Walt Disney Co. (DIS) had "a lot of good reasons" to fire Michael Ovitz (search) from his job as president, but none of the reasons were good enough to justify a for-cause firing, an expert for the company's board of directors testified Friday.
The expert, California employment lawyer John Fox, is expected to be one of the last witnesses in the trial of a shareholder lawsuit challenging Disney's 1996 decision to terminate Ovitz with a $140 million severance package after 14 months as president.
Shareholders say Disney's board was lax in reviewing Ovitz's employment contract and in failing to fire him for cause due to alleged dishonesty and insubordination to Disney Chief Executive Michael Eisner (search), the longtime friend who recruited him.
Disney's review of the decisions to hire and fire Ovitz was so flawed that the company lost the chance to avoid paying the $140 million severance, shareholder attorney Steven Schulman said Friday.
Fox is the second defense expert to say there is no evidence Ovitz was guilty of dishonesty or other conduct that would meet the standard of gross negligence or malfeasance.
Without such proof, Disney would likely have faced a lawsuit from Ovitz for defamation, fraud and breach of contract, an action that would have exposed the company to hundreds of millions of dollars in damages, both defense experts said.
"Disney would have lost," Fox said Friday.
Schulman suggested Ovitz would have sued Eisner and other Disney leaders, rather than the company, for blackening his reputation in a wrongful firing for cause.
The shareholder derivative lawsuit, which has been in progress for more than seven years, claims Disney's board failed in its fiscal responsibilities by not properly scrutinizing Ovitz's employment contract when he joined the company in 1995 and then granting him a nonfault termination that entitled him to the massive severance package when he left in December 1996.