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In the Superior Court of Muscogee County State of Georgia

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In the Superior Court of Muscogee County State of Georgia GEORGIA, MUSCOGEE COUNTY SUPERIOR/STATE COURT eFILED 6/1/2018 3:44 PM SHASTA GLOVER, CLERK IN THE SUPERIOR COURT OF MUSCOGEE COUNTY STATE OF GEORGIA WILLIAM T. HEARD, and ERIC LANIGAN, ) AS TRUSTEE OF THE WILLIAM T. HEARD ) IRREVOCABLE LIFE INSURANCE TRUST II, ) ) Plaintiffs, ) ) CIVIL ACTION v. ) ) FILE NO. SU15CV3681-68 J. BARRINGTON VAUGHT, and, HATCHER, ) STUBBS, LAND, HOLLIS & ROTHSCHILD, ) LLP, ) ) Defendants. ) PROPOSED CONSOLIDATED PRE-TRIAL ORDER The following constitutes the Proposed Consolidated Pretrial Order submitted by the parties in the above-styled case: 1. The name, address and phone number of the attorneys who will conduct the trial are as follows: Plaintiffs W. Winston Briggs Georgia Bar No.081653 W. Winston Briggs Law Firm 1005 Howell Mill Road Building C Atlanta, Georgia 30318 Peter V. Hasbrouck Georgia Bar No.335608 Martenson, Hasbrouck & Simon, LLP 3379 Peachtree Road, NE Suite 400 Atlanta, Georgia 30326 Chris J. Perniciaro Georgia Bar No. 618477 Martenson, Hasbrouck & Simon, LLP 3379 Peachtree Road, NE Suite 400 Atlanta, Georgia 30326 Defendant J. Barrington Vaught Eric J. Frisch Georgia Bar No. 261683 Carlock, Copeland & Stair, LLP 191 Peachtree Tower, Suite 3600 Atlanta, Georgia 30303 Defendant Hatcher, Stubbs, Land, Hollis & Rothschild, LLP M. Elizabeth O’Neill Georgia Bar No. 058163 Womble Bond Dickinson (US) LLP 217 17th Street NW, Suite 2400 Atlanta, Georgia 30363 2. The estimated time required for trial is: By the Plaintiffs: 10 days By the Defendants: 10 to 15 days 3. There are no motions or other matters pending for consideration by the Court except as follows: By the Plaintiffs: Plaintiffs have filed a Motion for Summary Judgment and a Motion to Compel that have not yet been ruled on by the Court. Plaintiffs also intend to file Motions in Limine prior to trial. Defendants have filed Motions for Summary Judgment and a Motion in Limine that have not yet been ruled on by the Court. Plaintiffs object to any Motions in 2 Limine of Defendants that have not been filed by Defendants or served on Plaintiffs prior to trial. By the Defendants: The Defendants have filed motions for summary judgment and a motion to exclude testimony from Plaintiffs’ expert Thomas Kaplan, which were submitted to the Court for argument on April 19 and May 17, 2018. Defendants have filed motions in limine which have not yet been heard by the Court. Defendants object to Plaintiffs filing any motions outside the time limits set forth in the Case Management Order or pursuant to other Order of this Court. 4. The jury will be qualified as to relationship with the following: By the Plaintiffs: 1. Officers, directors, employees and shareholders of Endurance American Specialty Insurance Company 2. Officers, directors, employees and shareholders of Allied World Surplus Lines Insurance Company a/k/a Darwin Insurance 3. The Parties and Counsel in this case By the Defendants: William T. Heard, III Eric Lanigan Lanigan & Lanigan, P.L. W. Winston Briggs W. Winston Briggs Law Firm Edward B. Heard Wesson Tribble J. Barrington Vaught Hatcher, Stubbs, Land, Hollis & Rothschild, LLP 5. (A). All discovery has been completed, unless otherwise noted, and the Court will not consider any further motions to compel discovery except for good cause shown. The 3 parties, however, shall be permitted to take depositions of any person(s) for the preservation of evidence for use at trial. (B). Unless otherwise noted, the names of the parties as shown in the caption to this order are correct and complete and there is no question by any party as to the misjoinder or nonjoinder of any parties. 6. The following is the Plaintiffs brief and succinct outline of the case and contentions: It is difficult to give a brief and succinct outline of this case. The facts including record citations are set forth in Plaintiffs’ Motion for Summary Judgment and supporting Brief and Statement of Facts as well as Plaintiffs’ Responses to Defendants’ multiple Motions for Summary Judgment. Plaintiffs seek to recover damages for Defendants’ legal malpractice, Breach of Fiduciary Duty and Breach of Trust. Plaintiffs’ Briefs in support of Motion for Summary Judgment and in Opposition to Defendants’ Motions for Summary Judgment, including record citations and legal arguments, are incorporated herein by reference. Plaintiffs seek to recover Compensatory damages, Attorney’s Fees and Litigation expenses, and Punitive damages. 