Shareholders Can Sue Disney

Walt Disney Co. shareholders can sue officials of the No. 2 media company over former President Michael Ovitz’s $140-million severance package, an appeals court has ruled.

The Delaware Supreme Court on Wednesday overturned a dismissal of the suit seeking to recoup payments made to Ovitz. A Delaware judge found in October that shareholders couldn’t prove the payments were a waste of company money based on their allegations.

Wednesday’s decision allows disgruntled shareholders to file an amended lawsuit arguing that Disney directors were asleep at the switch when they approved Ovitz’s compensation and severance packages upon becoming Chairman Michael Eisner’s second-in-command in 1995. Ovitz left the company 14 months later.

“One can understand why Disney stockholders would be upset with such an extraordinarily lucrative compensation agreement and termination payout awarded a company president who served for only a little over a year and who under-performed to the extent alleged,” Delaware Chief Justice Norman Veasey wrote in the 45-page opinion.