Debtors have determined . . . that the Assets should be sold to Buyer [SLC, LLC]. . . and that the consideration to be realized by the Debtors is fair and reasonable”;25 and (3) that “Buyer [SLC, LLC] has acted, and is acting, in good faith, and is therefore entitled to the provisions afforded to a good faith purchaser under 11 U.S.C. § 363(m).”26 Furthermore, it is clear from Judge Lax’s Order and the agreement incorporated therein were drafted with the intent of maintaining control over the manner in which these very valuable assets were being managed. 2.

What Actually Happened:

Even though Judge Lax and all of the interested parties very apparently went through great effort to negotiate and finalize the terms and conditions of the April 11, 2002 Order, Stan Lee, by his own admission in the plaintiffs’ FAC, unilaterally and without any authority of any kind, decided not to close on the sale of the assets to SLC, LLC. In fact, Stan Lee never even set up SLC, LLC, even though for the approximately six (6) months from November of 2001 through April 11, 2002 he 24

Id. at Order, p. 3, lines 5-7. Id. at Order, p. 3, lines 10-19. 26 Id. at Order p. 4, lines 6-8. 25

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allowed the bankruptcy judge, trustee, creditors and all interested parties believe that he was doing so and/or had done so. Furthermore, on November 19, 2001 Stan Lee went so far as to sign a document that was filed with the court in support of the proposed sale of assets, warranting that SLC, LLC was, at the time of that filing, an existing limited liability company pursuant to the laws of the State of California.27 In short, there was never any closing involving SLC, LLC and never any transfer or sale of assets to SLC, LLC, as was specifically ordered by Judge Lax. Instead, the plaintiffs now allege in their FAC that Stan Lee caused the assets to be transferred and assigned to QED. The defendants are aware of only one documented transfer by SLM to QED, that being the fraudulent assignment of copyrights by Junko Kobayashi as the purported “authorized representative” of SLM to Gill Champion, as agent of QED. The date of said fraudulent assignments was August 7, 2006. Even assuming plaintiffs’ allegations to be true, the April 11, 2002 and agreement strictly prohibited such an assignment without the express written consent to such a change by all parties to the agreement.28 IV.

ARGUMENT

29

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" 27 28

Id. at Agreement, Article 3, Section 3.2. Id. at Agreement, Article 7, Sections 7.6 and 7.9.

29

Sicor Ltd. v. Cetus Corp., 51 F.3d 848, 853 (9th Cir.) # Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)$ 116 S.Ct. 170 (1995) 30 Jesinger v. Nevada Federal Credit Union, 24 F.3d 1127, 1130 (9th Cir.1994) -9-

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A.

Plaintiffs Will Not Be Able To Prove

That They Are The Legal and Rightful Owners Of The Properties and Rights Asserted, and Therefore Have No Standing 1.

The Properties

Plaintiffs’ claimed ownership of the Properties, marks, copyrights, publicity rights, signatures and photographs (hereinafter the “Assets”), is an essential element of all of the causes of action asserted in Count I,32 Count II,33 Count III,34 Count IV,35 Count V,36 Count VI,37 Count VII,38 and Count VIII.39 Plaintiffs must be able to prove, as an element of each of said causes of action that they own the Assets at issue.40 Plaintiffs’ claimed ownership of the Assets is 31 32

Clark v. City of Lakewood, 259 F.3d 996, 1004 (9th Cir.2001) Plaintiffs’ FAC at ¶ 39.

