Peter Paul's Answer to Stan Lee's 2nd Amend Complaint

8/14/2019 Peter Paul's Answer to Stan Lee's 2nd Amend Complaint

1/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

2324

25

26

27

28

PETER F. PAULIN PRO PERSONA1854A HENDERSONVILLE RD #10ASHEVILLE, NC 28803(828) 776 [email protected]

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

QED PRODUCTIONS, LLC, aDelaware limited liability company;

POW! ENTERTAINMENT, INC., aDelaware corporation; STAN LEE, anindividual, suing individually and in aderivative capacity on behalf ofshareholders of Stan Lee Media, Inc.,STAN LEE MEDIA, INC., a ColoradoCorporation; and STAN LEE MEDIA,INC., a Delaware corporation

Plaintiffs,

v.

JAMES NESFIELD, an individual;A.F. GALLOWAY, an individual;DOUGLAS C. COGAN, an individual;and DOES 1 through 10, inclusive,

Defendants.

CASE NO. CV 07-00225 SVW (SSx)

[Hon. Stephen v. Wilson]

DEFENDANT PETER PAUL'SANSWER TO SECOND AMENDEDCOMPLAINT; DEMAND FORJURY TRIAL


2/31


3/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

2324

25

26

27

28

ANSWER TO SECOND AMENDED COMPLAINT

Defendant Peter Paul ( Defendant) answers the averments in the Second

Amended Complaint herein (the SAC) as follows:

1. Answering the averments in Paragraph one, Defendant denies that this Courthas federal questions jurisdiction over the claims alleged under federal law

because Plaintiffs do not have requisite standing in that they do not legally

own the intellectual property rights that give rise to the federal questions

raised.

2. Answering the averments in Paragraph two, Defendant admits that this

Court has personal jurisdiction over the Defendant. Except as expressly

admitted herein, Defendant denies the remaining averments in the

Paragraph.

3. Answering the averments in Paragraph three, Defendant admits that venue

may remain in this Court. Except as expressly admitted herein, Defendant

denies the averments in the Paragraph, including but not limited to the

averment that Plaintiffs claims arose within this district.

4. Defendant denies the averments in Paragraphs four, five, six and seven.

5. Defendant denies the averment in Paragraph eight.

6. Defendant admits the averments in Paragraph nine and ten.

7. Answering the averments in Paragraph eleven, Defendant admits that

Defendant James Nesfield is a resident of the State of North Carolina, and

has been so at all times material hereto. Except as expressly admitted

herein, Defendant denies the averments in the Paragraph.8. Answering the averments in Paragraph twelve, Defendant admits that

Defendant A. F. Galloway is a resident of the State of North Carolina, and

has been so at all times material hereto. Except as expressly admitted

herein, Defendant denies the averments in the Paragraph.

1


4/31


5/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

co-creations are well-known projects such as Fantastic Four, Incredible

Hulk, Spiderman and X-Men, which have been developed and marketed, at

times, by Marvel Entertainment, Inc. and by Stan Lee individually, and

some of Marvel Entertainment, Inc.s predecessors in interest and affiliatedcompanies; and (e) Stan Lee performed work in association with certain

predecessors in interest of Marvel Entertainment, Inc. and continues to be

one of the highest paid employees, and a fiduciary, of Marvel Entertainment,

Inc. Except as expressly admitted herein, Defendants deny the averments in

the Paragraph.

16. Answering the averments in Paragraph twenty-four, Defendant admits the

chronology of events surrounding the founding and taking public of SLMI

but emphatically denies all averments that Stan Lee Media, Inc. has no

interest in any creation of Stan Lee, and Stan Lee's creations were always

deemed to be works for hire by Stan Lee and that Stan Lee Media has no

claims to all of Stan Lee's creations .

17. Defendant denies the characterizations of him and his role in Stan Lee

Media and averments in the last sentence of Paragraph twenty-five.

Defendant admits that he was co-founder of SLMI and served as a

consultant to the company and advisor to the Chairman Stan Lee along with

personal legal counsel to Stan Lee, in-house legal counsel from Skadden

Arps, outside legal counsel from pre-eminent corporate and entertainment

law firms including Ziffren, Brittenham and Branca, Skadden Arps, Arthur

Lieberman and Jeff Segal and , and global accounting firms.18. Defendant denies the averment in Paragraph twenty-six because when Stan

Lee founded SLMI in October, 1998, he had no contractual limitations

whatsoever on his actions, employment or his ownership of any and all

property rights he ever created.

3


6/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

19. Answering the averments in paragraph twenty-seven, Defendant admits that

Ex. A to the SAC speaks for itself. Except as specifically admitted herein,

Defendant denies the remaining averments in the Paragraph.

20. Answering the averments in paragraph twenty-eight, Defendant admits thatStan Lee signed the November 17, 1998 Marvel Agreement a month after he

signed the October 15, 1998 SLE Agreement. Except as specifically

admitted herein, Defendant denies the remaining averments in the

Paragraph.

21. Defendant denies the averments in Paragraphs twenty-nine and believes that

Exhibits B and C, which have only been produced to this court in altered

photocopy form eliminating the fax headers appearing on the original

photocopies as presented to Defendant in a deposition in another action,

have been intentionally altered to reflect dates different from when they

were originally transmitted in an effort to mislead and deceive this court and

to be used for publicity purposes to hide frauds committed by Plaintiffs.

22. Defendant denies the averments in Paragraphs thirty, thirty-one, thirty-two,

thirty-three, thirty-six, thirty-nine .

23. Defendant admits the averments in Paragraph thirty-four, thirty-five, and

thirty-seven and thirty eight, but denies reference in thirty-eight that he

made any profit from the stock manipulation intended to assist SLMI.

