DOCUMENT cmourrcounros . BALDWIN . I JOEY. WISE CAMPBELL, CLERK- IN THE CIRCUIT COURT OF BALDWIN COUNTY, ALABAMA FORREST H. JAMES, JR, BOBBIE M. JAMES, FORREST H. JAMES, IV, SARA D. JAMES and ESCAIVIBIA COUNTY ENVIRONMENTAL CORPORATION, Plaintiffs, vs. Civil Action No.2 PATRICK F. JAMES, SR. and AMERICAN DIVERSIFIED INVESTMENTS, LLC, :44 >14 Defendants. COMPLAINT FORREST H. JAMES, JR, BOBBIE M. JAMES, FORREST H. JAMES, IV, SARA D. JAMES and ESCAMBIA COUNTY ENVIRONIVIENTAL CORPORATION complain of PATRICK F. JAIWES, SR. and AMERICAN DIVERSIFIED INVESTMENTS, LLC and allege as follows: 1. Plaintiff FORREST H. JAMES, JR. is an adult resident citizen of the State of Alabama residing in Baldwin County. At all times material to this action, the said Forrest H. James, Jr. has been the owner of 85% of the issued and outstanding capital stock of Escambia County Environmental Corporation. 2. Plaintiff BOBBIE M. JAIVIES is an adult resident citizen of the State of Alabama residing in Baldwin County. DOCUMENT 2 James, at al. vs. James, at al. Page 2 3. Plaintiff FORREST H. JANIES, IV is an adult resident citizen of the State of Tennessee. At the present time, the said Forrest H. James, IV is the owner of 0.5% of the issued and outstanding capital stock of Escambia County Environmental Corporationl. 4. Plaintiff SARA D. JAMES is an adult resident citizen of the State of Tennessee and is the owner of 2.5% of the issued and outstanding capital stock of Escambia County Environmental Corporation. 5 . Plaintiff ESCAMBIA COUNTY ENWRONMENTAL CORPORATION is an Alabama Corp oration which is owned by the remaining Plaintiffs and the individual Defendant named in this action in the percentages herein set forth. 6. Defendant PATRICK F. JAMES, SR. is an adult resident citizen of the State of Alabama residing in Baldwin County. At all times material to this action, the said Patrick F. James, Sr. has been the owner of 12% of the issued and outstanding capital stock of Escambia County Environmental Corporation. 7. Defendant AMERICAN DIVERSIFIED INVESTMENTS, LLC is an Alabama limited liability company which, on information and belief, it is wholly or partially owned and/ or controlled by Defendant Patrick F. James, Sr. the time. of the wrong?il conduct of Defendants as herein alleged, the issued and- outstanding capital stock in ECEC was owned by Forrest H. James, Jr. Sara D. James (3 and Patrick F. James, Sr. DOCUMENT 2 James, et al. vs. James, at Page 3 Factual Background 8. In approximately 2010 or 201 1, Defendant Patrick F. James, Sr. (sometimes referred to herein as ?Patrick?) became the President of ECEC, and thereby became charged with the primaiy responsibility for the daynto?day operation and management thereof. 9. In his capacity as President of ECEC, Patrick has, at all times, owed a ?duciary duty to ECEC and all shareholders of said 0105er held corporation. 10. Beginning in or about 2013 and continuing through the date of the ?ling of this action, Patrick has abused the trust of all Plaintiffs and other family members. In particular, Patrick has, on repeated occasions, fraudulently obtained significant funds from Plaintiffs Forrest H. James, Jr. and Bobbie M. James, who are Patrick?s parents, at all times promising repayment from various financial ventures, none of which, on information and belief, were bona?de, but in fact were a cover for Patrick?s fraudulent behavior. 11. approximately July of 2015, Patrick caused ECEC to enter into a . transaction by which certain indebtedness owed by ECEC to PNC Bank would be refinanced pursuant to a new loan (?Refinance?) advanced by the Bank of Brewton in the amount of $3,350,000.00. 12. The Re?nance was completed on or about August 3, 2015, resulting in the complete satisfaction of the prior indebtedness owed by ECEC, and further resulting in net cash proceeds in the amount of $254,865.22 due and payable to ECEC. However, Defendant Patrick F. James, Sr. caused $150,000.00 of the net refinance proceeds to be paid to ADI as an undisclosed fee, for its direct bene?t and for Patrick?s indirect benefit. Patrick concealed this payment from the DOCUMENT 2 James, at al. vs. James, er Page 4 shareholders of ECEC, and has continued to conceal said payment through the date of the ?ling of this complaint. 