33

Id. at ¶ 51. Id. at ¶¶ 59-68. 35 Id. at ¶ 71. 36 Id. at ¶ 78. 37 Id. at ¶ 84. 38 Id. at ¶ 99. 34

39 40

Id. at ¶¶ 104(a), 104(b), 104(c), 106 and 108. Count I—Copyright Infringement (

' Cavalier v. Random House, Inc., 297 F.3d 815, 822 (9th Cir.2002) # Shaw v. Lindheim, 919 F.2d 1353, 1356 (9th Cir.1990)$ ( )! * # +he “deliberate, bad-faith, and abusive registration of Internet domain names in violation of the rights of trademark owners.” Virtual Works, Inc. v. Volkswagen of Am., Inc. , 238 F.3d 264, 267 (4th Cir.2001) (quoting S.Rep. No. 106-140, at 4 (1999)); Count IV—Common Law Right of Publicity ( ,,- ./ ,01- # 2 ! ,22-$ ( ' ,$ 3 3 (1$ 3 ' 3 ( /$ ' ( 0$ # 4,,5607 6- # 0 ,2-,$ $ ( ) ! 8 # Pacific Gas & Electric Co 96 ! / ,,,5 -2, - 10 -

expressly based upon the April 11, 2002 Order, as plaintiffs specifically allege such basis in their pending FAC.41 The defendants have produced the April 11, 2002 Order to this Court for consideration on this motion. There are no additional facts that could be presented by the plaintiffs with regard to their claimed ownership rights with regard to the April 11, 2002 Order. All of the material facts that could possibly be placed before this Court regarding the origin of the plaintiffs’ claims of ownership of the Assets, as based upon the April 11, 2002 Order, are currently before this Court. Pursuant to the express language of the April 11, 2002 Order, it is clear that plaintiffs are not the rightful owners of the Assets at issue. It is important to note that the plaintiffs have attempted to convince this Court (after filing an original complaint with entirely different factual allegations) that it is somehow acceptable for Stan Lee to have changed Judge Lax’s Order by attempting to sell and convey the Assets to another entity because “[t]here was no operational difference between the two [SLC, LLC & QED]; that is, what SLC, LLC was intended to be, as compared with what QED was intended to be, other than a difference in the name of the two companies.”42 The defendants contend that Stan Lee had no authority to modify anything in Judge :1 95-# !

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Lax’s Order, and that if he wanted to modify anything in the April 11, 2002 Order he needed to obtain court approval, as well as approval from all interested parties. In failing to do so, Stan Lee’s actions are no different than some third party stealing the assets from SLM during the bankruptcy proceedings—they are void. Even putting aside for a moment the contempt of Stan Lee in disregarding Judge Lax’s Order, the reason provided by the plaintiffs for his decision also reveals even deeper frauds upon the bankruptcy court. Specifically, the plaintiffs contend that the reason Stan Lee ignored Judge Lax’s Order was because he “did not want his name or persona to be directly associated with the company that would be purchasing those properties from SLM.” 43 Such a statement is the complete opposite of the reasons cited by Stan Lee in obtaining approval from the bankruptcy court for the sale in the first place.44 Therefore, throughout the negotiations and hearings before the bankruptcy court in 2002, Stan Lee stood by while Judge Lax authorized the sale of assets (including the Properties) of SLM to SLC, LLC, purportedly based upon the assertion by Stan Lee that the assets could derive their full potential from the affiliation with his name and persona. The order was executed on April 11, 2002 and the closing on the sale was to take place within ten (10) days of the date of the order. If what the plaintiffs are alleging is true, at some point in time during those 43

Id. at p. 9, ¶ 22, lines 10-11.

44

A copy of the SLM bankruptcy filing entitled “Notice of Motion and Motion for Order to Approve Sale of Assets Free and Clear of Liens; Memorandum of Points and Authorities; Declaration of Kenneth S. Williams in Support Thereof” dated November 27, 2001 has been submitted to this court for consideration on this motion as an exhibit to the Declaration of Sean P. Sheppard. Said motion and declaration include the following pertinent statements: “Based on the Debtors’ unsuccessful marketing efforts and the importance of Stan Lee’s personal involvement in the productions, it was evident that the highest and best use for the estates’ assets would be through the exploitation of such assets by Stan Lee. Accordingly, the Debtors engaged in negotiations with Stan Lee, who was represented by independent counsel, regarding the development and exploitation of the [] Assets. The Creditors’ Committee was also involved in such negotiations and assisted the Debtors in obtaining a result which is much more favorable for the estate than originally proposed by Stan Lee. . . . Based upon extensive negotiations among the Debtors, the Committee and Stan Lee, which spanned approximately two (2) months, the parties reached an agreement, the salient terms of which the Debtors understand are acceptable to the Committee.” (emphasis added herein). - 12 -

