DeLorean Estate Alleges Royalties Were Improperly Distributed

The John DeLorean estate is in a clash once again with the unaffiliated DeLorean Motor Company (DMC), this time over royalty payments that Universal Pictures (Universal) allegedly directed to DMC instead of to the estate for the right to use the iconic Back to the Future DeLorean DMC-12 on merchandise and advertising material.

The suit, filed by DeLorean’s widow, revisits a settlement agreement reached in 2015 between the estate and DMC that divvied up intellectual property rights between the two parties. In the 2015 agreement, DMC received the rights to the DeLorean Motor Company’s name, trademarks, and logo. The delorean estate received the rights to John DeLorean’s name and personal depictions. The 2015 agreement with DMC did not mention the prior royalty deal that John DeLorean entered into with Universal in 1989, which channeled to John DeLorean 5% net receipts from any merchandise and commercial tie-ins that featured the DeLorean time machine.

delorean estate
According to the delorean estate’s complaint, DMC allegedly violated the 2015 agreement by representing itself to Universal as the owner of the DeLorean name. In February, the estate apparently sent a letter to Universal inquiring into lapsed royalty payments and learned that DMC had allegedly informed the studio that it was the new, rightful recipient of royalties pursuant to the 2015 agreement. According to the estate’s complaint, Universal already made a “substantial payment” to DMC for many years of previously unpaid royalties. On April 23, 2018, the delorean estate filed suit, seeking a declaratory judgment that John DeLorean’s contractual rights, including his rights under the 1989 royalty deal with Universal, passed to his estate after his death in 2005 and did not transfer to DMC. The estate also demands the money that DMC allegedly collected from Universal. Three days prior to filing the lawsuit, DMC threatened to file a tortious interference action against the estate unless it dropped its request for payment from Universal. A settlement conference was scheduled for July 10, 2018.

It is not clear why the 2015 agreement failed to mention the 1989 royalty deal that DeLorean struck with Universal. If the estate knew about the deal, there should have been negotiations or discussions as to whether the estate intended to transfer those rights to DMC under the 2015 agreement. The fact that the estate indicated in its pleadings that it did not have a copy of the contract with Universal, and therefore could not enforce it, suggests that the estate might not have been aware of the deal at the time at which it entered into that 2015 agreement with DMC. In considering the arguments, the court will likely review the language of the 2015 settlement agreement between the DeLorean estate and DMC and if there exists any ambiguity, may consider extrinsic evidence, including evidence as to the intention and understanding of the parties at the time at which they entered into the agreement. Regardless of the outcome, this case reminds us of the importance of good legal drafting and proper record keeping with an eye toward estate planning.

 

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