13. Prior to the filing of this action, and in compliance with Rule 23.1 of the Alabama Rules of Civil Procedure, Plaintiffs through other family members acting on their behalf communicated with Defendant Patrick F. James, Sr. for the purpose of seeking reimbursement of any sums wrongfully misappropriated in the Re?nance transaction, and for the additional purpose of seeking the return of cash hidden away and/ or cash held by Patrick which had been fraudulently obtained from Plaintiffs Forrest H. James, Jr. and Bobbie M. James. Said communication was delivered to Patrick in written form on September 21, 2015, a copy of which is attached hereto, . incorporated by reference and marked as Exhibit 1. Patrick replied to said request on September 22, 2015, and in such reply provided false information in an attempt to justify his continued wrongful conduct. Patrick?s reply is attached hereto, incorporated by reference and marked as Exhibit 2. Despite such requests, neither Patrick nor ADI have made reimbursement to ECEC nor to Plaintiffs Forrest H. James, Jr. and Bobbie M. James. In addition, the communication evidenced by Exhibits 1 and 2 complies with the requirements of Rule 23.1 of the Alabama Rules of Civil Procedure requiring an attempt to resolve the disputed issues prior to the filing of a civil complaint. First Cause of Action (Breach of Fiduciary Duty) 14. Plaintiffs reallege each and eVery allegation contained in Paragraphs 1 through 13 above, as though fully set forth herein. DOCUMENT 2 James, at al. vs. James, at al. Page 5 15 By engaging in the conduct set forth above, Defendant Patrick F. James, Sr. has breached his ?duciary duties owed to ECEC, as well as to the mdividualPlaintiffs named herein, who collectively own 88% of the issued and outstanding capital stock and said corporation. 16. As a direct and proximate result of the breach of ?duciary duties as herein alleged, plaintiffs have suffered damages. Such damages include, but are not limited to, the loss of cash, investment proceeds, deprivation of business opportunities, loss of pro?ts and other damages to be proven at trial. WHEREFORE, Plaintiffs Forrest H. James, Jr., Forrest H. James, IV, Sara D. James and Escambia County Environmental Corporation demand judgment for compensatory damages against Defendants Patrick F. James, Sr. and American Diversi?ed Investments, LLC, together with interest and costs. Second-Cause of Action (Preliminary injunction) l7. Plaintiffs reallege each and every allegation contained in the First Cause of Action, as though ?illy set forth herein. 18. On information and belief, the sum of $150,000.00 wrongfully paid to ADI as herein alleged has been deposited into Account No. 405000183 at The First of Baldwin County, 1207 North McKenzie Street, Foley, Alabama 36535. 19. Plaintiffs seek the entry of a preliminary injunction against Patrick, ADI and allpersons or entities acting on their behalf and at their direction (including, Without limitation, John DOCUMENT 2 James, at al. vs. James, at al. Page 6 Cox, attorney for Patrick and ADI, and Robert Hall, CPA), prohibiting said parties from disposing, withdrawing, pledging or otherwise hypothecating said funds, pending a ?nal hearing in this action. 20. Plaintiffs have no adequate remedy at law unless the preliminary injunction herein requested is granted by the Court. 2 . Plaintiffs will suffer irreparable injury if Defendants are permitted to withdraw or otherwise dispose of the subject funds. 22. Plaintiffs have a reasonable chance of success on the merits. 23. Any burdens imposed on Defendants as a result of the preliminary injunction will be outweighed by the bene?t to Plaintiffs, and to ECEC, which is the lawful owner of said funds. WHEREFORE, Plaintiffs request the Court to conduct a hearing on Plaintiffs? request for preliminary injunction, and thereafter enter a preliminary injunction against Patrick F. James, Sn, American Diversi?ed Investments, LLC and all persons or entities acting at their direction or under their control, prohibiting said parties from disposing, withdrawing, pledging or otherwise hypothecating said funds, pending a ?nal hearing in this action. Plaintiffs further request that after the entry of a preliminary injunction, that the same be continued in full force and effect pending a ?nal hearing in this cause. Plaintiffs offer to post bond in support of the preliminary injunction in such amount as the Court deems appropriate under the circumstances. DOCUMENT 2 James, at al. vs. James, er al. Page 7 Third Cause of Action (Fraudulent Transfer) 24. Plaintiffs reallege each and every allegation contained in the First and Second Causes of Action, as though fully set forth herein. 