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Ninth Circuit nixes $1 million sanction on Stan Lee’s daughter in fight over comic legend’s name

A three-judge panel found the lower court had "abused its discretion" by slapping the daughter of comic book legend Stan Lee with a $1 million fine.

(CN) — A Ninth Circuit panel on Monday affirmed the dismissal of a lawsuit filed by the daughter of comic book legend Stan Lee but tossed the $1 million sanction leveled by the lower court against her as an abuse of discretion.

"I’m deeply disappointed that the court was unable to uphold the sanction award," said Chaz Rainey, the attorney for defendant POW! Entertainment. "This case was patently frivolous. If we allow lawyers to file these types of cases with impunity, I don’t really know what the rule of law means anymore."

"Today the 9th Circuit made a clear statement that this lawsuit was neither frivolous, legally unreasonable nor filed for an improper purpose," said Joan Lee's attorney, Jonathan Freund, in an email.

The main creative force at Marvel Comics throughout the 1960s and 1970s, Stan Lee co-created a plethora of superheroes including Spider-Man, Iron Man, Black Panther, the Fantastic Four and the X-Men. He died in 2018.

The following year, Joan sued POW! Entertainment, a company co-founded by her father, over the rights to Stan Lee's name and likeness. Joan, sometimes called JC, claimed those rights belonged to a different company co-founded by her father, Stan Lee Media, and that they had been improperly assigned to POW!

A federal judge threw out the suit in June 2020, finding that the rights had clearly been assigned to POW! and that the matter had already been adjudicated in at least five different court proceedings.

"The court finds it completely unreasonable to file a suit premised on an issue debated and analyzed in more than five federal district courts over the last decade,” U.S. District Judge Otis Wright wrote. “Filing such a claim could only have been accomplished without a competent and reasonable inquiry.”

Wright called Joan Lee "a negligent, if not willful, participant in the frivolous and improper filings" and fined her $1 million. Her attorney, Jonathan Freund, got hit with a $250,000 penalty.

"Stan Lee, a superhero in his own right, served to inspire the everyday hero," Wright wrote. "The court urges parties to treat his legacy with respect and cease engaging in meritless litigation."

In arguing the appeal before the Ninth Circuit, attorney Craig Huber called the sanction filed against Joan Lee a "heavy-handed measure," especially since it was aimed at a "non-attorney."

"The seven-figure sanction was supposed to deter her from something that she’d never done before, which was filing a frivolous lawsuit," Huber told the panel.

U.S. Circuit Judge Marsha Berzon, a Bill Clinton appointee, seemed to agree, telling Rainey, "This is a very unusual circumstances to impose $1 million sanctions against her. Ordinarily, someone has to have some repeat behavior."

U.S. Circuit Judge Johnnie Rawlinson, another Clinton appointee, and U.S. District Judge John Antoon II, sitting by designation from the Middle District of Florida, rounded out the panel.

The panel agreed with Joan Lee is barred from suing over name and likeness right, because of the existence of "privity" between her and some of the previous plaintiffs — meaning they had a "sufficient commonality of interest."

But the judges found the sanctions against Lee and Freund had to go as the lawsuit was not "clearly frivolous, legally unreasonable, or brought for an improper purpose."

In an email, Freund said that while he and his client "continue to believe the underlying action has merit," they were pleased with the appeals court's ruling.

"JC Lee is Stan Lee’s sole heir," he said. "Her only concern was, and remains to protect and preserve her father’s legacy.“

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