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MARVEL ENTERTAIN. GROUP v. YOUNG ASTRONAUT

August 1, 1990

MARVEL ENTERTAINMENT GROUP, INC. AND MARVEL PRODUCTIONS, LTD., PLAINTIFFS,
v.
YOUNG ASTRONAUT COUNCIL AND YOUNG ASTRONAUT MANAGEMENT CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Robert L. Carter, District Judge.

OPINION

Plaintiff Marvel Entertainment Group is a Delaware corporation with its principal place of business in New York City. It is a major publisher and distributor of comic books, and markets and licenses its own and third-party trademarks and copyrights. Co-plaintiff Marvel Productions Ltd., a Delaware corporation with its principal place of business in Van Nuys, California, is a major producer of animated television shows. Plaintiffs hereafter will be collectively referred to as "Marvel".

Defendant Young Astronaut Council (the "Council") is a not-for-profit corporation organized under the laws of the District of Columbia with its principal place of business in Washington, D.C. It was created in 1984 with the objective of encouraging American children to study math and science by using the United States space program as a catalyst. Co-defendant Young Astronaut Management Corporation is a for-profit corporation wholly owned by the Council and organized under the laws of the District of Columbia, with its principal place of business in Washington, D.C. Its purpose is to raise revenue to fund the Council's programs. Defendants hereafter will be collectively referred to as "YAC".

FACTS

In 1984, Marvel and YAC entered into an agreement whereby Marvel was given the sole and exclusive right to use YAC's name, logo and trademarks to create, design, publish and sell comic books, magazines and related publications (the "Publishing Agreement"). While the Publishing Agreement did not require a certain number of publications, if, after 1988, Marvel had not published at least six books or paid YAC certain minimum royalties, YAC was entitled to terminate it.

Subsequently in 1984, a second agreement was entered into by the parties which authorized Marvel to act as YAC's exclusive representative to arrange and negotiate licensing agreements for the commercial use of YAC's names, logos and trademarks and any YAC related creations of Marvel (the "Merchandising Agreement"). For its efforts, Marvel was to receive a yearly set fee plus 10% of any profits.

In 1985, the parties entered into an agreement whereby Marvel was given the exclusive right to make and produce animated television shows based on YAC's name, related names, logo and trademarks (the "T.V. Agreement"). Under this agreement, Marvel was to receive a fee calculated as a percentage of the license fee and a percentage of the net profits.

In March, 1986, YAC decided it wanted to terminate its relationship with Marvel. Discussions and negotiations to that end proceeded, and on June 30, 1986, the parties signed a so-called Modification Agreement in Washington, D.C. Under this agreement, the T.V. and the Merchandising Agreements were terminated; Marvel's exclusive agency was terminated and YAC received back the rights to its name, logos, trademarks, characters and symbols; and Marvel's royalty rate for licenses purchased by McDonald's was modified. The Modification Agreement provided that the parties would list all licensing agreements and pending agreements entered into between YAC and any licensee, and all such agreements and pending agreements entered into between Marvel and any licensee. In addition, the parties agreed to set forth all monies received pursuant to such agreements from whatever source. It was warranted that these listings covered all licensing agreements and revenues derived therefrom, as well as all pending agreements. The Publishing Agreement was not affected.

Marvel instituted this action in July, 1988, to recover payments allegedly due under the Modification Agreement. On October 27, 1989, in an opinion with which familiarity is presumed, the court granted Marvel partial summary judgment in the amount of $75,000 based on YAC's obligation to make fixed compensation payments as required by paragraph 5 of the Modification Agreement. See, No. 88 Civ. 5141 (RLC), slip op. at 17-18, 1989 WL 129504 (S.D.N.Y. Oct. 27, 1989). Neither Marvel's other claims for breach of the Modification Agreement, nor YAC's counterclaims for breaches of the Publishing, Merchandising and T.V. Agreements could be resolved by summary judgment. Accordingly, these matters were brought to trial before the court on April 17-19, 1990.

At trial, Marvel sought to establish that YAC failed to account for all monies due Marvel or for monies received by YAC from McDonald's, Pepsi, Coleco and Quaker. There was no disagreement as to the amounts received from each of these four accounts, and it is also undisputed that YAC did not list the disputed sums in the Modification Agreement. YAC contends, however, that these sums were not required to be listed in the Modification Agreement and that nothing is due Marvel from these accounts. YAC further claims that Pepsi was not a licensee and that Marvel knew about the Pepsi contributions in any event; that the payments from Coleco post-dated the Modification Agreement and, that although it did receive funds on the day the Modification Agreement was signed, it was an advance on an agreement with Coleco which was to become operative subsequently; that the Quaker account which was terminated with a payment $40,000 would have generated $250,000 to $500,000 but for Marvel's dilatory conduct in contract negotiations, and; that nothing is due from the funds received from McDonald's because Marvel failed to produce the promised television show.

DETERMINATION

The threshold issue is whether the Modification Agreement constituted a settlement of the parties' earlier agreements. In its motion for summary judgment, Marvel asked the court to construe the Modification Agreement as a settlement and release with respect to the Merchandising and T.V. Agreements. This the court declined to do at that time because the available facts were conflicting. See, No. 88 Civ. 5141 (RLC), slip op. at 15-17 (S.D.N.Y. Oct. 27, 1989). These conflicts were resolved at trial with the testimony of Joseph Calamari, executive vice president of Marvel, and Wendell Butler, president of YAC, who both stated that it was the intent of the parties that the Modification Agreement settle their prior relationship. In the words of Butler, the Modification Agreement was a settlement "with respect to existing relationships" involving YAC, Marvel and third parties. Transcript at 432.

"New York law requires that a release contain an `explicit, unequivocal statement of a present promise to release defendant from liability.'" Bank of America National Trust & Savings Assoc. v. Gillaizeau, 766 F.2d 709, 713 (2d Cir. 1985). The parties' intent will determine the scope of the release, id., and no particular form or language is required to manifest a release. Pratt Plumbing and Heating, Inc. v. Mastropole, 68 A.D.2d 973, 414 N.Y.S.2d 783, 784 (3d Dep't. 1979). If ambiguities in the document prevent a firm conclusion that it is a release, additional evidence may be considered to resolve the issue. Bank of America, supra, 766 F.2d at 714. Whether a document is a release is a factual question and therefore extrinsic evidence and oral testimony may be considered. Id.

Paragraph 4 of the Modification Agreement explicitly terminates the Merchandising and T.V. Agreements and provides that neither Marvel nor YAC shall have any further obligations under either contract. Although there is no statement that the Modification Agreement is a settlement, compromise or release of prior claims under the two terminating agreements, the principals involved in negotiating it testified that they intended it to be a settlement. The primary function of the court in interpreting a contract is to effect the parties' purpose in coming to terms. Cromwell Towers Redevelopment Co. v. Yonkers, 41 N.Y.2d 1, 6, 390 N.Y.S.2d 822, 826, 359 N.E.2d 333, 337 (1976) ("[a] fair and reasonable interpretation, consistent with [the parties'] purpose, must guide the courts in enforcing the agreement"); New York Bank for Savings ...


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