IN RE THE WALT DISNEY COMPANY
CONSOLIDATED DERIVATIVE LITIGATION

C.A. No. 15452  

Court of Chancery of Delaware,
New Castle County.

Submitted: April 28, 2005
Decided: August 9, 2005

Footnotes

¹ The subject of executive compensation itself has recently produced much thoughtful analysis and comment. See, e.g., Lucian Bebchuk and Jesse Fried, PAY WITHOUT PERFORMANCE: THE UNFULFILLED PROMISE OF EXECUTIVE COMPENSATION (2004) (describing how management influence distorts the compensation process); Stephen M. Bainbridge, Executive Compensation: Who Decides, 83 TEX. L. REV. 1615 (2005) (reviewing and critiquing Bebchuk and Fried’s Pay Without Performance).

² To be consistent with the parties’ submissions, the trial transcript will be cited as “Tr. ####,” and at relevant times will indicate the particular witness by including that witness’ name in parentheses. Deposition testimony will be cited as “[Deponent] ####.” Plaintiffs’ trial exhibits will be cited as “PTE” and Defendants’ trial exhibits will be cited as “DTE.” Finally, for the sake of clarity, the Court will refer to Roy Disney as such.

³ See Tr. 4148:11-4150:5.

⁴ Tr. 3997:24-3999:4; see also 6025:7-19. 6

⁵ See Tr. 4150:20-4152:8.

⁶ Eisner never called a board meeting for the specific purpose of discussing the possibility of hiring Ovitz, but at various times Eisner did contact board members on an individual basis. See Tr. 3665:1-3676:20 (Gold); 3997:6-3999:4 (Roy Disney); 4699:194700:24 (Eisner); 5913:23-5914:10 (Bowers); 7125:2-18 (Poitier); 7628:19-7629:2 (Lozano); 8142:2-8 (Stern); see also Bowers 183:13-185:6; 192:8-25; Lozano 54:1356:14; Mitchell 17:23-19:14; Wilson 44:22-45:23; 48:14-49:2.

⁷ Tr. 1105:12-1106:13 (Ovitz) (“[O]ver the years, he had asked me, and we had talked many times about doing something together from the time he [Eisner] was with ABC, then at Paramount and then when he went to Disney.”).

⁸ Eisner 111:3-112:2

⁹ Tr. 1091:6-10.

¹⁰ CAA’s beginnings were so modest that the wives of the five founding partners were needed on a rotating basis to answer the company’s phones. Tr. 1093:1-5.

¹¹ Tr. 1094:20-1095:16.

¹² Id.

¹³ Tr. 1093:8-24.

¹⁴ During trial, Ovitz best explained the concept of packaging by way of example. After Warner Brothers had rejected the screenplay for the motion picture Rain Man, the screen writer, using CAA as a conduit, was able to pass his work on to Dustin Hoffman, who teamed up with Tom Cruise, another CAA client, and Barry Levinson, to produce a picture that went on to win 1989’s Academy Award for Best Picture. Tr. 1094:2-19.

¹⁵ If the fair market value of CAA’s non-consulting business was less than $50 million, Ovitz, Meyer and Haber would be required to invest their personal assets to bring their collective investment in MCA up to $50 million. In return, MCA would provide Ovitz, personally, with ninety percent of the quantity of MCA restricted stock needed to bring the three CAA shareholders’ collective stake in MCA equity up to six and a half percent. PTE 793.

¹⁶ Id.

¹⁷ Tr. 1280:14-1281:22.

¹⁸ Id.

¹⁹ See Tr. 4173:24-4175:12 (Eisner) (“I saw a parade of horribles in front of me, which were resolved in a fairly, averagely managed company coming back to America. I saw a company that spent money pretty freely, wanting maybe to get Michael Ovitz to come manage it. And I was getting a little nervous about the prospect of … having Michael Ovitz work for us be usurped by MCA, and not only have him not work for us but be a competitor.”).

²⁰ Id.

²¹ From the beginning, Bass made clear that he would support Ovitz’s hiring but that he would not support Ovitz sharing equal power with Eisner. See PTE 778 at MDE 000053.

²² See, e.g., Tr. 4175:13-4177:3.

²³ Id.

²⁴ Plaintiffs have contended that the compensation committee had no informed discussions concerning Ovitz’s earnings while with CAA and attribute this failure to Russell. See Pls.’ Post Trial Open. Br. at 20; Tr. 2755:1-22. Russell did, however, have a basic understanding of what MCA was willing to pay Ovitz. See Tr. 2630:8-2631:10; see also DTE 76 at DD001991. Russell also testified that Goldman had represented to him that Ovitz was earning approximately $20 to $25 million a year from CAA and that he had no reason to question Goldman’s veracity. Tr. 2755:1-22.

²⁵ Ovitz repeated several times throughout his testimony that he had learned during his years of experience representing talent always to negotiate for upside participation and downside protection, and that when it came to negotiating for his own interests, he wanted no less. See, e.g., Tr. 1277:9-1278:5; 2175:2-2177:7.

²⁶ Tr. 1108:5-1113:5.

²⁷ Tr. 1113:21-1115:4; 1116:7-1119:2.

²⁸ See PTE 386 at DD001925; see also Tr. 2415:2-14. 15

²⁹ After the MCA negotiations fell apart, and Ovitz decided to go to Disney, Ovitz, Meyer, and Haber transferred their interests in CAA to nine agents in exchange for seventy-five percent of revenues over the next four years on deals consummated before Ovitz left. See PTE 204. These payments were conditioned upon the new CAA first attaining certain financial benchmarks. See id. At the time this transfer occurred, no up-front cash was paid and it was uncertain whether new CAA would be profitable. See, e.g., Tr. 1274:13-24. The record demonstrates that the compensation committee did not consider this arrangement when they determined Ovitz’s level of compensation. See Tr. 2761:9-15 (Russell); 7206:22-7207:20 (Poitier); 7698:24-7699:2 (Lozano); 8096:1-10 (Watson).

³⁰ See Tr. 2415:4-2421:13; 4203:22-4204:6.

³¹ See DTE 40 at DD001942; see also Tr. 2391:14-2392:18.

³² See PTE 7 ¶ 9 at WD00209. But see Tr. 804:18-805:5 (Murphy) (opining that the OEA did not contain a mitigation or non-compete clause and that Ovitz “would be perfectly free to go accept additional alternative employment”).

³³ See PTE 33 at DD001768-69.

³⁴ PTE 64 at DD001935.

³⁵ Id.

³⁶ Id.

³⁷ Id.

³⁸ Id. at DD001936.

³⁹ Tr. 2765:2-5.

⁴⁰ This was the first instance where a board member other than Russell or Eisner was brought into the Ovitz negotiation process. See, e.g., Tr. 7167:5-13 (Poitier) (testifying that before August 13, 1995 he did not discuss Ovitz’s compensation package); 7658:421 (Lozano) (testifying that before the August 1995 press release, he did not speak to any board member, aside from Eisner, concerning Ovitz’s employment); 2425:18-2427:15 (Russell) (testifying that it was his intention to inform Watson of the negotiations only after there was a good possibility of a deal).

⁴¹ Crystal, who had previously headed Towers Perrin’s compensation practice, has consulted on behalf of Disney for many years and is actively engaged in both teaching and publishing in the field. See Tr. 2714:5-2715:5; 3243:2-3261:15.

⁴² The Black-Scholes’ method is a formula for option valuation, widely used and accepted by industry figures and regulators, that determines option value based upon a complex calculation involving the exercise price and term of the options, the price of the underlying stock, its dividend history and volatility, and the risk-free interest rate. Tr. 764:20-765:13.

⁴³ Tr. 3268:13-3269:11.

⁴⁴ The various inputs accounted for different numbers of options, vesting periods, and potential proceeds of option exercises at various times and prices. See, e.g., id.; see also DTE 12; DTE 28; DTE 32; DTE 56.

⁴⁵ PTE 365.

⁴⁶ Id.

⁴⁷ Plaintiffs have questioned whether this conversation actually occurred. See Pls.’ Post Trial Opening Br. at 11. Based on the testimony adduced at trial the Court is satisfied that Crystal, Watson and Russell did indeed speak by phone to discuss their findings. See Tr. 2444:13-2445:4; 2452:10-16; see also DTE 120 at WD07502; PTE 215.

⁴⁸ See PTE 59.

⁴⁹ Id. at DD001391.

⁵⁰ Id.

⁵¹ See Tr. 2790:11-21; 7707:8-7708:3.

⁵² See PTE 214 at DD001385; see also Tr. 2458:3-2460:11.

⁵³ See PTE 366.

⁵⁴ While vacationing together, Eisner told Ovitz that Sid Bass was flying into Aspen for dinner and that “either we’re going to have a deal by the time he lands … or we’re not, … [and] the deal will be gone.” Ovitz was then given until 6:00 p.m. that night to concede on a number of issues; the two largest concessions were: 1) the reduction in the number of options from a single grant of five million to two separate grants,—the first grant being three million options for the first five years, and the second grant consisting of an additional two million options if the contract was renewed; and 2) Ovitz abandoning the idea of joining the Company as a Co-CEO. See Tr. 4196:10-4198:3.

⁵⁵ Litvack was also Disney’s Chief of Corporate Operations and Executive Vice President for Law and Human Resources.

⁵⁶ See Tr. 6040:20-23; 6045:15-6047:11.

⁵⁷ See id.

⁵⁸ Tr. 5274:4-5276:2; 6048:1-6049:13.

⁵⁹ See, e.g., Tr. 6027:13-6028:22.

⁶⁰ See Tr. 5271:22-5272:11.