24. Answering the averments in Paragraph forty, Defendant admits that he

spoke with Chris Belland various times during 2000, but denies any

nefarious intent.25. Answering the averments in Paragraph forty-one, Defendant admits that he

sold two blocks of stock at a discount to pay margin calls and employee

salaries of SLMI and otherwise denies the averments.

26. Defendant denies the averments in Paragraphs forty-two, forty-three, forty-

four and forty-five.

4


7/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

27. Answering the averments in Paragraph forty-six, Defendant admits that Stan

Lee while Chairman of SLMI, in concert with his attorney-business partner

Arthur Lieberman, violated his fiduciary duties to the company by

attempting to breach his own employment agreement and rights assignmenton the eve of filing for Chapter 11 bankruptcy protection in order to defraud

shareholders of SLMI and the Bankruptcy Court by creating artificial

grounds to argue that the Primary Asset of the Company, as described in the

10KSB filed with the SEC in March, 2000, the Employment-Rights

Assignment Agreement he made with SLMI on October 15, 1998, was

legally terminated by use of a demand letter unsupported by any other legal

actions. Defendant denies that the SLE Employment Agreement was ever

legally terminated, or that the Rights Assignment part of that agreement was

ever affected by any attempt to terminate the Employment part of the hybrid

Agreement.

28. Defendant denies the averments in Paragraphs forty-seven, forty-eight.

29. Defendant admits the averments in Paragraph forty-nine.

30. Answering the averments in Paragraph fifty, Defendant admits that (a) a

document entitled Asset Purchase Agreement appears to have been executed

on or about November 2001 by Stan Lee, in his capacity as agent of SLC,

LLC, a California Limited Liability Company, as purchaser, and the

Estate of Stan Lee Media, Inc. a Delaware corporation and Stan Lee Media,

a Colorado corporation, as debtors; (b) a document entitled Amendment to

Asset Purchase Agreement appears to have been executed on or aboutJanuary 2002 by Stan Lee, in his capacity as agent of SLC, LLC, a

California Limited Liability Company, as purchaser; (c) another document

also entitled Amendment to Asset Purchase Agreement appears to have been

executed on or about February 2002 by Stan Lee, in his capacity as

President of SLC, LLC, a California Limited Liability Company, as

5


8/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

purchaser, and Wild Brain, Inc. as a creditor to SLMI during the

bankruptcy proceedings; (d) the documents contain provisions regarding the

proposed acquisition by SLC, LLC, as purchaser of certain intellectual

properties and produced entertainment projects of SLMI, including TheAccuser, The Drifterand Stans Evil Clone akaEvil Clone, which were

specified to be developed by SLC, LLC with very specific conditions for the

manner in which SLC, LLC was to be established and managed to solely

and exclusively benefit creditors, lenders and shareholders of SLMI NOT

any insiders of SLMI, and benchmarks provided for guaranteed minimum

payments for the assets with a right of reversion of all the assets in the event

that the benchmarks were not met; and (e) the totality of the agreements as

amended were approved by an Order of the Bankruptcy Court in the

Bankruptcy Case on or about April 11, 2002 based on sworn Declarations

that no SLMI insiders other than Stan Lee would in any way benefit from

the sale. Except as expressly admitted herein, Defendant denies the

remaining averments in the Paragraph.

31. Answering the averments in Paragraph fifty-one, Defendant admits that Stan

Lee, Gill Champion, as directed by their partner and lawyer Arthur

Lieberman, and/or the other principals of POW! Entertainment, Inc. and

QED Productions, LLC, decided to form POW! Entertainment, Inc. and

QED Productions, LLC,six months before concluding a Court approved

sale of assets to a phantom entity- SLC LLC, warranted to have been in

good standing and capable of contracting, with the intention of deceiving thecourt and creditors regarding the establishment and use of a Special Purpose

Entity named SLC LLC that would be the purchaser of assets of SLMI

based on Stan Lee's good faith promise to exploit those assets exclusively

for the benefit of shareholders and creditors; and thereafter attempted

wrongfully, without the knowledge of the bankruptcy court or creditors and

6


9/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

illegally to transfer assets of SLMI to POW! Entertainment, Inc. and QED

Productions, LLC, instead of obeying the Bankruptcy Courts April 11, 2002

Order by conveying the assets to SLC, LLC, a California limited liability

company. Except as expressly admitted herein, Defendants deny theremaining averments in the Paragraph.

32. Defendant denies the averments in Paragraph fifty-two and has personal

knowledge that as of October, 2006, neither the creditor's committee nor the

DIP Lender knew that Plaintiffs had transferred assets without Bankruptcy

Court approval to POW Entertainment, without notice or payment of any

kind to them or SLMI. The April 11, 2002 Order of the bankruptcy Court

specifically includes warranty clauses made by Stan Lee that the purchaser

approved by the court, intended to be a juridical entity existing under the

laws of California, was a duly established California LLC in good standing

in which Stan Lee warranted he was the President, capable of contracting

and performing all of the undertakings that were painstakingly crafted to

assure and secure his performance. Based on information recently obtained,

this was an elaborate hoax and fraud on the federal bankruptcy court, the

creditors, lenders and shareholders of SLMI and the new shareholders of

POW Entertainment which offered and sold its shares to the public.

33. Answering the averments in Paragraph fifty three, Defendant admits that

Plaintiffs succeeded in successfully hiding their illegal and nefarious actions

successfully from all involved until the US Trustee, after being notified by

Defendant and others, caused the five and one half year sham of a Chapter11 Reorganization proceeding to be dismissed for cause by virtue of

malfeasance and misfeasance of Plaintiffs, including causing SLMI to be

dissolved administratively by the State of Colorado when they had a court

imposed and fiduciary duty to maintain the company in good standing.

