GILL et al v. HARTSHORN et al
Filing
222
ORDER denying 179 Motion to Void Settlement; granting 201 Motion to Approve Settlement; denying 180 and 209 Motions to Dismiss; granting 176 Motion for Leave to File; granting 199 Motion to Dismiss; terminating 187 , 189 , and 195 Motions in Limine. Ordered by U.S. District Judge CLAY D LAND on 04/14/2014. (CGC)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
COLUMBUS DIVISION
KAREN GILL, et al.,
*
Plaintiffs,
*
vs.
*
KEVIN HARTSHORN, et al.,
*
Defendants.
CASE NO. 4:12-CV-77 (CDL)
*
O R D E R
Plaintiffs,
beneficiaries
of
the
Gill
Family
Cornerstone
Trust, seek Court approval of their settlement with one of the
trustees of the Gill Family Cornerstone Trust, Kevin Hartshorn,
and one of the trustees of the trusts that benefit the Cornerstone
Trust, Daniel Van Gasken.
Other individuals who contend that they
are trustees of the Cornerstone Trust or related trusts object to
the settlement.
Defendants Loren Gill and Elm Leasing, LLC argue
that if the settlement is approved over their objection, the Court
will no longer have subject matter jurisdiction, so this action
should
be
dismissed.
For
the
following
reasons,
the
Court
approves the settlement and finds that it still has subject matter
jurisdiction
over
the
remaining
controversy.
Accordingly,
the
motion to void the settlement (ECF No. 179) is denied, the motion
to
approve
the
settlement
(ECF
No.
201)
is
granted,
motions to dismiss (ECF Nos. 180 & 209) are denied.
and
the
In addition
to
the
issues
related
to
the
settlement,
Kevin
Hartshorn
and
Daniel Van Gasken (“Hartshorn Defendants”) seek leave to answer
the Intervenor Complaint out of time.
That motion (ECF No. 176)
is granted.
FACTUAL BACKGROUND
Fifteen years ago, a local businessman named John Gill took a
vow of poverty designed to separate him from his substantial real
estate holdings for tax purposes but leave him in control of those
assets for all practical purposes.
placed
into
a
single
asset
Each piece of property was
property
trust,
and
the
sole
beneficiary of all of the single asset trusts is the Gill Family
Cornerstone Trust.
The original beneficiaries of the Cornerstone
Trust included John Gill’s children and an organization called the
Healing Water Ministries Integrated Auxiliary of the Order of the
International
Academy
of
Lymphology.
John
Gill
became
a
missionary, minister, and health educator of the Order of the
International
business
Academy
associates,
transferred
to
the
of
Lymphology
continued
trusts
to
(and
and,
manage
received
assisted
the
by
property
remuneration
several
he
had
for
his
efforts) until he was convicted of a felony in Florida and fled
the
country
as
a
fugitive
from
justice
shortly
before
he
was
supposed to report to prison in 2009.
John Gill attempted to manage the trusts and real estate as a
fugitive, but he lost his grasp over them.
2
In his absence, John
Gill’s former business associates, Kevin Hartshorn and Daniel Van
Gasken, who are trustees of the trusts, took over management of
the trusts and rental properties.
John Gill’s brother Loren Gill
attempted to assume control over the trusts and rental properties,
but his efforts failed.
Hartshorn continues to serve as trustee of the Cornerstone
Trust.
Under the Cornerstone Trust, Hartshorn is permitted to
establish “charitable Trusts or other organizations . . . for
purposes of beneficial distribution.”
Hartshorn Defs.’ 1st Mot.
for Summ. J. Ex. A, Decl. of Trust for the Gill Family Cornerstone
Trust (“Cornerstone Trust Decl.”) at 9 ¶ 12.1, ECF No. 60–3.1
Hartshorn established The Compassionate Order of Service of The
Church of Compassionate Service—an organization of which he is a
minister—and designated it as a beneficiary of the Cornerstone
Trust.
are
Again, the other beneficiaries of the Cornerstone Trust
Plaintiffs
and
the
Healing
Water
Ministries
Integrated
Auxiliary of the Order of the International Academy of Lymphology.
