1980: Warren vs Harris - Buying & Selling Warren Publishing
What happened to Warren Publishing is a
sad, and cautionary, tale. The company was founded by James Warren in the late 1950s
and in it’s heyday, was responsible for some of the best comic book magazines
ever published. Titles such as Creepy, Eerie, Vampirella and Blazing
Combat are still looked upon today as being before their time, and feature
some of the best, and most imaginative, work by the likes of Archie Goodwin,
Frank Frazetta, Joe Orlando, Alex Toth, Bernie Wrightson, Gene Colan, Steve
Ditko, Neal Adams and dozens of others.
The magazine format enabled Warren to
circumvent the Comic Code, thus freeing artists and writers up to use their
complete imagination. Add to that a preference to publish in black and white,
and it’s easy to see why many felt that working at Warren was the pinnacle. It
wasn’t the most lucrative company to work for, but the freedom offset the page
rates.
By the early 1980s, Warren Publishing was
in trouble. Sales began to drop and Warren himself had begun to experience
health issues, which resulted in him withdrawing from the world at large.
Editorial changes happened, but the end was inevitable.
The first nail in the coffin came when
Harlan Ellison sued Warren for plagiarism. Ellison claimed that his 1969 story,
A Boy and his Dog, had been rewritten and published, without his
permission. Without getting into the finer details of the case, Ellison was
right and won his case. A settlement was reached. While the Ellison case was
happening, editor James Stenstrum and managing editor Chris Adams quit. Soon
after Bill DuBay also left.
The line struggled on for a period, but, in
1983, it was all over. Publishing was suspended and staff let go. Warren blamed
the layoffs on the shrinking market for black and white magazines of the time,
but the truth was that more magazines, and fanzines, than ever were in the
market and Warren was finding it hard to compete.
An early attempt at selling the assets of
Warren didn’t bring the huge amounts that were expected, with the bulk of the
magazines and comic books failing to bring more than a few cents on the dollar
and, with mounting debts, lawsuits and a general apathy by publisher and owner
James Warren, the company had been placed into Chapter 7.
Chapter 7, to summarise, “…provides for
"liquidation" - the sale of a debtor's nonexempt property and the
distribution of the proceeds to creditors.[1]”
On January 4, 1984, the United States
Bankruptcy Court, at U.S. Courthouse, Foley Square, New York, held a hearing to
sell the property of Warren Communications. James Warren, if he so desired,
could bid on his own company.
He chose not to. In fact, Warren chose to
ignore the sale completely. As you’ll read in this hearing, Warren was well
aware of what was happening and chose to not respond to the court, or even his
own layers. Thus he could not complain when his company, and assets, were sold.
But he did complain. Not right away, but
years down the line when Harris began to publish a new version of Vampirella,
Warren sued for the character. But that’s another story for another day.
On the block at this hearing in January
1984 were all of Warrens assets, books, merchandise, trademarks, copyrights,
original art, magazines, reprint and publishing rights – absolutely everything.
Problems were identified at the time,
notably by Bill DuBay, Forrest J Ackerman and Frank Throne, but the court
elected to skim over them. DuBay, who’s nephew would later sue Stephen King for
plagiarism regarding The Rook and The Dark Tower, made an
impassioned plea for his artwork, citing contracts and the relevant Copyright
Act. Again, as you’ll read, despite artists believing that the contracts they
had signed called for the return of their artwork, a search of Warrens files
turned up virtually nothing. Three contracts were found, none of them had a
provision for art returns.
This meant that sold with the company was
original art, rumoured to be the better part of a large storage unit. This
included art by the likes of Neal Adams, Steve Ditko, Bernie Wrightson, Bruce
Jones and dozens of others, virtually every artist whose work had ever appeared
in the pages of a Warren comic or magazine. This was sold without the
permission of those artists, most of whom then began the legal fight to get
that art (rightfully) returned.
The saddest part is all of this could have
been avoided, or altered, if only James Warren had decided to speak at the
time. Instead he waited. For years.
APPEARANCES
James Beldner, Esq, for Warren
Communications.
Barbara Balaber-Strauss, Esq, for the
Trustee.
Elias Schoenfield, Esq, for Harris
Publications
Bill DuBay, for himself
MS.
BALABER-STRAUSS: Good morning, Your Honor. This is
a hearing on the Trustee's notice to sell certain property of the Debtor and
the Trustee's right, title and interest, if any, in and to certain property of
the Debtor, Warren Communications Corporation, also known as the "Captain
Company".
I’ll give you a little background on the case.
