Film Production Deal Ruled Separate from Marital Agreement

Billionaire Ronald Perelman has to pay $4.3 million to a film company he formed with his ex-wife, Ellen Barkin, despite Perelman's claim that the actress' breach of the couple's separation agreement relieved him of his financial obligations to the company, the New York Appellate Division, First Department ruled. Applehead Pictures LLC v. Perelman, 3193.

In its unanimous ruling, the appellate division rejected Perelman's argument that Barkin's alleged violation of a provision in the couple's separation agreement concerning a “Get,” or Jewish divorce, relieved him of his obligations to invest in Applehead Pictures LLC. “The record makes clear that the amended operating agreement [of Applehead] and the separation agreement were not intended to be interdependent,” Justice Eugene L. Nardelli wrote for the court.

In 2005, Perelman, Barkin and her brother, George, formed Applehead Pictures. Under the operating agreement, Perelman received 25% of the film production company's profits and was obligated to invest $3.4 million in the company, which was incorporated in Delaware. The following year, Perelman and Barkin decided to end their six-year marriage and entered into a separation agreement that included a confidentiality provision barring the parties from speaking to the media about certain “prohibited topics.”

The pact also incorporated language from the couple's prenuptial agreement requiring the parties to “fully cooperate with each other in obtaining a get or other religious divorce.” Specifically, the parties were to obtain a Get within three days of Barkin's receipt of money she was owed under the prenuptial agreement.

The same day the separation agreement was signed, Perelman, Barkin and her brother entered into an amended operating agreement for Applehead, which reduced Perelman's share of net profits to 2%. While Perelman still was required to make a total of $3.4 million in capital contributions to the company, the amended contract removed him from having any “control, supervision or participation” in Applehead. Barkin also agreed to make sure that Applehead vacated its offices in the marital residence by the end of the month.

The couple divorced on Feb. 14, 2006. In the summer of 2007, Applehead brought a $3.4 million contract suit against Perelman for his alleged refusal to honor the company's operating agreement. Perelman, who admitted he had failed to pay capital contributions to Applehead, then turned around and brought a derivative action on behalf of the film production company. The suit, which accused Barkin and her brother of using funds from Applehead to set up a competing company, was ultimately consolidated with the contract action against Perelman.

Perelman maintained that his funding obligations to Applehead were “part of a complex and heavily negotiated agreement of separation” between him and Barkin. He insisted that Barkin's alleged failure to abide by the provisions in the separation agreement concerning the Get and confidentiality relieved him of his obligations under Applehead's operating agreement.

However, last January, Acting Supreme Court Justice Debra A. James in Manhattan granted Applehead partial summary judgment and ordered Perelman to pay the film company $4.3 million, which included interest on the investment. The judge noted that the separation agreement and the company's operating agreement “are governed by the laws of two different states, serve different purposes, and do not have identical parties.” The “operating agreement by its very terms stands on its own and is enforceable separately from, and without reference to, the separation agreement,” she added.

The Appellate Division agreed. “Perelman's capital contribution obligation arose prior to the execution of the separation agreement, and was restated in the amended operating agreement without any reference to the separation agreement or any indication that it was now conditional upon Barkin's performance of her obligations under the separation agreement,” Justice Nardelli wrote.

He also noted that the separation agreement did not obligate Barkin to initiate proceedings to obtain a Get but simply provided that the couple would cooperate in obtaining a religious divorce. “Even if the agreements were found to be intertwined, the allegation that Barkin breached the provision of the separation agreement involving the Get is meritless,” Justice Nardelli concluded.

The court also found “unavailing” Perelman's claim that Barkin violated the separation agreement by talking with the media about the couple's marriage. Finally, the panel rejected claims by Perelman that the Barkins had breached a covenant of good faith and fair dealing by using Applehead's assets to set up a competing venture and disagreed that Perelman's damages should be mitigated by contributions his ex-wife made to Applehead.

Charles A. Stillman, Scott M. Himes and Daniel V. Shapiro of New York's Stillman, Friedman & Shechtman represented Perelman. Himes did not return a call for comment. Jacob W. Buchdahl, Stephen D. Susman and Rebecca S. Tinio of the New York office of Susman Godfrey represented Applehead. Buchdahl said Applehead and Barkin were “happy to see that the court had rejected every single one of Mr. Perelman's arguments.”

