NEW YORK — Ever the dealmaker, Michael Ovitz was in the middle of negotiating an $85 million-$90 million settlement for Jeffrey Katzenberg’s exit from the Mouse House when Michael Eisner stopped him.
Katzenberg would go on to win a staggering $250 million payout from Disney: the difference would have paid for Ovitz’s controversial $140 million severance package, which is now under scrutiny by a Delaware court.
That’s according to Los Angeles trial attorney Larry Feldman, who returned to the stand Wednesday in the Disney shareholder trial as an expert witness retained by Ovitz.
They want money back
Shareholders want Ovitz’s $140 million golden parachute back from the Mouse House, saying he failed miserably as Disney prexy and that the board and top execs, including Eisner, were negligent in not firing Ovitz for cause.
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Feldman, however, said Ovitz worked as “hard as a person could work,” but that Eisner — known for being a micromanager — effectively cut off Ovitz’s authority at almost every turn. He said it’s no crime that the two men had wildly different styles.
As Disney’s CEO, Eisner had every right to give instructions as he pleased, but that doesn’t mean Ovitz did a bad job. Indeed, Ovitz’s ideas for various deals and acquisitions ultimately could have been a revenue boon for the conglom, Feldman said.
All told, various deals put forth by Ovitz but never approved by Eisner would have paid his salary “tenfold,” according to Feldman.
Ovitz was a “man who had big visions,” Feldman testified. “He was not a meat-and-potatoes kind of person. Those things have to be supported.”
In one instance, Ovitz received permission from Eisner and then-Disney general counsel Sandy Litvack to settle with Katzenberg, the former prexy of Disney Studios who resigned in 1994, testified Feldman. Ovitz prided himself on his connections as Hollywood’s most powerful player.
Ovitz went ahead and brokered a tentative deal with Katzenberg’s reps for a $85 million-$90 million settlement, but when he sought confirmation to seal the offer, that authority wasn’t forthcoming, according to Feldman.
“That certainly would have been, in hindsight, a great deal for Disney,” Feldman continued.
Katzenberg ending up settling with Disney for more than $250 million in the middle of his 1999 breach-of-contract trial.
People close to Eisner have dismissed the suggestion that Ovitz could indeed have brokered a Katzenberg settlement in 1995-96.
At one point, attorneys for shareholders tried to have Feldman disqualified as an expert witness, but Chancellor William B. Chandler III refused the motion.
Shareholders returned their own expert witness, Yale Law School professor John J. Donohue, to the stand in the late afternoon. Donohue, who testified earlier in the trial and returns to the stand this morning, continued to maintain that Ovitz could have been fired for cause, which would have deprived him of severance pay.
Eisner consistently instructed Ovitz to stop looking at acquisitions and instead seek to improve the company’s operations, Donohue testified.
Not following orders
“I think if you look through the evidence in this case … that message comes across rather clearly that Eisner was encouraging and instructing Ovitz to focus more on the operations and was very unhappy he was failing to do that … contrary to Eisner’s instructions,” Donohue said.
Donohue also testified that Ovitz displayed a pattern for giving lavish gifts on Disney’s dime, along with having a potential conflict of interest in still receiving some money from Creative Artists Agency, the firm he co-founded.
But witnesses for Ovitz, Eisner and Disney have testified that Ovitz’s expenses and gift-giving didn’t violate Disney policy, and that he disclosed his ongoing ties with CAA from the outset.
Starting with Eisner
Feldman, however, did say that if he had been hired by Disney as outside counsel to investigate whether Ovitz could be fired for cause, he certainly would have followed up on Eisner’s comment, written in a memo, that Ovitz is a “psychopath.”
“I would start with Eisner and follow the trail to the end,” Feldman said.
Donohue and Feldman are among the final three witnesses testifying in the trial, which resumed this week after a lengthy holiday hiatus.
Once testimony concludes, both sides will submit post-trial papers before Chandler considers the case and issues a ruling.