If you thought the Disney-related lawsuits had come to an end or reached any kind of pause, think again.

Disney has become involved in a number of lawsuits recently — from ones related to the battle with Florida Governor Ron DeSantis over Disney’s former Reedy Creek Improvement District to another related to an investor in the Company, and another regarding the Park Pass system. But this latest lawsuit brings some statements from former CEO Bob Chapek (as well as other Disney leaders) front and center.

According to The Hollywood Reporter, this new lawsuit was filed on May 12th in federal court in California. It was filed by Local 272 Labor-Management Pension Fund against the Walt Disney Company, former Disney CEO Bob Chapek, Disney’s current Chief Financial Officer Christine McCarthy, and Kareem Daniel the former head of the Disney Media & Entertainment Distribution (DMED) division (a.k.a. Chapek’s right-hand man).

The lawsuit alleges that Chapek, McCarthy, and Daniel made various false and/or misleading statements regarding Disney+.

Specifically, it claims that Disney and its leaders “repeatedly misled investors about the success of the Disney+ platform by concealing the true costs of the platform, concealing the expense and difficulty of maintaining robust Disney+ subscriber growth, and claiming that the platform was on track to achieve profitability and 230-260 million paid global subscribers by the end of fiscal year 2024.”

They allege that between December 10th, 2020 and November 8th, 2022, “Disney+ was never on track to achieve the 2024 profitability and subscriber figures provided to investors and such estimates lacked a reasonable basis in fact.”

They also claim that the entire DMED structure was used to “inappropriately shift costs out of the Disney+ platform” so as to conceal some of these facts. The DMED structure was created under Chapek and centralized spending decisions within that division. This took away some control from the creatives behind the projects. According to the Complaint, the reorganization and creation of DMED was “hugely controversial.” It is a structure that Iger has since reversed.

The Plaintiffs argue that Disney even debuted certain shows meant to be Disney+ originals on television networks like the Disney Channel to shift costs away from Disney+.

They refer to the entire thing as a “fraudulent scheme” Disney (and its leaders named in the Complaint) engaged in to “conceal…adverse facts,” “hide the extent of Disney+ losses and to make the growth trajectory of Disney+ subscribers appear sustainable and 2024 Disney+ targets appear achievable when they were not.”

The Complaint goes through various actions that reportedly formed part of this “fraudulent scheme” and comments from Chapek, Daniel, and McCarthy that they claim were false and all part of this strategy to reportedly hide the truth.

The Complaint argues that many of these statements were “materially false and misleading” because they failed to reveal that:

• Disney + was “suffering decelerating subscriber growth, losses, and cost overruns”
• The “true costs” of Disney+ had been “concealed by Disney executives” by debuting things on other channels first
• DMED was making decisions not based on consumer preference or behavior “but based on the desire to hide the full costs of building Disney+’s content library”
• Disney+ was allegedly not on track to achieve their 2024 subscriber and profitability targets

Then in November 2022 things really started to look different. That’s when Chapek reported that the direct-to-consumer division had lost $1.5 BILLION in the last quarter.

The Complaint alleges that “Disney missed analyst estimates by wide margins” and also reported a “decline in its average revenue per Disney+ subscriber.” Just a few weeks later, Chapek was removed from the CEO position and it was announced that Iger would be returning for a limited time (2 years).

Following this, in early 2023, Disney+ reported a loss of Disney+ subscribers, and that has continued with the latest earnings call from May of 2023. The Complaint argues that because of the reportedly fraudulent previous statements from Disney and the declines in Disney’s stock value, the Plaintiffs and other potential members of the class have suffered significant losses. They are asking that the Court award them compensatory damages and any other relief deemed appropriate.

Thus far, Disney hasn’t responded to a request for a comment per the Hollywood Reporter, but we expect a response of some kind in the form of a legal document will come soon. We’ll keep an eye out for updates.

In the meantime, you can click here to see the latest updates on Disney+. There has been a loss of Disney+ subscribers recently though it is mainly in Disney+ Hotstar. Domestically there was also a small loss in Disney+ subscribers.

We’ll keep an eye out for more news on this and other lawsuits and let you know what we find.

Click here to see a breakdown of the Reedy Creek lawsuit Disney filed against DeSantis

Join the DFB Newsletter to get all the breaking news right in your inbox! Click here to Subscribe!

The post New Lawsuit Claims Former Disney CEO Bob Chapek Engaged in “a Fraudulent Scheme” first appeared on the disney food blog.