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Trampled

The goal of this report is to lay out Peggy Lee’s case, versus Disney. Peggy Lee, a singer, entered into an agreement with Disney to work on a film in 1955.  She provided her voice to two of the six songs she wrote for the films.  While she was paid for her work, she also kept the rights for residuals of the phonographic recordings and transcriptions at 12.5%. The contract specified that Disney had the right to distribute the film including “the rights to any other technology yet to be invented” but also said the sale of copies of the transcriptions made were Peggy’s revenue. Lee sued Disney in 1958, a year after the film began to be distributed.  She claimed she was entitled to $9 million, and also claimed to be entitled to 12.5% of the profits from the video cassette sales which she said was not authorized in the 1952 contract.  Disney countered saying the distribution was authorized and that Lee was only entitled to 12.5%, capped at $381,000 by union rules.

The report will be going over the legal clauses that relate to the case, starting with the breach of contract then going into invasion of privacy. Disney argues that the contract goes against their “custom, practice, and usage” policies. Lee will get paid no matter if she wins or lose this case but the total will be much less if Disney wins. Lee’s damages would be determined based on different totals from Disney’s income statement. If Lee prevails, she would get a payment from Disney’s gross profit. Lee would also be entitled to prejudgement interest.

PEGGY LEE V. DISNEY

Lee, the plaintiff, is suing Disney, the defendant, based on the grounds that Disney breached their contract and invaded her privacy. According to the agreement, the defendant had the authority to sell the films using current technology and technology yet to be invented. In § 12(b), the contract states that Lee would earned 12.5% of sales of phonographic recordings and transcriptions. This would classify the videocassettes as transcriptions, meaning that Lee would also get paid 12.5% of sales of the videocassettes. The contract gives Disney the right to produce the videocassettes based on the clause “any other technology yet to be invented”, which would mean that Lee would not be entitled to sales of videocassettes based off invasion of privacy.

BREACH OF CONTRACT

In their 1952 agreement, Disney agreed that Lee was entitled to 12.5% of sales received from selling such products as the phonographic recording to the public. It did not explain any agreement to do with the production of video cassettes using Lee's voice.

Lee believes, Disney committed a breach of their contract, because the sales of the videocassettes was never authorized in the 1952 contract. There were no statements of her given rights to the distribution of videocassettes specifically. It is very difficult to determine the future of technology. Lee could never predict that her voice would be used and distributed 30 years in the future, on technology that was yet to be invented. She believes she is owed 12.5% of sales of the videocassettes because she retained the rights to residual payments of any distribution of her voice. In § 12(b) of the agreement, Lee has the right to 12.5% of profits generated from the sales of phonographic records and/or transcriptions for sales to the public.The ambiguity of the transcriptions is the real problem. In Lee’s defense, transcriptions would apply to videocassettes or any other future media. Lee would be entitled to the full 12.5% of any transcription sold to the public. Disney states that in § 12(b) they are given the right to any other technology that has yet to be invented. Lee agreed to 12.5% of sales from phonographic recordings only. In Disney’s defense, transcription could only mean copies of phonographic recordings. This would mean, Disney does not have to pay Lee for videocassettes, or any other media besides phonographic recordings. Even though Disney has the right to distribute any future technology, §12(b) of the agreement would supersede Disney’s right to distribute videocassettes without paying Lee for her work. Since there is ambiguity, the case would be in favor of Lee, which would mean that any transcription of Lady and the Tramp would lead to her getting paid 12.5% of sales.

INVASION OF PRIVACY

Lee believes that she had not authorized the commercial use of her name, voice, signature, photograph or likeness. The invasion of privacy is concentrated on the use of someone's image for purposes of advertising, soliciting and generating an income without their consent. In Lee and Disney’s case, Lee believes that Disney invaded her privacy by not compensating her for the videocassettes. The contract does not state the use of her voice in videocassettes, specifically. Since their agreement was only based on the use of her voice in the phonographic recordings, Lee believes she has the right to sue Disney for invading her voice privacy in producing and selling the videocassettes. Lee also thinks that she is eligible to the proceeds from the sale of the videotapes.  Disney is under the impression that they did not invade Lee’s privacy due to the fact in that in §12(b), she had given Disney the consent to distribute the film with “any other technology to be invented.” Meaning the videocassettes would be covered under the future technology clause.

