244, 249 (Del. 2000) (“Disney II”). The Supreme Court, however, also permitted
the plaintiffs to replead their demand futility claims and remanded the case to the
Court of Chancery.
Heeding the advice of the Delaware Supreme Court, plaintiffs made a books and records demand on the Company pursuant to Section 220 of the Delaware General Corporation Law, and used the results of that demand to craft an amended complaint, which was met with another motion to dismiss. In re The Walt Disney Co. Deriv. Litig., 825 A.2d 275 (Del. Ch. 2003) (“Disney III”).
In their amended complaint, plaintiffs brought breach of fiduciary duty claims against the Disney directors alleging that they had “abdicated all responsibility to consider appropriately an action of material importance to the corporation.” Id. at 278.
The amended complaint, as characterized by the Court, alleged that:
The Company approved an executive compensation contract negotiated by Eisner with his long-term friend of 25 years, without the board reviewing a draft of the agreement, without analyzing its costs, without information comparing it to industry standards and with barely any discussion.
The terms of the contract ultimately negotiated, several of which were significantly different than those described to the compensation committee, gave Ovitz stock options that were “in the money” when issued and allegedly provided a total award of over $140 million to Ovitz in the event of a non-fault termination,