ten (10) days following the April 11, 2002 Order, Stan Lee completely changed his mind about being affiliated with the assets, unilaterally made the decision to ignore Judge Lax’s Order, and decided to convey the assets, not to SLC, LLC, but to convey them to an entity that he had established some six (6) months earlier. In making any determination as to the issues in this case, it is also very important to look into the timeline of events, as they transpired in preparation for the sale of assets: Gill Champion works with Stan Lee on commencing the work for the formation of POW! Entertainment, Inc. (06/2001);45 Stan Lee forms POW! Entertainment, Inc. and QED Productions, LLC in Delaware (11/2001),46 Asset Purchase Agreement is negotiate and signed (11/19/2001);47 Motion for approval of sale of assets is filed (11/27/2001);48 Amended Asset Purchase Agreement is negotiated and signed (01/20/2002);49 Supplement in Support of Motion for approval sale of assets (02/12/2002);50 Order Granting Motion for Order to Approve Sale of Assets (04/11/2002).51 A copy of the Certificate of Formation of QED has been filed with this Court in support of this motion.52 It is clear that QED was formed on November 8, 2001

45

Copy of the website material published by POW! on their website is attached as an exhibit to the Declaration of Sean P. Sheppard. 46 Copies of the certificates of formation of QED and POW! are attached as exhibits to the Declaration of Sean P. Sheppard. 47 See April 11, 2002 Order and exhibits, including copy of original agreement signed and dated on 11/19/2001, which is an exhibit to the Declaration of Sean P. Sheppard. 48 See Notice of Motion and Motion for Order to Approve Sale of Assets Free and Clear of Liens; Memorandum of Points and Authorities; Declaration of Kenneth S. Williams in Support Thereof dated 11/27/2001, which is an exhibit to the Declaration of Sean P. Sheppard. 49 See Supplement in Support of Motion for Order to Approve Sale of Assets Free and Clear of Liens dated January 20, 2002, which is an exhibit to the Declaration of Sean P. Sheppard. 50 Id. 51 See Order Granting Motion for Order to Approve Sale of Assets Free and Clear of Liens dated April 11, 2002, which is an exhibit to the Declaration of Sean P. Sheppard. 52 Copy of the certificate of formation of QED is attached as an exhibit to the Declaration of Sean P. Sheppard. - 13 -

with the initial member of the limited liability company being plaintiff, Stan Lee.53 This is important in that QED was formed before any agreement was ever signed, any motion was ever filed and any order was ever entered.54 In an effort to demonstrate the metamorphosis that took place while the SLM Bankruptcy Case was still pending, the defendants present the following for this court’s consideration: Name of Officer

Position at SLM

Position at POW! as of November 2001

Stan Lee

Chief Creative Officer & Chairman

Chief Creative Officer & Chairman

Gill Champion

Chief Operating Officer

President & Chief Operating Officer

Junko Kobayashi

Controller, DIP Representative

Chief Financial Officer

Plaintiff, POW!, published and continues to publish on their website the following information: “Gill Champion, President . . . Prior to joining the Company [POW!], he was COO of [SLM] from July 1999 until it terminated operation in about June of 2001. [SLM] filed for bankruptcy protection in about January 2001, and has since ceased all operations. From about June of 2001 until the formal creation of [POW!] in November 2001 Mr. Champion worked to form [POW!] and to start the development of various [POW!] projects.”55 “Stan Lee, Founder, Chairman and Chief Creative Officer of POW! Entertainment. . . During 2001, Stan formed POW! (Purveyors of Wonder) 53

