Katzenberg vs. Disney
Current DreamWorks CEO's Legal Battle With Disney CEO Michael Eisner
May 29, 2008 Dominic von Riedemann
From 1988 to 1994, Jeffrey Katzenberg resurrected Disney Animation by developing runaway hits like The Little Mermaid, Aladdin and The Lion King. However, Katzenberg's success and blatant ambition (he wanted to become president of the company) turned CEO Michael Eisner against his one-time protegé, with Eisner regularly telling friends, "I think I hate the little midget."
Roy E. Disney and the other animators also disliked Katzenberg, but it was for his overbearing ways and artistic ignorance. One oft-repeated story told of how he wanted the animators to fix a ceiling background in 1992's Beauty and the Beast.
"Make it French," Katzenberg insisted, "like Botticelli."
But the animators felt that Eisner's treatment of their boss was unnecessarily cruel and condescending. And Katzenberg had an unerring sense of what Middle America wanted from Disney, which helped those animated films, and spinoff Broadway shows, become massive hits. However, every one of Katzenberg's successes seemed to make Eisner's distaste increase, and his complaints became more and more frequent.
When Disney president Frank Wells died in a helicopter accident in 1994, Katzenberg quickly lobbied for the post, reminding Eisner that he had promised Katzenberg the gig should Wells ever leave (it's worth noting that Eisner frequently complained about Wells as well). However, this maneuver only sealed Eisner's paranoia, and the CEO forced Katzenberg out of Disney that September.
Round One: Shrek mocks Disney
Katzenberg quickly formed DreamWorks Studios with close friends David Geffen and Steven Spielberg. In order to prove who was really the genius behind Disney's "animation renaissance," Katzenberg promised to produce animated films that would compete directly with the Mouse House. DreamWorks Animation not only headhunted the notoriously unappreciated Disney animators, but also produced successful films like Madagascar and the Shrek franchise.
The latter series made more than $1.7 billion at the box office, and ruthlessly spoofed Disney classics. Michael Eisner was actually the model for the first Shrek's villain, Lord Farquaad (say that name five times really fast)
But Disney's legal battles really began when Katzenberg reminded Eisner that his contract contained a promise that his severance package would contain a 2% bonus from every hit film he had put together for the studio. Eisner was well aware about this: according to Project Snowball, a secret dossier he'd compiled on Katzenberg, this severance bonus would cost Disney $169.4 million.
Despite knowing about this, Eisner angrily claimed that Disney owed Katzenberg nothing. Katzenberg threatened to take the company to court.
In 1995, David Geffen approached Eisner on Katzenberg's behalf, and said that Katzenberg would drop the lawsuit if Disney paid him $60 million. Katzenberg was willing to go so low, because he needed the $33.3 million to bankroll his part of DreamWorks. Eisner again refused.
"The price is only going to go up," Geffen warned as he left.
Round 2: Ovitz Gets Knifed
The next year, then-Disney president Michael Ovitz, realizing that Katzenberg "had an excellent chance of winning" his lawsuit, negotiated a deal with Geffen that would give Katzenberg a $90 million settlement. Geffen and Katzenberg agreed to the deal but Eisner, feeling that Ovitz had exceeded his authority, shot it down.
For his part, Ovitz felt betrayed, not only by Eisner, but also by Disney legal counsel Sandy Litvack, who had knifed him in the back to further his campaign for Ovitz's job. It also destroyed Ovitz's legendary 100% success rate in closing deals, ruined his career, and doomed him at the company. Litvack's betrayal failed: Eisner took over, both as CEO and president of Disney.
In the spring of 1999, the case went to trial and Judge Paul Breckenridge swiftly ruled in favour of Katzenberg. Hoping to avoid a costly judgment, senior Disney board member Stanley Gold met with David Geffen, and agreed to pay Katzenberg a $280 million settlement. Eisner's display of pique towards his former protegé had ultimately cost Disney $111 million.
Katzenberg Lawsuit: Beginning of Eisner's End?
This incident had far-reaching implications for both Disney and Eisner. After Stanley Gold' negotiated the settlement with Geffen, Eisner became suspicious of the senior board member, and plotted to have him removed. But Gold was a close ally of Roy E. Disney, Walt's nephew. When Roy started making trouble on Gold's behalf, Eisner also attempted to have Roy purged from the company his father and uncle had created.
That was when Eisner's reach exceeded his grasp. Stunned by the CEO's audacity and disgusted with his handling of the company and its executives, Roy E. Disney and Stanley Gold assembled their Save Disney campaign, which successfully lobbied Disney's shareholders to force Eisner's resignation and to split the jobs of CEO and president, two positions Eisner had held since Ovitz's removal.
(Thanks to IMDb, and James B. Stewart's book Disney War for background material for this article)
Jeffrey Katzenberg
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