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Justices rule company engaged in UPL in trust mill case

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Not every court decision can be held out as one that either protects or chips away at the foundation of the practice of law.

But those are the themes being bounced back and forth after an April 14 ruling by the Indiana Supreme Court about estate planning services and the unauthorized practice of law.

One side says the court has reinforced that non-attorneys aren't allowed to give anything that resembles legal advice and if they do, the penalties can be sharp. Meanwhile, the company found to have engaged in UPL and hit with a disgorgement order says the decision will harm consumers and make it more difficult for people to maneuver the legal issues involved in estate planning.

Ruling per curiam, justices issued a significant UPL decision in State of Indiana, Ex. Rel. Indiana State Bar Association v. United Financial Systems Corp., No. 84S00-0810-MS-551. The court heard oral arguments in December, and by all accounts the ISBA won this UPL action against Indianapolis-based estate-planning services company, United Financial Systems Corp.

In October 2008, ISBA filed the action against United Financial Systems and accused it of operating a trust mill operation that engaged in unauthorized practice of law and wrongly collected more than a $1 million from at least five families throughout the state. The company argued that it hadn't been engaged in UPL, and that it's made changes in recent years to correct whatever activity might have been interpreted that way.

Justices named Senior Judge Bruce Embrey from Miami Superior Court as a special commissioner on the case. After a hearing last year, he issued a report with 266 findings last summer for the high court's review. Justices heard arguments in December, ultimately taking the matter under advisement for about four months before its recent decision against United Financial Systems.

"We are convinced, however, that UFSC's business model has marginalized the attorney's role to such a degree as to cross the line of permissible practices," the court wrote. "We are also convinced that the changes UFSC indicates it has made to its business model in Indiana since the filing of the verified petition are cosmetic at best and are not remotely sufficient to prevent its business model from running afoul of the prohibition against the unauthorized practice of law."

Justices ordered the Indianapolis-based company to stop engaging in any conduct that might be considered UPL, and that the company should have been on notice about the unauthorized nature of its conduct after a previous ruling in 2006. The justices also ruled that the ISBA is entitled to certain statutory attorney fees and that disgorgement of the fees United Financial Services received because of its UPL should be returned.

Deciding on relief, the court relied on its past decision in State ex rel Indiana State Bar Ass'n v. Northouse, 848 N.E.2d 668 (Ind. 2006), that addressed the issue of disgorgement - or returning the ill-gotten fees.

"Notwithstanding the potential availability of other civil remedies, we believe the disgorgement or a similar form of restitutionary remedy serves as a more reliable and effective deterrent against the unauthorized practice of law," the court wrote. "Persons or companies should be deterred from the unauthorized practice of law irrespective of the actual harm their conduct may cause, and the fact that some of the persons who have purchased estate plans from UFSC may have received a product adequate for their needs does not alter the illegality of UFSC's conduct."

By order, the company must notify all of its Indiana estate plan customers since 1995, as well as those since the Northouse ruling in 2006 about possibly receiving money back.

The justices also found against the ISBA in its argument that Administrative Disciplinary Rule 24 should be expanded to include attorneys fees for the "costs and expenses," finding that Indiana Code 34-52-1-1 permits an award of attorney fees in civil actions that occur because of the claims.

The ISBA may get a portion of the $19,500 it spent on attorney fees directly stemming from United Financial Systems' claims about past and current settlements, but that is up to Judge Embrey to determine on remand. The commissioner will also determine what amount the ISBA should get from the $11,093 in costs for ISBA's counsel for copying, phone calls, and other routinely billed legal expenses as well as from the $25,882 the ISBA paid directly to various vendors for copies and transcripts, as well costs to an attorney who rebutted United Financial's expert about the legitimacy of its business model.

All of the justices agreed, except Chief Justice Randall T. Shepard noted that he would have granted ISBA's request for fees incurred in this prosecution.

Most of the financial aspects of the case return to Judge Embrey to decide, and attorneys say he hasn't yet set any hearings on those issues.

Attorney Kevin McGoff with Bingham McHale represented the ISBA, and praised the court's decision.

"This opinion makes it crystal clear what the court's view is on non-lawyer's engaging in that practice of writing wills and trusts, that people may not legally understand," McGoff said.

He noted the disgorgement decision is significant but it's also worthwhile to note how the company's principals were also held personally responsible - he doesn't recall seeing that before.

While the ISBA did lose on its Rule 24 argument about attorney fees being included in "costs and expenses," McGoff said it's difficult to be too disappointed in that aspect.

"The point of the suit was to stop them from engaging in UPL, and now there's a very clear directive that this is prohibited," he said. "We have a bright-line rule, and that's very significant because of the belief that it's part of the bar's obligation is to protect the sanctity of our legal profession from those who might be performing UPL."

Indianapolis attorney Ronald Elberger with Bose McKinney & Evans, who represented United Financial Systems, declined to offer any legal analysis or comment about the significance of the court's decision outside this case. Instead, he deferred to a written statement offered by the company a week after the ruling.

Mostly, the statement criticized the justices' and Judge Embrey's handling of the case and denied that any UPL activity had occurred. The statement defended its conduct and noted that it never prepared legal documents, and that it repeatedly informed customers it wasn't a law firm and that it wasn't providing legal advice. United Financial Systems said the case stems from a longstanding effort to root competitors from the marketplace because they offer more affordable estate-planning services.

"The decision, supposedly designed to protect the state's consumers, actually reduces their choices for estate planning, and increases the cost of these services," the company statement says. "The ripple effects of this decision stand to be felt across the marketplace in Indiana. Any non-lawyer, whether an insurance agent or agency, investment adviser, educational institution or philanthropic entity, may stand accused of practicing law without a license if the lawyer to whom they hand over that client or donor ultimately charges a fee the Bar Association feels is too low."

Describing the ruling as a regrettable "defeat for the interest of Indiana's working families," the company's statement adds: "Indiana's consumers are now left with even fewer helping hands in navigating the often intimidating and expensive world of legal services. Many will likely find the prospect of retaining an estate planning attorney impossible, either because the process is too unnerving or because they are simply priced out of the market."

Hoosier estate planning attorneys discount that claim about fewer options, saying the state has certified that area as a specialty in recent years and that pretty much every bar association has referral networks for attorneys to help in those complicated areas of the law.

"I find it hard to believe that there's a lack of knowledge in the marketplace, or that there's a real problem with people being able to obtain this type of legal service," said Indianapolis attorney Bill Pope, who leads the estate planning group at Barnes & Thornburg. "It's a matter of safeguarding the public, and there's no justification for having unlicensed lay people out recommending these legal estate plans. If this hadn't been discovered, it would have been disastrous for even more people."

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  1. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  2. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  3. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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