A Jersey Judge Benchslaps Paul Weiss and Lowenstein Sandler -- Hard

Back in June, we bestowed Lawyer of the Day honors upon two of the nation’s top litigators: Ted Wells and Martin Flumenbaum, the co-chair and former chair, respectively, of the renowned litigation department at Paul Weiss. Given the sterling reputations of the two lawyers and their firm, it was a surprising development.

We recognized Messrs. Wells and Flumenbaum after a New Jersey judge sanctioned Paul Weiss and its co-counsel — Lowenstein Sandler, one of the Garden State’s leading law firms, and Wells’s former home (before he jumped across the Hudson) — for pursuing a “frivolous” and “ridiculous” legal claim on behalf of billionaire Ronald Perelman against his ex-father-in-law, Robert Cohen.

In June, Judge Ellen Koblitz ordered Paul Weiss and Lowenstein Sandler to pay Cohen’s fees and costs for opposing the claim; she scheduled a hearing to determine the amount. The hearing took place last month, and now we know the amount.

It’s nothing to sneeze at, even for firms as well-heeled as Paul Weiss and Lowenstein. And to add insult to (financial) injury, Judge Koblitz got super-snarky in the opinion setting forth her reasoning….

As first reported by Andrew Longstreth in the American Lawyer, last Friday Judge Koblitz issued her final opinion (PDF), “rejecting the firms’ arguments for mercy and ordering them to pay $1.96 million in legal fees to the defendants, Perelman’s former father-in-law and brother-in-law.” Here’s the money quote (hehe) from the ruling:

Paul Weiss and Lowenstein Sandler argue that since they are both such important, well-regarded law firms, the mere finding that they engaged in frivolous litigation is deterrence enough. They argue that this court’s finding of frivolous litigation has been widely publicized and besmirches their reputation, which will cost them untold, unspecified damages. A monetary sanction, however, is clearly appropriate here.”

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Then Judge Koblitz saucily cited the firms’ financials. From her opinion:

This lawsuit from the beginning has been a dispute between individuals over hundreds of millions of dollars. The law firms chose to represent the parties as a sound business decision. Paul Weiss is reported to be one of the top-ranked national firms in terms of income, while Lowenstein Sandler is number two in New Jersey in revenue. According to published reports not disputed by plaintiffs’ counsel, in 2009 Paul Weiss received $650 million in revenue and Lowenstein Sandler reported $183 million in revenue. This litigation has generated close to $15,000,000 in fees for defense counsel, who estimate that plaintiffs’ counsel fees must be considerably higher, given that they utilized the services of approximately twice as many lawyers and a higher percentage of New York (higher billing) counsel.

Some New Jersey lawyers have a chip on their shoulders about how their billing rates are lower than comparable attorneys on the other side of the Lincoln Tunnel. Judge Koblitz just turned the tables on the Manhattanites. Well-played, Your Honor.

Have the two firms adopted any remedial measures to ensure that they never again wander into the Land of Frivolous Litigaton? Here Judge Koblitz draws a distinction between Lowenstein — the New Jersey firm, and therefore the less evil of the two villains — and big bad Paul Weiss:

Lowenstein Sandler now has an internal method to address the issue. Lownstein Sandler set up a new system in their firm in the fall of 2009 which they hope will safeguard against the pursuit of frivolous litigation in the future. A firm committee, including at least one attorney not involved in the litigation and inside general counsel, will review any 1:4-8 letter received. This process, which began before the frivolous litigation finding in this case, appears salutary.

Paul Weiss offers no demonstrable reason why they might not engage in this type of offensive litigation again. They claim never to have been found to have engaged in frivolous litigation in the one hundred year history of the firm. They argue that it will not happen again because it did not happen before. Of course firms change lawyers and practices. Without recognizing and addressing a problem, it is hard to be sure that it will not resurface. A sufficient monetary sanction is necessary to impress upon counsel the need to make greater efforts to avoid frivolous litigation in the future.

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And here’s a bill for $2 million. To quote one of the tipsters who alerted us to this story, “Paul Weiss checked into the Smackdown Hotel at the Corner of Jabroni Drive and Know Your Role Blvd.”

Neither firm was pleased with Judge Koblitz’s decision, and both plan to appeal. “We believe the lower court’s decision and monetary award are unjustified,” Paul Weiss chairman Brad Karp said in a statement. “We firmly believe that the representation we provided our client was proper and appropriate and we will appeal the judge’s decision.”

