Paul Newman’s Warring Heirs & Metaverse Estate Planning

Paul Newman with his wife, actress Joanne Woodward.
Paul Newman with his wife, actress Joanne Woodward. Photo: Fotos International/Archive Photos/Getty Images
Eriq Gardner
October 24, 2022

What’s a guy gotta do to make his intentions clear? Take Paul Newman, who beginning in 1986 repeatedly sat down with a friend to record recollections of his life. The idea was to use these interviews to create an autobiography. Then, in 1998, Newman halted the project and burned the tapes. But evidently, throwing hundreds of recordings into a pit of fire is the sort of move that’s open to interpretation. The transcripts survived, and so this past week, The Extraordinary Life of an Ordinary Man: A Memoir, was published. “If he didn’t want [the book] put out there, I don’t think he would have kept [the transcripts],” Clea Newman Soderlund, the actor’s youngest daughter, explained to The Wall Street Journal. And that fire? Ethan Hawke, who used the transcripts to create the HBO Max docu-series The Last Movie Stars, has a theory. “He got totally bored with being quote-unquote Paul Newman… and the mythologizing of himself,” Hawke told MovieMaker magazine. 

Wait, what? That guy whose face is plastered on salad dressing and microwave popcorn and uncommonly good frozen pizza got tired of mythologizing himself? Are we really to believe Paul Newman was only setting fire to his ego? That’s hard to believe, especially in light of what came next. 

The same year that he burned his past, Newman also turned his attention to drawing up his future. That year, he met repeatedly with his longtime attorney, Leo Nevas, who wrote up a plan for a private foundation that would administer the licenses for use of his name and image. The idea was that Newman would license his name and image to Newman’s Own, the food company established in the early 1980s, via a foundation. The move would eliminate estate taxes, and the foundation would donate royalties to charity. The Color of Money Oscar winner liked the plan so much that he quickly sent it to his wife, Joanne Woodward, and kids along with a note: “This seems to be where we are headed. –Pop.”

And so continued Newman’s Own caesar dressing even after the actor’s death in 2008. A lot of money did, in fact, go to charity—about $25-30 million annually. But the trouble with estate planning, especially when it involves managing image rights or ongoing profits, is the deceased’s intentions. As any good lawyer will tell you, there’s infinite room for interpretation if you know where to look. 

Indeed, Newman’s daughters, Susan Kendall Newman and Nell Newman, are now suing Newman’s Own Foundation, claiming that contrary to their father’s wishes, those administering the foundation have unilaterally cut the amount that was to be allocated to charitable donations dictated by the kids, from $400,000 to $200,000 per year per daughter. In a complaint filed in late August, the Newmans target the company’s executives for seizing control of their father’s legacy and for “mismanagement and misconduct.” Many of the allegations are vague and have a whiff of self-conceit, but the suit does allege that up until recently, “more than half of [Newman’s Own Foundation] donations went to less than one percent of the recipients, many of which had close relationships with members of NOF’s Board,” and that “NOF, in the last few years, has also rejected Mr. Newman’s long-standing desires with respect to the types of charities NOF should support.” 

On Oct. 12, Newman’s Own Foundation filed a motion to dismiss and argued that the kids don’t have standing to pursue these claims because they are not trustees of Paul’s estate nor beneficiaries of his publicity rights nor members of the foundation itself. The defendant adds that if there’s been any malfeasance with respect to the charitable trust, the power to do something vests exclusively with Connecticut’s Attorney General.

So I contacted the office of Connecticut Attorney General William Tong, whose website just so happened to be in the midst of hyping International Charity Fraud Week. They’re aware of the allegations, they say, but have no open investigation at the moment: “We will continue to monitor for any further developments which might merit our involvement in this matter.”

The A.I. Afterlife

But this story isn’t just about salad dressing, and which charities are getting a taste. It’s also about artificial intelligence. 

I’ve been playing around with a website called Character.AI and marveling at just how good technology has become at simulating real people. I’ve asked Elon Musk’s A.I. all about the Twitter acquisition and Emilia Clarke’s A.I. all about Game of Thrones, and I came away pretty impressed with the responses. Spend any time on this site or watch that Tom Cruise deep fake or listen to Val Kilmer during Top Gun: Maverick and you’ll probably agree that today’s celebrities don’t just have to think about the opportunity to endorse frozen pizza but also how their names and likenesses may be put to use in all sorts of vivid ways—especially in death.

Two big issues arise as famous people make the kind of plans that Paul Newman did in 1998. First, many stars may not care to think about the value of their avatar in the metaverse, but it’s likely that the I.R.S. does. In recent years, tax authorities have gone after the estates of Michael Jackson, Whitney Houston, and Prince for not properly valuing their posthumous name and image rights. I’ve spoken to estate planning attorneys who are very conscious of the ever more lucrative nature of these rights, and have accordingly been obsessed with ways to mitigate tax exposure. Kilmer’s Top Gun voice even made it into a PowerPoint presentation that one such lawyer—Jeffer Mangels partner Bradford Cohen—gave at an American Bar Association conference earlier this month.

Second, there will inevitably be the issue of who controls the licensing. That will be dictated by estate planning, too. Yeah, famous people can do what Robin Williams did when he restricted exploitation of his image for 25 years. But even that’s only as effective as the people tasked with policing misuse. So do stars bequeath that authority to a trustee or assign intellectual property to a corporation? If the latter, who is dependable enough to be on the board? Those are decisions that are being debated this second that will have consequences much later.

Which brings me back to Paul Newman, who has shown there can be massive commercial opportunities even in death, and that success can lead to a family war over control. In an odd way, this dispute may be a harbinger of future fights.

Royalties vs. Profits

“All profits to charity”: That’s the slogan that appears on the label of every Newman’s Own product. But even if true, it’s perhaps not quite as special as it appears. The original 1998 plan, after all, was for royalties, not profits, to go to charity. The difference? According to court documents, Newman explained to his children why the food company would be paying the foundation to license his image: “[T]he reason we set up a royalty system is because that royalty comes off the top of every product sold and goes to charity. So, even if you don’t make a profit, money goes to charity.”

Not a bad idea. Plus, there are obvious tax advantages. After all, it wouldn’t matter how valuable those publicity rights are. They’d belong to the foundation, not the estate. Plus, the food business could potentially deduct its licensing fees as an expense on its own income taxes.

But that’s not how it all played out. Instead, Newman’s Own Foundation now owns the for-profit food company. And when the foundation came to a point a few years ago where it would have to either dispose of the food business or pay a huge tax, it successfully lobbied Congress for an exception.

That might make the most business sense, but is that what Paul Newman wanted? The complaint (read here) from his kids makes quite a big stink about how the foundation’s rights to use Newman’s I.P. had always been conditioned on compliance with his intentions, which supposedly include charitable endeavors. If this suit survives the standing issues (read the dismissal motion), the case may explore those. Maybe not from transcripts salvaged from a fire. But that’s not the only way Paul Newman may still speak.