A federal judge has dismissed a complaint against Arlin Adams in a case stemming from turmoil in the wealthy Perelman family.
Raymond Perelman, the family patriarch, was claiming fraud and negligence on Adams’ part in the handling of a $24 million business deal between him and his estranged son, Jeffrey Perelman, more than 20 years ago.
Adams, a former judge on the U.S. Court of Appeals for the Third Circuit, has been of counsel at Schnader Harrison Segal & Lewis since leaving the bench in the 1980s.
U.S. District Judge Eduardo C. Robreno of the Eastern District of Pennsylvania threw out the action, holding that Raymond Perelman’s claims are barred by statutes of limitations and the doctrine of res judicata, observing that he had made similar claims in state court cases.
"The dismissal will hopefully put an end to the seemingly endless litigation among members of this unhappy family involving these related claims," Robreno said in Perelman v. Adams.
Referring to that part of the opinion, Abraham Reich said, "The judge’s opinion, particularly the last paragraph, says it all." Reich, of Fox Rothschild, represented Adams in this action and represented Schnader in a similar suit brought by Perelman earlier.
Perelman’s lawyer, Andrew Eckert of Buckley, Brion, McGuire, Morris & Sommer in West Chester, Pa., couldn’t be reached for comment.
"This was a lawsuit that never should have been filed," Reich said, adding that it is unfortunate that "such a distinguished member of the legal community" would be "sullied" with allegations like this.
Perelman had alleged that Adams had been in control of the transaction in 1989 that was supposed to have required Jeffrey Perelman to pay $24 million for 13 subsidiary companies with the caveat that half of the stock in the companies was to be put in a trust for Jeffrey Perelman’s daughter. Raymond Perelman told the court that he learned in 2010, when he got copies of documents relating to the sale of the companies, that his son hadn’t paid for them and that half their stock hadn’t been put into a trust for his granddaughter.
Robreno divided Perelman’s claims into two categories: those related to the allegation that he wasn’t paid for the companies and those related to the allegation that his granddaughter wasn’t given the trust that he had requested.
"The court finds all of plaintiff’s claims to be precluded, but reaches this conclusion through two separate paths of analysis," Robreno said.
Regarding the claims over the lack of payment, Perelman cited Pennsylvania’s discovery rule, which allows the statute of limitations to hold off if the person claiming it proves that he couldn’t have known about the injury until a certain point.
"In invoking the rule of discovery, plaintiff appears to argue that because he was so wealthy, he could not be expected to notice the absence of $24 million," Robreno said. "Even if true, this argument focuses on plaintiff’s subjective state of mind," while the rule requires him to satisfy the objective standard that he acted with reasonable diligence.
"Apparently recognizing the weakness of this argument, plaintiff turns to the doctrine of fraudulent concealment to toll the statute of limitations," Robreno said.
That doctrine applies when a person has loosened his grip on the reins because another person — in this case, a lawyer — has, through fraud or concealment, caused him to do so.
Looking to other cases in the circuit, Robreno said, "The rule that emerges from these cases is that while a fiduciary relationship relaxes the duty of diligence, subsequent events, other than the fiduciary’s disclosure of the fraud, may put the principal on notice of the need for an increased level of inquiry. Such is the case here."
In 2007, Perelman learned that his granddaughter hadn’t been named as the beneficiary of half of the companies’ stock, according to the opinion. He told the court that he had been "shocked and dismayed" by the discovery.
"A reasonable person, ‘shocked and dismayed’ by the discovery in 2007 that an important and substantial provision relating to the family trust had not been included, would have requested and reviewed the agreements with dispatch to ensure that his intended terms, including the $24 million payment, had been met in a closely related transaction," Robreno said. "At this point, if not earlier, plaintiff was on notice of the need for a ‘searching inquiry’ into his fiduciary’s actions."
Perelman didn’t conduct such an inquiry, meaning that the statute of limitations as to the $24 million payment, at the latest, would have started to run in 2007, Robreno said.
Turning to the issues related to the trust fund, Robreno said that they, too, would be barred by the statute of limitations, but they had already been barred by res judicata since they were already litigated in a suit that Perelman had filed in the Philadelphia Court of Common Pleas against the Schnader firm. That court dismissed his claims for legal malpractice, breach of contract, and breach of fiduciary duty, according to Robreno’s opinion.
Robreno wasn’t persuaded by Perelman’s argument that Adams was working outside of the scope of his employment at the law firm, thereby enabling him to bring claims against Adams personally.
Robreno noted that in his suit against Schnader in the Philadelphia court, Perelman had argued that Adams’ work should be imputed to the law firm.
"To now claim that defendant was not acting as an agent of the Schnader firm constitutes a 180 degree turn from plaintiff’s position in previous litigation," Robreno said. "While a party may change or modify a legal theory to meet emerging facts, the opposite is not true. Facts cannot be changed to meet new legal theories."
(Copies of the 26-page opinion in Perelman v. Adams, PICS No. 13-1164, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •