John S. Middleton, the billionaire part-owner of the Phillies, is battling in court with a younger sister over a 2003 deal in which he bought her and others out of the family's conglomerate for about $200 million and then sold part of the firm four years later for $2.9 billion, according to documents filed in Montgomery County Orphan's Court last week.
The sister, Anna K. Nupson, has yet to make specific claims of wrongdoing in court. But she said in a court document last month that she may bring "substantive claims that pertain to possible self-dealing" by her brother.
In 2003, Middleton was president of the family's holding company, Bradford Holdings Inc., which owned part of the Phillies, a hotel chain, and a cigar company.
Middleton also was trustee of his sister's personal trust that sold more than 70,000 private shares in Bradford back to the company, allowing her brother to consolidate his control and creating a potential conflict.
Middleton says that his sister was represented by her own attorneys in the deal and that she released him from claims of self-dealing as part of a negotiated family settlement, also in 2003.
Middleton bought back the company stock, those close to him say, as the family firm's largest asset faced an onslaught of tobacco lawsuits that could have devastated it - a financial risk he accepted but his sister did not.
"I am deeply disappointed that my sister Anna has seen fit to do this," said Middleton, 60, of Bryn Mawr, in a statement Friday. "I have worked extraordinarily hard for decades to ensure the success of our family business for all of the Middleton family. My wife and I hope that this matter can be resolved quickly in court. Let me be clear, we are not going to subject our family to veiled threats and demands."
Middleton - seen by some as a possible future majority owner of the Phillies - has hired a high-powered legal team and a public-relations firm to defend himself.
Last week his legal team asked an Orphan's Court judge to affirm the 2003 agreement allowing him to restructure the family business and buy out Nupson; a second sister, Lucia Hughes; and his mother, Frances S. Middleton, who died in 2013.
Nupson's attorney, Brian A. Gordon, declined requests to respond. A court filing from her attorneys is expected by April 20.
"I don't think it's in Anna's interest to make any comments to the press," said Gordon, an elected commissioner in Lower Merion Township. Nupson was previously represented by New Mexico attorney Joel Young.
Nupson, 51, once worked in sales and marketing for the family-owned cigar-maker, John Middleton Inc. of King of Prussia. She now lives in New Mexico as the managing partner of at least four film-production companies created in the last seven years.
Middleton bought his sisters and mother out of Bradford Holdings in 2003 for about $165 million - plus a $54 million dividend payment split among all the family members. Court papers say the buyout was initiated by Middleton's other sister, Hughes, and Nupson joined her. Hughes was represented in her discussions of the buyout by the North Carolina law firm Womble, Carlyle, Sandridge & Rice L.L.P., which also defended the cigarette company R.J. Reynolds in tobacco lawsuits.
The prices paid for the shares held by Nupson and her sister were far more generous than the price suggested in two appraisals of Bradford Holdings, in 2000 and 2002, court documents say. The price was also more than Hughes initially sought.
At the time of the deal, the family's biggest asset, the cigar manufacturer, seemed on the financial ropes because of class-action lawsuits against tobacco companies, court documents said. The cigar company did not have liability insurance to cover the potential costs of those suits.
In addition, the shares in Bradford Holdings couldn't be easily sold because they were privately held and the individual family members held minority - not controlling - stakes in the company.
But the stocks in cigarette companies began rebounding in mid-2003. Two years later, the cigarette-maker Philip Morris USA Inc. announced an "adjacency growth strategy" and began looking at tobacco-related companies - which would be a boon for Middleton.
Altria Group Inc., Philip Morris' corporate parent, bought John Middleton Inc., maker of the popular Black & Mild cigars, in 2007 for $2.9 billion.
Michael Hussey, associate professor at Widener University School of Law, said the key issue from a trust perspective was whether Middleton had a conflict of interest serving both as trustee on Nupson's personal trust and as president of Bradford Holdings.
In that top executive position, Middleton would seek to buy the shares in Nupson's trust at the lowest price, Hussey said.
As trustee on Nupson's trust that held her assets, Middleton would be seeking to sell those shares at the highest price, the professor said.
"What it boils down to is that [Nupson] has been hinting around that [her brother] bought those shares at too cheap a price," Hussey said. "Basically, she seems to say that he was on both sides of the transaction."
James T. Smith, Middleton's attorney and chair of the litigation department at Blank Rome L.L.P., said Friday that in multiple agreements Nupson "specifically acknowledged there was no self-dealing or conflict of interest."
Until recently, the dispute between the Middleton siblings was merely a simmering legal affair in Norristown.
Attorneys for both sides, in filings and hearings since December, sparred over access to tens of thousands of documents and a $517,816 life-insurance payment. A dozen lawyers have entered the case.
In one of those hearings, on Jan. 27, the two sides convened in a small fourth-floor courtroom in Norristown before Judge Lois E. Murphy. The courthouse opened an hour late because of a snowstorm. Neither Middleton nor Nupson attended; a few extraneous lawyers sat in the gallery of the dim room.
Attorneys argued over the production of trust documents - one estimate for copies, according to court records, would cost between $40,000 and $60,000 - and Nupson's attorneys protested Middleton's offer to provide documents dating back only to Sept. 30, 2010.
"Should she find a smoking gun, 'Oh well,' " Young, a Nupson attorney, told the court. "Should she not, we will be done, and everybody would be happy, and we will move on with our lives."
Speculation has pegged Middleton as one day becoming majority owner of the Phillies. Middleton, two sources said last October, increased his ownership stake to 48 percent.
Baseball officials - both inside and outside the Phillies - have portrayed Middleton as a powerful behind-the-scenes force. The Phillies, owned by a limited partnership since 1981, said in a statement in October that they "do not foresee" one entity holding a majority share.
Middleton and his wife, Leigh, were honored with the Philadelphia Award in 2014 for their philanthropic efforts. "We're spotlight avoiders," Middleton said in a 2014 interview with The Inquirer.
Nupson credits herself as a producer in three documentaries about mixed martial arts, including one released in 2013 called Mexican Fighter. She registered with an online personal-branding service that traced her success to "stubbornness and never taking 'no' for an answer."