This weekend, I contributed to an article for the New York Post with an exclusive on a move by the new board governing Disney properties to declare the recent transfers of power to the company to be null and void. Below is my column on the legal implications of that move and how Disney may be set for a truly wild ride in the weeks ahead.
Here is the column:
Walt Disney used to say, “The way to get started is to quit talking and begin doing.”
Gov. Ron DeSantis is about to put Disney’s own motto to the test — against Disney.
According to a high-ranking Florida official, the newly created Central Florida Tourism Oversight District is set early this week to call Disney on one of the worst bluffs of all time.
The result could prove the House of Mouse made a costly miscalculation.
For decades, Disney had reason to be the “happiest place on Earth.” Florida supported the company by giving it a unique status in controlling its own governance.
The Reedy Creek Improvement District controlled the Disney property, and Disney effectively controlled its board.
Technically, the board was elected by those living on the Disney property, which amounts to a small number of people living among the “cast members.”
It was a breathtaking deal for the company, which set its own building standards, granted its own construction permits and determined the scope of services, building codes, waste collection and other infrastructure matters.
Outside of the Vatican, such self-governance is little more than a fantasy for companies and organizations.
That favored status came to a crashing halt when Disney went public with a pledge to oppose Florida’s Parental Rights in Education Act.
The legislation prohibited classroom instruction on sexual orientation and gender identity from kindergarten to third grade. It also required “age appropriate” material in other grades.
Then-Disney CEO Bob Chapek originally told workers the company would not take a public position on the legislation to stay out of politics.
Disney employees protested, and Chapek quickly caved, declaring the company would fight to have the law rescinded.
The company has long been “woke” in its policies. But this was a crossing of the Rubicon in plunging into politics.
Disney became the symbol of increasing corporate activism.
While going woke will not necessarily force Disney to go broke, it is facing unprecedented boycotts of its parks and movies, including controversial children’s films with same-sex characters and relationships. On two of those movies, Disney lost more than a quarter of a billion dollars.
Picking fights with people with general tax authority is rarely a winning strategy for a company.
The state responded by removing Disney’s favored status, gutting the Reedy Creek Improvement District and creating the new board with governing authority over Disney properties.
Disney could still have tried to find a compromise. Instead, it did something even more reckless.
In the final days of the Disney-dominated board, the members voted to transfer powers to the company.
Disney is used to being its own self-governing boss.
That history may have warped its judgment in attempting this power grab. It is a move that would make the pirates of the Caribbean blush.
The “declaration of restrictive covenants” gives Disney total control over development and even bans the new board from using Disney’s name or the names of any of its “fanciful characters.”
It added what is called a royal clause, used in England since 1692.
It specified this “Declaration shall continue in effect until 21 years after the death of the last survivor of the descendants of King Charles III, King of England, living as of the date of this declaration.”
Disney may have been too clever by half. The “Hail Mickey” play appears fundamentally flawed.
I have been told the new board intends to treat the declaration as null and void. It appears to have strong grounds to do so.
Indeed, Disney’s legal case seemed no better planned than its political campaign.
First and foremost, under Florida Section 163.3225, a board cannot order such changes without giving a seven-day public notice and other conditions.
You are not allowed a jump scare like Space Mountain — you must give notice on your intended measures.
There is no indication the board did so.
That alone could nullify the declaration. Ordinarily, a board would simply reschedule the vote with proper notice, but the old board is gone.
There are also serious problems with a board using a declaration to nullify a state law and pass a development plan with no actual plan for development.
It is a curious legal claim that this now-defunct board could negate not just current state law but law for the next 30 years.
Instead, the new board will “quit talking and begin doing.” It will proceed with a vengeance.
Since the old board is no more, Disney will have to sue to try to enjoin the new board. For new CEO Bob Iger, this could make Mr. Toad’s Wild Ride look like a walk in the park.
Disney has no good options.
Even if it could sustain this dubious declaration, the state has myriad ways to impose added costs on the corporation.
When you are sitting on billions in a fixed, unmovable 27,000 acres (42 square miles) of real estate assets, declaring war on your host state is remarkably stupid.
Worse yet, this declaration does appear invalid, and I am told the new board is ready to give Disney a rude awakening this week.
Pro-Disney staff will be canned and public hearings planned on the range of new regulations for the Magic Kingdom.
There are a host of areas that will be subjected to inspections, from the elevators to the famed monorail.
There are also salaries for first responders and others, who may have been underpaid by the Mouse.
Likewise, decades of controlling its own environmental compliance will come to an end with the potential for considerable costs and changes.
The “Small World” is going to get a lot smaller with inspectors testing the water, boats and electrical systems.
Shareholders are likely to raise a familiar question over Disney executives’ priorities in pursuing social and political agendas.
This has already cost the company, and those costs are likely to grow in the coming weeks.
Disney will be demanding it alone among companies dictate its own rules as if it were an Indian reservation that comes with its own faux Indians.
Disney is not alone. In recent days, Bud Light and Nike have faced backlashes and boycotts after aligning their brands with transgender influencer Dylan Mulvaney.
In the case of Anheuser-Busch, Bud Light’s parent company, the immediate impact was the loss of $6 billion in value.
It joins a long list of corporations embracing political and social causes despite significant opposition from their consumers.
The fight over governance is a no-win situation for Disney, but the corporate leadership didn’t seem to care. That may trigger a long-needed discussion of shareholders’ and consumers’ ability to push back on political or environmental, social, governance (ESG) policies.
Once again, the company seems oblivious to economic consequences of its aggressive postures toward the state.
While this may be popular for executives, it is not popular with a sizable number of consumers, particularly in Florida.
If, as I have been told, the new board proceeds with its plan, Disney will have to make a choice. It can abandon this effort and seek terms with the state.
Or it can move to enjoin the new board. That will again play to the advantage of DeSantis, who has made the struggle with Disney a core part of his legacy.
Litigation would keep Disney in the news in a negative and polarizing way. It would also expose its operations — and relations to this board — to discovery and public scrutiny.
Unlike its opposition to education law, this move lacks any principle, precedent and prospect to succeed.
Even if a court allows a company to effectively grant itself unchallenged authority, even one the size of Disney cannot win in the long run against the third-most-populous state in the union.
With four theme parks, two water parks, 25 hotels and about 80,000 employees, the state has a host of areas where “leveling the playing field” with other companies will cost Disney dearly.
Indeed, DeSantis and the board just might enjoy this. It’s a fight they’ll likely win legally and politically cannot lose.
They will be fighting to force inspections of monorails and elevators, enforce environmental standards, raise salaries of first responders and oppose a company demanding its own laws.
They’ll be seeking to apply the same laws in the same way to Disney as other large corporations.
Disney will have to argue against such a level playing field and demand to be treated as a virtual sovereign over its own “Kingdom.”
That is a fight DeSantis clearly welcomes. As Mary Poppins said, “In every job that must be done, there is an element of fun.” Whatever happens early this week, it is likely to be fun for everyone but Disney.
Jonathan Turley is an attorney and a professor at George Washington University Law School.