Billionaire Ronald Perelman has to pay $4.3 million to a film company he formed with his ex-wife, Ellen Barkin, despite Perelman's claim that the actress' breach of the couple's separation agreement relieved him of his financial obligations to the company, the New York Appellate Division, First Department ruled. Applehead Pictures LLC v. Perelman, 3193.

In its unanimous ruling, the appellate division rejected Perelman's argument that Barkin's alleged violation of a provision in the couple's separation agreement concerning a “Get,” or Jewish divorce, relieved him of his obligations to invest in Applehead Pictures LLC. “The record makes clear that the amended operating agreement [of Applehead] and the separation agreement were not intended to be interdependent,” Justice Eugene L. Nardelli wrote for the court.

In 2005, Perelman, Barkin and her brother, George, formed Applehead Pictures. Under the operating agreement, Perelman received 25% of the film production company's profits and was obligated to invest $3.4 million in the company, which was incorporated in Delaware. The following year, Perelman and Barkin decided to end their six-year marriage and entered into a separation agreement that included a confidentiality provision barring the parties from speaking to the media about certain “prohibited topics.”

The pact also incorporated language from the couple's prenuptial agreement requiring the parties to “fully cooperate with each other in obtaining a get or other religious divorce.” Specifically, the parties were to obtain a Get within three days of Barkin's receipt of money she was owed under the prenuptial agreement.

The same day the separation agreement was signed, Perelman, Barkin and her brother entered into an amended operating agreement for Applehead, which reduced Perelman's share of net profits to 2%. While Perelman still was required to make a total of $3.4 million in capital contributions to the company, the amended contract removed him from having any “control, supervision or participation” in Applehead. Barkin also agreed to make sure that Applehead vacated its offices in the marital residence by the end of the month.

The couple divorced on Feb. 14, 2006. In the summer of 2007, Applehead brought a $3.4 million contract suit against Perelman for his alleged refusal to honor the company's operating agreement. Perelman, who admitted he had failed to pay capital contributions to Applehead, then turned around and brought a derivative action on behalf of the film production company. The suit, which accused Barkin and her brother of using funds from Applehead to set up a competing company, was ultimately consolidated with the contract action against Perelman.

Perelman maintained that his funding obligations to Applehead were “part of a complex and heavily negotiated agreement of separation” between him and Barkin. He insisted that Barkin's alleged failure to abide by the provisions in the separation agreement concerning the Get and confidentiality relieved him of his obligations under Applehead's operating agreement.

However, last January, Acting Supreme Court Justice Debra A. James in Manhattan granted Applehead partial summary judgment and ordered Perelman to pay the film company $4.3 million, which included interest on the investment. The judge noted that the separation agreement and the company's operating agreement “are governed by the laws of two different states, serve different purposes, and do not have identical parties.” The “operating agreement by its very terms stands on its own and is enforceable separately from, and without reference to, the separation agreement,” she added.

The Appellate Division agreed. “Perelman's capital contribution obligation arose prior to the execution of the separation agreement, and was restated in the amended operating agreement without any reference to the separation agreement or any indication that it was now conditional upon Barkin's performance of her obligations under the separation agreement,” Justice Nardelli wrote.

He also noted that the separation agreement did not obligate Barkin to initiate proceedings to obtain a Get but simply provided that the couple would cooperate in obtaining a religious divorce. “Even if the agreements were found to be intertwined, the allegation that Barkin breached the provision of the separation agreement involving the Get is meritless,” Justice Nardelli concluded.

The court also found “unavailing” Perelman's claim that Barkin violated the separation agreement by talking with the media about the couple's marriage. Finally, the panel rejected claims by Perelman that the Barkins had breached a covenant of good faith and fair dealing by using Applehead's assets to set up a competing venture and disagreed that Perelman's damages should be mitigated by contributions his ex-wife made to Applehead.

Charles A. Stillman, Scott M. Himes and Daniel V. Shapiro of New York's Stillman, Friedman & Shechtman represented Perelman. Himes did not return a call for comment. Jacob W. Buchdahl, Stephen D. Susman and Rebecca S. Tinio of the New York office of Susman Godfrey represented Applehead. Buchdahl said Applehead and Barkin were “happy to see that the court had rejected every single one of Mr. Perelman's arguments.”