Bankruptcy Trustee Sues Over “Muppet Babies” Reboot

Nearly a year after a screenwriter's lawsuit over Disney's "Muppet Babies" reboot was dismissed, the trustee of Jeffrey Scott's bankruptcy estate has filed a new complaint alleging copyright infringement in a production bible and scripts from the original series.
Muppet Babies / The Walt Disney Company

Nearly a year after a screenwriter’s lawsuit over Disney’s “Muppet Babies” reboot was dismissed, the trustee of Jeffrey Scott’s bankruptcy estate has filed a new complaint alleging copyright infringement in a production bible and scripts from the original series.

Following a number of procedural twists and turns, the “Muppet Babies” reboot lawsuit has been rebooted.

Back in October 2020, I wrote about a copyright infringement case filed by Jeffrey Scott against the Walt Disney Company. Scott is a veteran TV writer who penned most of the episodes for the first three seasons of the original Muppet Babies series, which aired on CBS starting in 1984. In the show, childhood versions of Kermit, Fozzie, Piggy and the other Muppet characters hung out in a nursery overseen by a headless nanny with striped socks, as they ostensibly waited for parents who never bothered to pick them up.

Scott v. The Walt Disney Company

Scott claimed in his original complaint that he was the author and copyright owner of the Muppet Babies “production bible,” which “created and defined the foundational elements for the original show.” He alleged that in exchange for the bible, original series owner Marvel Productions promised that Scott would get the opportunity to write all episodes of the show, as well as a royalty and credit on future episodes whether he wrote them or not. After Marvel’s successor Disney released a new Muppet Babies reboot in 2018 without providing him credit or compensation, Scott filed a lawsuit for copyright infringement and breach of contract in the Central District of California.

The case didn’t get very far as a result of a somewhat unusual set of circumstances. Disney successfully argued that Scott didn’t have standing to file the lawsuit because he failed to disclose the production bible as an asset in a personal bankruptcy that Scott filed back in 1995. In a March 2021 order, the court ruled that, under bankruptcy law, Scott’s failure to properly schedule the copyright meant that it continued to belong to Scott’s bankruptcy estate—not to Scott as the debtor. Without any ownership interest in the production bible, Scott had no right to assert a copyright infringement claim. As a result, the court dismissed Scott’s case without prejudice, allowing the suit to be re-filed following appropriate proceedings to reopen Scott’s bankruptcy.

During the past year, Scott’s lawyers (now representing the Chapter 7 trustee of Scott’s bankruptcy estate) have been working to reopen those prior bankruptcy proceedings to include the Muppet Babies copyright claims as assets of Scott’s bankruptcy estate.

Ehrenberg , Ch. 7 Trustee v. The Walt Disney Company

With the prior bankruptcy schedules now amended, Bankruptcy Trustee Howard M. Ehrenberg has filed a new lawsuit (read here) against Disney on behalf of the bankruptcy estate. The trustee alleges that the Muppet Babies reboot infringes Scott’s alleged copyrights in the original Muppet Babies production bible and scripts. He also seeks a declaration that Scott’s bankruptcy estate is a co-owner of copyright in the new reboot episodes to the extent they incorporate original elements from Scott’s bible and scripts.

Interestingly, however, the trustee’s new complaint leaves out a number of the key factual allegations that Scott made in his 2020 copyright lawsuit—allegations that will likely be treated as judicial admissions binding on the trustee. Among other things, the trustee’s complaint makes no mention at all of the purported “partly oral and partly in writing” agreement that Scott claimed he reached with Marvel in 1983. Scott previously alleged that his agreement permitted Marvel to use his bible so long as Marvel complied with the payment and credit terms of the parties’ deal. As I explained in my original post on the case, Scott asserted claims for copyright infringement based on conduct which was seemingly permitted by his alleged contract. As a result, it’s questionable whether Scott had any ability to claim infringement, even if he were able to show an ownership interest in the series bible in the first place.

No explanation’s been given as to why the contract claims have been excluded from the trustee’s new complaint. The omission is even more curious given that these claims were specifically included in the estate’s amended bankruptcy schedules:

Amendments to Jeffrey Scott’s bankruptcy schedules listed his copyright interests and breach of contract claims in connection with “Muppet Babies.”

While it’s possible that trustee’s counsel believed that a contract claim would be subject to judicial estoppel based on Scott’s failure to schedule it originally, presumably that would also be true of the copyright claims as well.

The trustee’s complaint alleges that the bankruptcy estate is now the sole copyright owner in Scott’s production bible as well as in nearly 40 original Muppet Babies scripts. Resolution of the copyright ownership questions (including whether Scott created the bible or scripts as works made for hire) will likely need to await discovery. However, there are a number of issues—in addition to the judicial estoppel discussed above—that may spell doom for both the copyright infringement and co-ownership claims at the pleading stage. 

Does the Bankruptcy Trustee Have a Case?

As I noted earlier, Scott conceded in his original complaint that Disney had the right to use Scott’s work (incurring certain payment and credit obligations upon doing so). This admission could preclude an infringement claim by the trustee. In addition, the allegations in the original complaint suggest that, at the very least, Scott would have granted Marvel and Jim Henson Productions an implied license to use his materials in its Muppets Babies series, which would also foreclose an infringement claim. Given that Scott’s work was so heavily based on the preexisting Muppets material, there’s also a question as to the extent to which the trustee has adequately alleged any separately protectable elements in the bible in the first place.

As for the co-ownership claims (which weren’t alleged in Scott’s original lawsuit), they’re premised on the theory that Scott had the “exclusive right” to produce derivative works of his bible and scripts. But that allegation seems to contradict Scott’s complaint, which conceded that he gave Marvel permission to produce Muppet Babies episodes based on those works. In addition, as I explained in my recent post on the “Invincible” copyright lawsuit, Ninth Circuit law requires that putative joint authors must share an intent that both be co-owners of rights in the resulting work. The trustee hasn’t alleged any facts to support such an intent, and it just doesn’t seem plausible under the circumstances.

In light of these flaws, my sense is that the Bankruptcy Trustee’s new lawsuit has less chance of succeeding than we are to ever see Miss Nanny’s head. But I’d like to hear your thoughts: let me know in the comments section below or on social media @copyrightlately.

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  1. Might the contractual obligations have been – or will be – discharged in the bankruptcy, which is why they didn’t assert that theory?

    1. Scott originally took the position that he had no reason to believe that his agreement with Marvel remained executory (carried ongoing obligations) or had any continuing value at the him of his bankruptcy, which is why he didn’t schedule it. And not having been scheduled, it wasn’t discharged. But by the time Scott filed the first lawsuit, he did believe the contract was executory. (Indeed, this was the basis for his contract claims with respect to the reboot.)

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