Court Rulings Go Against Disney in Pooh Dispute

A Los Angeles County Superior Court judge has made several rulings against Walt Disney Co. in a bitter lawsuit with a small Florida firm over hundreds of millions of dollars in royalties from the sale of Winnie the Pooh merchandise, according to new court documents.

Superior Court Judge Ernest M. Hiroshige in August sanctioned Disney $90,000 for destroying 40 boxes of documents, including one labeled “Winnie the Pooh--legal problems,” according to court records that will be unsealed today.

The suit was filed 11 years ago by Stephen Slesinger Inc., which holds merchandising rights to the Winnie the Pooh characters. The Slesinger family maintains that Disney has cheated them out of at least $200 million in royalties on Pooh-related videocassettes, DVDs, computer software and merchandise sold in Disney theme parks.

Hiroshige wrote that Disney “knew or should have known” that Slesinger’s lawyers would be interested in the destroyed documents, and that Disney “made false and evasive responses” to requests by the lawyers for the evidence, according to court papers.

The trial is expected to begin later this year and could reveal the value of the lucrative Pooh franchise, which some analysts say in some years has generated more than $4 billion for Disney and its licensees.

Disney maintains that it has fulfilled its royalty obligations under a 1983 contract, and that the destroyed documents had little to do with the Pooh legal case.

“There is no proof that the documents destroyed were evidence,” said Disney’s lead attorney Daniel Petrocelli. “These were old meaningless papers destroyed by people in Disney’s records management department who had no knowledge of any lawsuit. No harm, no foul.”

The shredded documents belonged to a former Disney executive, Vincent Jefferds, who was in charge of Disney’s consumer products division two decades ago and signed the 1983 contract with Slesinger’s heirs.

Jefferds died in 1992.

Slesinger was a New York literary agent who acquired the Pooh merchandising rights from author A.A. Milne in 1930. Slesinger’s widow and daughter sued Disney for fraud and breach of contract.

Hiroshige also ruled in August that Disney cannot dispute statements made by Jefferds during a 1983 meeting with Slesinger’s daughter at the Polo Lounge of the Beverly Hills Hotel. At the time, the family was still negotiating with Disney over the royalty contract that was signed a month later.

Slesinger’s widow and daughter contend that Jefferds assured them that Disney would pay royalties on all Pooh merchandise, including videocassettes, according to the court documents.

Disney has never paid royalties on Pooh videocassettes, DVDs or computer software and the 1983 contract does not specifically mention payments for videos, according to court records and attorneys in the case.

Slesinger’s daughter Patricia wrote a memo to her mother in March 1983 describing her conversation with Jefferds.

“[Jefferds] said videos and all these new things are covered and to shut up about it,” according to court records that quote the Patricia Slesinger memo.

Disney’s attorney Petrocelli said he plans to challenge the authenticity of Slesinger’s 1983 “Dear Mommy” memo.

“What else can they say?” asked Slesinger attorney Bert Fields. “The document buries them.”

A key question, however, that Hiroshige left open is whether Jefferds had the authority to make promises binding Disney.

The Slesinger heirs also contend that Disney failed to pay them royalties on Pooh revenue generated at Disney theme parks in Japan and France. In addition, they say Disney concealed promotional payments it received, including a $600,000 payment by Sears, Roebuck & Co. in 1975 so the retailer could sponsor a “Winnie the Pooh” program on NBC television.

Petrocelli’s firm took over Disney’s defense more than a year ago after other lawyers were forced to recuse themselves since they probably will be called to testify about the destroyed Pooh documents.

“For years and years, Slesinger has tried to show that they were not getting paid,” said Petrocelli. “But only after Vincent Jefferds passes away do they suddenly say that this man made all these wild promises that Disney would pay them for everything under the sun.”

Most details of the Pooh case have been secret since a November 1991 order sealed the court file. However, Hiroshige last month granted a motion by The Times to unseal the files. Nearly 40 volumes will be made available today.