Perelman v. Perelman
| Decision Date | 12 February 2010 |
| Docket Number | Civil Action No. 09-4792. |
| Citation | 688 F. Supp.2d 367 |
| Parties | Jeffrey E. PERELMAN, et al. v. Raymond PERELMAN, et al. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
James T. Smith, Rebecca D. Ward, Blank Rome Comisky & McCauley LLP, Philadelphia, PA, for Jeffrey E. Perelman, et al.
Brian P. Flaherty, George M. Gowen, III, Stephen A. Cozen, Cozen O'Connor, Philadelphia, PA, for Raymond Perelman, et al.
This action arises out of a series of financial transactions made twenty years ago between a father and a son. Disputes between the two family members and others have now arisen over whether the transactions, which involved the son's acquisition of several companies from his father and the subsequent formation of a trust to benefit the son's daughter, conform to the parties' agreement at the time.
Two related lawsuits have been filed: the above-captioned action in this Court and an action in Pennsylvania state court, both commenced on the same day. In the state court action, the father, Raymond Perelman, brings claims of fraud, conversion, and breach of contract against his son, Jeffrey Perelman, alleging that he violated the terms of their agreement and that he mismanaged the assets that were placed in trust for his daughter.
In the action in this Court, Jeffrey Perelman, joined by the co-trustee and a holding company involved in the acquisition, seeks a declaratory judgment that his father has no viable claim against him or the other plaintiffs relating to the formation and management of the trust. Jeffrey Perelman also brings a defamation claim against his father and his brother, Ronald Perelman, alleging that they told others that he had defrauded his father and stolen money from his daughter.
The defendants in this Court, Raymond and Ronald Perelman, have now moved to dismiss or, in the alternative, stay this action in favor of the state court litigation. The Court will deny the motion, finding that it has no discretion to dismiss or stay the plaintiffs' defamation claims and that, although it has such discretion with respect to the declaratory judgment claims, the factors guiding the exercise of that discretion require that the Court retain jurisdiction over those claims.
The plaintiffs in this action are Jeffrey Perelman, suing both individually and as trustee of the Alison R. Perelman Trust ("the trust"), Frank Katz, suing in his capacity as co-trustee of the trust, and JEP Management, Inc. ("JEP"). JEP was involved in the acquisition of the companies acquired from Raymond Perelman (the "purchased companies") and acts as a management company for the purchased companies.
The plaintiffs' original complaint, filed with this Court on October 19, 2009, contained only one count, seeking a declaratory judgment against Raymond Perelman. This count seeks a declaration concerning possible claims that Raymond Perelman may have against Jeffrey Perelman, the trustees of the trust, or the trust itself concerning the trust's formation and administration and Jeffrey Perelman's acquisition of the purchased companies. The count asks the Court to declare that Raymond Perelman has no standing to bring such claims regarding the trust, that he is barred from bringing any such claims by the statute of limitations and other defenses, and that he has no such viable claims.
The plaintiffs amended their complaint on November 12, 2009, to add Ronald Perelman as a defendant and to add a claim of defamation per se. The defamation claim is brought by Jeffrey Perelman in his individual capacity against both Raymond and Ronald Perelman.
The amended complaint makes the following factual allegations.
After working as an officer in his father's businesses for several years, Jeffrey Perelman resigned in 1989 due to escalating personal and business conflicts with his father. Urged to repair their relationship by family and friends, Jeffrey Perelman began to negotiate his return to the family businesses later that year. See Am. Compl. at 6-7.
These negotiations concerned a series of transactions to effect the sale to Jeffrey Perelman of certain companies owned and controlled at the time by Raymond Perelman. Jeffrey Perelman alleges that Raymond Perelman identified three concerns regarding the structure of the transactions: (1) that Raymond Perelman would incur no tax obligations from the sale, (2) that Jeffrey Perelman's wife, Marsha Reines Perelman, would renounce her interest in certain of the transferred assets, and (3) that 50% of the assets and stocks transferred in connection with the transactions would be placed in a trust for the ultimate benefit of Jeffrey Perelman's daughter, Alison Perelman, and any other children Jeffrey Perelman may have. See id. at 7.
