Disney Court Goes Home for the Holidays

15 December 2004

To the sound of 'White Christmas' sung by a heavenly choir, the long running courtroom epic Disney Shareholders versus Disney Directors is taking a well-earned holiday intermission.

The Yuletide fadeout at Delaware chancery court followed the testimony of former Walt Disney Company director Robert Stern.

He told the court the company made a wise investment when it fired its former president Michael Ovitz without cause, thus entitling him to a $140m (€105m, £73m) severance payout.

Stern says the former Hollywood uber agent's "destructive nature" made it difficult for him to find his "executive niche in the company".

He did not believe Ovitz, who toiled at the mouse house for just fourteen months 1995 through 1996, was dishonest but that he was prone to putting a positive spin on things, especially his own role.

Stern feels this was a legacy of his tenure at Creative Artists, the top talent agency he founded and left to join Disney at the urging of his erstwhile friend, ceo Michael Eisner.

And it is Eisner and his fellow board directors who are at the centre of this high profile lawsuit brought by Disney shareholders. They claim the board was negligent in its hiring and firing of Ovitz, insisting there was sufficient cause to sack him, quoting abuse of his expense account and habitual lying. They want the $140m back plus interest.

The directors contend Ovitz was fired because he did not fit with Disney's culture and business ethos but that he was not guilty of malfeasance or gross negligence, the only reasons under his contract terms to sack him without compensation.

The Disney board did try to shoehorn Ovitz into Sony as an alternative to paying him the severance money, but when that option failed "there was no other way to go", claimed Stern, quoting ex-Disney legal eagle Sanford Litvack.

The eagerly awaited sequel, Disney Shareholders versus Disney Directors II, opens in January.

Data sourced from Wall Street Journal Online; additional content by WARC staff