Seniors file class action against sellers of living trusts

Michelle Massey, East Texas Bureau Jan. 10, 2008, 3:00am

Editor's Note: Plaintiffs voluntarily withdrew their allegations against defendants CLA USA Inc., CLA USA Insurance Services, CLA Marketing, CLA Estate Services, CLA Insurance Services, Charles Loper Jr. and Charles Loper III on March 5, 2012. Read about problems caused by defending the litigation here on the Southeast Texas Record

TEXARKANA - A number of Texarkana residents have filed suit against sellers of living trust documents in a class action accusing the salesmen of exploiting senior citizens.

Class representatives James P. Birts, Nate S. Orben and Darlene M. Orben filed suit Dec. 19, 2007, in the Circuit Court of Miller County, Ark. Defendants named are John R. Vermillion, John Vermillion and Associates L.L.C., CLA USA Inc., CLA USA Insurance Services, CLA Marketing, CLA Estate Services, CLA Insurance Services, Charles Loper Jr., Charles Loper III., Steven Morgan, Robert Reese and The Estate Plan Inc.

Plaintiff James Birts of Texarkana, Texas, says he purchased a living trust after attending a lunch presentation at Cattleman's Steakhouse Restaurant. However, Birts states the document was misrepresented and that if he dies with only these estate-planning documents, his estate will still need to be probated because the living trust failed to factor in his real property in Arkansas.

The living trust sellers are facing allegations of "masquerading as qualified financial advisers, estate planners, lawyers, and paralegals" to "exploit and prey" upon senior citizens with the creation and selling of "unnecessary and often useless" living trusts.

According to the legal dictionary on, a living trust
is created by a declaration of trust executed by the trustor during his/her lifetime, as distinguished from a "testamentary trust," which is created by a will and only comes into force upon the death of the person who wrote the will.

Most commonly it is a trust in which the trustor receives benefits from the profits of the trust during their lifetimes, followed by a distribution upon the death of the trustor, or the trust continues on for the benefit of others (such as the next generation) with profits distributed to them.

Defendants are accused of fraud, unauthorized practice of law, negligence, breach of fiduciary duty and conspiracy. The suit alleges that the defendants created and sold the living trusts as part of a scheme to gain access to senior citizens' financial information in order to sell annuities and other financial products.

According to the original complaint, the scheme begins with advertisements that persuade senior citizens to attend a free lunch or dinner. At these meetings, the "unlicensed" living trust defendants conduct presentations and distribute materials that misrepresent the impact of probate fees and estate taxes in order to create fear that the senior citizens need to buy a trust to prevent heirs from losing their estate.

These presentations include references to celebrities such as Elvis and describe the large amounts these celebrities have paid in estate taxes. The plaintiffs state these presentations do not include information about the federal estate tax exemption, the sliding scale of the exemption amount, or the possibility of the elimination of future estate taxes.

Further, the presentation does not tell senior citizens with estates larger than the exemption amount that the purchase of these living trusts will not automatically eliminate all estate taxes. The forms and decisions made by the defendants fail to take into account the entire senior's assets and ultimately and fail to serve the legal purpose as presented, argue the plaintiffs.

In addition, the complaint contends that the defendants convince the seniors to execute a "pour-over will" at the time the living trust and the other documents are executed.

"Senior consumers are unaware and are never told verbally that any property not disposed of in the trust will be disposed of according to the pour-over will, which will need to be probated," the complaint states.

The plaintiffs claims the presentations convince the senior citizens to use their IRA accounts or other tax-exempt growth products to purchase variable annuities. However, according to the plaintiffs' accusations, the presentations and documents do not demonstrate the redundancy with regard to a variable annuity's tax deferral benefit when purchased in a qualified plan and also do not inform the consumer of the associated fees, surrender charges and commissions associated with these variable annuity products.

After an initial down payment on these products, defendants' representatives conduct a follow-up meeting with the seniors and will often execute the living trust documents among other legal documents. The second payment is collected after the documents are executed.

The complaint emphasizes that up until this point, the defendants involved in the estate planning, drafting, and execution of legal documents are not licensed to practice law. However, in a "feeble attempt to escape liability for the unauthorized practice of law," the defendants use attorney John R. Vermillion to rubber stamp his name as approval, the complaint states.

Although the attorney receives a check directly from the seniors, the plaintiffs state the attorney does not advise or draft any of the legal documents involved. The plaintiffs accuse Vermillion of violating rules of professional conduct, failing to advise clients, engaging in unsolicited contact with clients and practicing law in Arkansas while unlicensed.

Defendant and attorney John R. Vermilion is licensed to practice law in Texas, Louisiana, Oklahoma and Tennessee. According to his law firm's Web site, he is a member of the American Academy of Estate Planning Attorneys and the National Academy of Elder Law Attorneys. He is affiliated with Hyatt Legal Services and serves as a referral attorney for defendant The Estate Plan.

Defendant The Estate Plan states that its licensed attorney network allows an estate planner to refer potential clients who have completed a comprehensive workbook and signed a purchase or retainer agreement for attorney services. The Web site states this arrangement allows an attorney to avoid the time and costs associated with marketing and advertising. The estate planner receives a consultation fee for consulting with the clients about general information about estate and financial planning concepts.

Self described, CLA USA "coordinates: non-legal services, legal services provided by your attorney, tax services provided by your accountant, stock broker, and insurance services." Defendant CLA USA maintains that it is in the "business of preserving people's assets" and its insurance representatives are internally certified and have specialized knowledge with elderly and retired clients' issues.

The potential class members include those seniors who purchased living trusts from the defendants from Jan. 1, 1998, until the date of class certification.

Common questions of law and fact among the potential class include:

  • Whether defendants made misrepresentations to entice potential class members to purchase living trusts and other products;

  • Whether defendants fraudulently concealed material omissions;

  • Whether defendants engaged in unauthorized practice of law;

  • Whether there was conspiracy among the defendants to commit fraud;

  • Whether defendants breached fiduciary duties;

  • Whether defendants' conduct was intentional;

  • Whether plaintiffs are entitled to rescission, refund, or restitutionary damages and;

  • Whether plaintiffs are entitled to injunctive relief.In addition to the disgorgement of defendants' gains and restitution, the plaintiffs are seeking temporary and permanent injunction against the defendants to cease and desist the sales of living trusts while telling the consumers they will avoid estate taxes, for the defendants to explain in every meeting that the living trusts is unnecessary to avoid estate taxes because of federal estate tax exemptions, for the defendants to notify members of the proposed class with regard to the potential restitutionary relief and any other activities to prevent future fraud.Texarkana attorneys Richard Adams, Shivali Sharma, Leisa Pearlman and Corey McGaha of the law firm Patton, Roberts, McWilliams and Capshaw L.L.P., are representing the plaintiffs. Other class counsel includes Texarkana attorneys Marshall Wood and Cyndia Hammond of the law firm Norton and Wood and attorney Ronald S. Burnett.

    Currently, the defendants have not responded to the plaintiffs' allegations.

    Miller County Circuit Judge Jim Hudson is assigned to the litigation.

    Case No.: Cv-2007-474-2

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