7. The following is the Defendants brief and succinct outline of the case and contentions: Defendant J. Barrington Vaught: In 1996, Plaintiff William T. Heard, III (“Mr. Heard”) set up a life insurance trust known as the William T. Heard, III Irrevocable Life Insurance Trust II (the “Trust”). Mr. Heard appointed J. Barrington Vaught (“Mr. Vaught”) as trustee. In the Trust instrument, Mr. Heard indicated that Synovus would serve as successor trustee. If Synovus could not serve as 4 successor trustee, then Mr. Heard wanted a corporate fiduciary with at least $50 million in assets to serve. Mr. Heard set up the Trust to hold life insurance policies on the lives of his parents and to use the proceeds for purposes of purchasing the existing shares of Bill Heard Enterprises, Inc. (“BHE”). In 1996 and 1998, the Trust came to own two life insurance policies with values of $10 million and $15 million. The life insurance policies were to pay out after the second to die of Mr. Heard’s parents. BHE paid the premiums for the policies under what is called a “split dollar agreement,” which was a form of bonus compensation for company executives. The premiums were $352,000 per year, due on July 1. The life insurance policies were “universal whole life,” meaning that any amounts paid by BHE over and above the cost of insurance built up inside the life insurance policies as an investment, known as the accumulated cash value. BHE paid the premiums for the life insurance policies through 2003 in the amount of $1.778 million. In 2003, the IRS issued guidance regarding the taxability of such “split dollar arrangements.” As a result of the IRS guidance and the tax consequences, BHE’s financial advisors recommended unwinding the split dollar agreement. On November 28, 2003, the Board of Directors of BHE unanimously voted to terminate the written split dollar agreement and accept two promissory notes from the Trust, which memorialized the obligation to pay back BHE for the premiums. The promissory notes indicated the amounts totaling $1.778 million were due and payable in October 2006 with interest. BHE collected interest on the promissory notes from 2004 to 2007. On September 27, 2008, BHE declared bankruptcy. In its bankruptcy filings, BHE, which continued to operate the business, promised to collect as much money as it could to pay of its creditors. Mr. Vaught learned that BHE would likely demand payment on the notes. Mr. 5 Vaught then contacted Mike Taylor, the insurance broker who sold the policies to BHE, about options. Mr. Taylor provided Mr. Vaught with three options: sell the policies, take out a loan against the policies, or surrender the policies for the cash value. Mr. Taylor advised Mr. Vaught that if a loan was taking out, the Trust would need cash from outside to pay the premiums in July 2009 and going forward to keep the policies. On October 8, 2008, BHE sent a letter to Mr. Vaught, as trustee, to collect on the promissory notes. BHE demanded payment of the notes in a letter that referred to the original due date of October 2006. BHE demanded that Mr. Vaught access the accumulated cash value to pay back BHE for the premiums that had been advanced. Mr. Vaught then contacted Mr. Heard and his family by letter regarding the demand. Mr. Vaught wrote to Mr. Heard regarding the options given to him by Mr. Taylor. Mr. Vaught wrote that he had not sought legal advice regarding whether there was a defense to BHE’s collection on the notes but offered to do so if Mr. Heard wanted. In the fall of 2008, Mr. Heard began taking courses to get his insurance license. Mr. Vaught was told to attempt to sell the policies. He retained a company that specializes in selling life insurance policies, who marketed the policies. By March 2009, Mr. Vaught had received only one offer for a very low amount. Mr. Vaught did not accept the offer. In early March 2009, Mr. Heard retained a lawyer in Florida named Eric Lanigan to get a “second opinion” regarding what to do with the insurance policies in the Trust. Mr. Lanigan advised Mr. Heard there could be other options. Mr. Lanigan told Mr. Heard to request a copy of the notes, original Trust instrument, and the policies. Mr. Heard contacted Mr. Vaught, who provided the copies. 6 On April 12, 2009, Mr. Heard wrote to Mr. Vaught that he felt there were “other options” available for the life insurance policies. Mr. Vaught responded by telling him that there was no money available to pay BHE and the premiums, that there were no offers, and that BHE’s demand was adverse to Mr. Heard’s interests. On April 15, 2009, Mr. Heard instructed Mr. Vaught to send BHE’s demand to Mr. Lanigan. Mr. Heard also instructed Mr. Vaught that the Trust would not make any payment to BHE. On April 21, 2009, on the advice of Mr. Lanigan, Mr. Heard terminated Mr. Vaught as trustee and ended any attorney-client relationship he had with Mr. Vaught. Mr. Vaught accepted this by letter dated April 22, 2009. When he set up the Trust, Mr. Heard designated Synovus as the successor trustee and that if Synovus could not serve, the next trustee had to be a corporate fiduciary with at least $50 million in assets.
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