Ending nearly a decade of litigation, Delaware’s Supreme Court Thursday upheld a ruling that absolved Disney’s board of wrongdoing in Michael Ovitz’s rich payout.
Decision comes as Steven Schulman, who led the case against Disney, finds himself and his firm, Milberg Weiss Bershad & Schulman, in legal hot water. Schulman was recently indicted for allegedly paying plaintiffs to push shareholder class-action cases against companies.
Last July, Judge William B. Chandler III of Delaware Chancery Court ruled Mouse directors committed no illegality in giving Ovitz a package worth about $130 million for 14 months of work as then chairman-CEO Michael Eisner’s No. 2.
Ovitz was pushed out in December 1996. Shareholders filed suit in 1997 and the case eventually went to trial in Delaware in fall 2004. The star-studded proceedings entranced Hollywood and were followed closely by companies across the nation.
Shareholder activists had gained ground and some boards and managers been discredited after a series of financial scandals. The case was seen as a bellwether for future corporate governance complaints.
Chandler’s ruling cleared the board, and corporate America breathed a sigh of relief.
But his lengthy decision still blasted Eisner and his directors. “By virtue of his Machiavellian (and imperial) nature as CEO, and his control over Ovitz’s hiring in particular, Eisner to a large extent is responsible for the failings in process that infected and handicapped the board’s decision-making abilities,” he wrote.