Hill v. Schilling

ALBERT G. HILL, III, Plaintiff, v. WILLIAM SCHILLING, et al., Defendants.

Civil Action No. 3:07-CV-2020-L

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

January 15, 2016

MEMORANDUM OPINION AND ORDER

Before the court is CHD and CNBW's Motion for Payment, filed June 16, 2015 (Doc. 1576). Having considered the motion, responses, reply, surreply, appendices, record, and applicable law, the court grants in part and denies in part CHD and CNBW's Motion for Payment.

I. Background Facts and Procedural History

This case involves a family dispute relating to the management of the Margaret Hunt Trust Estate ("MHTE") and the Haroldson Lafayette Hunt, Jr. Trust Estate ("HHTE"), two trusts created by the late Texas oil magnate H.L. Hunt for his eldest children, Margaret Hunt Hill and H. L. Hunt, Jr. Margaret Hunt Hill had three children, including Albert G. Hill Jr. ("Al Jr."), all of whom were beneficiaries of both the MHTE and HHTE. Al Jr., in turn, had three children, including Albert G. Hill, III ("Hill III" or "Al III"), all of whom were also beneficiaries of the MHTE and HHTE.

A. The Initial Lawsuit

In November 2007, Al III brought this lawsuit in Texas state court in his individual capacity and on behalf of the MHTE and HHTE against specific beneficiaries, including Al Jr. and various other members of his extended family, as well as against the trustees and advisory board members of the MHTE and HHTE (the "Defendants"). Among other things, Al III alleged wrongdoing in the management and administration of the MHTE and HHTE by their respective trustees and violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C § 1961, et seq. He also sought a declaration that he was a direct and vested beneficiary of the MHTE as a consequence of his father's disclaimer of various interests he held in the MHTE.¹ Following removal to federal court on December 3, 2007, the case was randomly assigned to United States District Judge Reed C. O'Connor.

A parallel case proceeded in the Dallas County Probate Court ("Probate Court"). See In re: Margaret Hunt Trust Estate, No. 07-02210-P2-A, Probate Court No. 2 in Dallas County, Texas (the "Probate Suit"). Pending judicial resolution of the validity of Hill Jr.'s disclaimer, the MHTE trustee tendered trust distributions in the amount of $88,428,312.42 (including interest) to the Probate Court. See MHTE's Notice of Compliance with Paragraphs 17 and 41 of the Final J. (Doc. 1013). The trustee of the MHTE also deposited $4,125,000 into the registry of Probate Court representing the disputed portion of MHTE's 2008 year-end distribution to its beneficiaries See id.

From October 2008 to November 2009, Campbell Harrison & Dagley, L.L.P., including Suzanne E. Goss, of counsel to Campbell Harrison & Dagley, L.L.P. ("CHD"), and Calloway,Norris, Burdette & Weber, PLLC ("CNBW") represented Al III in this action, and also represented Al III and his wife, Erin Nance Hill (collectively, the "Hills"), in related lawsuits filed in state court.²

B. The Settlement Agreement

Ultimately, Al III agreed to a settlement of the dispute, which United States Magistrate Judge Paul D. Stickney placed on the record on May 5, 2010. See Transcript of Settlement Agreement Proceedings (Doc. 878). On or about May 13, 2010, the parties entered into the Global Settlement and Mutual Release Agreement (the "Settlement Agreement") (Doc. 879) that settled this action and related state court actions. The Settlement Agreement affirmed Al Jr.'s 2005 disclaimer (see supra note 1) and provided, among other things, that the MHTE would be divided, pro rata, into separate sub-trusts for all beneficiaries, including Al III, who would become the sole beneficiary to one of the new subdivided trusts containing his individual interest, the MHTE-Albert G. Hill III Trust. Each sub-trust was to be separately administered by a new successor trustee. The Settlement Agreement had six central components:

1. A payment of $4,438,458.44 from the HHTE from the sale of certain of the MHTE's appraised illiquid assets, attributable to the MHTE-Albert G. Hill III Trust;

2. Installment payments totaling $30,675,000 to be made by Al Jr. to Al III between 2010 and 2015 to be used by Al III to establish trusts for Al Jr.'s grandchildren;

3. A payment of $10,5000,000 from the HHTE to Al III for estimated assignment gift taxes associated with establishing the grandchildren's trusts;4. A payment of approximately $29,476,104.14 (originally tendered to the Probate Court), transferred into the registry of the court from the MHTE to Al III constituting Al III's interest in the MHTE;

5. The fair market value of future income payments to be made to Al III from the MHTE-Albert G. Hill Trust and the MHTE-Albert G. Hill Jr. Income Beneficiary/Albert Hill III Termination Beneficiary Trust that Al III was required to establish (Doc. 999 ¶ 18); and

6. A payment from Al III to Al Jr. and his affiliates in the amount of $7,500,000.

The Settlement Agreement provided that further details remained to be supplied and agreed upon by the parties, and authorized the district court to resolve any disputes that might arise in that process. See Settlement Agreement, Sec. III, 5(c), p. 22 ("Any controversy or claim arising after the date of execution of this Agreement . . . shall be resolved by [Judge O'Connor], who shall retain continuing jurisdiction over this Agreement.").