There were huge operational differences between QED, a subsidiary of a

7


10/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

public company POW, owned and controlled by SLMI insiders Lieberman,

Champion, Lee and Kobyashi, which never attempted to pay anything for

the assets they looted from SLMI to capitalize yet another public company

and a Special Purpose Entity intended to be created exclusively to exploitassets of SLMI for the benefit of creditors, lenders and shareholders of

SLMI, NOT for the shareholders of POW Entertainment and malevolent

SLMI insiders. Defendant denies the remaining the averments in the

Paragraph.

34. Defendant denies the averments in Paragraph fifty-four.

35. Defendant admits the averments in Paragraph fifty-fifty and further admits

that the Courts ruling should have been mooted with the election by a

unanimous vote of all participating shareholders in the court supervised

Annual Shareholder's Meeting and Director's election held in December,

2007, of Nesfield, Galloway and Blumen as Directors, incorporated into an

order of the Court in Colorado on May 12, 2008.

36. Defendant denies the averments in Paragraph fifty-six.

37. Defendant lacks sufficient knowledge or information to form a belief as to

the truthfulness of the averments in Paragraph fifty-seven, fifty-eight, and on

that basis deny the averments.

38. Defendant denies the averments in Paragraph fifty-nine and sixty.

39. Answering the averments in Paragraph sixty-one, Defendant admits that (a)

the registrant of the website at www.stanleemedia.net is Defendant James

Nesfield, who at the time he registered the website was acting solely in hiscapacity as authorized agent of SLMI and not in his individual capacity; (b)

such registration was accomplished with the consent and authorization of the

then calculated majority of shareholders of SLMI that remained after the

settlement of the Sahreholders Class Action against Stan Lee and other

Directors of the company and after all other shares that should have been

8


11/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

voided due to settlements were calculated; Except as expressly admitted

herein, Defendants deny the remaining averments in the Paragraph.

40. Answering the averments in Paragraph sixty-two, Defendant admits that (a)

in their capacity as equitable agents of SLMI, and not in any other capacity,Defendants have used Stan Lees name, the signature of Stan Lee and

photographs of Stan Lee, as they are authorized to do pursuant to the

Assignment of Rights Agreement, which was executed by Stan Lee in favor

of SLMI on or about October 15, 1998; (b) at times, certain content

including artwork relating to The Accuser, a link to www.stanleereturns.org,

webisodes ofThe AccuserandEvil Clone, and artwork relating to The

Drifter, were available on the websites for the sole purpose of notifying the

world of Defendant' efforts to recover assets belonging to SLMI and

exposing the frauds of the Plaintiffs in illegally converting assets of SLMI

for their own benefits. Except as expressly admitted herein, Defendant

denies the remaining averments in the Paragraph.

41. Defendant denies the averments in the first sentence of Paragraph sixty-

three. Except as specifically denied herein, Defendant lacks sufficient

knowledge or information to form a belief as to the truthfulness of the

averments, and on that basis deny the averments.


the truthfulness of the averments in Paragraph sixty-four, and on that basis

denies the averments.

43. Defendant denies the averments in Paragraph sixty-five. Defendant furtheradmits and alleges as follows: (a) Plaintiff Stan Lee executed in SLMIs

favor an Assignment of Rights Agreement dated October 15, 1998

specifically authorizing SLMI to own, copy, distribute, license and exploit

the marks and properties described in the SAC; and (b) at all times material

hereto, all Defendants have acted in their capacity as agents of SLMI, and

9


12/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

not in their individual capacities with regard to SLMI; and (c) Plaintiffs have

no legal authority to use or control the Properties.

44. Defendant denies the averments in Paragraph sixty-six and based on

Defendant's personal knowledge and video taped admissions made by StanLee knows without a doubt that Stan Lee intended to assign everything in

the creative universe he owned as of October 15, 1998, to his new dot com

company SLMI, including all claims and rights to any intellectual property

he owned on that date, including his co-creator's rights to his creations for

Marvel.

45. Answering the averments in Paragraph sixty-seven, Defendant admits that

(a) in their capacities as agents of SLMI and its shareholders, and not in their

individual capacities, Defendants have asserted that SLMI is the owner and

controller of the properties identified in the SAC; and (b) Defendants, in

their capacity as agents of SLMI whose unanimous support by all

shareholders who participated in the last annual shareholder's meeting called

at the substantial expense of Christopher Belland, could have legally ratified

nunc pro tunc all their actions, and not in their individual capacities, have

asserted that SLMI is the owner ofcertain rights, income and profits in

various characters and properties co-created by Stan Lee in association with

Marvel Entertainment, Inc. and its affiliates and predecessors in interest,

including but not limited to Spider-Man, The Fantastic Four, The Incredible

Hulk, X-Men and various other valuable characters and properties.

Defendant further admits and alleges that the matter between SLMI andMarvel has absolutely nothing to do with the properties or claims at issue in

the instant action, and it is not clear what relevance the Marvel/SLMI matter

has to do with anything in this case. It is Defendant's belief that allegations

by Plaintiffs (who are alter egos of Marvel regarding this issue) denying

claims that SLMI has legally asserted in Federal Court in New York against

10


13/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

Marvel to enforce rights assigned by Stan Lee to capitalize SLMI, is a new

effort by Marvel to delay litigating the issues raised against it in a Federal

civil action in New York. Except as expressly admitted and alleged herein,

Defendant denies the remaining allegations of the Paragraph.46. Defendant denies the averments in Paragraphs sixty-eight and sixty-nine.

