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Sam K. Eck, (WSBA No. 13111, admitted 1983), of Bellevue, was ordered to receive two (2) reprimands following approval of a stipulation by the Disciplinary Board on September 19, 2012. This discipline is based on conduct involving failure to prevent conflicts of interest and sharing legal fees with a nonlawyer.
Mr. Eck is a solo practitioner whose practice emphasizes estate planning. From 1992-2012, Mr. Eck has been associated with EP, a company that markets estate planning packages. From 2007 through 2010, Mr. Eck was also associated with PG, which also marketed estate planning packages in Washington. Mr. Eck obtained several thousand clients through EP and 60 clients through PG, respectively. EP and PG use or used salespersons to sell the estate planning packages to clients in the clients’ homes. The salespersons would recommend that clients purchase the “living trust” package offered by the companies, so as to avoid probate. During these visits, the salespersons would collect data from the clients regarding their financial assets and their plans for disposing of the assets after death, which they entered into an estate planning “workbook”. During the home visits, the salespersons presented clients with Mr. Eck’s “retainer agreement” for legal services (“agreement”) and had the clients sign the agreement. The agreement stated the client was hiring Mr. Eck for representation “in the preparation of my Revocable Living Trust and accompanying documents.” Mr. Eck would receive a summary of the “workbook” and contact the clients by telephone. In some cases, the clients would meet with Mr. Eck in his office. Mr. Eck would then prepare the trust documents, based on the workbook and his conversations with the clients. In his communications with his clients, Mr. Eck operated on the assumption that the clients wanted to purchase a living trust-based estate plan rather than a will-based estate plan, and did not always advise his clients whether other estate planning options, such as a traditional will, would be more appropriate and/or economical for them. The cost of the PG living trust-based estate plan was approximately $2,200, while the cost of the will-based estate plan was approximately $700.
Mr. Eck did not disclose to his clients that he had a continuing business relationship with the living trust company whereby the living trust company would obtain clients for him, and did not disclose that his own interest in maintaining his business relationship with the living trust company could affect his independent judgment in advising his clients as to their estate planning options. Mr. Eck did not obtain informed consent, confirmed in writing, to his conflicts of interest.
In 2007, Mr. Eck established a financial planning company M&E with a financial planner and investment advisor. Mr. Eck and the financial planner each owned a fifty percent share in M&E. Client A was an estate planning client Mr. Eck obtained through his association with PG. When Mr. Eck contacted Client A regarding the purchase of a living trust, Client A mentioned that he was not happy with his financial advisor. Mr. Eck referred him to M&E. Client A hired M&E as his financial advisor. Mr. Eck failed to disclose to Client A in writing that he had a financial interest in M&E, did not advise Client A in writing of the desirability of seeking independent counsel before hiring M&E, and did not obtain Client A’s informed consent when Mr. Eck referred him to M&E.
The vast majority of the clients Mr. Eck obtained through PG purchased living trust-based estate plans priced at $2,195. Clients paid the fee by check made out to Mr. Eck. The PG salesperson would collect the check from the client and give it to Mr. Eck, who would cash the check and pay PG a set fee of $1,495 for its services. On October 14, 2008, Client B executed living trust documents at her home in the presence of a PG salesperson and paid the $2,195. In 2009, Client B wrote to Mr. Eck saying she no longer needed the trust, and requested a full refund. Client B informed Mr. Eck that she had talked to the Washington State Attorney General’s office regarding its investigation of PG. Mr. Eck wrote to Client B stating that because she signed the retainer agreement and executed the trust documents, she was not eligible for a refund.
On July 22, 2010, PG entered into a consent decree with the Attorney General’s office to settle charges of deceptive marketing claims. PG did not admit any wrongdoing. The settlement required PG to establish a restitution fund for consumers who purchased living trusts from the company. Client B applied for and received restitution from PG in the amount of $788, under a pro-rata system of restitution established by the Attorney General. On June 22, 2012, Mr. Eck refunded Client B $1,407, which represents the balance of the $2,195 she paid for the living trust.
Mr. Eck’s conduct violated RPC 1.7(a)(2), prohibiting a lawyer from representing one or more clients when there is a significant risk the representation will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer; RPC 1.7(b)(4), requiring a lawyer to receive informed consent to conflicts of interest, confirmed in writing by each affected client; RPC 1.8(a), prohibiting a lawyer from entering into a business transaction with a client or knowingly acquiring an ownership, possessory, security or other pecuniary interest adverse to a client; and RPC 5.4, prohibiting a lawyer from sharing legal fees with a nonlawyer.
Kevin Bank represented the Bar Association. Thomas M. Fitzpatrick represented Mr. Eck.
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