906 A.2d 27 (Del. Ch. 2006)
In re The Walt Disney Co. Derivative Litigation is a landmark decision by the Delaware Chancery Court that delves deeply into the board of directors' fiduciary duties, specifically focusing on the duty of care and good faith.
Did Disney's board of directors breach their fiduciary duties of care and good faith by approving Michael Ovitz's employment agreement and severance package?
Directors must act in good faith, with the care an ordinarily prudent person would exercise, and in the corporation's best interests. The business judgment rule protects directors if they meet these standards, barring gross negligence.
The Delaware Chancery Court held that Disney's directors did not breach their fiduciary duties. It concluded that the board's actions, while not exemplary, met the standards of due care and good faith required under Delaware law.
This case is pivotal for law students and practitioners studying corporate governance. It underscores the broad protections afforded to directors under the business judgment rule, provided they act in good faith and with due care. It also clarifies the concept of 'bad faith' in corporate fiduciary duty claims and the limits of judicial intervention in business decisions.