Updated from 4:40 p.m.
A Delaware judge ruled Tuesday that
directors weren't negligent in their handling of the hiring and firing of former exec Michael Ovitz.
The victory for the company comes in a class-action lawsuit that accused Disney's directors of putting their allegiance to CEO Michael Eisner ahead of their duties to look out for shareholders. The suit was sparked by the money Disney lavished on the former Hollywood talent agent over his brief tenure at the Burbank, Calif., media giant.
The board gave Ovitz cash payments of $39 million and stock options worth over $101 million for just 14 months' work in the mid-1990s. The episode fueled growing investor disenchantment with Eisner's imperial rule. Eisner agreed last fall to step aside a year early for successor Bob Iger, who has won over many former foes of the company.
The ruling caps off a trial that started last fall as the culmination of a the suit against Disney's board. The plaintiffs said Ovitz didn't deserve any severance and wanted Ovitz's pay returned to Disney, while the company and the directors denied any wrongdoing. The judge ruled Tuesday that the board didn't breach its fiduciary duty.
"We are pleased that the Court confirmed that we did not breach our fiduciary duties as directors of The Walt Disney Company in connection with the hiring and subsequent termination of Mr. Ovitz," former directors and onetime dissidents Stanley Gold and Roy Disney said late Tuesday through a lawyer. "We have always acted in the best interests of the Company and its shareholders.
The high-profile suit pitted Eisner against his former friend Ovitz in a courthouse in Delaware. Eisner testified that he hired Ovitz, a former talent agent, in August 1995 to groom him as his successor. He said he later decided to fire Ovitz in December 1996 after concluding that his friend of 30 years couldn't make the transition to corporate executive,
reported this past winter. During his five days on the witness stand, Ovitz testified that Eisner betrayed him by not giving him time to learn the president's job before firing him.
The ruling was made by Chief Chancery Court Judge William B. Chandler III.
The news came as Disney posted solid third-quarter numbers after the close Tuesday. In postclose action, Disney fell 14 cents to $26.