Bob Chapek, the former Disney CEO who was abruptly fired from the company last November, is part of a group of executives being sued for securities law violations over allegedly misleading statements and omissions about Disney+ and its subscriber growth.
The case, filed May 12 by Local 272 Labor Management Pension Fund in the U.S. District Court for the Central District of California, also names former Disney executive Kareem Daniel and current CFO Christine McCarthy, as well as Walt Disney Co. themselves, as defendants. The document says the case is seeking a lead plaintiff and court decision for a class action lawsuit representing Disney shareholders from December 10, 2020 to November 8, 2022.
“Each of the Individual Defendants was directly involved in the management and day-to-day operations of the Company at the highest level and was aware of confidential proprietary information about the Company and its operations, activities, services, plans, and current and future business prospects” , reads the 39-page document. “Furthermore, the Individual Defendants were involved in the preparation, production, review and/or dissemination of the false and misleading statements and information alleged herein, and were aware of, or recklessly disregarded, the false and misleading statements alleged issued with respect to the Company, and approved or ratified these statements, in violation of federal securities laws.”
The lawsuit alleges that Chapek and other executives failed to properly disclose the truthful state of Disney, specifically forecasts for Disney+ subscriber numbers and the company’s overall health in the streaming industry. While the company’s stock has continued to take major hits in recent months, it’s not an outlier in the entertainment industry, where studios have struggled to break into the streaming space as the linear television market continues to decline.
In a statement, Disney said, “We are aware of the complaint and intend to vigorously defend it in court.”
Attempted class action lawsuits often fail to progress to jury trials, though this case remains somewhat unique in the plaintiff’s decision to name specific executives. Chapek left Disney in November, with his predecessor Bob Iger taking over again to run the financially embattled company. Daniel’s departure was announced the following day, as Iger began reconstructing the Disney executive suite. McCarthy’s tenure spans both leadership regimes.
Last week, Disney reported that its streaming service had lost four million subscribers, although that quarterly drop was less steep than the previous quarter.