Lawsuits and Disney go hand in hand. At any given time the company is dealing with suits over injuries at Disneyland or lawsuits over alleged plagiarism over the Pirates of the Caribbean movies. However, right now the Walt Disney Company is involved in its highest-profile legal battle in years. It’s suing the state of Florida over the control of Walt Disney World property, and a suit by Florida is also expected to be filed against the company. And now, another big legal battle is brewing over Disney+.
Bob Chapek left his position as Walt Disney Company CEO under a cloud and in a hurry, but while Chapek may be gone, his legacy lives on. Specifically, his legacy as it regards the handling of Disney+, as Chapek is one of several defendants named in a lawsuit against the company which claims that DIsney made misleading statements about the state of DIsney+ to investors.
Deadline reports that Local 272 Labor Management Pension Fund has filed a lawsuit in the Central District of California claiming violations of securities law. The Walt Disney Company is named, as is Bob Chapek, CEO at the time of the alleged violation, CFO Christine McCarthy, and Kareem Daniel the former head of the Disney Media and Entertainment Division, which oversaw Disney+.
The lawsuit claims that over a period of two years, from December 2020 to November 2022, Chapek and others made false or misleading statements regarding subscriber growth and earnings from Disney+. When Disney ultimately failed to miss quarterly targets, the stock price took a significant hit, leading to losses for shareholders.
The November 2022 earnings call was a turning point for Disney when it was revealed that DIsney+ had seen a quarterly operating loss of nearly $1.5 billion. While Disney had always expected Disney+ to lose money in its early years, the losses there were seen as higher than expected, and the stock did take a serious hit.
It was shortly following that earnings call that Bob Chapek was ousted as CEO of Disney and Bob Iger was brought back into the fold. It’s since been reported that under Chapek, Disney has taken some potentially questionable actions, such as debuting Disney+ original shows on Disney Channel, as a way of offloading some of the production and marketing costs from Disney+ in order to make the streamer look better. The lawsuit includes this as a point of contention.
Following the return of Iger, Disney has undertaken a massive restructuring of its entertainment division, including significant Cast Member layoffs and restructuring, with an eye toward making IDsney+ more profitable.
The lawsuit is looking for a lead plaintiff as part of a class action lawsuit that would include anybody who purchased Disney stock during the two-year period. In a statement, Disney said it planned to defend itself “vigorously in court.”
