A FIGHT TO THE FINISH?

By KIM MASTERS/LOS ANGELES

What happens when an irresistible force meets an immovable object? They settle, of course. At least, that seems to be the disappointing conclusion in the breathlessly awaited Katzenberg v. Disney case, which was scheduled to go to trial on Nov. 18.

The dispute pits Jeffrey Katzenberg, the diminutive and determined former chairman of the Walt Disney Co. studio, against Michael Eisner, the towering and truculent chief executive and chairman of the whole Disney shebang. The fight stems from Katzenberg's claim that Disney promised him 2% of the profit from the film and other ventures he headed during his 10 years at the studio, a sum that might reach $250 million or more. Some of those projects, notably animated hits like Aladdin and The Lion King, generated billions in revenue.

Disney counters that Katzenberg forfeited the money by running out on his contract. Such quarrels rarely go to trial. But this time, as the movie poster used to say, it's personal. Eisner and Katzenberg despise each other.

Judge John W. Ouderkirk pressed hard for a deal, but when the two principals finally met face to face for a court-ordered chat on Nov. 3, things didn't go well. Having blown off some steam, the boys may finally be ready to talk and thus deprive Hollywood of a deliciously vicious courtroom clash. Technically, a jury would determine only whether Disney violated the contract. If the jury found it did, an arbitrator would determine the damage award.

This is not a contract dispute so much as a workplace divorce. Katzenberg and Eisner go back years, first at Paramount Pictures and then at Disney, where they presided over one of the most spectacular turnarounds in Hollywood history. But after 10 very good years, bad things started to happen. Frank Wells, Disney's charismatic No. 2 man, was killed in an April 1994 helicopter crash. Four months later, Eisner required emergency bypass surgery. To Katzenberg this seemed a logical time for his own advancement. He lobbied strenuously for the Wells job.

Eisner had other plans. One August morning, he handed Katzenberg a press release that was about to be distributed. It mentioned, in passing, that Katzenberg would be leaving the company. Katzenberg went on to launch DreamWorks in partnership with Steven Spielberg and music mogul David Geffen. Katzenberg was the only one who had to mortgage himself to put up the $33 million seed money. In these circumstances, the lawsuit--for which his attorneys had logged 9,000 expensive hours as of September--has proved to be an especially big pain in the wallet.

Though the parties are bound by a gag order, the fight has raged in the press for months. Katzenberg's side went after a draft of Eisner's autobiography, which Eisner had intended to publish this fall but postponed because of the trial. The Katzenberg camp let it be known that there were potentially embarrassing tidbits in the book. The Katzenbergers also hinted that Disney had conducted some sort of conspiracy to shortchange their man. And in one of those unaccountable leaks, it was reported that Katzenberg had prevailed in a couple of mock trials. An insider maintains that the pretrial exercises showed juries are predisposed to dislike Disney as a corporation and Eisner in particular.

Meanwhile Eisner's team says that if juries are not predisposed to dislike Katzenberg, it is only because they don't know him well enough. The Disney side threatened to make the introductions. A Disney source suggested that Katzenberg would suffer when the company highlights his poor record in live-action movies--a $56 million loss on Billy Bathgate, for instance. The company has also suggested that Katzenberg grabbed too much credit for animation successes.

Disney has deposed Spielberg and Geffen, hoping to force them to take the witness stand, perhaps to discuss DreamWorks and Katzenberg's performance, including a purported loss of more than $20 million on the studio's maiden picture, The Peacemaker.

Given the stakes, a settlement makes sense, though it would be awkward for Eisner to pay Katzenberg a vast sum in the wake of shareholder anger over the $130 million or so that Disney dealt to Michael Ovitz after firing him as president last December. Conversely, the Ovitz settlement ensures that Katzenberg's sights are set high: Why should Katzenberg take less for 10 successful years than Ovitz got for 14 unimpressive months? If a deal is made, three things seem certain. One: the terms will be sealed. Two: the amount will be leaked to the press--by both sides. Three: the numbers won't come close to matching.