Requests stay order until court determines if 4Kids' own license is still valid

--------------------------------------------------------------------------------

The North American media distributor 4Kids, which is filing for bankruptcy in the Southern District of New York, filed a motion on Friday requesting that the bankruptcy case's judge, Shelley C. Chapman, issue an order to stay (suspend) co-licensor Asatsu DK's (ADK's) attempts to exercise control over the Yu-Gi-Oh! anime franchise in the United States.

ADK's Nihon Ad Systems (NAS) and co-licensor TV Tokyo announced in March that they were terminating 4Kids' license due to the North American company's allegedly fraudulent underpayment of royalties. 4Kids also requested that the hearing for this motion be rushed, and Judge Chapman scheduled the hearing for May 25 rather than granting the standard 21 days. After TV Tokyo and NAS filed a motion for reconsideration, Judge Chapman rescheduled the hearing for May 31.

In its motion, 4Kids complained that ADK will promote Yu-Gi-Oh! Zexal, the fourth television anime in the franchise, at the Licensing International Expo in June, and declared that this would cause irreparable harm should TV Tokyo and NAS grant North American Yu-Gi-Oh! licenses previously held by them to new companies.

4Kids acknowledged that TV Tokyo and NAS' lawsuit is currently on hold due to its own bankruptcy filings, during which Judge Chapman filed a stay on the suit, but requested that TV Tokyo and NAS be prevented from "exercising control over 4Kids' rights under the Yu-Gi-Oh! license" — for example, by selling those rights to another company — pending a court decision as to whether the Japanese licensors' termination of their contract was valid. According to 4Kids, both they and the licensors have agreed to transfer their dispute from civil court to Judge Chapman's.

4Kids further argued against the validity of the licensors' termination, stating that it was "procedurally invalid" and declaring that the company is "likely to establish" that ADK and TV Tokyo's accusations are "without merit." 4Kids purported that ADK was aware of the company's deal to split revenue with North American anime distributor Funimation — which the licensors' lawsuit alleged was in fact an attempt by 4Kids to evade paying royalties to the Japanese companies. Additionally, it claimed that several of ADK and TV Tokyo's audit findings "arose more than six years ago" and have therefore passed beyond the statute of limitations.