The Keys to the Kingdom (59 page)

“I knew I had a dead witness on my hands,” Litvack continued with an astonishing lack of delicacy. “I wasn't sure a trier of fact would agree with me because I knew I had a dead witness on my hands.”

Fields hammered away at the specifics of the letters. In one of them, Litvack had written: “No one, not me and not Michael, has repudiated Jeffrey's right to his contractual incentive bonus.” How could Litvack have written that if, as he now swore, the company had decided that Katzenberg wasn't entitled to the money?

“You repudiate someone's right in my lexicon when you say, ‘I am not paying you. Go sue me,'” Litvack said.

 

IT WAS A
little past ten on a Tuesday morning when Eisner finally appeared.
Forbes
had just anointed him the highest-paid chief executive in America. By reaping $589 million in fiscal 1998, Eisner had handily beat out the runner-up, CBS president and chief officer Mel Karmazin, by almost $400 million. It perhaps wasn't the right crown to be wearing, because Disney's stock was still dragging and its earnings had been down 41 percent in the second quarter.

On the day of the trial, Eisner was having his perennial sartorial difficulties. One of the courtroom artists poised to make a sketch gazed upon him with a look of horror. “He's wearing a new jacket,” she whispered, “and he hasn't removed the stitching from his vents!” But with the usual pink tinge to his complexion, Eisner looked healthy and rested. He glanced at the reporters arrayed to watch this long-anticipated confrontation unfold. He and Katzenberg did not acknowledge each other.

Fields began by trying to force Eisner to acknowledge Katzenberg's contribution to Disney. He read from Eisner's 1988 letter to shareholders: “I can think of nothing but superlatives to describe [the] stunning performance of the entire Walt Disney Studio team starting with Chairman Jeff Katzenberg, and President Richard Frank.” Turning to Eisner, Fields asked, “You did say that, sir?” Eisner acknowledged that he did. “And you believed it at the time?” Again, Eisner answered yes.

Fields focused on what Eisner knew about Katzenberg's contract and when he knew it. Eisner was vague and unresponsive. When asked whether he stuck by his claim that Katzenberg had agreed to forfeit his bonus if he left in 1994, Eisner replied, “I don't think I claim that. I think it's true but I don't think—as a matter of fact, I'm pretty sure—I can't remember. We may have discussed it; we may not have discussed it. I can't remember now.” Pressed with his own testimony from depositions, Eisner said, “Now I'm confused as to what I knew when.” It appeared that either Eisner had
not allowed his lawyers to prepare him properly or they had done a poor job of it.

Eisner said he didn't talk to Katzenberg much about the deal when Katzenberg was renegotiating his contract in 1988. But Eisner testified that he had talked “many times” with Katzenberg about the notion that if he left in 1994, he would give up his bonus. “I never had a conversation with him, by the way, that was contentious,” Eisner volunteered. “In our entire relationship, I think we've had two…. We had a couple of quite emotional and intense conversations when he asked to be president.” Eisner also maintained that Wells had told him the 2 percent payment would be worthless.

Was it possible, Fields asked, that Wells could have ignored or misunderstood Eisner's orders in making the deal? “In my mind,” Eisner said, “it would be impossible.”

Fields tried to pin Eisner down on when he had told Wells that Katzenberg would lose the bonus if he opted out early. “I don't recall what specific proposal I objected to or didn't object to,” Eisner responded. Had he given Wells his orders before June 1988? Eisner seemed to concede that he had. If that was true, then how did he explain the many subsequent conversations in which Wells had told Katzenberg's lawyers and the board that the 2 percent bonus would continue? (There was also the July 1, 1988, deal memo which Eisner later told Tony Schwartz supported Katzenberg's position.) “If you put your foot down…then Wells was making an [unauthorized] offer?” Fields asked.

“You're trying to make me impugn a man not here to defend himself,” Eisner replied. “I'm not going to sit here and say Frank Wells disobeyed instructions or was insubordinate.”

Eisner said he thought Katzenberg's insistence on a four-year deal was “greedy.” Fields countered that if Katzenberg had signed the deal in 1988 and stayed through 1994, that would have kept him at the company for six years. “That's what you're labeling greedy?” he asked. “That was the length of your own contract.”

After some more back-and-forth, Judge Breckenridge made a rare interjection: “I think we're getting a little argumentative here.”

