There are several things Disney CEO Michael Eisner has not done as a witness in the shareholder suit over Michael Ovitz’s severance package: He has not turned purple with rage, he has not threatened anyone from the stand, and he has not called a former colleague “a little midget.”
To the contrary, Eisner has been affable during two days of direct testimony in Delaware, and he has worn a Mickey Mouse tie.
But Eisner hasn’t been cross-examined yet.
With the second of the two Mikes now on the stand, speculation is rampant over whether he’ll repeat the now-legendary performance in 1999 at Jeffrey Katzenberg’s breach of contract trial.
Said Bert Fields, Katzenberg’s attorney in that case: “I don’t know what could have helped Michael as a witness in the Katzenberg case — possibly anger management therapy. I’m sure his present attorneys are aware of the danger of his exploding again on the stand and are doing their best to prevent it.”
On May 5, 1999, Eisner testified as an adverse witness in “Katzenberg v. Disney.”
Combative from the moment he took the stand, Eisner could not remember many of the details of his conversations with Katzenberg over a bonus based on studio profits that Katzenberg had sued to recover.
But he was adamant that Katzenberg would lose it if he left Disney early.
Leading Eisner through never-before-released interview notes taken by writer Tony Schwartz, co-author of Eisner’s autobiography, Fields asked the studio chairman if he had ever said, “I hate the little midget.” (Fields had obtained the notes years earlier after Disney was on the losing end of a discovery motion).
Turning red in the face and rising from his chair, the 6-foot-plus Eisner shot back: “I think you’re getting into an area that’s ill-advised.”
Undeterred, the considerably smaller and older Fields pressed Eisner on whether he had ever said, “I was the cheerleader and Jeffrey was the end of my pom-pom.” All the while, the diminutive Katzenberg and his wife, Marilyn, sat in the courtroom staring at Eisner. Fields later said it was the only time in his career a witness had threatened him from the stand.
Composing himself after a break, Eisner tried to undo the damage by insisting, “I did not hate Mr. Katzenberg. I do not hate Mr. Katzenberg. We had a long, fruitful relationship.”
Later that day, Disney lawyer Lou Meisinger tried to rehabilitate Eisner by having him testify about Katzenberg’s failings as an executive and then quickly hustled him off the stand.
After that, it was all downhill for Disney.
The trial judge found that Disney had breached its contract with Katzenberg. To determine the value of the bonus, the court listened to weeks of dreary testimony during which Disney experts made gloomy — and correct – predictions about how profits would drop once the video boom had played out.
Disney finally settled with Katzenberg for a staggering $250 million.
The impetus for the July 7, 1999, settlement was apparently that Eisner was due back on the stand and another debacle was more than he or Disney could tolerate.
Could history repeat itself? The answer really lies with Eisner. Has he learned from his mistakes and will he listen to his lawyer? (In “Katzenberg,” the consensus was that Eisner either hadn’t bothered to prepare for trial or shook off the advice of his attorneys.)
Disney is no longer a stock market darling and Eisner is a lame-duck CEO, but beyond that, the two cases are more similar than different.
Both involve the departure of a high-level employee under acrimonious terms and the payment — or non-payment — of a huge amount of money. Both Katzenberg and Ovitz believed that Eisner was a close friend — and Eisner thought they were something less than that.
Need to vent
Both cases turned up embarrassing revelations stemming from Eisner’s apparent need to vent. In “Katzenberg,” it was his interviews with Schwartz. This time, it’s the barrage of memos, sent and unsent, in which Eisner castigated Ovitz for his “character” problem.
In a particularly damning memo, Eisner said of Ovitz, “he is a psychopath (doesn’t know right from wrong), cannot tell the truth. Basically he has a character problem, too devious, too untrustworthy to everybody and only out for himself.”
Perhaps prophetically, the trigger for Eisner’s greatest fury was the same in both cases — the fact that both Ovitz and Katzenberg talked too much.
Eisner has said he wrote the “psychopath” memo because he believed Ovitz was leaking stories to the media about the difficulties at Disney. Similarly, what sparked Eisner’s “little midget” outburst was his belief that Katzenberg ran to the press with any and everything Eisner said to him.