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Business Associations Keyed to Hamilton
Brehm v. Eisner
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*Case Brief Anatomy includes: Brief Prologue, Complete Case Brief, Brief Epilogue
- The Brief Prologue provides necessary case brief introductory information and includes:
- Topic: Identifies the topic of law and where this case fits within your course outline.
- Parties: Identifies the cast of characters involved in the case.
- Procedural Posture & History: Shares the case history with how lower courts have ruled on the matter.
- Case Key Terms, Acts, Doctrines, etc.: A case specific Legal Term Dictionary.
- Case Doctrines, Acts, Statutes, Amendments and Treatises: Identifies and Defines Legal Authority used in this case.
- The Case Brief is the complete case summarized and authored in the traditional Law School I.R.A.C. format. The Pro case brief includes:
- Brief Facts: A Synopsis of the Facts of the case.
- Rule of Law: Identifies the Legal Principle the Court used in deciding the case.
- Facts: What are the factual circumstances that gave rise to the civil or criminal case? What is the relationship of the Parties that are involved in the case. Review the Facts of this case here:
Disney’s compensation committee (Defendant) approved an employment agreement for Ovitz to serve as Disney’s president. This Ovitz Employment Agreement (OEA) contained No Fault Termination (NFT) terms that provided, inter alia, that in the event of a non-fault termination, Ovitz would receive: (1) the present value of his salary ($1 million per year) for the balance of the contract term, (2) the present value of his annual bonus payments (computed at $7.5 million) for the balance of the contract term, (3) a $10 million fee for termination, and (4) the acceleration of his options for 3 million shares, which would immediately become exercisable at market price. In approving OEA with the NTF terms, the committee (Defendant) met two times. At he first meeting, the directors (Defendant) on the committee considered a “term sheet” that summarized all the OEA’s material terms. The committee members (Defendant) were informed that the value of the option component of the severance package could reach the $92 million order of magnitude if they terminated Ovitz without cause after one year. Their sources of information were the value of benchmark options granted to Disney employees previously, valuations of the proposed Ovitz options that were explained to them, and the amount of downside protection Ovitz was demanding to leave a job that would have paid him between $150 million and $200 million in commissions over five years. This meant that if Ovitz was terminated without cause, the earlier in the contract term the termination occurred the larger the severance amount would be to replace the lost commissions. Ovitz was terminated without cause after about a year, and he was paid the severance package provided by the OEA. Disney shareholders (Plaintiff) brought suit claiming that the compensation committee members (Defendant) had breached their duty of care by failing to properly inform themselves of material facts and hence were grossly negligent in approving the NFT provisions; that the compensation committee (Defendant) and the remaining Disney directors (Defendant) had beached their duty of care when they approved the hiring of O; and that even if the approval of the OEA was protected by the business judgment rule, the payment of the severance constituted corporate waste. The Chancery Court rendered judgment for the directors (Defendant) on all claims, finding that even though the committee’s (Defendant) decision-making process did not nearly measure up to corporate governance “best practices,” the committee members (Defendant) breached no duty of care when they considered and approved the NFT terms of the OEA; that the business judgment rule presumptions protected the decisions of the compensation committee (Defendant) and the remaining directors (Defendant), not only because they had acted with due care but also because they had not acted in bad faith; and that the record did not support the claim that the NFT provisions of the OEA were wasteful because they incentivized Ovitz to perform poorly in order to receive payment of the NFT provisions. The state’s highest court granted review.
- Issue(s): Lists the Questions of Law that are raised by the Facts of the case.
- Holding: Shares the Court's answer to the legal questions raised in the issue.
- Concurring / Dissenting Opinions: Includes valuable concurring or dissenting opinions and their key points.
- Reasoning and Analysis: Identifies the chain of argument(s) which led the judges to rule as they did.
- The Brief Prologue closes the case brief with important forward-looking discussion and includes:
- Policy: Identifies the Policy if any that has been established by the case.
- Court Direction: Shares where the Court went from here for this case.