The title of this blog post is a paraphrase from a description in a recent article by Reuters about a case in the Delaware Court of Chancery against The Walt Disney Company, based on Section 220 of the Delaware General Corporation Law, that went to trial this past Wednesday. As of this writing, on Sunday evening, I’m not aware of a post-trial decision yet.
Regular readers of these pages over the last 18 years will be forgiven if they have grown weary of the hundreds of blog posts with highlights and commentary about Delaware decisions involving DGCL Section 220: the statute that gives stockholders the right, in some circumstances, to obtain certain corporate records. My anecdotal recent observation is that the number of 220 cases filed continues apace. That state of affairs makes sense in light of the Delaware Supreme Court and the Court of Chancery exhorting equity practitioners to “use the tools at hand”, such as Section 220, to obtain as much information as possible before deciding if a plenary suit is worthwhile. Yet, those familiar with 220 cases know they can be expensive and not always “summary in nature” especially if the trial court decision is appealed–and the court may decide after trial not to grant access to the requested documents.
Simeone v. The Walt Disney Company, C.A. No. 2022-1120-LWW, is not your “average 220 case”. The stockholder seeks corporate records that relate to public actions the company took to oppose lawfully-enacted legislation in Florida that sought to protect kindergarten students from sexually-explicit curriculum in public schools. After that public opposition by the company, and related actions the company took to oppose the new Florida law, the company’s stock lost about $82 billion in market value, according to some public reporting. There is a logical fallacy known by the Latin phrase: post hoc ergo propter hoc. In other words, simply because something follows an action, does not equate with causation. I’m sure economic experts could provide other reasons why the value of the company decreased by about $82 billion afterwards.
But one proximate result of the company’s opposition to the new Florida law that can be quantified more easily is the company’s loss of the “special district” that covered the Disney World theme park that afforded the company special tax treatment and special “self-governance” rights granted by the state–that it lost as a direct result of its public opposition to the new law. Florida’s Governor made it explicit that the loss of those special state-granted benefits was the state’s reaction to the public actions about the new law that the company took.
Lawsuits against companies, including Section 220 cases and plenary stockholder suits, are common when billions in market cap are lost and the loss is arguably related to corporate actions or omissions. That more suits were not filed against The Walt Disney Company in connection with the foregoing actions might be explained–perhaps–by many of the plaintiffs’ firms who typically file major stockholder class actions agreeing with the positions that the Disney Company took in opposition to the Florida law. Of course, there are over one million lawyers in the U.S., and I would never suggest that they are homogenous in their thought, nor would I suggest they all follow the same narrative as The Walt Disney Company did in this particular matter. The alleged ad hominem attack on the plaintiff and his lawyers in this case, however, may shed light on why more suits have not been filed.
For example: the arguments of the company’s lawyers have been described in court pleadings in this Section 220 case to include “anti-Catholic bias” against the plaintiff and his counsel. Wow. This accusation appears to be based in part on the positions taken by the civil rights group that is providing some funding for the suit. That same group recently defended, and obtained a verdict of not guilty, for someone who was arrested in a disgracefully orchestrated manner by the FBI, based on the public expression of his religious beliefs. Newsflash folks: in the year 2023, in some circles–apparently–religious beliefs of a certain ilk can be disfavored with impunity. Stated another way, the zeitgeist and some federal law enforcement agencies encourage disfavoring those beliefs.
Back to the specific details of the Section 220 case in Simeone v. The Walt Disney Company. I will attempt to report on the post-trial decision when it is published, but the best that the plaintiff can hope for in this 220 case is that the court will order that the company produce some documents that explain the circumstances surrounding the positions taken by the company that resulted in the loss of their special sui generis state-granted benefits, as well as–at least arguably–the loss of billions of dollars in the value of their market cap following their vociferous opposition to a law passed by the Florida Legislature that was not aimed at the company or its operations.