GOOD FAITH AND THE WALT DISNEY COMPANY DERIVATIVE LITIGATION -- GUIDANCE FOR DIRECTORS OF DELAWARE CORPORATIONS
Gilchrist Sparks, III1
Samuel T. Hirzel, II
HOLLYWOOD MEETS DELAWARE
Between October 20, 2004 and January 19, 2005, many of The Walt Disney Company’s present and former directors traveled to Georgetown, Delaware for a 37-day, well-publicized trial regarding whether the Company’s directors breached their fiduciary duties in connection with the spectacular hiring and even more spectacular firing of Michael Ovitz, “the most powerful man in Hollywood,” a little more than one year later. With his termination, Mr. Ovitz left the Company with a package of benefits that the plaintiffs argued was worth approximately $140 million.
On August 9, 2005, Chancellor William B. Chandler, III of the Delaware Court of Chancery issued his 174-page post-trial decision in In re The Walt Disney Company Derivative Litigation, Consol. C.A. No. 15452 (Del. Ch. Aug. 9, 2005) (“Disney IV”). Although the Court ultimately found that the directors were not personally liable for monetary damages for their role (or lack thereof) in the
Messrs. Sparks and Hurd are partners at, and Mr. Hirzel is associated with, the Wilmington, Delaware law firm of Morris, Nichols, Arsht & Tunnell, counsel to Roy E. Disney and Stanley P. Gold in In re The Walt Disney Company Derivative Litigation, Consol. C.A. No. 15452, filed in the Court of Chancery of the State of Delaware. The views expressed herein are solely those of the authors.