Levy Sues Fox Over Firing, Equity Stake : Ousted Key Executive Asks $20 Million, Says Diller Now Owns 5%

The closely guarded terms of Barry Diller’s contract as chairman of 20th Century Fox Film Corp. have been made a major issue in a $20-million lawsuit filed against the Los Angeles-based movie studio by its ousted vice chairman, Norman Levy.

The suit contends that Fox owner Marvin Davis promised Levy a 5% ownership interest just four months ago but that Diller, hired shortly afterward as chairman and chief executive, was given the 5% interest instead.

According to public documents filed in late November by Fox, Davis then held 100% of the studio’s stock as of Nov. 21, some of it through family trusts.

Glimpse of Shake-Up

Then on Tuesday, the company filed Diller’s employment agreement at the Securities and Exchange Commission in Washington, with a request that it be kept confidential.

Gerald Bergman, Fox executive vice president, indicated Thursday that the request, still awaiting SEC decision, was for exemption from federal disclosure on grounds generally involving “trade secrets” and related types of data.

Although privately owned, Fox is required to file SEC reports because it still has some publicly traded debt securities.

Levy’s lawsuit, filed Wednesday in Los Angeles County Superior Court in Santa Monica, provided a fresh glimpse behind the Fox executive suite shake-up last fall, when Chairman Alan J. Hirschfield departed, along with Levy and a number of high-level managers.

According to the suit, Davis had told Levy last September, shortly before the hiring of Diller, that he wanted Levy to remain with Fox as long as Davis owned the company.

Levy’s salary was raised then, retroactive to July, to $750,000 a year from $500,000 for his “outstanding” job performance, and he was promised the 5% interest for agreeing to stay with Fox last September, the suit said.

Very soon afterward, Diller demanded Levy’s resignation, the suit alleged.

The suit complained that Fox has refused to pay him a $500,000 severance bonus due the first week of January. This was a “malicious” move to obtain “improper leverage” on Levy to induce him to release his claim to the Fox ownership interest and to renegotiate his $750,000-a-year salary pact of last September, the suit further alleged.

Fox, through a spokesman, declined comment on the suit Thursday.

Diller himself, reached at Fox’s offices in New York, declined to discuss the terms of his employment arrangements. However, an insider at Fox said Levy’s contention that Diller had an ownership interest was “absurd.” Fox’s 10Q quarterly financial report this week to the SEC said the Oct. 1 agreement between Diller and TCF Holdings Inc., Fox’s parent, was “omitted as confidential” from the listed exhibits to the report but was filed with the SEC.

David Y. Handelman, Fox general counsel, said Fox has not yet heard from the SEC whether it will grant the confidentiality request. He said the company’s arguments for the request are part of the confidential information.

Levy’s attorney, Terry Christensen, expressed surprise that the company would seek secrecy for such information about its chief executive. He said investors are entitled to the information, and he will seek to obtain it from all possible sources, including the company’s SEC filing.

Mauri Osheroff, SEC deputy chief counsel, said she had not seen Fox’s request but said one of the standards for consideration by the SEC staff is whether the information is subject to disclosure under the Freedom of Information Act. Osheroff, who said she could not predict how long it would take to decide the matter, said one of the grounds for an exemption most frequently relied upon by companies is the category of trade secrets and commercial or financial information.

Levy’s suit said that when he was hired Aug. 17, 1981, for a 3-year term beginning July 1, 1981, his contract called for payment to him of $500,000 at the end of the contract term as an “end-of-term bonus.”

When the pact expired last June 30, Fox agreed to his request to defer the bonus until this month, the suit said. About Sept. 11, Fox entered a new employment agreement with Levy retroactive to July 1, it said. One provision was that either party could terminate it on 90 days’ notice.

At such termination, the contract provided that Levy could become a part-time consultant at $500,000 per year for five years or an independent producer for Fox at the same amount for the same term, the suit said.

Davis agreed, too, to “personally convey” to Levy or cause Fox to convey a 5% ownership interest in Fox as soon as Davis completed the buy-out of his 50% partner in Fox, oil trader Marc Rich, the suit said. It added that Levy believes such a buy-out of Rich occurred about the second week of September, but Levy never received the 5%.

After Diller was hired, Levy resigned on Sept. 26, and Levy elected to become a Fox consultant under his new contract.