Opposition Brief — United Financial Systems, Corp. v. Indiana ex rel. Indiana State Bar Ass'n
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In The
Supreme Court of the Anited States
*
UNITED FINANCIAL
SYSTEMS CORPORATION, et al.,
Petitioners,
3
STATE OF INDIANA, EX REL.
INDIANA STATE BAR ASSOCIATION,
Respondent.
On Petition For Writ Of Certiorari
To The Supreme Court Of Indiana
>
BRIEF IN OPPOSITION
KEVIN P. MCGOFF
Counsel of Record
KARL L. MULVANEY
RAFAEL A. SANCHEZ
MARGARET M. CHRISTENSEN
BINGHAM MCHALE LLP
2700 Market Tower
10 West Market Street
Indianapolis, Indiana 46204
317-635-8900
kmegoff@binghammchale.com
Attorneys for Respondent
COCKLE LAW BRIEF PRINTING CO. (800) 225-6964
OR CALL COLLECT (402) 342-2831
ITT.
QUESTIONS PRESENTED
Whether Petitioners have presented compelling
reasons to grant the Petition, where unautho~
ized practice of law (“UPL”) has been defined in
Indiana to include the sale of estate plans by
non-lawyers and where Petitioners’ actions do not
implicate fundamental First and Fourteenth
Amendment Freedoms.
Whether Petitioners have presented compelling
reasons to grant the Petition, where pursuant to
a Court order requiring all settlement agree-
ments be submitted to the Indiana Supreme
Court for approval, the Indiana State Bar Associ-
ation (““ISBA”) made a partial settlement pro
posal at Petitioners’ invitation.
Whether Petitioners have presented compelling
reasons to grant the Petition, where the Indiana
Supreme Court held all Petitioners jointly and
severally liable for UPL based on each individual
Petitioner's participation and role in UPL
RULE 29.6 DISCLOSURE STATEMENT
The ISBA is not a subsidiary or affiliate of a publicly
held company. No publicly owned company owns 10%
or more of the membership interests of the ISBA.
11]
TABLE OF CONTENTS
Page
Us 0 Ted EER End RUE? secisccedivesscausecerassenssnsess
RULE 29.6 DISCLOSURE STATEMENT .............
EPR I CAFE OE ask xs oss nkatene vuscapecssanasatecvans
PRPs OPE PUBS BE ee ssecsnascarinerscrsannerreniss
Ee Er WE os seins scan cuaeaixsbasecstinpavtertei cranes
STATEMENT OF THE CASE..................... eee eeeee eee
REASONS FOR DENYING THE PETITION .......
I.
Those Committing UPL Are Not Entitled
to Retain Unlawfully Collected Fees...........
A.
B.
Disgorgement of Fees Collected by Non-
Lawyers for Legal Services Is Not a
Penalty Subject to Criminal Due Pro-
cess Standards, but a Restitutionary
A INNO isco cvcuia cokes hccwmacicceatelandiecues
Disgorgement Is a Long-Standing
RUGUIIOTEY 100 EEMEIBIAD oe ccvissisccevecncaccssccceness
Rule 24 Is Not Impermissibly Vague
and Petitioners Cannot Claim an Un-
witting Violation of Indiana’s Prohibi-
COOHE FMP RIOUAE TINO TI isis sos ones cc csdsccnsssvescsss
l. A Rule 24 enforcement action is not
criminal or quasi-criminal, thus
the vagueness doctrine is not ap-
WRRIININOND ci vesinswinneccaegrsaer oe canta crac ceeier tees
6
6
10
14
14
TABLE OF CONTENTS — Continued
_
to
vague on its face, or as applied to
Page
; af ,
2. Evenif the vagueness doctrine were
apply to Rule 24, the rule is not
Petitioners’ conduct................... Laren
a.
