Irvine Co. Vs. Smith Nearing Settlement

A settlement in Joan Irvine Smith’s multimillion-dollar legal dispute with the Irvine Co. could be near.

Smith, granddaughter of the company’s founder, forced the developer to sue her after she agreed to sell her stock in 1983 but rejected its offer of $115 million. She sought $363 million.

A court referee decided in June that she should get $150.5 million.

Attorneys for Smith filed papers this week, saying the 57-year-old heiress will drop her appeal of that decision if the developer also agrees not to appeal.

Smith had said earlier that she would propose such an agreement, so the filing was expected.

Attorneys for Smith and the company have been negotiating intermittently for several months. Among the key issues are said to be how soon Smith would be paid should both sides drop their appeals.

With interest, the company now owes her $252.6 million. While that is a large sum, the company says it has long planned to pay Smith an amount in that neighborhood and has arranged to borrow the money.

Had Smith won the $363 million she demanded, the company would have owed well over half a billion dollars with interest.

Even so, if paid all at once--and soon--a quarter of a billion dollars might strain even the giant landowner, which laid off 40 people in the fall because of slow land sales. The giant company is privately held, so little is known about its inner financial workings.

Smith recently turned up the heat on the company to settle by announcing that she will donate some of the money she has been awarded to UC Irvine and other nonprofit organizations.

The company has until June 17 to file objections to a court-appointed referee’s report that awarded Smith the $252.6 million.

The company has said it is generally pleased with that decision: The referee’s award of $150.5 million for Smith’s 11% of the company’s stock is closer to the company’s estimate of the stock’s worth than Smith’s estimate.

And the company has also said it won on the question of what interest is due on that amount for the nearly eight years that the case has dragged on: The company argued for $102 million. Smith wanted $201.3 million. The referee fixed $102.2 million.

So it may be fair to assume that the company is leaning toward settling the case too.

The company has just a few objections to the referee’s report, Irvine Co. attorney William B. Campbell said. And if the developer wins its major objection on appeal, that would slice only about $20 million or so from the $150.5 million Smith was awarded.

Also, an appeal could take years to resolve through the courts in Michigan, where the company is incorporated. And it could cost millions of dollars more in legal fees--in addition to the $30 million or so both sides have already spent for legal work.

The company has three more weeks to file objections to the referee’s report and is considering its options, said Campbell, who declined to discuss his talks with Smith’s attorneys.

If a settlement is reached, he said, it will probably come within those three weeks. An attorney for Smith, Robert A. Holtzman, agreed.

“We fully expect to close this out within the next couple of weeks,” he said.

If an agreement cannot be reached, Smith’s attorneys have filed 21 objections with the Michigan courts that--in the unlikely event that she prevailed on all of them--could add $200 million or so, with interest, to her award, Holtzman said.

On the other hand, as part of any deal that Smith and her attorneys accept, they have agreed in their court filing to pay the company $299,000 in sanctions imposed against them by the referee for delaying the trial.