Warren Communications was a publisher of horror or fantasy fiction. They
started publishing these magazines somewhere around 1960, the sole shareholder
and boy genius of the company was one James Warren.
Somewhere around 1981, James Warren, upon information
and belief no longer was interested in running this company. From that time on,
the company slowly but surely lost its glow in the world, to which these magazines
appealed. Namely the fourteen to thirty year old male youth.
An involuntary Chapter 7 was filed on or about
April 20th, 1983.
Order for relief was entered on May 19th, 1983
Bob Fisher was appointed the interim Trustee, and I was retained as attorney
for Trustee. There were two auction sales held, one was in July, and magazines
comics, some mail order merchandise, Captain Company was, in fact, a company devoted
to the sale of various related objects, such as Star Wars figures, mass action,
little jewellery that was supposed to have come from Transylvania and we sold all
of this at an auction and I believe the auction brought somewhere in the
vicinity of about $30,000, is that correct?
MR.
FISHER: Correct. In August.
MS.
BALABER-STRAUSS: That was an attempt to sell
950,000 comics that were at a Brooklyn warehouse.
We did, after the sale, get some offers somewhere
in the vicinity of 3 cents a copy.
In addition, at that time, the Trustee's right,
title and interest was noted for sale , again, if any, in the reprint rights,
and in the re-use rights.
There were no objections to the sale, but unfortunately
there were no bids at the auction for the Trustee's title and interest, in the
re-use rights and copyrights, the Trustee sale sold an unexpired lease, I believe
we had some hearings before the Court with regard to that, and the results of
that sale enabled the estate to pay off $35,000 in U and O[2] to
the landlord, and thereby covered us for the time we held the auction sales.
The second auction sale incidentally, I believe
netted something like $27,000, which was the result of primarily the sale of
the Trustee's right, title and interest, if any, in certain art work that was
on the premises.
Today, after months of negotiation and bids
that never materialized , and offers that were not substantiated with
sufficient security to warrant the sitting tight for the pay out, we come to
you with a three prong offer. It's a private offer by Harris Publications.
To take it one at a time, first, Mr. Harris
is offering 3 and a half cents a magazine for the 950,000 some odd magazines
and comics that have been sitting in a Brooklyn warehouse. We have been
incurring U and O, and we are very happy to be getting rid of these magazines
at this time.
THE
COURT: What would the magazines sell for while the
company was in business?
MS.
BALABER-STRAUSS: Anywhere, I believe, wherever
seventy-five cents to $1.25, depending upon whether it was a magazine or a
comic.
I believe we gave you six of the magazines and
if you look on the front you can see the variety of prices.
THE
COURT: That's why I asked a question, I don't see
it, but go on, I'll take your word for it.
Yes, I do see it now. Well, this is "Creepy"
and it's $1.25. There is another one here called "Vampire".
MS. BALABER-STRAUSS: "Vampira"[3].
THE
COURT: That's it. Go ahead.
MS.
BALABER-STRAUSS: We did sell some of the comics and
magazines at the first auction, we had about 40,000, as I recall, in the
premises at East 32nd Street, and we were able to sell those comics
for anywhere between, I believe, 3 and a half to 5 cents and we sold some
individual issues for as much as one dollar, most of them were sold for
somewhere in the vicinity of 5 cents an issue.
That was not to the trade, Gem Auction appeared
at a convention that was held shortly prior to our sale, Forbidden Planets
convention, and distributed notice of our sale and unfortunately this marvelous
gold mine that we thought we had resulted in a mere 5 cents a copy sale on the
average.
THE
COURT: Now you're down to 3 and a half cents.
MS.
BALABER-STRAUSS: That's 950,000 books[4].
THE
COURT: I understand.
MS.
BALABER-STRAUSS: Rather a glut on the market at
this time. However, it is people in the trades' opinion that in time the value
will increase, and that the buyer, in fact, if he can hold onto the goods, is
making a wise investment.
THE
COURT: But from the language of your notice that I
have in front of me, you're not representing that the Trustee has any right,
title or interest. You're just saying if he has any you're willing to sell it.
MS.
BALABER-STRAUSS: I'm giving a quick claim deed Your
Honor, as a Trustee always will do.
THE
COURT: All right. Are there any objections to this
sale or does anyone want to be heard with respect to the sale?
Would you step forward.
MR.
DUBAY: My name is Bill DuBay. I was the editor of
Warren Publishing Company from 1972 to 1976 and again from 1979 to 1982.
This is a statement that I would like to read
this into the record.
THE
COURT: What is that?
MR.
