Herschends awarded $2M in Butterfly Palace suit

The side that fired the first shot in a legal battle waged over ownership of Branson's Butterfly Palace has prevailed.

On Aug. 24, a federal jury awarded $2 million in damages to Bruce and Dianna Herschend, who are now the sole owners and operators of the themed attraction at 4106 W. State Highway 76. The venue's botanical garden is home to more than 1,000 tropical butterflies, according to www.thebutterflypalace.com.

In November 2007, the Herschends filed a lawsuit against former business partners Bill and Debra Hill, of Florida, in U.S. District Court after the partnership went south. The Herschends asked a judge to allow them to buy out the Hills, who later filed counterclaims arguing they were wrongfully locked out of the palace premises in November 2006 and excluded from voting on major business decisions.

Eight jurors from southern Missouri unanimously ruled in favor of the Herschends, awarding the Branson couple $1.62 million in compensatory damages - the amount requested by their Springfield attorney, Joseph Reid, in his closing argument. The Herschends also were awarded $380,328 in punitive damages in connection with their fraudulent misrepresentation claim, bringing the total award to $2 million.

Bruce Herschend is son of Jack Herschend, the co-owner and former CEO of Herschend Family Entertainment Corp., which owns Silver Dollar City. Bruce Herschend said in a news release that he and his wife were "thrilled justice had been served."

U.S. District Judge Ortrie Smith presided over the five-day jury trial, which began Aug. 17 and included testimony from 10 witnesses, said Reid, with Lathrop & Gage LC.

The Herschends and Hills, who previously owned Butterfly Place - a separate butterfly-themed attraction - near the Welk Resort Theatre, formed their partnership in 2004 and created two limited liability companies: RBD Marketing LLC and Butterfly Creations LLC. RBD purchased land on the Branson strip for about $700,000, constructed The Butterfly Palace & Rainforest Adventure and leased the building to Butterfly Creations, which was equally owned by the couples.

When the business opened in June 2006, the startup costs had ballooned to $4.3 million, according to court documents. Prior to opening, RBD needed more money to complete construction of the building, which Reid said exceeded initial cost projections by at least $1 million.

The joint venture was financed with a $3.05 million loan from Ozark Mountain Bank that was personally guaranteed by both parties, according to court documents. The Herschends, however, ended up borrowing another $800,000 from the bank that was then loaned to RBD after the Hills declined to make additional capital contributions or loans, said Reid, who has contended that the Herschends owned a 51 percent majority of the limited liability company. Altogether, Reid said, the Herschends loaned more than $1 million to RBD to get Butterfly Palace off the ground.

"The Herschends are the ones that put all this money in, and they've been paying the interest on these notes and trying to keep things afloat for the last couple of years - and the business is doing better," Reid said.

Another point of contention at trial was whether the Hills misrepresented attendance figures at Butterfly Place. According to the Herschends, the Hills said the attraction brought in 80,000 visitors annually - a number the couple later suggested was indicative of peak attendance, Reid said. The Herschends eventually evicted Butterfly Creations for nonpayment of rent under its lease with RBD Marketing, and Reid argued in court that the Hills had already voluntarily abandoned the business.

In their counterclaim, the Hills alleged that the Herschends breached the contract by excluding them from business decisions and surreptitiously changing the locks at Butterfly Palace. They also contend that the Herschends changed the initial lease terms from $24,000 in monthly rent to more than $71,000, with additional monthly payments of $60,000 in June, July and August of 2006.

The Herschends additionally claimed that the Hills misappropriated funds and made questionable payments to W.T.F. Promotions Inc., a Florida-based business they own. Reid said a forensic accountant found at least $87,000 in unauthorized payments, including monthly rent for the Hills' condo in Branson and a salary increase for Debra Hill.

The Hills, who reside in Florida, now operate Branson Family Fun Factory at 2400 State Highway 165, which formerly housed Butterfly Place. Their Springfield attorney, Jim Arneson, said he would be filing post-trial motions in U.S. District Court but declined further comment.[[In-content Ad]]