Developer Schwyhart Sues His Former Attorney

Former Rogers developer Bill Schwyhart recently filed a lawsuit against his former attorney and his attorney's law firm for conflict of interest that resulted more than $18 million in judgments against him.

Schwyhart claims Little Rock law firm Lax Vaughan Fortson Jones & Rowe (formerly Lax Vaughan Fortson McKenzie & Rowe) botched the job of dividing ownership of $342.5 million worth of property in northwest Arkansas. The debt on the property was $258.9 million, which was also divided among the companies, including Pinnacle Group and J.B. Hunt LLC.

The attorney who handled the division, Thomas C. Vaughan Jr., "viewed the property division as friendly, collaborative effort among the Pinnacle Group members, who were then on good terms with one another," according to the lawsuit filed in Pulaski County Circuit Court. "Perhaps that is why he felt free not only to 'paper' the transaction, but to represent all parties involved."

Schwyhart, as it turned out, signed papers in which he alone personally guaranteed the debt for his various companies, the lawsuit said. But after the recession hit, Schwyhart's companies defaulted.

Vaughan's law partner, Grant Fortson, on behalf of J.B. Hunt LLC, then sued Schwyhart to collect the debts.

In the lawsuit, Schwyhart said Fortson shouldn't have sued him without getting a waiver because his firm had represented Schwyhart in the transaction to divide the land.

The Lax Vaughan law firm "acquired confidential information" about Schwyhart during the property transaction that was then used to win seven judgments against Schwyhart totaling $18.2 million. 

Schwyhart's companies filed for Chapter 11 bankruptcy protection in 2010.

Schwyhart is suing Fortson, Vaughan and their law firm for breach of fiduciary duty and is seeking at least $18.2 million in damages.

Fortson said the lawsuit is "frivolous and completely without merit."