Fees and
CONCLUSION
The Indiana Supreme Court has
defined UPL so that Rule 24 is
not unconstitutionally vague on
Se ea SO: AERO Fee PERE
In addition to the plethora of
case law defining UPL in Indi-
ana, Petitioners knew that their
conduct was prohibited because
they obtained legal advice as to
legality of their practices and
admitted that identical conduct
constituted UPL in Ohio ..... NG
Il. The Indiana Supreme Court Found Peti-
tioners’ Accusations of Prosecutorial Mis
conduct by the ISBA to be Without Merit.....
Ill. The Indiana Supreme Court Correctly
Held the Individual Petitioners Jointly and
Severally Liable for the Disgorgement of
Payment of Costs ............. eeetenwees
20
23
36
QU 44
38
TABLE OF AUTHORITIES
Page
CASES
Associated Builders and Contractors, Saginaw
Valley Area Chapter v. Director, Dept. of Con-
sumer & Indust. Serv., 705 N.W.2d 509
Ss Pec IN, MUI sss scavcccsecysciceaaudevecsuhvcaecacaunscbeds 21
Bellows v. Merchants Despatch Transp. Co.,
257 A.D. 15 (N.Y. App. Div. 1939), judgment
Oy ae Reg ie eg Go |: } ee re 21
Broadrick v. Oklahoma, 413 U.S. 601 (1973)............ 21
Brotherhood of Railroad Trainmen v. Va. ex rel.
Va. State Bar, 377 U.S. 1 (1964)................... 6,18, 19
Cincinnati Bar Ass’n v. Kathman, 748 N.E.2d
I ct. ss os cage vavansendieedimaevetbeicusioal 24
Cincinnati Ins. Co. v. Wills, 717 N.E.2d 151
kL) iS eer Baap
City of Chicago v. Morales, 527 U.S. 41 (1999).......... 17
Cleveland Bar Ass’n v. Sharp Estate Seruvs.,
Inc., 837 N.E.2d 1183 (Ohio 2005).......... 2, 10, 23, 36
Cline v. Frink Dairy Co., 274 U.S. 445 (1927)........... 21
Conally v. General Constr. Co., 269 U.S. 385
MAIREAD Rapier hperyness Poet reo lee emir eny wens © REN EN Ta Rare 17
Fink v. Peden, 17 N.E.2d 95 (Ind. 1938)....9, 13, 22, 23
In the Matter of Fletcher, 655 N.E.2d 58 (Ind.
NEE a ERAS ter NP ERED RTT Ne at TI RE ROR PESO 16, 17
vl
TABLE OF AUTHORITIES — Continued
Page
Gonzales v. Carhart, 550 U.S. 124 (2007).................. 17
Hackin v. Arizona, 389 U.S. 143 (1967)..................... 23
Harris v. Clark, 81 Ind. App. 494 (Ind. 1924)............ 13
Hoffman Estates v. Flipside, Hoffman Estates,
Me Fe Me OI ovngisxsoniscsdconsccccaccadecvcsosns 14, 17, 27
Ind. Fam. and Social Servs. Admin. v.
Amhealth, 790 N.E.2d 162 (Ind. Ct. App.
IE Iai SAR np eet re Ty en A en ae 11
Ind. State Bar Ass’n v. Diaz, 838 N.E.2d 433
ase naaseanvedaseuaiede 17
State ex rel. Ind. State Bar Ass’n v. Northouse,
848'N.E.2d 668 (Ind. ZO06).............ccocccesssceeess passim
State ex rel. Ind. State Bar Ass’n v. United Fin.
Sys. Corp., 926 N.E.2d 8 (Ind. 2010).................... 5,9
Jerman v. Carlisle, McNellie, Rint, Kramer &
Ulrich LPA, 130 S. Ct. 1605 (2010) .............ccsscsesess 21
Keyishian v. Board of Regents of University of
State of N.Y ., S69 U.S. BBS (1967) .......cccscrcvcscoscssese 21
Marshall v. Jerrico, Inc., 446 U.S. 238
a teas 29, 30, 31
Miller v. Vance, 463 N.E.2d 250 (Ind. 1984)...... 7,8, 23
NAACP v. Button, 371 U.S. 415 (1963)................ 18, 19
NAACP v. Claiborne Hardware Co., 458 U.S.
