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Justices rule on trust mill UPL case

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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.

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  1. File under the Sociology of Hoosier Discipline ... “We will be answering the complaint in due course and defending against the commission’s allegations,” said Indianapolis attorney Don Lundberg, who’s representing Hudson in her disciplinary case. FOR THOSE WHO DO NOT KNOW ... Lundberg ran the statist attorney disciplinary machinery in Indy for decades, and is now the "go to guy" for those who can afford him .... the ultimate insider for the well-to-do and/or connected who find themselves in the crosshairs. It would appear that this former prosecutor knows how the game is played in Circle City ... and is sacrificing accordingly. See more on that here ... http://www.theindianalawyer.com/supreme-court-reprimands-attorney-for-falsifying-hours-worked/PARAMS/article/43757 Legal sociologists could have a field day here ... I wonder why such things are never studied? Is a sacrifice to the well connected former regulators a de facto bribe? Such questions, if probed, could bring about a more just world, a more equal playing field, less Stalinist governance. All of the things that our preambles tell us to value could be advanced if only sunshine reached into such dark worlds. As a great jurist once wrote: "Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman." Other People's Money—and How Bankers Use It (1914). Ah, but I am certifiable, according to the Indiana authorities, according to the ISC it can be read, for believing such trite things and for advancing such unwanted thoughts. As a great albeit fictional and broken resistance leaders once wrote: "I am the dead." Winston Smith Let us all be dead to the idea of maintaining a patently unjust legal order.

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  3. Do you know who the sponsor of the last-minute amendment was?

  4. Law firms of over 50 don't deliver good value, thats what this survey really tells you. Anybody that has seen what they bill for compared to what they deliver knows that already, however.

  5. As one of the many consumers affected by this breach, I found my bank data had been lifted and used to buy over $200 of various merchandise in New York. I did a pretty good job of tracing the purchases to stores around a college campus just from the info on my bank statement. Hm. Mr. Hill, I would like my $200 back! It doesn't belong to the state, in my opinion. Give it back to the consumers affected. I had to freeze my credit and take out data protection, order a new debit card and wait until it arrived. I deserve something for my trouble!

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