47. Answering the averments in Paragraph seventy, Defendant realleges his

answers to Paragraphs one through sixty-nine of the SAC.

48. Defendant denies the averments in Paragraphs seventy-one through eighty-

one, inclusive.

49. Answering the averments in Paragraph eighty-two, Defendant realleges his

answers to Paragraphs one through eighty-one of the SAC.

50. Defendant denies the averments in Paragraphs eighty-three through ninety.

51. Answering the averments in Paragraph ninety-one, Defendant realleges his

answers to Paragraphs one through ninety of the SAC.

52. Defendant denies the averments in Paragraphs ninety two through ninety-

eight.

53. Answering the averments in Paragraph ninety-nine, Defendant realleges his

answers to Paragraphs one through ninety-eight of the SAC.

54. Defendant denies the averments in Paragraphs one hundred through one

hundred four.

55. Answering the averments in Paragraph one hundred five, Defendant

realleges his answers to Paragraphs one through one hundred four of the

SAC.56. Defendant denies the averments in Paragraphs one hundred six through one

hundred thirteen.

57. Answering the averments in Paragraph one hundred fourteen, Defendant

realleges his answers to Paragraphs one through one hundred thirteen.

58. Defendant denies the averments in Paragraph one hundred fifteen.

11


14/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

59. Defendant admits the averments in the first three sentences of Paragraph one

hundred sixteen. Defendant denies the remaining averments in the

Paragraph.

60. Defendant denies the averments in Paragraphs one hundred seventeenthrough one hundred twenty and maintains that the rights to Stan Lee's name

and likeness remain assets of SLMI as assigned forever by Stan Lee in his

Rights Assignment Agreement dated October 15, 1998, re-ratified as

modified on October 9, 1999 as filed by Stan Lee with the SEC in form

10KB on March 30, 2000, while Chairman of SLMI.

61. Answering the averments in Paragraph one hundred twenty-one, Defendant

realleges his answers to Paragraphs one through one hundred twenty of the

SAC.

62. Defendant denies the averments in Paragraphs one hundred twenty-two

through one hundred twenty-eight.

63. Answering the averments in Paragraph one hundred twenty-nine, Defendant

realleges his answers to Paragraphs one through one hundred twenty-eight.

64. Answering the averments in Paragraph one hundred thirty, Defendant lacks

sufficient knowledge or information to form a belief as to the truthfulness of

the averments regarding plaintiffs alleged conduct and motives, and on that

basis deny the averments. Defendant denies the remaining averments in the

Paragraph, and further denies that QED and POW lawfully acquired any

rights to SLMI properties and could not be damaged by efforts by SLMI and

its agents to hold Plaintiff's accountable for their thefts of SLMI property.65. Defendant denies the averments in Paragraphs one hundred thirty-one and

one hundred thirty-two.

66. Answering the averments in Paragraphs one hundred thirty-three and one

hundred thirty-four, Defendant lacks sufficient knowledge or information to

form a belief as to the truthfulness of the averments, and on that basis deny

12


15/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

the averments, however Defendant denies specifically that Plaintiffs could

enter into any valid contract with third parties regarding assets belonging to

SLMI.

67. Defendant denies the averments in Paragraph one hundred thirty five.68. Answering the averments in Paragraph one hundred thirty-six, Defendant

realleges his answers to Paragraphs one through one hundred thirty-five.

69. Answering the averments in Paragraph one hundred thirty-seven, Defendant

lacks sufficient knowledge or information to form a belief as to the

truthfulness of the averments regarding plaintiffs alleged conduct and

motives, and on that basis deny the averments. Defendant denies the

remaining averments in the Paragraph, and further deny that QED lawfully

acquired any rights to SLMI properties.


the truthfulness of the averments in Paragraphs one hundred thirty-eight, and

on that basis deny the averments.

71. Defendant denies the averments in Paragraphs one hundred thirty-nine

through one hundred forty-two and reiterates his position that all of his

actions have been intended to vex and hold accountable Plaintiffs for their

frauds and conversions of property and claims owned by SLMI.

72. Answering the averments in Paragraph one hundred forty-three, Defendant

realleges his answers to Paragraphs one through one hundred forty-two.

73. Answering the averments in Paragraphs one hundred forty-four and one

hundred forty-five, and one hundred forty-seven Defendant admits that anyfilings with the Secretary of State are matters of public record and speak for

themselves. Except as specifically admitted herein, Defendant lacks

sufficient knowledge or information to form a belief as to the truthfulness of

the averments, and on that basis deny the averments.

13


16/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

74. Answering the averments in Paragraph one hundred forty-six, Defendants

admit that their public statement speak for themselves. Except as

specifically admitted herein, Defendant lacks sufficient knowledge or

information to form a belief as to the truthfulness of the averments, and onthat basis deny the averments.

75. Defendant denies the averments in Paragraphs one hundred forty-eight and

one hundred forty-nine.

76. Answering the averments in Paragraph one hundred fifty, Defendant lacks

sufficient knowledge or information of Colorado law to form a belief as to

the truthfulness of the averments which are not accompanied by a citation

to any authority and on that basis deny the averments.