CUSTOM, PRACTICE, AND USAGE

Disney’s “custom, practice, and usage” of declining to give their voice performers participation deals comes from past contracts that the Disney family had badly experienced in the 1920’s, according to a testimony given by Roy Disney. This is relevant to Disney, as this proves that they have had the same “custom, practice, and usage” long before Peggy entered her contract in 1952, meaning that she would not have had a voice performers participation deal. Lee is only getting paid for her lyrics and participation. Disney wants to make it clear that she is not getting paid for her voice work. The two witnesses, Jodi Benson who was the voice of Ariel in The Little Mermaid (released in 1989) and Cheech Marin who was a voice in Oliver & Co. (released in 1988), both testified that Disney did not give them, voice actors, profit participation deals. This only further supports Disney’s testimony.

DISNEY’S COUNTER CLAIM

If Disney prevails in the case, Lee would be entitled to 12.5% of the sales of transcriptions of phonographic recordings after the cost of goods sold is subtracted, limited to $381,000 based on union rules. The total amount of sales of phonographic recordings is not given so an exact number cannot be created.

LEE’S DAMAGE CLAIM IF DISNEY PREVAILS

Based on the Lady & the Tramp Project Income statement, Lee calculated her claim of nine million dollars by taking 12.5% of sales. Sales on the income statement is stated to be $77,236,000. The result, of multiplying 77,236,000 to 0.125, is $9,654,500. Lee rounds this down to get a total of $9,000,000.

ECONOMIC SALES TERMS

A company's sales revenue (also referred to as "net sales") is the income that it receives from the sale of goods or services. On the other hand, gross profit is the income that a company makes from its sales after the cost of the goods and operating expenses have been subtracted. This may include material cost, labor cost, expenses etc. contribution to overhead is the amount of money a single department has available after its direct expenses are paid to help pay for the overhead of the business. Departmental contribution to overhead is calculated by subtracting direct expenses from the department's revenues.

LEE’S DAMAGES

There are four different possibilities of damage totals that Lee could be entitled to. Sales revenue would be the total amount of sales. Lee should not be entitled to the total amount of sales because Disney has to payback other expense accounts before paying Lee. Gross profit would be the most relative option for Disney. After cost of goods is subtracted, Disney should be paying Lee 12.5% of the gross profits ($45,272,520) which would total to $5,659,065. This does not equal to the 9 million she is asking for. Contribution to overhead would not be relevant because  overhead would include the payments to Lee. To obtain contribution to overhead, Disney would have to subtract Lee’s payments. Profit before tax would also be irrelevant because Disney must pay the tax before Disney pays Lee. Lee wants sales revenue but Disney does not have to pay her the full sales revenue because Lee’s payments is a part of Disney’s overhead. Disney would use their gross profit to determine Lee’s 12.5% of sales.

PREJUDGEMENT INTEREST RATES

If we base Lee’s damages off of gross profits, she would make $5,659,065 from the sales of the videocassettes. The court would make Disney pay a prejudgement interest rate of 7.5% yearly. The date of demand would begin on February 28, 1988 and the judgement date would be March 1st, 1991 which would be three years. The interest would be compounded yearly. After the three years, the total would be $7,030,238.76. This would be the damages that Lee would receive if she prevails in this case against Disney.

CONCLUSION

Peggy Lee sued Disney on the pretenses of breach of contract and  invasion of privacy. We concluded that her claim was invalid due to the fact that she signed the contract with Disney, and signed over her consent for them to use her voice in recordings. However, we decided that Disney did, in fact, breach their contract. Disney had agreed to residual payments of 12.5% of sales, over time this accrued to be approximately $9,000,000, which Lee should receive if she prevails.