Judge Sanctions Law Firms Over 'Frivolous' Estate Claim

N.J. Judge Sanctions Firms Over Perelman's 'Frivolous' Estate Claim
The New York Law Journal by Mark Fass - June 16, 2010

A New Jersey judge has sanctioned two firms, Paul, Weiss, Rifkind, Wharton & Garrison and Lowenstein Sandler, for pursuing a "frivolous" and "ridiculous" legal claim on behalf of billionaire Ronald Perelman against his 85-year-old ex-father-in-law. Mr. Perelman had alleged that Robert Cohen, the father of Mr. Perelman's ex-wife, Claudia Cohen, who died in 2007, had promised Ms. Cohen that she would receive one half of Mr. Cohen's estate. Superior Court Judge Ellen L. Koblitz ruled that Mr. Perelman's attorneys should have known that the claim was unsupportable.

"No competent attorney could have missed the frivolous nature of this promise claim once the unhelpful testamentary documents were received," Judge Koblitz said in ordering the sanctions last Wednesday. "There was no legal or factual basis for the plaintiffs to proceed with their amended complaint given the evidence they had and the state of the law in New Jersey." Read a transcript of the New Jersey court proceedings. Although not the basis for the sanction, the judge also criticized Paul Weiss, and in particular its former head of litigation, Martin Flumenbaum, for the bare-knuckled tactics the firm employed in pursuing this and other claims against Mr. Cohen. "Counsel for the estate engaged in hard-fought litigation that at times crossed the boundary of appropriate litigation tactics," Judge Koblitz wrote. She said Mr. Flumenbaum's examination of Mr. Cohen, who suffers from Parkinson's, was "harsh and painful." She ordered Paul Weiss and Lowenstein Sandler to pay Mr. Cohen's fees and costs for opposing the claim and set a hearing for July 8 to determine the amount. The defense, led by Wilson, Sonsini, Goodrich & Rosati partner Robert Gold and of counsel Mitchell Epner, has estimated that those fees will total several million dollars. In addition to Mr. Flumenbaum, Paul Weiss' legal team included litigation department chairman Theodore Wells and partner Roberta Kaplan. Lowenstein Sandler's team included Zulima Farber, the former attorney general of New Jersey. Paul Weiss chairman Brad S. Karp said in a statement, "We firmly believe that the representation we provided our clients throughout this case was appropriate in all respects and we intend to appeal the lower court's ruling." Mr. Gold of Wilson Sonsini declined to comment on the case, saying only, "I have great respect for Paul Weiss. I said it all in court." Ms. Farber of Lowenstein did not return a call for comment. Mr. Perelman, an investor whose holdings include a majority share of Revlon, filed the underlying action in 2008 on behalf of his daughter, Samantha, and the estate of Ms. Cohen, whom he divorced in 1994, against Ms. Cohen's father, Robert Cohen, who built up the Hudson County News Company, one of the largest regional magazine wholesalers in the nation. Mr. Perelman sought to enforce Mr. Cohen's alleged promise to his daughter, Claudia, that she would receive one half of his estate. A will signed by Ms. Cohen shortly before her death from ovarian cancer left the majority of her estate, which would include any funds from her father, in trust to Samantha. As executor of Ms. Cohen's will, Mr. Perelman would oversee the trust. Judge Koblitz granted a directed verdict in favor of Mr. Cohen in August 2009 after a seven-week trial.

In a memorandum filed last month, Mr. Cohen argued that Mr. Perelman's counsel should be sanctioned for pursuing the claim. The judge's ruling came in response to that request. Under New Jersey law, the promise would have to have been made before Sept. 1, 1978, when the state barred oral testamentary promises. It would also have had to extend to Ms. Cohen's unborn children. Mr. Perelman's attorneys should have known that there was no evidence of any such promise and that neither Mr. Perelman nor his daughter Samantha, who was not born until 1990, would even testify that such a promise had been made, Mr. Cohen argued. (Mr. Perelman never testified to a "promise," but rather to the "concept" that Mr. Cohen had intended.) Paul Weiss argued, among other defenses, that it had sufficient evidence to advocate the claim and expected to uncover even more. According to a court transcript of last week's hearing, Paul Weiss partner Robert Atkins told the judge, "The sin, if there is one, is that at the end the day we presented insufficient evidence… But the record evidence was that [Mr. Perelman] heard from both Mr. Cohen and his wife and later his former wife on multiple occasions [about] a commitment by Mr. Cohen to divide his estate. Judge Koblitz, ruling from the bench, found that Paul Weiss and Lowenstein Sandler had violated New Jersey Court Rules by filing the amended complaint after receiving documents showing the claim was untenable. "In September 1978, Claudia was 27 years old, unmarried and childless. She did not meet Perelman until 1983," Judge Koblitz wrote. "The testimony of Perelman did not support the promise claim. No other evidence was introduced to support the promise. The changing nature of the purported promise is an additional indication of the frivolous nature of the promise claim." The case is one of at least five lawsuits Mr. Perelman has filed against his former in-laws, four of which have been dismissed. The fifth action, filed in Manhattan Surrogate's Court, also suggests that Mr. Cohen had promised Claudia Cohen one half of his estate. Mark Fass can be reached at mfass@alm.com.