Eric L. Zagar


  • Washington University in St. Louis
    B.A. 1992
  • University of Michigan School of Law
    J.D. 1995
  • Pennsylvania
  • California
  • New York
  • USDC, Eastern District of Pennsylvania
  • USDC, Northern District of California
  • USDC, Central District of California
  • USDC, Eastern District of California
  • USDC, Southern District of California
  • USDC, Western District of Tennessee
  • USDC, District of Colorado
  • USDC, Western District of Michigan
  • USCA, Third Circuit
  • USCA, Fourth Circuit
  • USCA, Fifth Circuit
  • USCA, Ninth Circuit
  • United States Court of Federal Claims
  • USCA, Seventh Circuit
  • USDC, Northern District of Ohio
  • USDC, Eastern District of Wisconsin

Eric L. Zagar, a partner of the Firm, co-manages the Firm’s Mergers and Acquisitions and Shareholder Derivative Litigation Group, which has excelled in the highly specialized area of prosecuting cases involving claims against corporate officers and directors.  

Since 2001, Eric has served as lead or co-lead counsel in numerous shareholder derivative actions nationwide and has helped recover billions of dollars in monetary value and substantial corporate governance relief for the benefit of shareholders.

Ongoing Cases
  • On January 27, 2021, Vice Chancellor Joseph R. Slights III of the Delaware Court of Chancery issued an opinion in In re CBS Corporation Stockholder Class Action and Derivative Litigation, Consolidated C.A. No. 2020-0111-JRS, sustaining all but one of the claims asserted by Co-Lead Counsel KTMC on behalf of our client, Co-Lead Plaintiff Bucks County Employees Retirement Fund.  In the 157-page opinion, which contains references to a wide array of Delaware case law and legal scholarship, as well as such diverse sources as Rolling Stone magazine, Game of Thrones author George R.R. Martin, and Greek mythology, Vice Chancellor Slights holds that the stockholder plaintiffs adequately pled their claims against CBS’s (now known as ViacomCBS) Board Chair and controlling stockholder Shari Redstone, other members of the CBS board of directors, and former CBS President Joseph Ianniello challenging their conduct in connection with the December 2019 merger of CBS and Viacom, Inc., also controlled by Ms. Redstone. 

    Plaintiffs alleged that the merger of CBS and Viacom (referred to as the “Merger”) was the culmination of a years-long effort by Shari Redstone to combine the two companies in order to save the floundering Viacom, despite the lack of economic merit of the Merger and the opposition of CBS directors and stockholders alike.  Plaintiffs alleged that Shari Redstone wrested control of NAI (the holding company that controls CBS and Viacom) from her ailing father Sumner Redstone, and twice previously attempted to merge CBS and Viacom and failed.  The first time she was rebuked by the CBS board of directors, after which she publicly proclaimed that “the merger would get done even if [she had] to use a different process.” 

    Two years later, Ms. Redstone was back at it, attempting to force a CBS-Viacom merger.  This time the CBS board was so concerned that Ms. Redstone would force a merger over their objections, that they took the “extraordinary” measure of attempting to dilute Ms. Redstone’s control of CBS to protect CBS and its stockholders from her influence.  After hard-fought, expedited litigation, a settlement was reached that resulted in the CBS board turning over, and the addition of six new directors hand-picked by Ms. Redstone.  Importantly, Ms. Redstone and NAI also agreed that they would not propose that CBS and Viacom merge for a period of two years following the settlement.

    In spite of the settlement’s prohibitions, Plaintiffs allege that Ms. Redstone and NAI pushed forward.  Only four months after the settlement Shari Redstone caused the new CBS board—whom she had largely hand-picked—to form a committee to evaluate a merger with one primary target: Viacom.  Ms. Redstone sidelined carry-over directors who opposed her, enticed CBS’s acting CEO Joseph Ianniello (who previously opposed the Merger) to support her with hefty compensation packages, and worked to impose her views on an ultimate tie up through Ianniello’s newfound support.  As controlling stockholders of CBS, NAI and Ms. Redstone decided not to give CBS’s minority stockholders any say on the Merger—such as by permitting them to vote—and instead pushed the Merger through on deal terms that benefitted NAI and Viacom to the detriment of CBS and its stockholders in violation of their fiduciary duties.

