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.
[3] The magazine was called ‘Vampirella”.
[4] Resulting in a total of $33,250.
[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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