By Dawn Chmielewski and Tom Hals
(Reuters) - A district board appointed by Florida Governor Ron DeSantis to oversee development around Walt Disney (NYSE:DIS) Co's Florida theme parks sued the company on Monday to void "backroom deals" favorable to the entertainment giant.
The state court lawsuit escalates tensions between Disney and the Republican governor and likely presidential candidate. It comes in response to a case Disney filed last week in federal district court against DeSantis and members of the Central Florida Tourism Oversight district board.
Disney accused DeSantis and his supporters of illegally using state government to punish the company for exercising its free-speech rights last year when Disney criticized a state measure banning classroom discussion of sexuality and gender identity with younger children. DeSantis who is expected to soon declare his candidacy for U.S. president, has repeatedly attacked "woke Disney" in public remarks.
"Since Disney sued us, we have no choice now but to respond," board Chair Martin Garcia said at a Monday meeting.
The lawsuit in state court in Orange County, Florida, seeks to invalidate an agreement prior board members made with Disney, arguing it amounted to a one-sided deal that was rubber stamped.
The Central Florida Tourism Oversight District board maintained that Disney rushed through the agreement before the new board assumed oversight of municipal services and development within the 25,000 acres of land in and around Walt Disney World.
“In an effort to stymie Florida’s elected representatives, Disney covertly cobbled together a series of eleventh-hour deals with its soon-to-be-replaced puppet government,” the lawsuit alleged. “Disney hoped to tie the hands of the new, independent Board and to preserve ... its own government in the District for at least the next 30 years."
The lawsuit argues that Disney worked with its "puppet board" to "perpetuate its stranglehold" over the district, insulating itself from the new board by adopting a developers agreement and restrictive covenants.
The DeSantis-appointed board said the agreements were "riddled with procedural and substantive defects" that render them void and unenforceable. The lawsuit argues the prior board failed to provide adequate public notice or follow proper procedures.
Disney's lawsuit argued that the company did what any prudent developer would do: use tools to secure its future development plans. The company said the oversight board, then known as the Reedy Creek Improvement District, complied with public notice requirements and held public meetings.
Florida lawmakers passed legislation that ended Disney's virtual autonomy in central Florida where the Disney World theme parks attract millions of visitors each year.
In its lawsuit, Disney also took issue with the DeSantis-appointed board's assessment that development contracts Disney reached with its predecessors were "void." Those deals laid the foundation for billions of dollars of future investment in its Walt Disney World resort.
"The government action was patently retaliatory, patently anti-business, and patently unconstitutional," Disney said in its filing.
Martin said the oversight board is merely following laws enacted by the Florida legislature, through actions taken to promote the public good.
"The district will seek justice in state court here in central Florida where both it and Disney reside and do business," Martin said.
There was a chance the two lawsuits would run simultaneously in state and federal court, where Disney sued DeSantis and the board, said Mary-Rose Papandrea, a professor at University of North Carolina School of Law.
One possible outcome would be for the first case to reach a resolution that then might then be applied in the other court, said Papandrea. However, the claims in the cases differ, making that difficult.
DeSantis weighed in on the Disney dispute at a press conference on Monday.
"It is wrong for one corporation to basically corrupt the local government and run it as its own fiefdom, be exempt from laws, have all kinds of benefits that nobody else has," DeSantis said.
The Florida governor said he is carrying out the "will of the people," and Disney is "putting their thumb in the eye of the voters of the state."
Disney did not immediately respond to a request for comment on the lawsuit.
DeSantis’ clash with Disney has been a centerpiece of his speeches around the United States ahead of his expected presidential bid. But his political risks have mounted as the battle has intensified.
Former President Donald Trump, favorite for the Republican nomination, has said on social media that DeSantis "is being destroyed by Disney" and has warned the company would reduce its investments in Florida.