DUBAY: It's in response to the notice dated
December 6, 1983 concerning case number 83 B 10531, I wish the following
entered into the record: "Under the Copyright Act of 1976, Title 17 of the
United States code, copyright protection of a work subsists from the time that
the work is created I n fixed form; that is, it is an incident of the process of
authorship.
The copyright in the work of the authorship
immediately becomes the property of the author who created it. Only the author
or those deriving their rights through the author can rightfully claim copyright.
In the case of works made for hire, the employer
and not the employee is presumively(?) to be considered the author. Section 101
of the copyright statute defines a "work made for hire" as a work officially
ordered or commissioned for use as a contribution to a collective work, as a
part of a motion picture or other audio-visual work, as a translation, as a
supplementary work, or as a compilation, as an instructional test, as answer
material for a test or an atlas, if the parties expressly agree in a written instrument
signed by them that the work shall be considered a work made for hire.
Authors of a joint work are co-owners of
the work unless there is agreement to the contrary.
Copyright in each separate contribution to
a periodical or other collective work is distinct from copyright in the
collective work and as a whole and vests with the author of the contribution.
I wish therefore to have it understood that
the proposed sale of the right, title and interest, if any, to all domestic and
foreign reprint rights with no limitation in the literary material comprising
the magazines and comic books published by Warren Communications Corp. to
Harris Publications, Inc. does not include any material or collaboration of material that has appeared within the Warren
magazines under my authorship, to wit: In excess of 300 independent stories and
features produced from 1969 through 1983.
I wish it further understood that while I
do not object to the sale of individual magazines titles created by Mr. James
Warren for the Warren Communications Corp., I most strenuously object to the blanket
sale of the material under my authorship, produced for publication, and will no
longer allow Harris Publications, Inc., or any publisher to produce my material
without express written permission from myself.
I believe that's all I can object to, as representing
myself.
Further, as editor-in-chief of the Warren magazines,
from 1972 through 1976, and again from 1979 through 1982, and as an interested
party, I further object to the blanket sale of artwork in the possession of
Warren Communications Corp. at the time of its declared bankruptcy, under the
Fair Practices Act of the State of New York, "A work of art is of enduring
and crucial importance to the artist and the artist's reputation.
"Ownership of original artwork when it
is used for publication remains the property of the artistic creator unless the
ownership is transferred in written contract."
I submit that no transfer of artwork by artists
who have worked in the freelance capacity for Warren Communications Corp. has
ever taken place.
Neither has there ever been a written agreement
by the creators of material appearing within Warren magazines that their work
shall be considered a work for hire.
In the legal interest of all, and to avoid legal
entanglements at a future date which may arise from the blanket sale of artwork
and the rights of published material, I therefore urge the Court to instruct
the return of all art which does not expressly belong to Warren Communications
Corp., and to determine and designate those specific publication rights which are
to be included in the transfer of ownership by Warren Communications Corp. to
Harris Publications.
THE
COURT: All right.
MR. DUBAY: This is the letter that I would like to submit to the Court.
THE
COURT: You've read it into the record and I
certainly will accept a copy, if you want, you make may that a part of this
record.
MR.
DUBAY: Thank you, Your Honor.
THE
COURT: Mark it using his name as Exhibit 1.
Are there any other persons in Court that
want to be heard with respect to this sale?
Let the record reflect I hear no answer, so
I gather there isn't.
Let the record indicate that the Court does
have a copy of a Western Union Mailgram addressed to Robert Fisher which in
substance objects to the same and requests a hearing on behalf of Forrest J. Ackerman,
2495 Glenn Dover Avenue, Los Angeles.
Counsel, have you been served with a copy
of that objection?
MS.
BALABER-STRAUSS: Yes, I did, and I had this morning
an opportunity to talk to counsel for Mr. Ackerman.
THE
COURT: That's Jacklyn Applebaum.
MS.
BALABER-STRAUSS: And I informed Ms. Applebaum that
what the Trustee was selling was the right, title and interest, if any, to the
works.
I further informed Ms. Applebaum that I would
transmit to the Court her objection insofar as she was not in the country at
the time that Mr. Ackerman sent you the Mailgram, and I would inform the Court
that Ms. Applebaum would like an opportunity to address the objection in
writing to the Court.
Again, Your Honor, I informed her that all we
were doing this morning was selling our right, title and interest, if any, and
the basis for Mr. Ackerman's objection, is that he claims that he owns the
rights to one of the magazines, Famous Monsters.
THE
COURT: All right.
MS.
BALABER-STRAUSS: I believe that there are two other
characters that he refers to in his Mailgram, I have no knowledge of there ever
having been magazines bearing those titles.
