Disney Rocked With Another Lawsuit, This One Is Bad

In an unprecedented lawsuit, a group of Disney shareholders has filed a 63-page claim against The Walt Disney Company, Bob Chapek, Bob Iger, Christine McCarthy, Kareem Daniel, Susan Arnold, and other Disney executives for their alleged involvement in damaging the company.

The lawsuit, created by Stourbridge Investments LLC on behalf of the shareholders, accuses The Walt Disney Company and its executives of violating the Exchange Act, breaches of fiduciary duty, insider trading and misappropriation of information, unjust enrichment, and waste of corporate assets.

During a two-hour livestream on his YouTube channel, legal analyst Andrew Esquire said, “So we’ve seen the other lawsuits like the TSG lawsuit, which talks about Disney+, which talks about this shift to streaming and their loss of revenue from their breach of contract. But it’s that element that is in there, within that lawsuit, as well as within the previous pension fund lawsuit talking about this kind of funny accounting. This kind of Hollywood accounting that’s going on with shifting costs from Disney+ to legacy media. So that is one of the big allegations, here.”

The lawsuit alleges that Disney executives lied about the success of Disney+ and the capability of the platform to hit profitability by 2024 and that these lies caused investors to be harmed. It also alleges insider trading, accusing Bob Chapek, Christine McCarthy, and Kareem Daniel of selling stock before the bust.

Esquire commented, “And to be clear this is a federal lawsuit that is really taking action under various provisions under the Securities and Exchange Act. So these are essentially securities allegations brought by the shareholders that they are violating securities law.”

The lawsuit follows the claims of film financier TSG Entertainment, which recently sued Disney for breach of contract and attempted deprivation of profit, as well as the case filed by the Local 272 Labor-Management Pension Fund. This allegation accused the defendants of issuing false and misleading statements regarding the success of Disney+, being aware of the false and misleading statements, and concealing the extent of Disney+ losses.

The lawsuit remains pending, but legal analysts like Esquire believe it will survive a motion to dismiss and demonstrate the “reasonable basis” required to proceed in court.

It remains to be seen exactly what will come of the lawsuit, but it certainly indicates a disruption in the shareholding dynamic and serves as a reminder of the intricate and complex legal environment in which large corporations can find themselves operating.

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