Phillies co-owner John Middleton moved to settle his family's grinding legal dispute Monday by agreeing to pay $22 million to his sister, Anna Nupson, after she dropped accusations that she had been shortchanged in the sale of the family's cigar company.
The settlement resolves a troubling case for multi-billionaire Middleton, who was facing demands of more than $1 billion — along with years of costly litigation — if a trial had gone against him.
Middleton and Nupson did not acknowledge each other during a tense, 20-minute hearing before Judge Lois Murphy in Montgomery County Orphan's Court. Middleton and Nupson separately testified that they had reached a "compromise of disputed claims."
"Thankfully, this misguided venture by my sister came to a merciful conclusion," Middleton said in a statement after the hearing. The Phillies co-owner said he now wanted to focus on what was important in his life, which included "returning the Phillies to the glory years" and his philanthropy. Accompanying Middleton was his wife, Leigh.
Nupson, who flew into Philadelphia from New Mexico with her lawyers, was emotional and asked for a glass of water as she answered scripted questions. She and her lawyers immediately left the courtroom after the hearing and declined comment.
In the settlement, Nupson agreed that Middleton did not engage in fraud or conspiracy when he consolidated ownership of the family's cigar company in 2003. She also agreed not to sue Middleton in the future over the financial dealings related to the family's trusts.
Monday's agreement – reached with the assistance of a federal mediator — still needs Orphan's Court approval. Middleton's other sister, Lucia Hughes, or any of her children, now have 20 days to file objections to the agreement and could seek their own payment. Hughes has been mostly silent in public during the litigation. Her lawyer in court, Courtney Saleski of DLA Piper, on Monday would not disclose what Hughes intended to do.
The settlement could lift a cloud hanging over the Phillies ownership. Middleton's stake in the Phillies was part of a 2003 deal that Nupson had contended in court filings was fraudulent.
Middleton holds a 48 percent stake in the ball club. The Phillies ownership group operated in silence for decades before Middleton was named the team's control person in 2016. He has since been present at news conferences, offering his opinion on manager hiring and player signings. He was in Clearwater this month for the first two weeks of spring training, and was seen celebrating with Philadelphia Eagles owner Jeffrey Lurie in his private box at U.S. Bank Stadium after the Birds won the Super Bowl.
The family's case has run up well more than $1 million in legal fees and has involved, on Middleton's side, some of Philadelphia's biggest law firms: Blank Rome, Schnader Harrison, and Cozen O'Connor. Middleton is also represented by trust attorney James Mannion, of Mannion Prior LLP in King of Prussia.
Lawyers had said the dispute could take years to reach a trial — with the potential for tens of millions of dollars in legal fees.
A year ago, Murphy expressed frustration over what she called "concealment" of facts in the case – in an apparent victory for Nupson's side — and told Middleton's lawyers to begin their litigation over.
"This court cannot at this juncture rely upon them to determine any disputed facts," she wrote.
Since then, Middleton's lawyers have won rulings that appeared to expose Nupson to significant financial liabilities – for instance, she could have to relinquish one-third of the family fortune if a 2001 trust was deemed valid.
Nupson's main allegations in court documents were that her brother cheated her when he bought out her, Hughes, and their mother from the family cigar company John Middleton Inc. in 2003 for about $200 million.
The family cigar company had been founded by an ancestor in the 19th century as a tobacco shop. In the 20th century, the firm moved into manufacturing cigars and expanded rapidly with its tipped cigars and its popular black and mild brand. The firm faced dire liability as regulators took aim at cigarette companies. But that threat eased about a decade ago when the federal government decided not to regulate cigars as rigorously as cigarettes.
That shift enabled Middleton to sell the company in 2007 to Altria Inc. for $2.9 billion, reaping a huge gain.
Middleton, 62, has said that Nupson, 54, is motivated by greed and that he took a big financial risk turning around the cigar company.
Orphan's Court documents in the case exposed a patriarchal Main Line family full of suspicion after the death in 1998 of Herbert Middleton, the father of John, Lucia and Anna.
The Middleton parents planned on leaving the cigar company to John, the only son, court documents show. But Lucia opposed doing so, calling it too lucrative a deal for her brother.
The cigar company was instead divided three ways. But then the dispute arose over the valuation of the firm at the time when Middleton bought out his sisters and mother.
According to court documents, Nupson's mother considered disinheriting her because of her personal problems. Both Nupson and Middleton hired private investigators to dig up dirt on one another. Nupson lives on a 40-acre ranch in New Mexico. She has been divorced twice, and is a recovering alcoholic.