25. Plaintiffs allege that the transfer of the sum $150,000.00 to ADI as herein alleged was a fraudulent transfer within the meaning of ?8?9A?l et seq. of the Code of Alabama (1 975). 26. The subject ?audulent transfer was made without payment of reasonably equivalent value to ECEC, because at the time of such transfer, no obligation, contractual or otherwise, was due and owing from ECEC to ADI. WHEREFORE, Plaintiffs request the Court to enter an order declaring the transfer of the sum of $150,000.00 from the Refinance proceeds to be a fraudulent transfer within the meaning of?8?9A?l et seq. of the Code of Alabama (1975), and that upon such declaration, that the proceeds wrongfully transferred to American Diversi?ed Investments, LLC be restoredto the rightful ownership and possession of Escambia County Environmental Corporation, together with such damages, interest, costs and attorney?s fees which Plaintiffs are entitled to recover. Fourth Cause of Action (Accounting) 27. Plaintiffs reallege each and every allegation contained in the First, Second and Third Causes of Action, as though fully set forth herein. DOCUMENT 2 James, er al. vs. James, at al. Page 8 28. Plaintiffs Forrest H. James, Jr. and Bobbie M. James demand an accounting of all ?nancial activities undertaken by Patrick in eonne ction with any transactions involving monies or other things of value belonging to said Plaintiffs. 29. Plaintiff ECEC demands an accounting of all ?nancial activities undertaken by Patrick and/0r ADI in connection with any transactions involving monies or other things of value belonging to ECEC. WREFORE, Plaintiffs Forrest H. James, In, Bobbie M. Jamesand Escambia County EnvironmentalCorporation request the Court to enter an order requiring Defendants Patrick F. James, Sr. and Anierican Diversi?ed hivestrnents, LLC to provide an cconnting of all transactions herein alleged. TIMOTHY E. JAMES, SR, Individually and as Attorney-in~F act for FORREST H. IR. STATE OF ARIZ NA COUNTY OF I, the undersigned TIMOTHY JAMES, SR., Individually a as Attorne -in?F act for FORREST H. JAMES, JR., hereby certify under oath that the foregoin egations a? true and correct to the best ofmy W14 TIMOTHY E. sat/j Individually and as Attorney?in?Fact for FORREST H. JAMES, JR. Sworn to and subscribed before me this NOTAQY STATE OF ARIZONA day of September, 2015. -- Marlcopa County ?is? DAVID L. WARFIELD My Gommlaslcn Expires 05/05/18 Notary ub e, MConn one My Commission Expires: 1 n: -r DOCUMENT 2 James, 61? al. vs. James, er al. Page 9 s/Daniel G. Blackburn DANIEL G. BLACKBURN BLAO43 GRANT BLACKBURN BLA133 Attorneys for Plaintiffs Forrest H. James, Jr., Bobbie M. James, Forrest H. James, IV, Sara D. James and Escambia County Environmental Corporation OF COUNSEL: BLACKBURN CONNER, P.C. Attorneys at Law Post Of?ce Box 458 Bay Minette, Alabama 36507 (251) 937?1750 Defendants may be served via personal service as follows: Patrick F. James, Sr. 509 McAdams Avenue Daphne, AL 36526 American Diversi?ed Investments, LLC Attir: John R. Cox, Registered Agent 978 Timber Circle Spanish Fort, AL 36527 1long conversation with mom and dad yesterday about all that has happened. This email comes from this conversation. Mom and dad want to sign it at the end to express their agreement with it and their requests to you. Mom has made much improvement over the last three weeks here. There seem to be fewer and fewer anxiety related issues and her physical strength is returning slowly. She still tires substantially before the end of each day, but this seems to be happening later as time goes on. Daddy remains his usual delightful self. discussed with him that he is not as mentally sharp on finances as he was 20 years ago. A lot of stress remains on mom and dad, due mainly to the unresolved financial issues before us. A lot of stress remains on all of us. i had tolevel with daddy, in front of mom, on what has happened. Mom pretty much had already figured out the gist of it, though she did not know the financial details. Dad was unaware of the situation: Here are the main things we