Kerkorian Agrees to Pay $35 Million to Settle Lawsuit

MGM/UA majority shareholder Kirk Kerkorian and his Tracinda Corp. have agreed to pay $35 million to settle a class-action suit filed in connection with the 1986 sale of the company.

The settlement, which came as the reclusive Kerkorian was scheduled to take the stand in the 1-week-old trial, was tentatively approved by Los Angeles Superior Court Judge R. William Schoettler Jr. on Tuesday, after both sides expressed support for the agreement.

The only opposition came from four MGM/UA insurance carriers who had already reached a separate settlement with shareholders. That settlement would be canceled under the new agreement. The insurers, who approved the earlier settlement over MGM/UA’s objections, argued that they will now be exposed to further liability.

The settlement, if finally approved Nov. 19, would end four years of often rancorous litigation between former MGM/UA shareholders and Kerkorian. It would also mean as much as an additional $3 per share for the parties to the suit, according to the plaintiffs’ attorney, James W. Mercer.

J. Michael Hennigan, Mercer’s partner, said the agreement represents a victory for stockholders, who initially sought $200 million. “When we look at the number of shareholders likely to be represented, we think this is an extremely favorable result for the class,” Hennigan said.

In a prepared statement, MGM/UA said it was forced into the “bad faith” settlement by its insurance carriers, which had earlier agreed to pay $8 million to $20 million for a partial settlement of the suit. Under that agreement, all defendants except Kerkorian and Tracinda were absolved of liability. MGM/UA filed suit against the insurers as a result of the settlement.

MGM/UA declined to say whether the company will pay the $35-million settlement on behalf of Kerkorian and Tracinda. But Terry Christensen, Kerkorian’s attorney, said the company fully expects to recoup the $35 million, plus punitive damages, from the insurance companies. Christensen also said MGM/UA denies any wrongdoing in the case.

The class-action suit arose from the $1.5-billion sale of MGM/UA to Turner Broadcasting Co. Shareholders maintained that Kerkorian undervalued the parent company in a plan to reacquire United Artists, and eventually the MGM/UA name, at a sweetheart price. MGM/UA maintained that the company negotiated a strong deal for its shareholders.