The Cornerstone Trust provides that “distributions will be at the
sole discretion of the Trustees” and “will be handled under a
sprinkling provision” that permits the trustees to decide which
beneficiaries will receive a distribution and the amount of each
distribution.
Id. at 11 ¶ 12.12.
1
The Cornerstone Trust Declaration does not contain page numbers. For
the sake of simplicity, the Court refers to the page numbers of the
electronic version of the Cornerstone Trust Declaration, which is in the
present record at ECF No. 60–3.
3
For several years, John Gill’s children, brothers, and former
business
associates
have
feuded
over
control
of
the
trusts.
Plaintiffs in this action are John Gill’s children, Lauren Gill
and
K.G.,
a
minor.
They
accused
the
Hartshorn
Defendants
of
mismanaging the trusts and diverting trust assets to themselves or
to entities with which they are affiliated, including The Church
of Compassionate Service.2
Plaintiffs also accused their uncle
Loren Gill of defrauding the Hartshorn Defendants into diverting
trust assets to a company Loren Gill owns called Elm Leasing, LLC.
Van Gasken accused Loren Gill of conversion based on the diversion
of single asset trust assets to Elm Leasing.
Loren Gill accused
the Hartshorn Defendants, who managed Elm Leasing for a while, of
pocketing Elm Leasing revenue instead of giving it to him.
More
recently, John Gill’s other brother, Michael Gill, and two former
business associates, Steve Thomas and Wallace Whitten, joined the
feud, contending that they are trustees and/or beneficiaries of
the trusts and accusing
the Hartshorn Defendants
of breach of
trust.
After
Gill’s
obtaining
children
and
legal
counsel,
beneficiaries
Plaintiffs,
of
the
who
are
Cornerstone
John
Trust,
approached counsel for the Hartshorn Defendants in an attempt to
2
The Hartshorn Defendants also include Jay Nicol and several entities
controlled by Hartshorn and Van Gasken: Eastern Property Development,
LLC, South East Enterprises Group, LLC, EPD 1 Holding Trust, EPD 2
Holding Trust, SEE Holding Trust, The Church of Compassionate Service,
and The Compassionate Order of Service of The Church of Compassionate
Service.
4
extricate themselves from the problems created by the confusing
Cornerstone Trust while protecting their beneficial interests in
the trust consistent with John Gill’s intentions in creating the
trust.
Those efforts resulted in a settlement agreement with the
Hartshorn
Defendants.
Plaintiffs’
breach
The
of
settlement
trust
claims
agreement
against
the
resolves
Hartshorn
Defendants and provides that 40% of the assets that are currently
in single asset trusts that benefit the Cornerstone Trust will be
placed into a separate trust for the benefit of Plaintiffs.
Once
the settlement is fully completed, Plaintiffs will waive their
right to the remaining 60% of trust assets.
The settlement does
not purport to extinguish any breach of trust claims by other
individuals or entities who have standing to pursue such claims.
It
also
does
not
release
Plaintiffs’
right
to
pursue
claims
against Loren Gill and Elm Leasing for the misappropriation of
trust assets.
DISCUSSION
I.
The Settlement Agreement is Reasonable and Permissible
Plaintiffs
their
and
settlement
the
pursuant
Hartshorn
to
Defendants
O.C.G.A. §
seek
29-3-3,
approval
which
of
requires
court approval for the settlement of a minor’s claim under certain
circumstances.
object
to
Defendants.
the
Loren
Gill,
settlement
Michael
between
Gill,
Thomas,
Plaintiffs
and
and
the
Whitten
Hartshorn
They argue that the settlement agreement amounts to
5
impermissible self-dealing by the Hartshorn Defendants and should
be rejected on that basis.
They further contend that the trust
documents do not give the Hartshorn Defendants authority to take
the actions contemplated by the settlement.
The Court addresses
each argument in turn.
First, the Court must determine whether the settlement was
entered
into
in
good
faith,
is
in
the
best
interest
of
the
beneficiaries, and is consistent with the trust settlor’s intent.
See
O.C.G.A. §
53-12-261(b)(22)(A)-(B)
(permitting
trustee
to
settle claims involving the trust as long as there is no “fraud,
bad
faith,
or
gross
negligence”
on
the
part
of
the
Under this standard, the settlement should be approved.
trustee).
