I don't care much for ABC's Amber Lit converter. I find it does strange things, loses a lot of formatting and often will add spaces in the wrong places. Sometimes thousand's of spaces which is tiresome to correct.
I prefer ConvertLit GUI. I don't know if it will handle smart quotes but it's worth a try.
Get it here:
http://dukelupus.pri.ee/
I think how successful the conversion is depends on how the lit file was created originally. If the Lit file was made with a Microsoft HTML coded file then this can cause problems and also increases the file size. I have found that a better lit is created using the MS "Filtered" HTML or MS RTF format. At least, I find that these convert back much nicer with little or no editing to do.