We know the date, the time and the place: Nov. 18, at 9 A.M., in a grungy room in California Superior Court in Los Angeles. What we haven’t known, up until now, is the choice of weapons.
Sources have said that in his $250 million breach-of-contract lawsuit against the Walt Disney Company, Jeffrey Katzenberg will brandish the signatures of a dead man and the unpublished memoir of his ex-boss, Disney chairman Michael Eisner. It is a wickedly honed legal strategy designed to ensure that Mr. Eisner, at the very least, falls on his sword.
But Disney’s dagger may prove deadlier. The Observer has learned that Mr. Eisner’s lawyers recently took depositions from Steven Spielberg and David Geffen, Mr. Katzenberg’s partners in Dreamworks SKG. “Both Katzenberg and Dreamworks will go on trial,” said a Disney source. “We’re going to put David and Steven on the witness stand and conduct an examination of their company as well.”
This is the first insight into Disney’s strategy; previously, the company had been silent and inscrutable on the matter. Dragging Messrs. Spielberg and Geffen into the fray is nothing but nasty, and not just because Mr. Katzenberg’s dispute with Disney predates Dreamworks’ 1994 founding. Until now, it seemed that Mr. Katzenberg-who was chairman of Walt Disney Studios when he resigned in 1994-had nothing to lose and everything to gain by pressing his lawsuit. That may not be so anymore. Disney’s legal team believes it may have found his Achilles’ heel: his partners. The attorneys-who include litigator Lou Meisinger, known as the ultimate studio lawyer who never represents talent, and Disney in-house consigliere , executive vice president Sandy Litvack, a former assistant U.S. attorney general in the Justice Department’s antitrust division-intend to exploit various press reports of reputed rifts developing in the chummy environs of Dreamworks.
The conventional wisdom is that Mr. Spielberg and, to a lesser extent, Mr. Geffen, are the keys to Dreamworks’ success; in the company pecking order, Mr. Katzenberg is not just the worker bee, but literally the poor relation. He has been heard to lament that he mortgaged himself up to his ears to come up with his $33 million share to join Dreamworks. (Friends have suggested that he not bring this up in court, however, as 12 normal people might not feel too sorry, since those mortgaged homes are in Malibu, Beverly Hills and Deer Valley, Utah.) Disney’s side has even suggested that the reason Mr. Katzenberg is pursuing the lawsuit is because he is not making any money at Dreamworks. In fact, a Katzenberg defender confirmed that the Dreamworks partners decided to delay taking earnings out of the company for 10 years.
Mr. Spielberg, who has a well-known distaste for legal wrangles, surely won’t be thrilled to take time away from fine-tuning his latest opus, Amistad , for its Dec. 10 opening in order to be a pawn in his partner’s courtroom confrontation. (The film, about a dramatic slave revolt, is Dreamworks’ hope for an Oscar this year.) And Mr. Geffen, though famously pugnacious, could be reluctant to appear in court for the same reasons as Mr. Eisner. For them, it’s tantamount to being administered truth serum in front of a gallery of media hyenas- The New York Times, Variety, The Hollywood Reporter, Business Week the Los Angeles Times , Time, Newsweek , CNN, CNBC, The Observer and, in the pièce de résistance , Vanity Fair ‘s Dominick Dunne-who are gleefully awaiting the opportunity to hear any studio executive answer, under oath, all kinds of questions about profits, losses and salaries.
It’s obvious that Disney’s hardball tactics are aimed at not just bringing Mr. Katzenberg to his knees, but to the settlement table.
A California Superior Court referee is bearing down on both sides, urging them to work out a compromise and avoid a trial. And miracles do happen. But despite a published report in the Los Angeles Times on Oct. 31, Mr. Eisner’s position has not softened; rather, it has hardened, sources close to him told The Observer . And a particularly disastrous settlement session between the two sides on Nov. 3 ended with one insider saying, “They’re definitely headed to court.”
News of the Disney strategy appeared to surprise Mr. Katzenberg’s side. “What they’re going to say about Dreamworks couldn’t be worse than what the press has already written about us,” said one Dreamworks executive, alluding to the media reaction to Dreamworks’ first feature film, The Peacemaker , a box office failure. Ironically, Mr. Katzenberg had little to do with the film; it was greenlighted by Mr. Spielberg, said a Dreamworks source. “Their talking about Dreamworks is our equivalent of talking about Eisner’s questionable judgment in hiring [Michael] Ovitz [to be president of Disney]. It has nothing to do with the case at hand.”
