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Justices consider 'costs' in UPL action

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The Indiana State Bar Association wants the state's highest court to define the term "costs and expenses" as it's never done before, and in doing so order a company being prosecuted for the Unauthorized Practice of Law to have to pay those fees and disgorge any profits it shouldn't have made in the first place.

Hearing arguments today in State of Indiana, Ex. Rel. Indiana State Bar Association v. United Financial Systems Corp., No. 84S00-0810-MS-551, justices considered an issue of first impression on how far its scope extends in interpreting Administrative Disciplinary Rule 24, and what statutory considerations are involved in this litigation about whether an estate planning company engaged in unlawful legal work.

The ISBA initiated the action in October 2008 against estate planning service United Financial Systems in Indianapolis, accusing it of operating a trust mill operation that engaged in unauthorized practice of law and wrongly collected more than $1 million from at least five families located throughout the state. Acting as special commissioner in the case, Senior Judge Bruce Embrey from Miami Superior Court issued a report in July to the Indiana Supreme Court that included 266 findings and conclusions of law about the company's practice, and after supplemental briefing the justices set the matter for oral argument.

What's at issue in this case is an ISBA request for a disgorgement of fees and reimbursement of the unlawful money the company collected. The organization paid almost $36,965 in legal expenses on this case, according to court records.

The ISBA has never settled a UPL case in exchange for money from an individual or corporation accused of violating the state provisions, and no costs or fees have ever been received by the ISBA in the course of processing these cases, according to Indianapolis attorney Kevin McGoff who represents the state bar association.

"The bar believes that 'costs and expenses' hasn't been previously defined, and we think that attorney fees should be included here in this case," McGoff told the justices, pointing out that ISBA is only one of the three Indiana entities able to prosecute a UPL action but that it doesn't have any staff to handle those issues as the Attorney General's Office and Indiana Supreme Court Disciplinary Commission have. "Given the uniqueness of these proceedings... this would be an exception that wouldn't be a blanket rule that goes outside UPL cases. This wouldn't open the floodgates."

United Financial attorney Suzanna Hartzell-Baird with Bose McKinney & Evans argued that neither amount is appropriate in this case, and ordering any attorney fees or disgorgement would conflict with common law and precedent from the U.S. Supreme Court - specifically because it would be considered a sanction, and the company had received no notice so this goes against ex post facto law present in criminal cases. The company wasn't aware that could be possible when it engaged in litigation, so that might have influenced the decision to litigate, she said. She also disagreed with the commissioner's findings that United Financial had engaged in any frivolous or baseless claims, something she challenged justices to determine for themselves in reviewing the record.

Ordering disgorgement and awarding attorneys fees would have a chilling effect, Hartzell-Baird said.

Justices wondered about the implications this could have on the traditional American rule of not awarding these attorneys fees as part of the costs and expenses, and if it should be considered a cost of doing business. Justices Theodore Boehm and Frank Sullivan pondered whether disgorgement is considered a penalty, as Hartzell-Baird contended, or whether it was simply a return of money that any company engaged in UPL shouldn't have received in the first place.

Don Lundberg, executive secretary of the Disciplinary Commission that's admitted as amicus curiae, urged the court to narrowly craft a rule so that it doesn't impact the Disciplinary Commission or Attorney General's Office in future UPL actions. He also said it's appropriate for the court to exercise disgorgement power since that serves as a deterrent and public protection against future UPL.

This was one of two cases the Supreme Court heard arguments on today. The other was Wayne D. Kubsch v. State of Indiana, No. 71S00-0708-PD-335, a post-conviction relief appeal involving Kubsch's three murder convictions and death sentence.
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  1. It was mentioned in the article that there have been numerous CLE events to train attorneys on e-filing. I would like someone to provide a list of those events, because I have not seen any such events in east central Indiana, and since Hamilton County is one of the counties where e-filing is mandatory, one would expect some instruction in this area. Come on, people, give some instruction, not just applause!

  2. This law is troubling in two respects: First, why wasn't the law reviewed "with the intention of getting all the facts surrounding the legislation and its actual impact on the marketplace" BEFORE it was passed and signed? Seems a bit backwards to me (even acknowledging that this is the Indiana state legislature we're talking about. Second, what is it with the laws in this state that seem to create artificial monopolies in various industries? Besides this one, the other law that comes to mind is the legislation that governed the granting of licenses to firms that wanted to set up craft distilleries. The licensing was limited to only those entities that were already in the craft beer brewing business. Republicans in this state talk a big game when it comes to being "business friendly". They're friendly alright . . . to certain businesses.

  3. Gretchen, Asia, Roberto, Tonia, Shannon, Cheri, Nicholas, Sondra, Carey, Laura ... my heart breaks for you, reaching out in a forum in which you are ignored by a professional suffering through both compassion fatigue and the love of filthy lucre. Most if not all of you seek a warm blooded Hoosier attorney unafraid to take on the government and plead that government officials have acted unconstitutionally to try to save a family and/or rescue children in need and/or press individual rights against the Leviathan state. I know an attorney from Kansas who has taken such cases across the country, arguing before half of the federal courts of appeal and presenting cases to the US S.Ct. numerous times seeking cert. Unfortunately, due to his zeal for the constitutional rights of peasants and willingness to confront powerful government bureaucrats seemingly violating the same ... he was denied character and fitness certification to join the Indiana bar, even after he was cleared to sit for, and passed, both the bar exam and ethics exam. And was even admitted to the Indiana federal bar! NOW KNOW THIS .... you will face headwinds and difficulties in locating a zealously motivated Hoosier attorney to face off against powerful government agents who violate the constitution, for those who do so tend to end up as marginalized as Paul Odgen, who was driven from the profession. So beware, many are mere expensive lapdogs, the kind of breed who will gladly take a large retainer, but then fail to press against the status quo and powers that be when told to heel to. It is a common belief among some in Indiana that those attorneys who truly fight the power and rigorously confront corruption often end up, actually or metaphorically, in real life or at least as to their careers, as dead as the late, great Gary Welch. All of that said, I wish you the very best in finding a Hoosier attorney with a fighting spirit to press your rights as far as you can, for you do have rights against government actors, no matter what said actors may tell you otherwise. Attorneys outside the elitist camp are often better fighters that those owing the powers that be for their salaries, corner offices and end of year bonuses. So do not be afraid to retain a green horn or unconnected lawyer, many of them are fine men and woman who are yet untainted by the "unique" Hoosier system.

  4. I am not the John below. He is a journalist and talk show host who knows me through my years working in Kansas government. I did no ask John to post the note below ...

  5. "...not those committed in the heat of an argument." If I ever see a man physically abusing a woman or a child and I'm close enough to intercede I will not ask him why he is abusing her/him. I will give him a split second to cease his attack and put his hands in the air while I call the police. If he continues, I will still call the police but to report, "Man down with a gunshot wound,"instead.

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