A AER terre eee seats cael 32
Nash v. United States, 229 U.S. 373 (1913)......... 21, 26
V11
TABLE OF AUTHORITIES — Continued
Page
Ohio State Bar Ass’n v. United Fin. Sys. Corp.,
921 N.E.2d 1054 (Ohio 2010) 4,5, 10, 23, 26
Qhralik v. Ohio State Bar Ass’n, 436 U.S. 447
(U.S. 1978)
State ex rel. Pearson v. Gould, 437 N.E.2d 41
RE ) RTTEAN IMRAN APY CPT REESE re ARE RR Ae eA 2:
In the Matter of Perrello, 386 N.E.2d 174 (Ind.
PINE 207.) ccncecac nein cudambcnkavaruntextrastcpncsttunevewincichavesiiive 7
Porter v. Warner Holding Co., 328 U.S. 395
, 19
Rizzo v. Goode, 423 U.S. 632 (1976)...........................2
In the Matter of Roberts, 442 N.E.2d 986 (Ind.
RRR RR RAR IE Ne ote At Mee Ss RAG Ai De PAO IO a 5
Rollings v. Smith, 716 N.E.2d 502 (Ind. Ct.
CE: PLATS ERPS ERIN Or AA PAS OOD EN A
Sedima v. Imrex Co., 473 U.S. 479 (1985)
Sperry v. Florida, 373 U.S. 379 (1963)
Staie v. Indiana Real Estate Ass’n, Inc.,
N.E.2d 711 (Ind. 1963)
In the Matter of Thrasher, 661 N.E.2d 546 (Ind.
1996)
Trumbull Cty. Bar Ass’n v. Hanna, 684 N.E.2d
eh uat Ns guannacauanes 24
Tull v. United States, 481 U.S. 412 (1987)
Tumey v. Ohio, 273 U.S. 510 (1927)
Vill
TABLE OF AUTHORITIES — Continued
Page
United Mine Workers of America v. Illinois
State Bar Ass’n, 389 U.S. 217 (1967)...............0.. 6,19
United States v. Newman, 144 F.3d 531 (7th
ase te as acu sennndenivonshees 11
United Transportation Union v. State Bar of
hs PR Wile IF CREE Ades cscsesceccosecccescsvcesscsaousesss 19
Wainright v. Stone, 414 U.S. 21 (1978)... ee. 22
Young v. United States ex rel. Vuitton Et Fils
ee 0, POE OED ccccnccccdbscdnccaveccsuacveveasss 29, 30
STATUTES
Se es Oe aE, . ccneusccvescesedecuvnevesseeactverescents 6
i ee eo cvéausoosensdisebesenediensupecss 16
RULES
By ee PUNE, GE BNI OG viscccesesapesecserecsacvavscrcaves passim
RUN CO, BOE Bhs WESC PIED ovicdececcccsnscevensscnssossccsnercvensss 24
BE, Ss Be BO sedcesvestndencecensis TE elsitatatdavaidaciaussistesreivintnas 6
CONSTITUTIONAL PROVISIONS
es sunduksnbocddaGuevedesucdees 6,18
INTRODUCTION
The ISBA petitioned the Indiana Supreme Court
to enjoin Petitioners’ actions violating Indiana Rule
of Admission and Discipline 24 (“Rule 24”) (the “En-
forcement Action”). The Indiana Supreme Court en-
tered an order enjoining Petitioners’ actions and
ordering Petitioners to disgorge certain fees (the “Dis-
gorgement Order”). The thrust. of Petitioners’ request
for certiorari is to avoid disgorgement of unlawfully
collected fees. The Petition should be denied because
Petitioners have not demonstrated a cognizable vio-
lation of the United States Constitution so as to
warrant review by this Court.