The Court
previously concluded that Plaintiffs, the only children of John
Gill,
are
undisputedly
beneficiaries
of
the
Cornerstone
Trust.
Gill v. Hartshorn, No. 4:12-CV-77, 2014 WL 29450, at *7 (M.D. Ga.
Jan.
3,
2014)
(“[T]he
Cornerstone
Trust
Declaration
clearly
manifests John Gill’s intention to give a beneficial interest in
the trust property to his children.”).
benefit from the settlement.
trust
assets
that
will
be
Plaintiffs will clearly
They are provided with substantial
used
for
their
sole
benefit,
and
Plaintiffs will be extricated from the Cornerstone Trust and its
two
other
(dubious)
beneficiaries:
The
Compassionate
Order
of
Service of The Church of Compassionate Service and the Healing
Water
Ministries
Integrated
Auxiliary
6
of
the
Order
of
the
International Academy of Lymphology.
the
Church
of
Compassionate
Even if Healing Water and
Service
are
legitimate,
Plaintiffs
will benefit because their interests are potentially in conflict
with those other beneficiaries; under the settlement, Plaintiffs
will no longer be subject to the Cornerstone Trust’s “sprinkling
provision” that permits all of the distributions to be given to
the other beneficiaries and none to Plaintiffs.
also
makes
adequate
provision
for
the
The settlement
interests
of
the
beneficiaries by leaving 60% of the assets for their benefit.
other
And
the Court notes the Hartshorn Defendants are closely identified
with
these
other
beneficiaries
and
have
settlement is also in their best interest.
the
settlement
is
clearly
in
the
concluded
that
the
The Court finds that
best
interest
of
all
beneficiaries and is consistent with the trust settlor’s intent.
Second, the Court rejects any argument that the Hartshorn
Defendants
settlement.
did
not
The
have
the
Cornerstone
authority
Trust
and
to
single
enter
asset
into
the
property
trusts provide the trustees, Hartshorn and Van Gasken, with broad
discretion.
See, e.g., Cornerstone Trust Decl. at 14 ¶ 14.1e.3
(giving trustees “power to create other organizations, including
Trust[s]: both revocable and irrevocable, using all or part of the
Gill Family Cornerstone Trust organization’s assets to fund such
organizations”); Hartshorn Defs.’ 1st Mot. for Summ. J. Ex. C,
Decl. of Trust for the 202 Oakridge Commercial Real Estate Holding
7
Trust at 7 ¶ 15d.10, ECF No. 60-6 (giving trustees of single asset
property trust “power . . . to transfer [trust] assets to the
[Cornerstone]
Trust”).
The
broad
discretion
conferred
by
the
trust declarations allows for this settlement.
Third, the Court finds that the settlement does not amount to
impermissible self-dealing.
Although Plaintiffs initially brought
this action against the Hartshorn Defendants alleging that they
had breached their fiduciary duties to Plaintiffs and although the
settlement does not require the Hartshorn Defendants to make any
payments from their personal assets to consummate the settlement,
the Court nevertheless finds the settlement to be appropriate and
not
the
result
of
impermissible
self-dealing.
Generally,
a
trustee “must not place himself in a position where his personal
interest
will
conflict
with
the
interest
of
the
beneficiary.”
Hanson v. First State Bank & Trust Co., 259 Ga. 710, 711, 385
S.E.2d 266, 267 (1989) (internal quotation marks omitted).
But
where the trustee is also a beneficiary and the settlor knows of
this conflict, the trustee may continue to act in that capacity as
long as he operates within the discretion conferred by the trust
declaration.
See Lovett v. Peavy, 253 Ga. 79, 81, 316 S.E.2d 754,
757
(finding
(1984)
remainderman
as
that
trustee
where
knowing
settlor
that
the
designated
trustee’s
trust’s
interests
conflicted with the beneficiary’s, that conflict did not justify
removal of the trustee).
8
Here, John Gill knew that there was a potential conflict when
he drafted the Cornerstone Trust so that the trustee was permitted
to establish new beneficiaries.
John Gill also knew there was a
potential conflict when he drafted the Cornerstone Trust so that
the trustee could make distributions to one or some but not all of
the beneficiaries.