77. Defendant denies the averments in Paragraphs one hundred fifty-one

through one hundred fifty-four and vehemently objects to any claims for

equitable relief in connection with Plaintiff's racketeering in looting,

destroying and attempting to annihilate SLMI through egregious and illegal

violations of fiduciary duties as directors, officers of SLMI and then as

Debtors in Possession and Trustees of SLMI when they looted assets, made

and aided and abetted false SEC filings and bank loans, filed claims

rightfully belonging to SLMI that were settled for in excess of $10 million

personally benefitting Plaintiffs at the expense of SLMI as part of a

collusive effort between Plaintiffs and the management and chief

shareholder of Marvel entertainment to hide claims against Marvel legally

owned by SLMI that are valued in the tens of millions of dollars.78. Defendant denies the averments in Paragraphs one hundred fifty-five

through on hundred sixty nine, which averments are known by Plaintiffs and

their counsel to be patently false and are now supported by newly

discovered (after 10 years), patently fabricated, evidence originating from

Arthur Lieberman, the former IP lawyer for SLMI and Stan Lee's personal

14


17/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

lawyer turned Svengali and partner in the fraudulently capitalized POW

Entertainment who is the mastermind behind Plaintiff's efforts to loot the

valuable assets and claims of SLMI while abusing the judicial process to

prejudice those who are making every effort to expose their frauds and holdthem accountable.

79. Answering the averments in Paragraph one hundred seventy, Defendant

realleges their answers to Paragraphs one through one hundred sixty-nine.

80. Answering the averments in Paragraphs one hundred seventy-one through

one hundred seventy-six, Defendant lack sufficient knowledge or

information to form a belief as to the truthfulness of the averments regarding

the conduct of other individual defendants, and on that basis deny the

averments. Defendant denies the remaining averments in the Paragraphs.

81. Answering the averments in Paragraph one hundred seventy-seven,

Defendant realleges his answers to Paragraphs one through one hundred

seventy-six.

82. Defendant denies the averments in Paragraphs one hundred seventy-eight

through one hundred seventy-nine.

83. Answering the averments in Paragraph one hundred eighty, Defendant

admits that a controversy exists with Plaintiffs. Defendant denies the

remaining averments.

84. Answering the averments in Paragraph one hundred eighty-one, Defendant

lacks sufficient knowledge or information of Plaintiffs state of mind, and on

that basis deny the averments. Defendant denies the remaining averments.85. Answering the averments in Paragraph one hundred eighty-two, Defendant

realleges his answers to Paragraphs one through one hundred eighty-one.

86. Answering the averments in Paragraph one hundred eighty-three, Defendant

denies that the representations set forth are false. Defendant lacks sufficient

15


18/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

knowledge or information to form a belief as to the truthfulness of the

remaining averments, and on that basis denies the averments

87. Answering the averments in Paragraph one hundred eighty-four, Defendant

admits that a controversy exists between them and Plaintiffs, but denies thatPlaintiffs are entitled to any equitable relief whatsoever due to failing to do

equity and having the uncleanest of hands along with all of their other

appendages. Defendant denies the remaining averments.

88. Answering the averments in Paragraph one hundred eighty-five, Defendant

lacks sufficient knowledge or information of Plaintiffs state of mind, and on

that basis denies the averments. Defendant denies the remaining averments.

Defendant has no recollection of posting the blog entry described in

Paragraphs 186- 193. In the event that defendant did post that entry, which is

the kind of entry Plaintiff has posted and similar to one he did post on his

blog site at www.peterfpaul.com, then Defendant would maintain that Stan

Lee's video taped deposition from February, 2005, speaks for itself in

capturing Stan Lee admitting to being illegally reimbursed a $100,000

federal campaign contribution made by him, in his name.

AFFIRMATIVE DEFENSES

Facts Common To All Affirmative Defenses

The following averments are common to all of the following affirmative

defenses asserted by the Defendants:

1. Defendant has exercised his first amendment rights to petition thecourts and speak freely about malfeasance, fraud, theft and related

administrative illegalities that he witnessed or discovered committed

by Plaintiffs and those who colluded and conspired with them.

16


19/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

2. Contrary to the allegations of the SAC, the Defendant has done

nothing wrong, improper or illegal, and in SACt, Defendant is the

primary reason SLMI has not been entirely annihilated by Plaintiffs to

hide and obstruct their accountability for their misconduct and theirfraudulent ownership and conversion of assets rightfully owned by

Stan Lee Media Inc..

3. But for the Defendant, SLMI shareholders would not know of the

assets that were hidden from them and wrongfully converted by the

Founder of SLMI, Stan Lee as directed by his Mastermind partner

and lawyer, Arthur Lieberman, who also directed the former COO and

Controller of SLMI in a perfect orchestration of blatant corruption

that has taken the true property of the company during and after it was

dismissed from bankruptcy for cause due to malfeasance of Plaintiffs.

4. In fact, the only reason Plaintiffs have asserted a derivative action in

the instant case is to attempt to maintain control of the entity that they

attempted to destroy in bankruptcy and then thwarted shareholder's

efforts to reinstate the company they illegally caused to be

administratively dissolved by the State of Colorado because of their

unlawful refusal to maintain the company in good standing while

Debtors in Possession. However, based solely upon the extraordinary

efforts of Defendant, SLMI and its records reportedly remain intact.5. The Defendant has done all things necessary and proper to save SLMI

from the abuse and neglect it had suffered at the hands of the

Plaintiffs, expose the malfeasance of Plaintiffs and help those who are

spending millions in legal costs and fees to recover for the

17


20/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

shareholders of SLMI millions in assets that have been hidden and

looted by Plaintiffs.

6. In order to provide both a legal and factual basis for the currentmanagement and state of affairs of SLMI, it is necessary to provide

the Court with the following information and evidence regarding

SLMI.

7. Stan Lee Entertainment, Inc., a Delaware Corporation and

predecessor in interest to SLMI, was incorporated on October 13,

1998.

