Wells memo sells mock jury in Katzenberg suit

Attorneys for Jeffrey Katzenberg consider it the smoking gun in their case against Walt Disney: A memo from former Walt Disney Co. prexy Frank Wells assuring Katzenberg of his 2% stake in the conglom’s revenues even after Katzenberg left the company.

The memo — which had been rumored to exist but has not previously been disclosed because the court file of Katzenberg vs. Disney is sealed to all but the litigants — played a crucial role in a mock jury’s decision to twice find in favor of Katzenberg.

The former Walt Disney Studios chairman, now a principal in DreamWorks, is suing Disney for $250 million, an amount that represents money Katzenberg claims he is owed under his employment contract for beefing up the studio’s revenues during his 10-year run.

According to sources, two mock juries gave the memo, authored by Wells shortly before his death in a helicopter crash, considerable weight among the other documentation presented during the daylong session before deciding in favor of Katzenberg. The focus group sessions were held Sept. 22 at the Encino offices of Adept Consumer Testing, and were commissioned by Katzenberg’s lawyers.

Real court today

The confidential results of the decision of the two mock juries come to light as attorneys for the two sides return to court today as part of a mandatory settlement conference, a court-ordered formality that’s the last procedural step before beginning trial.

Adept samples consumers’ opinions on products, services and lawsuits and monitors the groups’ discussions — in this case a mock jury’s deliberations.

Two separate panels viewed videotaped presentations by Katzenberg counsel Bert Fields, who told participants, among other things, of the existence of the memo and its contents.

Fields also presented the defense’s version of the case using facts and exhibits obtained during the discovery process, which has been ongoing since the lawsuit was filed April, 9, 1996.

The mock deliberations were then monitored and the comments of the “jurors” noted as part of a trouble-shooting strategy used to identify any points that a real jury may have trouble understanding. The case is set for trial on Nov. 20.

The use of such focus groups, while more commonplace in the TV or consumer products industries, is sometimes used in litigation and high-stakes lawsuits that typically involve products that have caused debilitating injuries.Sources said the terms of Katzenberg’s lucrative contract were also discussed, and that a sticking point among some of the mock jurors was whether the pact had been extended. Katzenberg’s deal was extended to 1996, but he left the studio in 1994.

Bonuses key question

At the heart of Katzenberg’s lawsuit is the question of whether Disney is contractually obligated to pay “post-termination” bonuses, and whether Disney breached Katzenberg’s employment agreement by failing to provide him with reasonable supporting documentation related to bonuses.

Disney lawyers claim Katzenberg, who left the studio on Sept. 30, 1994, when Walt Disney Co. chairman Michael Eisner failed to give Katzenberg the post of prexy of the parent company, forfeited any bonuses because he exited two years before his employment pact expired. Disney says the exit triggered a so-called bonus forfeiture clause in the pact.

The narrowing of the lawsuit to two main issues is part of a “bifurcation agreement” signed by Fields and Disney counsel Lou Meisinger on Oct. 17, 1996 (Daily Variety, Sept. 10). The pact also calls for dividing the litigation into two phases: the trial and an arbitration. Should it be determined damages are to be paid, an arbitrator will determine the amount.

Fields and Meisinger declined to comment.

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