⁶¹ See PTE 60.

⁶² The compensation committee was comprised of Russell, Watson, Ignacio Lozano and Sidney Poitier.

⁶³ See PTE 60 at DD002932.

⁶⁴ In his prior deposition, Poitier testified that the first contact concerning the Ovitz contract occurred at the compensation committee meeting on September 26, 1995. See Poitier 117:19-118:5. At trial, the witness revised his testimony to reflect that the first contact actually occurred via a phone call from Russell on Sunday August 13. Tr. 7125:19-7126:13; 7167:5-13. Russell testified that he had called Poitier twice. The first call occurred on August 13, and the second call was made the next day before the press release on August 14. See Tr. 2445:17-2446:20. I am satisfied that both calls did in fact occur and that at the time of the calls, Poitier was on his yacht vacationing in Sardinia.

⁶⁵ Tr. 7167:14-17.

⁶⁶ Tr. 7126:10-13.

⁶⁷ Tr. 7127:4-17.

⁶⁸ Tr. 7129:13-18.

⁶⁹ Tr. 7637:14-7638:3.

⁷⁰ Lozano could not recall when the call occurred, but in an August 18, 1995 memo, Russell notes that “all the members of the Compensation Committee heartily endorse this pay package. Watson had a long discussion with Ignacio Lozano and I had two long conversations with Sidney Poitier in which all the details were reviewed and discussed before the deal was signed.” PTE 215 at DD001636.

⁷¹ Tr. 7631:18-7632:1.

⁷² See, e.g., Tr. 4215:12-4216:14 (Eisner); 3704:3-23 (Gold) (testifying that he received a call from Eisner and also spoke with Roy Disney); 5388:9-23 (Bollenbach); 5582:155583:8 (Mitchell); 5802:14-23 (Nunis); 7658:4-21 (Lozano); 8141:23-8143:3 (Stern); see also DTE 413 (Eisner’s phone log).

⁷³ See DTE 92; DTE 428 Ex. 4a.

⁷⁴ Tr. 6055:16-6056:14.

⁷⁵ Santaniello 48:23-49:19.

⁷⁶ See id. at 50:7-19; see also PTE 348 (Russell’s letter to Eisner suggesting the elimination of the $50 million guarantee and replacing it with: (1) the reduction in the option strike price from 115% to 100% of the Company’s stock price on the day of the grant for the two million options that would become exercisable in the sixth and seventh year after commencement of employment; (2) Payment of $10 million in severance if the Company chose not to renew Ovitz’s contract; and (3) alteration of the renewal option to provide for a five year extension, $1.25 million per year in salary, the same bonus structure as the first five years of the contract, and the grant of three million additional options).

⁷⁷ Tr. 2485:22-2486:16.

⁷⁸ See, e.g., Tr. 2489:7-21.

⁷⁹ PTE 39.

⁸⁰ Tr. 2521:8-2522:19. Although Russell used Wells’ and Eisner’s contracts as benchmarks for Ovitz’s pay package, neither Poitier nor Lozano were able to recall any discussion concerning Crystal’s observation that there were no comparables of non-CEO presidents of public companies that could justify Ovitz’s pay package. See Tr. 7181:217182:1; 7701:4-10.

⁸¹ See, e.g., Tr. 2522:11-2523:4. Although the term sheet did highlight the term “wrongful termination,” no one on the committee recalled any discussion concerning the meaning of gross negligence or malfeasance. See Tr. 2903:8-16; 7198:14-20; 7701:237702:2; 7716:22-7717:3. Despite this omission, the terms gross negligence or malfeasance were not foreign to the board of directors, as the language was standard, and could be found, for example, in Eisner’s, Wells’, Katzenberg’s and Roth’s employment contracts. See Tr. 6081:1-9.

⁸² Tr. 7848:16-21. Poitier could not recall whether Watson had actually distributed copies of his spreadsheets, but he did recall that “figures and numbers” were passed around and discussed. See Tr. 7222:20-7223:8. Lozano also had no recollection at trial that these spreadsheets were actually distributed. Tr. 7702:3-6. I attribute this lack of recollection to the nine years that have passed between that meeting and the trial and do not attribute any lack of veracity to Watson’s testimony because of it.

⁸³ Tr. 3602:2-21.

⁸⁴ Plaintiffs contend that since Litvack had no responsibility in the actual negotiations of the Ovitz contract, the question session, which followed Russell’s and Watson’s presentations, and was memorialized in the committee minutes, could not have been of any substance. See Pls.’ Post Trial Opening Br. at 21. The Court does not agree with this contention. Litvack testified that he knew what the deal was. See Litvack 384:18-385:4. He could therefore speak intelligently to questions from the committee. Whatever personal animosity Litvack harbored for Ovitz, not actually negotiating the deal did not prevent him from answering the committee’s questions with “substance.”

⁸⁵ Plaintiffs have demonstrated that at no point were the following matters discussed in the committee meeting: (1) the purchase of Ovitz’s private jet for $187,000 over the appraised value; (2) the purchase of Ovitz’s BMW at acquisition cost and not the depreciated market value; (3) the purchase of Ovitz’s computers at replacement value instead of their lower book value; (4) any specific list of perquisites, despite Eisner already agreeing to provide Ovitz with numerous such benefits; and (5) that despite Ovitz’s bonus being payable completely on a discretionary basis, Russell’s memorandum to Ovitz indicating that the bonus would likely approximate $7.5 million annually. Although I have concluded that plaintiffs have established these facts, they are ultimately immaterial to my decision.

⁸⁶ See Tr. 7136:23-7137:3; 7140:12-19; 7636:2-10; 7639:21-7640:3.

⁸⁷ PTE 39 at WD01170.

⁸⁸ At the behest of Watson, the committee discussed the time and energy Russell had placed into the negotiations and suggested that the committee recommend to the full board that Russell be compensated $250,000. The compensation committee voted to recommend this fee and the full board, while in executive session, approved it. See PTE 39 at WD01171; PTE 29 at WD01195-96. Russell abstained from voting on the issue.

⁸⁹ PTE 29 at WD01195-96.

⁹⁰ Neither Litvack nor Bollenbach attended the executive session. Id.

⁹¹ Tr. 2537:11-2540:16 (Russell); 3733:1-3735:16 (Gold); 4014:7-4017:24 (Roy Disney); 4872:4-4879:4 (Eisner); 5585:12-5588:11 (Mitchell); 5919:7-5925:2 (Bowers); 7851:57853:9 (Watson); 8145:13-8146:8 (Stern).

⁹² PTE 29 at WD01196.

⁹³ PTE 39 at WD01170 (mentioning that Ovitz’s stock option grant would be delayed until further details were worked out between Ovitz and the Company), WD01186-88 (term sheet outlining vesting schedule, other special terms of Ovitz’s options, and that Ovitz’s options would be formally granted at a later date).

⁹⁴ PTE 41 at WD00118; Tr. 2546:1-2547:24; 2971:3-2972:10; 7228:18-7229:1. Although not members of the compensation committee, Litvack, Schultz (Vice President-Corporate Compensation) and Santaniello attended this meeting. PTE 41 at WD00118; Tr. 6076:22-6077:2; Schultz 86:10-15; Santaniello 102:12-19. Poitier and Russell attended by telephone from the Company’s New York office, but Lozano and Watson were present in person. PTE 41 at WD00118; see also PTE 372 (Russell’s notes of the October 16, 1995 meeting).

⁹⁵ PTE 41 at WD00119-21, WD00123-141; Tr. 6077:3-6078:17. But see Tr. 7732:12-17 (Lozano has no independent recollection of the October 16, 1995 meeting).

⁹⁶ PTE 41 at WD00120; see PTE 30 (memo requesting the board’s unanimous consent to the amendments to the 1990 Plan and adoption of the 1995 Plan and explaining the differences between the old 1990 Plan and the new Plans, including the potential for exercisability beyond twenty-four months following termination); PTE 265 (unanimous written consent of the Company’s board of directors approving the amendments to the 1990 Plan and adoption of the 1995 Plan); DTE 142 (proxy statement dated November 13, 1995 requesting shareholder approval of the amendments to the 1990 Plan and adoption of the 1995 Plan); Tr. 2548:1-2549:9.

⁹⁷ Discussion of the bona fides of the OEA was minimal because that discussion had occurred at the compensation committee meeting on September 26, 1995. See Tr. 2976:17-2977:3; 6648:9-6649:1.

⁹⁸ PTE 41 at WD00121-22; Tr. 2979:7-10; 6078:21-6080:4; see PTE 43 (memo from Marsha Reed to Donna Scanlon confirming the grant of Ovitz’s options and their key terms); PTE 44 (PTE 43 with marginalia); PTE 48 (Ovitz’s Stock Option Agreement); PTE 339 (same). But see Tr. 7230:4-7231:10 (Poitier) (testifying that he does not independently recall Litvack’s discussion of the OEA).

⁹⁹ PTE 41 at WD00122; Tr. 2979:11-16; 2980:18-2981:4; 6083:7-24; see PTE 43; PTE 44; PTE 48; PTE 339.

¹⁰⁰ PTE 41 at WD00122. A similar resolution was also part of the resolutions approving the amendments to the 1990 Plan and adoption of the 1995 Plan. Id. at WD00121.

¹⁰¹ PTE 48; PTE 339.

¹⁰² PTE 48 at DD002785; see PTE 41 at WD00142-43.

¹⁰³ See PTE 3 at DD002012.

¹⁰⁴ PTE 267 (Eisner faxed a copy of the letter to Watson on October 16, 1995); Tr. 4251:7-18.