But forget any gentlemanly rules of engagement. This is Hollywood’s version of extreme combat, and you don’t even have to subscribe to pay-per-view to watch! (Court TV has requested permission from Superior Court Judge John W. Ouderkirk to broadcast the trial live.) And while both sides claim they don’t want cameras in the courtroom (a source on Mr. Katzenberg’s team expressed concern that Mr. Eisner “will try to perform for the camera, like he does on The Wonderful World of Disney “), it seems a growing inevitability.
A court-issued gag order has for some time forbidden either side from talking to the press. Then again, when did a court order ever stop people from gossiping in Hollywood? The back-and-forth pretrial chatter resembles that old Saturday Night Live skit: “Jeffrey, you ignorant slut …” For example, Disney sources noted that Dreamworks recently held a special companywide conference to reassure the staff that their groovy studio has not lost its mystical chic. (Dreamworks characterized it as the company’s annual corporate retreat.) A Katzenberg loyalist pointed out that the visages of Mr. Eisner and his wife, Jane, seem to have been surgically refreshed in time for ABC’s new fall lineup. A Disney official denied that allegation as “ridiculous.”
Over the years, the entertainment business has witnessed its share of courtroom vitriol. Martin Davis v. Barry Diller, Sumner Redstone v. Edgar Bronfman Jr., Rupert Murdoch v. Ted Turner. But what makes this singular is that Mr. Katzenberg and Mr. Eisner are like a couple who find themselves in divorce court after 19 years of marriage: They know exactly which buttons to push to cause the most pain. What’s especially ironic here is that Mr. Katzenberg learned his tactics at the feet of the master, Mr. Eisner. Disney, after all, is consistently tougher and meaner than all the other studios combined, a reflection of Mr. Eisner’s vengeful leadership style.
Disney’s trial strategy will be to contend that Mr. Katzenberg was not the model employee he has presented himself to be. Targeted in particular will be his record on live-action feature films, where his initial success starting in 1984-making high-concept, low-budget films with over-the-hill stars-began to falter by 1990 with bombs like Blank Check and My Father, the Hero . To drive the point home, a Disney source said the company’s lawyers will show that Mr. Katzenberg’s losing streak has extended to his tenure at Dreamworks.
However, Disney will face the near-impossible task of impugning Mr. Katzenberg’s incredible track record with animated features like The Little Mermaid , Beauty and the Beast and The Lion King . Mr. Katzenberg’s side will claim that Disney’s animation department has been in a shambles ever since the executive’s departure, as evidenced by decreasing revenues and last summer’s anemic Hercules .
Powering Mr. Katzenberg’s case against Disney (in addition to the executive’s near total recall for detail) are his two attorneys: Bert Fields and Herbert Wachtell. “Until Michael Eisner met Herb Wachtell, there was nobody he was more terrified of on the other side than Bert Fields,” Mr. Katzenberg often jokes. Said another source close to the executive, “Even if Eisner wins this lawsuit, he loses, because you know he will be sliced, diced and fed to the fishes here by these attorneys. They’re going to kill him.”
Mr. Fields is a Century City entertainment lawyer whose nickname is the Exterminator. (He used to be called the Terminator.) The 68-year-old litigator, who has never lost a trial, is representing at least six cases against Disney and its independent arm, Miramax Pictures. “I love to sue Disney,” Mr. Fields told The Observer recently. “Well, maybe that’s an overstatement. I just find myself in a position of doing it a lot.”
The attorney represents screenwriter Robert Towne, producer Joel Silver, directors James Cameron and Mike Nichols and actors Warren Beatty, Dustin Hoffman and Tom Cruise. A University of California at Los Angeles graduate with a degree from Harvard Law School, Mr. Fields is accustomed to his former adversaries-like David Geffen-later retaining him. (The litigator successfully represented Mr. Towne, who wrote and directed Personal Best , against Mr. Geffen, the film’s producer, over the final cut of the film.) Big cases like Mr. Katzenberg’s are Mr. Fields’ specialty. The same applies for Mr. Wachtell. The Observer has learned that Mr. Katzenberg is spending $10 million on his legal team, which is comprised of four attorneys under Mr. Fields and eight under Mr. Wachtell. Near the end of each workday, Mr. Katzenberg checks in with his bicoastal attorneys in a 15-minute phone call.
It was Mr. Katzenberg’s idea to hire Mr. Wachtell, a partner of the Manhattan firm of Wachtell, Lipton, Rosen & Katz. Mr. Wachtell may be even tougher than Mr. Fields. After all, he was hired by the Philip Morris Companies and Lorillard Inc. as one the chief negotiators in the tobacco companies’ settlement with 40 state attorneys general. Last summer, representing Seagram Corporation’s chief executive, Mr. Bronfman, he made mincemeat of Viacom Inc.’s chief executive, Mr. Redstone, during a Delaware Chancery Court trial in which the two executives fought over the disposition of their shared asset, USA Networks. The court ruled in favor of Mr. Bronfman.
