Edward Heard suing prominent firm, former partner for over $25M
A son of former automobile mogul Bill Heard Jr. is suing one of the city's most prominent law firms and one of its former partners for more than $25 million, according to documents filed in Muscogee Superior Court.
Edward Heard's lawsuit against Hatcher, Stubbs, Land, Hollis & Rothschild, as well as former partner J. Barrington Vaught, charges legal malpractice, breach of fiduciary duty and breach of trust and seeks not only actual damages of as much as $25 million but punitive damages and attorney fees.
The defendants have answered the complaint, denying the charges and asking that the case be dismissed with prejudice and that the plaintiff bears all costs.
A previous lawsuit was filed in 2011 in Houston, where Edward Heard lives, but was dismissed because the court ruled it was filed in the wrong jurisdiction. The current lawsuit was filed in September of 2013 and is scheduled to come to trial in Superior Court Judge Arthur Smith's courtroom on Nov. 2.
At issue is an irrevocable trust that Bill Heard Jr. and his wife, Sarah, set up for Edward Heard, identical to one established for their other son, Bill Heard III. The trusts, according to the lawsuit, consisted primarily of life insurance policies
on both parents. Each son's trust had a $15 million policy on their father and a $10 million policy on their mother, making each trust worth at least $25 million upon the parents' deaths.
The trusts were drafted in 1996 by Hatcher Stubbs partner John Sheftall, according to the complaint, but Vaught at some point became the firm's trustee of the trusts.
The premiums for the policies were originally paid by Bill Heard Enterprises (BHE), which operated the automotive empire Bill Heard Jr. once owned, according to the suit, but a change in tax law in 2003 altered that arrangement. At that point, promissory notes to Bill Heard Enterprises were extended from the trusts for the amount of the premiums it had paid. Henceforth, premiums were paid out of the cash value of the insurance policies, the suit states.
In 2008, Bill Heard Enterprises declared bankruptcy and went out of business, and a creditors' committee sought to collect on the promissory notes from both brothers' trusts, the suit states. The trusts were marketed in an attempt to raise the money to pay the creditors, but that failed.
Vaught, according to the suit, then advised both brothers that they should surrender the policies to the committee for their cash value in order to pay the committee.
Bill Heard III balked, the suit states, and changed lawyers. His new lawyer, who was not identified in the suit, recommended that he borrow against the value of the policy and supplement that with personal funds to raise the approximately $1.4 million value of the policy to pay the committee, according to the suit.
That arrangement was apparently carried out and Bill Heard III retained his trust, according to the suit.
Edward Heard stayed with Vaught and the law firm, according to the lawsuit:
"Vaught represented to plaintiff (Edward) Heard that he could not discuss any other option to pay the policy premiums because the bankruptcy court had ordered him to cash in the policies."
The suit continues:
"In reality, what Vaught told plaintiff Heard about a bankruptcy court 'order' to cash in the policies was not true. At no point did the bankruptcy court order the policies to be surrendered. Rather, a demand was made by the creditors' committee for an amount equal to the cash surrender value, which was approximately $1.4 million as of the spring of 2009."
Heard's suit also contends that the defendants breached their fiduciary duties "by advising plaintiff Heard to surrender the life insurance policies in Edward's trust when other viable options remained available to plaintiffs, and by surrendering the policies."
The suit also claims that Vaught further breached his fiduciary duties "by negotiating a fee with the creditors' committee in BHE's bankruptcy without first disclosing such negotiations to plaintiff Heard, thereby putting his own interests ahead of those of Edward's Trust and of plaintiff Heard as beneficiary of the Trust."
The suit further claims that those actions also constituted a breach of trust.
In separate but very similar answers to the suit, Vaught and Hatcher Stubbs deny all of the allegations.
The lawsuit might have gone away for a fraction of the $25 million value of Edward Heard's trust, according to documents filed in the case.
At some point in late 2014 or early 2015, lawyers for Edward Heard apparently offered to settle the lawsuit for $5 million, which was the limit of the law firm's insurance policy covering such cases, according to a motion filed by his lawyers in June.
The offer was a "time limited settlement demand on defendants' counsel offering to settle all of plaintiff's claims against defendants for what was represented to be the defendants' (insurance) policy limits of $5 million," the motion states.
The original deadline to respond to the offer was Feb. 6, 2015, but the defendants asked for and were granted a 10-day extension because the insurance carriers "would like additional time to respond," the motion states.
At 4:45 p.m. on Feb. 16, the final day of the offer, "plaintiffs' counsel received a fax from defendants' counsel rejecting plaintiffs' time limited demand."
In a subsequent letter from W. Winston Briggs, attorney for Edward Heard, to Eric Frisch, attorney for Vaught, Briggs stated his intention to take the case to trial and to "seek a large collectible excess verdict."
"As hard as it is to believe, this case has gotten even worse for your clients/insurance carriers since they rejected our time limited settlement demand," Briggs wrote.
Briggs said in a deposition that Steve Dansker of American General Insurance testified he helped Bill Heard III keep his insurance policies and that "any competent insurance professional" would have known to do the same.
Briggs wrote that Dansker further testified that there were "multiple other alternatives" that would have maintained Edward Heard's policies and that it was "financially irresponsible" to surrender them.
Briggs further said that Dansker testified that he had spoken to Vaught at the time and advised him that it would not be in the Heard brothers' best interest to surrender the policies.
"This case continues to get worse and worse for your clients," Briggs wrote.
Frisch said Wednesday that he could not comment on any aspect of the settlement negotiations that might have occurred between the parties involved.
"I am not commenting on settlement discussions, what was offered, what wasn't offered, or any of those things because I am not allowed to do that," Frisch said. "Settlement discussions are confidential and private and the reasons for accepting or rejecting or taking any position are part of an attorney's communications with his client, and they're confidential."
Neither Briggs nor M. Elizabeth O'Neill, who is representing Hatcher Stubbs in the lawsuit, could be reached for comment Wednesday.
This story was originally published August 12, 2015 at 10:37 PM with the headline "Edward Heard suing prominent firm, former partner for over $25M ."