¹⁰⁵ Some examples of Eisner’s compliments to Ovitz: “I have noticed how quickly and brilliantly you have taken to the company and the company to you….” PTE 267 at DD002287. “Your instincts were right in coming to The Walt Disney Company and mine were right in suggesting it.” Id. “Our partnership is born in corporate heaven….” Id. at DD002290. “This is basically your first week on the job and I can already see how well it is all going to work.” Id. at DD002291.

¹⁰⁶ Eisner wrote that PTE 267 “is a practical letter.” Id. at DD002288. Some examples of Eisner’s teachings: “There is no need to tell you how unique this company is….” Id. at DD002287. “[W]e generally stay away from partnership and joint ventures. … We recognize that business control is creative control.” Id. at DD002287-88. “We must concentrate on the operations. We must concentrate on continuing to lead creatively. We must throw out mediocrity.” Id. at DD002288. Eisner told Ovitz that public company executives should “act like ‘Caesar’s wife’.” Id. “I feel about acquisitions exactly as I feel about everything else. We don’t need them. … Most companies create the fiction that they can run anything better than the management of a target company. Often that is not true.” Id. at DD002289. Eisner also provided a list of ten questions to ask before making an acquisition. Id. at DD002290.

¹⁰⁷ Ovitz 211:21-22.

¹⁰⁸ Id. at 212:2-9.

¹⁰⁹ PTE 313; Tr. 4263:5-18.

¹¹⁰ PTE 313 at MDE000041; see also Tr. 3746:13-3747:14 (Gold) (testifying that “very early on” in Ovitz’s tenure, Eisner’s communications to him about Ovitz “were relatively complimentary”); 3750:20-3751:10. But see Tr. 4018:9-4021:6 (Roy Disney) (testifying that Ovitz was known by October 1995 as being habitually late to meetings); 6088:126092:23 (Litvack) (testifying to an argument between himself and Ovitz in October 1995 regarding Disney characters appearing on the David Letterman Show and explaining how this was an example of how Litvack and Ovitz could not get along, but that the fault belonged to both of them).

¹¹¹ Tr. 4265:7-4266:7.

¹¹² PTE 313 at MDE000042-44.

¹¹³ PTE 316. Eisner testified that his statements contained in PTE 316 were “honest and candid” when they were written. Tr. 4273:13-19; 4274:15-20.

¹¹⁴ PTE 316 at MDE000035.

¹¹⁵ Id. at MDE000036. If these areas were difficult for Disney to define, it is understandable that Ovitz would have a difficult time making the necessary adjustments.

¹¹⁶ Id. at MDE000037.

¹¹⁷ PTE 331; Tr. 4277:8-4278:15.

¹¹⁸ PTE 331 at DD002275.

¹¹⁹ Tr. 4278:18-4279:2. Especially after seeing the project come to fruition, Eisner is thankful for Ovitz’s advice during late 1995 to place the gate to Disney’s California Adventure theme park directly across from the main gate to Disneyland. Tr. 4278:184279:23; see Tr. 5302:19-5304:10 (Bollenbach) (testifying that he believed that notwithstanding Ovitz’s difficulties, Ovitz could still be “valuable” and “a contributor to the company”).

¹²⁰ Tr. 4279:24-4280:6. These positive, but still realistic, evaluations of Ovitz’s performance stand in contrast to statements that Bass claims Eisner made at a dinner in early November 1995. See Bass 88:15-90:16. In my discretion as fact-finder, I do not find Bass’ statements on this subject credible, and I conclude instead that the contemporaneous documents authored by Eisner, together with his trial testimony in regards to them, are credible and probative. At his deposition, Bass said that only after having his recollection refreshed was he able to recall that his meeting in Aspen with Ovitz occurred in August 1995, Bass 40:18-23, and when asked the “approximate date” of Ovitz’s hiring, Bass could only reply “Fall 95.” Bass 76:3-5. Because the time at which Eisner made the statements attributed to him is of paramount importance, I do not credit Bass’ deposition testimony for that reason, but not that reason alone. See Tr. 4274:21-4276:12 (Eisner) (testifying that Bass was mistaken with respect to when certain events occurred). Bass’ testimony is also vague as to the problems attributed to Ovitz— that Eisner “was having no success in dealing with Ovitz,” that Ovitz “didn’t care about money,” “never looked at economics,” and had “continuous problems of veracity.” Bass 88:25-89:8. Furthermore, Eisner may not have been completely truthful with Bass or may have exaggerated the extent of the problems with Ovitz due to the stresses of that day or any other reason. See Tr. 4372:13-16; 4373:11-17; 4431:6-4433:21. Had I had the opportunity to observe Bass at trial, I might have reached a different conclusion as to the weight of his testimony, but based upon the record presented to me and my personal determinations as to the credibility of the testimony presented at trial, I find Eisner’s account of Ovitz’s performance together with the contemporaneous documents credible, and Bass’ deposition testimony not credible. As a totally separate matter, Bass’ statements would be of little worth even if I were to credit them, because they are hearsay and, therefore, inadmissible against all defendants other than Eisner. D.R.E. 801.

¹²¹ See Tr. 6970:21-6971:11; 7141:2-22. Compare Tr. 2567:7-16, 3746:17-3747:14, 3750:20-3751:6, 4010:10-4011:1, 5591:20-5593:1, 5806:12-5808:7, 5925:3-5926:10, 6086:5-17 and 7640:9-12 with 2567:17-2568:2, 3751:11-3751:18, 4021:7-4022:9, 4280:7-13, 5291:24-5292:16, 5593:2-11, 5808:8-20, 5926:11-24, 7241:14-7243:20, 7552:2-16, 7640:13-22, 7854:24-7857:12 and 8146:9-8147:2 (comparing the directors’ views of Ovitz in 1995 and 1996).

¹²² Tr. 4280:14-4282:22.

¹²³ Tr. 4281:4-4282:1.

¹²⁴ Tr. 4281:23-24; see also Tr. 4282:2-22.

¹²⁵ Tr. 5291:24-5295:7; 5307:2-18; see also Tr. 3751:11-3754:16 (Gold) (testifying to a lunch meeting with Eisner on January 26, 1996, where Gold was “shocked” to hear of these problems with Ovitz); 3754:17-3755:7 (Gold) (testifying that he spoke to Roy Disney about this conversation, and Roy Disney was less surprised to hear of these difficulties than Gold because of his personal interactions with Ovitz).

¹²⁶ Tr. 2567:17-2571:18; 4021:7-4022:12; 4294:4-4295:20 (between January and May 1996, Eisner spoke with Gold, Bollenbach, Litvack, Watson, Wilson and Russell about the increasing difficulties with Ovitz); 4733:7-4734:2; 5593:2-11; 5810:8-12; 5851:105854:12; 6095:19-6099:17; 7855:20-7857:12; 8147:3-8148:24; PTE 67 (note from Eisner to Watson and Russell enclosing an email from Eisner to Bass on May 26, 1996, discussing a conversation they had a few weeks earlier); see also Tr. 4297:2-4304:5 (Eisner) (testifying that he was aware in May 1996 that Iger, Bollenbach and Litvack were having problems with Ovitz); 6099:18-6100:9 (Litvack) (testifying that he was also aware of the problems between Ovitz and Iger).

¹²⁷ Tr. 6836:15-6838:9; 4734:3-4735:12.

¹²⁸ See Tr. 4345:17-4346:4; 4354:3-4355:6; 4368:1-18; 7555:22-7556:2; 8153:10-8154:5.

¹²⁹ PTE 8; PTE 21; PTE 22; PTE 166; PTE 171; PTE 300; PTE 304; PTE 321; PTE 507; PTE 508; PTE 509.

¹³⁰ PTE 8.

¹³¹ Tr. 5930:2-13; see PTE 89 (fax from Gold to Roy Disney on November 6, 1996, attaching the text of the article); see also Tr. 5199:20-5200:23 (Eisner) (recalling having read the article); 6580:13-15 (Litvack) (testifying he is “sure” all the directors saw the article); 7574:10-14 (Tom Murphy read it). But see also Tr. 6757:14-21 (O’Donovan) (failing to recall reading the article); 7916:23-7917:3 (Watson) (recalling the article’s existence, but not reading it).

¹³² Ovitz 183:21-187:5; PTE 476; DTE 110; see Tr. 1927:6-1940:24; PTE 24 at DD002451.

¹³³ Ovitz 162:16-163:7; Tr. 5289:14-5291:23 (Bollenbach) (testifying that he thought it was a “very good practice” to provide information to an officer coming to a senior position at the company before that person officially begins work); 6074:22-6075:8 (Litvack testified that: “It was not unusual at all,” for someone to begin work before their employment agreement was executed). See generally Tr. 2222:9-2223:8; PTE 545 (presentation regarding the CapCities/ABC acquisition that was forwarded to Ovitz before he arrived at the Company, but there is nothing in the record to suggest that Ovitz received this document before mid-August 1995); PTE 622; PTE 742; DTE 190; DTE 192; DTE 193; DTE 224. Eisner also applauds Ovitz’s attendance on a trip to Jackson Hole, Wyoming to meet the Company’s Consumer Products division before his employment officially began. PTE 316 at MDE000037. Because Ovitz was performing work either on behalf of the Company, or in preparation for his tenure there, his request for reimbursement of expenses related to The Walt Disney Company during that period of time are therefore appropriate and reasonable. See DTE 59 at WD6601. The appropriate persons in both management and auditing approved those September 1995 expenses. Id.

