Jeffrey Katzenberg found himself at the wrong end of a class action lawsuit filed Monday by the Ann Arbor City Employees Retirement System.
The plaintiff group claims the DreamWorks Animation founder got way too sweet a “side deal” when Comcast agreed to acquire his DWA. They accuse Katzenberg of being in “breaches of fiduciary duty as the company’s controlling stockholder, breach of contract, and breach of the implied covenant of good faith and fair dealing.”
The Michigan city’s retirement system is a DreamWorks shareholder, and believes the second-largest (Ann Daly is actually the biggest major direct shareholder, per Yahoo Finance) of them all, Katzenberg, violated those fiduciary duties by agreeing to a very personally lucrative plan.
Part of his deal sees Katzenberg consulting with Comcast on the development of AwesomenessTV and DWA Nova over a period of two years. In return, he gets just $1 per year, but 7 percent of their profits in perpetuity — that latter part is the obscene one, the plaintiff group says. Following the close of Comcast-DWA, Katzenberg is set to be chairman of DreamWorks New Media, which will contain those two companies under its umbrella.
“The Profit-Sharing Arrangement is incredibly valuable to Katzenberg. AwesomenessTV has quadrupled in value in the last three years,” the filing states. “If AwesomenessTV continues along even a remotely similar trajectory, Katzenberg will be entitled to a substantial amount of cash pursuant to the Profit-Sharing Arrangement. If DWA Nova realizes its potential, the Profit-Sharing Arrangement only becomes more valuable.”
“The Side Deal constitutes disguised disparate merger consideration for Katzenberg,” the Delaware court document continued, calling this particular term of the deal “is so valuable that it cannot credibly be characterized as compensation for a two-year consulting contract.”
Furthermore, it violates the “the equivalent consideration provision” in DreamWorks’ own certificate of incorporation, plaintiffs say. They’re seeking recovery from an unspecified amount in damages.
Pamela Chelin contributed to this report.