Interesting POV on the lawsuit
From a legal POV...Roy Disney's lawsuit (a little painful on the bottom - but I think it has interesting points) - I prepare to be yelled at now...
Roy Disney's lawsuit
Dissident Disney investors (and former Disney directors) Roy Disney and Stanley Gold have filed suit against, among others, Walt Disney Co., the Disney board of directors, outgoing CEO Michael Eisner, and incoming CEO Bob Iger. Disney and Gold claim that Disney's board of directors misled investors about the succession process that led to Iger's selection. Specifically, the complaint (available from SaveDisney.com) alleges that had "Disney and Gold known that the Company and a majority of the Board did not intend to stand by their public statements about engaging in a bona fide CEO selection process, [Disney and Gold] would have run an alternate slate of directors at the 2005 annual stockholders meeting." As relief they seek invalidation of the 2005 board election and new board election.
I would be very surprised if Disney and Gold received the relief they're seeking. Their fraud claim seems pretty weak - anybody who had been following events at Disney knew Iger was the frontrunner to succeed Eisner. Indeed, as I reported in September 2004, Disney and Gold were already complaining all the way back then about the prospect that Iger would succeed Eisner. The notion that the board somehow juked them out of their socks when it came time to put up or shut up is just ludicrous. (Gordon Smith seems to agree, while Larry Ribstein seems inclined to give Disney and Gold the benefit of the doubt.)
Update: With respect to the foregoing, Larry replies:
I don’t see the logic of that argument against the suit. Doesn’t it show why Disney and Gold thought it important that the board promised an open search?
Count I of the Disney-Gold complaint sounds in fiduciary duty, but is actually a nondisclosure claim. Count II of their complaint is explicitly grounded in fraud. I don't think they'll be able to prove they reasonably relied on the purported Disney board statements. How can they reasonably claim to have been defrauded when they were complaining all along about the prospect of Iger being selected?
Setting aside the merits of their claim, it's worth noting that the relief they're seeking is highly extraordinary. In public corporations, Delaware courts rarely grant equitable retrospective relief of this sort. Damages for fraud and/or breach of fiduciary duty would be far more typical.
A minor point: Larry notes that:
... it’s not clear Disney and Gold would have no claim even if they clearly wouldn’t have run an alternative slate – the shareholders might well have just voted down the incumbent slate, as they almost did before.
The problem with this argument is that Disney followed (and I believe still does so) the statutory default under which directors are elected by a mere plurality. As I've explained before, the shareholders' option to withhold authority to vote for certain candidates does not empower them to vote against those candidates. In the absence of a competing slate, a single vote for Eisner (say) would suffice for him to be elected to the board even if all the other shareholder withheld their votes from him. So I disagree that Disney and Gold have a claim absent a showing that they would have run a competing slate.