C. CHD and CNBW Intervene in the Lawsuit

Following execution of the Settlement Agreement, on or about November 16, 2009, the Hills notified CHD and CNBW that they had obtained alternative representation and would no longer need their legal services. On August 20, 2010, CHD and CNBW sought to intervene in this action "to secure their rights to receive a portion of the property that would otherwise be distributable to or on behalf of Albert G. Hill III, under the settlement agreement reached by the parties in this case." See Mot. Intervene 1 (Doc. 929). Judge O'Connor ultimately granted CHD and CNBW's motion to intervene. See Order (Doc. 997). Several other claimants, including the Hills's former counsel, Lisa Blue, Charla Aldous, Steve Malouf, and their respective law firms (collectively, "BAM"), alsointervened to secure their alleged right to collect amounts due and owing under fee agreements with the Hills.

D. The November 8, 2010 Final Judgment

On November 8, 2010, Judge O'Connor issued a Final Judgment implementing and memorializing the various obligations and rights of the parties under the Settlement Agreement. Among other things, the Final Judgment: affirmed Al Jr.'s 2005 disclaimer of a portion of his interest in the MHTE (see supra note 1) (Final J. ¶ 5); divided the MHTE and HHTE into separate sub-trusts for all beneficiaries, including the MHTE-Albert G. Hill III Trust of which Al III was the sole beneficiary (id. ¶¶ 6-8); and ordered the trustee of the MHTE to effect the transfer of funds previously tendered to the Probate Court to this court's registry for the benefit and account of Al III (id. ¶ 17).³

As part of the settlement of Al III's disputed claims with Al Jr. (the "Al Jr. Settlement"), the Final Judgment required Al Jr. to make four annual installment payments of $7.5 million each, beginning in November 2012, to be placed in trusts for the benefit of his grandchildren (the "Installment Payments"), and required Al III to establish separate irrevocable trusts for Al Jr.'s threegrandchildren (the "Grandchildren's Trusts"). The Final Judgment also required the HHTE to deposit $10,500,000 into the court's registry earmarked for estimated gift taxes associated with the Grandchildren's Trusts. Specifically, paragraph 21 of the Final Judgment states:

21. IT IS ORDERED that Al Jr. shall pay in settlement of the disputed claims to Al III . . . by payment made to the registry of this Court for Al III's benefit, the total sum of $30.675 million. . . . IT IS FURTHER ORDERED that the trustee and advisory board members of the HHTE shall cause to be paid in settlement of disputed claims by Al III, by payment made to the registry of this Court for Al III's benefit, a total sum of $10.5 million from the HHTE within ten (10) days after the Court's entry of this Final Judgment.

The Final Judgment also required Al III to irrevocably assign his rights to receive the Installment Payments to the Grandchildren's Trusts, as follows:

22. IT IS ORDERED that no later than three (3) business days following Al III establishing the Grandchildren's Trusts . . ., Al III shall irrevocably assign his right to receive the Installment Payments of the Al Jr. Settlement to the Grandchildren's Trusts . . . with each trust receiving a principal amount equal to one-third (1/3) of the gross proceeds received from any payment of the Installment Payments, less any applicable gift taxes in excess of 10.5 million ("Assignment 1").

* * * *

IT IS FURTHER ORDERED that, within five (5) business days following Al Jr.'s payment of each of the Installment Payments of the Al Jr. Settlement to the registry of this Court for Al III's benefit, the Court shall distribute the entirety of each installment to the Grandchildren's Trusts with each of the Grandchildren's Trusts receiving a principal amount equal to one-third (1/3) of the gross proceeds received from each installment payment, less any applicable taxes, by wire transfer to such account(s) as provided in writing to this Court by the trustee of each of the Grandchildren's Trusts, and the Court shall provide notice of each such distribution paid by the Court to counsel for Al Jr. and Al III by ecf notification of the execution of the order.

Final J. ¶ 22 (emphasis added).

Following an extended period of litigation regarding Al III's compliance with aspects of the Final Judgment, on May 13, 2011, Al III executed Assignment 1, thereby assigning, transferring and conveying all his rights and interests in the Installment Payments to the Grandchildren's Trusts. See Resp....