A New Jersey appeals court on Thursday threw out $1.96 million in sanctions against Paul Weiss Rifkind Wharton & Garrison and Lowenstein Sandler for their representation of billionaire businessman Ronald Perelman in litigation as executor of his deceased ex-wife’s estate.
The appeals panel agreed with the trial judge that the lawyers continued to pursue the case after it became clear it had no merit but remanded for reconsideration of the penalty. The judge considered improper factors, such as overaggressive questioning at trial, while failing to take into account mitigating factors like the good reputation of the firms, the panel said.
In all other aspects, the appeals court affirmed the judge’s dismissal of the suit, Estate of Cohen v. Cohen.
Perelman, as executor for his ex-wife Claudia Cohen, a gossip columnist who died in 2007, was seeking to enforce an alleged oral promise made to Cohen by her father, Robert, owner of Hudson County News Co., that she and her brother, James, would inherit equally when he died.
At trial in Bergen County in June 2009, Superior Court Judge Ellen Koblitz dismissed the claim sua sponte, citing a lack of evidence of an enforceable promise. Soon after, she also tossed the rest of the case, including undue influence and fraud claims.
Robert Cohen subsequently prevailed on a $10 million counterclaim against the estate based on a decision that his transfer of that amount to Claudia had been a loan, not a gift.
Robert and James Cohen then sought sanctions against Perelman and his attorneys at Lowenstein Sandler and Paul Weiss.
Part of the firms’ defense was that negative publicity from the frivolous litigation determination would be punishment enough.
In June 2010, Koblitz granted the motion as to the firms but not as to Perelman. The Cohens were awarded $1,406,215 and $554,766, respectively, in fees and costs, with Paul Weiss and Lowenstein jointly and severally liable.
The Appellate Division on Thursday upheld Koblitz’s rulings on the merits, including the counterclaim, her denial of penalties against Perelman personally and her decision that the litigation was frivolous.
The judges also found no abuse of discretion in her ruling that sanctions should run from March 2009, the date an amended complaint was filed, because by that point the firms had seen testamentary papers showing that Robert did not intend to split his estate down the middle.
“These documents should have alerted plaintiffs that there was no longer a good faith basis to pursue the promise claim,” wrote Judges Paulette Sapp-Peterson, William Nugent and Michael Haas.
Nor did they fault Koblitz for holding that in setting the size of the sanctions, the billing rates for the New York lawyers defending Robert Cohen should be cut to reflect the New Jersey forum.
In reversing the counsel fee award, however, the panel found Koblitz improperly relied on such factors as the firms’ aggressive trial strategy, especially their questioning of the elderly and fragile Robert Cohen, who suffered from Parkinson’s disease and died in 2012 at age 86.
The panel said Koblitz could not base a sanction on conduct she did not try to rein in as it occurred, noting that she never interrupted the questioning or admonished the lawyers.
Another inappropriate factor was what Koblitz saw as the firms’ lack of remorse, evidenced by their intent to appeal the sanctions. Had they shown contrition by admitting the promise claim was frivolous, they would have waived their right to challenge the frivolous litigation determination, the appeals court said.
Additional improper factors were the lawsuit’s disruption of family relations and the apparent manipulation of Perelman’s then-minor daughter, Samantha, who was also a plaintiff.
Despite the incorrect factors, the panel thought sanctions might still be warranted and therefore provided “additional guidance” for the remand.
The judge — who will not be Koblitz, since she is now on the Appellate Division — must consider mitigating circumstances disregarded the first time: the firms’ good reputation and lack of a history of frivolous suits, as well as Lowenstein’s 2009 establishment of a committee to guard against future frivolous litigation.
Lowenstein managing partner Gary Wingens said in a statement he is pleased that the appeals court vacated the sanctions.
Brad Karp, managing partner at Paul Weiss, did not return a call.
Benjamin Clarke of DeCotiis, FitzPatrick & Cole in Teaneck, who represents James Cohen, says he is “very happy that the court upheld the finding of frivolousness” and is “fully prepared to address the appropriateness of sanctions on remand.”
Robert Cohen’s counsel, Christopher Weiss of Ferro, LaBella & Zucker in Hackensack, did not return a call.
Perelman’s appellate lawyer, former New Jersey Supreme Court Justice Peter Verniero, now with Sills Cummis & Gross in Newark, referred a request for comment to Perelman’s spokeswoman Chris Taylor, who did not respond.
Samantha Perelman, now 23, filed her own undue influence case against her uncle James, and trial is now under way.