Why is Disney Being Sued?

On May 1, 2023, the Central Florida Tourism Oversite District (the “Oversite District”) sued Disney in Orange County.  The Oversite District seeks to void a Development Agreement between Disney and the Oversite District’s predecessor, the Reedy Creek Improvement District (the “Improvement District”). The Development Agreement allows Disney to continue exercising significant autonomy over land use in the district where its theme parks are located.[1] Parties struck the deal as Gov. DeSantis was preparing to take control of the Disney-friendly Improvement District and appoint an entirely new board of directors.  The Oversite District claims that the last-minute Development Agreement is a blatant attempt to thwart the will of Florida’s legislature to end Disney’s autonomy over the district and make it so that Disney has no more control over the functioning of the district than any other taxpayer.

The Oversite District’s suit was brought a month after Disney filed its own federal case against the Oversite District and Gov. DeSantis.  In its complaint, Disney alleges that the Governor only seeks to strip Disney of its autonomy over its special district because Disney publicly opposed a controversial bill the Governor supported.[2]  It argues the Governor’s retaliation is a violation of its First Amendment right to free speech.  In essence, it argues the Governor is violating the rule of law by singling it out for retribution do it its political stance.

How did we get here?  A Brief Timeline:

Late 1950s – 1967: Disney Comes to Florida and Gets a Special District

In the late-1950s, Walt Disney, seeing the success of Disneyland in California, set out to establish an east coast resort and theme park.  He settled on 25,000 acres of remote land in Central Florida’s Orange and Osceola Counties[3].  Today, that land is home to Walt Disney World Resort, a popular tourist destination and Florida’s third-largest employer[4] and single largest taxpayer[5].

In 1967, the Florida State Legislature, in coordination with Disney, established the Improvement District[6].  The special district, one of 1,900 in the state, allowed Disney to control functions traditionally entrusted to a local government, such as regulating land and water use, collecting taxes, issuing bonds, and proving for emergency services.  Under the arrangement, Disney essentially acted as the government[7].

1967 – 2022: Growth in Disney’s Improvement District

In the five-and-a-half decades Disney ran the Improvement District, it helped transform the region into a popular tourist destination.  The influx of visitors to experience Disney’s attractions fueled Florida’s tourism industry, benefiting not only the company but also other businesses in the surrounding areas such as hotels, restaurants, retail establishments, and transportation services.  The resulting economic impact has been significant, with billions of dollars generated annually for the state[8].

2022: Dispute over Controversial Bill Jeopardizes Disney’s Special District

The Controversial Bill

The ever-intensifying feud between Gov. DeSantis and Disney stems from Disney’s criticism of the controversial Parental Rights in Education bill (the “Bill”) backed by the Governor. The Bill, which prohibits Florida public school teachers from teaching sexual orientation and gender identity in kindergarten through third grade, faced widespread criticism.[9] Opponents of the bill, who commonly refer to it as Florida’s “Don’t Say Gay” bill, generally view it as an attack on the LGBTQ+ community which could create a climate of fear and censorship in schools, out students to their parents, and make it harder for LGBTQ+ students receive support and services they need.

Disney’s Opposition to the Bill

The controversial Bill passed the Florida House of Representatives on February 24, 2022 and the Florida Senate on March 8, 2022.[10]  As the public waited for Governor. DeSantis to sign the Bill into law, some Disney employees criticized their employer for not using its substantial political power in the state to act against the Bill.[11]  On a shareholder call on March 9, 2022, Disney’s then-CEO, Bob Chapek, who had been facing internal pressure to oppose the Bill, announced he had signed the Human Rights Campaign’s statement opposing the Bill and pledged to donate $5 million to fight it.[12]

The Fallout of Disney’s Opposition

On March 11, 2022, two days after Disney opposed the Bill, Governor DeSantis’ office released a statement slamming “Woke Disney” for “echoing Democrat propaganda and falling for the corporate media’s phony hysteria” over the Bill.[13] On the same day, Chapek announced Disney would suspend future political donations in Florida.[14]  Disney, a major player in Florida politics, donates to candidates on both sides of the aisle, but historically has donated more to Republicans than Democrats.[15]

On April 19, 2022, about five weeks after Disney suspended political donations in Florida, Governor DeSantis announced that Florida legislators would examine whether it should end certain special districts in the state, including the Disney-controlled Improvement District.[16] Two days later, on April 21, 2022, the Florida legislature voted to abolish the special district, which would end Disney World’s autonomy in the district.[17] The following day, the Governor signed a bill which would dissolve the Improvement District in June 2023.[18]

Both Sides Go to Court 

On February 8, 2023, a Florida House of Representatives passed a bill which re-named the Improvement District to the Oversight District and allowed Gov. DeSantis to appoint a new five-member Board of Supervisors to control the district.[19]

Before Gov. DeSantis could appoint the entire board of the Oversight District, Disney World secured a Development Agreement with the soon-to-be-replaced members of the Improvement District’s board. The agreement severely limits the power of the Oversight Board’s board while giving Disney many of the freedoms it enjoyed when it controlled the Improvement District. Essentially, the Development Agreement preempted the Governor’s plan to strip Disney’s autonomy over the district.

