Financial Straits

06.14.12

Inside ‘Real Housewives’ Star Taylor Armstrong’s Lawsuit Settlement

The settlement of a medical records lawsuit against Taylor Armstrong shows how far the ‘Real Housewives of Beverly Hills’ star has fallen—from her hocked engagement ring to her knockoff Birkins. Maria Elena Fernandez reports.

In the end, we won’t know if Real Housewives of Beverly Hills star Taylor Armstrong was a willing participant in her deceased husband’s efforts to defraud a medical records company or if he really coerced her to cooperate with his threats of violence. But what we do know, now that the matter has been settled out of court, is that the housewife who once spent $60,000 on her daughter’s fourth birthday party is in such financial straits that not even her Hermès Birkin bags are real.

Armstrong and MyMedicalRecords.com last month reached a settlement, which the two parties signed on May 25 and May 26, respectively, that required Armstrong to turn over “valuable” personal property to partially recompense MMR for more than $1 million the company says it lost at the hands of the Armstrongs. We’re not talking sprawling estates, luxury sedans, or yachts here. It’s more like an engagement ring, (yes, the one that wound up on eBay—more on that later), two designer bags (wink, wink), and a banknote. The case was scheduled to go to trial in Los Angeles Superior Court on July 11.

“After many meetings with their side and going through various forms of settlement conversations, it became obvious that even if we won the battle, we could lose the war since collectability from Taylor at $1.5 million or more was questionable,” said Robert Lorsch, CEO of MMR, a service providing secure online access to an individual or family’s medical history. “So…we began the process of negotiating for personal property that we were told had very high values and a note for a nominal amount of money in case we didn’t get anything we bargained for.”

The lawsuit, filed in July, alleged that Russell Armstrong, who owned 60 percent of MMR’s stock and raised investor capital for the startup, pocketed investor money with his wife’s assistance. Russell Armstrong was eventually ousted from MMR through a legal settlement in which he paid the company $250,000, relinquished all of his shares, and he and Taylor Armstrong were required to disclose every investor from whom they had received money. When MMR discovered three investors with legitimate claims who had been left out, the company sued Russell Armstrong for $1.5 million. But he committed suicide two weeks later, leaving his wife of six years to deal with the legal mess by herself.

Armstrong declined to comment about the settlement through her personal lawyer John Bluher but maintained in court papers that she was coerced into signing the original agreement with MMR under “duress and threat of physical harm.” In her autobiography, Hiding From Reality—My Story of Love, Loss, and Finding the Courage Within, Armstrong describes in graphic detail the violent abuse she suffered at the hands of her husband.

As part of the lawsuit’s settlement, MMR also received a “representation” from Armstrong that she has no deals in the works or any expected sources of income of any consequence, besides her job on the Bravo hit Real Housewives, for a period of time.

“The idea was we didn’t want to sign an agreement, take the ring, buy into this poverty story, and all of a sudden find out she signed a million-dollar deal,” Lorsch said. “That to us was a substantive part of the settlement and could leave the door open for more in the future.”

So what exactly did MMR walk away with? The centerpiece is Armstrong’s 10 carat yellow stone diamond ring, which was valued at $251,000 and became tabloid fodder when MMR quickly tried to auction it on eBay and Armstrong’s camp complained to TMZ that Taylor Armstrong wanted to give the ring to her daughter and “feels she’s been backed into a corner because of Russell’s misdeeds.”

“Knowing our experience with the Armstrongs in the past, we trusted very little so we add the [banknote] at the last minute when there was no paperwork on the bags.”

The ring wound up with its own little story after eBay stopped the auction and closed MMR’s account, and the personal health records company found itself having to prove it did, in fact, have ownership of the ring. Eventually, eBay reinstated the account. The listing is not live now, as MMR has decided to wait for a second appraisal of the ring to be completed.

MMR was criticized on celebrity websites for trying to capitalize on Taylor Armstrong’s fame in the listing: “This ring has been seen on television! This is your chance to own a piece of Hollywood history!”

“We believed it was in our best interest as a publicly traded company to maximize the value of the property as quickly as possible for the benefit of shareholders,” Lorsch explained. “So we decided to put it on eBay, where anyone in America [or the world] would have a chance to buy the ring and own a piece of television history. It’s a very flashy, desirable piece of jewelry.”

In a way, MMR shouldn’t be blamed for trying to cash in as fast as possible. Already in the hole over its business dealings with at least Russell Armstrong, it didn’t take the company long to figure out that the two Hermès Birkin bags Taylor Armstrong relinquished were not what they seemed.

“The Birkin bags turned out to be fakes from a real housewife,” Lorsch said. “Knowing our experience with the Armstrongs in the past, we trusted very little so we add the [banknote] at the last minute when there was no paperwork on the bags. At the end of the day, I think we will do OK with the ring…it got the case settled. We didn’t want to go out and spend over $100,000 at trial and maybe hundreds of thousands of dollars trying to recover [damages]. For us the chapter is closed.”