## Facts

- The Walt Disney Productions (Disney) hired conductor Leopold Stokowski to arrange, conduct, and consult on music for the motion picture *Fantasia*.
- Disney and Stokowski entered into a written contract that included Clause 6, requiring Stokowski to deliver an agreement from the Philadelphia Orchestra Association (and its members) stating they retained no rights in connection with *Fantasia*.
- Stokowski, the Orchestra’s conductor, arranged for the Orchestra’s performance to be used in the *Fantasia* soundtrack.
- Stokowski allegedly failed to provide an agreement that fully barred the Orchestra and its members from later asserting rights connected to *Fantasia*.
- Years later, the Philadelphia Orchestra Association sued Disney seeking a share of revenues from videocassette and laser disc sales of *Fantasia*, forms of exploitation not expressly addressed in the Orchestra-related paperwork Disney claimed Clause 6 required.
- Disney then asserted claims against Stokowski’s estate, contending that Clause 6 obligated the estate to indemnify Disney for any amounts Disney might be required to pay the Orchestra, and also seeking a related setoff.
- Stokowski’s estate moved to dismiss Disney’s indemnification and setoff claims for failure to state a claim and on statute-of-limitations grounds.

## Issues

1. Whether Disney sufficiently stated a claim for contractual indemnification (and a related setoff) based on Clause 6’s requirement that Stokowski secure an agreement eliminating the Orchestra’s rights connected to *Fantasia*.
2. Whether Disney’s indemnification and setoff claims were time-barred where the contract was executed decades earlier, but Disney’s asserted loss depended on the outcome of the Orchestra’s later lawsuit.
3. Whether Disney’s indemnification claim was premature because Disney’s liability to the Orchestra had not yet been fixed by judgment, settlement, or payment.

## Decision

- The court denied the estate’s Rule 12(b)(6) motion to dismiss.
- The court held Disney’s pleadings adequately alleged a contractual basis, tied to Clause 6, for indemnification and for a related setoff theory.
- The court declined to dismiss on statute-of-limitations grounds at the pleading stage because an indemnification claim generally accrues when the indemnitee’s liability becomes fixed or the indemnitee pays the loss, not when the underlying contract was signed.
- The court allowed Disney to pursue indemnification even though Disney’s potential liability to the Orchestra was contingent on the still-pending third-party action.

## Legal Principles

- On a Rule 12(b)(6) motion, the court accepts well-pleaded factual allegations as true and draws reasonable inferences in favor of the nonmoving party.
- Under New York law, a contractual indemnification claim typically accrues when the indemnitee’s liability is fixed by judgment or settlement, or when the indemnitee makes payment, rather than at contract formation.
- Contract language assigning responsibility to obtain third-party releases or waivers may support an indemnification claim at the pleading stage, even where the dispute turns on the scope and effectiveness of those releases.
- A court may permit a contingent indemnification claim to remain in the case while related third-party litigation is unresolved, rather than requiring a later, separate action once liability is determined.
- A setoff claim may proceed where it is tied to the same alleged contractual breach and would affect the financial allocation between the parties if the underlying third-party claim results in liability.

## Conclusion

In *Muller v. The Walt Disney Productions*, the Southern District of New York denied Stokowski’s estate’s motion to dismiss Disney’s indemnification and setoff claims arising from Clause 6 of the *Fantasia* contract, holding that Disney plausibly alleged a contractual basis for shifting any Orchestra-related liability to the estate and that limitations and prematurity arguments did not justify dismissal at the pleading stage.


Muller v. The Walt Disney Productions, 876 F. Supp. 502 (1994)