Sunday, November 24, 2013

In re The Walt Disney Co. Derivative Litigation case brief

In re The Walt Disney Co. Derivative Litigation case brief summary
906 A.2d 27 (Del. June 8, 2006)

Appellant shareholders brought derivative actions on behalf of appellee corporation against appellees, the corporation's former president and directors who served at the time of the events complained of. The Court of Chancery of the State of Delaware, in and for New Castle County, ruled in favor of appellees, finding that the director defendants did not breach their fiduciary duties or commit waste. Appellants challenged that judgment.

The shareholders claimed that a decision to approve the president's employment agreement and a decision to terminate him on a non-fault basis resulted from various breaches of fiduciary duty by the president and the corporate directors.


  • The supreme court disagreed. 
  • No reasonably prudent fiduciary in the president's position would have unilaterally called a board meeting to force the corporation's chief executive officer to reconsider his termination and the terms thereof, with that reconsideration for the benefit of shareholders and potentially to the president's detriment.
  • The decisions to approve the president's employment agreement, to hire him as president, and then to terminate him on a no-fault basis were protected business judgments, made without any violations of fiduciary duty. 
  • Having so concluded, it was unnecessary to reach the shareholders' contention that the directors were required to prove that the payment of severance was entirely fair. 
  • Because the shareholders failed to show that the approval of the no-fault termination terms of the employment agreement was not a rational business decision, their corporate waste claim failed.

The judgment was affirmed.

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