    In the end, Plaintiffs allege that the Merger forced the poorly performing Viacom on CBS and destroyed value for CBS and its stockholders for NAI’s benefit.  Plaintiffs brought both direct class and stockholder derivative claims in the Delaware Court of Chancery in the Spring of 2020, and alleged that the current ViacomCBS board was conflicted and, therefore, not able to entertain a stockholder demand to initiate litigation against the board and NAI.  In its opinion, the Court credited nearly all of Plaintiffs’ allegations and held that the transaction was a “conflicted controller transaction” where Shari Redstone “engineered the Merger to bail out Viacom for the benefit of NAI, and thereby extracted a non-ratable benefit from the transaction.”  Vice Chancellor Slights noted in response to Defendants’ arguments that “A sinking ship remains a sinking ship, regardless of its proximity (spatial or temporal) from rock-bottom; and Plaintiffs have satisfactorily pled Ms. Redstone believed Viacom needed to be rescued at the time of the Merger.”

    With respect to Plaintiffs’ class claims, the Court ruled that sufficient to survive were Plaintiffs’ claims that “Ms. Redstone coerced Ianniello and the CBS Board into playing roles in the dramedy that culminated in the Merger, where CBS ostensibly played the role of acquirer” despite that what “really happened” was that “Ms. Redstone, desperate to combine Viacom and CBS, and viewing Viacom as the entity that would emerge from the Merger as superior, caused CBS to be subjugated by Viacom’s Board and management in a combined company that would henceforth be known as ViacomCBS.”

    The case will now proceed to discovery, with a trial expected to be set for some time in mid- to late-2022.

  • Kessler Topaz is co-lead counsel in a derivative and class action on behalf of Tesla, Inc. and its minority stockholders challenging Tesla’s 2016 acquisition of SolarCity Corporation. Plaintiffs allege that the acquisition was essentially a bailout of the financially struggling SolarCity, which was founded and run by Elon Musk’s cousins. At the time of the acquisition, Elon Musk was chairman of both boards of directors and the largest stockholder of both Tesla and SolarCity. Six of the seven members of Tesla’s Board of Directors, their family members and/or business partners were investors in SolarCity and therefore benefited from the acquisition, which allowed SolarCity to escape an impending threat of bankruptcy.

    Plaintiffs’ consolidated action in the Delaware Court of Chancery alleges that the Board’s approval of the acquisition constituted a breach of fiduciary duties and a waste of Tesla’s assets. On January 22, 2020, Plaintiffs reached an agreement in principle with all Defendants other than Elon Musk to resolve all claims asserted against them for $60 million. On February 4, 2020, the Court denied the remaining parties’ cross-motions for summary judgment, holding that Plaintiffs had raised genuine issues of material fact regarding whether Elon Musk controlled Tesla’s Board of Directors in connection with the acquisition and whether material information was withheld from Tesla shareholders when they were asked to vote on the transaction. Previously scheduled to commence on March 16, 2020, the trial has been adjourned until July 12, 2021 in response to the pandemic.

Representative Outcomes
  • Kessler Topaz served as co-lead counsel in a shareholder derivative action challenging 2.745 million “spring-loaded” stock options.

    On the day before CytRx announced the most important news in the Company’s history concerning the positive trial results for one of its significant pipeline drugs, the Compensation Committee of CytRx’s Board of Directors granted the stock options to themselves, their fellow directors and several Company officers which immediately came “into the money” when CytRx’s stock price shot up immediately following the announcement the next day. Kessler Topaz negotiated a settlement recovering 100% of the excess compensation received by the directors and approximately 76% of the damages potentially obtainable from the officers. In addition, as part of the settlement, Kessler Topaz obtained the appointment of a new independent director to the Board of Directors and the implementation of significant reforms to the Company’s stock option award processes. The Court complimented the settlement, explaining that it “serves what Delaware views as the overall positive function of stockholder litigation, which is not just recovery in the individual case but also deterrence and norm enforcement.”

  • Kessler Topaz represented an individual stockholder who asserted in the Delaware Court of Chancery class action and derivative claims challenging merger and recapitalization transactions that benefitted the company’s controlling stockholders at the expense of the company and its minority stockholders.

    Plaintiff alleged that the controlling stockholders of Erickson orchestrated a series of transactions with the intent and effect of using Erickson’s money to bail themselves out of a failing investment. Defendants filed a motion to dismiss the complaint, which Kessler Topaz defeated, and the case proceeded through more than a year of fact discovery. Following an initially unsuccessful mediation and further litigation, Kessler Topaz ultimately achieved an $18.5 million cash settlement, 80% of which was distributed to members of the stockholder class to resolve their direct claims and 20% of which was paid to the company to resolve the derivative claims. The settlement also instituted changes to the company’s governing documents to prevent future self-dealing transactions like those that gave rise to the case.

