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. If a class action suit or other manner of retribution is possible, count me in. I have email and voicemail from the man. He colluded with opposing counsel, I am certain. My case was damaged so severely it nearly lost me everything and I am still paying dearly.

  2. There's probably a lot of blame that can be cast around for Indiana Tech's abysmal bar passage rate this last February. The folks who decided that Indiana, a state with roughly 16,000 to 18,000 attorneys, needs a fifth law school need to question the motives that drove their support of this project. Others, who have been "strong supporters" of the law school, should likewise ask themselves why they believe this institution should be supported. Is it because it fills some real need in the state? Or is it, instead, nothing more than a resume builder for those who teach there part-time? And others who make excuses for the students' poor performance, especially those who offer nothing more than conspiracy theories to back up their claims--who are they helping? What evidence do they have to support their posturing? Ultimately, though, like most everything in life, whether one succeeds or fails is entirely within one's own hands. At least one student from Indiana Tech proved this when he/she took and passed the February bar. A second Indiana Tech student proved this when they took the bar in another state and passed. As for the remaining 9 who took the bar and didn't pass (apparently, one of the students successfully appealed his/her original score), it's now up to them (and nobody else) to ensure that they pass on their second attempt. These folks should feel no shame; many currently successful practicing attorneys failed the bar exam on their first try. These same attorneys picked themselves up, dusted themselves off, and got back to the rigorous study needed to ensure they would pass on their second go 'round. This is what the Indiana Tech students who didn't pass the first time need to do. Of course, none of this answers such questions as whether Indiana Tech should be accredited by the ABA, whether the school should keep its doors open, or, most importantly, whether it should have even opened its doors in the first place. Those who promoted the idea of a fifth law school in Indiana need to do a lot of soul-searching regarding their decisions. These same people should never be allowed, again, to have a say about the future of legal education in this state or anywhere else. Indiana already has four law schools. That's probably one more than it really needs. But it's more than enough.

  3. This man Steve Hubbard goes on any online post or forum he can find and tries to push his company. He said court reporters would be obsolete a few years ago, yet here we are. How does he have time to search out every single post about court reporters and even spy in private court reporting forums if his company is so successful???? Dude, get a life. And back to what this post was about, I agree that some national firms cause a huge problem.

  4. rensselaer imdiana is doing same thing to children from the judge to attorney and dfs staff they need to be investigated as well

  5. Sex offenders are victims twice, once when they are molested as kids, and again when they repeat the behavior, you never see money spent on helping them do you. That's why this circle continues