One of Plaintiffs’ main complaints is that
Hartshorn used trust assets for the benefit of the Church of the
Compassionate Service and its members.
Therefore, at least some
of Plaintiffs’ claims concern actions that were permitted by the
Cornerstone Trust declaration, and the Court cannot conclude that
the settlement of such claims in exchange for a distribution of
trust property is impermissible.
See Heiman v. Mayfield, 300 Ga.
App. 879, 882-83, 686 S.E.2d 284, 287-88
release
of
distribution
negligence
of
trust
claims
against
assets
was
not
(2009)
trustee
against
in
(finding that
exchange
public
for
policy).
Based on the foregoing, the Court approves the settlement between
Plaintiffs and the Hartshorn Defendants.
II.
The Court Has Subject Matter Jurisdiction
The
Court
previously
concluded
that
federal
question
jurisdiction exists in this action based on Plaintiffs’ claims
under the federal Racketeer Influenced and Corrupt Organizations
Act (“RICO”), 18 U.S.C. §§ 1962, 1964.
Loren Gill and Elm Leasing
(“Elm Defendants”) contend that the Court cannot exercise subject
matter
jurisdiction
in
light
of
9
the
settlement
because
(1)
Plaintiffs lost standing to pursue their federal RICO claims and
(2) Plaintiffs failed to state a federal RICO claim against the
Elm Defendants.
A.
The Court addresses each issue in turn.
Plaintiffs Have Standing to Pursue RICO Claims
The Elm Defendants argue that in light of the settlement,
Plaintiffs are no longer beneficiaries of the Cornerstone Trust,
and they contend that under Nalley v. Langdale, 319 Ga. App. 354,
734 S.E.2d 908 (2012), Plaintiffs do not have standing to pursue
their claims.
In Nalley, the Georgia Court of Appeals concluded
that a former trustee who had resigned from his position could no
longer pursue claims on behalf of the trust’s beneficiaries for
return of funds to the trust.
S.E.2d at 918.
Nalley, 319 Ga. App. at 367, 734
The Court of Appeals noted that “the right to
pursue an action concerning the wrongful distribution of trust
funds belongs exclusively to the trust beneficiaries or to one
with the authority to act on behalf of the trust beneficiaries.”
Id.
Though
they
settled
their
claims
against
the
Hartshorn
Defendants, Plaintiffs reserved their claims against Loren Gill
and Elm Leasing.
Those claims allege that Loren Gill fraudulently
obtained assets from the Cornerstone Trust for the benefit of his
company, Elm Leasing, and that he should be required to return
those assets to the Cornerstone Trust.
Plaintiffs maintain that
they have a sufficient beneficial interest in the return of those
10
assets because under their settlement agreement, they are entitled
to 40% of any recovered assets.
separate
themselves
from
the
Though Plaintiffs are seeking to
Cornerstone
Trust,
they
will
not
waive their beneficiary status until all of the claims between the
Elm Defendants and the Cornerstone Trust are resolved.
if
the
Court
agreed
with
the
Elm
Defendants’
And even
position
that
Plaintiffs have waived their right to continue as beneficiaries of
the
Cornerstone
Trust,
Plaintiffs
have
a
contractual
agreement
that entitles them to 40% of the assets that are restored to the
Cornerstone
pursuing
Trust.
the
Plaintiffs
recovery
of
thus
these
have
a
keen
misappropriated
trust
Their interest is not hypothetical or speculative.
If
they
are
benefit.
successful,
They
have
they
every
are
entitled
incentive
to
to
interest
in
assets.
It is real.
a
pursue
significant
the
claims
vigorously.
Moreover, Plaintiffs are the only parties with the incentive
and motivation to seek recovery of those assets pursuant to RICO.
Hartshorn and Van Gasken have not asserted a RICO claim against
the
Elm
Defendants.
Therefore,
unlike
the
former
trustee
in
Nalley, Plaintiffs are arguably the only ones with a sufficient
interest to have standing to pursue the RICO claims against the
Elm Defendants.
contingent
The Court rejects Defendants’ argument that the
nature
of
Plaintiffs’
standing to pursue their claims.
