The billionaire deal maker Ronald O. Perelman loves to litigate, having tussled over the years with, among others, his former vice chairman, his onetime chief financial officer and the investment bank Morgan Stanley — not to mention his four former wives.
Now he has begun a legal battle against a man who helped put him on the map: Michael R. Milken.
One of Mr. Perelman's companies, Harland Clarke Holdings, filed a little-noticed lawsuit last month accusing Mr. Milken of fraud. The case stems from Harland Clarke's 2011 purchase of GlobalScholar, an education technology company backed by Mr. Milken, the fallen financier and philanthropist.
The lawsuit, filed in state court in San Antonio, was said to have surprised Mr. Milken, who had done business with Mr. Perelman for decades and counts him as a friend, according to a person briefed on the matter who is not authorized to discuss the lawsuit publicly.
For Mr. Perelman, people close to him said, the lawsuit is nothing personal against Mr. Milken — just business.
After Harland Clarke executives came to believe that Mr. Milken and other individuals deceived them during negotiations for the company, they decided to seek legal redress. Mr. Perelman was briefed and decided to let the action proceed, these people said.
A spokesman for Mr. Milken, Geoffrey Moore, characterized Harland Clarke's complaint as a case of buyer's remorse.
"If under the plaintiff's subsequent management the purchased company failed to meet their expectations, those failings are certainly not the fault of the defendants," Mr. Moore said.
The legal clash adds a colorful chapter to the story of the two men's lucrative business relationship. Mr. Milken, 67, is the well-known 1980s-era junk bond salesman whose career ended in disgrace after he pleaded guilty to securities law violations and spent two years in prison. But before his legal troubles, Mr. Milken and his former firm, Drexel Burnham Lambert, provided financing for several of Mr. Perelman's early deals, including his audacious 1985 buyout of the cosmetics giant Revlon.
Mr. Perelman was "dependent on Drexel for the multibillion-dollar deals he craved," Connie Bruck wrote in her book "The Predators' Ball," an account of Mr. Milken and his band of takeover artists.
After Mr. Milken's incarceration, he maintained a business relationship with Mr. Perelman.
In 1998, Mr. Milken agreed to pay $47 million to settle a Securities and Exchange Commission complaint that he violated a lifetime ban from the securities industry by advising on two transactions, including one involving Mr. Perelman.
Today, the 70-year-old Mr. Perelman, who is said to be worth more than $12 billion, controls a sprawling business empire through his conglomerate MacAndrews & Forbes. His conflict with Mr. Milken centers on a major holding, Harland Clarke, the country's largest check-printing company.
In January 2011, as part of Harland Clarke's push into the education field as it sought to diversify away from the dying business of check printing, Harland Clarke acquired GlobalScholar. It paid $135 million for the company, which provides software for teachers to better assess students' performance.
Yet the GlobalScholar acquisition soured quickly, according to the complaint, with the business's performance falling far short of expectations.
"Much of the software was 'vaporware,' " said the complaint. The lawsuit describes vaporware as "software that appears to be robust and fully functioning, but that is no more than a mirage intended to appear complete but not actually functional."
In its complaint, Harland Clarke takes direct aim at Mr. Milken, who over the last several decades has become an influential player in the profit-making education field. He serves as the chairman of a group of education companies called Knowledge Universe. Among his holdings are KinderCare Learning Centers, a chain of day care centers. Knowledge Universe also had an investment in GlobalScholar, and in 2010 it began discussions to sell the business to Harland Clarke.
"Milken represented that his 30 years of experience in the education and technology field assure the success of Knowledge Universe and its related companies, specifically GlobalScholar," the complaint said.
The lawsuit highlighted a meeting, just months before the deal was struck, that Mr. Milken attended with the chief executive and another senior official at Harland Clarke. During the negotiations, Harland Clarke said its officials were misled about GlobalScholar's relationship with Houghton Mifflin Harcourt, an educational publishing company in which Mr. Milken also had an investment. Mr. Milken and others made false representations that Houghton Mifflin would play a crucial role in GlobalScholar's growth, the complaint said.
(Read More: No Doom, Little Gloom But Lots of Caution at Milken)
In addition to Mr. Milken, Harland Clarke also named as defendants Knowledge Universe and Kal Raman, the founder and former chief executive of GlobalScholar, who left just eight months after the acquisition. Mr. Raman now serves as chief operating officer of the online coupon provider Groupon.
The lawsuit seeks $135 million in financial damages, as well as punitive damages and other costs.
Mr. Moore, the spokesman for Mr. Milken, noted that the transaction was a heavily negotiated deal with a 77-page purchase agreement. "This is a baseless action brought by a sophisticated buyer of technology represented by equally sophisticated counsel," said Mr. Moore, alluding to Skadden, Arps, Slate, Meagher & Flom, which advised Harland Clarke on the deal. "They negotiated a comprehensive agreement and had abundant opportunity for extensive due diligence before they completed the purchase."
Mr. Perelman has also recently been wrangling with federal regulators. Last month, MacAndrews & Forbes agreed to pay a $720,000 civil penalty to resolve accusations that the company violated reporting requirements related to acquiring shares in the Scientific Games Corporation. And a week before, Revlon, which he still controls, said it would pay $850,000 to settle claims that it deceived shareholders during an attempt to take the company private.
—By Peter Lattman of The New York Times