Irked Eisner egged on in Katzenberg trial

Lawyer focus on 'personal animus'

In some of the most intense and provocative testimony so far, Disney chairman Michael Eisner on Tuesday flushed red with anger when asked if he had ever called Jeffrey Katzenberg “a little midget.”

Katzenberg attorney Bert Fields was trying to get Eisner to admit to having used the phrase in order to underscore the “personal animus” theme of his case. It is that animus, Katzenberg’s lawyers maintain, that kept the former studio chief from receiving a controversial bonus worth hundreds of millions of dollars.

Leading Eisner through never-before released interview notes taken by writer Tony Schwartz, the co-author of Eisner’s autobiography, Fields asked the studio chairman point blank if he had ever said, “I hate the little midget.”

But a blustering, seething Eisner shot back: “I think you’re getting into an area that’s ill-advised.”

Eisner’s a towering 6 feet plus while Katzenberg is considerably shorter.

Later, in a more composed tone, Eisner, who spent the entire day on the stand, insisted, “I did not hate Mr. Katzenberg. I do not hate Mr. Katzenberg. We had a long, fruitful relationship.”

Continuing the intense barrage of questions, Fields asked if Eisner ever told Schwartz, “I was the cheerleader and Jeffrey Katzenberg was the end of my pom-pom.” Eisner responded that “I might have said something like that in humor.”

But the Disney chairman answered “yes” when queried by Fields about a 1994 meeting in which Katzenberg tried to resolve the issue of the bonus. “I don’t care what he thinks. I am not going to pay him any of the money,” is what Eisner remembered as having said to Schwartz about the bonus provision of Katzenberg’s contract.

Under examination by Disney counsel Lou Meisinger, Eisner tried to put some of his statements in context and to explain the source of his ire at Katzenberg.

Played out in press

Eisner testified that what provoked him to say he wouldn’t pay Katzenberg was that everything he ever told his studio chief ended up in the press, including the fight over the bonus. Eisner said he was particularly irked because he had just gotten a misdirected fax from Katzenberg to Fields thanking him for all his help.

Telling everything to the media was “the dark side of an otherwise sterling executive,” Eisner said of his antagonist in the trial.

Making it clear where he thought the credit for reviving animation lay, Eisner claimed that Katzenberg considered live-action features his strong suit and early on at Disney “threw the animators off the lot” over the “mild objection of Roy Disney.”

Eisner also testified that Katzenberg was initially opposed to re-releasing animation on video. Damning Katzenberg with faint praise, Eisner testified “In all fairness to him, he wasn’t looking at the big picture” but only at how video would cut into theatrical revenues.

The Disney chairman concluded his testimony by saying that in the year Katzenberg left, he was paid $400,000 in a discretionary bonus in addition to the $7.1 million he collected for that year under the 2% incentive bonus. “We rounded it up to $7.5 million … I couldn’t remember the anger I had before, I guess.”

Eisner also said that he would never have agreed to the 1988 contract knowing Katzenberg would retain all his stock options, a house payment and various bonuses — including the hotly contested 2% bonus at issue in the trial — if he left four years into the six-year deal.

“If he was going to exit that early, he was not going to get all the goodies, including the 2% bonus,” Eisner told the packed courtroom.

Wearing a light gray suit, Eisner was accompanied to court by Disney chief operations officer Sanford Litvack and head of publicity John Dryer.

The dwindling press corps showed up in full force in the Century City mock courtroom of Disney’s attorneys for the long-awaited showdown. Katzenberg maintained his usual seat between his wife and DreamWorks exec Helene Hahn.

During the proceedings, Eisner remained focused on Fields; Katzenberg from the back of the room mostly stared at Eisner. If the two former colleagues spoke, it was out of the presence of reporters.

In earlier testimony, Eisner, was taken through the details of the 1988 negotiation over the bonus, which is the subject of this lawsuit. Katzenberg claims he was entitled to a 2% bonus on all product made during his tenure in perpetuity. He claims it is worth $250 million.

Although the settlement agreement remains sealed, more facts have come to light about what has already been paid. Two payments have been made to Katzenberg, one of which was for $77 million. This payment is a credit against the final judgment in the current phase two of the case.

Under a formula set forth in the settlement agreement, Katzenberg receives 72% of the figure ultimately decided by the judge. Another, somewhat smaller payment, also was made to settle phase one of the litigation, bringing the total already paid to more than $100 million.

‘Like the dentist’

Combative from the moment he took the stand, Eisner could not remember many details of the negotiations,but he was adamant that Katzenberg would lose the bonus if he left early. Asked to recall whether he had an “emotional, intense conversation” with Katzenberg about the bonus, Eisner replied, “It’s like the dentist. You try to forget about the pain.”

Fields also took Eisner through a series of memos between Frank Wells and Katzenberg’s attorney, purporting to show that the bonus remained even if Katzenberg left after four years. Eisner insisted that at some point he became aware that Katzenberg’s deal was “too rich” if he would not agree to a longer term, and he said to Wells, “I won’t make that deal.”

While Eisner testified that he didn’t want Katzenberg to get the bonus if he left early, he also said that he thought the bonus would be worthless because at the time of the 1988 contract negotiations Disney was “$50 million in the red.”

(Reuters contributed to this report.)