Originally created 10/03/04

Shareholder suit airs Disney deals



LOS ANGELES - As The Walt Disney Co. plans for a future without iconic CEO Michael Eisner, a lawsuit filed by disgruntled shareholders is forcing Disney to relive one of his most embarrassing mistakes, hiring Michael Ovitz as president.

The suit filed in 1997 is finally going to a trial that will feature some of Hollywood's biggest egos, including Mr. Eisner and Mr. Ovitz, the famed talent agent whose tumultuous reign at Disney ended after just 14 months. It also is expected to reveal some of the less-than-savory dealings at Disney during one of the company's most difficult periods.

Shareholders are objecting to Mr. Ovitz's severance package, valued at about $140 million. The lawsuit charges that Disney's board at the time was negligent in not consulting an expert before approving Mr. Ovitz's contract and that Mr. Eisner let Mr. Ovitz collect the money to avoid personal embarrassment.

The trial is set to begin Oct. 18 in Delaware, where, like many companies, Disney is incorporated. Although Mr. Eisner and then-board members including Mr. Ovitz are defendants, shareholders brought the suit on behalf of the company, which would benefit from any judgment.

When Mr. Ovitz was hired in 1995, Disney had just become a media giant with the purchase of Capital Cities/ABC but was still reeling from the death of its president, Frank Wells, the previous year.

Mr. Ovitz claims he was doomed from the start: micromanaged by Mr. Eisner, undermined by key executives and forced to leave before he had time to prove his worth. Mr. Eisner and the company contended Mr. Ovitz was a lavish spender whose arrogance alienated executives and who ultimately could not be trusted.

Mr. Ovitz recently succeeded in dismissing part of the case against him, but must still defend his role in approving his severance package.

"The evidence is going to show that the board had no grounds to terminate Michael Ovitz for cause and that he had every right to obtain the benefits of his employment contract," Mark Epstein, Mr. Ovitz's attorney, said.

Mike McKeon, a spokesman for Mr. Eisner and other board members, said lawyers were not available for comment.