¹³⁴ PTE 476; DTE 110; cf. Tr. 1934:11-1935:24; PTE 475 (memo dated January 15, 1995 addressed to Ovitz with respect to millwork expenditures in Ovitz’s office, though the context makes it clear that if January 15 is the correct date, that the memo must have intended to be dated January 15, 1996, as DTE 144, DTE 152 and DTE 153 all indicate that there were outstanding issues regarding the millwork in Ovitz’s office from December 1995 until at least February 1996).

¹³⁵ Tr. 4389:10-4391:11; 6075:12-6076:16; 6141:9-24; see also Tr. 1318:13-1326:1; 1927:6-1940:24; DTE 144; PTE 654. Furthermore, the work that may have occurred on Ovitz’s office between mid-August 1995 and the formal commencement of his employment on October 1 of that year is consistent with what would be anticipated when a company prepares for a new employee before their expected arrival.

¹³⁶ See Tr. 1128:5-1133:18.

¹³⁷ DTE 188 (memo to Eisner dated August 14, 1995 summarizing the status of the Company’s prior discussions with the NFL; Ovitz was copied on the memo).

¹³⁸ See PTE 621; PTE 631; DTE 189; DTE 191 (duplicative of PTE 631); Tr. 5159:125166:18. There are no allegations, nor any factual support in the record, for the proposition (which plaintiffs have not put forward) that Ovitz received a salary from the Company for work performed before October 1, 1995.

¹³⁹ Tr. 1133:19-1134:2; 5164:7-16. The deposition testimony cited by plaintiffs (Bass 76:9-77:25; Eisner 330:3-331:6), which they argue supports the contrary proposition that Ovitz continued pursuing a deal with the NFL after Eisner instructed him to cease such discussions, is too vague to contradict the trial testimony previously cited. See also Tr. 4283:19-21 (Eisner) (testifying that Ovitz “walked away from” deals that made no economic sense).

¹⁴⁰ See PTE 8 at DD002123, DD002125.

¹⁴¹ Tr. 5308:10-5310:10. Bollenbach did, however, reaffirm at trial that certain portions of PTE 8 were accurate. See Tr. 5399:7-5401:4; 5412:18-5413:9; 5471:22-5472:6.

¹⁴² Tr. 5308:10-5310:10.

¹⁴³ Ms. Tarses was a television executive and is sometimes referred to as Jamie McDermott. Tr. 1698:7-8; 1713:7-8.

¹⁴⁴ PTE 85; PTE 303; see PTE 435.

¹⁴⁵ Tr. 4385:3-4386:16; DTE 194; see Tr. 1700:5-22. But see Ovitz 450:14-451:3.

¹⁴⁶ Iger 97:21-99:8; see Tr. 6136:23-6138:1. But see Bass 123:7-125:5 (Bass’ opinion on the Tarses situation is that it was Ovitz’s fault based upon statements made by Eisner that are inadmissible hearsay against all defendants but Eisner).

¹⁴⁷ Tr. 1217:14-19; 4386:17-23.

¹⁴⁸ Tr. 1218:19-1220:4; 6138:10-15.

¹⁴⁹ Tr. 1217:20-1218:12; 4386:24-4389:3; 6138:2-15. Because Ovitz had no authority over the motion picture studio, Eisner’s attempt to blame him for losses in that area was unwarranted. See PTE 755 at WD09868. Indeed, Eisner had recognized in his May 26, 1996, email to Bass that the cost overruns in the motion picture studio were due to Roth’s decision to dramatically increase marketing costs on unsuccessful movies. PTE 67 at DD002980-81.

¹⁵⁰ See supra note 119.

¹⁵¹ Tr. 1204:11-1208:2; 4278:18-4279:23.

¹⁵² Tr. 1233:8-1238:5.

¹⁵³ Tr. 1249:7-1255:14; 5034:5-5038:13; see also Tr. 6539:6-6542:6.

¹⁵⁴ Tr. 1229:16-1231:9.

¹⁵⁵ Tr. 1208:3-1209:18; Roth 9:22-10:18. In the end, Ovitz and Roth had different and wholly incompatible perspectives on the use of talent. See Roth 34:9-38:15.

¹⁵⁶ Tr. 1153:18-24; 4053:8-16.

¹⁵⁷ Tr. 4690:1-6; see also Tr. 3824:1-3829:22.

¹⁵⁸ Tr. 1153:18-1160:12.

¹⁵⁹ Tr. 1159:18-1160:5.

¹⁶⁰ Litvack testified that “[n]o one could settle the Jeffrey Katzenberg case for $90 million.” Tr. 6132:22-23. See supra note 157.

¹⁶¹ Tr. 1164:7-1165:12; 5168:12-24.

¹⁶² Tr. 5168:20-5169:6; see PTE 744 at WD09336-37.

¹⁶³ Tr. 5170:5-10.

¹⁶⁴ See Tr. 1180:14-1181:8.

¹⁶⁵ Tr. 1165:13-1171:18.

¹⁶⁶ Tr. 1171:19-1179:17; see also Tr. 1179:18-1180:13.

¹⁶⁷ Tr. 1210:23-1213:6; PTE 322; PTE 747; PTE 749.

¹⁶⁸ Tr. 1160:18-1163:19.

¹⁶⁹ Tr. 1163:21-1164:9; see also Tr. 4286:8-12. 45

¹⁷⁰ See Tr. 1134:7-1137:24. Hollywood Records, according to Litvack, was from its creation to that time, “a spectacular failure.” Tr. 6146:23-6147:5; see also DTE 207; PTE 638.

¹⁷¹ Tr. 1138:1-1139:10.

¹⁷² Tr. 1139:18-1147:2.

¹⁷³ Tr. 1139:11-17; 1147:3-9.

¹⁷⁴ See PTE 24 at DD002452-53; PTE 626; PTE 780 at WD13842.

¹⁷⁵ See PTE 606; PTE 622; PTE 629; PTE 768; DTE 190. Donohue’s predictable opinion that “Ovitz could have been in a coma and still collecting these empty documents” is of no benefit to the Court and, indeed, documents such as PTE 606 and PTE 622 contain marginalia with Ovitz’s handwriting, which would refute Donohue’s opinion that there is no indication that the files were ever read by Ovitz. See Tr. 9282:15-9284:16. Furthermore, plaintiffs’ attempt to use Ovitz’s statement on the Larry King Live show— that after a year on the job he knew “about one percent of what I need to know”—to demonstrate that Ovitz failed to apply himself on the job, is specious and wholly unpersuasive. PTE 323 at 7.

¹⁷⁶ Plaintiffs’ authority for this argument comes from the letter Eisner wrote to Ovitz dated October 10, 1995. PTE 267. Plaintiffs often quote the letter in this way: “Acquisitions are something we should … almost never do.” Id. at DD002290. The sentence actually reads: “Acquisitions are something we should look at and almost never do.” Id. (emphasis added). It is obvious that this letter, therefore, can provide no support for the proposition that Ovitz intentionally disobeyed an order or directive from Eisner to not pursue acquisitions under any circumstances. As discussed above, the record does not bear out the assertion that Ovitz continued pursuing specific acquisitions after being instructed by Eisner to no longer pursue them.

¹⁷⁷ Ironically, Ovitz testified that Eisner advised him not to take the job at MCA because Eisner believed that Ovitz would not have enough autonomy to turn the company around. Tr. 1275:14-1276:14.

¹⁷⁸ See, e.g., Tr. 1171:14-18.

¹⁷⁹ See Roth 29:16-30:20. 47

¹⁸⁰ See Tr. 4284:9-4285:10.

¹⁸¹ I note that Judge Posner eloquently emphasized this point in his critique of the 9/11 Commission Report by saying that:

    Much more troublesome [than the public relations effort by the commission, especially the participation of victims’ relatives] are the inclusion in the report of recommendations (rather than just investigative findings) and the commissioners’ misplaced, though successful, quest for unanimity…. And pressure for unanimity encourages just the kind of herd thinking now being blamed for that other recent intelligence failure—the belief that Saddam Hussein possessed weapons of mass destruction.
    At least the commission was consistent. It believes in centralizing intelligence, and people who prefer centralized, pyramidal governance structures to diversity and competition deprecate dissent. But insistence on unanimity … deprives decision makers of a full range of alternatives. For all one knows, the price of unanimity was adopting recommendations that were the second choice of many of the commission’s members or were consequences of horse trading. The premium placed on unanimity undermines the commission’s conclusion….

Richard A. Posner, The 9/11 Report: A Dissent, N.Y. TIMES, August 29, 2004 (emphasis added). Judge Posner’s critique also warns against the dangers of judging past actions with the benefit of perfect hindsight, saying that, “The commission’s statement that Clinton and Bush had been offered only a ‘narrow and unimaginative menu of options for action’ [in response to al Qaeda] is hindsight wisdom at its most fatuous,” by outlining several of the available options. Id.

¹⁸² See Tr. 3811:3-3814:15.

¹⁸³ As with many of their other allegations, plaintiffs heavily rely on PTE 20, PTE 24, PTE 67, PTE 79, and the hearsay statements of Bass. In attempting to bolster their position, plaintiffs point to part of Ovitz’s trial testimony to argue that his “self-serving” testimony was contradicted by other witnesses. See, e.g., Tr. 1220:14-1228:1. In that passage, Ovitz recalls meetings in New York with Bollenbach, Litvack and Iger, followed by a meeting with Eisner in Los Angeles. Id. Eisner’s testimony indicates a lack of specific recollection of that meeting, but basic familiarity with the issues purportedly discussed there. Tr. 5081:8-5084:5. Bollenbach could not specifically recall the meeting either, but does remember at least one meeting in New York with Ovitz. Tr. 5488:10-5493:11. Litvack’s testimony was unclear on whether he remembered the meeting to which Ovitz was referring, at one point saying “I am sure that we met with Mr. Eisner after these meetings, yes,” with the very next words out of his mouth being, “I don’t recall.” Tr. 6555:5-6556:16. Needless to say, the contradiction is, at most, minimal and a natural consequence of the many years that have passed since these events transpired rather than evidence of a lack of honesty on the part of Ovitz.

