Disney Investors Seek Reversal of Ovitz Ruling

A lawyer representing Walt Disney Co. shareholders Wednesday asked Delaware’s high court to reverse a ruling that found that the company’s directors did not breach their duty when awarding former Disney President Michael Ovitz a severance package the shareholders value at $130 million.

Steven Schulman, a New York attorney with Milberg Weiss Bershad & Schulman, argued before the five justices of the Delaware Supreme Court that the rule used to show the Disney directors acted in good faith had been wrongly interpreted.

But Gregory Williams, a lawyer representing the defendants, told the court the board acted properly and “no one expected this perfect storm,” where Ovitz was ousted after only 14 months and Disney’s stock price shot higher, inflating the price of the severance package.

“People believed hiring Ovitz was the right thing for the company,” Williams said.

The oral arguments marked the latest chapter in the long-running legal battle over Ovitz’s payout. The case, which has dragged on for nearly a decade, has been closely watched because it tests the limits of liability for directors making corporate decisions.

In the appeal filed in October, attorneys for the shareholders claimed that the judge’s ruling was flawed on procedural and evidentiary grounds and should be overturned.

In August, Judge William Chandler of Delaware Chancery Court ruled that the Disney board did not breach its duties when Ovitz walked away with the huge payout in 1996 after a stint as president. The ruling dealt a blow to shareholder activists seeking to hold boards responsible for their conduct.

In his ruling, Chandler said that although the board’s conduct might not have been ideal, former Disney Chief Executive Michael Eisner and other directors acted legally.