Just when we thought things couldn’t get messier for the Mouse, it seems another wild story hits the headlines.
Disney has faced an animated movie flop, the ongoing battle between Disney and DeSantis in Florida, a writers’ strike, thousands of layoffs across the company – including at Walt Disney World and Disneyland – and a recent drop in Disney+ subscribers.
Now, after suing Florida and Governor DeSantis, Disney is being sued itself.
The DeSantis Story
It’s been a crazy few weeks in Disney legal news. In a dramatic turn, Disney filed a lawsuit on April 26, suing Ron DeSantis, the board, and other state officials in federal court, claiming “a targeted campaign of government retaliation.”
Amid a political boycott of The Walt Disney Company, the Florida Governor fulfilled his promise to remove Walt Disney World’s Reedy Creek Improvement District – but after being outsmarted by Disney, the feud has escalated beyond the boardroom to the courtroom. A board appointed by Florida Governor Ron DeSantis to oversee government services at the Walt Disney World Resort voted Wednesday, April 26 to nullify two agreements that gave Disney control over the 25,000-acre property, and Disney CEO Bob Iger was ready to counteract.
Now, a lawsuit has been filed in US District Court for the Central District of California, suing former Disney CEO Bob Chapek, The Walt Disney Company, current CFO Christine McCarthy, and former Entertainment Chief Kareem Daniel. The lawsuit accuses them of “misleading investors and concealing the true cost of the Disney+ platform.”
The Lawsuit Against Disney
Wild, right? The new lawsuit is a securities class action on behalf of all purchasers of the Disney common stock between December 10, 2020, and November 8, 2022. Former Disney CEO Bob Chapek was controversially fired back on November 20, 2022.
The lawsuit stems from The Walt Disney Company’s reorganization in October 2020, alleging that a scheme looked to hide steep costs associated with the Disney+ streaming service, via Bloomberg Law.
The complaint states that the accused “repeatedly misled investors about the success of the Disney+ platform by concealing the true costs of the platform, concealing the expense and difficulty of maintaining robust Disney+ subscriber growth, and claiming that the platform was on track to achieve profitability” by the end of the fiscal year 2024.
The lawsuit further alleges that executives, including Chapek, “debuted content created for Disney+ initially on a legacy platform in order to shift marketing and production costs onto that platform.”
Interestingly, the complaint notes that Chapek’s reorganization was “a dramatic departure from Disney’s historical reporting structure” and supposedly redirected power and control from creative content executives to Chapek’s lieutenant Kareem Daniel. The reorganization resulted in the Disney Media and Entertainment Distribution (DMED) unit.
Chapek Vs. Iger
Bob Chapek was dramatically fired as Disney CEO and replaced by previous Disney CEO Bob Iger. Bob Iger was a well-loved Disney CEO, steering Disney through acquisitions of Lucasfilm, Pixar, Marvel Studios, and 21st Century Fox to become the giant entertainment company it is today.
Bob Chapek’s time as CEO of The Walt Disney Company divided Disney fans, with several Disney PR backlashes, a political battle with Florida Governor Ron DeSantis over the “Don’t Say Gay” bill, the new Genie+ and Disney Park Reservation systems, and a focus on budget cuts after a poor quarterly earnings report.
Disney’s streaming services lost $1.47 billion in his last quarter as CEO, more than double the unit’s loss from a year prior, while shares of Disney fell roughly 8% in after-hours trading on Wall Street.
One of Iger’s first moves upon his return in November 2022 was a full reorganization of the company, as well as announcing Kareem Daniel’s departure.
The pension fund lawsuit seeks damages and injunctive relief on its securities fraud claims. According to Bloomberg, Disney has not responded for comment, but we will keep you posted on any further updates regarding this developing story.
The news comes after DeSantis’ board filed a lawsuit against Disney that will seek to “uphold and enforce the board’s April 26, 2023 legislative findings relating to the February 8, 2023 development agreement and declaration of restrictive covenants.”