Jeffrey Katzenberg appears to have won an important victory in his $250 million lawsuit when attorneys for the Walt Disney Co. on Monday conceded that the former studio chairman is owed money under terms of his employment contract.
The surprise concession, being billed by both sides as a “partial settlement” in the year-long litigation, removes the dispute from the courtroom and sends it to the arbitration table.
There will be no need for a trial — the Nov. 18 start date has been canceled — and the move effectively keeps the studio’s business dealings from the prying eyes of the industry and media. All that is left to agree upon is how much money the studio owes Katzenberg.
“I’m very pleased with the outcome and glad Michael and I were able to resolve my business dispute without having to go to trial,” Katzenberg told Daily Variety. “It’s time to move on.”
The settlement is an about-face for the studio, which had maintained Katzenberg was not entitled to any money and that he had been paid according to the terms of his employment contract.
It also seems a marked departure from a week ago, when a Nov. 3 pre-trial settlement conference was so heated, according to sources, that an accord seemed impossible.
“Although the parties have not agreed on a settlement amount, they will now engage in a further proceeding to determine the amount to be paid to Katzenberg,” said a statement released jointly by the studio and Katzenberg’s lawyers. “The parties have agreed that the terms of the settlement will remain confidential.”
The move to arbitration follows the terms of a bifurcation agreement reached between Katzenberg’s attorney Bert Fields and Disney counsel Lou Meisinger (Daily Variety, Sept. 10).
That pact split the case into two phases: a trial and an arbitration, with the latter taking place only if Katzenberg proved victorious during the trial.
The arbitration would determine the amount he was owed. That approach eliminated the potential for a lopsided monetary award bestowed upon Katzenberg by jurors who were sympathetic and/or not savvy in Hollywood dealmaking.
“The company is pleased that this part of the proceedings is behind them,” Meisinger told Daily Variety.
Arbitration makes it easier for Disney attorneys to conduct financial aspects of the case behind close doors. The arbitration requirement had been written into Katzenberg’s 1988 employment contract.
After a multitude of pre-trial stories, a high level of media scrutiny was expected during the trial — every major news organization reserved seats in the courtroom to cover the trial — so veteran litigators surveyed on Monday suggested that the settlement was a good tactical decision by Disney lawyers.
A trial of sorts had already taken place as Fields had presented his case to a mock jury, which twice found in favor of Katzenberg (Daily Variety, Oct. 8).
The “jurors” were apparently swayed by memos signed by the late-Frank Wells, the then-prexy of the Walt Disney Co.. which allegedly promised Katzenberg a 2% share of revenues derived from projects begun during his tenure.
Katzenberg — who is now a partner in DreamWorks, the company he founded with David Geffen and Steven Spielberg — helped build a moribund Disney into one of the industry’s top entertainment conglomerates: taking it from $244 million in revenues in 1984 to $4.8 billion in 1994.
The bifurcation pact, signed Oct. 17, 1996, stipulated that a trial would be confined to two issues: Whether Disney is contractually obligated to pay Katzenberg “post-termination bonuses” he claims he is owed and whether “Disney breached Katzenberg’s employment agreement by failing to provide him with reasonable supporting documentation related to bonuses reported to Katzenberg” while he worked at Disney.
The heart of Katzenberg’s claims were those post-termination bonuses, which were incorporated into the two employment pacts covering his 10-year run at the studio.
The studio claimed Katzenberg forfeited the bonuses when he exited the studio two years earlier than the employment pact permitted.