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ARTICLE · 26 AUGUST 2005

Lessons from Disney

Morrison Foerster
Morrison Foerster
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Morrison Foerster

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On August 9, 2005, the Delaware Chancery Court issued its post-trial opinion in In re The Walt Disney Company Derivative Litigation. The facts of the case are set out in detail in the opinion. What follows is a preliminary analysis of some of the key messages that can be drawn from the opinion.

United StatesCorporate/Commercial Law
Michael G. O'Bryan
Michael G. O'Bryan
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On August 9, 2005, the Delaware Chancery Court issued its post-trial opinion in In re The Walt Disney Company Derivative Litigation. The facts of the case are set out in detail in the opinion. What follows is a preliminary analysis of some of the key messages that can be drawn from the opinion.

General Holding

The court found that the Disney directors did not violate their fiduciary duties or commit waste in the 1995 hiring and 1996 termination of Michael Ovitz as president of Disney.

Fiduciary Duties and the Business Judgment Rule

Directors Should Take Comfort from the Business Judgment Rule

. The court acknowledged the risks inherent in business and the advantages of allowing boards to accept risks. The business judgment rule accordingly prevents courts from second-guessing business decisions. Redress for bad business decisions "must come from the markets, through the actions of shareholders and the free flow of capital," rather than from courts.

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