  • Just one day before trial was set to commence over a proposed reclassification of Facebook's stock structure that KTMC challenged as harming the company's public stockholders, Facebook abandoned the proposal.

    The trial sought a permanent injunction to prevent the reclassification, in lieu of damages. By agreement, the proposal had been on hold pending the outcome of the trial. By abandoning the reclassification, Facebook essentially granted the stockholders everything they could have accomplished by winning at trial.

    As background, in 2010 Mark Zuckerberg signed the "Giving Pledge," which committed him to give away half of his wealth during his lifetime or at his death. He was widely quoted saying that he intended to start donating his wealth immediately.

    Facebook went public in 2012 with two classes of stock: class B with 10 votes per share, and class A with 1 vote per share. Public stockholders owned class A shares, while only select insiders were permitted to own the class B shares. Zuckerberg controlled Facebook from the IPO onward by owning most of the high-vote class B shares.

    Facebook's charter made clear at the IPO that if Zuckerberg sold or gave away more than a certain percentage of his shares he would fall below 50.1% of Facebook's voting control. The Giving Pledge, when read alongside Facebook's charter, made it clear that Facebook would not be a controlled company forever.

    In 2015, Zuckerberg owned 15% of Facebook's economics, but though his class B shares controlled 53% of the vote. He wanted to expand his philanthropy. He knew that he could only give away approximately $6 billion in Facebook stock without his voting control dropping below 50.1%.

    He asked Facebook's lawyers to recommend a plan for him. They recommended that Facebook issue a third class of stock, class C shares, with no voting rights, and distribute these shares via dividend to all class A and class B stockholders. This would allow Zuckerberg to sell all of his class C shares first without any effect on his voting control.

    Facebook formed a "Special Committee" of independent directors to negotiate the terms of this "reclassification" of Facebook's stock structure with Zuckerberg. The Committee included Marc Andreeson, who was Zuckerberg's longtime friend and mentor. It also included Susan Desmond-Hellman, the CEO of the Gates Foundation, who we alleged was unlikely to stand in the way of Zuckerberg becoming one of the world's biggest philanthropists.

    In the middle of his negotiations with the Special Committee, Zuckerberg made another public pledge, at the same time he and his wife Priscilla Chan announced the birth of their first child. They announced that they were forming a charitable vehicle, called the "Chan-Zuckerberg Initiative" (CZI) and that they intended to give away 99% of their wealth during their lifetime.

    The Special Committee ultimately agreed to the reclassification, after negotiating certain governance restrictions on Zuckerberg's ability to leave the company while retaining voting control. We alleged that these restrictions were largely meaningless. For example, Zuckerberg was permitted to take unlimited leaves of absence to work for the government. He could also significantly reduce his role at Facebook while still controlling the company.

    At the time the negotiations were complete, the reclassification allowed Zuckerberg to give away approximately $35 billion in Facebook stock without his voting power falling below 50.1%. At that point Zuckerberg would own just 4% of Facebook while being its controlling stockholder.

    We alleged that the reclassification would have caused an economic harm to Facebook's public stockholders. Unlike a typical dividend, which has no economic effect on the overall value of the company, the nonvoting C shares were expected to trade at a 2-5% discount to the voting class A shares. A dividend of class C shares would thus leave A stockholders with a "bundle" of one class A share, plus 2 class C shares, and that bundle would be worth less than the original class A share. Recent similar transactions also make clear that companies lose value when a controlling stockholder increases the "wedge" between his economic ownership and voting control. Overall, we predicted that the reclassification would cause an overall harm of more than $10 billion to the class A stockholders.

    The reclassification was also terrible from a corporate governance perspective. We never argued that Zuckerberg wasn't doing a good job as Facebook's CEO right now. But public stockholders never signed on to have Zuckerberg control the company for life. Indeed at the time of the IPO that was nobody's expectation. Moreover, as Zuckerberg donates more of his money to CZI, one would assume his attention would drift to CZI as well. Nobody wants a controlling stockholder whose attention is elsewhere. And with Zuckerberg firmly in control of the company, stockholders would have no recourse against him if he started to shirk his responsibilities or make bad decisions.

    We sought an injunction in this case to stop the reclassification from going forward. Facebook already put it up to a vote last year, where it was approved, but only because Zuckerberg voted his shares in favor of it. The public stockholders who voted cast 80% of their votes against the reclassification.

