Delaware court affirms Disney-Ovitz case decision
The Delaware Supreme Court on Thursday upheld a ruling exonerating the board of The Walt Disney Co. of wrongdoing in connection with a $140 million severance package paid Michael Ovitz at the end of his brief stint as president of the entertainment company.
A one-time friend and confidante of former Disney CEO Michael Eisner, Ovitz held the post for about 14 months in the mid-1990s, and was ousted with a compensation package that lawyers for shareholders said was out of line.
Thursday's ruling affirmed the findings of Chancellor William B. Chandler III of Delaware's Court of Chancery, who said there was much to criticize about the Disney board's oversight of Ovitz's hiring and firing, but no legal liability.
The derivative action was an attempt to recoup for the company the money paid to Ovitz as he was pushed to leave after a stormy tenure at Disney.
Years in the making, the contest over Ovitz's payout was one that had corporate attorneys worried that higher standards would be set for board oversight in important decisions, such as the hiring and firing of top executives.
The Delaware Supreme Court found Eisner and other Disney directors didn't abandon their duty to the shareholders.
The state's generous "business judgment" rule immunizes corporate officers from liability for mistakes as long as there is some evidence they acted in good faith in making decisions for the company.
"Even though the Chancellor found much to criticize in Eisner's 'imperial CEO' style of governance, nothing has been shown to overturn the factual basis for the court's conclusion that, in the end, Eisner's conduct satisfied the standards required of him as a fiduciary," Justice Jack B. Jacobs wrote for the court.
In a statement, Eisner attorney Gary Naftalis said Eisner was "very pleased" with the Delaware Supreme Court ruling.
"We always believed that there was no basis for this case and that Mr. Eisner had always acted properly and in the best interests of the Disney shareholders," Naftalis said.