Disney at Crucial Point in Pooh Case

Walt Disney Co. was talking trash Tuesday.

At a hearing in the long-running battle over millions of dollars in Winnie the Pooh royalties, attorneys focused on the question of whether confidential documents were plucked from a garbage bin behind a Disney building in Burbank or purloined from the desks of the company’s lawyers.

Disney’s legal team alleged that an unlicensed investigator broke into Disney’s offices about a decade ago and stole hundreds of pages of company papers from desks and filing cabinets as part of an effort to bolster the royalties case against Disney.

“Rarely do you ever see a case where the rules have been broken so badly and so often and so unapologetically,” Disney’s lead attorney, Daniel Petrocelli, told Los Angeles County Superior Court Judge Charles W. McCoy.

The alleged misconduct, Petrocelli argued, warrants the dismissal of the 13-year-old lawsuit.

If the case isn’t dismissed, a trial could start in January 2005. Much is at stake for the Burbank-based entertainment giant: Disney has conceded that losing the case could cost it hundreds of millions of dollars.

Disney acquired the merchandising rights to the honey-loving bear and his forest friends in 1961 from Shirley Slesinger Lasswell. She had inherited the rights from her late husband, Stephen Slesinger, who was a New York literary agent and pioneer in the business of marketing cartoon characters. He had acquired merchandising rights from the creator of Pooh, A.A. Milne, in 1930.

Over the years, Disney paid the Slesinger family more than $66 million in royalties; Disney’s marketing machine roared into gear in the mid-1990s, turning the befuddled bear into a $1-billion-a-year business at its peak.

Shirley Slesinger Lasswell and her daughter Patricia Slesinger became suspicious that the company wasn’t paying all they should. Patricia Slesinger said Pooh products she purchased during her travels around the world didn’t always show up on royalty statements.

In 1991, the family filed their breach-of-contract lawsuit against Disney.

In addition, the family contends that a ranking Disney executive promised that they would be paid the royalties for the sale of videocassettes.

Disney says that since the most recent contract, which was signed in 1983, doesn’t mention payments for Pooh videos, DVD or computer software, the company isn’t required to pay for them.

This week’s hearing deals little with the substance of the documents, but rather how they landed in the hands of the Slesingers. Lawyers for the Slesingers contend that their clients searched through Disney’s trash -- legally -- because they had reason to be suspicious that Disney wasn’t turning over all Pooh-related materials as required by the court.

The company has been sanctioned for destroying scores of documents related to Winnie the Pooh. Disney maintains that only meaningless documents were disposed of and has tried unsuccessfully to get the sanctions overturned.

As a result of the dispute over the retrieval of the documents, much of Tuesday’s hearing was dedicated to discussions of Disney’s trash disposal techniques.

Disney’s attorneys presented large, blown-up photos that portrayed tidy trash bins in secure locations to illustrate that it would be impossible for casual “dumpster divers” to find. They also said employees were instructed to get rid of confidential documents in “instant-shredder bins” and less-sensitive papers were to be deposited in large barrels that were emptied and hauled away by a Canoga Park firm.

Attorneys for the Slesingers, in turn, presented large photos of one trash site they said was the source of the “garbage documents.” The photo showed two dumpsters that were easily accessible along with an affidavit from a neighbor who said he had often complained that the trash would sometimes blow through his yard.

The day ended with testimony from Terry Lee Sands, the man hired by Slesinger’s husband, David Bentson, to dig through Disney’s trash.

Petrocelli asked Sands how he knew where the trash was processed.

“I followed the trash trucks that left the Disney building,” Sands said.

His testimony continues today.

The allegations of misconduct have consumed more than a year of motions and depositions, prompting lawyers who represent the Slesingers to attack the company’s legal strategy as a delay-and-smear campaign.

“It’s outrageous that these people would be dragged through the mud like this,” said Patrick Cathcart, one of the attorneys representing Patricia Slesinger and her mother.

This week’s hearing is the first substantive proceedings in the matter for nearly two years. The case has been mired in controversy and intrigue since one prominent Hollywood attorney Bert Fields, who had been representing the Slesingers, withdrew last summer and refused to say why.

The Slesingers hired a new firm, but promptly fired it a few months later. High-profile attorney Johnnie L. Cochran Jr. is part of their new legal team, but he did not attend Tuesday’s hearing.

Meanwhile, the judge who had been overseeing the case for more than a decade also dropped out without giving a reason.

Since the case was filed, more than 10 law firms have been involved. During the last year, the pleadings have bounced from Los Angeles County Superior Court to federal court and back to Superior Court.