From The Wall Street Journal:
Alan Dean Foster was in his late 20s when George Lucas, standing near a model of the Millennium Falcon in a warehouse in Southern California, met him to discuss writing the novel adaptation of his forthcoming movie “Star Wars.”
The original contract called for an upfront payment of $7,500, until Mr. Lucas tossed Mr. Foster a 0.5% royalty on sales that Mr. Foster, now 74 years old, says added up to several times that initial payment. They arrived several times a year as the original 1977 blockbuster set box-office records and the novelization he wrote went on to sell more than one million copies.
Then, in 2012, Walt Disney Co. bought Lucasfilm Ltd.—and the royalty checks stopped.
Now, Mr. Foster and other authors from Disney-purchased franchises are in a heated dispute with Hollywood’s biggest empire, which they say refuses to pay royalties on book contracts it absorbed in the $4 billion Lucasfilm deal and other acquisitions. The amount of money at stake is minuscule to a company of Disney’s size but important to the writers seeking it. While Disney has mined Lucasfilm for new movies that have collectively grossed nearly $6 billion at the world-wide box office, these writers say the company has delayed dealing with their complaints and stiffed them on checks that rarely total a few thousand bucks apiece.
Since Mr. Foster’s dispute was taken public by the Science Fiction and Fantasy Writers of America association, other authors of books tied to projects from Indiana Jones to “Buffy the Vampire Slayer” have come forward with similar stories of royalty checks that stopped after Disney acquired the properties. In each case, Disney threatens to alienate an obscure but vital tentacle of the franchises, as these novelizations helped build and maintain fan loyalty. Complicating matters: The exact amount of money at stake is unknown, since sales and royalties for the books involved have fluctuated wildly over time.
A Disney spokesman said: “We are carefully reviewing whether any royalty payments may have been missed as a result of acquisition integration and will take appropriate remedial steps if that is the case.”
Mr. Foster, who is well-known to longtime Star Wars fans, says Disney is ignoring the workaday players who help build intergenerational connections to beloved characters. He and his wife are both in poor health, and he said the royalty earnings could come in handy for medical expenses.
“I’m not Steve Spielberg. I’m not Steve King. I don’t even have a name that starts with Steve,” he said.
The dispute began in the summer of 2019, when Mr. Foster’s literary agent, Vaughne Hansen, first asked Disney why he had stopped receiving royalty checks on three novels he had written tied to “Alien,” the outer-space horror series produced by Twentieth Century Fox, the studio Disney bought as part of a $71.3 billion deal in 2019.
Mr. Foster and his agent then realized the same thing had occurred to his royalties for two Star Wars books after Disney bought Lucasfilm.
In response to queries about the “Alien” checks, a Disney attorney told Mr. Foster that the company had acquired the rights to these books, but not the obligations to pay out royalties. But in the case of “Alien,” Ms. Hansen said, the rights to Mr. Foster’s novels had been reassigned several times, with no interruption of royalty checks, before Disney bought Fox.
“Disney has acquired a house with a mortgage on it. They want to keep living in the house. They don’t want to pay the mortgage,” Mr. Foster said.
The writers group says a similar pattern has emerged following other Disney acquisitions. At least a half dozen writers across a range of Disney-owned properties have since said they are in the same boat, said Mary Robinette Kowal, president of the Science Fiction and Fantasy Writers of America.
. . . .
Disney has begun reviewing the “Alien” case, but there is a line of writers behind Mr. Foster waiting for a turn at the negotiating table. In total, Ms. Hansen estimates her client had made more than $50,000 in royalties on the original Star Wars novelization alone before the checks stopped in 2012.
If Disney agrees to calculate the missing royalties, it faces a daunting task tracking down sales that cover six years and, in Mr. Foster’s case alone, five novels published in dozens of international markets.
Link to the rest at The Wall Street Journal (PG apologizes for the paywall, but hasn’t figured out a way around it.)
PG has posted concerning this interesting Disney legal theory before.
Here’s a short excerpt from a textbook on general business law:
Parties to a contract may transfer their rights and obligations to other people through an assignment or delegation. An assignment involves the transfer of contract rights. A delegation involves the appointment of another to perform one’s duties under a contract.
When an assignment is made, the assignee receives exactly the same rights that the assignor had before the assignment took place. Thus, if the obligor has a valid excuse for not performing for the assignor under the original contract, the same excuse is also good against the assignee. Nonpersonal rights under a contract can be legally assigned without the obligor’s permission, whereas rights to receive personal services may not be assigned without the consent of the person who is to perform the services. Rights also may not be transferred if the parties include a provision in their contract prohibiting an assignment, if the assignment is against public policy or otherwise illegal, if the assignment would violate a statute, or if a court disallowed the transfer.
https://college.cengage.com/business/goldman/business_law/7e/chapters/chapter12.html
PG thinks that Disney’s legal theory is too cute to be legally-enforceable. This will especially be the case if those individuals or entities who/that received compensation from Disney’s acquisition of Lucasfilm are claiming they’re not liable for payments or are effectively unreachable via American legal processes.
PG speculates that The Walt Disney Company, incorporated in Delaware, but having its principal place of business in California, and, thus, likely subject to California laws in these sorts of matters, is likely to attract the attention of more than a few of the many entrepreneurial attorneys who practice in that state.
Given the enormous size of the creative industries located in Hollywood and its environs, an aggressive and innovative law firm (or a group of such law firms) could decide that Disney might represent a big fat target. During the course of what would likely be protracted litigation, plaintiffs’ counsel might discover a lot of additional novel legal theories adopted by Disney’s attorneys to short-change authors and other creators.
While PG is a long-time member of the California Bar and knows many intelligent and competent fellow members, he acknowledges that a lot of crazy things happen in California’s legal world, he has difficulty believing such a transparent technique for avoiding contractual obligations on Disney’s part would survive close examination by California courts.
Plus, if this tactic works for Disney, it should also work for a lot of other California organizations and individuals to the detriment of the many creators in California and elsewhere.
One wonders if Disney’s lawyers have ever pondered whether a policy and practice of not paying contractual obligations as they come due — even if those “obligations” were somehow separated from the “privileged” by a valid amendment to the contract actually signed by all relevant parties and/or imposed by a court of competent jurisdiction (primarily, but not only, a bankruptcy court) — just might implicate Cal. Bus. & Prof. Code § 17200.
That is, one would wonder if one had not been the author of multiple communications suggesting that such pondering was a professional obligation of said counsel.