By no means the patrician that Mr. Fields is, Mr. Wachtell was born in the Bronx to a lower-middle-class family, which nevertheless managed to send him to New York University, where he received his undergraduate and law school degrees. At 65, Mr. Wachtell, who is separated from his wife, lives on Fifth Avenue and in a low-key part of East Hampton.
Together, the pair of attorneys has been focusing on a two-pronged attack, one aimed at Mr. Eisner, the other at Disney. A source close to Mr. Katzenberg said that his attorneys, looking for a legal way to get inside Mr. Eisner’s head after he successfully dodged his deposition with scores of I-don’t-recalls, seized on the idea of subpoenaing Mr. Eisner’s memoir, which was being ghostwritten by New York writer Tony Schwartz and was scheduled to be published in October by Random House. As The Observer noted when it broke that story in June 1997, the lawyers didn’t content themselves with Mr. Eisner’s manuscript. Instead, they demanded all the notes and transcripts accumulated since the project commenced in 1984, right after Mr. Eisner, with Mr. Katzenberg in tow, jumped from Paramount to Disney.
Subpoenaing “the book started out to be a petty annoyance, an attempt to make [Mr. Eisner] pay something in the pain quotient,” the source suggested. “Ultimately, it’s ended up being a gold mine for litigation which nobody ever expected. It just goes on and on and on and on. It’s pretty amazing.”
Even though they lost their attempt to quash the subpoena, Mr. Eisner’s tacticians appear cocky that Judge Ouderkirk will only allow what a source close to Mr. Eisner deemed “relevant portions of the book”-and not any potentially humiliating or embarrassing revelations about prominent Hollywood stars and executives.
One thing is absolute: The book’s publication has been derailed by the move until the resolution of the trial. That has to hurt Mr. Eisner, who is said to be emotionally invested in the project. “Nothing matters more to Michael than his reputation. That’s what that book is all about,” said one source who knows both Messrs. Katzenberg and Eisner well. “I thought he cared more about his legacy than about wanting to kill Jeffrey. That’s why it’s so illogical to me why Michael wants to get into a courtroom.”
Sources said that the litigators also have in their possession several internal memos, all signed by Frank Wells, the Disney president and chief operating officer who was killed in an April 1994 helicopter crash, promising Mr. Katzenberg a bonus of 2 percent of the profits generated by all Disney movie and TV shows put into production during Mr. Katzenberg’s tenure. The $250 million that the executive claims Disney now owes him is derived from that formula, but the figure could go as high as $500 million when all the numbers are crunched. Disney has long asserted that no such promises were made by Wells, and even if they were, that they were made null and void when Mr. Katzenberg resigned.
As a source has said, “It will become incredibly clear when they get into a courtroom that Jeffrey’s not crazy. It’s there in black and white, and it’s not one smoking gun, but 10 smoking guns, one after another and another, and they’re in Frank’s own handwriting.”
It was Wells’ death, followed by Mr. Eisner’s quadruple-bypass surgery three months later, which suddenly raised emotionally charged issues between the mentor, Mr. Eisner, and the protégé, Mr. Katzenberg, of power, loyalty and betrayal. The struggle between the two-Mr. Katzenberg wanted to be promoted into Wells’ job; Mr. Eisner said No-transcended business and quickly became all too personal.
It could be argued that both men, while so clear-eyed when it comes to the art of the deal, have proven themselves blind in their postpartum attitude toward one another. For his part, Mr. Katzenberg has said repeatedly to his friends that he bears no personal animus toward Mr. Eisner, and that unlike three years ago, when he was very publicly furious, he has become a Zen master and learned to let it go.
Only a fool would believe that. Perhaps his real sentiments are expressed when he attributes more hot-blooded emotion to his wife of many years, Marilyn. Mr. Katzenberg, when dining with friends, has said that if Mr. Eisner were to walk in the door, he would go over and shake his hand. “But if Marilyn were here,” he added, “she would pick up this fork, go over and stab him between the eyes. But then again, she’s a Jewish girl from the Bronx.”
Judge Ouderkirk seems the perfect choice to preside over all this acrimony. It’s not just that he oversaw one of Los Angeles’ most racially charged trials-that of three black men charged with the live-broadcast beating of truck driver Reginald Denny in South Central Los Angeles on the first day of the 1992 riots. More to the point was the judge’s handling of a ghoulish scandal that rocked California’s funeral home industry, in which a husband and wife were convicted for unlawfully removing eyes, hearts, lungs and brains from corpses. Judge Ouderkirk’s experience with dismemberment should prove useful to him when and if Katzenberg v. Walt Disney Company comes before him on Nov. 18.
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