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In Superman copyright case, creators' lawyer loses privilege appeal

4/18/2012 COMMENTS (0)

As far as DC Comics and its parent Warner Brothers are concerned, the Los Angeles lawyer and businessman Marc Toberoff is Lex Luthor in a kryptonite suit. For more than 10 years, Toberoff (with recent help from Kendall Brill & Klieger) has represented the heirs of Superman's creators, Jerome Siegel and Joe Shuster, in an epic battle for copyrights to the Man of Steel. Toberoff won a partial summary judgment for Siegel's heirs in 2008, only to be named as a defendant in DC Comics' declaratory judgment action against him, his companies, and the heirs in Los Angeles federal district court. In essence, DC Comics (represented by O'Melveny & Myers) contends that Toberoff induced Siegel and Shuster's families to break previous rights agreements and cast their lot with him. In return, he allegedly gets 40 percent of whatever the families end up earning from Superman rights.

Even Superman would struggle under the hefty record of this litigation, which has involved at least a half-dozen trips to the 9th Circuit Court of Appeals. The appellate court is still receiving briefing in Warner Brothers' appeal of the 2008 summary judgment decision(here's Warner's most recent filing, from last month), but a corollary mandamus case decided Tuesday could affect the record in that appeal. A three-judge 9th Circuit panel ruled that Toberoff cannot claim attorney-client privilege on documents he turned over to prosecutors investigating a former Toberoff associate who allegedly stole Superman-related work product from his office.

As a result of the ruling, Warner Brothers and DC Comics will get access to material that supposedly supports their argument that both the Siegel and Shuster families had already entered into binding rights agreements before Toberoff poisoned the relationships with DC Comics.

The privilege dispute comes with a back story that's about as super-charged as any you'll find in a copyright dispute. According to the 9th Circuit opinion (written by Judge Diarmuid O'Scannlain for a panel that also included Chief Judge Alex Kozinski and Judge Randy Smith) Toberoff briefly employed a lawyer named David Michaels, who absconded with several documents from the Shuster and Siegel family files. After he failed to persuade the heirs to shift their business to him, Michaels sent the documents to DC Comics, along with an unsigned cover letter in the form of a timeline depicting Toberoff's strategy to gain control of Superman rights.

The comics company immediately sent the materials into the care of a lawyer otherwise uninvolved in the case, then sought to obtain them in discovery motions against Toberoff and the heirs. Toberoff claimed all his communications with the Siegel and Shuster families were privileged, even though he wasn't acting as an attorney in all of them. Some of the documents -- but by no means all -- were ordered to be produced in the summary judgment case, including the timeline. That timeline provided the framework of DC Comics' declaratory judgment suit, filed in 2010.

About a month after that suit was filed, Toberoff asked the U.S. Attorney's office to investigate Michaels, according to the 9th Circuit opinion. Prosecutors issued Toberoff grand jury subpoenas for copies of the stolen documents. Toberoff turned them over, after negotiating for a letter in which the government agreed not to share the material with anyone else.

The federal magistrate in DC Comics' suit, however, concluded that Toberoff had waived any claim to attorney-client privilege when he gave the documents to the government (which never took any action against Michaels). When U.S. District Judge Otis Wright declined to review the ruling by U.S. Magistrate Ralph Zarefsky, Toberoff went to the 9th Circuit for a writ of mandamus.

There was pretty much no shot he'd get it, based on the 9th Circuit's discussion of precedent on whether privilege is waived by sharing materials with the government. That was a hot issue in the last 20 years or so, as prosecutors and government regulators demanded that corporations turn over the fruits of internal investigations. The 8th Circuit accepted the concept of a "selective waiver" that would preserve the privilege in private litigation, but the 1st, 2nd, 3rd, 4th, 6th, 7th, 10th, and D.C. Circuits have all held that privilege is waived when documents are turned over to the government. The 9th Circuit agreed with the overwhelming majority of appellate courts, rejecting Toberoff's argument that a selective waiver promotes the public interest by encouraging cooperation with the government.

Losing the document fight is bad for Toberoff, but there may be an even more ominous sign in a comment O'Scannlain made at the beginning of the opinion, when he was describing Toberoff's dual role as a lawyer and business adviser to the Superman heirs. "The ethical and professional concerns raised by Toberoff's actions will likely occur to many readers, but they are not before this court." The appeals judge is right: Those actions weren't before the court in the mandamus case -- but as he probably knows, given the number of times the Superman copyright dispute has been on the 9th Circuit's docket, Toberoff's conduct will eventually be considered by the appellate court.

Matthew Kline of O'Melveny referred me to a Warner spokesman, who sent an email statement: "We are extremely pleased that the 9th Circuit unanimously found in our favor. The ruling means that defendant Marc Toberoff must now turn over critical evidence in the pending litigation against him and others."

I left phone messages with Toberoff and his counsel Richard Kendall of Kendall Brill but didn't hear back.

(Reporting by Alison Frankel)

Follow us on Twitter: @AlisonFrankel, @ReutersLegal


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