WPP Wins One, Loses One in CMD Case

(MoneyWatch)  A judge handed down a mixed ruling in a case in which ad agency holding company WPP (WPPGY) sued the former owner of Current Medical Directions, a medical education company that WPP bought in 2004.

• Download the decision here.

CMD's main client was Pfizer (PFE) when wrapped it into its Sudler & Hennessey unit. The price was $18 million plus $47 million in contingency payments. But almost as soon as the buy was done, the business began to unravel, WPP alleges. WPP sued CMD's former owner and CEO, Daniel Salamone, for $18 million it believes it is owed because CMD did not perform up to expectations.

WPP claimed that Salamone lied about CMD's revenue projections and his choice of an heir apparent. The judge kicked out WPP's claim that Salamone's revenue projections were fraudulent. He also ruled that WPP breached its contract with Salamone by not providing him with an account of the agency's financial before firing him.

But the judge found that WPP might have a case on the issue of whether Salamone was untruthful about his choice of heir -- he initially tapped former CMD exec Diane Plateis but then let her go before the deal closed. A judge also said that a belated audit of CMD's books performed by Deloitte was legit.

The judge had some negative things to say about Salamone's conduct during the litigation:

Salamone's selective use of the record tends to raise issues about his own integrity and credibility.

And he also revealed the text of a gossipy email sent by Sudler CFO Ellen Goldman before the deal closed. In the message, she complained about Salamone getting rid of the woman he had chosen to replace him at the top of the company:

WPP "would have preferred if he had gotten rid of his dirty laundry prior to the closing date, but that didn't happen. This whole thing is a nightmare."

The ruling was a summary judgment; the case may thus settle or proceed to trial.

• Related:
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• WPP: Some Rank Speculation on Who Will Succeed Martin Sorrell as CEO
• WPP's Sorrell Admits Acquisition Due Diligence "Probably Not" Good Enough
• WPP Awaits Ruling in CMD Case; Is There a Pattern Here?