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Disney owes Katzenberg

Retired Los Angeles County Superior Court judge Paul Breckenridge has ruledthat Jeffrey Katzenberg, the former head of Disney's film unit, did notforfeit a lucrative bonus when he left the company in 1994 and is entitledto interest on any money he is owed. Judge Paul Breckenridge issued hisdecision Wednesday and will next hear testimony to determine exactly howmuch money Disney should pay. Katzenberg, who left Disney in 1994 after hewas denied a promotion, is suing Disney for what he says is at least $250million from an incentive bonus promised in his contract. At stake is 10%statutory interest per year that would be tacked on to any award.

Katzenberg claims the bonus is worth 2 percent of all future profits fromevery Disney product generated during his decade with the company, thatincludes everything from T-shirts to games from such blockbusters as THELION KING and ALADDIN. If the bonus ends up being close to what Katzenbergwants, the compounded interest could be worth tens of millions of dollars.In his ruling, Breckenridge found that Disney breached Katzenberg'scontract on Oct. 1, 1994, and "was obligated to pay a post-terminationbonus" with interest. The judge further ruled that Katzenberg can go afterrevenues earned by Disney merchandise created in-house (rather thanlicensed), and can go after online earnings, but only after the conglom'sInternet venture is deemed to be more than a promotional tool. Theserevenues include profits from merchandise sold in Disney stores and attheme parks. In rulings for Disney, the judge found that Katzenberg was notentitled to any bonus money from profits at the three Club Disney playcenters. The judge's decisions also gave a key point to Disney by findingthat there was no fraud on the part of the studio's execs in its efforts todeny Katzenberg monies due under his employment contract. Breckenridge'sdecision - which was made public Wednesday - closes the first phase ofKatzenberg's lawsuit against Disney and sets the stage for the secondphase. In addition to the amount of the bonus, the judge left undecided thedate from which the interest should start accruing.

Disney had argued that Katzenberg forfeited his bonus because he left twoyears before the end of his six-year contract. The parties reached apartial settlement at an earlier time, but most of the terms have beenplaced under seal. What is known is that Disney has already paid Katzenbergsome money - more than $100 million, according to sources. It is thissettlement that authorized Breckenridge to resolve disputes on whethercertain products fall under the bonus, and the exact value of that bonus.The proceeding has been portrayed as the messy aftermath of thedisintegration of a Hollywood power marriage, with the trial turning into abitter personal battle between Katzenberg and his former boss, DisneyChairman Michael Eisner. In an extraordinarily unusual airing of Hollywoodgrievances, Katzenberg argued the dispute boiled down to Eisner's animositytoward him. Eisner, under questioning by Katzenberg's lawyer, acknowledgedhe may have once said of Katzenberg, "I think I hate the little midget."However, Eisner did say that he probably made that remark in anger afterKatzenberg left the company.