Disney has emerged victorious in a ruling by a Delaware judge, who dismissed an investor lawsuit accusing the company of mismanagement. The suit was brought by longtime Disney stockholder Kenneth Simeone, who sought internal company documents regarding officers and directors’ ties to political organizations and causes. The lawsuit came after Disney publicly feuded with Florida Governor Ron DeSantis over a law that restricted classroom discussion of sexual orientation and gender identity.
Vice Chancellor Lori Will of Delaware’s Court of Chancery found that Simeone brought the suit at the direction of the conservative legal organization and anti-abortion group, the Thomas More Society. The judge determined that Simeone’s disagreement with Disney’s position on the law did not provide evidence of wrongdoing. Simeone alleged that Disney’s officers and directors prioritized their own beliefs over their obligations to stockholders and ignored the risks associated with its special district, which has been dissolved and is currently embroiled in litigation.
According to Delaware law, stockholders have the right to inspect corporate books and records as long as they can show a proper purpose. However, defendants can prove that a stockholder brought a suit as a proxy for legal counsel. In this case, the judge emphasized the “lawyer-driven nature” of the litigation, pointing to testimony from Simeone that he did not recall reading a draft of his demand for records before it was sent to Disney.
The judge concluded that Simeone’s allegations did not suggest potential wrongdoing but rather criticized a business decision. Delaware law grants directors significant discretion to guide corporate strategy, including on social and political issues. The judge noted that corporate speech on policy matters carries both risk and opportunity, and it is within the company’s authority to weigh these considerations. Stockholders invest with the understanding that management has the power to direct corporate affairs.
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Furthermore, the judge determined that the Disney board did not abdicate its duties or allow personal views to dictate its decision to oppose the law. She cited former Disney CEO Bob Chapek’s acknowledgment that the company’s original approach “didn’t quite get the job done.” Facing backlash from employees and talent in Hollywood, Disney changed its stance after holding a special meeting about political engagement and communications. The judge found that Disney could have believed that its decision would build long-term value.
The legal battle between Disney and Governor DeSantis continues, as they trade blows in a litigation that will determine whether Disney can retain the powers of its special district. Disney filed a complaint in Florida federal court seeking a court order that the legislation dissolving its special district was enacted in retaliation for its political speech, violating the First Amendment. Governor DeSantis has moved to dismiss the suit, claiming immunity.
Neither Disney nor the Thomas More Society, which backed Simeone’s lawsuit, have provided comment on the ruling. The conservative legal group has been involved in drafting legislation that allows private citizens to sue anyone assisting with an abortion outside of a state that has banned the procedure.
In summary, Disney successfully navigated a legal challenge from an investor who accused the company of mismanagement. The judge ruled in favor of Disney, stating that the investor’s disagreement with the company’s position on a controversial law did not constitute evidence of wrongdoing. The ruling affirmed the discretion of directors to make business decisions, including taking a stance on social and political issues. The legal battle between Disney and Governor DeSantis over the powers of Disney’s special district is ongoing.
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