discussed. The present situation where you have lived off mom and dad in anticipation of the "next deal" has been going at least since 2009, 6 years. The pattern has been for you to ask for money because you have a "deal" or several deals working, and then when they don't come in, switch to a new set of "deals" while continuing to ask for more money. This has been month in and month out, over and over, non-stop for at least 6 years. Since your bankruptcy in 2009?2010, you have taken at least $1.5 million dollars from mom and dad. After Tim sold the farm a couple of EXHIBIT 1 .lJUb .l .4 years ago and mom received around $1.1 million (about after tax), you have spent down their money at a rate of about per month. Your "deals" are in fact either imaginary or deliberate lies. What you have done has caused enormous harm. You have taken advantage of daddy in particular to effectuate your take?down, and you have not had a paying job in seven years. Worst of all, you have threatened mom and dad's personal autonomy and economic livelihood in their remaining years. When Tim and?l got involved about a month ago, after mom's meltdown which in fact was a cry for help, mom and dad had only $120,000 left in the Raymond James account. Down from from over in less than 2 years. Shannon was complicit with you in doing this, by requesting the withdrawals from the Raymond James account. If you had continued, all of mom and dad's cash would have been gone in a few months, and all that would have been left would have been the landfill income, if that. You have assured me and Tim, through your attorney John Cox, in writing, that the landfill income is unencumbered except for the Bank of Brewton loan. We have to ask this because although you are using mom and dad's money, you are not transparent about your "deals." You form separate entities apart from ECEC to do landfill?related "deals," and then you tell us that you and dad are going to split it "50/50." Dad's ownership percent in ECEC isabout 86%, yours about 12%. And it is his and mom's money you are using for these so-called deals. There is no accounting of where the money has gone, where it has 1. been spent, or where it has been lost. For 6 years. You promised afull accounting a few days ago, as well as a promissory note to dad. Keep your promissory note. What we want for mom and dad is any cash that remains that we don't know about. I am copying this email to John Cox because all records involving any of mom and dad's money, whether for business or personal use, needs to be kept and not destroyed. This includes all ECEC records. PJ, here are the things that are Specifically requested to be done: 1. Resign as president of ECEC today. Cease all "dealmaking" activities of any kind with mom or dad's money. If there is cash that can be saved, including the CD that Tim mentioned, disclose it fully, save it immediately in conjuction with me and'Tim, and return it to mom and dad. 2. You, along with Shannon, immediately execute quitclaim deeds of your interests in the 529 McAdams property back to mom and dad. Mom and dad were not aware that you presented them with deeds last year that contained the equivalent of a testamentary gift of the house to Shannon upon their deaths. Mom and dads Will is othenNise. You tricked them. You and John Cox said to Tim and me last week in writing that mom and dad are the sole beneficial owners of the property, but the deeds say otherwise. Correct it. 3. Set up a phone conference within 24 hours with Sandy Wise, with all of us, including mom and dad, to be on the phone. The $900,000 mortgage is a threat to mom and UULUWLDIV 1 A dad's livelihood, and they want the house marketed with a priority to get it sold ASAP. They want to be closely advised by Sandy on all leads from prospective buyers as they occur. 