Disney Goes to Court
In April 2023, The Walt Disney Company did the unimaginable.
Disney sued the governor of Florida, along with all members of the Central Florida Tourism Oversight District.
Later, that group countersued Disney, which always struck me as the legal equivalent of “Not if I sue you first!”
More recently, some enterprising attorney finally recognized Disney’s vulnerability stemming from the Bob Chapek fiasco.
A pension fund is suing Disney for financial irregularities at the end of Chapek’s tenure.
Folks, Disney is about to defend itself in several dramatic lawsuits. Disney is going to court, and here’s what you need to know about each lawsuit.
The Central Florida Tourism Oversight District vs. Disney
I’ll begin with this one, as it’s potentially the latest example of Disney outsmarting members of the Central Florida Tourism Oversight District (CFTOD).
Disney just filed a motion in court to dismiss the CFTOD’s lawsuit, and a cursory inspection of the claim is…pretty funny.
The CFTOD and the governor may have worked against their own self-interests with this series of events.
When Disney sued the CFTOD, most analysts recognized that DeSantis couldn’t back down here. He’s running for POTUS, and it’s…not going well.
If you thought the Jeb Bush campaign imploded spectacularly in the 2016 cycle, wait until this guy formally announces 😂 pic.twitter.com/81X9nPnVb7
— Thomas Kennedy (@tomaskenn) May 16, 2023
Seriously, what was that laugh?
Anyway, DeSantis has escalated the Florida Feud with his words and actions. It’s a calculated attempt to garner more positive headlines and votes.
The governor instructed Florida’s gerrymandered legislature to punish Disney by nullifying all the actions the company legally performed with the Reedy Creek Improvement District.
Simultaneously, the new CFTOD board countersued Disney for, well, suing them in the first place.
I read all of Disney’s filing but couldn’t get past page 12 of the countersuit because it reads very much like a child telling a parent, “Well, they started it!”
Alas, Disney attorneys had to read the whole thing, and that’s worked to their benefit.
Some of them pieced together that the lawsuit filing makes zero sense in the wake of the legislation.
The CFTOD is currently suing to do the thing that Florida’s legislature recently empowered them to do.
So, Disney is correct that this lawsuit is frivolous and unnecessary. Disney is also correct that federal litigation should take precedence.
In this manner, the filing serves a second purpose.
Since the matter is fairly cut-and-dry, their attorneys can discover how fairly DeSantis-appointed state judges will act with this suit. That’s informational.
The Big One: Disney Sues Florida
Obviously, the CFTOD’s countersuit against Disney isn’t significant in the greater scheme.
Disney’s recent legal machinations indicate that the company doesn’t want DeSantis to claim victory, even temporarily.
The governor possesses a much greater chance of winning in a state court stacked with his previously appointed judges rather than a federal one.
As I’ve previously mentioned, most attorneys agree that the law heavily favors Disney in what should be a protracted legal battle.
Citizens United once infuriated Democrats with its legal recognition of corporations as people.
Now, many lawyers point to the ruling as one that turns Disney’s lawsuit into a legal formality.
If a corporation is a person, DeSantis and the CFTOD violated that person’s rights to speak out against the Don’t Say Gay legislation.
Weirdly, both parties in this legal dispute agree on all the facts as well.
DeSantis has bragged about what he has done, leading to a weird filing wherein Disney uses the governor’s own autobiography against him.
Everyone agrees about what has happened. The debate lies in whether the governor of a state may arbitrarily punish a corporation or person as has happened here.
Attorneys believe that the only way Disney could lose this case is if a judge or the Supreme Court reverses previous legislation.
Could that happen? Well, I’ve freaked out a couple of good reporters by indicating that it wouldn’t surprise me. The world has gotten kind of bizarre lately.
Still, I believe all the attorneys I’ve interviewed when they express the sentiment that Disney’s case appears rock-solid.
The Bob Chapek Lawsuit
What’s the one word that makes corporate lawyers break into flop sweat? The answer is, “exposure.”
When a company faces exposure, somebody has screwed up on a grand scale. And that brings me to former Disney CEO Bob Chapek.
At the end of last year, I threw out an entire batch of Disney Rumors because they no longer applied.
Instead, I wrote about the firing of Disney’s CEO. Something I mentioned at the time was a Wall Street Journal report involving Chapek.
According to the story, Disney CFO Christine McCarthy went to Disney’s Board of Directors about a problematic issue.
The CFO claimed that Chapek hid some of the losses in the Direct-to-Consumer (DTC) division.
Disney’s CEO at the time had committed the company toward a digital business model. It was a bad look for DTC to lose tons of money.
McCarthy indicated that Chapek aired a few titles on Disney’s linear networks and placed their costs with the still-profitable broadcast television division.
By doing so, Chapek reduced the DTC losses for the quarter to $1.474 billion. Yes, even after accounting tricks, this division still lost nearly $1.5 billion.
That’s not even the worst part. The moment the Wall Street Journal published McCarthy’s claims, Disney faced liability issues.
That’s the CFO of the company telling the Board of Directors that the CEO of the company cooked the books to mislead investors.
A lawsuit has appeared inevitable ever since then, and the only surprise is that it took six months.
Now, the Local 272 Labor Management Pension Fund has filed a class action suit in U.S. District Court for the Central District of California.
Some local attorneys are gauging interest as well. Federal securities law is tricky, but Disney is at least somewhat vulnerable here.
For most Disney adults, the running joke is that nobody wants to face the Mouse in court.
Recently, some folks have gotten frisky in testing that belief.
While any of these lawsuits could take a turn at a moment’s notice – that seems to be Disney’s fate lately – we can draw a few conclusions.
The CFTOD filing looks like a nuisance suit now, and Disney could win the motion to dismiss. If not, the company’s issues here are simple.
DeSantis has stacked the deck with his people in the state court system and really doesn’t need to win long-term.
His priority involves a ruling or two in his favor that boosts his candidacy on the campaign trail.
While Disney is well-positioned legally, it also has much more to lose here. If the company wins, it indemnifies the Reedy Creek agreement for decades.
Should the court system rule against Disney, it faces an angry governor and a hostile oversight board. Well, Disney already faces that but…more now.
As for the investor lawsuit, those things are tough to win. However, the facts of the matter support the claim, which is problematic for Disney.
You should probably expect this one to stretch out for a while, and it wouldn’t shock me if Disney eventually settled.
That’s a guess based on personal opinion rather than reporting, though.
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