August 4, 1999

Sam Zell was bursting with pleasure Tuesday, happier with the little bedside reading the previous night than if he'd scored a deal for another few hundred million bucks or so.
"I'm ecstatic," he said. "I never read anything like this before."

What the billionaire Chicago financier was crowing about was not an inspirational poem but an 18-page decision issued by federal Appeals Judge Frank Easterbrook.

The Monday decision by the 7th U.S. Circuit Court of Appeal appeared to vindicate Zell and his associates in Equity Group Investments in their fight with a former employee who sued them on charges including fraud and racketeering.

In a sometimes acid ruling, Easterbrook found that Richard Perlman, who had originally sued Zell for around $5 million in a suit invoking the federal racketeering law, which triples damages for a victorious plaintiff, lost the case on almost all counts.

Easterbrook suggested that Judge Ruben Castillo, who tried the original case in federal court that resulted in somewhat muddy jury findings, take another look at his decision awarding litigation costs to Perlman. Law and custom generally give the victor in a case, not the loser, the right to recover expenses.

And Easterbrook, who noted that the issues involved a contract dispute rather than fraud, goes on to say that Perlman "shot himself in the foot" by some of his claims in the suit, becuse he would have ended up getting more money if he had waited for Zell's operation to pay out as promised on some property interests rather than filing suit.

Zell's attorney, Stephen Novack, figured Perlman, who quit as a top executive in Zell's operation in 1990, would end up getting about $1 million minus his own legal expenses -- less than Zell would have paid him in due course if the property deals had matured.

"Pretty cool," Novack called the ruling. "There was an underlying theme of 'Why did this suit get filed in the first place?'"

A call to Perlman's attorneys was not returned.

Zell's joy was unrestrained. The case, he said in an interview, was "about greed and about taking a shot at me. [Perlman's] lawyer's thesis was, here's a big billionaire who gets everything he wants."

For him, that made the case a "matter of integrity and principle," Zell said. "When your reputation is at stake, there is no limit to how far you will extend yourself."

The case will go back to Castillo for rulings on how much interest Perlman should get on the money owed him and on the legal expenses, but Zell expressed confidence those rulings would favor him.

"I'm a very excited guy today," he said.