‘Feeble’ but not frivolous: Quinn Emanuel escapes sanctions in Leon Black case

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Leon Black, Chairman and CEO Apollo Global Management, LLC, takes part in Private Equity: Rebalancing Risk session during the 2014 Milken Institute Global Conference in Beverly Hills, California April 29, 2014. REUTERS/Kevork Djansezian (UNITED STATES - Tags: BUSINESS)

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(Reuters) - Billionaire financier Leon Black and his lawyers were socked with a fusillade of unflattering adjectives on Thursday – including “feeble,” “dubiously pled,” “legally tenuous” and “threadbare” -- to describe the racketeering allegations they lobbed against law firm Wigdor, which represents an ex-model who has accused Black of rape.

The good news for Black and his counsel from Quinn Emanuel Urquhart & Sullivan and Estrich Goldin: Frivolous is a step beyond feeble.

That narrow distance saved Black, Quinn Emanuel and Estrich from being sanctioned under Rule 11 of the Federal Rules of Civil Procedure in a decision from U.S. District Judge Paul Engelmayer of Manhattan.

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Engelmayer teased out the threads of accusation and counter-accusation in Wigdor’s sanctions motion, Black’s opposition and a spray of subsequent filings in this exceedingly vicious litigation. Ultimately, the judge said, Black’s allegation that Wigdor conspired with the ex-model, Guzel Ganieva, and others to smear the hedge fund founder were “thin gruel” that almost certainly would not have survived a dismissal motion if Black’s lawyers hadn’t voluntarily dropped the claim.

Indeed, in a related decision on Thursday, Engelmayer dismissed Black’s rejiggered racketeering claims against Ganieva and a business rival of Black. The judge declined to exercise jurisdiction over Black’s remaining state-law claims, tossing the case out of federal court.

But Engelmayer concluded in his sanctions ruling that Black's allegations against Wigdor included just enough substance to preclude sanctions.

Quinn Emanuel, which withdrew as Black’s counsel in the federal litigation after the initial complaint accusing Wigdor of racketeering but remained a party to Wigdor’s Rule 11 motion, claimed victory from Engelmayer’s ruling.

“We are pleased that the court agreed with our position that the sanctions motion was meritless,” wrote Quinn co-managing partner Michael Carlinsky in an email. “We take our professional obligations very seriously, and the court's decision rejecting sanctions is validation."

Black counsel Susan Estrich said in an email statement that Black will appeal the dismissal of his federal-court suit and will “bring additional legal proceedings,” presumably in New York state court, where Ganieva is litigating a suit against the billionaire. “[Black] remains confident that those responsible will be held accountable,” Estrich said.

Ganieva counsel Jeanne Christensen of Wigdor said the firm was gratified by Engelmayer’s criticism of Black’s pleadings in the dismissal decision. “When Leon Black filed his frivolous federal lawsuit against our client Guzel Ganieva and our law firm, we said it was blatant retaliation because she spoke out about his sexual violence,” Christensen said. “We will be amending Ms. Ganieva’s claims in New York Supreme Court to add Mr. Black’s horrific retaliation.”

Christensen said Engelmayer’s denial of Wigdor’s motion for sanctions would have no effect on a potential retaliation claim.

Legally, the most intriguing part of Engelmayer’s sanctions decision was his analysis of whether lawyers can be accused of racketeering based largely on their litigation tactics. In this case, that’s a multi-layered question that requires some factual explanation.

Ganieva filed her initial state-court complaint in June 2021, alleging that during the course of a six-year relationship, Black sexually assaulted her and eventually forced her to sign a 2015 nondisclosure agreement. Black, who contends that he has given Ganieva millions of dollars in the course of their consensual affair, countered that Ganieva’s lawsuit was a shakedown.

He elaborated on that theory in the federal-court litigation he launched in October 2021, asserting that Wigdor and Ganieva had teamed up with an unnamed litigation funder and public relations experts to tar Black’s name. (Black’s amended complaint identified the purported funder as financier Josh Harris, a onetime rival of Black’s at Apollo Global Management Inc. Harris has vehemently denied that he even knows Ganieva, let alone that he conspired with her.)

Black’s original complaint in federal court alleged that Ganieva’s suit in New York state court was a sham. The litigation, he alleged, was just part of a vast legal and media blitz to wound and humiliate Black – and Wigdor, according to Black, was at the heart of the campaign.

Widgor’s Rule 11 motion argued that it was Black who was engaging in sham litigation. Ganieva’s lawyers alleged that Black had accused Wigdor of racketeering in an attempt to punish the firm for bringing Ganieva’s suit and, perhaps, to scare Wigdor off of the case. It was particularly egregious, Wigdor argued, for Black to engage in its own sham litigation alleging a racketeering conspiracy that relied entirely, at least with respect to Wigdor, on Wigdor’s actions as Ganieva’s counsel.

Engelmayer found that Wigdor hadn’t sufficiently shown Black’s only motive to be harassing and bullying the law firm. He also found that there’s precedent for racketeering conspiracies between lawyers and clients. Lawyers can’t be liable under RICO simply for providing legal services, Engelmayer said, but Black also accused Wigdor of illegal conduct – “engineering defamatory press coverage of Black” -- beyond prosecuting Ganieva’s court case.

The allegations were “sparse,” Engelmayer said, but “a law firm is not precedentially foreclosed from participating in the operation and management of a RICO enterprise, such that the pleadings stand no chance of success.”

Interestingly, the judge suggested that Wigdor’s case for Rule 11 sanctions might have been stronger if the firm had been able to prove its allegation that Quinn Emanuel offered to drop Black’s RICO claim against Wigdor if the firm would provide information linking its client to Black’s business rival. But because Quinn Emanuel disputed Wigdor’s account of the conversation between Carlinsky and its defense counsel, Engelmayer said he could not “reliably resolve this swearing contest.”

I’ve said before that the Black litigation pits two of the most aggressive litigation shops in New York against each other. I have a feeling that Engelmayer’s rulings will only prompt both sides to sharpen their weapons.

Read more:

Quinn Emanuel, Wigdor escalate hostilities in Leon Black mudfest

Wigdor claims Quinn Emanuel urged betrayal of client in Leon Black RICO case

The curious case of the Quinn Emanuel partner and the alleged conspiracy against Leon Black

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Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.