8. On October 15, 1998, Stan Lee, assigned everything he owned in the

creative universe to SLMI and granted to SLMI the exclusive rights to

his name and likeness in a hybrid Employment and Rights

Assignment Agreement signed by Lee on both October 20 and 21 of

1998 one month before executing a new similar agreement with

Marvel..

9. On April 14, 1999, Stan Lee Entertainment, Inc. merged into Stan Lee

Media, Inc., a Delaware Corporation, another predecessor in interest

to SLMI. On or about August 12, 1999, by reverse merger with a

company by the name of Boulder Capital Opportunities, Inc., a

Colorado corporation, Stan Lee Media, Inc., a Delaware corporation,

became a Colorado corporation and thereafter was publicly traded for

a time on the New York Stock Exchange.10. On October 9, 1999, Stan Lee, acting under advice of his personal

counsel, modified his October 15, 1998 Rights Assignment and

Employment Agreement to forgive a 10% profit participation grant to

him in order to help enhance the share value of the company's stock in

which he was the largest shareholder. On that date Lee ratified the

18


21/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

October 15 1998 Agreement in all other respects and never challenged

the date of its execution

11. On or about February 16, 2001, SLMI filed for bankruptcy protection

pursuant to Chapter 11 in the Central District of California.12. The SLMI bankruptcy was pending between February 16, 2001 and

November 14, 2006, a period of almost five (5) years and nine (9)

months. During the entirety of the bankruptcy proceedings, Stan Lee

and Ms. Junko Kobayashi were the purported representatives and

fiduciaries of SLMI. In SACt, in the SAC Plaintiffs allege that

Junko Kobayashi was appointed by SLMIs board of directors to

serve as the authorized representative of SLMI during the

Bankruptcy Case. Thus Stan Lee, who has stated he remained as the

sole remaining Director of SLMI throughout the bankruptcy and

Junko Kobayashi were positioned at the gates of SLMIs assets.

13. On or about November 7, 2006, counsel of record for SLMI filed a

Notice of Non-Opposition to Dismissal of Chapter 11 Bankruptcy

Cases, which included an allegation that there were no

unencumbered assets over and above the post-petition secured debt,

which may be monetized for the benefit of creditors and requested

permission to destroy all property, files and records of SLMI.

14. On or about November 14, 2006, SLMIs bankruptcy petition was

dismissed by verbal order of the bankruptcy judge.

15. On or about November 15, 2006, and in an emergent attempt to savethe property, files and records of SLMI from imminent destruction,

Defendant James Nesfield, after acquiring the proxies of a majority of

the then known, eligible voting shareholders of SLMI and after

obtaining the authority of said majority of shareholders of SLMI,

wrote a letter to SLMIs bankruptcy counsel on behalf of the

19


22/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

concerned shareholders he represented asking for said counsel to turn

over and not destroy SLMIs property, records and files.

16. On or about November 16, 2006, bankruptcy counsel for SLMI wroteback to James Nesfield confirming that the bankruptcy cases had been

dismissed by verbal order of the bankruptcy judge on November 14,

2006, and assuring James Nesfield that steps were being taken to

preserve SLMIs records.

17. On November 27, 2006, proper notice of a Special Meeting of

Shareholders of Stan Lee Media, Inc. of Colorado was sent to all

interested parties, with more than 75% of the shareholders being

notified by direct mailing and the remaining shareholders being

notified by publication of the meeting on Media-Newswire.com.

18. On December 7, 2006, a special meeting of the shareholders of SLMI

was held and a majority of the known, eligible shareholders appeared

at the meeting. None of the Plaintiffs who received notice of the

meetings made appearance or objected.

19. The proposed resolutions at the meetings were passed by unanimous

vote of those present.

20. Those present at the meetings also ratified all previous actions of the

Defendants, and officers and directors were properly appointed and

SLMI has been conducting business ever since.

21. Contrary to the false statements in the SAC, Defendants have beenacting with the best of intentions, have published and noticed all of

their actions to all interested parties, including publishing their efforts

and intentions on the internet corporate site of SLMI, and have

conducted themselves with the best interests of the shareholders of

20


23/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

SLMI under the circumstances that the company had been rendered

insolvent and dissolved by the actions of Plaintiffs.

22. As of this date, SLMI remains a global branded content creation,

production and marketing company founded by pop culture icon StanLee. SLMI continues to attempt to conduct business and intends to

continue with its revised business plan of conceiving, creating, co-

creating, producing, marketing and licensing branded characters and

story franchises for entertainment, merchandising and promotional

exploitation worldwide.

23. In the SLMI bankruptcy proceedings, what Judge Lax ordered and

what actually happened are two very different things. Specifically,

during the SLMI bankruptcy, the Honorable Judge Kathleen T. Lax,

United States Bankruptcy Court Judge, Central District of California,

San Fernando Valley Division, presided over the SLMI bankruptcies,

Case No. SV 01-11329 KT, jointly administered with Case No. SV

01-11331 KT, entered an Order dated April 11, 2002, that authorized

the sale of certain assets of SLMI to a company by the name of SLC,

LLC. The assets authorized to be sold by Order are the same assets at

issue in the SAC.

24. The April 11, 2002 Order was entered as a result of a motion

supported by a sworn declaration, a supplement to the motion, and a

notice of hearing. As is clear from these documents, all interested

parties, as well as Judge Lax, were considering and ultimatelyapproved the sale of the assets to SLC, LLC, a purported California

limited liability company, based on warranties provided by Stan Lee.

