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Nearly nine years after Marvel Entertainment Group Inc. filed for Chapter 11 and began a comeback worthy of any comic book hero, litigation related to the bankruptcy case continues. A decision Tuesday by the 3rd U.S. Circuit Court of Appeals in Philadelphia gave a partial victory to a litigation trust and dealt a setback to billionaire Ronald Perelman, Marvel’s former chairman. The ruling by Judges Dolores K. Sloviter, Ruggero J. Aldisert and Walter K. Stapleton overturned two summary judgments in favor of Perelman and remanded the case back to the U.S. District Court for the District of Delaware in Wilmington for further proceedings. The upcoming trial will pit trustees Ronald Cantor, Ivan Snyder and James A. Scarpone against Perelman, William C. Bevins, Donald G. Drapkin, Mafco Holdings Inc., MacAndrews & Forbes Holdings Inc. and Andrews Group Inc. The trustees will try to show that the defendants breached their fiduciary duty when they reaped $553.5 million in dividends from three bond sales by various Marvel parents in 1993 and 1994. In addition, the trustees will pursue claims for damages on two of the issues. A summary judgment in favor of the Perelman group on the third issue will stand because the statute of limitations has run out. The judges upheld the lower court decision denying the trustees summary judgment on the unjust enrichment claim, which would have eliminated the need for a trial. Given Marvel’s tangled history, chronicled in Dan Raviv’s “Comic Wars: How Two Tycoons Battled over the Marvel Comics Empire — and Both Lost,” the long-running case should come as no surprise. Perelman bought the New York-based Marvel (Parent) Holdings Inc. from New World Entertainment Ltd. on Jan. 6, 1989, for $82.5 million and took 40 percent of the company public on July 22, 1991. Along with Bevins and Drapkin, both vice chairmen of MacAndrews & Forbes, Perelman formed the boards of the three Marvel parent companies, Marvel III Holdings Inc., Marvel (Parent) and Marvel Holdings Inc. Those companies and Marvel filed for bankruptcy on Dec. 27, 1996, after sales of comic books slowed and labor problems including a baseball strike hurt Marvel’s Fleer and Skybox trading-card businesses. An attempted prepackaged bankruptcy plan backfired, however, when bondholders balked at a stock issuance that would have given Perelman 80 percent of Marvel, up from roughly 60 percent. The bondholders objected because Perelman wanted to make a $350 million stock purchase at a below-market-price 85 cents a share — a move that would slash the value of the zero-coupon bonds issued by the Marvel parents because they were backed by stock whose worth would then be diluted. By reducing the collateral behind the bonds, their value fell more than 55 percent on the open market, according to a bondholder suit filed in 1997. Marvel itself filed suit against Perelman and the other defendants on Oct. 30, 1997, and the company’s final reorganization plan created the Mafco litigation trust to pursue the claims on behalf of unsecured creditors and shareholders. Toy Biz Inc., a Marvel subsidiary that held a license to make and market toys, eventually withstood a Carl Icahn takeover attempt and acquired its parent out of bankruptcy on Oct. 1, 1998, changing its name to Marvel Enterprises Inc. Marvel’s suit against Perelman has been winding through the courts ever since. In December 2002 Magistrate Judge Mary P. Thynge gave Perelman the partial summary judgments that were reviewed Tuesday. District Court Judge Kent A. Jordan adopted the ruling on Feb. 18, 2004. No matter which way the litigation goes, both sides have been doing well. Perelman won $604.3 million in compensatory damages and another $850 million in punitive damages in May from his own lawsuit against Morgan Stanley related to his 1998 sale of Coleman Co. to Sunbeam Corp. Marvel, meanwhile, posted $124.88 million in income last year on $513.47 million in sales. The company, which has published comic books since 1939, owns characters including the X-Men, Fantastic Four, Spider-Man, The Incredible Hulk, Blade, Daredevil, Elektra and The Punisher, all of which have been featured in recent movies. The company also licenses its creations for TV shows, consumer products, toys, foreign-language publications and theme park appearances. Edward A. Friedman, Andrew W. Goldwater, Robert D. Kaplan, Daniel B. Rapport and Emily A. Stubbs of Friedman Kaplan Seiler & Adelman and Lawrence C. Ashby and Philip Trainer Jr. of Ashby & Geddes PA represent the plaintiff trustees. Robert E. Zimet of Skadden, Arps, Slate, Meagher & Flom represents Perelman and the other defendants. Friedman wouldn’t comment on the case. Ashby and Zimet did not return calls Wednesday. Copyright �2005 TDD, LLC. All rights reserved.

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