DISNEY APPEALS 'TOON CHARACTER RULING.

Byline: Linda Deutsch Associated Press 

Once upon a time, a cuddly cartoon character known as Marsupilami seemed destined for the big time. Imported from Europe and placed under contract with Walt Disney Co., he was touted as ``The next Mickey Mouse.''

But, as a federal appeals court heard Tuesday, stardom never came. Marsu, the character's European parent company, says Disney failed to follow through on a deal said to be worth $700 million. Disney says only the great Mickey could command such sums and asked the court to throw out a $10.3 million damage award.

In arguments before the 9th U.S. Circuit Court of Appeals, Disney attorney Michael Cardozo encountered open skepticism from a panel of three judges when he insisted that Marsupilami could not have made as much money as its owners contend.

``Bugs Bunny didn't produce these kind of figures,'' he said.

Judge Pamela Rymer noted that Disney's own legal documents in the case offered estimates of huge profits awaiting Marsupilami in Hollywood.

``How can we be convinced this is wildly off when Disney itself gave the same estimate?'' asked Rymer. ``Unless Disney was really dumb - and far be it from me to suggest the mouse is dumb.''

Cardozo acknowledged that Disney agreed to take a risk on Marsupilami and, ``They said if they hit $100 million, they would hit it big.'' Estimates ranged up to $700 million over two years.

Judge Harry Pregerson suggested that Disney's initial agreement to pay Marsu $5 million for rights to develop the character showed optimism for its future.

``Otherwise, it sounds from what you say that whoever made this deal was a little bit crazy,'' Pregerson told the Disney lawyer.

Attorney Patricia Glaser, representing Marsu, said the 1990 agreement called for Disney to produce at least 13 half-hour TV programs suitable for network broadcast. Disney also promised to exploit the character through merchandise and licensing deals.

Marsupilami, a popular fantasy figure throughout Europe, had produced $24 million in profits for Marsu in 1989 - ``and that was in only 20 percent of the world.''

Disney, she said, agreed to market the character to the rest of the world.

But when it came time to act, she said, ``They put the junior-most people in the organization on the project'' and then decided to abandon it in favor of other opportunities.

``Meanwhile, they kept Marsupilami out of the control of any competitors,'' she said.

U.S. District Judge Edward Rafeedie, who presided at the breach-of-contract trial, said Disney never offered the character to TV networks. He awarded Marsu $10.3 million damages for lost profits. There were no punitive damages.

For Marsupilami, a yellow-and-black, long-tailed animal - described by its creator as a cross between a mouse and a marsupial - Glaser said the Hollywood dream died hard.

``He got one step toward heaven and the ladder was pulled out,'' she said.