    By abandoning the reclassification, Zuckerberg can still give away as much stock as he wants. But if he gives away more than a certain amount, now he stands to lose control. Facebook's stock price has gone up a lot since 2015, so Zuckerberg can now give away approximately $10 billion before losing control (up from $6 billion). But then he either has to stop (unlikely, in light of his public pledges), or voluntarily give up control. There is evidence that non-controlled companies typically outperform controlled companies.

    KTMC believes that this litigation created an enormous benefit for Facebook's public class A stockholders. By forcing Zuckerberg to abandon the reclassification, KTMC avoided a multi-billion dollar harm. We also preserved investors' expectations about how Facebook would be governed and when it would eventually cease to be a controlled company.

    KTMC represented Sjunde AP-Fonden ("AP7"), a Swedish national pension fund which held more than 2 million shares of Facebook class A stock, in the litigation. AP7 was certified as a class representative, and KTMC was certified as co-lead counsel in the case. The litigation at KTMC was led by KTMC attorneys Lee Rudy, Eric Zagar, J. Daniel Albert, Grant Goodhart, and Matt Benedict.

  • Kessler Topaz served as Co-Lead Counsel in this shareholder class action brought against the directors of Genentech and Genentech’s majority stockholder, Roche Holdings, Inc., in response to Roche’s July 21, 2008 attempt to acquire Genentech for $89 per share.

    We sought to enforce provisions of an Affiliation Agreement between Roche and Genentech and to ensure that Roche fulfilled its fiduciary obligations to Genentech’s shareholders through any buyout effort by Roche. After moving to enjoin the tender offer, Kessler Topaz negotiated with Roche and Genentech to amend the Affiliation Agreement to allow a negotiated transaction between Roche and Genentech, which enabled Roche to acquire Genentech for $95 per share, approximately $3.9 billion more than Roche offered in its hostile tender offer. In approving the settlement, then-Vice Chancellor Leo Strine complimented plaintiffs’ counsel, noting that this benefit was only achieved through “real hard-fought litigation in a complicated setting.”

  • Kessler Topaz represented stockholders of four closed-end mutual funds in a derivative action against the funds’ former investment advisor, Morgan Asset Management.

    Plaintiffs alleged that the defendants mismanaged the funds by investing in riskier securities than permitted by the funds’ governing documents and, after the values of these securities began to precipitously decline beginning in early 2007, cover up their wrongdoing by assigning phony values to the funds’ investments and failing to disclose the extent of the decrease in value of the funds’ assets. In a rare occurrence in derivative litigation, the funds’ Boards of Directors eventually hired Kessler Topaz to prosecute the claims against the defendants on behalf of the funds. Our litigation efforts led to a settlement that recovered $6 million for the funds and ensured that the funds would not be responsible for making any payment to resolve claims asserted against them in a related multi-million dollar securities class action. The fund’s Boards fully supported and endorsed the settlement, which was negotiated independently of the parallel securities class action.

  • This derivative action challenged improper bonuses paid to two company executives of this small pharmaceutical company that had never turned a profit.

    In response to the complaint, Hemispherx’s board first adopted a “fee-shifting” bylaw that would have required stockholder plaintiffs to pay the company’s legal fees unless the plaintiffs achieved 100% of the relief they sought. This sort of bylaw, if adopted more broadly, could substantially curtail meritorious litigation by stockholders unwilling to risk losing millions of dollars if they bring an unsuccsessful case. After Kessler Topaz presented its argument in court, Hemispherx withdrew the bylaw. Kessler Topaz ultimately negotiated a settlement requiring the two executives to forfeit several million dollars’ worth of accrued but unpaid bonuses, future bonuses and director fees. The company also recovered $1.75 million from its insurance carriers, appointed a new independent director to the board, and revised its compensation program.

  • Kessler Topaz, as co-lead counsel, represented International Brotherhood of Electrical Workers Local 98 Pension Fund in a shareholder derivative action challenging breaches of fiduciary duties and other violations of law in connection with Encore’s debt collection practices, including robo-signing affidavits and improper use of the court system to collect alleged consumer debts.

    Kessler Topaz negotiated a settlement in which the Company implemented industry-leading reforms to its risk management and corporate governance practices, including creating Chief Risk Officer and Chief Compliance Officer positions, various compliance committees, and procedures for consumer complaint monitoring.

  • Represented shareholders in derivative litigation challenging board’s decision to accelerate “golden parachute” payments to South Financial Group’s CEO as the company applied for emergency assistance in 2008 under the Troubled Asset Recovery Plan (TARP).

