Roy Disney Sues Disney Company

[Mimi Q]

Burbank, CA - May 9, 2005 -- Roy E. Disney and Stanley P. Gold today filed suit in Delaware Chancery Court against The Walt Disney Company and certain members of the Board of Directors of the Company alleging that the Board made false statements to the Company's shareholders about its CEO search in order to induce shareholders to vote for the incumbent Board at the 2005 meeting and to induce Messrs. Disney and Gold not to run an alternate slate of directors at that meeting.

In addition to The Walt Disney Company, the two former Disney Directors sued Robert A. Iger, Michael D. Eisner, Judith L. Estrin, John S. Chen, Aylwin B. Lewis, Monica C. Lozano, George J. Mitchell and Leo J. O'Donovan, S.J, for fraud and breach of the duty of disclosure in connection with the Board's public statements about the search for a replacement for outgoing CEO Michael Eisner.

In their lawsuit, Messrs. Disney and Gold are asking the Court to void the 2005 election of Disney Company directors and to compel the Company to hold another election for directors after full and fair disclosure of all material facts about the CEO selection process. Messrs. Disney and Gold are also asking the Court to enjoin the Company and the Board from changing either Eisner's or Iger's compensation or employment contracts. :

The complaint states, "In light of Disney's and Gold's successful 'Just Say No' campaign at the 2004 Annual Meeting and threat to run an alternate slate of directors at the 2005 Annual Meeting, Defendants delayed their selection of [Robert] Iger until shortly after the 2005 Annual Meeting, used Company resources to promote Iger's candidacy and did not in good faith seriously consider any other candidate." As a result of Messrs. Disney's and Gold's efforts, a total of 45.37% of the Company's stockholders withheld their votes for Mr. Eisner, 25.69% withheld their votes for Senator Mitchell, and 24.37% withheld their votes for Ms. Estrin in an unprecedented "No Confidence Vote" at the Company's 2004 Annual Meeting.

According to the complaint, despite the Board's public promises to Company shareholders that it would conduct the CEO search with 'open minds' and with no predeterminations or preconditions, in reality, the Board's CEO selection process precluded serious and effective consideration of external candidates. The complaint cites, among other things:

reports that the Board interviewed only one external candidate, delayed notifying her of any decision and did little to dissuade her from withdrawing her candidacy;
Michael Eisner's presence or expected presence at interviews of external candidates; and
the Board's failure to investigate Iger's role in the Fox Family Channel acquisition, the presentation of overly optimistic projects about Fox Family to the Board and the related withholding from the Board of the CFO's plan to save the Company $400 million by writing down the value of those Fox Family assets.
Messrs. Disney and Gold's complaint states that shareholders were misled by the Board's public promises of open mindedness, saying that had "Disney and Gold known that the Company and a majority of the Board did not intend to stand by their public statements about engaging in a bona fide CEO selection process, [they] would have run an alternate slate of directors at the 2005 annual stockholders meeting."

Also revealed in the complaint is the Company's recent rejection of Messrs. Disney's and Gold's request under Delaware law for books and records documenting the Board's search for Eisner's successor. Messrs. Disney and Gold's complaint cites the Company's refusal to permit any scrutiny of the Board's decision to appoint Iger as CEO as further evidence that shareholders were misled by the Board's statements about a bona fide process.

 

[DVCconvert]

Good!!

 

[BRERALEX]

To quote Paris: "Thats hott"

 

[NandP]

You beat me to the punch!

I was gonna paste my email from SAVEDISNEY.COM but I saw your thread first!

Good job!

 

[NandP]

You beat me to the punch!

I was gonna paste my email from SAVEDISNEY.COM but I saw your thread first!

Good job! here it is anyway:

Roy Disney, Stanley Gold Sue The Walt Disney Company, Certain Directors For Fraud, Breach of Duty of Disclosure Regarding Board's Public Statements About Search for Eisner's Replacement As CEO

Suit Asks Court to:
Void 2005 Election of Directors
Compel Company to Hold Another Election for Directors After Full Disclosure About CEO Selection Process
Enjoin Company and Board from Changing Eisner's or Iger's Compensation or Contracts

Burbank, CA - May 9, 2005 -- Roy E. Disney and Stanley P. Gold today filed suit in Delaware Chancery Court against The Walt Disney Company and certain members of the Board of Directors of the Company alleging that the Board made false statements to the Company's shareholders about its CEO search in order to induce shareholders to vote for the incumbent Board at the 2005 meeting and to induce Messrs. Disney and Gold not to run an alternate slate of directors at that meeting.

In addition to The Walt Disney Company, the two former Disney Directors sued Robert A. Iger, Michael D. Eisner, Judith L. Estrin, John S. Chen, Aylwin B. Lewis, Monica C. Lozano, George J. Mitchell and Leo J. O'Donovan, S.J, for fraud and breach of the duty of disclosure in connection with the Board's public statements about the search for a replacement for outgoing CEO Michael Eisner.

