The Delaware Chancery Court has ruled that the lawsuit brought by Roy E. Disney and Stanley P. Gold against the Walt Disney Co. and eight directors can go forward with an expedited trial date of August 2005.
The lawsuit, which was filed on May 9, 2005, alleges that the Walt Disney Co. board made false statements to the company's shareholders about its ceo search in order to induce shareholders to vote for the incumbent board at the 2005 annual meeting and to induce Disney and Gold not to run an alternate slate of directors at the meeting.
In addition to the Walt Disney Co., the two former Disney directors sued Robert A. Iger (the incoming ceo), Michael D. Eisner (the outgoing ceo), Judith L. Estrin, John S. Chen, Alwyn B. Lewis, Monica C. Lozano, George J. Mitchell and Leo J. Donovan, S.J., for fraud and breach of duty of disclosure in connection with the board's public statements about the search for a replacement for outgoing ceo Eisner.
In his ruling, Chancellor Chandler stated, "...plaintiffs have alleged facts suggesting that the company's board did not go about the process of searching for a new ceo with 'open minds,' without prior determinations and giving "full consideration" to external candidates. The complaint alleges that only one external candidate was interviewed, that Mitchell told that candidate 'she was not a serious candidate,' and that Eisner's presence at interviews of external candidates, "was intended to chill and did chill full consideration of qualified external candidates for the position of ceo.'
"Should these allegations be proven, plaintiffs could be entitled to the relief they seek because the board's statements materially misled plaintiffs with respect to the board's intent to conduct a bona fide executive search process."
In their lawsuit, Disney and Gold asked the Court to void the 2005 election of Disney Co. directors and to compel the company to hold another election for directors after full and fair disclosure of all material facts about the ceo selection process. Disney and Gold also asked the Court to enjoin the company and the board from changing either Eisner's or Iger's compensation or employment contracts.