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HERMAN E. MULLER

January 17, 1994

HERMAN E. MULLER, JR., as the Executor under the Last Will and Testament of Leopold Stokowski, Plaintiff, against THE WALT DISNEY PRODUCTIONS, THE WALT DISNEY COMPANY, and BUENA VISTA HOME VIDEO, Defendants. THE WALT DISNEY COMPANY and BUENA VISTA HOME VIDEO, Plaintiffs, -against- HERMAN E. MULLER, in his capacity as Executor for the Estate of Leopold Stokowski, deceased, Defendant.


The opinion of the court was delivered by: GERARD L. GOETTEL

 The cases before us in this motion arose from a 1939 contract between Leopold Stokowski, then the conductor of the Philadelphia Orchestra, and Walt Disney Productions, entered into for the purpose of making the beautiful music that accompanied the movie "Fantasia." Somewhat surprisingly, "Fantasia" was not a financial success upon its initial release. However, "Fantasia's" fall 1991 release on videocassette and laser disc has been profitable, to the tune of $ 190 million, according to Stokowski's estate. This event turned relations between Disney and various participants in the making of "Fantasia" discordant, leading to several different lawsuits, including those before us today. The instant motion to dismiss by Muller, the Executor under the Last Will and Testament of Leopold Stokowski, concerns claims by Disney for indemnification and a setoff from Stokowski's estate against possible judgments on behalf of the Philadelphia Orchestra Association and the publisher of Igor Stravinsky's "The Rite of Spring."

 PROCEDURAL HISTORY

 In May 1992, the Philadelphia Orchestra Association (hereafter the "Association") filed suit against Disney in the Eastern District of Pennsylvania. See The Philadelphia Orchestra Ass'n v. The Walt Disney Co., No. 92 Civ. 2634 (E.D. Pa.) (McGlynn, J.) On December 30, 1992 Disney filed suit against Muller, also in the Eastern District of Pennsylvania, seeking a declaration that Stokowski's estate has no rights in connection with the sale and distribution of "Fantasia," and that Stokowski's estate must indemnify Disney for any sums adjudged against Disney in the Association's lawsuit. See The Walt Disney Co. v. Muller, No. 92 Civ. 7440 (E.D. Pa.) (McGlynn, J.).

 The other related lawsuit against Disney is Boosey & Hawkes Music Publishers, Ltd. v. The Walt Disney Co., No. 93 Civ. 0373 (S.D.N.Y.) (Conboy, J.), in which the publishers of Igor Stravinsky's "The Rite of Spring," which was featured in "Fantasia," are seeking damages on the grounds that a 1939 license did not grant Disney the right to exploit "The Rite of Spring" on videocassette.

 FACTS

 Muller's motion seeks to dismiss various Disney claims for failure to state a claim under which relief can be granted, and as time barred. The first object of Muller's motion is Disney's claim, embodied in Count II of the complaint in Disney v. Muller, and the first counterclaim in Muller v. Disney, that Stokowski's estate must indemnify Disney against sums awarded to the Association because Stokowski was contractually obligated to deliver to Disney an agreement between the Orchestra and Disney providing that the Orchestra and its members would retain no rights in connection with "Fantasia." Disney's second counterclaim in Muller v. Disney seeks, on the same grounds, to set off any sums awarded to the Association against any sums awarded to Stokowski's estate.

 The basis for this claim is a contract dated January 18, 1939 between Leopold Stokowski and Walt Disney Productions, engaging Stokowski's services in arranging, conducting, and consulting on the music for the motion picture "Fantasia." Clause 6 provides in part:

 
You [Stokowski] agree to use your best efforts, at your own expense, to obligate the Philadelphia Symphony Orchestra Association, Inc. to do said recording. You further agree to furnish us [Disney] with a written commitment executed by the properly constituted and empowered authority, granting us the right to use the said Philadelphia Symphony Orchestra, its name and the music rendered by it hereunder for the purposes herein provided and contemplated in this contract.

 The second object of Muller's motion to dismiss is Disney's claim, set forth in the second and third counterclaims in Muller v. Disney, that since the Association and Stravinsky's publisher are after the same videocassette and laser disc profits that Stokowski's estate is pursuing, any award in favor of the Association or Stravinsky's publisher must be set off against any award for Stokowski's estate. Disney points out that both the Association and Stokowski's estate seek to split the profits with Disney "fifty-fifty," and that all three suits against Disney seek a sum equal to any unjust enrichment by Disney. A setoff, Disney argues, is the proper mechanism for avoiding inconsistent judgments.

 DISCUSSION

 1. Choice of Law

 The initial question is which state's laws we must apply. The well-established rule is that a federal court sitting in diversity follows the choice of law rules of the state in which it is located. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). Since Muller began his action against Disney in New York, we apply New York's choice of law rules. However, since Disney began its action against Muller in the Eastern District of Pennsylvania, and the action was subsequently transferred to our district pursuant to 28 U.S.C. 1404(a) after a motion by ...


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