Evidence phase of trial over firing of Michael Ovitz ends

Yale Law Professor John Donohue, in his third trip to the witness stand, said Disney could have fired Ovitz for cause without paying him a $140 million severance package and without risking even larger damages for fraud and defamation.

Trial of the case began in October, and no decision is expected until after lawyers have exchanged briefs presenting their views of what the evidence showed.

Disney Chief Executive Michael Eisner, Ovitz and members and former members of Disney's board of directors testified in the case, which was brought by shareholders seeking to recover some of the severance package for the company.

Investors attempted to prove Disney was lax in hiring and firing Ovitz, handing the one-time Hollywood power broker a contract that made it more profitable for him to fail than to succeed.

Ovitz said the one-time friend who recruited him to the second spot at Disney failed to stand by him when other executives who had been passed over for the job balked at answering to the newcomer.

In the concluding phase of the trial, high-profile principals gave way to expert witnesses who debated whether Disney should have fired Ovitz for cause or given him the no-fault termination and $140 million severance.

Defense experts testified last week that a for-cause firing would have cost Disney much more than $140 million.

They said they could find no evidence Ovitz was a liar, in spite of repeated references to Ovitz's dishonesty by Eisner.

A for-cause firing based on flimsy evidence or mere suspicion of wrongdoing, they said, would have exposed Disney to greater damages.

Yale professor Donohue said the failure of experts to find proof Ovitz lied seven years after the alleged dishonesty didn't mean there was none.

Had the board of Burbank, Calif.-based entertainment giant Disney probed suspicions of Ovitz's alleged dishonesty and extravagance in 1996, the record in the Delaware trial might have looked much different, the shareholder expert said Wednesday.

Whether Ovitz was entitled to his no-fault termination isn't the only, or perhaps even the most critical issue to be decided in the case.

Even if the ex-president is found guiltless, some current and former Disney directors may still be found liable for failing their duties to shareholders in allegedly mishandling the Ovitz matter.

In a September pretrial ruling, Chancellor William Chandler III said Ovitz couldn't be sued for negotiating the best employment deal he could get when he left the talent agency he had founded to take the job at Disney.

Ovitz could still be found liable if the judge finds he improperly engineered a no-fault departure from Disney, when a termination for cause was warranted.

Corporate and shareholder attorneys, however, will be watching Chandler's ruling most closely for signs of change in the law governing board responsibility for major decisions such as the hiring and firing of top executives.