On April 26, 2023, Disney sued Ron DeSantis in federal court, alleging the governor engaged in a “targeted campaign of government retaliation” against the company for its speaking out against the Bill, pledging to donate to an organization fighting the Bill, and pausing political donations in Florida.[20]

On May 1, 2023, the DeSantis-controlled Oversight Board filed suit against Disney over the Development Agreement.[21]  It argues the contract was entered into illegally in a desperate, last-minute scheme to weaken the Oversight Board and give Disney a level of autonomy over the district ] the Florida legislature determined it should not have. In response, Disney argues that Development Agreement is valid because the Improvement District notified the public of the agreement in January and February 2023, the agreement was discussed openly at two board meetings, and the public had multiple opportunities to comment on the agreement.[22]

On May 5, 2023, Governor DeSantis signed a bill nullifying Disney’s Development Agreement[23].  Since then, the Oversight Board has primarily controlled the district. In all likelihood, Disney will challenge this bill in court.

What’s Next for the Oversight Board’s Lawsuit?

Though it is too early to say how the Oversight Board’s lawsuit will play out, a few possible outcomes could emerge.

1. The Oversight Board’s Suit is Dismissed as Moot. Disney has filed a motion to dismiss the Oversight Board’s suit on mootness grounds. It essentially argues the issue is no longer ongoing and therefore outside of scope of judicial review.  The court may conclude since the Governor nullified the Development Agreement, the Oversight Board’s suit to void it no longer makes sense.

2. The Development Agreement is Upheld. The court may uphold the agreement on the grounds that it was voluntarily entered into by parties after the public was notified of the deal and given the opportunity to comment on it. This would be a major win for Disney as it would be a significant step toward Disney’s control reverting to the significant level it historically had. Even if the agreement is upheld, Disney would still need to challenge the law Governor DeSantis signed into law on May 5, 2023, which nullifies the Development Agreement.

3. The Development Agreement is Voided. The court may nullify the agreement on the grounds that the Improvement District did not follow proper protocol prior to executing the deal with Disney. This would be a major win for the Governor.

4. Disney and DeSantis Establish a Truce. Although neither side shows any sign of backing down, the most likely outcome mains a ratcheting down of tensions, as the feud has provenly costly for both sides. The dispute ostensibly played some part in Disney’s recent decision to scrap a billion-dollar investment project in Florida[24], which hurt the state. On the other hand, Disney has suffered reputational harm over its handling of the issue.

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Sources

[1] https://www.orlandoweekly.com/news/gov-desantis-signs-bill-to-overturn-disney-development-agreement-34129363

[2] https://www.nytimes.com/2023/04/26/business/disney-desantis-board-florida.html

[3]https://www.rcid.org/about/#:~:text=In%201967%20the%20Florida%20State,responsibility%20as%20a%20county%20government.

[4] https://worldpopulationreview.com/state-rankings/largest-employer-by-state

[5] https://disneyconnect.com/dpep/fueling-floridas-economy-with-supplier-diversity/#:~:text=As%20the%20country’s%20largest%20single,in%20state%20and%20local%20taxes.

[6]https://www.rcid.org/about/#:~:text=In%201967%20the%20Florida%20State,responsibility%20as%20a%20county%20government

[7] Id.

[8] https://disneyconnect.com/dpep/fueling-floridas-economy-with-supplier-diversity/#:~:text=As%20the%20country’s%20largest%20single,in%20state%20and%20local%20taxes.

[9]https://www.flsenate.gov/Committees/billsummaries/2022/html/2825#:~:text=CS%2FCS%2FHB%201557%20%E2%80%94%20Parental%20Rights%20in%20Education&text=The%20bill%20(Chapter%202022%2D22,in%20the%20public%20school%20setting.

[10] https://www.wftv.com/news/local/disney-v-desantis-heres-timeline-battle-between-floridas-governor-theme-park-giant/4GKIRTTDYRBM3IFJYDPWWKBWI4/

[11] https://www.wired.com/story/disney-florida-dont-say-gay/

[12] https://www.wftv.com/news/local/disney-v-desantis-heres-timeline-battle-between-floridas-governor-theme-park-giant/4GKIRTTDYRBM3IFJYDPWWKBWI4/

[13] https://www.wptv.com/news/political/desantis-bashes-woke-disney-after-ceo-voices-opposition-to-dont-say-gay-bill

[14] https://www.wftv.com/news/local/disney-v-desantis-heres-timeline-battle-between-floridas-governor-theme-park-giant/4GKIRTTDYRBM3IFJYDPWWKBWI4/

[15] https://www.disneydining.com/republicans-benifit-most-from-disney-campaign-donations-could-that-change-jb1/

[16] https://www.wftv.com/news/local/disney-v-desantis-heres-timeline-battle-between-floridas-governor-theme-park-giant/4GKIRTTDYRBM3IFJYDPWWKBWI4/

[17] Id.

[18] Id.

[19] Id.

[20] https://abcnews.go.com/Business/disney-sues-florida-gov-ron-desantis-officials-targeted/story?id=98877157; https://www.politico.com/news/2022/03/11/disney-pledges-to-stop-florida-campaign-donations-dont-say-gay-00016705

[21] https://www.themeparktribune.com/wp-content/uploads/2023/05/CFTOB-countersuit-against-Disney.pdf

[22] https://www.wdwmagic.com/other/reedy-creek-improvement-district/news/24apr2023-desantis-appointed-board-outlines-its-reasons-for-declaring-disneys-last-development-agreement-with-reedy-creek-null-and-void.htm

[23] https://www.orlandoweekly.com/news/gov-desantis-signs-bill-to-overturn-disney-development-agreement-34129363

[24] https://apnews.com/article/disney-florida-campus-california-desantis-f68879e039ab85b3f027ddf91d84eb6a