THE
COURT: Well, there is another objection by a person
called Frank Thorne, and it was filed by Develyn, Norton and Rose, · attorneys
for Mr. Thorn, in substance claiming much the same position as Mr. Ackerman. I
gather these are consistent with what Mr. Dubay read into the record.
MS.
BALABER-STRAUSS: Your Honor, may I call your
attention to a prior notice of sale dated August 15th, 1983, a copy of which is
in the Court's possession.
The notice was sent by the clerk of the Court
to all creditors and interested parties, much the same as this notice was, and
in this notice, again, we are selling but at auction, the Trustee's right,
title and interest, if any in and to the following: The publishing rights,
reprint rights, copyrights to – and we go on to name every publication that we
were selling rights, if any, in and to. We received no objection to that sale.
THE
COURT: Well --
MS.
BALABER-STRAUSS: We weren't able to sell.
THE
COURT: Does anyone else want to be heard?
How about the Creditors Committee, is there
a Creditors Committee?
MS.
BALABER-STRAUSS: This is a Chapter 7, Your Honor,
and we do not have a Creditors Committee.
THE
COURT: Let me hear from the proposed buyer.
MR.
SCHOENFIELD: If Your Honor please, my name a Elias
Schoenfield, representing Harris Publications.
Understanding the nature of some of these claims
that are being made, although they are corning up today more vociferously than
we would have been led to believe, Harris Publications is prepared to go ahead with
the terms of notice.
THE
COURT: You understand if the Trustee has no rights
you get no rights.
MR.
SCHOENFIELD: It is my understanding that no claims
exist with respect to any of the artwork that was published prior to 1976.
Just as Mr. Dubay told us that this morning,
he also understands that subsequent to 1976, certain artists had writings from
Warren Communications which guarantee to them the return of their artwork.
The attorney for the Trustee indicated that
in going through the papers in the Warren offices she found three such
contracts which did not apply to any of the artwork which she had.
Again, I was assured that there was no question
but that regardless of who owned the artwork, the publication rights in that
artwork were clearly the property of Warren.
My client is a publisher, we are interested
in publishing magazines, we are interested in selling the magazines which
exist, and in publishing new ones based upon those characters, and using the
trademarks of the titles which, again, there is no question, except in the one
case of this gentlemen from California, belonged to Warren.
So I think we are making a good investment,
we are prepared to do so.
THE
COURT: You're making an investment but you're also
assuming the risks that are involved as you hear them expressed here today on
the record.
MR.
SCHOENFIELD: Yes.
THE
COURT: Does anyone else want to be heard?
How about Mr. James Warren, is he in Court?
MR.
BELDNER: Your Honor, we represent the Debtor,
Siegel, Sommers & Schwartz. Mr. Warren has been advised of the sale of
these items, he's been a very difficult individual to get in touch with, as the
Trustee relayed to the Court.
He is aware of everything, he has not expressed
to my office any objection or any intent to bid personally on these items, as
well.
One thing, Your Honor, he is an interested party
in the fact that he has a personal guarantee to several of the creditors.
Based on the offer and the attempts by the Trustee
to sell these items, all to no avail over the past six months, we believe that
this is in the best interest of Mr. Warren, as well as the creditors.
THE
COURT: Well, let me address myself to counsel for
Trustee in Paragraph 3, the Trustee is disposing of all of the Trustee's right,
title and interest, if any, in and to a loan receivable in the amount of
$357,000 odd against James Warren, consisting of transfers of cash, real
property and artwork, said consideration being the waiver by Harris of its
filed claim as Assignee of World Color, Inc., a creditor of the Debtor, in the
amount of $206,000 odd.
Do you want to explain the terms of that
and the necessity for it?
MS.
BALABER-STRAUSS: Your Honor, World Color is the
largest creditor, and attorney for World Color, Harold Goodman, is in the Court
today, and can expand upon World Color's claim, if the Court believes it
necessary.
With regard to the $357,144.37 loan receivable,
those numbers were derived as a result of the accountant for the Trustee, Eli
Rossman's review of the general ledger.
Mr. Rossman is in the courtroom today, and can
testify with regard to the basis for that loan receivable.
THE
COURT: But in short, what you're saying is that
James Warren ·owes you as the Trustee $357,000 because of claims the U.S.
Trustee has against him for the transfers of cash that were made to him, real estate,
property and artwork.
MS .
BALABER-STRAUSS: Correct, Your Honor, as I have
indicated, the numbers were derived from an examination of the general ledger.
