A class action lawsuit has been filed on behalf of purchasers of securities of the Walt Disney Company (NYSE:DIS) between August 15, 1997 and May 15, 2002, inclusive, in United States District Court for the Central District of California.
The complaint alleges that Disney and certain of its officers and directors violated the Securities Exchange Act of 1934 by failing to disclose to the investing public the existence, details, and potential effects of a pending lawsuit over merchandising rights concerning "Winnie the Pooh." If successful, the Pooh lawsuit could force Disney to pay hundreds of millions of dollars in royalty payments, or even possibly terminate the Company's merchandising agreement for Winnie the Pooh products, representing a loss of several billion dollars a year in revenue. Throughout the class period, defendants knew of, but failed to disclose in SEC filings and other public statements, the existence and/or extent of the Pooh litigation. On May 15, 2002, defendants finally revealed the amount of claims involved and the potential fallout of the Pooh litigation. Since this disclosure, Disney stock price has fallen 28%.

Update

On April 7, 2003, plaintiffs' lead counsel filed their Consolidated Amended Complaint, which defendants moved to dismiss. On September 12, 2003, the court granted defendants' motion without prejudice. On November 5, 2003, plaintiffs voluntarily dismissed the case.