Id. Id.; see also, Notice of Motion and Motion for Order to Approve Sale of Assets Free and Clear of Liens; Memorandum of Points and Authorities; Declaration of Kenneth S. Williams in Support Thereof dated 11/27/2001, which is an exhibit to the Declaration of Sean P. Sheppard. 55 Copy of the website material published by POW! on their website is attached as an exhibit to the Declaration of Sean P. Sheppard. 54

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Entertainment, with producer Gill Champion and attorney Arthur Lieberman. A company unrelated to Marvel which has been active in creating a number of new projects that are in various stages of development.”56 “Junko Kobayashi, CFO, . . . Prior to joining POW! Entertainment, she was controller of Stan Lee Media, Inc. from January 2000 until it terminated operations in June 2001 where she was in charge of preparing financial information for SEC purposes.”57 The defendants have submitted to this Court the records of the U.S. Copyright Office regarding the purported assignment of the copyrights for The Accuser and The Drifter.58 Junko Kobayashi is currently the Chief Financial Officer for POW! Ms. Kobayashi secured an executive position with the newly formed companies of POW! and QED in 2001. In fact, she, like others, secured her position while she was purportedly acting in the capacity as agent and fiduciary of SLM. As a result, Ms. Kobayashi was purportedly acting as fiduciary and agent of SLM during the Bankruptcy Case, while also acting as the Chief Financial Officer for POW!, the new parent company of QED. It was none other than Ms. Kobayashi herself who actually signed the Assignment of Copyrights purportedly “on behalf of” SLM (as “Assignor”) directly to QED (as “Assignee”)59 even though Ms. Kobayashi was fully aware of the content of Judge Lax’s order (she was on the certificate of service), she had actual knowledge that the assets were ordered to be sold to SLC, LLC and not to QED, and she had actual knowledge that the sale of assets was supposed to have taken place more than four (4) years prior.60 56

Id. Id. 58 Copies of the U.S. Copyright Office records on the purported assignment of copyrights from SLM to QED have been submitted to this court for consideration on this motion as exhibits to the Declaration of Sean P. Sheppard. 59 Id. 60 See Order Granting Motion for Order to Approve Sale of Assets Free and Clear of Liens dated April 11, 2002, which indicates in the Certificate of Service that Junko Kobayashi received a copy of said order (among other documents and filings during the bankruptcy proceedings) at her 57

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In addition, Ms. Kobayashi was fully aware of the security interest that was to be maintained by Wild Brain, Inc. in the very assets she was attempting to illegally, and without authority, convey from SLM to QED, thereby ignoring and intentionally interfering with such security interest rights of said creditor.61 Plaintiff, Gill Champion, who is purporting now attempting to act on behalf of SLM in a derivative action against the defendants, was the person who signed the purported assignment on behalf of QED, as Assignee. Like Ms. Kobayashi, the plaintiff, Gill Champion, knew everything that was going on with the Bankruptcy Case and the April 11, 2002 Order and sale of assets agreement, as Gill Champion was the Chief Operating Office (COO) of SLM during the Bankruptcy Case, and was also named as President and Chief Operating Officer (COO) of POW! in 2001.

On

page six (6) of the Agreement plaintiff, Stan Lee, specifically warranted and represented to Judge Lax that “Purchaser [SLC, LLC] is a duly formed limited liability company organized under the laws of California.”62 This statement cannot be interpreted in the hypothetical and anticipatory context suggested by the plaintiffs’ counsel. Instead, Stan Lee specifically represented and warranted to Judge Lax that SLC, LLC had already been formed and was in existence as of the date of his signing of the Agreement, January 20, 2002.63 In yet another attempt by the plaintiffs to convince this court of facts which simply are not true, the plaintiffs attempt to state that they have fully complied with all of the provisions, terms and conditions of Judge Lax’s Order.64 Aside from authorizing a sale of assets to one particular entity—SLC, LLC, Judge Lax’s April address which is indicated as “Stan Lee Media, Inc., c/o Junko Kobayashi, 5050 Klump Avenue, #302, North Hollywood, CA 91601. Copy of said April 11, 2002 Order is an exhibit to the Declaration of Sean P. Sheppard. 61

