The Disney Case

1
The Disney Case

• Professor D. Gordon Smith
• University of Wisconsin Law School

2
The Players
3
Triad of Fiduciary Duty
4
Traditional Bad Faith in Corporate Law

• Illegal
• Fraudulent
• Ultra vires

5
The Good Faith Thaumatrope?
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The Good Faith Thaumatrope?
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Good Faith as Substantive Due Care?

• Allen theoretical possibility of liability for
  egregiousdecisions
• Veasey Due care in the decisionmaking context
  is process due care only

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Good Faith as Irrationality

• Veasey Irrationality may tend to show that
  the decision is not made in good faith

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Conscious and Intentional Disregard

• Chandler We dont care about the risks
  attitude
• Chandler Knowing or deliberate indifference

10
The Resurrection ofSmith v. Van Gorkom?

• Van Gorkom unilaterally negotiated the merger
  with Pritzker

• Eisner unilaterally made the decision to hire
  Ovitz

• No agreements presented for board review before
  meetings

• No agreements presented for board review before
  meetings

• Short meeting, no questions about employment
  agreement

• Short meeting, no questions about price or tax
  implications

• No expert consultant

• No expert valuation

• No post meeting review and final agreement
  differed substantially

• No post-meeting review and docs considerably at
  variance