¹⁸⁴ PTE 67 at DD002981; Tr. 4298:6-4302:7.

¹⁸⁵ Tr. 4300:7-4301:22. This testimony demonstrates that there could be any number of reasons for which Iger would no longer trust Ovitz. Lack of veracity is but one.

¹⁸⁶ Eisner wrote:

    Michael [Ovitz] does not have the trust of anybody. I do not trust him. None of the people he works with feels comfortable with his directness and honesty. Like an athlete who has lost his way, Michael is pressing, is confused, [is] ineffective. His heart may be in the right place, but his ego never allows it to pump. His creative instincts may be in the right place, but his insecurity and existential drive never allows a real functioning process. … He would be a great salesman, but his corporate disingenuous nature undermines him. And his lack of interests in long-term outcomes affects his judgment on short-term deals. The biggest problem is that nobody trusts him, for he cannot tell the truth. He says whatever comes to mind, no matter what the reality. Because of all the above his executives, outside business associates, and the Press have turned against him.

PTE 79 at DD002624.

¹⁸⁷ Tr. 4434:1-4439:22; see also Tr. 3763:11-23; 6386:24-6388:4.

¹⁸⁸ Tr. 4438:10-4439:22.

¹⁸⁹ Tr. 6373:18-6374:13. But cf. Bass 44:17-46:5; 102:24-103:5 (Bass’ opinion that Ovitz was not honest was not based upon first hand experience and personal knowledge, but was based instead on the hearsay statements of Eisner and other unnamed declarants). Eisner’s credible trial testimony on this subject significantly undermines the probative value of Bass’ testimony, which again, the Court was not able to observe personally. See, e.g., Tr. 4434:1-4439:22.

¹⁹⁰ Tr. 6132:11-19; see also Tr. 6088:12-6092:23; 6374:18-6378:17.

¹⁹¹ Tr. 6135:1-4. Clearly, these statements, even if construed as lies, would not constitute gross negligence or malfeasance.

¹⁹² See Tr. 2621:15-2622:13 (Russell); 3755:8-3756:9 (Gold); 4012:14-4013:8 (Roy Disney); 5307:17-5308:9 (Bollenbach); 5809:3-7 (Nunis); 5940:20-23 (Bowers); 6724:715 (O’Donovan); 6847:10-16 (Wilson); 7148:8-12 (Poitier); 7552:23-7553:1 (T. Murphy); 7649:10-16 (Lozano); 7867:6-9 (Watson); 8161:6-7 (Stern); Roth 118:20

¹⁹³ At trial, when asked to give specific instances of lies by Ovitz, Donohue could only provide two concrete examples of Ovitz’s lying, one with respect to a deal Ovitz apparently made to sell an airplane to one of his prior business partners, see PTE 404 at 45 n.48, and the other relating to breaking the purported mutual non-disparagement agreement that Ovitz agreed to when he left the Company. Tr. 655:24-658:12. Donohue’s report indicates that even he did not consider the alleged deception with respect to the airplane grounds for a for-cause termination because it did not occur in the course of Ovitz’s duties for Disney. PTE 404 at 45 n.48. Any statements Ovitz may have made that violated a mutual non-disparagement agreement would similarly not constitute cause for termination because they occurred after his termination was publicly announced, and were not made in the course of his duties for the Company.

¹⁹⁴ See PTE 200 (W-2 for 1995 representing Ovitz’s income at CAA from January 1, 1995 to the end of September 1995 for almost $18 million). This W-2 is consistent with Ovitz’s testimony. Tr. 1099:5-15.

¹⁹⁵ PTE 314; PTE 127 (transmission of the signature page of the document by Adler to Santaniello). Ovitz’s statement reads as follows:

    I beneficially own a majority interest in my prior employer (“Prior Employer”), a franchised talent agency. My ownership interest is held by an independent trustee. The talent agency business of the Prior Employer is being continued by Creative Artists Agency LLC (“CAA”), in which I have no direct or indirect ownership interest. The Prior Employer will continue to receive commissions from contracts entered into by its former talent agency clients on or before September 30, 1995 and will also lease certain real and personal property to CAA.
    Except for ownership interests of less than 5% in publicly traded companies, either I or my Prior Employer may be deemed to beneficially have ownership interests in the following entities that are engaged in the media, entertainment, communications or publishing businesses: Diamond Cable Communications PLC [&] Ziff-Davis Holdings Corp.

PTE 314 at DD000292.

¹⁹⁶ Oldco’s (also known as CAA, Inc. or “Prior Employer”) receipt of revenues from booked talent commissions were based upon Newco’s (also known as CAA, LLC) financial success. See PTE 203 at MTO 1660; Tr. 1450:5-1452:5; 1533:2-1535:4. To alleviate any potential conflicts relating to this symbiotic relationship between Oldco and Newco, Disney created a process by which conflicts of interest between Ovitz and CAA were to be avoided through approval of transactions greater than $100,000 involving a CAA client by any two of (1) Eisner, (2) Litvack, or (3) Gerry Swider. PTE 148; PTE 374; Tr. 1298:11-1299:22; 1610:20-1613:2; 6457:15-6469:20; 6696:5-6697:1. Plaintiffs attempt to use PTE 581 to demonstrate that this process was not followed, but Litvack’s memory of these deals is hazy, and with respect to many of the deals, Litvack testified that he believed the projects related to many of those deals were not completed. Tr. 6494:11-6508:7. Given the sparsity of this record, I cannot conclude first, that the conflict of interest avoidance procedure was not used, or second (and more importantly), that if the procedure was not used, such failure was attributable to Ovitz, or that Ovitz used his position as President to facilitate deals with CAA clients in order to advance his personal financial interests. See Tr. 8844:10-8851:19.

¹⁹⁷ See PTE 202 at MTO 582, PTE 206 at MTO 611-12; PTE 208.

¹⁹⁸ Ovitz 561:22-562:6; see also PTE 206 at MTO 610-11.

¹⁹⁹ It appears that the definition of booked commissions may have been altered in 1999, long after Ovitz left Disney, making such change irrelevant to this case. PTE 209 at MTO 2161-63. This alteration may have been necessitated by Newco’s arrearages in paying Oldco, arrearages which were substantial as of October 1997. PTE 205.  Eventually, Newco and Oldco reached a settlement in full accord and satisfaction of their respective obligations. PTE 209.

²⁰⁰ See PTE 203 (creation of interest); PTE 254 (perfection of interest).

²⁰¹ PTE 254.

²⁰² Plaintiffs’ allegations that Ovitz again lied in relation to the Statement of Policy Regarding Conflicts of Interest and Business Ethics and Questionnaire Regarding Compliance when he left the Company, see PTE 70, must also fail in light of my findings below that Ovitz was in compliance with the Company’s policies regarding gifts.

²⁰³ See PTE 378; Tr. 3046:6-3049:17; 4393:1-4394:4. 54

²⁰⁴ Tr. 2560:3-2563:18.

²⁰⁵ PTE 318; Tr. 1315:8-1318:12.

²⁰⁶ Tr. 1317:11-1318:12.

²⁰⁷ At trial and in the post-trial briefing, plaintiffs have relied extensively on PTE 147, a draft report by Price Waterhouse which purportedly uncovers numerous examples of Ovitz’ expense reimbursement requests not complying with Company policy. I have previously ruled that the report is hearsay, and therefore inadmissible when offered to prove the truth of the matters asserted in the report. See In re The Walt Disney Co. Derivative Litig., 2005 WL 407220, at *1 (Del. Ch. Feb. 4, 2005). Plaintiffs also cite to DTE 59, a collection of expense reports submitted by Ovitz in an effort to show that Ovitz requested reimbursement for non-Disney expenses. The documents in DTE 59 on their face do not demonstrate that the expenses were not related to Disney, and there is no testimony in the record to lead me to believe otherwise. In fact, each and every expense report in DTE 59 has been countersigned in the box for “Audit Approval,” with the overwhelming majority (but not all) of the forms also having been countersigned in the box for “Management Approval.” In the absence of further evidence, this can lead me to no other conclusion than that all of the expenses detailed in DTE 59 were properly reimbursable under appropriate Company guidelines, including those incurred in late December 1996. DTE 59 at WD04935, WD05159.

²⁰⁸ See PTE 24 at DD002451; PTE 378; Tr. 3049:18-3051:20.

²⁰⁹ See Tr. 2632:21-2633:23; 2892:4-14; 4578:9-4580:20; 6145:20-6146:6; 6171:86178:11; 6362:5-23; 6533:4-20; 6604:5-16; 6692:12-6693:12; cf. Tr. 2883:24-2885:21; 3041:2-22.

²¹⁰ See PTE 385; PTE 403.

²¹¹ DTE 178.

²¹² Id.

²¹³ Tr. 6174:17-6176:16.

²¹⁴ Tr. 4579:4-4580:20; 4400:21-4402:4; 5044:16-5045:19; 6423:19-6424:19.

²¹⁵ Tr. 4579:4-4580:20; 4400:21-4402:4; 5044:16-5045:19; 6423:19-6424:19.

²¹⁶ Tr. 6174:8-6175:23; 6178:7-11; 6604:5-6605:23; see also Tr. 6273:9-6275:9; 6533:420; 6691:16-6692:24.