“Lowenstein Sandler acted properly at all times in representing its client in this matter,” said Lowenstein managing director Gary Wingens. “We believe that this decision is contrary to established law and may have the unfortunate consequence of chilling effective advocacy in this jurisdiction. We fully intend to appeal the court’s ruling.”

Meanwhile, their opposing counsel — Benjamin Clarke, a partner at DeCotiis, FitzPatrick & Cole, another prominent New Jersey firm — couldn’t help but gloat a little (in a statement to the ABA Journal, reprinted in full at the end of this post):

Since the filing of this lawsuit in April 2008, we have contended that Ronald Perelman’s claims were completely without merit. There was no factual basis at all to support Perelman’s allegation that his former wife, Claudia Cohen, was ever promised a major or equal share of her father’s estate.

We are gratified that, in her final decision, Judge Koblitz found the promise claim – the core claim on which the entire suit was founded – to be frivolous, and imposed strong sanctions for the improper prosecution of the litigation. According to plaintiff’s own attorneys, the nearly $2 million sanctions award in this case is the “largest in New Jersey history by a factor of ten.”

But will it stand up on appeal? As Peter Lattman — previously at the WSJ Law Blog, but now over at DealBook — pointed out:

Judge Koblitz herself came under criticism this month over another frivolous litigation ruling. Wednesday’s New Jersey Law Journal reported that the state’s appellate court reversed a frivolous litigation sanction by Judge Koblitz in a different case. A year after a Hackensack lawyer was sanctioned by Judge Koblitz, the appellate court said that while the lawyer bungled the procedural posture of the case, that “does not warrant a frivolous litigation sanction.” The court also said the judge violated New Jersey procedure in issuing the fee sanctions.

Stay tuned. If you’d like to take a closer look at Judge Koblitz’s reasoning, as well as her calculations, check out the full opinion.

P.S. Judge Koblitz is based in Bergen County, where I grew up. Bergen is pleasant and suburban, blessed with numerous malls (Garden State Plaza, holla). But as Judge Koblitz’s benchslappery demonstrates, if you cross Bergenites, they can brawl just as well as their brethren down in Essex.

Estate of Claudia L. Cohen v. Cohen [Superior Court of New Jersey via Am Law Daily]
Paul Weiss and Lowenstein Ordered to Pay $1.96 Million for Filing Frivolous Suit Against Ron Perelman’s In-Laws [American Lawyer]
Law Firm Smackdown [DealBook]
Judge Orders Paul Weiss, Lowenstein to Pay $1.96M in Fees for Frivolous Suit [ABA Journal]

Earlier: Lawyers of the Day: Ted Wells and Marty Flumenbaum?


DECOTIIS, FITZPATRICK & COLE – STATEMENT – THE FINAL DECISION IN ESTATE OF CLAUDIA L. COHEN BY ITS EXECUTOR, RONALD PERELMAN AND SAMANTHA PERELMAN V. ROBERT COHEN

(Teaneck, NJ August 26, 2010): “Since the filing of this lawsuit in April 2008, we have contended that Ronald Perelman’s claims were completely without merit. There was no factual basis at all to support Perelman’s allegation that his former wife, Claudia Cohen, was ever promised a major or equal share of her father’s estate.

We are gratified that, in her final decision, Judge Koblitz found the promise claim – the core claim on which the entire suit was founded – to be frivolous, and imposed strong sanctions for the improper prosecution of the litigation. According to plaintiff’s own attorneys, the nearly $2 million sanctions award in this case is the ‘largest in New Jersey history by a factor of ten.’

We hope that the award will serve to curtail abuses of the judicial process by making clear to all litigants and attorneys that our courts stand ready to hold them accountable for litigation misconduct.

It is important to note that Judge Koblitz’s decision of August 20 marks the end of four suits that Ronald Perelman filed as the Executor of Claudia Cohen’s Estate against James and Robert Cohen. The four suits resulted in the issuance of ten judicial decisions, with all of Perelman’s claims being resolved in favor of James and Robert Cohen, and dismissed.”

Frank Huttle III, Benjamin Clarke and Russell Passamano of DeCotiis, FitzPatrick & Cole represented James Cohen in this matter.