Excerpts From Judge's Ruling In the Disney-Ovitz Case
August 9, 2005 7:41 p.m.
The following are key excerpts from the decision released Aug. 9, 2005, by Chancellor William Chandler of Delaware's Court of Chancery, in the shareholder lawsuit against current and former directors of Walt Disney Co.
* * *
The Case
"It is easy, of course, to fault a decision that ends in failure, once hindsight makes the result of that decision plain to see. But the essence of business is risk. …The redress for failures that arise from faithful management must come from the markets … and not from this Court."
* * *
"Should the Court apportion liability based on the ultimate outcome of decisions taken in good faith … decision-makers would … take decisions that minimize risk, not maximize value."
* * *
Michael Eisner
"Despite all of the legitimate criticisms that may be leveled at Eisner, especially at having enthroned himself as the omnipotent and infallible monarch of his personal Magic Kingdom, I nonetheless conclude … that Eisner's actions were taken in good faith."
* * *
"By virtue of his Machiavellian (and imperial) nature as CEO, and his control over Ovitz's hiring in particular, Eisner to a large extent is responsible for the failings … that infected and handicapped the board's decisionmaking abilities."
* * *
"Eisner stacked his (and I intentionally write "his" as opposed to "the Company's") board of directors with friends and other acquaintances who .. were certainly more willing to accede to his wishes … than truly independent directors."
* * *
Michael Ovitz
"Furthermore, having just been terminated, no reasonably prudent fiduciary in Ovitz's shoes would have insisted on a board meeting to discuss and ratify his termination after being terminated by the corporations chief executive officer (with guidance and assistance from the Company's general counsel)."
* * *
"As it relates to job performance, I find it patently unreasonable to assume that Ovitz intended to perform just poorly enough to be fired quickly, but not so poorly that he could be terminated for cause. First, based on my personal observations of Ovitz, he possesses such an ego, and, enjoyed such a towering reputation before his employment at the Company, that he is not the type of person that would intentionally perform poorly. Ovitz did not build Hollywood's premier talent agency by performing poorly. Second, nothing in the trial record indicates to me that Ovitz intended to bring anything less than his best efforts to the Company. Additionally, I have found and concluded…that Eisner believed Ovitz would be an excellent addition to the company throughout 1995, a far cry from plaintiffs' accusations of deciding to hire him for the purpose of firing him shortly thereafter with a spectacular severance payoff."
The Trial
"The trial consumed thirty-seven days (between October 20, 2004 and January 19, 2005) and generated 9,360 pages of transcript from twenty-four witnesses. The Court also reviewed thousands of pages of deposition transcripts and 1,033 trial exhibits that filled more than twenty-two 3 1/2-inch binders. Extensive post-trial memoranda also were submitted and considered."
August 9, 2005 7:41 p.m.
The following are key excerpts from the decision released Aug. 9, 2005, by Chancellor William Chandler of Delaware's Court of Chancery, in the shareholder lawsuit against current and former directors of Walt Disney Co.
* * *
The Case
"It is easy, of course, to fault a decision that ends in failure, once hindsight makes the result of that decision plain to see. But the essence of business is risk. …The redress for failures that arise from faithful management must come from the markets … and not from this Court."
* * *
"Should the Court apportion liability based on the ultimate outcome of decisions taken in good faith … decision-makers would … take decisions that minimize risk, not maximize value."
* * *
Michael Eisner
"Despite all of the legitimate criticisms that may be leveled at Eisner, especially at having enthroned himself as the omnipotent and infallible monarch of his personal Magic Kingdom, I nonetheless conclude … that Eisner's actions were taken in good faith."
* * *
"By virtue of his Machiavellian (and imperial) nature as CEO, and his control over Ovitz's hiring in particular, Eisner to a large extent is responsible for the failings … that infected and handicapped the board's decisionmaking abilities."
* * *
"Eisner stacked his (and I intentionally write "his" as opposed to "the Company's") board of directors with friends and other acquaintances who .. were certainly more willing to accede to his wishes … than truly independent directors."
* * *
Michael Ovitz
"Furthermore, having just been terminated, no reasonably prudent fiduciary in Ovitz's shoes would have insisted on a board meeting to discuss and ratify his termination after being terminated by the corporations chief executive officer (with guidance and assistance from the Company's general counsel)."
* * *
"As it relates to job performance, I find it patently unreasonable to assume that Ovitz intended to perform just poorly enough to be fired quickly, but not so poorly that he could be terminated for cause. First, based on my personal observations of Ovitz, he possesses such an ego, and, enjoyed such a towering reputation before his employment at the Company, that he is not the type of person that would intentionally perform poorly. Ovitz did not build Hollywood's premier talent agency by performing poorly. Second, nothing in the trial record indicates to me that Ovitz intended to bring anything less than his best efforts to the Company. Additionally, I have found and concluded…that Eisner believed Ovitz would be an excellent addition to the company throughout 1995, a far cry from plaintiffs' accusations of deciding to hire him for the purpose of firing him shortly thereafter with a spectacular severance payoff."
The Trial
"The trial consumed thirty-seven days (between October 20, 2004 and January 19, 2005) and generated 9,360 pages of transcript from twenty-four witnesses. The Court also reviewed thousands of pages of deposition transcripts and 1,033 trial exhibits that filled more than twenty-two 3 1/2-inch binders. Extensive post-trial memoranda also were submitted and considered."