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IP/Entertainment Case Law Updates

Lee v. POW! Entertainment

District court dismisses licensing rights claims brought by Stan Lee’s daughter and awards sanctions against her, finding that same issue had been litigated numerous times in federal court over past two decades.

Comic book legend Stan Lee was responsible for creating many of Marvel Comics’ most popular and successful characters, including The Avengers, X-Men and Spider-Man. When Stan Lee left Marvel in 1998, he formed Stan Lee Entertainment Inc. (SLEI) and conveyed his name, license and creator rights in an agreement with SLEI. Three years later, Stan Lee brought suit against SLEI’s successor-in-interest, Stan Lee Media Inc. (SLMI), accusing it of breach of salary and benefit provisions, which he alleged justified the termination of the 1998 agreement. SLMI subsequently declared Chapter 11 bankruptcy, and Lee and others formed a new corporation, POW, to manage his creator rights and licenses. Stan Lee died in 2018, leaving his only daughter, JC Lee, as his heir and the trustee of his estate. JC Lee alleged that the other members of POW manipulated Stan Lee into conveying the licensing rights to POW, and brought suit claiming that Stan Lee had divested those rights to SLMI and that they still belonged to SLMI. 

The initial 1998 agreement between Stan Lee and SLMI has been the subject of at least five lawsuits in federal courts across the country. Notably, in 2010, the Southern District of New York found that the licensing agreement between Stan Lee and SLMI had been terminated in 2001 per Stan Lee’s correspondence, and that regardless, the statute of limitations to challenge the termination had expired. In 2012, the Central District of California dismissed similar claims on the grounds of claim preclusion, as the claims had already been litigated in the 2010 New York lawsuit. A 2013 case filed in the District of Colorado was dismissed on the same grounds.

Despite these decisions, JC Lee claimed that SLMI filed a claim against Stan Lee’s estate and reached a settlement, and that she was therefore seeking to vindicate the rights of the estate against POW. However, the court noted that the details of this settlement were not provided to the court, and so while the court inferred that JC Lee was seeking declaratory relief against POW, there was no evidence of any existing judgment against Stan Lee’s estate.

POW moved to dismiss all claims on grounds of claim preclusion, arguing that the same issues had previously been litigated in the 2010, 2012 and 2013 cases. The court found that the claims arose out of the same 1998 agreement that was the source of the previous lawsuits. The court further found that because POW had prevailed in the previous suits, further litigation would serve only to burden the court. JC Lee argued that she was not in privity with SLMI and that, therefore, her suit was distinct from the previous cases against POW. However, the court disagreed, noting that JC Lee was working with SLMI to clear title to Stan Lee’s rights and that her efforts sought to vindicate SLMI’s claims with regard to the 1998 agreement. 

Having found that the case was identical in interest to the previous cases that had already been litigated, the court dismissed the case with prejudice. 
POW also moved for sanctions against JC Lee and her attorneys under Rule 11 of the Federal Rules of Civil Procedure, which the court granted.  Rule 11 sanctions are warranted when the case is “frivolous,” meaning that the claims are baseless and brought with improper purpose. In analyzing whether the claims were baseless, the court noted that there had been several previous attempts at re-litigating the 2010 decision, with the court in each decision determining that the claims were barred by claim preclusion. The court determined that any further attempts to litigate the terms of the 1998 agreement would be baseless in light of these facts. Further, the court determined that JC Lee’s attorneys could not have undertaken a reasonable and competent inquiry given the facts of the previous cases.

In terms of improper purpose, POW also alleged that JC Lee’s claims here were meant to bring negative publicity against POW in the wake of Stan Lee’s death. JC Lee did not respond to these claims, leading the court to believe that the claims were brought with improper purpose. Further, the court noted that when experienced attorneys bring a baseless lawsuit, there is a strong presumption that it is done for an improper purpose.  

Having established that the case was frivolous, the court determined that sanctions were warranted. Although JC Lee had not been party to the previous SLMI lawsuits, she was aware of them and their outcomes, and thus, the court determined, it was appropriate to sanction her as well as her attorneys. Noting that the purpose of sanctions is to deter, not to compensate, and that as a result of Stan Lee’s death, JC Lee had inherited between $50 million and $70 million, the court sanctioned JC Lee $1 million and held her attorneys jointly and severally liable for one-quarter of that amount, or $250,000.

Summary prepared by David Grossman and Alex Inman