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Brehm v. Eisner (In re Walt Disney Co. Derivative Litig.)

Supreme Court of Delaware

January 25, 2006, Submitted ; June 8, 2006, Decided ; June 8, 2006, Filed

No. 411, 2005

Opinion

 [*35]  JACOBS, Justice:

In August 1995, Michael Ovitz ("Ovitz") and The Walt Disney Company ("Disney" or the "Company") entered into an employment agreement under which Ovitz would serve as President of Disney for five years. In December 1996, only fourteen months after he commenced employment, Ovitz was terminated without cause, resulting in a severance payout to Ovitz valued at approximately $ 130 million.

In January 1997, several Disney shareholders brought derivative actions in the Court of Chancery, on behalf of Disney, against Ovitz and the directors of Disney who served at the time of the events complained of (the "Disney defendants"). The plaintiffs claimed that the $ 130 million severance payout was the product of fiduciary duty and contractual breaches by Ovitz, and breaches of fiduciary duty by the Disney defendants, and a waste of assets. After the disposition of several pretrial motions and an appeal to this Court, 1 [**5]  the case was tried before the Chancellor over 37 days between October 20, 2004 and January 19, 2005. In August 2005, the Chancellor handed down a well-crafted 174 page Opinion and [**4]  Order, determining that "the director defendants did not breach their fiduciary duties or commit waste." 2 The Court entered judgment in favor of all defendants on all claims alleged in the amended complaint.

The plaintiffs have appealed from that judgment, claiming that the Court of Chancery committed multitudinous errors. We conclude, for the reasons that follow, that the Chancellor's factual findings and legal rulings were correct and not erroneous in any respect. Accordingly, the judgment  [*36]  entered by the Court of Chancery will be affirmed.

I. THE FACTS

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906 A.2d 27 *; 2006 Del. LEXIS 307 **; 37 Employee Benefits Cas. (BNA) 2756

IN RE THE WALT DISNEY COMPANY DERIVATIVE LITIGATION, WILLIAM BREHM and GERALDINE BREHM, as Trustees and Custodians; MICHAEL GRENING; RICHARD KAPLAN and DAVID KAPLAN, as Trustees; THOMAS M. MALLOY; RICHARD J. KAGER and CAROL R. KAGER, as Joint Tenants; MICHAEL CAESAR, as Trustee for Howard Gunty, Inc. Profit Sharing Plan; ROBERT S. GOLDBERG, I.R.A.; MICHAEL SHORE; MICHELE DeBENDICTIS; PETER LAWRENCE, I.R.A.; MELVIN ZUPNICK; JUDITH B. WOHL, I.R.A.; JAMES C. HAYS; and BARNETT STEPAK, Plaintiffs Below, Appellants, v. MICHAEL D. EISNER, MICHAEL S. OVITZ, STEPHEN F. BOLLENBACH, SANFORD M. LITVACK, IRWIN RUSSELL, ROY E. DISNEY, STANLEY P. GOLD, RICHARD A. NUNIS, SIDNEY POITIER, ROBERT A.M. STERN, E. CARDON WALKER, RAYMOND L. WATSON, GARY L. WILSON, REVETA F. BOWERS, IGNACIO E. LOZANO JR., GEORGE J. MITCHELL, LEO J. O'DONOVAN, THOMAS S. MURPHY and THE WALT DISNEY COMPANY, Defendants Below, Appellees.

Prior History:  [**1]  Court Below: Court of Chancery of the State of Delaware, in and for New Castle County. C.A. No. 15452.

In re Walt Disney Co. Derivative Litig., 907 A.2d 693, 2005 Del. Ch. LEXIS 113 (Del. Ch., Aug. 9, 2005)

Disposition: Affirmed.

CORE TERMS

termination, good faith, Post-trial, fiduciary duty, appellants', options, bad faith, fiduciary, gross negligence, negotiations, terms, due care, committee member, approve, payout, breached, duty of care, spreadsheets, business judgment, provisions, electing, appellant's claim, without cause, duty to act, presumptions, decisions, business judgment rule, board of directors, credibility, reasons

Civil Procedure, Appeals, Summary Judgment Review, Standards of Review, Reviewability of Lower Court Decisions, Preservation for Review, Business & Corporate Law, Directors & Officers, Terms in Office, General Overview, Authority to Act, Apparent Authority, Reliance, Standards of Review, De Novo Review, Evidence, Testimony, Credibility of Witnesses, Management Duties & Liabilities, Fiduciary Duties, Types of Evidence, Business Judgment Rule, Burdens of Proof, Burden Shifting, Duty of Care, Duty of Loyalty, Inferences & Presumptions, Presumptions, Rebuttal of Presumptions, Duty of Good Faith, Compensation, Scope of Authority, Causes of Action, Negligent Acts of Directors & Officers, Remedies, Damages, Monetary Damages, Corporations, Articles of Incorporation & Bylaws, Settlements, Indemnification & Reimbursement, Defenses, Interpretation of Articles of Incorporation, Interpretations of Bylaws, Contracts Law, Contract Interpretation, Ambiguities & Contra Proferentem, Documentary Evidence, Parol Evidence, Expert Witnesses, Allocation, Presumptions, Standards of Performance