Centerview Partners LLC co-founder and Chief Executive Officer Robert Pruzan conceded in court that David Handler, who had been one of the investment bank’s top performers, was verbally promised an equity stake, casting doubt on the firm’s claim that there was no partnership agreement.
(Bloomberg) — Centerview Partners LLC co-founder and Chief Executive Officer Robert Pruzan conceded in court that David Handler, who had been one of the investment bank’s top performers, was verbally promised an equity stake, casting doubt on the firm’s claim that there was no partnership agreement.
Pruzan’s testimony in Delaware Chancery Court on Wednesday appeared to undermine the investment bank’s legal position in its dispute with Handler, the former head of Centerview’s technology practice who says he was forced out last year.
Handler claims he’s owed compensation for 6.25% equity granted in 2013, under the oral agreement in 2012, and for an additional 1% promised in 2014 — stakes now valued at hundreds of millions of dollars. He’s sued to gain access to the firm’s books and records.
In court filings, Centerview has argued Handler was never an equity partner in its limited partnership. The firm also dismissed Handler’s assertion that he’d reached an oral agreement with Pruzan and his co-founder Blair Effron at a meeting at New York’s University Club in 2012.
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During his testimony in Delaware, Pruzan initially insisted there was no agreement in 2012, and if there were, it would have been written down in a document and signed by Handler, which it wasn’t.
But under cross examination by Handler’s lawyer, Michael Bowe of Brown Rudnick LLP, Pruzan said he compensated Handler in a different way after their November 2012 meeting, awarding him a larger equity stake than what Handler received upon joining the firm four years earlier.
“By what written contract did Centerview give him the 6.25%?” Bowe asked. “There isn’t any, right?”
“Correct,” Pruzan said.
“Okay, so that was an oral agreement to give it to him, and you carried through with that agreement, right?” Bowe pressed.
As Pruzan began to explain, Bowe cut him off: “Yes or no.”
Pruzan paused for a moment, staring away. Then he said, “Yes,” and shrugged.
Examine the Books
The admission was the climactic moment of a two-day evidentiary hearing to determine whether Handler has the right to examine Centerview’s books and records during his 14-year tenure at the firm.
Handler has accused Pruzan and Effron of reneging on promises made at the 2012 meeting, which he claims amounted to an oral agreement that would transform his role at Centerview from highly compensated rainmaker into an equity partner who would plow back some of his pay package into the firm.
After Bowe’s cross examination, Pruzan’s lawyer Jennifer Barrett asked him whether he wanted to clarify his testimony regarding the equity award. “I agree to lots of things,” the Centerview CEO said. “I did not form, have a formal agreement, like a written agreement. I think those things are different.”
Barrett then asked him if he agreed with Bowe’s characterization of changes that occurred in Handler’s compensation after 2012, starting with the equity award, as an affirmation of the “oral agreement” claimed by Handler. “No,” Pruzan said. “I agreed to something specific that we were making at that time, but it wasn’t, if you will, the equivalent of a written document that would exist,” that would “give people legal rights.”
Handler, during his testimony in Delaware, said when he started the technology group in 2008, it got paid up to 50% of the revenue it generated, while the firm picked up costs for the group’s staff. When Pruzan and Effron wanted to restructure his compensation package in 2012, Handler insisted that he become more of a partner in the firm, with a significant chunk of equity and “a place at the table” in terms of management decisions.
Handler claims he got most of what he wanted through an oral agreement. But during cross examination, Centerview lawyer Michael Carlinsky of Quinn Emmanuel Urquhart & Sullivan LLP showed him emails that appeared to contradict the notion that an agreement had been reached. The emails suggested that the meeting was just a first step in an ongoing process of back-and-forth with the co-founders.
Handler refused to budge, insisting that an agreement had been reached, even though it hadn’t been set down in writing and signed. The plan had been to negotiate secondary elements before committing to the arrangement in writing, he maintained.
“You’re a banker, sir,” Carlinsky said. “You do billion-dollar deals. Do you expect the parties in billion-dollar deals just simply agree orally and never memorialize something so important?”
“It happens all the time,” Handler said. “But in any case, that’s what we did.”
Repurchase Stake
Carlinsky also emphasized the other leg of Centerview’s defense in the case. Even if Handler were a partner, he would not have been entitled to keep his equity stake, or have the firm repurchase it at fair market value, upon his departure. Unless there’s a terminal event, like a sale of the firm or an IPO, those stakes are subject to repurchase by the firm at book value, Carlinsky said.
Handler disagreed.
The judge overseeing this case, Vice Chancellor Sam Glasscock, said he would reserve judgment on the question of whether Handler had the legal standing to examine the firm’s books and records until he heard arguments on Handler’s claim that one of the records provided to him by Pruzan last year had been altered to hide evidence in favor of his claims. Centerview dismissed Handler’s claim in a recent filing, saying its general counsel had “edited” a historical document for the sake of accuracy.
(Corrects date and effect of verbal agreement in the lede. Updates with more testimony from Pruzan.)
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