In their lawsuit, Messrs. Disney and Gold are asking the Court to void the 2005 election of Disney Company directors and to compel the Company to hold another election for directors after full and fair disclosure of all material facts about the CEO selection process. Messrs. Disney and Gold are also asking the Court to enjoin the Company and the Board from changing either Eisner's or Iger's compensation or employment contracts. :

The complaint states, "In light of Disney's and Gold's successful 'Just Say No' campaign at the 2004 Annual Meeting and threat to run an alternate slate of directors at the 2005 Annual Meeting, Defendants delayed their selection of [Robert] Iger until shortly after the 2005 Annual Meeting, used Company resources to promote Iger's candidacy and did not in good faith seriously consider any other candidate." As a result of Messrs. Disney's and Gold's efforts, a total of 45.37% of the Company's stockholders withheld their votes for Mr. Eisner, 25.69% withheld their votes for Senator Mitchell, and 24.37% withheld their votes for Ms. Estrin in an unprecedented "No Confidence Vote" at the Company's 2004 Annual Meeting.

According to the complaint, despite the Board's public promises to Company shareholders that it would conduct the CEO search with 'open minds' and with no predeterminations or preconditions, in reality, the Board's CEO selection process precluded serious and effective consideration of external candidates. The complaint cites, among other things:

reports that the Board interviewed only one external candidate, delayed notifying her of any decision and did little to dissuade her from withdrawing her candidacy;
Michael Eisner's presence or expected presence at interviews of external candidates; and
the Board's failure to investigate Iger's role in the Fox Family Channel acquisition, the presentation of overly optimistic projects about Fox Family to the Board and the related withholding from the Board of the CFO's plan to save the Company $400 million by writing down the value of those Fox Family assets.
Messrs. Disney and Gold's complaint states that shareholders were misled by the Board's public promises of open mindedness, saying that had "Disney and Gold known that the Company and a majority of the Board did not intend to stand by their public statements about engaging in a bona fide CEO selection process, [they] would have run an alternate slate of directors at the 2005 annual stockholders meeting."

Also revealed in the complaint is the Company's recent rejection of Messrs. Disney's and Gold's request under Delaware law for books and records documenting the Board's search for Eisner's successor. Messrs. Disney and Gold's complaint cites the Company's refusal to permit any scrutiny of the Board's decision to appoint Iger as CEO as further evidence that shareholders were misled by the Board's statements about a bona fide process.

 

[DancingBear]

Seems unlikely that this will go anywhere. Knowing they were under scrutiny, I'm sure Mitchell made sure they at least did the minimum required.

 

[WDSearcher]

Good!!

Howso?

 

[YoHo]

Seems unlikely that this will go anywhere. Knowing they were under scrutiny, I'm sure Mitchell made sure they at least did the minimum required.

Yes, because The board and Disney in general haven't gotten screwed all over the courtroom in the past.

Everyone thought they had their ***** covered at the 2004 shareholders meeting too.

It sure is a long shot, but I wouldn't put any faith in the Disney Lawyers. Of course, the real issue is the fact that as you just illustrated, everyone knows it was a sham. Which means if Roy and Gold don't win, justice wasn't served as it were.



AS for why it's a good thing, I'm not that selfish. If Disney did something in violation of good corporate governance and in Violation of Sharehold trust, then I want them to get called on the carpet for it.


Just because I like their Theme parks doesn't mean I'll absolve them of being jerks.

 

[DancingBear]

Score one for the Lawyers in the Comcast battle. Other than the Katzenberg case (which, IMO, was about Eisner trying to push the envelope to make a point, rather than what the lawyers may have advised him), just when have the Disney lawyers been pushed around?

Remember, the Ovitz thing has not been decided, and if the DE chancery court had not shocked everyone by making new law on the issue, it wouldn't have even gone to trial. And what does the 2004 shareholder vote have to do with the legal advice?

Generally, Boards only lose these kinds of things if they get caught off-guard. Given Save Disney's existence, and the Ovitz suit, I tend to think Mitchell was treading carefully.

The Pixar contract, the South African "Lion Sleeps Tonight" suit, the Pooh suit---the Disney lawyers are doing pretty well, all in all.

And it's not necessarily bad Governance and a Violation of Shareholder Trust to favor the inside candidate. If you don't like those decisions, the remedy is to replace the board (which Roy and Stan said they would have tried to do, if only they hadn't been led astray by their naive trust in the Board's statements).

 

[WDSearcher]

AS for why it's a good thing, I'm not that selfish. If Disney did something in violation of good corporate governance and in Violation of Sharehold trust, then I want them to get called on the carpet for it. Just because I like their Theme parks doesn't mean I'll absolve them of being jerks.

And I get that. But in the world of "what's best for Disney", where does this fit?

Granted, not everyone was thrilled that Iger was the choice, but reviews on him thus far have been cautiously optimistic. He's got Steve Jobs saying nice things about him, and giving everyone hope that there may actually be some re-negotiations about Pixar's future with Disney. He's made some quick and apparently positive changes at the corporate level. He was hardly ever seen with Eisner during the 50th, but was prominently seen on the streets of both DL and WDW during the event. He's not been cocky or condescending or any of the other things that people so hated about Eisner.

