The winter of 2002 was a difficult time at Big Idea. Not that any time in the prior 2 years had been particularly chipper, but things were really glum now. With Jonah’s theatrical release behind us, we nervously awaited the home video launch in March. Spirits aboard the good ship Veggie were sinking rapidly. The Lyrick lawsuit had already cost us $2 million in legal fees, and the bills kept coming. 3-2-1 Penguins and “Larryboy 2D” were shut down. “The Bob & Larry Movie” was indefinitely postponed. Two more rounds of layoffs rocked the company as we desperately tried to preserve cash. Noticing the water rising in the hold, artists started jumping ship. Blue Sky Studios in New York was just starting production on “Robots,” their follow-up to the surprise CGI hit “Ice Age.” One Big Idea artist left for Blue Sky, and several others immediately followed. Eventually so many Big Idea artists jumped at the project that we began referring to any studio sick days as “Blue Flu.”
Since any effort to raise or borrow additional money was precluded by the unresolved lawsuit with Lyrick, settling the suit became our top priority. Lyrick’s new owners at HIT wouldn’t budge, though. As a last resort, we explained our financial situation to HIT’s CEO. We had $500,000 set aside to try the case in court. We offered HIT that money as a last ditch settlement offer, confessing that if the suit went to court and we lost, we would be forced into bankruptcy and Lyrick would have to get in line with the other creditors. We were out of money. HIT still refused to settle and the case was scheduled for April in Dallas federal court.
Tensions were also rising higher internally as we searched for new ways to cut costs. My president in LA thought our Chicago operations could be cut back significantly. Given the death of 3-2-1 Penguins and Larryboy 2D, I wondered why we still needed the staff in LA hired to oversee their development. He wanted to shut down the animation studio in Chicago. I wanted to curtail his development efforts in LA. Unable to resolve our differences, we parted company. The LA office closed shortly thereafter.
The changes saved us some money, but now I was the only one left at the company with enough knowledge of our distribution experience to represent Big Idea at the Lyrick trial. Our Dallas attorneys flew to Chicago to prepare me for my first experience in big time litigation. Bob the Tomato and Barney the Dinosaur were about to mix it up in front of a jury of their peers.
Meanwhile, back in the world of retail, the Jonah home video and DVD hit stores March 4, 2003. Like the film in theaters, it performed solidly if not spectacularly, selling about 2.5 million copies. I had hoped for 3 million, but the four years since I had made my original projection had seen a steady weakening in VeggieTales’ sales. Every property has a “life cycle,” and Jonah, conceived at VeggieTales’ peak, was hitting home video about 2 years late. Even worse, my original forecast was ignorant of the fact that Jonah’s two-disc format and shiny “holofoil” packaging, plus Artisan’s use of Fox Home Video for certain fulfillment services would add an extra $1.50 or more to the cost of each DVD. The result was much less money coming back to recoup Artisan’s marketing expenditure and, ultimately, our investment. In the end we sold 2.5 million copies of Jonah on VHS and DVD and didn’t see a single penny of revenue. Our $14 million investment ($12.5 million for production plus another $1.5 million for computer gear we assumed we’d use on future movies as well) was completely lost.
By early April 2003 only 65 people remained at Big Idea, down from 210 just 6 months earlier. Thirteen of us gathered for an evening prayer meeting just a few days before I was to head down to Dallas for the trial, and prayed earnestly for the survival of Big Idea. The next week I walked to a department store across the mall from our offices and picked out a suit to get me through the projected 2-3 weeks of sitting in court. I called it my “law suit.” I arrived in Dallas and checked into the Hampton Inn across from the Federal building. It had been fourteen years since I started GRAFx Studios, initiating my quest to tell stories and make a difference in the world. Now it appeared it would all be decided by nine strangers sitting under cold fluorescent lights in a courtroom that, combined with the Texas accents of most of the participants, made me wonder if I had just woken up in a bad episode of “Matlock.”
The first day was jury selection. Two women quickly identified themselves as huge VeggieTales fans and confessed that they couldn’t possibly imagine Big Idea doing any wrong. They were quickly excused from the room, never to be seen again. (No doubt eaten in the parking lot by an angry purple dinosaur.) At lunch our lawyer told me to try to look more “interested” in the jury selection process. As if wearing a suit every day wasn’t punishment enough! It’s not that I wasn’t interested, mind you. It was just that after 4 or 5 hours of listening to lawyers ask truck drivers if they had any strong preconceived notions about Christians, Texas or Barney the Dinosaur, one’s mind can wander. I tried harder.
