Opinion ID: 2556088
Heading Depth: 4
Heading Rank: 1

Heading: The Disney Litigation

Text: In In re Walt Disney Co. Derivative Litigation, [26] the stockholder-plaintiffs filed a derivative action in the Court of Chancery, claiming that the Disney directors had breached their fiduciary duties by approving an employment contract with Disney's president, which contained a very large severance package, and thereafter, by approving a non-fault termination of the president under that contract. [27] The Court of Chancery dismissed the stockholder-plaintiffs' derivative complaint with prejudice for failure to make a pre-suit demand upon the Disney board. [28] On appeal, this Court affirmed, but held that the derivative complaint should have been dismissed without prejudice. [29] This Court further suggested that the plaintiffs use 8 Del. C. § 220 as a tool to develop facts sufficient to replead demand futility in an amended derivative complaint. [30] Following that suggestion, the stockholder-plaintiffs prosecuted a Section 220 action in the Court of Chancery seeking inspection of Disney's books and records. [31] Armed with additional information, the plaintiffs thereafter filed an amended complaint in their (earlier-dismissed) derivative action. This time, that complaint survived a renewed Rule 23.1 motion to dismiss. The Court of Chancery held that pre-suit demand was excused, because the amended complaint adequately pled demand futility, based on particularized facts uncovered through the Section 220 inspection, which showed a lack of board oversight so egregious that it called into question whether the directors had exercised their fiduciary duties in good faith. [32]