Fields continued to confront Eisner with examples of Wells memoranda that included Katzenberg's bonus. “I don't know when this was done,” Eisner insisted. “I don't know what it means.”

“We have four notes—June 6, June 13, June 20, and June 21—that you
would have found unacceptable,” Fields continued. How did that fit with Eisner's position that Wells kept him informed about everything he had done? Eisner dodged Fields's questions, prompting the judge to ask whether Eisner would have objected to what Wells had written in the memoranda. “I just don't recall,” Eisner said at last. But he said he objected generally to a four-year deal with the 2 percent payment in place. “I don't know the timing of the objection,” he said. “I may have been in Europe…. I don't even know if I was in town.”

Fields turned to Project Snowball. Eisner admitted he was aware of a project to track Katzenberg's compensation but had never heard that name. Fields presented him with a memo—copied to Eisner by Wells—labeled “Project Snowball.”

“I don't think I ever saw this memo,” Eisner said. “I don't think that it came to me…. Maybe it was a draft. I never saw it.”

Fields produced another memo addressed to Eisner. “I don't recall seeing it,” Eisner said.

Why, Fields asked, would Wells tell Katzenberg's lawyer that the 2 percent was “a tremendous concept” if he'd told Eisner the bonus was worthless? “I would have allowed him to say whatever he thought was appropriate,” Eisner said. “He was obviously encouraging Arthur Emil to accept this deal.”

“While Wells was telling you the 2 percent was meaningless, he was trying to get it back from Mr. Katzenberg. Is that correct?” Fields continued.

“Yes,” Eisner replied.

“Did you say to Mr. Wells, ‘If it's meaningless, why do we want to make him give it back?'”

“No.”

Whatever Eisner's credibility was when he took the stand, it suffered a direct hit when Fields asked about his autobiography. Eisner testified that he didn't know whether coauthor Tony Schwartz, who had been toiling on the project for almost ten years, had been working for him or for the Walt Disney Company. He wasn't sure whether he or Disney had paid what had to be hundreds of thousands of dollars.

Fields turned to the notes that Schwartz had taken. Now it was time to examine the issue of animus. All this time Fields had maintained his contemptuously polite tone, even when asking questions like “Has your memory slipped?” or, when asking about Katzenberg's share of merchandise, “Did you think zero would be a fair allocation?”

But suddenly Fields closed in. “Did you say you consider yourself to be the cheerleader and Mr. Katzenberg merely the tip of your pom-pom?”

Eisner seemed unfazed, at first. “If I said it, I'm quite sure it was in humor,” he replied.

“Did you say, ‘I think I hate the little midget'?”

Eisner stiffened. “You're getting into an area that I think is ill-advised,” he said ominously. If he said it, he continued, it was “about a series of things that Mr. Katzenberg had done to me…. It was completely private.” Then Eisner warned, “If you pursue this line of questioning, it will put into the public record those things that [should not] be in the public record.”

“Didn't you say more than once that you hated Mr. Katzenberg to Mr. Schwartz?” Fields persisted.

“I do not hate Mr. Katzenberg,” Eisner said. “We had a long and fruitful relationship.” Then he said again: “You're going in a direction that I think is not in your client's best interest or mine, but particularly your client's.”

What he meant by that, Eisner never said.

 

MEISINGER GAVE EISNER
a chance to explain some of his comments to Schwartz, including his remark that he didn't care what Katzenberg thought, he wasn't going to pay him any money. Eisner cited what he said was a misdirected fax from Katzenberg to Fields in 1994, just after he and Katzenberg parted ways. According to Eisner, the fax thanked Fields for helping him spin a story by Ken Auletta in
The New Yorker
. “I now said to Tony Schwartz, ‘Screw that. If he's going to play this…disingenuous game'…I simply was not going to pay him his money…. I could have been more generous after this final, final confirmation of bad behavior—I just wasn't going to do it.”

Eisner said he never intended to put his comments in his book. “I don't deal that way,” he protested. “But occasionally somebody does something that goes toward the dark side, that makes you so aggravated that you get annoyed.”

