Disney Litigation

Question 1

What is the role of Disney’s Section 102(b)(7) clause in the Disney litigations?

1. It would exculpate the directors for violations of their duty of loyalty, and so meant they did not have to make a demand
2. It meant that the directors would be exculpated for violations of their duty of care, and so could have exercised their business judgment in considering a demand by the plaintiff shareholders
3. It meant that the Disney D&O policy would cover the costs of the Ovitz severance payment
4. It meant that Disney would be exculpated for the losses connected to its violation of its good faith responsibilities to its shareholders
5. None of the above

Answer 1

2. It meant that the directors would be exculpated for violations of their duty of care, and so could have exercised their business judgment in considering a demand by the plaintiff shareholders

Question 2

In In re The Walt Disney Company Derivative Litigation, 907 A. 2d 693 (Del. Ch. 2005) (Disney III), Chancellor Chandler ruled that:

1. The Disney directors did not act in bad faith
2. The Disney directors exercised their business judgment
3. The Disney directors were at most ordinarily negligent
4. Ordinary negligence is not enough to constitute a violation of the fiduciary duty of care
5. All of the above

Answer 2

5. all of the above

Question 3

According to the dicta in In re The Walt Disney Company Derivative Litigation, 906 A.2d 27 (Del. 2006), which of the following may be exculpated by a Section 102(b)(7) clause?

1. Fiduciary conduct motivated by an intent to do harm
2. Fiduciary action taken solely by reason of gross negligence, without any malevolent intent
3. Fiduciary conduct that constitutes intentional dereliction of duty, a conscious disregard for one’s responsibilities
4. All of the above
5. None of the above

Answer 3

2. Fiduciary action take solely by reason of gross negligence, without any malevolent intent