Disney Shareholders Re-Run Ovitz Payout Saga

27 January 2006

The latest in a long line of sequels to the saga of the Walt Disney Company's firing of its former president Michael Ovitz has premiered in a US court.

The current instalment of the never-ending story, spun out over nearly ten years and costing millions of dollars in lawyers' fees, features Disney shareholders' attempt to reverse the decision last year of Delaware Chancery Court to absolve the company's directors of a breach of duty claim [WAMN: 10-Aug-05].

The original failed lawsuit, seeking financial compensation, was brought after the board's ousting of Ovitz "without cause" in 1997, just fourteen months into the job. This triggered his right to a $140 million (€114m; £78m) severance package.

The ruling dealt a blow to shareholder activists seeking to hold directors responsible for their conduct.

Following the filing of an appeal, Delaware's high court has now heard from shareholders' lawyer Steven Schulman that the rule used to show the Disney directors acted in good faith had been wrongly interpreted by trial Judge William Chandler.

Schulman cited the directors' actions as an example of the board's gross negligence and argued there was adequate 'cause' in the testimony of former Disney ceo Michael Eisner, who hired Ovitz.

But Gregory Williams, representing the directors, told the court the board acted properly and Chandler's handling of the case had been "meticulous and fair".

The end credits are expected to role within 90 days, when the court must rule, but no one expects this to be the final chapter.

Data sourced from New York Times; additional content by WARC staff