Id. See Order Granting Motion for Order to Approve Sale of Assets Free and Clear of Liens dated April 11, 2002. Copy of said April 11, 2002 Order is an exhibit to the Declaration of Sean P. Sheppard. 63 Id. 64 Plaintiffs’ FAC at ¶ 23. 62

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11, 2002 Order also contemplated payments that were to be made first to the secured creditor in Wild Brain, Inc. and thereafter to SLM.65 The plaintiffs allege in their FAC that QED has “complied with all of the terms of the Asset Purchase Agreement and Bankruptcy Court order of April 2002, approving the terms of the Agreement.”66 Although we already know that there are countless factual flaws with such a statement, yet another is that QED has paid nothing to Wild Brain, as the secured creditor and has paid nothing to SLM, as was specifically ordered by Judge Lax. As defendants have been denied access to the corporate records, support for this contention could not be provided to the Court on this motion. However, even if this Court were to find that somehow Judge Lax’s April 11, 2002 allowed the parties to simply substitute in whatever terms and parties they felt were convenient to them at the time, the allegation that QED has somehow “complied with all of the terms” in place of SLC, LLC, is a completely false statement, unsupported by any evidence of any kind whatsoever. If such factual support does exist, the undersigned would certainly expect factual support for plaintiffs’ contentions in this regard to be presented in response to this motion. To the extent that QED and/or POW! may attempt to rely upon the purported assignment of copyrights executed by Junko Kobayashi dated July 31, 2006,67 such assignments were likewise executed and recorded without any authority of the bankruptcy court in the Bankruptcy Case.68 As the plaintiffs allege in their FAC, Junko Kobayashi was the appointed “authorized representative” of SLM during the 65

See Order Granting Motion for Order to Approve Sale of Assets Free and Clear of Liens dated April 11, 2002. Copy of said April 11, 2002 Order is an exhibit to the Declaration of Sean P. Sheppard. 66 Plaintiffs’ FAC at ¶ 23. 67 Copies of the U.S. Copyright Office records on the purported assignment of copyrights from SLM to QED have been submitted to this court for consideration on this motion as exhibits to the Declaration of Sean P. Sheppard. 68 See Order Granting Motion for Order to Approve Sale of Assets Free and Clear of Liens dated April 11, 2002. Copy of said April 11, 2002 Order is an exhibit to the Declaration of Sean P. Sheppard. - 17 -

bankruptcy proceedings.69 Being the representative for SLM during the bankruptcy proceedings, Junko Kobayashi had full knowledge of everything that was transpiring, including the April 11, 2002 Order and was on the certificate of service for all papers and filings material to this motion.70 What the plaintiffs fail to point out in their initial or FAC is that, while the bankruptcy proceedings for SLM were pending, Ms. Kobayashi took on a position as Chief Financial Officer of POW! Entertainment, Inc., the parent company of QED Productions, LLC.71 As a result, Junko Kobayashi had legal and fiduciary obligations to SLM, the bankruptcy court, the bankruptcy trustee, the creditors committee and the shareholders of SLM. As the Bankruptcy Case was pending through the hearing on November 14, 2006, Junko Kobayashi had absolutely no authority, and in fact, was well aware of the April 11, 2002 Order, which specifically authorized only one form of sale and transfer of assets; that being from SLM to SLC, LLC, a California corporation.72 Furthermore, the recipient of the purported assignment, Plaintiff, Gill Champion, on behalf of QED, had the same knowledge as Junko Kobayashi. It cannot be emphasized enough that all of these acts were completed while the court, the creditors, the trustee, and the shareholders of SLM relied on a sworn declaration that no transfer of the assets would benefit insiders.73 Furthermore, all of the aforedescribed transactions occurred while SLM was in bankruptcy protection. 69