11
interest
deprives
them
of
For all of these reasons, the
Court
concludes
that
Plaintiffs
have
standing
to
pursue
their
federal RICO claims against the Elm Defendants.
B.
Plaintiffs Stated a Claim Under RICO
The
Elm
Defendants
argue
that
even
if
Plaintiffs
have
standing to pursue the federal RICO claims, they failed to state a
claim upon which relief may be granted.
Plaintiffs allege that
Loren Gill conspired with John Gill to defraud Hartshorn and Van
Gasken into diverting Cornerstone Trust assets and single asset
property
trust
assets
to
Elm
Leasing
via
the
mail
and
wires.
Plaintiffs contend that they, as beneficiaries of the Cornerstone
Trust, were injured by this fraudulent diversion of trust assets.3
The Court is satisfied that these contentions sufficiently allege
conduct
activity
of
and
racketeering
an
enterprise
injury
to
through
business
activity.
See,
or
e.g.,
a
pattern
property
Corcel
of
by
racketeering
reason
Corp.
v.
of
the
Ferguson
Enters., Inc., No. 13-13284, 2014 WL 1230299, at *4 (11th Cir.
Mar. 24, 2014) (per curiam) (setting forth requirements of federal
civil RICO claim).
Therefore, Plaintiffs did not fail to state a
federal RICO claim against the Elm Defendants.
jurisdiction
exists,
and
the
Court
3
may
Federal question
exercise
supplemental
The Court is convinced that the present allegations sufficiently state
a RICO claim against Elm Leasing and Loren Gill.
There is apparently
some confusion among the parties regarding the precise nature of
Plaintiffs’ RICO claims against the Elm Defendants, however, so to avoid
any contention at trial that Defendants were not on notice of the claims
against them, the Court requires Plaintiffs within 14 days of today’s
order to supplement their RICO interrogatory responses to explain the
exact contentions supporting their RICO claims.
12
jurisdiction over the remaining state law claims, which arise out
of the same common nucleus of operative fact.
The Elm Defendants’
motions to dismiss (ECF Nos. 180 & 209) are denied.
III. Hartshorn Defendants’ Motion to File Out-of-Time Answer
The Hartshorn Defendants seek leave to file an out-of-time
answer to the Intervenor Complaint (ECF No. 176).
In late 2012,
Intervenors Wallace Whitten, Steve Thomas, and Michael Gill sought
leave to intervene in this action.
The Court granted Intervenors’
motion to intervene on February 19, 2013.
Intervenors filed their
Complaint on February 22, 2013—in the middle of discovery and
while two summary judgment motions were in the briefing stage.
Counsel for the Hartshorn Defendants inadvertently failed to file
an answer to the Intervenors’ Complaint on behalf of the Hartshorn
Defendants.
mistake.
The Hartshorn Defendants now seek to correct that
Intervenors oppose the motion for leave to file answer
and request entry of a default judgment against the Hartshorn
Defendants.
The Hartshorn Defendants’ Motion for Leave to File
Answer Out of Time (ECF No. 176) is granted.
The
against
Intervenor
Defendants
Complaint
Kevin
asserts
Hartshorn
Intervenor Compl. ¶¶ 25-29, ECF No. 82.
breach
and
of
Daniel
trust
Van
claims
Gasken.
The Intervenor Complaint
also seeks (1) a declaration that Wallace Whitten and Steve Thomas
are trustees of the Cornerstone Trust, (2) an order requiring
Hartshorn and Van Gasken to return funds they allegedly diverted
13
from the Cornerstone Trust and related trusts, and (3) removal of
Hartshorn and Van Gasken from their trustee positions.
24, 28.
Id. ¶¶ 15-
The relief sought in the Intervenor Complaint is nearly
identical to the relief sought in the cross-claim of Defendant
Loren Gill against the Hartshorn Defendants—which Wallace Whitten
and Michael Gill attempted to join before they intervened in this
action.
See generally Answer & Cross-cl. of Loren Gill & Elm
Leasing, LLC, ECF No. 31.
Specifically, the cross-claim seeks (1)
removal of Hartshorn and Van Gasken from their trustee positions,
(2) damages caused by the alleged breaches of trust by Hartshorn
and
Van
Gasken,
and
(3)
appointment
of
additional
trustees.
