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IN RE WALT DISNEY CO. DERIVATIVE LITIGATION Case Brief
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Case Brief Summary & Legal Analysis
tl;dr: Shareholders sued Disney’s board over a massive severance package for its president, Michael Ovitz. The court denied the directors’ motion to dismiss, finding allegations that the board consciously disregarded its duties stated a claim for a breach of good faith not protected by the business judgment rule.
Legal Significance: This case established that a conscious and intentional disregard of directorial duties constitutes a breach of the duty of good faith. Such a breach is distinct from a mere breach of care and is not exculpated by a charter provision adopted pursuant to 8 Del. C. § 102(b)(7).
IN RE WALT DISNEY CO. DERIVATIVE LITIGATION Law School Study Guide
Use this case brief structure for your own legal analysis. Focus on the IRAC methodology to excel in law school exams and cold calls.
Case Facts & Court Holding
Key Facts & Case Background
CEO Michael Eisner, a close friend of Michael Ovitz, unilaterally decided to hire Ovitz as Disney’s president. The compensation committee met for less than an hour to approve the hire, relying on an incomplete summary and without reviewing the draft employment agreement or any expert analysis of its potential costs, particularly a lucrative non-fault termination provision. The full board’s review was similarly cursory, and it delegated final negotiation authority to Eisner. The final agreement, executed months later, was significantly more favorable to Ovitz than the summarized terms, including an “in the money” stock option grant. After approximately one year of poor performance, Eisner, without board consultation or approval, granted Ovitz a non-fault termination. This resulted in a severance package valued at over $140 million. The board took no action to review, question, or stop the termination payment. Shareholders brought a derivative suit, alleging the directors breached their fiduciary duties and committed corporate waste.
Court Holding & Legal Precedent
Issue: Do allegations that a corporate board consciously disregarded its responsibilities by failing to adequately inform itself or deliberate on a material transaction, such as a massive executive compensation package, state a claim for a breach of the duty of good faith sufficient to excuse demand and survive a motion to dismiss?
Yes. The court denied the defendants’ motion to dismiss. The plaintiffs’ particularized Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident,
IRAC Legal Analysis
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IRAC (Issue, Rule, Analysis, Conclusion) is the exact format professors want to see in your exam answers. Our exclusive Flash-to-Full briefs combine holding, analysis, and rule statements formatted to match what A+ students produce in exams. These structured briefs help reinforce the essential legal reasoning patterns expected in law school.
Legal Issue
Do allegations that a corporate board consciously disregarded its responsibilities by failing to adequately inform itself or deliberate on a material transaction, such as a massive executive compensation package, state a claim for a breach of the duty of good faith sufficient to excuse demand and survive a motion to dismiss?
Conclusion
This decision clarified that a director's conscious disregard of duty constitutes a Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute
Legal Rule
A conscious and intentional disregard of directorial responsibilities, demonstrating a "we don't Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in volupt
Legal Analysis
The court focused its analysis on the second prong of the Aronson Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud e
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Flash Summary
- The court denied a motion to dismiss, finding shareholders alleged facts
