IN RE WALT DISNEY COMPANY DERIVATIVE LITIGATION
906 A.2d 27 (Del. 2006).
NATURE OF THE CASE: Stockholders (P) brought action against corporate directors and officers for breach of fiduciary duty and waste in connection with hiring and termination of corporate president, who received generous termination benefits even though employment at corporation lasted little more than a year.
FACTS: This is the Court's decision after trial in this long running dispute over an executive compensation and severance package. The stockholder plaintiffs have alleged that the director defendants breached their fiduciary duties in connection with the 1995 hiring and 1996 termination of Michael Ovitz as President of The Walt Disney Company. 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.
The court finally made a determination regarding this derivative litigation and held that : (1) president did not breach duty of loyalty to corporation when president accepted non-fault termination package upon termination by chief executive officer (CEO); (2) termination of president and payment of non-fault termination benefits did not constitute waste; (3) CEO acted in good faith and was not grossly negligent so as to breach his fiduciary duty of care when he negotiated with and hired president; (4) chairman of corporation's compensation committee was not grossly negligent and did not act in bad faith when he negotiated with and hired president; (5) compensation committee member who helped design compensation package and employment agreement did not breach fiduciary duty of care or act in anything other than in good faith; (6) board of directors was not under a duty to act with respect to termination of president; (7) general counsel acted in good faith when he advised chief executive officer with respect to termination; and (8) CEO acted in accordance with his fiduciary duties and in good faith when he terminated president. Judgment for defendants.
ISSUE:
RULE OF LAW:
HOLDING AND
DECISION:
LEGAL ANALYSIS:
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