Under Meisinger's questioning, Eisner tried to reinforce the image of Katzenberg as a credit grabber. He said that when Katzenberg arrived at Disney, he had sent the animators “off the lot…into never-never land.” (Of course, Eisner had been fully on board when the animators were moved to the suburb of Glendale.) And Eisner denied that he had thrown Katzenberg out of his office when he tried to plead for his bonus. The meeting, he said, seemed “quite pleasant” to him. After Katzenberg left Disney and
started DreamWorks, he added, Eisner had approved a final $400,000 discretionary bonus for the year. “I thought it was fair based on what he had done,” he said. “I couldn't remember the anger that I had before, I guess.”

 

IN THE FINAL
analysis, Fields told the court, someone had to be lying.

Either Wells had tried to pull a fast one by slipping unfavorable language into Katzenberg's contract—which would be “garden-variety, half-truth fraud”—or the provision was never meant to strip Katzenberg of his bonus. Fields concluded that Eisner was the one who had fabricated his story.

“Can Mr. Eisner really have gone into Mr. Wells's office and said, ‘I won't make this deal?' No, he can't,” Fields said in his closing argument. “Mr. Wells didn't make proposals without clearing them. It didn't happen.” Fields referred to “the many stories of Michael Eisner” on the bonus. He invited the court to contrast Katzenberg's testimony with Eisner's. “Mr. Katzenberg answered the questions,” he said. “He didn't try…and duck and bob and weave…. Can we say that about Mr. Eisner? No.” He displayed a poster titled “The Circle of Animus.” A photo of a smiling Eisner was encircled by examples of his alleged hostility. The “I hate the little midget” quote and the pom-pom remark were prominently featured.

But the Fields version was clearly a bit too simple. Was Eisner making up his entire story? It seemed more plausible that Wells had convinced Eisner that he had the situation under control. With or without explaining his thinking to Eisner, Wells might well have put the contested language into Katzenberg's contract to cover himself and Disney if the relationship blew up. He must have assumed that in the near term, at least, he could handle things. Katzenberg would be persuaded to stay, the question of his bonus could be postponed for years, and Wells could be satisfied that he had kept things running as smoothly as could be expected at a burgeoning corporation filled with egos and ambitions and relentless desires for more.

Did he do what Eisner had always feared most: mislead him—betray him, to Eisner's way of thinking—for what he might have considered the greater good? Or did he collude with Eisner to placate Katzenberg, planning all the while to whittle at the money Katzenberg had been promised? This was a central mystery of the case and one that the triers of fact would fail to illuminate despite all the enormous volumes of testimony and documents that had accumulated by the time Fields rested his case.

 

OTHER NOTES THAT
Schwartz had taken based on conversations with Eisner were introduced into evidence but never discussed during the trial. Though meandering and sometimes murky, they gave broad hints as to why Eisner might have said he hated “the little midget.”

Eisner complained about “the fact that he comes to dinners and leaves after first course.” Eisner alluded to “underlying insufferability,” adding, “only i know how good and bad Jeff is.” And another time: “pathological beyond belief; Jeff…sicker than sick.”

And perhaps the hatred had begun in earnest in 1991, when Katzenberg wrote his ill-considered memo on the state of the industry. Eisner vented his anger over the memo—which he felt had been “plagiarized” from his own similar effort years before, when he was at Paramount. Of course Eisner knew what his own memo had been—an attempt to carve his own profile with the board, to step out of Barry Diller's shadow, to wrest distribution from Frank Mancuso, “the Sicilian.” But if Eisner was disturbed that Katzenberg might have borrowed his technique in an attempt to establish himself—not just with the board but in the entertainment industry generally—he didn't cast his objections quite in those terms. Instead, he expressed disgust with Katzenberg's apparent self-satisfaction, his lack of originality, and most of all, his defiance. Perhaps Eisner's memo hadn't had the intended effect but at least he had been graceful about it.

“He didn't write anyway,” Schwartz's notes read. “He was so proud of it…he wanted me to read it, thought it was so brilliant….[I said] you should use it in your head, don't show to anyone; i wrote on the memo…DO NOT XEROX OR SEND THIS TO ANYONE…. I he a rafter that, some got it with that written on it; he completely disobeyed me; frank and i discussed throwing him out; i told him not to do it; from that moment on i knew it was over. it wasn't the memo, fact i told him not to show it and faxed it and lied about it…. I just let him have it; just sits there and stares at you and walked out; everyone knew i was pissed off…from that memo on never made a decent movie.”