So in the absence of anything blatantly negative, I guess I'm wondering why this new suit from Disney and Gold is seen as a good thing for the company. Because that's what Save Disney is all about -- what is best for the company.

Yes, if the board violated some rule or policy, call them on it. But Roy and Stan are going to need more than just what they believe happened or what they think everyone's motives were. And I honestly don't think they're looking at what this could do to the Company -- both image-wise and financially. Think of the time, resources and money a court case will take away from the company and the stockholders (and the CMs and the guests). And no, I don't think that boards should be allowed to misbehave simply because it costs too much to pursue a case. But you can't also have so much tunnel vision the other way that you can't look at things in context. It's as though Roy and Stan wouldn't really care if the Company tanked, as long as they got back at Eisner and Mitchell.

 

[mitros]

Great! Let's hope the judge is not in Eisners back pocket like the board is!

 

[manning]

Seems unlikely that this will go anywhere. Knowing they were under scrutiny, I'm sure Mitchell made sure they at least did the minimum required.

Maybe it will or maybe it won't. But remember alot of people said it would be impossible for them to get a 45 percent (give or take) no vote on Eisner!!!

Let the debate begin.

Round and round it goes, where it stops nobody knows!!

 

[Peter Pirate]

If the Board is guilty and if the suit has legs this will be bad for Disney.

Disney is on a temendous high right now. Iger seems to be a strong man of the future and profits are making everyone smile. Negative pub certainly could impact this.

Personally though, I agree with Yoho (which rarely happens) and think illegal transgressions should be dealt with regardless of the circumstances (at least I think that's what Yoho believed) and Disney should be held accountable. In my personal opinion I believe Disney probably did cross enough "T's" and dot enough "I's" but the truth should be determined.

Also I'd add that if nothing comes of this or if Roy and Stan lose the battle this should (and hopefully will) end their reign of terror. It's really looking like sour grapes from my POV.

 

[manning]

The complaint as filed:

http://www.savedisney.com/news/features/complaint050905.pdf

The supporting exhibits:

http://www.savedisney.com/news/features/complaint050905.pdf


Looks like Roy and Gold did the classic let's sit back and see if their actions indict (right word?) them, which they feel has. It also looks like they wrote key correspondence to set the situation they wanted. Gold knowing the enemy and their actions has set them up as best he could.

One thing you have to admit, Gold is tenacious and clever.

If it works, time will tell!!

 

[Chuck S]

It's as though Roy and Stan wouldn't really care if the Company tanked, as long as they got back at Eisner and Mitchell.

They don't, they were in favor of "Welcome to Disney World, presented by Comcast."

 

[tomerin]

regardless of whether the disney board bent or broke a few rules it is starting to seem to me that Roy is starting to become a cranky old man. why introduce this lawsuit now when we are in the process of celebrating the 50th birthday of WDL. maybe roy's timing is off here but the focus should not be back on him. i agree that rules need to be followed but why wasnt this done sooner. i am not a lawyer so i guess that it takes time to prepare a lawsuit but all i can now to roy disney are 2 things:

1) why now Roy? why not wait a few months into the celebration instead of now. is he afraid that Iger gets positive press due to the celebration will it hurt roy's course.

2) why not offer an olive branch to Iger and offer him your and stanley's help in making the entire WDW world the icon it used to be. Iger seems to be off to a good start here so why not give him a chance. roy's prescence as a "consultant" could serve as a great help to Iger by lending him his expertise and experience and also roy's presence would serve as an irritant to Eisner.

 

[DVCconvert]

I'm wondering why this new suit from Disney and Gold is seen as a good thing for the company.

Because the BOD, specifically, still had a bad 'oder' about it. If the corporation can be forced to open up the windows, blow out the foul air and take the highest road possible, in the longer term this will encourage investor confidence and that will be good for the company.

Also, assuming Mr. Iger has no 'smoking guns' in past practices, that definate knowledge will help his creditibility with Fans, Cast and Investors alike.

 

[dcentity2000]

A law suit? This may do far more harm than good in respect to the company's financial position...



Rich::

 

[SoCalKDG]

Or is Roy and Co. just desperate.



Its hail mary time....

http://jimhillmedia.com/mb/articles/showarticle.php?ID=1435

 

[YoHo]

I seriously can't believe you people some time.


Look, I don't care about Disney the Company that trades stock on Wall Street. I care about Disney the creative and inventive force that created these beloved movies and beloved themeparks. As such, I care about having a board that understands the industry Disney is in and will work to make sure Disney excels in it. This is more then Iger throwing out a few olive branches to keep the unwashed masses in line. I want a Disney board and CEO that want the same things for the company that I want and I think Roy provides that.


I really don't care if things are on a temporary upswing (there movies this year have been junk and they're coasting on video sales of 2003 hits. The parks haven't made any changes since Eisner was in charge that would make me believe they can maintain growth. I need to see Phase 2 as it were first)

I don't care how good Disney (tm) is DOing, I only care about the Disney ideal flourishing and I don't think the current board will provide that.













I just realized I lost most of you, so I'll scurry back into my hole now.