Yahoo Finance Behind the billion-dollar legal war between Disney and DeSantis
Disney (DIS) and Florida governor Ron DeSantis are at odds over what the entertainment giant can do with land surrounding the Walt Disney World theme park. They also can’t agree which laws and which court should decide the dispute.
The company is making its argument before a federal judge, while the DeSantis camp is pursuing its claims before a state judge. What happens if both win their cases? No one yet knows.
The legal strategy of each side is emerging, however. Both combatants are seeking jurisdictions where their arguments appear to have the best chance of victory, with billions of dollars at stake. Each also has a chance to prevail, according to legal experts.
“They’re going for different things,” said Florida land use attorney Jacob Schumer.
The story of a feud
The dispute started a year ago when Disney opposed a parental rights bill in Florida that prohibited educators from leading classroom instruction on sexual orientation and gender identity. Opponents labeled the bill “Don’t Say Gay.”
Florida’s legislature then passed a series of bills that stripped the company of power it held for 55 years to self-govern a special tax district home to its world-famous resort and roughly 25,000 acres surrounding it.
No longer would a five-person, Disney-appointed body known as the Board of Supervisors oversee the area. Instead DeSantis appointed five new people to call the shots as part of a Central Florida Tourism Oversight District.
Disney fired back. Before DeSantis's replacement board could gain control, the Disney-backed Board of Supervisors agreed to a series of new development contracts favorable to the company.
These deals imposed a 30-year freeze on regulations already in place, cemented Disney as sole developer of the land and added restrictive covenants preventing the district from altering its authority over the property in perpetuity.
Disney followed those maneuverings with a federal lawsuit against DeSantis, Florida officials, and the replacement board members. It claimed Disney's constitutional rights had been violated when its property was taken without just compensation and when it was punished for its stance on the parental rights law.
The company also contended that its loss of authority over the district would stymie a plan to invest more than $17 billion over the next decade and create 13,000 new jobs.
DeSantis didn’t countersue in federal court. Instead, the governor's new tax district board filed a state lawsuit claiming land development contracts blessed by the old Disney-appointed board were invalid because Florida legal procedures had been ignored.
Disney's legal strategy
The strategy behind the company's federal suit, said University of New Haven economics professor Brian Marks, is to force DeSantis and his new board to defend layers of constitutional claims.
The arguments have a chance to prevail, he and other legal experts said, but they also have vulnerabilities.
One of the company's main claims is that its 1st Amendment right to speak freely without repercussions was violated after it openly opposed DeSantis's parental rights bill in 2022, saying it “should never have passed."
The government, it said, retaliated by taking away control of the Walt Disney World tax district.
In an amended complaint filed Monday, Disney accused DeSantis and Republican state lawmakers of “weaponizing the power of government to punish private business,” a tactic that is prohibited by the 14th Amendment.
“I think Disney has the better argument on just one of its claims – the big one: That the takeover itself was in retaliation for protected speech, and therefore should be reversed,” Schumer said. “It’s pretty clear that it was in retaliation for free speech.”
Marks expects the government defendants to argue that the laws serve the public interest "but if you look at the governor's and state's actions in totality it appears as retaliation,” he said.
It will be harder for Disney to make the case for retaliation, however, if the court views the new laws as neutral and not particular to Disney, Schumer said. And courts, he added, are hesitant to examine why legislatures act in a particular way.
Another set of claims being made by Disney — that the DeSantis camp violated the constitution's contracts and takings clauses — may be heavily contested because courts view those protections with some flexibility, said University of Iowa property law professor Christopher Odinet.
'No doubt the governor will prefer to be in state court'
The decision by DeSantis' board allies to go after Disney in state court could be driven by a search for a more favorable audience, according to Marks.
“There’s always this notion of home court advantage playing out in the court system," he said. "And no doubt the governor will prefer to be in state court.”
But he and other legal experts agree that the state case will turn on whether the claims are in fact true.
The core allegation made by DeSantis and his allies is that the Disney-controlled Board of Supervisors skipped mandatory legal steps when it locked in development contracts favorable to the company, such as providing public notice of proposed contracts and adopting proposed ordinances.
“If those turn out to be true, I think they could spell problems for that development agreement,” Schumer said. “We're talking about [state] laws here.
DeSantis and the state legislature passed a series of laws over the last year that are at issue, including one signed last Friday. It allows the governor's replacement board to retroactively cancel the land development contracts that Disney's board secured just before its ouster.
Upholding that law could also be a balancing act for the Florida court, because doing so carries risk of jeopardizing future land development elsewhere in the state.
"It would mean that these kinds of agreements would be much more risky for developers,” Schumer said.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
Find live stock market quotes and the latest business and finance news