Over the next week I would be asked not to look around the room casually. Not to bounce my knee. Not to exhibit excessive interest in the light fixtures overhead. I was beginning to think I might not be cut out for this line of work. The court proceedings themselves vacillated between painfully boring and extremely aggravating. Lyrick’s lawyer at times made me so angry I wanted to jump up and yell, “That’s ridiculous!” But by then I had learned that my job was to sit still and look interested. Nothing more, nothing less. So on the outside I appeared interested. But on the inside I was asking God to cut the power to the Federal building so we could all go home.
In the end, Lyrick’s argument boiled down to this: Even though a contract had never been signed nor even fully agreed on, and acknowledging that copyright law precludes the transfer of any rights without a signed document, they insisted there was a binding agreement between Lyrick and Big Idea based on the original offer letter that bore their president’s signature and a return correspondence from one of my employees that carried his signature on a fax cover sheet. Even though their president’s letter clearly stated that there would be no “binding relationship” until a formal agreement was signed by both parties, Lyrick argued that this letter and our fax cover sheet constituted the binding relationship.
Furthermore, they argued, even though the unsigned draft agreement clearly stated that we could walk away if we did not approve of a new owner or replacement for Dick Leach, Lyrick’s lawyer pointed out that they had added the wording “approval which Big Idea will not unreasonably withhold.” We pointed out that we had never agreed to such a vague phrase (which, in fact, was one of the reasons the agreement was still unsigned and under negotiation). Now Lyrick went for broke. Big Idea didn’t walk away because we didn’t like HIT Entertainment, they argued. HIT Entertainment was a perfectly acceptable partner. We didn’t walk away because HIT Chairman Peter Orton wasn’t an acceptable replacement for Dick Leach. Dick Leach was hardly active in the business any more. No, Big Idea walked away because we wanted more money. Lots more money. Big Idea didn’t walk away because of philosophical convictions, Lyrick explained to the jury. We walked away because we were greedy for money. And that was not a “reasonable” reason to walk away. Yes, Big Idea had the right to approve of HIT’s purchase of Lyrick. But we “unreasonably withheld that approval.” I looked at the jury. Could they possibly be buying this?
Finally, recognizing that VHS sales were declining rapidly and damages from lost VHS sales would be minimal, Lyrick argued that we had given them DVD rights to all our films, even though the draft contract clearly stated “videocassette” only. Their evidence: the two films we had allowed them to release on DVD to test audience interest in the new format. Lyrick’s lawyer showed the two DVD cases to the jury, highlighting the Lyrick logos on the back corner. “See? They gave us DVD rights.” This argument struck me as particularly preposterous. “They’ll never go for that logic,” I chuckled to myself.
The jury was sent away with four questions to answer – questions that would determine the fate of everything we’d built in 14 years. The next week we returned to court to hear the conclusions. Did Lyrick Studios and Big Idea have a binding agreement? “Yes,” the lead juror responded. Did Big Idea have the right to walk away if they didn’t approve of the sale of the company? Again, “Yes.” Did Big Idea ‘unreasonably withhold’ that approval? “Yes.” And finally, did Lyrick have the rights to VeggieTales DVDs? “Yes.”
The gavel came down awarding Lyrick $11 million in damages. All their legal fees, plus every penny they estimated they would have made selling VeggieTales DVD’s over the remainder of the term stated in our unsigned draft agreement. Lyrick’s lawyers were ecstatic. Big Idea’s lawyers were flabberghasted. Our lead lawyer, a great guy who was shocked by the loss, drove me to the airport for a long, painful flight back to Chicago. Big Idea Productions was dead. It was over.
Continued in Part 10 >
As a lawyer, I’d like to comment on Phil’s account of the trial in his book. I was impressed at Phil’s ability to understand the other side’s arguments. Most persons in his position are so focused on their own perspective they cannot grasp the other side’s arguments; but Phil fully understood Hit’s legal/factual case. So he was all the more credible in explaining why those arguments were completely, totally, wrong.
The court of appeal decision, which reversed the jury’s verdict, did so for just the reasons Phil articulated. It’s a very rare thing for a court of appeal to reverse a jury verdict. In his book, Phil gives what may be the most likely explanation for how it was that the jury got it wrong: God blinded them, because God wanted Big Idea Inc. to fail, so Phil could be Phil. A lawyer would provide another explanation, though: the trial court judge should never have let that case go to the jury.
Finally, I was moved by Phil’s gracious words about the lawyer who lost the case; and admire his restraint in speaking about the lawyers for Hit Entertainment.
Good luck, Phil.
Amazing story. I just heard about this on focus on the family today. Now that this is over God can use Phil to simply share the gospel in a way kids can understand like he does through jellytelly. The millions and millions kind of made my head swim and I’m sure we can all learn to shun debt and be prudent. Most of all we need to seek God’s kingdom first and all the other things will come.
God bless ya Phil
3-2-1 Penguins isn’t owned by Big Idea anymore. They sold it.
Thanks for taking the time to write this. True to form you have a gift for storytelling. This helped me see today.