I asked Mr. Rossman to review the
particular real estate transfers if he could, from the notes in the books, and
as a result, I pinpointed a date on which the transfer of property was to have
been made. I ordered a title search by Chicago Title in the name of James
Warren and Warren Communications in the towns of West Hampton and West Hampton Beach,
where the purported property is to be found.
The title search revealed that one piece of
property was never in the name of Warren Communications, but rather was deeded
directly to James Warren and the other piece of property was originally in the
name of Warren Communications, but in 1975 was transferred to James Warren.
That property accounts for $190,000 of that
loan receivable.
In the business judgement of the attorney for
the Trustee, the receipt of the $206,000 waiver makes sense to the estate.
THE
COURT: But, in short, are you giving to Harris
Publications the right to proceed against Mr. Warren for the balance?
MS.
BALABER-STRAUSS: With regard to –
THE COURT: The balance, the difference between $206,000 and $357,000?
MS. BALABER-STRAUSS: I am, Your Honor, with regard to the balance, other than the real
property. Your Honor, rather than my
reviewing the particular transactions, if there is a question, I would prefer
that Eli Rossman, who is an accountant, review the transaction.
THE
COURT: Let's here from Mr. Rossman, I'm curious
about that.
MR.
ROSSMAN: The composition of the $357,000 claim
consists of primarily three types of transactions.
Number one, are monies due from Jim Warren for
cash advance, loans made to Jim Warren, which loans consisted of loans made
directly to him by the company and the amount of $23,000 and change
representing monies that he received which were the net proceeds of Certificates
of Deposit which were offset by the Republic National Bank against a loan, and
the monies left over as previously described, $23,000 some odd were then turned
over to Jim Warren. The real estate of $190,000 is previously described by
counsel for the Trustee and the balance being $32,000 in artwork.
These transactions appeared on the books
and records of the Debtor and immediately prior to the closing of their normal
fiscal year end, which I believe is September 30th, entries were made on the books
transferring these assets by book entry out of their asset account on the
general ledger, and were charged to the account of Jim Warren.
THE
COURT: Was Warren Communications a publicly held
company?
MR.
ROSSMAN: To the best of my knowledge no, Your
Honor.
THE
COURT: What are the claims, the total claims of the
creditor body.
MS.
BALABER-STRAUSS: Your Honor, with regard to the
shares of Warren, it is my understanding from counsel for Warren that James
Warren was the sole shareholder , the claims filed as of December 28th, 1983 are
as follows:
Liquidated and uncontested claims at an amount
of $92,694.
Except for a claim by Harlan Ellison,
again, a suit for copyright infringement, unliquidated, in the amount of
$100,000 plus profits going back to 1963[5].
A claim by Forrest Ackerman, again, unliquidated
in the amount of $25,000.
The claim by World Color of $206,000, which
the proposed offer will waive.
A claim by Flint that's presently in the discovery
stages in Federal Court, again, it appears that it's copyright infringement and
plagiarism.
MR.
BELDNER: No, Your Honor, just to correct the
record, Flint is a distributing company that distributed the Debtor's magazines
during a period of time.
They have filed a claim for approximately $356,000.
According to the books and records of the Debtor, in fact, there might be a
receivable against Flint for $25,000.
We are defending Mr. Warren on his personal
guarantee in Federal Court at the present time and we are in the discovery
stage.
THE
COURT: Is that Federal Court in the Southern
District?
MR. BELDNER:
Yes, Your Honor.
THE
COURT: Which judge has it?
MR .
BELDNER: I believe it's Judge Knapp.
MS.
BALABER-STRAUSS: There was also a recently filed
claim by the New York State Taxing Commission in the amount of $81,217.21.
In discussions with the Debtor's former accountants,
it appears that most of the taxes were paid up to date, and I believe that this
too is an unliquidated claim.
THE
COURT: All right. Does anyone else want to be
heard?
Well, based on the record before me and the
statements of the proposed purchaser, Harris Publication, who is willing to
take the risk of buying something that may have other liabilities attached to it
and everyone fully understanding the transaction, I'm prepared to authorize the
sale. You may submit an Order to that effect.
MS.
BALABER-STRAUSS: Thank you, Your Honor.
End Notes:
[1] https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics
[2] Use and occupancy (U&O) refers to a type of permit required by
some local governments whenever real property is transferred. Usually, U&O
regulations require the property seller to pay a fee of around $100 and allow a
government official to inspect the property.
[5] Ellison sued Warren
over a story that ran in the Warren magazine ‘1984’. The story, titled ‘Mondo
Megillah’, was based upon Ellison’s story ‘A Boy and his Dog’, and was
published without the permission of Ellison. Ellison sued Warren publishing for
copyright infringement and won the case.
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