Ralph Lerner, a former Sidley Austin partner recently suspended from practicing law in New York for a year over false expense filings, went on the offensive this week in an unrelated suit in Delaware state court in which he is accused of improperly billing a foundation created by the late artist Cy Twombly.
Lerner, a prominent art lawyer, joined Withers Bergman in New York in 2008 after leaving Sidley when management confronted him about fabricating $50,000 in supposedly work-related taxi rides that led to the suspension of his license last week. (As of Wednesday, the Withers website listed him as of counsel at the firm.)
Lerner was with Sidley when he began advising Twombly in 2005 and he continued in that capacity after moving to Withers. Since Twombly's death in 2011, Lerner has acted as counsel to a foundation created by the artist while also serving as a member of the organization's board of directors. The foundation, according to court filings, now has $1.1 billion in assets.
As The Am Law Daily has previously reported, two board members, Nicola Del Roscio and Julie Sylvester, sued a third, Thomas Saliba, in March in Delaware, accusing him of improperly collecting fees for managing foundation investments. In an amended complaint filed in September, Del Roscio and Sylvester added Lerner as a defendant, claiming he helped Saliba carry out his alleged scheme while also billing the foundation for hundreds of thousands of dollars "in unauthorized, improper and inflated legal fees to his law firm."
Specifically, the plaintiffs claim, Lerner routed $750,000 in legal bills over the course of a year and a half to himself to avoid foundation scrutiny and instead authorized wire transfers to pay the bills "without review or approval by the board." The suit also claims Lerner improperly billed the foundation for attending board meetings; for research Withers conducted related to board infighting; and for arranging for workmen to enter the foundation's New York townhouse. In addition, the plaintiffs accuse Lerner and Saliba of arranging inflated appraisals of artwork held in a Twombly trust in order to reap excessive commissions.
In papers submitted Monday in support of a previously filed motion to dismiss the suit, Lerner denies the accusations against him and argues that the plaintiffs filed their suit only after he moved to break a deadlock on what was then a four-member board by filing a Delaware Chancery Court action in January to force the appointment of a fifth director.
Beyond that, Lerner maintains that Del Roscio and Sylvester do not have the authority to bring the suit on behalf of the Cy Twombly Foundation, which is also named as a plaintiff, and also lack any evidence to support their contention that there was anything inappropriate about the bills in at issue.
"Despite their rhetoric and ad hominem attacks," Lerner's filing states, "plaintiffs’ claims are nothing more than a transparent attempt to convert allegations of ordinary mistakes or questions of billing judgment into the type of claims that will satisfy the stringent requirements for demand futility and removal of a corporate director under Delaware law."
Lerner's filing goes on to say that Del Roscio and Sylvester "have not alleged that the invoices contained false entries, or that the foundation was billed for work that was not performed or was deficient in any respect. They have not alleged that billing entries were inflated, or that timekeepers were misidentified. And they have not alleged that the work performed was unnecessary either for the foundation or the closely related trust. Thus, the typical attributes of a fraudulent billing lawsuit are not present here."
In the filing, Lerner also attempts to undercut the plaintiffs' claim that they were unaware of the fees Saliba was collecting by attaching as an exhibit an email that he says "made clear that Saliba 'gets paid for investment advice and managing the financial assets for the foundation and the trust.'"
Ronald Minkoff, a Frankfurt Kurnit Klein & Selz partner who represents Lerner in the matter, said in a statement, "We are asking the court to look past the hyperbole in the complaint and rule that the claims against our client are insufficient as a matter of law.” (Lawyers from Delaware-based Richards, Layton & Finger are also part of Lerner's defense team.)
David Baum, a Dentons partner representing Del Roscio and Sylvester in the litigation, said in a statement, "It’s hard to take Lerner’s latest excuses seriously. He was just suspended from the practice of law for fraudulent billing. There’s obviously a reason that he hid these legal bills for more than a year.”
In lieu of dismissing the suit, Lerner asks the court to stay the case until his January action seeking the appointment of a fifth director is resolved. The appointment of an independent director, he says, "could moot this action entirely, saving this court and the parties a great deal of time and money, while allowing the foundation to achieve its true charitable, literary and educational purposes."