²¹⁷ See PTE 24 at DD002451-52; PTE 148; PTE 374. Plaintiffs attempt to use DTE 61 to impugn Ovitz’s handling of gifts. The document on its face, however, supports the conclusion that Ovitz was complying with Company policies by demonstrating that three of those four gifts were retained by Ovitz in exchange for a charitable contribution, and that the fourth was used as a prize at a Company event. In my mind, the simple fact that two of the gifts were not received by Disney until January 7, 1997 is unremarkable and not probative in any way detrimental to Ovitz, especially in light of the holiday season during which Ovitz was terminated and that the gifts were submitted to Disney shortly after the new year began.

²¹⁸ See PTE 17; PTE 378; DTE 151.

²¹⁹ Tr. 6139:10-6141:8; 6146:7-9; see PTE 406 (all gifts reported by Ovitz were turned over to the appropriate department within the Company); DTE 61.

²²⁰ Tr. 6437:21-6445:22; 6518:11-6530:4; 6533:1-20; see Tr. 5023:4-5029:18; 5034:55038:13; 5039:9-5042:22; see also Tr. 2201:15-2210:21 (Ovitz) (describing the reasons for some of his gifts); cf. Tr. 3049:18-3066:16 (Russell unable to give useful testimony expounding upon PTE 378 and PTE 17 due to lack of recall).

²²¹ Tr. 6101:2-6102:18; 6562:7-13.

²²² Tr. 4354:19-4355:6; 4731:13-4732:16; 6102:21-6103:14.

²²³ Tr. 4319:10-23. Eisner testified that when Ovitz first brought the Sony option up that Eisner believed that it would provide him a graceful way out of the Ovitz problem. See id.

²²⁴ Ovitz 537:24-25; Tr. 1350:5-13552:9; 6103:15-6103:24.

²²⁵ Tr. 1352:14-1353:20.

²²⁶ PTE 18.

²²⁷ Tr. 4351:23-4354:2. Eisner was hoping to obtain the licensing rights to The Young and the Restless, which would help Disney with its new Soap Opera Channel. Eisner also believed that if he did not ask for something in return for Ovitz, that Sony would think that Disney did not want Ovitz and then Sony may not have wanted him either.

²²⁸ PTE 18.

²²⁹ Id.

²³⁰ PTE 19 at WD00399-401.

²³¹ Id. at WD00402. Eisner also forwarded this letter to Ovitz.

²³² Tr. 6104:8-6107:6.

²³³ Tr. 7858:21-7859:22.

²³⁴ Tr. 2571:23-2572:14.

²³⁵ Tr. 3766:2-3767:6.

²³⁶ Tr. 4022:10-4023:8.

²³⁷ PTE 19 at WD00404.

²³⁸ See Tr. 1363:17-1365:2 (Ovitz) (stating that he did not continue negotiations with Sony because there were, in his view, severe conflicts within Sony’s upper management); 4362:1-9 (Eisner) (stating that he was told that Ovitz did not get an offer at Sony because Ovitz was being unreasonable in his demands and that he was asking for “the sun and the moon” from Sony).

²³⁹ Tr. 6677:2-11; 7592:8-10.

²⁴⁰ Tr. 4349:13-4350:5; 4728:17-4729:12.

²⁴¹ Tr. 3087:7-3088:16 (Russell); 3818:9-21 (Gold); 4021:7-4022:9 (Roy Disney); 5593:2-5594:12, 5725:6-5726:2 (Mitchell); 5810:8-12 (Nunis); 6836:5-6837:19 (Wilson).

²⁴² PTE 323, PTE 505.

²⁴³ PTE 79; see also supra text “Veracity and ‘Agenting’” at 49. Although I have found that Ovitz was not a liar, Eisner’s persistently-vocalized reservations about Ovitz’s veracity are not inconsistent with that finding. I conclude that while Ovitz gave this Court no reason to believe that he lied, that it is entirely possible that his actions while at Disney and his general character led Eisner to believe that Ovitz was not completely honest. Eisner, however, was unable to point to specific instances where Ovitz was untruthful.

²⁴⁴ Id. at DD002623.

²⁴⁵ Tr. 4436:14-4439:6.

²⁴⁶ Tr. 3078:17-3079:15; 7881:10-7887:3.

²⁴⁷ Tr. 4368:9-4369:3.

²⁴⁸ Tr. 4369:4-4370:2; 6838:18-6839:11.

²⁴⁹ PTE 24.

²⁵⁰ Tr. 4372:5-19.

²⁵¹ Tr. 5028:13-19.

²⁵² PTE 24 at DD002454-002455.

²⁵³ Eisner 606:4-7.

²⁵⁴ Tr. 6143:3-20.

²⁵⁵ Tr. 3090:9-3091:8; 3095:20-3096:3.

²⁵⁶ Eisner 606:8-607:14; see also Tr. 5199:14-19; 2017:17-2018:15.

²⁵⁷ PTE 325 at DD002549.

²⁵⁸ Tr. 4370:3-19. The threat of chaining himself to his desk, although obviously metaphorical, demonstrates exactly how unwilling Ovitz was to even consider leaving Disney at that point.

²⁵⁹ Tr. 4379:23-4380:19; 6110:12-6111:3.

²⁶⁰ Tr. 4380:22-4381:15.

²⁶¹ Tr. 6110:15-6111:3.

²⁶² Tr. 6113:21-6114:19.

²⁶³ Tr. 6114:20-10 (Litvack) (stating that he did not do any case research because he “didn’t believe that there were going to be any cases that were going to answer the question for [him]. [He] had been dealing with contracts and litigation all [his] life…. [He] felt he knew the facts as to what the man had done and not done.”).

²⁶⁴ Tr. 6115:22-6116:14 (Litvack) (stating that he did not order an outside investigation because he believed he knew the facts and an outsider would have gone to him to get the facts, and also because he believed that the firing of Ovitz was a sensitive matter and he wanted to involve as few people as possible); 6130:5-24 (Litvack) (explaining that he did not order an outside written opinion because it would have been expensive, and he believed it was a “CYA tactic done by general counsels to cover themselves” and he didn’t believe he needed that). Litvack consulted Val Cohen, co-head of the Disney litigation group, and possibly Santaniello, and to the extent he met with them, he stated that they both agreed with his conclusion that there was no cause, although there is no record of their having met or discussed the existence of cause. See Tr. 6119:22-6121:8. Litvack admits, however, that all the information Val Cohen knew about Ovitz, she would have learned from Litvack. See Tr. 6401:2-6405:4.

²⁶⁵ Tr. 6121:9-6126:8.

²⁶⁶ Tr. 6222:22-6225:13.

²⁶⁷ Tr. 6398:3-11.

²⁶⁸ PTE 391; PTE 392 (bill contains charge of $25,500 for consultation in the Ovitz matter which included advice regarding proxy disclosure and tax considerations relating to Ovitz’s termination).

²⁶⁹ Tr. 6114:24-10. In light of the hostile relationship between Litvack and Ovitz, I believe if Litvack thought it were possible to avoid paying Ovitz the NFT payment, that out of pure ill-will, Litvack would have tried almost anything to avoid the payment. See Tr. 6115:9-21 (“[I]f there was a way not to pay him, I would have loved not to pay him…. I didn’t like him, and he didn’t like me. I didn’t feel he had done the job.”).

²⁷⁰ Tr. 4380:10-21.

²⁷¹ Tr. 6128:6-11.

²⁷² Tr. 6118:16-6119:13; 6129:2-6130:3.

²⁷³ Id. Litvack also believed that attempting to relocate Ovitz within Disney would not improve the situation as Ovitz just was not a good match for Disney, although he conceded that that was up to Eisner. See Tr. 6128:12-6129:1.

²⁷⁴ PTE 91.

²⁷⁵ Id. at WD01561A.72

²⁷⁶ Tr. 3771:21-3772:16 (Because the proxy was not due for some time, Gold stated that the board chose to renominate Ovitz and then change the slate after he was fired instead of embarrassing Ovitz at the meeting.).

²⁷⁷ I recognize that certain portions of the deposition testimony concerning this executive session, whether it occurred, and what was said at it, are to some degree in conflict with the trial testimony. See Gold 357:20-361:24 (stating that he does not independently recall when the executive session occurred, but that there was an executive session during which Ovitz’s termination was discussed); Litvack 573:7-574:9 (stating that he was unaware of an executive session, however if there was such a meeting, he would have been excluded); Russell 731:18-732:7 (stating that he does not recall an executive session after the November 1996 board meeting); Stern 163:14-164:2 (stating that he has no recollection of an executive session of the board after the November 1996 meeting). Although he later testified that after reviewing Gold’s trial testimony that he vividly recalled the meeting, see Tr. 8155:13-8158:4, Eisner himself testified that this was not an official executive session, but instead he gathered the non-management directors in a room to discuss Ovitz. See Tr. 4425:7-4426:10. Despite these conflicts, I am convinced that such a meeting took place. What was discussed at that meeting, however, is an entirely separate question that I will deal with shortly.

²⁷⁸ Mitchell was called after the meeting by Eisner and was told that there was some discussion of Ovitz’s performance. Tr. 5758:21-5759:10. Mitchell, however, was not told anything concerning the NFT. See Tr. 5782:8-18.

²⁷⁹ Tr. 4551:17-4552:21 (Eisner); 3772:17-3773:18, 3785:3-9 (“You couldn’t have left the November … executive session without knowing where Mr. Eisner was going [as concerned Ovitz].”) (Gold); 5950:20-5952:13 (Bowers); 7859:23-7862:5 (Watson); 8155:13-8158:4 (Stern).

