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Ovitz ignored Eisner, Donohue tells court

Memos pull former superagent's honesty into question

Expert witness John J. Donohue returned to the stand Thursday in the waning days of the Disney shareholder case, testifying that Disney had good cause to fire Michael Ovitz and avoid paying him severance.

At the heart of Donohue’s conclusion were statements and memos by Disney CEO Michael Eisner, former Disney chief operating officer Sandy Litvack and investor Sid Bass questioning Ovitz’s honesty. In one much-discussed memo, Eisner described Ovitz as a psychopath. Donohue, testifying on behalf of the plaintiffs, said that his analysis also was based on the fact that Ovitz’s expenses were excessive and that he refused or was unable to do what Eisner asked of him.

Donohue pointed out that Eisner kept asking Ovitz to pay attention to operations, while Ovitz continued to pursue big corporate and talent acquisitions even when Eisner told him the company rarely did them. In response to questions about whether it was reasonable for Ovitz to try to sign Janet Jackson, pursue strategic mergers or try to bring an NFL football team to Los Angeles, Donohue maintained that the issue in determining whether there was cause to fire Ovitz was whether he was doing the things Eisner asked him to do, not whether Ovitz’s ideas were good.

No cause, sez Fox

Testifying as an expert on behalf of the defense, attorney John Fox said that terminating Ovitz for cause would have cost more than paying the severance. Fox said Litvack reasonably concluded that there were no grounds for firing Ovitz for cause and that Disney would have lost a wrongful termination suit. “Not only would Disney have lost the wrongful termination case,” said Fox, but there also would have been fraud and defamation claims, making even a settlement very costly.

Skirmishes over document production continued even though the trial is almost over. Donohue claimed that late-produced documents only reinforced his conclusion that there was cause to fire Ovitz because they showed him continually ignoring Eisner’s directives. Fox, on the other hand, claimed the documents showed that Ovitz operated within normal corporate rules.

Donohue and Fox are among the final trial witnesses in the 7-year-old shareholder derivative action. Plaintiffs seek the return of the $140 million Disney paid to Ovitz after it terminated the onetime Disney president after a disastrous 14-month tenure. Delaware Chancery Judge William B. Chandler is expected to take several months to issue a written opinion.