Katzenberg is sued over Comcast-DreamWorks merger deal
A DreamWorks Animation shareholder has filed a class action lawsuit against Chief Executive Jeffrey Katzenberg, alleging the mogul struck a lucrative side deal with Comcast Corp. that benefits him but not rank-and-file investors in his company.
Comcast two months ago agreed to pay $3.8 billion to acquire DreamWorks Animation. As part of the deal, Katzenberg agreed to relinquish day-to-day management of the Glendale studio, but he will maintain an ongoing financial interest in two promising digital ventures currently owned by DreamWorks Animation.
The ventures include the online entertainment studio Awesomeness TV, which has witnessed rapid revenue growth, and DWA Nova, which uses 3D animation technology to help third-party companies, such as Nike, create marketing campaigns.
The lawsuit, filed Monday on behalf of the Ann Arbor (Mich.) City Employees Retirement System, alleges that Katzenberg breached his fiduciary duty to all shareholders while negotiating the deal with Comcast. The suit claims that by entering into a separate consulting agreement with Comcast, Katzenberg put his own interests ahead of those of other shareholders.
Katzenberg’s continued involvement with DreamWorks, post-merger, was outlined in a two-year consulting agreement with Comcast. As part of that deal, Katzenberg would become chairman of DreamWorks New Media and receive a $1 annual salary.
The 27-page lawsuit filed this week argues that Katzenberg’s so-called side deal is not actually a consulting agreement, but rather continued equity in the company. The side deal violates DreamWorks’ charter that requires that all shareholders are treated equally during merger negotiations, the lawsuit contends.
“The profit sharing arrangement — which provides Katzenberg the right to receive 7% of the joint venture entities’ profits in perpetuity — is so valuable that it cannot credibly be characterized as compensation for a two-year consulting contract,” according to the suit filed by Michael J. Barry of the Grant & Eisenhofer law firm in Wilmington, Del.
Katzenberg controls 60% of DreamWorks Animation voting shares. A representative of Katzenberg declined to comment.
From the Emmys to the Oscars.
Get our revamped Envelope newsletter, sent twice a week, for exclusive awards season coverage, behind-the-scenes insights and columnist Glenn Whipp’s commentary.
You may occasionally receive promotional content from the Los Angeles Times.