    We sought injunctive relief to block the payments and protect the company’s ability to receive the TARP funds. The litigation was settled with the CEO giving up part of his severance package and agreeing to leave the board, as well as the implementation of important corporate governance changes one commentator described as “unprecedented.”

  • As lead counsel in this derivative action, we negotiated a settlement with far-reaching implications for the safety and security of airline passengers. 

    Our clients were shareholders of Southwest Airlines Co. (Southwest) who alleged that certain officers and directors had breached their fiduciary duties in connection with Southwest’s violations of Federal Aviation Administration safety and maintenance regulations. Plaintiffs alleged that from June 2006 to March 2007, Southwest flew 46 Boeing 737 airplanes on nearly 60,000 flights without complying with a 2004 FAA Airworthiness Directive requiring fuselage fatigue inspections. As a result, Southwest was forced to pay a record $7.5 million fine. We negotiated numerous reforms to ensure that Southwest’s Board is adequately apprised of safety and operations issues, and implementing significant measures to strengthen safety and maintenance processes and procedures.

  • In 2006, the Wall Street Journal reported that three companies appeared to have “backdated” stock option grants to their senior executives, pretending that the options had been awarded when the stock price was at its lowest price of the quarter, or even year. An executive who exercised the option thus paid the company an artificially low price, which stole money from the corporate coffers. While stock options are designed to incentivize recipients to drive the company’s stock price up, backdating options to artificially low prices undercut those incentives, overpaid executives, violated tax rules, and decreased shareholder value.

    Kessler Topaz worked with a financial analyst to identify dozens of other companies that had engaged in similar practices, and filed more than 50 derivative suits challenging the practice. These suits sought to force the executives to disgorge their improper compensation and to revamp the companies’ executive compensation policies. Ultimately, as lead counsel in these derivative actions, Kessler Topaz achieved significant monetary and non-monetary benefits at dozens of companies, including:

    Comverse Technology, Inc.: Settlement required Comverse’s founder and CEO Kobi Alexander, who fled to Namibia after the backdating was revealed, to disgorge more than $62 million in excessive backdated option compensation. The settlement also overhauled the company’s corporate governance and internal controls, replacing a number of directors and corporate executives, splitting the Chairman and CEO positions, and instituting majority voting for directors.

    Monster Worldwide, Inc.: Settlement required recipients of backdated stock options to disgorge more than $32 million in unlawful gains back to the company, plus agreeing to significant corporate governance measures. These measures included (a) requiring Monster’s founder Andrew McKelvey to reduce his voting control over Monster from 31% to 7%, by exchanging super-voting stock for common stock; and (b) implementing new equity granting practices that require greater accountability and transparency in the granting of stock options moving forward. In approving the settlement, the court noted “the good results, mainly the amount of money for the shareholders and also the change in governance of the company itself, and really the hard work that had to go into that to achieve the results….”

    Affiliated Computer Services, Inc.: Settlement required executives, including founder Darwin Deason, to give up $20 million in improper backdated options. The litigation was also a catalyst for the company to replace its CEO and CFO and revamp its executive compensation policies.

  • Served as lead counsel on behalf of the Mississippi Public Employees’ Retirement System in an action alleging that the Board of Directors of Viacom, Inc. (Viacom) breached its fiduciary duties by paying excessive and unwarranted compensation to Executive Chairman and CEO, Sumner M. Redstone, and co-COOs Thomas E. Freston and Leslie Moonves, at a time when the company was suffering record losses.

    Specifically, in 2004, when Viacom reported a net loss of $17.46 billion, the Board improperly approved compensation payments to Redstone, Freston, and Moonves of approximately $56 million, $52 million, and $52 million, respectively. Under a settlement reached in 2007, Executive Chairman and controlling shareholder Redstone agreed to a new compensation package that substantially reduced his annual salary and cash bonus, and tied the majority of his incentive compensation directly to shareholder returns.

Speaking Engagements

Eric has been a featured speaker on shareholder derivative litigation at national and international conferences, including the Rights & Responsibilities of Institutional Investors in Amsterdam, Netherlands, the Practicing Law Institute’s Annual Securities Regulation Institute in San Francisco, California, and the American College of Business Court Judges Annual Meeting in Chicago, Illinois. 


A Review of Options Backdating Settlements and Corporate Governance, 2 Journal of Securities Law, Regulation & Compliance 236 (2009)