Although the April 11, 2002 Order speaks for itself, the Order

specifically: (1) authorized the agreement between Stan Lee, on

behalf of SLC, LLC, and SLMI, debtor-in-possession (attached to

21


24/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

the April 11, 2002 Order), to be consummated; (2) authorized the sale

of certain of SLMIs assets to an entity by the name of SLC, LLC,

which entity was specifically represented by Stan Lee to be a

California limited liability company; (3) involved not only Stan Lee,on behalf of SLC, LLC, but also a secured creditor by the name of

Wild Brain, Inc. and the Official Committee of Unsecured Creditors;

(4) not only limited the type of assets authorized to be sold, but also

specifically designated the entity to purchase the assets as SLC, LLC,

a California limited liability company; (5) required that the articles of

organization reflect that SLC, LLC be a special purpose entity,

thereby expressly restricting the business of SLC, LLC to only the

exploitation of the specific assets being sold and specifically

prohibiting SLC, LLC from conducting any other business; (6)

prohibited SLC, LLC from assigning, conveying, encumbering, or

otherwise transferring the assets to anyone without the express written

consent of SLMI; and (7) required that any purported assignment or

transfer of the assets at issue be approved by the Bankruptcy Court.

Thus, the specific instructions in the Order to Stan Lee, on behalf of

SLC, LLC, were not optional, and that Stan Lee did not have any

authority whatsoever unilaterally to change the Order and substitute

his own judgment based upon what he believed to be more convenient

to him and his cohorts.

25. The purpose for obtaining approval and authorization to sell assetsduring any bankruptcy is to ensure that no insider or equity holder of

the debtor-in-possession wrongfully benefits from a particular

transaction to the detriment of the creditors and the shareholders of

the debtor-in-possession. In SACt, Judge Laxs Order specifically

makes findings required in any such situation, such as (1) the terms

22


25/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

and conditions of the Sale Agreement is in the best interest of the

Debtors and their estates; (2) the terms of the sale of the Assets to

Buyer [SLC, LLC] are the result of good faith and arms length

negotiations between the Debtors, the Official Committee ofUnsecured Creditors (the Committee), Wild Brain and Buyer, and

the Debtors have determined . . . that the Assets should be sold to

Buyer [SLC, LLC]. . . and that the consideration to be realized by the

Debtors is fair and reasonable; and (3) that Buyer [SLC, LLC] has

acted, and is acting, in good faith, and is therefore entitled to the

provisions afforded to a good faith purchaser under 11 U.S.C.

363(m). Furthermore, it is clear that Judge Laxs Order and the

agreement incorporated therein were crafted with the intent of

maintaining control over the manner in which these very valuable

assets were being managed.

26. Even though Judge Lax and all of the interested parties expended

great efforts to negotiate and finalize the terms and conditions of the

April 11, 2002 Order, Stan Lee, by his own admission in the SAC,

unilaterally and without any authority, decided not to close on the sale

of the assets to SLC, LLC.

27. In fact, Stan Lee admits that he never even set up SLC, LLC, even

though for the approximately six months from November of 2001

through April 11, 2002, he allowed the Bankruptcy Judge, Trustee,

creditors and all interested parties to believe that he was doing so.Furthermore, Stan Lee went so far as to sign a document that was

filed with the Court in support of the proposed sale of assets,

warranting and representing that SLC, LLC was, at the time of that

filing, an existing limited liability company pursuant to the laws of the

State of California.

23


26/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

28. In short, there was never any closing and never any transfer or sale of

assets to SLC, LLC, as ordered. Instead, Plaintiffs now admit in the

SAC that Stan Lee caused the assets to be transferred to QED.

Interestingly, Plaintiffs fail to provide any date or dates upon whichthe purported transfers from SLMI to QED took place. Defendants

are aware of only one documented transfer by SLMI to QED, that

being the fraudulent assignment of copyrights by Junko Kobayashi as

authorized representative of SLMI to Gill Champion, as agent of

QED, August 7, 2006.

FIRST AFFIRMATIVE DEFENSE

(Failure to State a Cause of Action Upon Which Relief May be Granted)

As his first affirmative defense, Defendant avers that Plaintiffs have failed to

state any cause of action upon which relief may be granted. Moreover, at all times

material hereto. For this additional reason, Plaintiffs have failed to state any cause

of action upon which relief may be granted as against the defendant.

SECOND AFFIRMATIVE DEFENSE

(Lack of Standing)

As his second affirmative defense, Defendant avers that none of the

Plaintiffs (except SLMI if SLMI were properly a plaintiff) have any legal

enforceable rights of any kind to any of the assets at issue in this action and,

therefore, have no standing of any kind to bring the instant action against

Defendant. All of Plaintiffs purported claims allegedly arise out of and originate

with the sale of assets agreement, as amended, and as incorporated into theBankruptcy Courts April 11, 2002 Order. Because the sale of assets agreement,

as amended, and the April 11, 2002 Order clearly and unambiguously state that

none of the Plaintiffs are entitled to the ownership or rights to the assets at issue,

and that none of Plaintiffs could be the assignee of ownership rights without

24


27/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

further order of the court and written approval of SLMI, Plaintiffs lack standing to

bring their claims against these individual Defendants.

THIRD AFFIRMATIVE DEFENSE

(Unclean Hands)As his third affirmative defense, Defendants aver that, to the extent the

Plaintiffs (except SLMI if SLMI were properly a plaintiff) assert any equitable

claims, said Plaintiffs claims are barred because they come to this court with

unclean hands and are not entitled to any form of equitable relief.

