Marsu, B v. Plaintiff-Counter Defendant v. The Walt Disney Company, Defendant-Counter Claimant

185 F.3d 932, 99 Daily Journal DAR 7647, 99 Cal. Daily Op. Serv. 5966, 1999 U.S. App. LEXIS 5413, 1999 WL 543733
CourtCourt of Appeals for the Ninth Circuit
DecidedJuly 28, 1999
Docket97-56547, 98-56151
StatusPublished
Cited by45 cases

This text of 185 F.3d 932 (Marsu, B v. Plaintiff-Counter Defendant v. The Walt Disney Company, Defendant-Counter Claimant) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Marsu, B v. Plaintiff-Counter Defendant v. The Walt Disney Company, Defendant-Counter Claimant, 185 F.3d 932, 99 Daily Journal DAR 7647, 99 Cal. Daily Op. Serv. 5966, 1999 U.S. App. LEXIS 5413, 1999 WL 543733 (9th Cir. 1999).

Opinion

ORDER

The Memorandum disposition filed March 25, 1999 is redesignated as an authored Opinion by Judge Harry Preger-son.

*935 OPINION

PREGERSON, Circuit Judge:

I.

On August 14,1990, Marsu B.V. and The Walt Disney Company entered into an agreement (the “Agreement”) that gave Disney the exclusive right to exploit worldwide “Marsupilami,” a cartoon character owned by Marsu. Historically, Marsupila-mi had been marketed, without supporting television exposure, in France, Belgium, and Germany in French-language comic books. In 1989, the year before Marsu entered into its Agreement with Disney, Marsupilami had generated revenues up to $1.2 million, and its projected revenue for 1990 was $2 million. Given the 1990 projected revenue, Disney agreed to pay Mar-su a minimum of $2 million a year during the Agreement’s five-year term. But Disney told Marsu that based on Disney’s strength and expertise “significantly higher revenues” could be expected.

Under the Agreement, Disney was to develop maximum public awareness of Marsupilami by broadcasting in the United States half-hour animated films on network television coordinated with a broad merchandising campaign. To that end, Disney was required (1) to make thirteen half-hour animated films featuring Marsu-pilami by December 31, 1993; (2) to employ its “best efforts” to secure a television network commitment to air the half-hour animated films; and (3) to aggressively expand the market for Marsupilami by entering into licensing agreements with third parties to merchandise Marsupilami products. Disney paid Marsu $500,000 upon signing the Agreement and agreed to pay Marsu the annual guarantee of $2 million beginning January 1, 1992 until the Agreement expired or was terminated.

Contrary to the terms of the Agreement, Disney did not produce the thirteen half-hour animated films or use its “best efforts” to secure a commitment from a television network to air the animated films. Instead, in February 1991, Disney convinced Marsu to accept a “roll-out” strategy that contemplated a slower and more incremental release of Marsupilami animations by producing a number of six to eight minute “shorts” rather than thirteen half-hour animated films. Disney told Marsu that the roll-out strategy was the only way to get television networks to air Marsupila-mi animations. But while convincing Mar-su to accept the roll-out strategy, Disney never revealed that no Disney official had ever asked any television network to air half-hour Marsupilami animations.

With respect to its merchandising obligation, Disney did enter into several licensing agreements with third parties to merchandise Marsupilami products. But the merchandising campaign failed because Disney did not launch the campaign in coordination with television broadcasts of Marsupilami animations. What Disney did was launch a merchandising campaign in June 1993, nine months after the first animation “shorts” were broadcast on network television and three months before the second animation “shorts” were broadcast. One reason Disney failed to properly handle the Marsupilami merchandise campaign was that it placed the campaign in the hands of junior and inexperienced executives.

But the primary reason for the merchandising campaign’s failure was Disney’s preoccupation with exploiting more profitable animated characters, such as “Aladdin” and the “Little Mermaid.” In an October 1992 draft memo to Disney’s chief executive officer, a ranking Disney official on the Marsupilami project talked about whether Disney should exercise its option to terminate the Agreement with Marsu in light of Disney’s unexpected success with other “hot properties,” such as “Aladdin” and the “Little Mermaid.” The memo states that these properties were consuming all of Disney’s time and resources and making it impossible to “do Marsu right.” The memo recognized that Marsupilami was getting a cold reception because it had “less Disney weight behind it” than other hot properties.

*936 But it was not until December 27, 1993-fifteen months after the October 1992 memo was eirculated-that Disney gave Marsu 180 days notice that it was terminating the Agreement. Disney’s notice came four days before its obligation to produce the thirteen half-hour animated films featuring Marsupilami was to become due. After giving notice of termination, Disney waived guarantees merchandising sublicensees owed Disney. Pursuant to the 180-day notice, the Agreement terminated effective June 30, 1994. By that time, Disney had paid Marsu a total of $5.5 million, almost exclusively in payments of the annual $2 million guarantees Disney owed Marsu under the Agreement. 2

Marsu sued Disney claiming: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) fraudulent inducement; and (4) fraudulent concealment. Disney counterclaimed for breach of contract and accounting. After a two-week bench trial before Senior District Court Judge Edward Rafeedie, the court concluded that Disney had breached certain express provisions of the Agreement and had breached the implied covenant of good faith and fair dealing. The court also determined that Disney had committed fraudulent concealment. The court awarded Marsu $8,015,400 in lost profits. It also awarded Marsu $431,159, the amount Marsu would have received in guarantees from sublicensees had Disney not waived the guarantees.

We affirm the district court on the limited grounds that Disney breached the Agreement and also breached the implied covenant of good faith and fair dealing. We also affirm the district court’s determination that Marsu did not breach any contractual obligation it owed Disney. Finally, we affirm the district court’s award of damages and attorneys’ fees to Marsu.

II.

We review a district court’s findings of fact for clear error and its legal conclusions de novo. See Price v. United States Navy, 39 F.3d 1011, 1021 (9th Cir.1994).

III.

The district court concluded that Disney breached two express provisions of its Agreement with Marsu: (1) its obligation to produce thirteen half-hour animated films featuring Marsupilami by December 31, 1993; and (2) its obligation to employ its “best efforts” to secure television network commitment to air the half-hour animated films. Disney argues that it did not breach its animation obligation because it gave notice that it was terminating the Agreement before its obligation to complete the animated films became due. In the alternative, Disney argues that it met this obligation under the “roll-out” strategy.

The district court rejected both arguments. The district court correctly determined that Disney’s obligation to meet its animation obligations “accrued on December 31, 1993. Disney’s notice of termination on December 27, 1993, did not operate to relieve Disney of its animation obligation, as the actual termination did not occur until June 30, 1994.” The court also found that the “shorts” produced under the “roll-out” strategy did not satisfy Disney’s animation obligation because the films did not feature Marsupilami.

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185 F.3d 932, 99 Daily Journal DAR 7647, 99 Cal. Daily Op. Serv. 5966, 1999 U.S. App. LEXIS 5413, 1999 WL 543733, Counsel Stack Legal Research, https://law.counselstack.com/opinion/marsu-b-v-plaintiff-counter-defendant-v-the-walt-disney-company-ca9-1999.