Disney has been the subject of a few lawsuits lately, and now another has hit the Company.
We’ve already seen a lawsuit filed regarding Magic Key Passes and the Park Pass system in California, Annual Passes and the Park Pass system in Florida, and the Genie/Genie+ system. Now, another lawsuit has hit the Mouse, and it comes from an investor.
According to Bloomberg, Kenneth Simeone, an investor in Disney, filed a lawsuit in Delaware Chancery Court against Disney (Kenneth Simeone v. The Walt Disney Co., No. 2022-1120, Delaware Chancery Court (Wilmington)). Let’s go through the basics:
What Is the Lawsuit About?
The lawsuit is centered around Disney’s response to Florida’s Parental Rights in Education Bill (what critics called “Don’t Say Gay”). As a quick recap, Disney initially refused to make a statement on the bill. Later, Chapek apologized for not being a “stronger ally in the fight for equal rights,” and made it clear that Disney was opposed to the bill. Disney ultimately made a stronger statement as the bill was passed, indicating that it should not have been passed and that Disney would work toward its repeal.
This prompted Florida Governor Ron DeSantis to indicate that Disney had crossed a line. Following this, as a form of retaliation, the Florida legislature and Governor DeSantis passed/signed a bill into law that will dissolve Disney’s Reedy Creek Improvement District (RCID) in 2023. The RCID has essentially allowed Disney to function as its own county government for 50+ years, giving it a great deal of control over the land on which it operates in Florida.
There has been some talk about a new district that could replace the RCID and how it would essentially function much like the RCID but potentially give the Governor some “wins,” like the ability to nominate some individuals for the new district’s Board. No final decision or arrangement has been announced yet.
That brings us to the current day and the lawsuit brought in response to Disney’s actions in handling this “Don’t Say Gay” situation.
What Does the Lawsuit Allege?
According to Bloomberg, the lawsuit claims that Disney created “‘far-reaching’ financial risks for itself by opposing a Florida law limiting instruction on sexual orientation or gender identity in elementary schools.” Simeone claims that by criticizing “Don’t Say Gay” Disney “lost control over tax and improvement issues at its Orlando-area theme park.”
Simeone has demanded that Disney turn over internal records about the decisions made surrounding the Company’s opposition to “Don’t Say Gay.”
The lawsuit alleges that the “financial repercussions from Disney’s actions, and resulting harm to the company and its stockholders, have been swift and severe.”
The investor claims that there are “legitimate questions” about the decision by Disney’s Board of Directors to let executives within Disney publically oppose the bill (now law), knowing that Disney could “lose the benefits of a one-of-a-kind deal that has existed between Disney and the state for more than half a century.”
It wasn’t until after Disney’s statement against “Don’t Say Gay” as the bill was passed into law that it was revealed that Florida legislators had met to discuss a repeal of the RCID. But Simeone alleges that Disney “ignored a warning from the governor about opposing the statute.”
The bill to dissolve the RCID was introduced and then swiftly passed. Though the law would greatly impact Disney, it could also impact Florida and the counties that surround Disney. Some have warned that the dissolution of the RCID could result in a huge tax burden (particularly a burden surrounding outstanding bonds) being passed on to local counties.
Florida Democratic state senator Linda Stewart has explained that she didn’t “think [DeSantis] understood how badly this could go for the state of Florida and the counties and the cities.”
What Is This Lawsuit Really?
According to Bloomberg, this is what is known as a “books and records” action. Basically, it’s a way of demanding documents that could then later be used to sue Disney’s directors over their handling of the “Don’t Say Gay” situation.
Bloomberg points out that Delaware judges “often grant such file requests.” Now that the request for documents has been made/lawsuit filed, we’ll have to wait and see how the case is decided and whether the documents are provided. That could lead to further legal action against Disney’s Board of Directors.
For more updates about Reedy Creek and what could happen with the district, click here. And stay tuned for more news.
It’s shocking how bad Bob Chapek was? Hopefully the ship can be righted.
Can you actually sue a company for making bad business decisions? All investments are a risk with any company, some greater than others. You win some, you lose some.
Richard R Porqueddu says
Chapek was the symptom. The Board of directors dictated by Blackrock is the problem. Let’s hope this has legs and the board can be held accountable.
Sounds as if the Florida government was trying to avenge the Disney Corporation as one official claimed that by critizing ‘Don’t Say Gay’ Disney “lost control over tax and improvement issues at its Orlando-area theme park.” Florida senator Linda Stewart explained she didn’t “think DeSantis understood how badly this could go for the state of Florida and the counties and the cities.”
To me, this sounds like the kind of fight one would hear on a playground among ten year olds, not between a state governor and a major corporation. The entire thing is ridiculous. No one gains by this kind of behavior – not taxpayers, businesses and most of all, not the LGBTQ community.
Tesla stock has dropped and keeps going down. Can they also be sued?
Everyone in the upper echelon of Disney should be held fully accountable to the shareholders for this debacle. Perfect example of why companies who depend on the public for revenue should stay OUT of politics. That’s just plain common sense, and if Chapek and the Disney Board of Directors didn’t have enough common sense to know that, they should have, at least, known that it wasn’t a good dollars and cents move. Epic failure on all levels!
A sitting governor punishing a business for having an opinion against a law is the insane thing. DeSantis should sued, not Disney. So much for the “freedom of speech” these people claim to love.
Foreseen. It is very common for activists to spin a topic to spark a public outcry, especially when the facts are not widely known. For a publicly traded corporation to cater to activists, without careful consideration of their words and the potential impact to their investors, clientele and market, is a sign of incompetence and gross mismanagement.