Ruling expected TODAY in shareholders' lawsuit against Walt Disney Co.

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Excerpted from Roger Friedman's August 9 column at foxnews.com :

"Disney D-Day

Think you've got it tough? The Walt Disney Company has a conference call scheduled for 4 p.m. today for investors.

That would be tough enough, but also expected this afternoon is the ruling in their shareholders' lawsuit against the board of directors. This was the Chancery Court case heard in Delaware concerning the $140 million payout to Michael Ovitz.

Could the court decision be timed any worse? I don't think so. The Ovitz case is only one source of embarrassment, but it's maybe the most public.

Disney also has to answer for the demise of Miramax, which they instigated, as well their inability to negotiate with Pixar.

Then, there are the movies. Yikes! It was a rough year for the studio, as they watched their only real successes occur with Miramax and Pixar.

I hope someone on that conference call asks the key question: What sort of movies does Disney think they're going to make at faux-Miramax without the filmmakers who reaped hundreds of Oscars? They are all gone now.

That's an answer I'd like to hear.

As for the Ovitz decision, keep in mind that the shareholders' lawsuit was brought by the law firm of Milberg Weiss. That's the same firm suing Dreamworks Animation in another class action suit on behalf of shareholders.

The two suits have nothing to do with each other, except that their authors are the same."

The shareholders' lawsuit was a source of much of the research material in this year's book, "Disney Wars." Get ready to call your stockbroker. :lookaroun

 

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more, from marketwatch.com:

Decision expected Tuesday in Disney/Ovitz lawsuit
By Peg Brickley
Last Update: 6:21 PM ET Aug. 8, 2005


WILMINGTON, Del. (MarketWatch) -- A decision is expected to be issued Tuesday afternoon in the long-running legal fight over Michael Ovitz's brief but expensive tenure as second-in-command to Walt Disney Co. (DIS) Chief Executive Michael Eisner in the mid-1990s.

Chancellor William B. Chandler III of Delaware's Court of Chancery will rule on whether Disney's board of directors did its job when Eisner hired his good friend as Disney's president nearly a decade ago.

Hollywood powerbroker Ovitz found himself out of a job after a little more than a year as Eisner's second-in-command at the entertainment giant.

Shareholders sued to recoup $140 million in exit pay that cushioned Ovitz's departure, in a case that bounced around the Delaware courts for years before coming to trial in 2004.

If they win, they are asking damages of about $262.3 million, which includes interest from December 1996 through March 2005.

Corporate lawyers are eagerly awaiting the ruling from Chandler, top judge of a corporate law tribunal that sets the standard for board behavior in Delaware, where many of the nation's largest companies are incorporated.

Some current and former Disney directors stand accused of being lax in their oversight of Ovitz's hiring and termination, letting Eisner set up a deal that made it more profitable for his former friend to depart than to stick around.

Eisner made an effort to distance himself from Ovitz during the trial. "We're talking semantics here," he said. "Michael Ovitz had a lot of best friends. Michael Ovitz was a salesman, is a salesman."

About Ovitz, Eisner said, "I was a good friend. I was a reasonable friend. I liked his wife. I was amused by him...He was one of my friends."

Directors named as defendants include current directors such as George Mitchell, Disney's chairman, and those who have since given up their seats on Disney's board, such as the actor Sidney Poitier.

The directors deny the charges and Ovitz, at trial, portrayed himself as a hard-working, but frustrated, manager who was ultimately forced out in a treacherous Disney climate.

Law professors have already made plans for an online symposium to discuss what Chandler has to say in the Disney case, particularly about how much attention boards of directors need to pay to the hiring, and firing, of top executives.

The morning-after Web session will be held at www.theconglomerate.org, a blog hosted by University of Wisconsin Law School Professor D. Gordon Smith and other academics.

Larry Ribstein of the University of Illinois College of Law has already predicted victory for Disney's directors on his Ideoblog.

Filed as a derivative suit, the action seeks recovery on behalf of Disney against leaders who allegedly wronged it.

So for all its academic interest, Chandler's ruling may have little or no lasting impact on the fortunes of Walt Disney Co., which is poised for a change of leadership that has only dim connection to the lawsuit over Ovitz's passage through the top ranks in the mid-1990's.

Eisner is slated to step down from the top slot at Disney on Sept. 30. Robert A. Iger becomes CEO Oct. 1.

In 2004, six months after 45% of shareholders delivered a vote of no confidence in him, Disney's long-time CEO announced his plan to retire.

A lawsuit over Iger's accession settled in July, amidst a truce with former directors who were among the most vocal critics of Disney's leadership and board.

Roy Disney, nephew of founder Walt Disney, and Stanley Gold, who resigned from the board to lead a shareholder movement for reform, agreed to back Iger as CEO and drop plans to run a rival slate of directors.

-Contact: 201-938-5400

 

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From cnn.com:

Judge Sides With Disney Board in Ovitz Shareholder Suit
Tuesday, August 09, 2005

The Delaware Court of Chancery (search) Tuesday ruled that the board of the Walt Disney Co. (DIS) did not breach its duties in awarding a $140 million severance package to Michael Ovitz (search), the Hollywood dealmaker ousted as the company's president after just 14 months in the job.

Judge William Chandler rejected the arguments of Disney shareholders, who said the media company should not have paid the severance to Ovitz.

Shareholders contended that Ovitz, who left Disney in 1996, failed miserably as Disney president and should have been fired for cause.

The shareholder derivative lawsuit, which has been in progress for more than seven years, claimed Disney's board failed in its fiscal responsibilities by not properly scrutinizing Ovitz's employment contract when he joined the company in 1995 and then granting him a nonfault termination that entitled him to the massive severance package when he left just over a year later.

The shareholders claimed that Ovitz was ineffective in his job at Disney and could have been fired for cause for excessive spending and habitual lying while at the company.

Reuters and the Associated Press contributed to this report.

:wave: Guess Disney shareholders aren't getting into the pockets of their board of directors. Oh well. How about Ovitz? Do some people have all the luck, or what?