NEW YORK — “Rosie O’Donnell shall hold the role of editorial director of the magazine with control over the editorial process and the editorial staff, subject only to the veto of the chief executive.”

This story first appeared in the November 6, 2003 issue of WWD. Subscribe Today.

This clause of the contract between O’Donnell and Gruner + Jahr, publisher of her namesake magazine and plaintiff in the case, emerged Wednesday as the central theme in the legal dispute between the two parties.

In private, sources familiar with O’Donnell’s case said settlement talks are ongoing, but that confidentiality remains a point of impasse, since O’Donnell feels she was slandered in the press last summer by G+J and wants to present her side of what happened. O’Donnell admitted to settlement talks outside the courtroom at the end of the day, at which point she was ushered off by her spokeswoman, who, when asked to elaborate, said all settlement talks were private, as did a spokeswoman for the plaintiffs.

After a bumpy few days, G+J’s lawyers did make some headway Wednesday morning with the testimony of Cindy Spengler, chief marketing officer of the company, who frequently served as a buffer between O’Donnell and G+J chief executive Dan Brewster.

The lawyers established that O’Donnell’s indecisiveness — she could not seem to decide whether or not to fire editor in chief Cathy Cavender and replace her with Susan Toepfer —made for an impossible situation. And then there was a recount of horrifying comments O’Donnell acknowledged making in private, once going so far as to tell Spengler, a cancer survivor, “Do you know what happens to people that lie? They get cancer.”

But things did not go particularly well for the plaintiffs when Brewster finally took the stand, arguing repeatedly that McCall’s was a storied “asset.”

That argument suffered major setbacks in cross-examination as O’Donnell’s lawyers showed internal projections for 2001 that stated the magazine would likely lose $15 million that year.

And Judge Ira Gammerman seemed to agree, going so far as to interrupt the proceedings to say, “Unless I hear to the contrary, this magazine was in serious trouble.”

Then came the issue of veto power.

Brewster contended that O’Donnell did not have “editorial control” of the magazine and that he only signed her to do the magazine on that condition.

But lawyers for O’Donnell argued that veto power and editorial control are two different things. The president, they said, can use his veto power to say no

to legislation drafted by Congress but he cannot decide to do Congress’ job.

More testimony is expected today and O’Donnell will likely take the stand. Significant testimony could come about the company’s financials, which her lawyers claim were manipulated by G+J.

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