Jeffrey Perelman and Raymond Perelman negotiated through the summer and fall of 1989 to determine how the parties could best structure the transaction to meet Raymond Perelman's concerns. They jointly retained the law firm of Schnader, Harrison, Segal & Lewis to facilitate the transfer and signed a waiver of any conflicts arising from the joint representation. The amended complaint also alleges that Raymond Perelman employed a team of in-house counsel who were familiar with asset and stock acquisition agreements, the formation of trusts, and the tax issues that arise from such transactions. See id. at 8.
When negotiations concluded in January of 1990, Raymond Perelman agreed to sell to Jeffrey Perelman, and Jeffrey Perelman agreed to purchase, all of the stock or all of the assets of several of Raymond Perelman's companies. As consideration, Jeffrey Perelman agreed to pay approximately $27 million and assume significant liabilities of the purchased companies. The assets and stock of the purchased companies were ultimately sold through a series of twelve asset purchase agreements and stock purchase agreements (collectively "the purchase agreements"). See id. at 8-9.
Jeffrey Perelman placed stock and assets representing half of the ownership of the purchased companies into an irrevocable trust, then known as the "Jeffrey E. Perelman Trust" and subsequently renamed the "Alison R. Perelman Trust" in 2009. Jeffrey Perelman and Judge Arlin Adams, a family friend and advisor who helped negotiate the transaction and was a signatory to the trust agreement, were designated co-trustees. Judge Adams served as co-trustee until plaintiff Frank Katz took Judge Adams' place in December of 2008. See id. at 9.
Almost all of the corporations whose stock was owned by the trust were formed as "S" corporations in order to receive favorable tax treatment. See id. at 26. The only exception was plaintiff corporation JEP, which was formed as a "C" corporation to address certain tax issues arising out of the formation of the "S" corporations. Jeffrey Perelman placed 50% of the common stock of JEP into the trust on or about January 24, 1990. See id. at 15-17.
The amended complaint states that, in or about 2007, Raymond Perelman began to make claims to family members, friends, and others that he was misled and defrauded by his son and others regarding the structural organization of the trust. See id. at 20. Specifically, the complaint alleges that Raymond Perelman has claimed that (1) he did not know that Jeffrey Perelman had the right to receive income from the trust during Jeffrey Perelman's lifetime, (2) he expected Alison Perelman to have ownership of the 50% of the stock and assets and/or to be the sole beneficiary of the trust from its inception, (3) Jeffrey Perelman either misled him about the structure of the trust and the formation of JEP, or Jeffrey Perelman and/or JEP breached some promise or agreement with Raymond Perelman regarding the stock and assets, (4) JEP was being used as an instrumentality to perpetuate fraud on the trust, and (5) Marsha Reines Perelman should have renounced all of her interests in all of the assets transferred, rather than the 50% transferred to the trust. See id. at 20-21.
The amended complaint alleges that Raymond Perelman has repeatedly threatened suit against Jeffrey Perelman, JEP and the trust and threatened to smear Jeffrey Perelman in the local media. See id. at 24-25. The amended complaint also alleges that Raymond and Ronald Perelman have made a series of defamatory statements about Jeffrey Perelman to family and mutual friends and acquaintances. See id. at 28-29.
The same day that the original federal court complaint was filed, Raymond Perelman instituted a separate state court proceeding in the Court of Common Pleas of Philadelphia County by way of a Writ of Summons. The state court complaint was filed under seal on October 27, 2009. The sole plaintiff in the state court case is Raymond Perelman and the sole defendant is Jeffrey Perelman.
In his state court complaint, Raymond Perelman states that he entered the transaction with Jeffrey Perelman for the purpose of sharing his wealth with Jeffrey Perelman's children and enabling them to enjoy a lifestyle comparable to his own. See St. Ct. Compl. at 2-3. He states that, with that purpose in mind, his agreement with Jeffrey Perelman was based upon certain specific and essential requirements and that Jeffrey Perelman understood and accepted all of his terms. See id. at 3.
The complaint alleges that Jeffrey and Raymond thereby formed an agreement pursuant to which Jeffrey Perelman would put the appropriate legal mechanisms in place to accomplish Raymond Perelman's requirements. The complaint alleges that Jeffrey Perelman did not carry out that agreement and, therefore, breached the contract and defrauded Raymond Perelman by (1) making Jeffrey Perelman, not his children, the principal beneficiary of the trust and rendering his children only remote contingent beneficiaries, and (2) allowing Marsha Reines Perelman to renounce only 50% of her interest in...
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