Plaintiffs’ FAC at ¶ 24. See Order Granting Motion for Order to Approve Sale of Assets Free and Clear of Liens dated April 11, 2002. A Copy of said April 11, 2002 Order is an exhibit to the Declaration of Sean P. Sheppard. 71 Copy of the website material published by POW! on their website is attached as an exhibit to the Declaration of Sean P. Sheppard. 72 See Order Granting Motion for Order to Approve Sale of Assets Free and Clear of Liens dated April 11, 2002. A copy of said April 11, 2002 Order is an exhibit to the Declaration of Sean P. Sheppard. 73 See Notice of Motion and Motion for Order to Approve Sale of Assets Free and Clear of Liens; Memorandum of Points and Authorities; Declaration of Kenneth S. Williams in Support Thereof dated 11/27/2001, which is an exhibit to the Declaration of Sean P. Sheppard. 70

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The expressed and exclusive purpose of SLC, LLC was for Stan Lee to use his good faith best efforts to exploit the properties and generate revenues to pay for the assets within an 18 month period, pursuant to detailed benchmarks, all of which were ignored and completely circumvented by the plaintiffs’ contemptuous acts. Finally, the creditors and SLM had certain reconveyance rights that were to be made part of the closing documents and the security agreements.74 Based upon the foregoing, the purported transfer of the intellectual properties from a debtor-in-possession, while the Bankruptcy Case was still pending, without any authority to do so, is an involuntary and unauthorized transfer. Involuntary transfers of assets, particularly those which are effectuated by persons having full knowledge of a judge’s order to the contrary, are governed by 11 U.S.C. § 362, which specifically states that the filing of a bankruptcy petition, as in the case of SLM, “operates as a stay, . . . , of—any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.”75 Involuntary transfers of assets in violation of 11 U.S.C. § 362 are void ab initio.76 Therefore, as a matter of law, the defendants contend that any purported assignment is void from its inception and had no legal effect whatsoever. As a 74

See Order Granting Motion for Order to Approve Sale of Assets Free and Clear of Liens dated April 11, 2002. Copy of said April 11, 2002 Order is an exhibit to the Declaration of Sean P. Sheppard. 75

See 11 U.S.C. § 362.

76

11 U.S.C. § 362 states, in pertinent part, as follows: “ #$

section 301 302 9# $ # /$ "

303

: = ,2-6 7 7. . . (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; see In re Schwartz, 954 F.2d 569, 570 (9th Cir. 1992) (holding that “[o] ' # In re Williams, 124 B.R. 311, 316-18 (Bankr.C.D.Cal.1991) In re Schwartz also states that t > ! In re Shamblin, 890 F.2d 123, 125 (9th Cir.1989) $ (

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$ - 19 -

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result, SLM continues to own and hold all rights, interest and copyrights in and to the intellectual properties at issue, and the plaintiffs, excepting only SLM, have absolutely no standing to be suing the defendants. Plaintiffs’ have also claimed, as a separate basis for ownership of the Assets referenced in Count II77 and Count IV,78 that Stan Lee, has entered into an agreement to allow POW! and QED to exploit the Stan Lee trademark, Stan Lee’s name and likeness, and Stan Lee signature in connection with the exploitation of certain of the assets at issue.79 Plaintiffs must be able to prove, as an element of each of said causes of action that they own the Assets at issue.

The October 15, 1998

Assignment was executed by Stan Lee, effectively conveying to SLM, forever, all right, title and interest Stan Lee had then and into the future, in his name, his likeness, trademarks, symbols, logos and designs.80

The October 15, 1998

Assignment, was acknowledged and referenced in the April 11, 2002 Order by way of the Agreement incorporated therein, which specifically reserved unto SLM “[a]ny property or interests in property no expressly included in Section 1.1.” 81 Furthermore, the plaintiffs expressly acknowledge that SLM has the continuing right “to exploit the [Stan Lee] mark in properties owned and exploited by them for other purposes.”82 Although such an allegation appears to be only a minor concession by the plaintiffs, this concession in the pleadings releases a series of logical and undeniable factual findings, all of which further support the defendants’ position. Any and all of SLM’s rights to utilize the name, likeness and persona of Stan Lee, among other things, are derived only from the October 15, 1998 Assignment and nothing else. As plaintiffs have acknowledged SLM’s rights to continue to use Stan 77