FOURTH AFFIRMATIVE DEFENSE

(Fraud)

As his fourth affirmative defense, Defendant avers that Plaintiff, Stan Lee

and Gill Champion acting in concert with their partner and lawyer, Arthur

Liebreman, and other principals of both POW! and QED, based upon the above-

mentioned SACts have committed certain frauds upon the Bankruptcy Court, the

Bankruptcy Judge, the Bankruptcy Trustee, the Debtor in Possession, SLMI, the

creditors of SLMI and the shareholders of SLMI, the shareholders of Marvel

Entertainment, the lenders to Marvel Studios, among others, by procuring the sale

of assets agreement, as amended, and the April 11, 2002 Order authorizing said

sale of assets, and by thereafter, intentionally disregarding said agreement and

order for their own personal financial gain, and to the financial detriment of SLMI

and its shareholders and creditors, and thereafter ignoring all other provisions of

said agreement and Order, and filing personal claims against Marvel Entertainment

based on assets legally owned by SLMI. As a result of such frauds, Plaintiffsshould be denied all relief sought in the SAC. In addition, Plaintiffs paid no

consideration for the assets looted from SLMI and failed to enforce the

Reconveyance right retained by SLMI under the Sale of Assets Agreement

providing that all assets sold thereunder would be reconveyed within 30 days of

25


28/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

written notice by SLMI to reconvey said assets if the benchmark development

deals and payments were not made- which have never been made.

FIFTH AFFIRMATIVE DEFENSE

(Forfeiture of Contract Rights, If Any)As his fifth affirmative defense, Defendant avers that, to the extent Plaintiffs

had any contractual rights of any kind, Plaintiffs forfeited any such rights pursuant

to the sale of assets agreement, as amended, and the Bankruptcy Court Order dated

April 11, 2002, by engaging in conduct that contradicted the terms of said

agreement and Order and, in the case of Stan Lee, was in direct contempt of the

April 11, 2002 Order. Additionally, said contract rights were forfeited by the

complete failure on the part of any of the Plaintiffs (except SLMI if SLMI were

properly a plaintiff) to pay any amounts due and owing SLMI and its creditors

pursuant to said agreement and order.

SIXTH AFFIRMATIVE DEFENSE

(Violation of 11 U.S.C. 362)

As their sixth affirmative defense, Defendant avers that Plaintiffs, Stan Lee,

Gill Champion, POW!, by and through its agents, and QED, by and through its

agents, committed certain wrongful and contemptuous acts in direct violation of

the Bankruptcy Courts April 11, 2002 Order, and thereby wrongfully and illegally

acquired possession and thereafter used certain assets rightfully belonging to

SLMI, then a Debtor in Possession before a United States Bankruptcy Court. The

purported transfer of the intellectual properties at issue from a debtor-in-

possession, while the Bankruptcy Case was still pending, without any authority todo so, is an involuntary and unauthorized transfer. Involuntary transfers of assets,

particularly those which are effected by persons having full knowledge of a

Bankruptcy Court Order to the contrary, are governed by 11 U.S.C. 362, which

specifically states that the filing of a bankruptcy petition, as in the case of SLMI,

operates as a stay, . . . , ofany act to obtain possession of property of the estate

26


29/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

or of property from the estate or to exercise control over property of the estate.

Involuntary transfers of assets in violation of 11 U.S.C. 362 are void ab initio.

Therefore, as a matter of law, any purported assignment of assets by Plaintiffs was

void from its inception and had no legal effect whatsoever. As a result, SLMIcontinues to own and hold all rights, interest and copyrights in and to the

intellectual properties at issue, and the Plaintiffs have absolutely no basis to be

suing the Defendants.

SEVENTH AFFIRMATIVE DEFENSE

(Statute of Limitations)

As his seventh affirmative defense, the Defendant avers that the Plaintiffs

claims are barred by the applicable statute of limitations with regard to each and

every legal cause of action alleged.

EIGHTH AFFIRMATIVE DEFENSE

(Doctrine of Laches)

As his eighth affirmative defense, the Defendant avers that the Plaintiffs

claims are barred by the doctrine of laches with regard to each and every equitable

cause of action asserted.

NINTH AFFIRMATIVE DEFENSE

(Doctrine of Acquiescence)

As his ninth affirmative defense, the Defendant avers that the Plaintiffs'

claims are barred by the doctrine of acquiescence with regard to each and every

equitable cause of action, and in connection with any action taken by Defendant

while he worked for SLMI from 1999-2000.

27


30/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

24

TENTH AFFIRMATIVE DEFENSE

(Failure to State Cause of Action for Punitive and/or Exemplary Damages)

As his ninth affirmative defense, the Defendant avers that the Plaintiffs have

failed to state any cause of action upon which relief may be granted in the form ofpunitive and/or exemplary damages of any kind.

PRAYER FOR RELIEF

WHEREFORE, Defendants pray as follows:

1. That Plaintiffs take nothing by reason of the Second Amended

Complaint, and that judgment be rendered in favor of Defendant;

2. For a judicial declaration that Plaintiffs have no rights to any of the

assets at issue in this action;

3. That Defendant be awarded his costs of suit incurred in defense of this

action;

4. That Defendant be awarded their reasonable attorneys fees incurred in

this action should he retain attorneys; and

5. For such other relief as the Court deems proper.

DATED: October 3, 2008 PETER F PAUL, Pro Per

By:Peter F Paul1854A Hendersonville Rd #10Asheville, NC 28803

(828) 776 4434

28


31/31

1

2

3

45

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

21

22

23

DEMAND FOR JURY TRIAL

Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Defendants

hereby demand a trial by jury.

DATED: October 3, 2008 PETER F PAUL, Pro Per

By:Peter F Paul

Peter Paul's Answer to Stan Lee's 2nd Amend Complaint

Documents

Transcript of Peter Paul's Answer to Stan Lee's 2nd Amend Complaint