Hedge Fund Elliott Management Is Backing Stan Lee Media's Spider-Man Lawsuit Against Disney

For the last few years Michael Wolk has quietly worked to advance the multi-billion dollar copyright infringement lawsuit that claims Walt Disney Co. does not own the rights to iconic Stan Lee-created superhero characters it acquired from Marvel Entertainment, like Spider-Man, X-Men, The Incredible Hulk and The Fantastic Four. Before Wolk got involved, the minority shareholders of a company Lee founded in the 1990s had for a long time unsuccessfully litigated over these characters, but Wolk has not been dissuaded.

“We are in the right here,” says Wolk in an interview. “No court has ever addressed or ever decided who is the owner of the characters—all of the prior litigation got dismissed for reasons that have nothing to do with who owns the characters.”

Hedge funds and other investment vehicles have increasingly been funding litigation against major corporations in return for a piece of any winnings. Elliott Management, which oversees $21 billion in assets, is a hedge fund that is comfortable using sharp elbows both in the stock market and in the courts. In its battle against Argentina over defaulted bonds, Elliott Management has worked to seize sovereign assets, successfully convincing the government of Ghana last year to take possession of an Argentine naval vessel, much to the dismay of President Cristina Fernandez de Kirchner. In a typical move for the activist investor, Elliott Management recently purchased shares of Hess Corp., proclaimed it would seek board seats and said “lack of focus is a chronic issue at Hess that remains unchecked by the board.”

Wolk was able to attract Elliott Management’s financial backing in 2011 after two key events. In May 2010, Wolk succeeded in getting the Colorado Court of Appeals to reverse a prior lower court decision in Stan Lee Media’s corporate governance case, allowing the company’s minority shareholders to take control of the company from Lee himself and appoint a new board of directors by 2011. In addition, in December 2009 Disney bought Marvel Entertainment for $4 billion and started to make blockbuster movies from Stan Lee characters like those in The Avengers.

Elliott Management declined to comment. Disney has said the “lawsuit is without merit; it arises out of the same core facts and legal claims that have been rejected by three federal district court judges.” The company did not respond to requests to discuss the case. Lee’s lawyer also did not respond to a request for comment.

Comic writer Lee assigned the rights to his superhero characters to Marvel in 1998, but after Stan Lee Media collapsed, minority shareholders of the company claimed that Lee had previously assigned those rights in a written agreement to a predecessor company of Stan Lee Media. The minority shareholders have previously brought legal proceedings in courts from New York to California, but have never been able to get anywhere, losing decisions and cases.

In motions to dismiss the lawsuit, Disney calls the new lawsuit “frivolous” and “a wholly improper attempt to revive a claim already rejected three times.” Disney is essentially arguing that Stan Lee Media is improperly trying to get around legal doctrines meant to bar continued litigation between the same parties over an already decided issue and that it’s trying to circumvent statutes of limitation. In its legal filings Disney implies that Marvel, where Disney says Lee worked for 40 years, owned the characters all along and states that Lee always retained the right to reclaim any intellectual property he assigned to Stan Lee Media’s predecessor company in the event of a material breach, which Disney claims Lee did in 2001. Disney has also asked the court to stay all discovery in the case.

“This action is the latest in a long series of attempts to assert non-existent rights over unspecified Marvel comic book characters allegedly stemming from a terminated 1998 agreement that on its face never granted any such rights in the first place,” Disney says in a court document. “Numerous previous litigations have soundly rejected the copyright claim.”

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