A New York civil court judge has denied a petition from Lev Leviev’s LGC USA Holdings for an injunction against New York City diamond powerhouse Julius Klein Group Holdings, part of what the Israeli billionaire’s company calls a messy “corporate divorce.”

A Sept. 20 ruling, noting the two parties are currently in arbitration over their partnership, suggested that was a better venue for this dispute. 

The petititon, filed in New York State Court on Sept. 17, centers on three businesses that Leviev owns jointly with Julius Klein: Julius Klein Diamonds LLC; Sunrise Ventures; and KLG, which manages the Leviev retail chain. According to the petition, Leviev and Julius Klein have been trying for a year to negotiate through arbitration a separation to the partnership.

In its legal papers, LGC claimed that Julius Klein has “deliberately delayed” selecting an arbitrator, and that LGC “has been wrongly frozen out” of the operations of those businesses, which have taken actions—such as selling the Ritani site—without LGC’s content. The need for immediate action was prompted, the petition argued, by the August theft at a Leviev store in Cannes. LGC complained in the filing that KLG has not kept it apprised of the status of the insurance claims.

LGG sought the injunction to, among other things, block JKD from taking significant actions regarding the business—including distributing insurance funds from the theft—without LGC’s consent, and to receive “full access” to the business’ books and records.

The failed petition’s contentions were firmly disputed by Julius Klein’s CEO, Martin Klein, in a Sept. 18 affirmation filed with the court.

“My cousin and I have always run the companies,” he said. “Neither LGC or Leviev has ever been involved in the management of the operations of the companies.”

He said that he had met with Leviev twice a year, and “never received any complaints” about how the businesses operated. He added that if LGC received veto power over the companies’ operations, it “would effectively cripple” their ability to do business.

The parties’ arbitration proceedings will continue, according to a Julius Klein statement.

Rob Bates

JCK News Director