Lawyers Sanctioned for Ignoring Res Judicata

A federal court tossed an intellectual property (IP) lawsuit brought by Stan Lee's daughter on res judicata grounds even though she was not a party to prior lawsuits. The court further sanctioned her $1 million for frivolous filings and ordered her attorneys jointly and severally liable for $250,000 of the sanction. The decision serves as a stark reminder that zealous advocacy is not an impenetrable shield against Rule 11 sanctions.

A Decade of Lawsuits

In 1998, Stan Lee assigned his IP rights to Stan Lee Entertainment, Inc., predecessor to Stan Lee Media, Inc. (SLMI). A few years later, Stan Lee terminated the agreement based on SLMI's failure to perform its salary and benefits obligations. He and others then formed POW! Entertainment, Inc. (POW), transferring all his IP rights to POW. Over the next decade, the 1998 agreement between Stan Lee and SLMI became the subject of several lawsuits across the country over the true owner of Stan Lee’s IP rights. Various courts found that the agreement was terminated, that any claims were barred by the statute of limitations, or that the claims were precluded by res judicata. Nevertheless, Stan Lee’s daughter, JC Lee filed Lee v. POW! Entertainment, Inc., in the U.S District Court for the Central District of California to enforce the rights under the 1998 agreement between her father and SLMI.