²⁸⁰ Tr. 4425:7-4426:10.

²⁸¹ Tr. 3773:15-3774:16.

²⁸² Tr. 3774:17-3776:7; 3906:17-3908:4. Gold told a slightly different story at his deposition which had Litvack in the room during the entire executive session and did not have Gold asking Litvack questions about outside counsel. See Gold 348:12-351:15.

²⁸³ Tr. 8155:13-8158:4.

²⁸⁴ Tr. 6343:20-6346:5.

²⁸⁵ Tr. 2050:1-10.

²⁸⁶ Wilson also testified that Eisner informed him that Ovitz would be entitled to a payment under the OEA if he was terminated without fault, and that Wilson knew what the approximate value of that payment was. See Tr. 7031:10-7032:4.

²⁸⁷ Tr. 2051:7-11.

²⁸⁸ Id.

²⁸⁹ Tr. 7016:16-22.

²⁹⁰ Tr. 7017:24-7018:5.

²⁹¹ Tr. 7016:23-7017:9.

²⁹² PTE 25.

²⁹³ Tr. 7026:22-7027:23; see also PTE 25.

²⁹⁴ Tr. 7028:2-7029:1.

²⁹⁵ Tr. 7030:6-7031:9.

²⁹⁶ PTE 326 DD002539.

²⁹⁷ Id. at DD002540; see also Tr. 2060:19-2061:9.

²⁹⁸ PTE 326.

²⁹⁹ Id. at DD002539.

³⁰⁰ Tr. 4397:20-24.

³⁰¹ PTE 326 at DD002540; see also PTE 379.

³⁰² Tr. 2577:3-2578:1.

³⁰³ Id.

³⁰⁴ Tr. 1379:21-1380:5, 3228:9-3229:19 (denial of continuing seat on board); 1379:1-20, 2098:5-13, 3227:8-18 (denial of consulting agreement); 3224:7-21 (denial of use of office and staff); 2063:21-2064:10, 3225:10-13 (denial of opportunity to repurchase plane); 6178:15-6179:23 (denial of repurchase or continued use of car).

³⁰⁵ Tr. 1378:6-14 (Ovitz) (stating that Eisner never mentioned to him the possibility that he would be fired for cause); 4455:3-19 (Eisner) (stating that at no time did he mention to Ovitz the possibility that he could be fired for cause, and denying that any negotiations took place between the two parties); 2640:17-2641:21 (Russell) (stating that he had never mentioned anything concerning a for cause termination to Ovitz or anyone working for Ovitz); 6186:15-6187:4 (Litvack) (stating that to the best of his knowledge, neither he nor anyone else at Disney ever mentioned to Ovitz or one of his representatives that he could be fired for cause).

³⁰⁶ PTE 51.

³⁰⁷ Id. Watson attended by phone.

³⁰⁸ Tr. 2581:23-2582:17; 3785:3-3786:11; 4429:7-4430:4; see also DTE 163. 80

³⁰⁹ PTE 51 at WD01229; see also 2582:18-2583:12.

³¹⁰ Tr. 3926:11-15 (Gold) (stating that Russell stated that the bonus was mandatory); 7752:1-7754:22 (Lozano) (stating that although he could not recall Russell advising the EPPC that the bonus was mandatory, that he believed that they were contractually obligated to grant Ovitz a $7.5 million bonus); 6154:15-6156:16 (Litvack) (stating that Russell told the EPPC that the bonus was mandatory, and that Litvack did not say anything because he was not sure what Russell was referring to and he did not want to embarrass Russell). Planning to correct Russell’s mistake when he spoke with him later on, Litvack nonetheless ordered that Ovitz’s bonus be paid. See PTE 175; Tr. 6156:166157:10.

³¹¹ Tr. 4402:8-4403:8.

³¹² Eisner did give some testimony that by December 11 he still intended to give Ovitz some sort of consulting arrangement separate from and unrelated to the OEA. The overwhelming weight of the evidence, however, demonstrates that this was not in fact the case, and it certainly did not happen. See Tr. 4601:6-23.

³¹³ Tr. 4592:18-4593:6.

³¹⁴ Eisner 654:16-655:16; see also Tr. 4601:8-18.

³¹⁵ PTE 13. The letter reads:

This will confirm the terms of our mutual agreement as follows:
    1. The term of your employment under your existing Employment Agreement with Disney will end on January 31, 1997.
    2. This letter will for all purposes of the Employment Agreement be given the same effect as though there had been a “Non-Fault Termination,” and the Company will pay you, on or before February 5, 1997, all amounts due you under the Employment Agreement, including those under Section 11 (c) thereof. In addition, the stock options granted pursuant to Option A, will vest as of January 31, 1997 and will expire in accordance with their terms on September 30, 2002.

³¹⁶ Tr. 6157:11-6159:8.

³¹⁷ Bowers 335:3-14; Gold 207:13-18; Roy Disney 189:20-190:10.

³¹⁸ Tr. 3933:8-20 (Gold); 4102:23-4103:11 (Eisner); 5772:18-5773:4 (Mitchell); 5881:245882:23 (Nunis); 5990:21-5991:10 (Bowers); 7248:3-7249:6 (Poitier); 7615:19-7616:16 (Murphy); 7758:2-7759:22 (Lozano).

³¹⁹ PTE 390.

³²⁰ Id.

³²¹ PTE 19 at WD4000. See also Tr. 2088:1-5 (Ovitz) (stating “what we agreed on that they tried to handle this with some dignity for me and some grace and were very generous in their press release, which was very nice for them to do.”).

³²² See also Tr. 2087:6-2088:5 (Ovitz) (stating that “I wouldn’t leave by mutual agreement and I wasn’t going to serve as an advisor and consultant. I wanted to [serve in those positions.]”); 2573:11-21 (Foster: “[Ovitz’s] departure was not voluntary, is that correct?” Russell: “No way, no way.”); 4525:12-16 (Schulman: “You were trying to work out getting Mr. Ovitz’s consent; correct?” Eisner: “I was not trying to get his consent on being fired. I was trying to get his consent of leaving the company in a graceful way.”).

³²³ Tr. 2087:6-2088:5. What makes it even clearer that Disney was simply trying to mislead the public is that no such representation was made in Ovitz’s termination letter. PTE 13.

³²⁴ Tr. 1382:22-1383:1.

³²⁵ DTE 413 (Eisner’s incoming and outgoing phone log from December 12 through December 14 listing calls placed to Nunis, Roy Disney, Russell, O’Donovan, Wilson, Murphy, Gold, Stern, Bowers, Poitier and Walker); see also Tr. 3802:6-2223 (Gold) (testifying that Eisner notified him by phone, and asked him to pass the news on to Roy Disney); 5810:19-5811:20 (Nunis) (testifying that Eisner notified him by phone); 5932:75833:3 (Bowers) (testifying that Eisner notified her by phone); 7556:1-7557:15 (T. Murphy) (testifying that Eisner notified him by phone); 7642:21-7643:9 (Lozano) (testifying that Eisner notified him by phone); 8159:19-8160:24 (Stern) (testifying that Eisner notified him by phone). Eisner also notified Bass and Warren Buffett. Tr. 4405:18-4406:14.

³²⁶ Tr. 3778:1-23 (Gold) (stating that as of the November 25 executive session, he concurred with Eisner’s decision to terminate Ovitz despite what it would cost Disney); 4026:13-4028:5 (Roy Disney) (stating that he supported the decision to terminate Ovitz despite the cost involved because of the significant problems Ovitz was causing within Disney); 4405:18-4409:10 (Eisner) (stating that he received no objection from any board member after placing phone calls to notify them of Ovitz’s termination or after they received copies of the press release and accompanying letter); 5810:19-5811:20 (Nunis) (stating that as of the press release he supported Eisner’s decision to terminate Ovitz because “turmoil at the top of the company” was dangerous for everyone); 5933:225935:15 (Bowers) (stating that she supported Eisner’s decision to terminate Ovitz as of the press release because it was clear that Ovitz was not a team player); 6720:11-6720:23 (O’Donovan) (stating that he supported Eisner’s decision to terminate Ovitz because it is important to have harmony at the top of a large organization); 7144:3-7146:13 (Poitier) (stating that he believed Ovitz had to be terminated according to the terms of the OEA because it was a “clear mismatch”); 7556:3-7557:7 (Murphy) (stating that he supported Eisner’s decision to terminate Ovitz despite the cost because it was the best thing for Disney and its shareholders); 7642:21-7643:24 (Lozano) (stating that he supported Eisner’s decision to terminate Ovitz despite the cost to Disney); 8158:5-8160:24 (Stern) (stating that he supported Eisner’s decision to terminate Ovitz because it was a bad relationship, and the amount Disney would save would outweigh the cost of the termination).

³²⁷ PTE 13.

³²⁸ Tr. 2587:1-7 (Russell); 5733:3-5734:17 (Mitchell); 6721:8-21 (O’Donovan); 7067:21-7069:8 (Wilson); 7561:9-13 (Murphy); 8233:5-16 (Stern).

³²⁹ Tr. 2889:10-2892:3 (Russell); 6720:21-6721:7, 6785:1118-6786:15 (O’Donovan); 7227:2-7 (Poitier); 7561:14-17 (Murphy); 7466:11-7467:2 (Lozano).

³³⁰ Tr. 6149:4-6151:11.

³³¹ Id.

