April 08, 2006
Disney: Will the Supreme Court Reverse?
Posted by Gordon Smith

Larry Ribstein thinks that the Delaware Supreme Court is taking a bit too long to decide the Disney appeal (their own rules require a decision within 90 days of the oral argument, which means that we will see something by April 25), and he is wondering whether the Court is planning to reverse. The grounds for reversal? Larry seems to favor the claim that Michael Eisner did not have authority to terminate Michael Ovitz without board oversight:

Another possible basis for reversal is that the chancellor held that Eisner had the power to terminate Ovitz on his own, and therefore that the board had no duty to act. The supreme court might hold that this was wrong -- the ceo's technical power does not limit the board's duty.

This was unquestionably the weakest part of Chancellor Chandler's opinion. If Larry is right in supposing that the Supreme Court wants to send a message to corporate directors, this would be the place to do it. As Larry observes, it would  be a "sufficiently narrow ground that the court can distinguish it in the future."

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