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In re Walt Disney Company Derivative Litigation (Disney IV)

Delaware Court of Chancery
907 A.2d 693 (Del. Ch. 2005)

In re Walt Disney Company Derivative Litigation (Disney IV)


Shareholders (plaintiffs) filed a derivative action against the Disney board of directors (defendants), challenging the board's hiring of the company's number-two executive, Michael Ovitz. Ovitz left Disney and received a non-fault termination after unsatisfying job performance. The non-fault termination triggered a large amount of severance pay. The plaintiffs alleged that Ovitz's employment contract incentivized Ovitz to leave Disney as soon as possible and receive a non-fault termination, rather than complete the term of the contract. As such, the plaintiffs argued that this amounted to waste. However, Ovitz argued that he had no incentive to leave early, because he could not know whether he would be terminated or if the termination would be without fault.

Rule of Law


Holding and Reasoning (Chandler, J.)

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