William Brehm v. Michael D. Eisner, Michael S. Ovitz, & The Walt Disney Company
Supreme Court of Delaware
746 A.2d 244 (2000)
Facts: Walt Disney hired Michael Ovitz a long-time friend of Disney Chairman and CEO
Michael Eisner. Mr. Ovitz was approved by the board of directors in 1995 and was granted,
under. Five year agreement, a $1 million per year salary, a discretionary bonus, and stock options
that would enable Ovitz to buy 5 million shares of Disney’s common stock. However, there was
also a non-fault agreement that if he were to quit that guaranteed a $10 million dollar termination
fee, remaining salary, amongst many other monetary figures. In 1996, fourteen months after he
was hired, the boar decided to revoke Ovitz’s employment; Ovitz received $140 million. William
Brehm and some of his fellow shareholders then accused Disney of derivative action against its
board of directors. They claimed that the fiduciary duty of the Old Board was breached and
failure to properly informing themselves of a non-fault termination. Furthermore, the New Board
is also being accused of constituting waste by agreeing to the termination.
Issue: Did the board of directors breach their fiduciary duty? Furthermore, is the board guilty if
it is not explained how payout is to be calculated when a contract, agreement, or relationship
ended?
Ruling: No, the board did not breach its duty because, they were fully informed as to how a
severance payout will be calculated. However, they were not informed as to the exact amount of
