The decade-long legal battle between Perella Weinberg Partners and Ducera Partners, a firm founded by former senior restructuring bankers from Perella Weinberg, has finally reached the courtroom. This high-stakes trial, unfolding in a New York state court, throws a spotlight on the acrimonious split and the ensuing accusations between these Wall Street players, with Ducera Partners at the heart of the dispute.
Opening arguments commenced on Friday, featuring Perella Weinberg co-founder Peter Weinberg as the initial witness. The core of the legal clash centers around Weinberg’s strained relationship with Michael Kramer, a significant revenue generator during his time at Perella Weinberg and now the Chief Executive Officer of Ducera Partners.
“These guys had been working behind my back,” Weinberg stated during his testimony, recounting his reaction to the alleged January 2015 meeting where Kramer purportedly encouraged his team to depart from Perella Weinberg. “I felt deceived by them, that they had betrayed my trust. I was upset. I was very, very upset.” This testimony underscores the deep personal and professional divisions that fueled the formation of Ducera Partners and the subsequent legal action.
Cases of this nature rarely proceed to trial. While it is common for Wall Street firms to pursue legal action against departing employees perceived as potential competitors, most disputes are resolved through settlements or confidential arbitration, as seen in the recent case between Jane Street Group and Millennium Management. This public trial between Perella Weinberg and Ducera Partners, expected to last three weeks without a jury, offers a rare glimpse into the internal conflicts within the upper echelons of Wall Street. Key figures such as Perella Weinberg co-founder Joseph Perella, former CEO Robert Steel, and restructuring partner Kevin Cofsky are anticipated to testify. Representing Ducera Partners, Kramer, Derron Slonecker, Joshua Scherer, and Adam Verost are also slated to take the stand. It’s noteworthy that Robert Steel is currently a board member of Bloomberg Inc.
Accusations and Counter-Accusations: Breach of Contract or Justified Departure?
Karin Portlock, representing Perella Weinberg, argued that Kramer and the Ducera Partners founders “blatantly violated” their partnership and employment agreements. She asserted that they actively solicited Perella Weinberg bankers and clients to join their newly established firm, Ducera Partners. According to Portlock, this alleged poaching “decimated” Perella Weinberg’s restructuring division, leading to the firm seeking approximately $40 million in damages.
Conversely, Maaren A. Shah, the legal representative for Ducera Partners, presented a different narrative. Shah contended that Perella Weinberg had marginalized Kramer’s team, ultimately choosing a combative approach rather than addressing their concerns fairly. “Why?” Shah questioned, suggesting the motivation was “To save face. To try to take control of the narrative, to seize tens of millions of dollars that they would have owed my clients had they terminated them without cause.” Ducera Partners is counter-suing, seeking damages exceeding $91 million.
Ducera Partners and Perella Weinberg: Still Major Players in Restructuring
Despite the ongoing legal fracas, both Ducera Partners and Perella Weinberg remain prominent forces in the financial restructuring landscape. Ducera Partners currently holds the position of lead financial advisor to Franchise Group Inc., a bankrupt brand management entity entangled in a Securities and Exchange Commission probe related to its dealings with B. Riley Financial Inc. Additionally, Ducera Partners is advising lenders to Allen Media Group in debt deal negotiations. Perella Weinberg, on the other hand, is advising the bankrupt cryptocurrency exchange FTX and is providing counsel to lenders of Thames Water Ltd. amidst the UK water company’s financial strain. These high-profile engagements underscore the continued relevance and expertise of both firms in the restructuring domain, even amidst their legal conflict.
The Genesis of the Dispute: Feeling Undervalued and Excluded
Court documents provide insights into the origins of the dispute, revealing a mutual understanding that Kramer, who joined Perella Weinberg in 2007 through an acquisition, built a highly successful restructuring group after the 2008 financial crisis. However, Kramer alleges that he and his team felt undervalued and were excluded from opportunities to expand into Perella Weinberg’s broader mergers and acquisitions (M&A) advisory business. This sense of exclusion reportedly fueled the discontent that ultimately led to the formation of Ducera Partners.
An email exchange on Christmas Eve 2014 between Kramer and Slonecker illustrates this sentiment. After Perella Weinberg sent a congratulatory email to its healthcare team regarding a potential deal, Kramer’s response, “Can you say Redheaded step child,” reveals a feeling of being secondary and unappreciated within the firm.
Perella Weinberg maintains that while they valued Kramer as a high-performing restructuring banker, they limited his broader management responsibilities due to perceived cultural incompatibility and frequent clashes with partners outside his immediate group. Weinberg recounted a conversation in October 2014 where Kramer expressed dissatisfaction with the firm’s management and direction, criticizing certain personnel within the organization.
Compensation and “Fair Value”: Differing Perspectives
Perella Weinberg disputes the claim that Kramer’s team was financially unappreciated. In a January 2015 email to Perella, Weinberg highlighted that “The restructuring MDs are paid amongst the highest of our MDs even though they had a slow year.” He further noted Kramer’s accumulated compensation of $50 million and $42 million in equity over the preceding eight years, and Slonecker’s $30 million, arguing, “That is fair value for their contribution no matter how you look at it.” This statement reflects Perella Weinberg’s perspective that Kramer and his team were fairly compensated, despite Kramer’s claims of feeling undervalued.
Perella Weinberg asserts that they were compelled to act after Kramer allegedly plotted the launch of Ducera Partners at a meeting on January 11, 2015, at his residence. Ducera Partners refutes this characterization, claiming the meeting was merely to discuss general concerns about their treatment at Perella Weinberg. Kevin Cofsky, the only member of Kramer’s team who remained at Perella Weinberg, is expected to testify about this pivotal meeting. Kramer has accused Cofsky of collaborating with Weinberg and Perella to create a pretext for firing him and his restructuring partners in exchange for a substantial bonus and leadership of the restructuring group.
Client Loyalties and Third-Party Frustration
Following the departures and the formation of Ducera Partners, client relationships became a battleground. Monsanto Co., a long-standing client of Kramer, chose Ducera Partners as its lead financial advisor in its $66 billion acquisition by Bayer AG. Perella Weinberg was also removed from the restructuring of Caesars Entertainment Operating Company Inc. due to a dispute over fee arrangements with Kramer.
Marc Rowan, co-founder of Apollo Global Management, a major owner of Caesars at the time, expressed frustration with the escalating conflict in February 2015 emails. “PWP needs to be an adult and put the client first,” Rowan wrote, although he later apologized to Weinberg, stating “sorry that Kramer was less accommodating.” This episode illustrates the disruption and complexities caused by the split between Perella Weinberg and Ducera Partners, even impacting client relationships and external stakeholders.
Legal Wrangling and Ongoing Claims
The legal proceedings have been protracted, partly due to disputes over the extent of Perella Weinberg’s lost business claims. An appeals court previously ruled that Perella Weinberg had not sufficiently demonstrated that Ducera Partners breached their duty by soliciting Monsanto and Caesars, as these companies reportedly approached Ducera Partners independently. However, the appellate court allowed Perella Weinberg to pursue claims related to assignments for creditors of Alpha Natural Resources Inc. and Fidelity Management and Research Co. in connection with Energy Future Holdings Corp. Ducera Partners ultimately worked on the Alpha Natural Resources bankruptcy but not the Energy Future restructuring. The trial continues to unfold, with significant financial and reputational stakes for both Perella Weinberg and Ducera Partners as the court seeks to resolve this long-standing and acrimonious dispute.