4. If there are any liabilities other than the house and landfill mortgages on mom and dad, disclose them at once with transparency. PrOvide the accounting you have promised, in particular a full accounting of where all the money has gone or how it has been spent. The latest ECEC re-fi added an additional 1.2 millionto the loan. You have told us this was to pay off the loan on the Northwest policy of approximately Where did the other go? - 5. Get a job and support your beautiful family. Bring this horrible nightmare to an end. Fob DOCUMENT 2 -- Forwarded message From: Pat James Date: Tue, Sep 22, 2015 at 9:31 AM Subject: response To: Forrest James Cc: John Cox <'rc 'rcoxlaw.com> Tim, Fob, Mom, and Dad, 1. I hereby resign as President of ECEC. I am personally liable to the company debt and have worked tirelessly for multiple years on behalf of the company. The obligation has required much time and energy. ECEC has been a full?time obligation over the past 18-24 months. I have done nothing to negatively impact the company but rather have worked to rebuild its lost cash ?ow from its solid waste operations. Tim and Fob have been totally removed. I have relied on George Eliot and Bobby Hall accounting advice and John Cox legal advice to advance the company. The formation of ADI was a strategic move to ensure ECEC has no exposure to the related transactions and if successful gives me the ability to repay loans to Dad that do not create a negative tax impact for him. The timeline to determine if the Backwards or the Gas project will materialize is 45 days. I intend to use my best efforts to work towards a successful close of both transactions. The CD is encumbered on a working line of credit. Please note I have already provided the summary and substantive documents related to both transactions and remain in constant discussion with Republic personnel. As to the pro?tability of either transaction, the backward will produce $400,000 net cash flow if it closes and the gas transaction will increase ECEC net income for years to come. I am including the personal ?nancial statements of Dad and I submitted to BancorpSouth which gives an accurate picture of our decisions and financial standing. 2. Shannon and I will execute any document that gives Mom and Dad 100% clear title to the property. As to your comments about Dad and Mom will or testamentary gift, there has been no intent to "trick" anyone. Mom and Dad were fully aware of the decisions we collectively made at the time of purchasing the property. As a matter of fact, Mom and Dad were ecstatic with the decision and 100% in support of the decision. In retrospect, I can and will acknowledge that if I made a mistake or bad judgement, I will accept full financial responsibility for any loss they incur. Accordingly, the bank appraisal stated the property was purchased at 50% of its market value and 30% of my real basis. I viewed the transaction as wise move at the time from a family stability and overall security measure for us being in close proximity of one another. If my decision was wrong, please forgive me. 3. Sandy is will be happy to provide any information as it develops. I personally have extreme con?dence in his ability to properly market and sale the asset. 4. As to the liabilities, I am working to assimilate the information in detail. I have all records, bank statements, personal ?nancial statements, etc. In order to completely bifurcate my ?nancial situation from Mom and Dad, the principle issues are as follows: 1 EXHIBIT 2 I DOCUIVIENT 2 1. Auto loans 2. Note payable for borrowed living expenses over past years 3. MBNA Visa 4. ADI line of credit 5 . ECEC guarantee resolution 6. Sale of 509 and 510 In the immediate short-term, I intend to sale my interest in commercial plazas in conjunction with any cash left in the northwest policy to retire the MBNA and auto loans. If I should die, I will sign an assignment of my death bene?t to repay these obligations. My chapter 7 has made it impossible for me to attain any student loans, any mortgages, any commercial debt with the exception of the ECEC re??nance. Mom and Dad have offered tremendous ?nancial assistance over the past years and I am extremely grate?ll. I desperately want to repay the obligation and continue to work towards that end. As to the language in Fob's letter such as ?imaginary or deliberate lies", "complicit", ?need to be kept and not destroyed?, I ?nd these accusations very hurtful and not true. It is true I have borrowed money from Mom and Dad, it is true I have tried to re?establish my life, it is true thatI am greatly sorrowful ifI have caused any undue stress or burden on the two people I absolutely love more than life. It is not true that I or Shannon have acted deceptively or maliciously towards Mom and Dad which the tone of your letter suggest. Please give Mom and Dad a copy of this letter. Pat Sent from my iPad