Disney Executive's Severance Ruled Legal

In a statement, Eisner attorney Gary P. Naftalis said, "Mr. Eisner is very pleased that the Court, after hearing all the testimony and seeing the witnesses, has found that he and the other directors properly carried out their fiduciary duties to the shareholders. We always believed that there was no basis for this case."

In a statement, Ovitz attorney Mark H. Epstein said, "The decision is consistent with what Mr. Ovitz has been saying all along. He always acted in accordance with his duties to Disney's shareholders and the allegations against him were without merit."

Defendants in the suit included high-profile current and former Disney directors, among them former Senate majority leader George J. Mitchell, actor Sidney Poitier, architect Robert A.M. Stern and former Georgetown University president the Rev. Leo J. O'Donovan. Mitchell is now chairman of the Disney board, and O'Donovan remains a director.

The case, which took seven years to wind its way into court last fall, drew reporters from across the world to the usually quiet town of Georgetown, Del., where Chandler lives and prefers to hear cases. (The main Delaware Chancery Court is in Wilmington.)

Ovitz testified during the trial that he went into his job at Disney with enormous energy and high hopes, only to be thwarted at every turn by a jealous and backstabbing Eisner.

"I went into a partnership with a man I was a life partner with, in a strange way, as a friend, and expected it to be a home run," Ovitz said on the stand in October. "And it was a nine-inning ballgame that was over in three innings." Ovitz said he was devastated by memos introduced in the trial in which Eisner referred to him as a "psychopath" and habitual liar.

Eisner testified that he kept the board fully informed about the terms of Ovitz's hiring and defended his decision to bring in Ovitz, even though the high-profile Hollywood agent had little experience as a senior executive at a publicly traded company. During the trial Eisner walked a fine line in his testimony, saying Ovitz was a bad fit for Disney but did nothing to warrant termination for cause.

Eisner's finely balanced testimony illustrated the strange alliance the case created. While bitterly estranged after a 25-year friendship, Eisner and Ovitz were on the same side in the case.

Elson of the University of Delaware said the fact that the case dragged on for so long, and aired so much dirty laundry, should be a deterrent to bad director behavior. "Even without liability, who would want to go through this kind of misery for eight years?" he said.

Elson also noted that Chandler sharply criticized the behavior of Disney directors and made a point of saying he took into account the fact that the decisions in question were made 10 years ago, before attitudes toward corporate governance changed. Chandler saved some of his strongest words for Eisner, saying the Disney chief did a poor job of keeping board members informed and "enthroned himself as the omnipotent and infallible monarch of his personal Magic Kingdom."