Ovitz keeps $140m Disney payout
Eisner, left, with Ovitz in 1996.
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NEW YORK (CNN) -- A U.S. judge ruled Tuesday that the directors of the Walt Disney Company did not breach their fiduciary duty when they awarded former President Michael Ovitz a severance package worth $140 million.
A group of Disney shareholders brought the case to trial in October 2004, claiming that the media giant's board was "derelict in its responsibilities" when it approved CEO Michael Eisner's hiring of Ovitz in 1995 and then allowed him to retain his full severance package when he was ousted just 14 months later.
In his ruling, Delaware Chancery Judge William Chandler said that while the directors' conduct "fell significantly short of the best practices of ideal corporate governance," he concluded that they "did not breach their fiduciary duties or commit waste."
The trouble began in 1995 when Eisner recruited longtime friend Ovitz to fill Disney's No. 2 spot.
Ovitz, co-founder of Creative Arts Agency and at the time the most powerful talent agent in Hollywood, quickly fell into a bitter power struggle with Eisner.
In late 1996, Eisner forced Ovitz out with a severance package worth about $140 million in cash and stock.
Since it was filed in 1997, the case has lumbered through the courts, bogged down by legal procedure; but through it all, lawyers for the defendants claimed that Ovitz, Eisner and Disney had broken no laws.
In a written statement, Ovitz's attorney, Mark Epstein, said, "The decision is consistent with what Mr. Ovitz has been saying all along. He always acted in accordance with his duties to Disney's shareholders, and the allegations against him were without merit."
Joshua Vinik, a partner at Milberg Weiss, which is the legal team representing Disney shareholders, said in a press release that, "because of our strong belief in the enforcement of fiduciary responsibilities on the part of officers and directors under Delaware law, and our conviction that these responsibilities were not met in this case, we are committed to appeal the decision by Chancellor Chandler."
The Walt Disney Company could not be reached for comment.
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