Disney shares edged lower Tuesday after Roy Disney and Stanley Gold filed suit against the company, claiming the board made misleading statements about the search for a replace Michael Eisner, the outgoing chief executive.
Roy Disney and business partner Gold -- both former Disney board members -- are demanding an expedited trial to prevent President Robert Iger from assuming control of the company, their attorney said. Iger is scheduled to assume the post from Eisner later this year.
Iger reportedly was Eisner's personal choice as a successor, which has been a source of consternation for Roy Disney and Gold. More importantly, the two men have little chances of success in the Delaware Chancery Court as they pursue their case, said Cy Smith, a corporate law attorney with Washington-based Zuckerman Spaeder.
"Let's just assume for a moment that there were some false statements made by the board or by the company about this selection process," Smith said. "In a claim for fraud, you have to demonstrate more than that. You have to demonstrate ... that there was intent to deceive.
"You've got to demonstrate that you reasonably relied on those statements," Smith added. "And you've got to show causation between your reliance on that information, and the injuries you suffered."
Proving they relied on the board's statements will be a problem for Gold and Roy Disney, Smith asserted, because they were such vociferous critics of the chief executive search from the beginning of the process.
"They would have to show that they and other shareholders reasonably relied on that information, when they've been arguing all along that they had problems with [Disney's] credibility," Smith said.