After a week of trial, a confidential settlement has ended a legal malpractice case involving allegations a Columbus lawyer and his now-defunct firm’s mishandling of financial matters for a scion of the once-mighty Bill Heard Chevrolet franchise cost his client millions of dollars.
The settlement reached Monday marks the second time former Hatcher, Stubbs, Land, Hollis & Rothschild partner J. Barrington “Barry” Vaught and the firm agreed to settle claims that Vaught’s actions caused Bill Heard III and Edward Heard to lose insurance trusts worth tens of millions of dollars. The trusts were set up by their father, Bill Heard Jr.
Monday’s settlement was with Bill Heard III. Edward Heard settled similar claims days before trial in 2015.
Monday’s agreement is a “great settlement, it’s a lot of money,” said attorney Winston Briggs of Atlanta’s W. Winston Briggs Law Firm, who represents Bill Heard III. Briggs also handled Edward Heard’s case.
“It was going to be a grueling trial,” said Briggs. “Our damages expert said Bill’s damages from the lost policies alone was $15.6 million, plus additional damages.”
Vaught, who is now in private practice in Columbus, is represented by Carlock Copeland & Stair partner Eric Frisch.
Hatcher, Stubbs, Land, Hollis & Rothschild—which was Columbus’ oldest law firm when it dissolved in 2015 after 143 years in business—is represented by Womble Bond Dickinson partner Elizabeth O’Neill.
O’Neill and Frisch said they could not discuss the settlement.
According to Briggs, court filings and previous coverage by the Daily Report, the case is rooted in a 1996 decision by Bill Heard Jr. to create trusts for his sons. The trusts were drafted by another Hatcher Stubbs partner who is not a party to the suit, and each included a $15 million life insurance policy on Bill Heard Jr. and a $10 million policy on his wife, Sara Heard, both are whom are still alive.
The premiums for each trust, which ran to about $350,000 a year, were paid by the senior Heard’s company, Bill Heard Enterprises.
The policies were structured so that, when they became payable upon the deaths of the parents, the sons would repay the premiums to Bill Heard Enterprises out of the insurance proceeds in what is known as a “split-dollar agreement.”
Hatcher Stubbs had represented the Heard family for years, and Vaught, an old friend and legal adviser to Bill Heard Jr., was named trustee of the trusts.
The Internal Revenue Service changed its rules regarding split-dollar arrangements in 2003, and Bill Heard Enterprises notified the brothers and Vaught that the trusts were going to have to sign promissory notes to pay back the premiums the company paid. The notes had a due date of 2006 even though there was never any intention to call them due until the policies became payable upon the parents’ deaths, Briggs said.
In 2008, Bill Heard Enterprises declared bankruptcy, and the creditors’ committee appointed by the bankruptcy court demanded payment on the promissory notes.
Vaught told Edward Heard that he should hand over the policies in his trust for their cash surrender value of about $1.4 million. Unknown to him, Vaught also pocketed a $135,000 fee from the creditors committee, Briggs said.
Vaught told Edward Heard that the committee insisted the policies came due in 2006 and that he surrender them, which Briggs said would later prove to be false. That advice was at the heart of the lawsuit and ultimate settlement with Edward Heard.
Bill Heard III, however, started taking insurance classes to prepare for life after his family company’s collapse, and he became suspicious. In 2009, he hired his own lawyer, Eric Lanigan of Lanigan & Lanigan, of Winter Park, Florida, and fired Vaught.
That same year, the bankruptcy committee sued Heard, demanding that he pay the promissory note. Lanigan, who was named trustee for Bill Heard III’s trust, ultimately ended up selling off the policies for more than $2 million, which was distributed among Heard’s creditors.
In 2014, during discovery in Edward Heard’s suit, Vaught was forced to turn over a 2003 memo between Bill Heard Enterprises, himself and others involved in drawing up the trusts making clear that they were not to come due until they were payable upon the deaths of Bill Heard Jr. and his wife.
“That why Bill Heard Enterprises never called the promissory notes due even after 2006,” Briggs said.
Bill Heard III sued Vaught and Hatcher Stubbs for legal malpractice, breach of fiduciary duty and breach of duty in Muscogee County Superior Court in 2015.
A mediation earlier this year before Barrickman, Allred & Young partner W. Barrickman failed to resolve the dispute, Briggs said.
Briggs said the 2003 memo, which Vaught denied recalling, was central to the trial that began June 11.
He said there were several tricky issues, including assertions by the defendants’ insurers that the claims were barred by the statute of limitations.
“There was an argument that the statute of limitations would have applied, had it not been tolled by the defendants hiding the evidence back in 2008,” Briggs said.
“But then the insurance companies’ argument was, ‘OK, if you prove fraud tolled the statute of limitations, we don’t have to cover it because we don’t insure fraud,’” he said.
The parties, insurers and Barrickman continued to discuss settlement options during the first week of trial before Judge William Rumer, Briggs said.
On the evening of Sunday, June 17, Lanigan called to say a settlement had been reached, Briggs said.
“I was packing my car, ready to go back to trial Monday morning,” he said.