DISNEY TRIAL TO BEGIN; MUCH AT STAKE FOR KATZENBERG.

Byline: Peter Hartlaub Daily News Staff Writer

Jeffrey Katzenberg is scheduled to square off Monday against The Walt Disney Co. in a trial that should provide an unprecedented look at the entertainment giant's inner workings.

The trial also may lend insight into the long-running spat between Disney Chief Executive Officer Michael Eisner and former studio head Katzenberg, which led to his departure in 1994.

At stake for Katzenberg are millions of dollars he claims he is owed by Disney for a string of box-office successes before he left his job at the Burbank-based firm, among them ``The Lion King'' and ``Sister Act.''

What worries Disney most is that the trial might reveal its secrets to success and the studio's blueprint for the future.

In arguing unsuccessfully to close the trial to the public, Disney General Counsel Louis Meisinger testified in court records that it could reveal ``Disney's most closely and privately held strategies, plans and forecasts.''

Legal experts agree.

``This is an airing of laundry that Disney would like to avoid,'' said entertainment lawyer Philip Kramer. ``Lots of people will be looking at this case very closely.''

The outcome may be dramatic, but Southwestern University School of Law professor Richard Lind said the legal issues aren't unique: It's the amount of money - Katzenberg is seeking more than $250 million - that could break new legal ground.

``I can't think of any case of this kind involving this kind of money,'' Lind said.

Game plan

The seeds of the dispute were planted in 1984, when Katzenberg became Disney's studio head. After Katzenberg left Disney in 1994, he teamed with Steven Spielberg and David Geffen to form their own studio, DreamWorks SKG.

He filed the breach of contract lawsuit against Disney in 1996, seeking a 2 percent bonus from profits for Disney productions he was involved with during his decade with the studio.

Disney and Katzenberg settled some of their differences in 1997 and agreed to let a private judge sort out the rest at trial.

The trial was postponed twice last week when one of the lead attorneys in the case said he couldn't start trial because of laryngitis. While trade magazines suggested that the case might settle, a Disney spokeswoman said no negotiations would take place during the time off.

A privacy agreement has kept attorneys from talking about what the trial will reveal. But court records offer a rough outline.

While many details will, no doubt, remain behind closed doors, most of the soap opera elements of the lawsuit are destined for the witness stand, including Katzenberg's rocky relationship with Eisner.

Documents currently under seal include the studio's future ``game plan,'' including its ``playbook'' for the next five to 10 years, Disney General Counsel Louis Meisinger testified in court papers.

It is unlikely, however, that the public will get to see much of it.

The media earned a victory when a state court judge said the trial can not be conducted behind closed doors. But Disney's lawyers can still ask private Judge Paul Breckenridge to close parts of the trial on a document-by-document, witness-by-witness basis.

A verdict in the Katzenberg case, because of its potential size and high-profile nature, could have long-term implications, Kramer said. A crafty lawyer, he said, could use testimony from the Katzenberg trial for future litigation.

``It makes it easier for them to have legal muggings in the future if they get hit and people know they got hit,'' Kramer said.

Trade secrets

Because corporations are allowed by law to keep their trade secrets from the public in court proceedings, Disney lawyers will likely object to anything that could hurt the company's ability to compete with other studios.

Kramer said studio lawyers would fight fiercely to keep company secrets private.

``Coca-Cola, McDonald's and Disney - they've been 1, 2, 3 as far as the positive image they are able to keep with the public,'' Kramer said. ``Disney guards that with great seriousness.''

Court records show that the trial will be split into three phases that will likely last for more than a month.

After opening statements, testimony will center around Katzenberg's employment contracts and fraud claims. The second phase will be filled with expert testimony, predicting Disney's revenues up to 40 years into the future.

The final phase will address claims by Katzenberg that he is still owed money for work he performed before he left the studio.

Most lawsuits like Katzenberg's settle quickly, making his legal battle a rare glimpse into studio business.