Answer & Cross-cl. 23-27, ECF No. 31; 2d Am. Cross-cl. ¶ 1, ECF
No. 48.
Loren
The Hartshorn Defendants did answer the cross-claim of
Gill,
which Whitten and Michael
Answer to Cross-cl., ECF No. 49.
Gill attempted to join.
The Hartshorn Defendants also
sought partial summary judgment on Whitten’s claims against them,
which was granted in part and denied in part.
Under Federal Rule of Civil Procedure 6(b), the Court may
extend
the
time
for
filing
an
answer
after
the
deadline
has
expired “if the party failed to act because of excusable neglect.”
Fed. R. Civ. P. 6(b)(1)(B).
four
factors
to
guide
neglect has occurred.”
(11th Cir. 2010).
courts
“The Supreme Court has identified
in
determining
whether
excusable
Staley v. Owens, 367 F. App’x 102, 105
Those factors are: (1) “the danger of prejudice
14
to
the
[other
party],”
(2)
“the
length
of
the
delay
and
its
potential impact on judicial proceedings,” (3) “the reason for the
delay, including whether it was within the reasonable control of
the movant, and” (4) “ whether the movant acted in good faith.”
Id.
(internal
quotation
marks
omitted).
The
most
important
factors are absence of prejudice and the interest of efficient
judicial administration.
Id. (citing Pioneer Inv. Servs. Co. v.
Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 396-98 (1993)).
It has never been a secret that the Hartshorn Defendants
oppose
the
relief
sought
in
the
Intervenor
Complaint.
The
Intervenor Complaint seeks relief that is largely identical to
relief
sought
by
Loren
Gill
in
his
cross-claim
against
the
Hartshorn Defendants, which Michael Gill and Whitten attempted to
join.
The Hartshorn Defendants did answer the cross-claim.
They
also sought partial summary judgment on Whitten’s claims that are
predicated on his status as a trustee of the Cornerstone Trust—a
claim that was made in the Intervenor Complaint, not in the crossclaim.
In
sum,
as
Intervenors
acknowledge,
the
parties
have
litigated this case as though the Hartshorn Defendants answered
the Intervenor Complaint and denied its allegations.
Resp. to
Hartshorn Defs.’ Mot. for Leave to File Answer 1, ECF No. 184
(agreeing that “the parties and the Court have treated some issues
raised in the Intervenors’ Complaint as contested”).
15
For these reasons, the Court finds that there would be no
danger of prejudice and no delay if the Hartshorn Defendants were
permitted to file an out-of-time answer to Intervenors’ Complaint.
The Court also finds that the Hartshorn Defendants’ failure to
file a timely answer was an inadvertent mistake and that there is
no
indication
of
bad
faith.
The
Court
therefore
grants
the
Hartshorn Defendants’ Motion for Leave to File Answer Out of Time
(ECF
No.
176).
The
Hartshorn
Defendants
shall
answer
the
Intervenor Complaint on or before April 25, 2014.
IV.
Remaining Motions
The Court declines to rule on the pending motions in limine
at this time and instructs the Clerk to terminate those motions
(ECF Nos. 187, 189 & 195).
The parties may refile those motions
in limine if necessary prior to the trial of this action, which
will take place in September 2014.
Plaintiffs’ motion to dismiss
Counts 1-5, 7-8, and 13 against Loren Gill and Elm Leasing (ECF
No.
199)
is
granted,
and
those
claims
are
dismissed
with
prejudice.
CONCLUSION
As discussed above, the motion to void the settlement (ECF
No. 179) is denied, and the motion to approve the settlement (ECF
No. 201) is granted.
are denied.
The motions to dismiss (ECF Nos. 180 & 209)
The Hartshorn Defendants’ motion for leave to file
out-of-time answer (ECF No. 176) is granted.
16
Plaintiffs’ motion
to dismiss Counts 1-5, 7-8, and 13 against Loren Gill and Elm
Leasing is granted (ECF No. 199).
The Clerk is instructed to
terminate the motions in limine (ECF Nos. 187, 189 & 195).
IT IS SO ORDERED, this 14th day of April, 2014.
S/Clay D. Land
CLAY D. LAND
UNITED STATES DISTRICT JUDGE
17
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