Id. at ¶ 51. Id. at ¶ 71. 79 Id. at ¶¶ 51 and 71. 78

80

October 15, 1998 Assignment at p. 4, ¶ 4(a). Id. at Agreement to the April 11, 2002 Order, Art. I, Section 1.2 “Excluded Assets”. 82 Plaintiffs’ FAC at ¶ 51. 81

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Lee’s mark with regard to certain properties, they have acknowledged the continuing validity of the October 15, 1998 Assignment, just as the April 11, 2002 Order and Agreement did. In fact, Stan Lee executed the Agreement incorporated into the April 11, 2002 Order, which is the same Agreement acknowledging that all things not specifically conveyed to SLC, LLC, were retained by SLM. Finally, there has been no legal action of any kind in the past, and Stan Lee is not now challenging in this pending FAC that the October 15, 1998 Agreement is not valid and binding. With all of this said, the April 11, 2002 Order does not authorize, and Stan Lee has never regained any authority of any kind whatsoever to enter into any agreement with POW! and/or QED to authorize either of said plaintiffs to utilize Stan Lee’s name, likeness, persona, signature, and/or trademarks. Therefore, any purported claim of ownership based upon agreements by and between the plaintiffs is without any merit. Plaintiffs are unable to present any additional facts to this Court sufficient to establish their purported ownership of the Assets. As such all causes of action related to claims asserted by plaintiffs and which are based upon plaintiffs’ purported ownership of same are without merit. As a result, summary judgment should be awarded in favor of defendants on all such counts. 2.

Stan Lee’s Name And Likeness

Like the intellectual properties discussed above, plaintiffs’ purported rights to use the name, likeness, mark and signature of Stan Lee are also based entirely upon the April 11, 2002 Order and/or the purported agreement between Stan Lee and POW!/QED. Once again, the Plaintiffs’ alleged ownership of the rights to use the name and likeness of Stan Lee are material allegations and necessary prima facie elements of the causes of action asserted in Count II,83 Count III,84Count IV,85 Count 83

Id. at ¶ 51. Id. at ¶¶ 59-68. 85 Id. at ¶ 71. 84

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V,86 Count VI,87 Count VII,88 and Count VIII.89 For the same reasons set forth above, plaintiffs are unable to present any additional facts to this Court sufficient to establish their purported ownership of the rights to the intellectual properties and the right to use the name and likeness of Stan Lee. As a result, summary judgment in favor of the defendants as to the entirety of Count II, Count III, Count IV, Count V, Count VI, Count VII, and Count VIII is proper. B.

Gill Champion Has Failed to Properly Plead Derivative

Causes of Action and Cannot Act Fairly and Adequately on Behalf of Those Similarly Situated “=

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96

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CONCLUSION

WHEREFORE,

the

defendants

respectfully request that this Court grant summary judgment in their favor and against the plaintiffs on all counts. DATED: August 31, 2008

THE ANDERSEN FIRM SEAN P. SHEPPARD

96

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O’DONNELL & ASSOCIATES PC PIERCE O’DONNELL JACK G. CAIRL By:

SEAN P. SHEPPARD Attorneys for Defendants JAMES NESFIELD, A.F. GALLOWAY and DOUGLAS C. COGAN CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing, as well as all Exhibits referenced herein were provided by United States Mail and email to Paul Sorrell, Esq., at Lavely & Singer, Professional Corporation, rd2049 Century Park East, Suite 2400, Los Angeles, California 90067-2906 on this 23 day of August 2007. __________________________________________ Sean P. Sheppard, Esq. THE ANDERSEN FIRM 1200 Plantation Island Drive South, Suite 220 St. Augustine, Florida 32080 Telephone (904) 471-5040 Facsimile (904) 461-9312 Attorneys for Defendants pro hac vice

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