Report sees holes in Katz suit

Think Jeffrey Katzenberg’s case against the Walt Disney Co. is a slam dunk? Think again. Despite the pro-Katzenberg buzz, a recent analysis of the court file suggests otherwise.

In the June 30 issue of California Law Business — a biweekly supplement to the legal newspaper Daily Journal — reporter Garry Abrams concludes that Katzenberg’s suit, seeking 2% of studio profits from the films made during his tenure, is worth far less than the $250 million he’s claiming, and that the studio holds an enormous strategic advantage.

Abrams points to a “bifurcation agreement” signed last year by Katzenberg’s attorney Bert Fields and Disney’s attorney Louis Meisinger, which separates the case into two phases. Under this agreement, the jury will only decide whether Disney is obligated to pay “post-termination” or future profits bonuses under Katzenberg’s contract. Damages, if any, will be determined by arbitration, apparently because of a mandatory arbitration clause in Katzenberg’s contract.

Conventional legal wisdom is that arbitration is a huge plus for the studio, because juries are believed to be more sympathetic to individuals, especially when pitted against big companies. Delay is also on Disney’s side because arbitration wouldn’t start until Disney has finished its appeals of the trial verdict. And because arbitration is private, Disney would not have to reveal its financial secrets to the public.

The limited scope of the case also means it may be less colorful than trial fans are expecting. Meisinger recently broke his customary silence to deny a report in the New York Observer that documents used by Disney chairman Michael Eisner for his memoirs supposedly containing embarrassing information would have any bearing on the case.

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