Four MGM/UA Communications Co. insurance carriers have agreed to pay up to $20 million to settle a class-action suit against the studio, despite MGM/UA's objections.
The agreement, which leaves MGM/UA majority shareholder Kirk Kerkorian and his Tracinda Corp. as the lone defendants in the case, will be presented to a Los Angeles Superior Court judge on Friday.
J. Michael Hennigan, one of the attorneys for the plaintiffs, hailed the settlement as a significant victory for shareholders.
But MGM/UA, which already has lawsuits pending against the insurers over the agreement, said it will vigorously oppose the settlement. MGM/UA attorney Terry Christensen accused the insurers of acting in a "backhanded and self-serving manner."
"The insurance companies are doing everything in their power to harm MGM/UA and its shareholders," Christensen said. "They want to try to reduce their exposure down to the absolute minimum and are willing to do so without regard to the consequences to the insured parties. . . . We will fight it in court, on appeal and in separate lawsuits. We will fight this one till it's vindicated, and in the state Legislature if we have to."
The insurance carriers involved in the case are Forum Insurance Co. of Chicago, Associated International Insurance Co. of Los Angeles, Harbor Insurance Co. of Los Angeles and National Union Fire Insurance Co. of Pittsburgh. An attorney for the companies declined comment.
The class-action case revolves around the 1986 sale of MGM/UA, which was known as MGM/UA Entertainment Co. at the time, to Turner Broadcasting.
The shareholders claim that Kerkorian undervalued United Artists when he sold the parent company to Turner for $1.5 billion, and that Kerkorian struck a sweetheart deal when he subsequently bought back United Artists and the MGM/UA name for about $470 million.
Under the settlement plan, the insurers have agreed to pay $8 million, or about 80 cents a share, to holders of MGM/UA stock at the time of the sale to Turner. The insurers also have guaranteed $10 million to $12 million to be recovered against Kerkorian's interests.
The settlement absolves the directors and other former MGM/UA executives of any responsibility in the case. But Hennigan said that several former directors, including Dinah Shore, Art Linkletter and Alexander Haig Jr., will probably still be called upon to testify.
"Under the law, the majority shareholder has the same fiduciary duties as a director, so the case will now focus on Kerkorian's duty and his breach of it when he purchased United Artists stock at a bargain," Hennigan said. "This is going to narrow the case that goes to jury, but the significant focus of the case will continue to be, 'How did this happen?' "
Christensen declined to say whether Kerkorian and Tracinda are protected against damages under separate insurance policies. Lawyers for MGM/UA have denied any wrongdoing in the case, noting that stockholders received $27 to $30 per share for stock that was selling in the $11 to $16 range at the time of the sale.
The case is scheduled to go to trial Sept. 24.