³³² Tr. 2574:5-2576:21 (Russell) (stating that he believed that Eisner and Litvack had done sufficient research and trusted their judgment that there was no cause to terminate Ovitz, that he was unaware of anything that would constitute cause to fire Ovitz, and that he was aware that Ovitz would receive the NFT payment); 3775:12-3778:18 (Gold) (stating that he was aware of the size of the NFT payment, that after asking Litvack about his conclusions concerning cause he believed that Litvack had done and was continuing to do sufficient research and Gold trusted his and Eisner’s conclusions, and that Gold also had no knowledge of any act that would have constituted cause to fire Ovitz); 5597:185598:13 (Mitchell) (stating that he relied on and trusted Litvack’s determination that there was no cause and Mitchell knew of nothing that would have constituted cause); 5813:2-24 (Nunis) (stating that he believed that if Eisner and Litvack could have avoided paying the NFT that they would have done so); 5933:4-5934:24 (Bowers) (agreeing with Eisner’s decision, that Disney would honor the terms of the OEA and make a large payment to Ovitz including a large cash payment and acceleration of the options); 6781:18-6782:9 (O’Donovan) (stating that he was not aware of the value of Ovitz’s payment and relied on Litvack entirely to make the cause determination); 7557:2-15 (Murphy) (stating that he believed that if there was a way that Eisner could have avoided paying Ovitz he would have and he therefore trusted Eisner’s judgment on the issue of cause); 7867:2-7868:2 (Watson) (stating that he did not believe that Ovitz was grossly negligent or malfeasant and that therefore he could not be fired for cause); 8160:28161:16 (Stern) (stating that he believed that Ovitz never lied to him, and that Stern trusted Eisner’s judgment because he had a reputation for being “a tough buck,” and if Eisner could have avoided paying Ovitz he would have).

³³³ DTE 243.

³³⁴ DTE 243 at 13-14; see also id. at DD002077, DD002068.

³³⁵ Id. at DD002075.

³³⁶ Id. at DD002077.

³³⁷ Id. at DD002068.

³³⁸ Id. at DD002075.

³³⁹ Id. at DD002084.

³⁴⁰ Tr. 4432:20-4433:1 (Eisner) (testifying that, when he confronted Ovitz about these articles, Ovitz admitted to hiring Rivers); see also DTE 243 at DD002076, DD002084, DTE 243 at 12, 14.

³⁴¹ Tr. 2090:17-2091:6.

³⁴² Tr. 4433:2-4433:14.

³⁴³ PTE 20.

³⁴⁴ Tr. 4433:15-21.

³⁴⁵ PTE 180; see also Tr. 6159:20-6161:5.

³⁴⁶ Tr. 2589:12-2591:1; see also PTE 384 (Russell’s notes of his meeting with Gold).

³⁴⁷ Tr. 3799:15-3800:7.

³⁴⁸ PTE 53.

³⁴⁹ Id.

³⁵⁰ PTE 93; see also Tr. 2591:15-2592:2; 3797:14-3799:14.

³⁵¹ Tr. 3796:1-18; 6167:20-6168:14.

³⁵² PTE 14.

³⁵³ Id.

³⁵⁴ Id.

³⁵⁵ Tr. 6170:14-19; 6586:18-6587:5.

³⁵⁶ Id. At the time that Eisner ordered the holdback, he did not know that Price Waterhouse would be called in to do a full audit of Ovitz’s expenses. Tr. 5147:155150:11.

³⁵⁷ Ovitz Post Trial Br. at 13.

³⁵⁸ Tr. 4400:21-4402:4.

³⁵⁹ See, e.g., Bowers 336:20-24; Lozano 213:19-214:2; Mitchell 40:13-23; T. Murphy 106:14-21; Nunis 80:3-5; O’Donovan 119:23-120:4; Poitier 176:24-177:18; Stern 192:923; Watson 442:16-19; Wilson 125:25-126:8; Roy Disney 190:11-24.

³⁶⁰ Tr. 3943:19-3944:22.

³⁶¹ Tr. 2599:10-2600:9 (Russell) (stating that Litvack had explained about the lawsuit and that he stated that “we had acted properly and that there would not have been a basis to claim that there was good cause under the employment agreement … with respect to the discharge of Michael Ovitz.”); 4444:8-4446:12 (Eisner) (stating that the board was fully informed of all the details of Ovitz’s termination and that Litvack explained the cause question “to the point that everybody was getting tired of me saying, “Okay, Sandy, say it once again. Who did you talk to? Are you sure? Did we do the right thing?”); 5936:135939:15 (Bowers) (stating that Litvack advised the board that there was no gross negligence or malfeasance to terminate Ovitz and that they had to pay him and that she also recalls Litvack stating that he had received outside counsel at this point); 6181:116183:11 (Litvack) (stating that he set out the whole Ovitz situation for the board and that he told the board that he did not believe there was gross negligence or malfeasance and hence no way to terminate Ovitz for cause) Litvack also stated that he did not recall saying that he had the advice of outside counsel, but that if he was asked he would have responded that he did. Id.; see also PTE 799.

³⁶² Tr. 6693:1-12.

³⁶³ A seventh expert, Alan Johnson, prepared a report on behalf of the defendants and was deposed, but he did not testify at trial. See Tr. 771:24-772:16. His amended report dated August 6, 2004, is part of the trial record. DTE 181. Professor Murphy spent a significant amount of time at trial disputing certain elements of Johnson’s report. Tr. 833:21-857:19.

³⁶⁴ Tr. 23:20-24.

³⁶⁵ See In re The Walt Disney Co. Derivative Litig., 2004 WL 550750 (Del. Ch. Mar. 9, 2004).

³⁶⁶ PTE 462.

³⁶⁷ Tr. 24:1-38:6.

³⁶⁸ Tr. 40:9-18.

³⁶⁹ For example, instead of using the term “custom and practice” in her report, Professor DeMott states that good corporate goverance “requires,” “includes” and “envisions” certain actions. Tr. 98:24-101:10; see also Tr. 161:22-166:3 (plaintiffs’ counsel objects to a question on cross-examination on the grounds that defense counsel was “just inserting the phrase ‘custom and practice,’” and that these questions were “not going to what is the custom and practice in the particular time frame with respect to public Delaware companies, but what are the legal requirements [imposed upon fiduciaries of Delaware corporations]”).

³⁷⁰ See PTE 462 at ¶ 14 (“Neither Disney’s Board nor its Compensation Committee gave careful consideration to the implications of the terms of Disney’s employment agreement with Mr. [Ovitz].”); see also id. at ¶ 17 (“The record leaves no doubt that both the decision to terminate Mr. Ovitz’s employment and the decision to characterize the termination as a non-fault termination were made by Mr. Eisner without consideration by Disney’s Board.”).

³⁷¹ PTE 462 at ¶¶ 9, 12, 17; Tr. 172:6-175:5.

³⁷² See Itek Corp. v. Chicago Aerial Indus., Inc., 274 A.2d 141, 143 (Del. 1971).

³⁷³ Professor DeMott’s testimony was useful, however, in the sense that it drew in stark relief the contrast between ideal corporate governance practices and the unwholesome boardroom culture at Disney—that is, her testimony clarified how ornamental, passive directors contribute to sycophantic tendencies among directors and how imperial CEOs can exploit this condition for their own benefit, especially in the executive compensation and severance area. See Tr. 43:4-46:15 (individualized one-on-one discussions between management and directors can lead to directors who are “unequally or unevenly informed with regard to significant matters” and “have the effect of vitiating, sapping the board’s ability as an institution to function together collectively and collegially and deliberatively”); 83:12-84:6.

³⁷⁴ See Tr. 636:16-637:6; 702:4-7.

³⁷⁵ PTE 404 at 4.

³⁷⁶ Id. at 7-34.

³⁷⁷ See id. at 4.

³⁷⁸ PTE 826.

³⁷⁹ Id.

³⁸⁰ See PTE 426 (Professor Murphy report). 98

³⁸¹ See, e.g., Tr. 748:22-749:13.

³⁸² Tr. 868:17-870:16; 1061:5-19; see also Tr. 1010:21-1020:18; 1036:12-1037:9; 1043:1-21.

³⁸³ See Tr. 901:6-919:14; 925:2-939:4; 980:4-989:7; 1072:11-1077:13; 1081:19-1085:17; PTE 426 at 24-31 (Professor Murphy’s discussion of the cost to the Company of Ovitz’s severance where he concludes that the Black-Scholes value (as opposed to intrinsic or realized cost) of Ovitz’s options (by far the highest of the three) is the appropriate way to measure that cost).

³⁸⁴ Tr. 803:3-805:5.

³⁸⁵ See PTE 7 ¶ 9 at WD00209-10.99

³⁸⁶ Notwithstanding the statements in the text above, Professor Murphy does make a very good point that the press release announcing Ovitz’s hiring (PTE 3) does not disclose any economic terms of Ovitz’s employment with the Company, and therefore, as a matter of common sense, the market cannot be said to have “approved” the economic terms of the OEA. See 859:7-860:3. One might intuit, however, that the $1 billion increase in the Company’s market capitalization as a result of Ovitz’s hiring would reflect the assumptions of the market as to the potential cost of Ovitz’s employment contract, even if the market was unaware of the actual cost. Dunbar testified to this effect, outlining the public reports of Ovitz’s compensation before the text of the OEA was filed publicly in December 1995 and concluding that the lack of statistically significant market reaction at that time was due to the market’s correct assumptions of the size of the compensation package on August 14, 1995. Tr. 7296:8-7297:20; 7414:19-7416:3; DTE 428 at 3-9.

³⁸⁷ See DTE 408 at 1-2. 100

³⁸⁸ DTE 408 at 47.

³⁸⁹ DTE 408 at 10-16. But see PTE 404 a