Wednesday, September 26, 2007
Appellate Panel Affirms Dismissal of Winnie-the-Pooh Suit
By STEVEN M. ELLIS, Staff Writer
Trial courts have inherent power to dismiss a case when a plaintiff’s deliberate and egregious misconduct makes any sanction other than dismissal inadequate to ensure a fair trial, this district’s Court of Appeal ruled yesterday.
Div. Four affirmed the decision of Los Angeles Superior Court Judge Charles W. McCoy to dismiss a suit claiming that the Walt Disney Company owes millions of dollars to the heirs of the man who acquired American merchandising rights to Winnie the Pooh from the character’s creator.
California courts have the ultimate power of dismissal under the common law and the California Constitution, Justice Thomas L. Willhite Jr. wrote, agreeing with McCoy that no lesser sanction would have protected Disney against the use of documents that Stephen Slesinger, Inc. had illicitly obtained while pursuing the litigation.
McCoy found that the Slesinger company, now controlled by the founder’s daughter, obtained over 6,000 pages of Disney documents, many marked privileged and confidential, when its agents broke into Disney office buildings and secure trash receptacles, and trespassed onto the facility of a secure document disposal company with which Disney had contracted to destroy confidential documents.
Characterizing the conduct as “breathtaking,” and “an assault on the legal system,” Daniel M. Petrocelli, counsel for Disney, told the MetNews yesterday that dismissal of the case was the only thing the court could do.
The litigation arose in 1991 when the Slesinger company claimed that Disney had failed to pay royalties it owed under a 1983 contract allowing commercial exploitation of the works of British author A.A. Milne in the United States and Canada.
Stephen Slesinger, who formed the company, had Slesinger, Inc. the rights to the corporation after acquiring them from Milne in 1930. Slesinger, Inc. licensed certain rights to Disney in 1961, and the parties modified the agreement several times prior to the 1983 contract.
After Slesinger’s death in 1953, his widow Shirley Slesinger Lasswell became the sole corporate officer and sole board member of the corporation, and their daughter, Pati Slesinger, the sole shareholder. Lasswell died during the course of the appeal.
Disney’s bid for sanctions concerned the conduct of Terry Lee Sands, an unlicensed private investigator with the Nick Harris Detective Agency. Sands was hired sometime in the early 1990s by Marshall Morgan, then the Slesinger attorney, and worked directly with David Bentson, who was Pati Slesinger’s husband at the time.
Sands, the evidence showed, worked for the corporation until at least 1995. Bentson told Sands to ensure that his actions were legal, but took no steps to ensure that Sands obeyed the directive – leaving Sands free to obtain documents as he saw fit, Willhite said.
Sands obtained documents by entering Disney offices, by breaking into secured dumpsters outside of Disney facilities, and by entering the secured document destruction facilities of Golden State Fibres, a company with whom Disney contracted to destroy its confidential documents, the courts found.
Sands then delivered the documents he obtained to Bentson, who delivered them to the corporation’s attorneys. Bentson also reviewed the documents, sometimes with Pati Slesinger, and passed along to Lasswell copies of documents he believed would be of interest.
Disney said it first became aware that it was the subject of surreptitious activity in June of 1994 when an anonymous caller alleged that he had helped Sands break into a Disney office and dumpster locations and had taken copies of documents.
Over the next few years, Slesinger, Inc. provided Disney with a number of documents containing confidential Disney material. However, Slesinger, Inc. claimed that it had no record of the source, and insisted that Disney had provided the documents.
In March of 2002, Slesinger, Inc. revealed to Disney that Sands had been gathering documents, but Sands claimed only to have taken the documents from publicly accessible dumpsters and testified that he had kept no record of the documents he had given to the corporation.
Finally, in October 2002 and pursuant to a Disney subpoena, Slesinger, Inc. turned over more than 6,000 pages of documents. Although a number of the documents had been altered, many were easily identifiable and were clearly marked “privileged,” or confidential.
The trial court found that Sands had taken documents from multiple Disney locales and the Golden State facility, and that Slesinger, Inc. had either explicitly or implicitly authorized his activities. It also found that Slesinger, Inc.’s denials of illegal activity and its “accidental” failure to keep accurate records were not credible.
Reasoning that Slesinger, Inc. could not satisfactorily assure that it had produced all of the documents it had illicitly obtained, that the company’s principals could not purge their minds of the knowledge they had illegally obtained, and that the company could not be believed to comply with future court orders given the egregious nature of its conduct, McCoy dismissed he suit.
The appellate panel upheld the ruling, noting that the inherent power to terminate litigation for deliberate and egregious misconduct when no other remedy can restore fairness exists in trial courts pursuant to the common law and the California Constitution, and is consistent with California statutes and case law, the overwhelming weight of authority from federal and other states’ courts, and the court’s historic powers in equity.
He also swept aside Slesinger, Inc. ’s arguments that Disney had failed to timely object to the conduct.
“The time lapse from the 1994 anonymous calls to the motion in February 2003 was caused not by Disney’s lack of diligence, but by SSI’s concealment of Sands’ employment, its false or recklessly-made claims to have no knowledge concerning how it came to possess internal Disney documents, and its refusal to give any hint as to the magnitude of the misconduct until forced to do so.”
Rejecting the plaintiff’s argument that Sands had not committed criminal trespass, Willhite declared that the evidence established that, in entering areas of Disney properties not accessible to the public and trespassing onto Golden State’s secure facility and, at those locations, improperly taking documents that Disney had not abandoned, Sands had committed both theft and burglary.
He further ruled that Slesinger, Inc. had implicitly, if not expressly, sanctioned Sands’ conduct, despite Bentson’s admonition to obey the law, noting that a litigant is vicariously liable for its investigator’s intentional misconduct committed within the course and scope of employment, and that the circumstantial evidence surrounding the documents, in particular their volume and markings as “confidential” or “privileged,” indicated that Sands was engaged in questionable conduct.
Finally, noting Slesinger, Inc.’s alteration of documents, the usefulness of the information illegally obtained, and the fact that no sanction could cause the company’s principals to unlearn what they had learned from the documents, he ruled that no lesser sanctions, including substitution of counsel was sufficient to ensure a fair trial, and that the trial court’s sanction was proper under the circumstances.
A call to Jerome B. Falk Jr., counsel for Slesinger, Inc., was not returned.
Willhite was joined in his opinion by Justice Nora M. Manella and Justice Steven C. Suzukawa.
The case is Stephen Slesinger, Inc. v. The Walt Disney Company, B178340.
Copyright 2007, Metropolitan News Company