ILNews

Justices rule on trust mill UPL case

Back to TopCommentsE-mailPrintBookmark and Share

The Indiana State Bar Association has won an unauthorized practice of law action against an estate planning services company, but wasn't able to completely sway the state's highest court that all "costs and expenses" should be completely granted for the prosecution of the case.

Ruling per curiam this afternoon, the Indiana Supreme Court 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 had heard oral arguments in December.

Justices ordered United Financial Systems, which is based in Indianapolis, 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.

Most of the financial aspects of the case go back to Senior Judge Bruce Embry from Miami Superior Court, who is the commissioner hearing the action.

In October 2008, ISBA filed the action against United Financial 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.

But the justices disagreed.

"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."

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 going back to 1995, as well as those since the Northouse ruling in 2006 about possibly receiving money back.

The justices 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's claims about past and current settlements, but that is up to Judge Embry to determine on remand. The commissioner will also determine what amount of the $11,093 and $25,882 the ISBA should get for other aspects of prosecuting the case.

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

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Mr. Levin says that the BMV engaged in misconduct--that the BMV (or, rather, someone in the BMV) knew Indiana motorists were being overcharged fees but did nothing to correct the situation. Such misconduct, whether engaged in by one individual or by a group, is called theft (defined as knowingly or intentionally exerting unauthorized control over the property of another person with the intent to deprive the other person of the property's value or use). Theft is a crime in Indiana (as it still is in most of the civilized world). One wonders, then, why there have been no criminal prosecutions of BMV officials for this theft? Government misconduct doesn't occur in a vacuum. An individual who works for or oversees a government agency is responsible for the misconduct. In this instance, somebody (or somebodies) with the BMV, at some time, knew Indiana motorists were being overcharged. What's more, this person (or these people), even after having the error of their ways pointed out to them, did nothing to fix the problem. Instead, the overcharges continued. Thus, the taxpayers of Indiana are also on the hook for the millions of dollars in attorneys fees (for both sides; the BMV didn't see fit to avail itself of the services of a lawyer employed by the state government) that had to be spent in order to finally convince the BMV that stealing money from Indiana motorists was a bad thing. Given that the BMV official(s) responsible for this crime continued their misconduct, covered it up, and never did anything until the agency reached an agreeable settlement, it seems the statute of limitations for prosecuting these folks has not yet run. I hope our Attorney General is paying attention to this fiasco and is seriously considering prosecution. Indiana, the state that works . . . for thieves.

  2. I'm glad that attorney Carl Hayes, who represented the BMV in this case, is able to say that his client "is pleased to have resolved the issue". Everyone makes mistakes, even bureaucratic behemoths like Indiana's BMV. So to some extent we need to be forgiving of such mistakes. But when those mistakes are going to cost Indiana taxpayers millions of dollars to rectify (because neither plaintiff's counsel nor Mr. Hayes gave freely of their services, and the BMV, being a state-funded agency, relies on taxpayer dollars to pay these attorneys their fees), the agency doesn't have a right to feel "pleased to have resolved the issue". One is left wondering why the BMV feels so pleased with this resolution? The magnitude of the agency's overcharges might suggest to some that, perhaps, these errors were more than mere oversight. Could this be why the agency is so "pleased" with this resolution? Will Indiana motorists ever be assured that the culture of incompetence (if not worse) that the BMV seems to have fostered is no longer the status quo? Or will even more "overcharges" and lawsuits result? It's fairly obvious who is really "pleased to have resolved the issue", and it's not Indiana's taxpayers who are on the hook for the legal fees generated in these cases.

  3. From the article's fourth paragraph: "Her work underscores the blurry lines in Russia between the government and businesses . . ." Obviously, the author of this piece doesn't pay much attention to the "blurry lines" between government and businesses that exist in the United States. And I'm not talking only about Trump's alleged conflicts of interest. When lobbyists for major industries (pharmaceutical, petroleum, insurance, etc) have greater access to this country's elected representatives than do everyday individuals (i.e., voters), then I would say that the lines between government and business in the United States are just as blurry, if not more so, than in Russia.

  4. For some strange reason this story, like many on this ezine that question the powerful, seems to have been released in two formats. Prior format here: http://www.theindianalawyer.com/nominees-selected-for-us-attorney-in-indiana/PARAMS/article/44263 That observed, I must note that it is quite refreshing that denizens of the great unwashed (like me) can be allowed to openly question powerful elitists at ICE MILLER who are on the public dole like Selby. Kudos to those at this ezine who understand that they cannot be mere lapdogs to the powerful and corrupt, lest freedom bleed out. If you wonder why the Senator resisted Selby, consider reading the comments here for a theory: http://www.theindianalawyer.com/nominees-selected-for-us-attorney-in-indiana/PARAMS/article/44263

  5. Why is it a crisis that people want to protect their rights themselves? The courts have a huge bias against people appearing on their own behalf and these judges and lawyers will face their maker one day and answer for their actions.

ADVERTISEMENT