## Facts

- Stan Lee helped create and popularize multiple comic-book characters during a decades-long relationship with Marvel Enterprises, Inc.
- Lee and Marvel previously operated under an arrangement that paid Lee a percentage of revenue received by Marvel.
- After Marvel emerged from bankruptcy, Lee and Marvel entered a new written agreement dated November 17, 1998.
- The agreement granted Lee a participation “equal to 10% of the profits” derived by Marvel from “any live action or animation television or movie (including ancillary rights) productions utilizing Marvel Characters.”
- The agreement did not define “profits.”
- The same paragraph stated that Lee’s participation “is not to be derived from the fee charged by Marvel for the licensing of the product or of the characters for merchandise or otherwise.”
- Lee read the contract to give him 10% of all profits from Marvel’s film and television projects using Marvel characters, and he argued the participation should not be limited by industry net-profit calculations (often described as “Hollywood accounting”). He also claimed entitlement to certain merchandising-related profits.
- Marvel argued Lee’s share was narrower: “profits” should be understood as net profits as used in entertainment-industry participations, and Lee could receive 10% only from those projects in which Marvel itself had a net-profit participation interest (after deductions such as production costs, distribution fees, and similar expenses).
- Lee sued. Both sides moved for partial summary judgment seeking a ruling on the meaning and scope of the profit-participation clause.
- After the 2005 partial summary-judgment ruling, Lee and Marvel settled and the action was dismissed with prejudice.
- Years later, Stan Lee Media, Inc. (SLMI), a nonparty, sought post-judgment relief to reopen the settled case through Rule 60 and related motions; the district court denied the request, and the Second Circuit affirmed.

## Issues

1. Whether the 1998 agreement’s undefined term “profits” gave Lee 10% of all profits from Marvel-related film and television projects using Marvel characters, or instead referred to net profits as understood in entertainment-industry profit participations.
2. Whether Lee’s 10% participation applied only to productions where Marvel itself held a net-profit participation interest, or applied more broadly regardless of Marvel’s deal terms on a given production.
3. How the agreement’s statement that Lee’s participation was “not to be derived from” Marvel’s licensing fees affected any claim to merchandising-related income.
4. Whether a nonparty (SLMI) could reopen the long-settled and dismissed case under Rule 60, and whether its request was made within a reasonable time.

## Decision

- The district court construed “profits” in the 1998 agreement to mean net profits determined in the commercial setting of entertainment profit participations, rather than all profits from Marvel’s film and television business.
- The court limited Lee’s 10% participation to those film and television projects in which Marvel itself had a net-profit participation interest (i.e., where Marvel’s own deal gave it a right to share in net profits).
- The court rejected Lee’s request for a declaration that he was entitled to 10% of all profits from Marvel’s film and television projects using Marvel characters regardless of Marvel’s net-profit position.
- After settlement and dismissal with prejudice, the district court denied SLMI’s Rule 60 and related post-judgment motions seeking to vacate the dismissal and reopen the case, finding the request untimely and unsupported by the demanding standards for such relief.
- The Second Circuit affirmed the denial of post-judgment relief in a summary order, leaving the settlement and dismissal intact.

## Legal Principles

- Under New York contract law, a court starts with the contract’s text; when a key term is undefined, the court may read it in light of the agreement’s structure, commercial context, and industry usage.
- In entertainment contracts, “profits” used without a special definition is commonly understood to mean net profits (after specified deductions), not gross receipts or all corporate earnings.
- A profit-participation promise generally does not require a party to pay out of profits it does not itself receive; where the promisor’s own rights are limited to net-profit participation on certain projects, the payee’s share may be limited the same way absent clear language expanding it.
- Language excluding “fees” for licensing from the participation base bars participation derived from those licensing fees as such, rather than converting the overall clause into a sweeping grant to all downstream revenue.
- Rule 60 relief from a final judgment is exceptional; a nonparty seeking to disturb a long-final, settled dismissal must satisfy strict standards and must move within a reasonable time, with substantial delay weighing heavily against reopening.

## Conclusion

Lee v. Marvel Enterprises held that the 1998 agreement’s undefined “profits” term was properly read as net profits in line with entertainment-industry profit participations, limiting Lee’s 10% share to projects where Marvel itself had a net-profit participation interest rather than all profits from Marvel’s film and television exploitation of its characters; years later, SLMI’s attempt to reopen the settled and dismissed case under Rule 60 failed because the motion was not timely and did not meet the high bar for post-judgment relief, and the Second Circuit affirmed.


Lee v. Marvel Enterprises, Inc., 386 F. Supp. 2d 235 (S.D.N.Y. 2005), aff’d, 471 F. App’x 14 (2d Cir. 2012)