Petitioners now acknowledge that their business
practices constituted UPL, but assert that prior to the
Enforcement Action they were not on notice that their
model of selling and delivering estate planning pack-
ages by non-lawyers, without attorney supervision,
was UPL. Petitioners contend that because they did
not know their actions amounted to UPL at the time,
and they were not on notice that they could be or
dered to disgorge those fees, it was a due process
violation for the Indiana Supreme Court to order
disgorgement. This argument fails because Petition-
ers were advised by outside counsel, and thus were on
notice no later than 1999, that the business practices
employed in Indiana would constitute UPL.
In addition, Petitioners had been conducting
business in Ohio for many years. The Ohio Supreme
Court held in 2005 that it was UPL for non-lawyers to
sell estate planning packages and provide legal ad
vice regarding the same and imposed joint and sever
al liability in its disgorgement order. Cleveland Bar
Ass’n v. Sharp Estate Servs., Inc., 837 N.E.2d 1183,
1188 (Ohio 2005). Similarly, in 2006, the Indiana
Supreme Court issued State ex rel. Ind. State Bar
Ass’n v. Northouse, 848 N.E.2d 668, 675 (Ind. 2006),
citing to the Ohio case, and finding that disgorgement
was an appropriate remedy for non-lawyers who sold
estate planning documents and provided legal advice
regarding the same. Finally, in 2009, two months
prior to the hearing in this case, United Financial
Systems Corporation (“UFSC”) admitted that operat
ing its business model in Ohio, and administering it
from its Indiana headquarters, constituted UPL
Petitioners’ claim that they did not or could not know
that their actions constituted UPL in Indiana and
that they had no notice that their unlawful actions
could result in disgorgement is simply untenable
STATEMENT OF THE CASE
Respondent adopts the facts contained in the
Disgorgement Order and the Commissioner’s Report,
both of which are included in the Petition’s Appendix
However, the following facts, downplayed or omitted
by Petitioners, must be addressed for this Court to
properly review the relevant legal arguments
The fact upporting rhe bindings
connection with Petitione busine
pract ices are
Non-lawver sale people
home and el] eslLacle pli Cay ; COT)
misson-only basis witho itt VISIO!
(App ~)
The non-lawyer lespeople pushed
expensive package of estate documer!
by UFSC. which cost $2. 695 QQ) 2O0O9
full or partial payment on
received commissions ran
$900.00 (App. 5-6
The no; lawve!r ale pcop
financial information from
The information is routed to Indian poll
URS ASS] each customer to the pan
ney contracted to complete the estat pl im p
Ave for the cu rome! (App t
UFSC pays the panel attorney a |
complete the estate plan package ld
lhe lawyer in most cases has only one phon
with the client and fills in the blanks on form
with the documents, often containing provision
inapplicable te the client or even Indiana law
App. 6-7; 102, 4 i44; 111, | 176; 123, 4] 216; 12%
4 214; 135, 4 237); and
UFSC pays another non lawye! $75.00 to deliver
the estate plan documents and assist the custom
er in executing the documents without any su
pervision by the panel attorney (App. 9
Petitioners’ statement of facts notes only that
Attorney William Hodes advised and testified that
their practices did not violate Rule 24. (Petition 3-6)
Petitioners omit the evidence supporting the Dis
gorgement Order that another of UFSC’s attorneys
earlier advised that the business mode] employed
here would be unlawful. Bruce Kotzan advised Pets
tioners in 1999 that “{[t]here must be contact between
the client and the attorney. In the event employees of
the company engage in the gathering of information
for the preparation of documents, these employee:
must be acting under the direction of the attorney.”
(App. 36, 4] 17). Petitioners ignored this advice, as the
business practices at issue in the Enforcement Action
did not involve attorneys supervising the non-lawyers
who interacted with the customers for whom the
attorneys completed legal documents. (App. 5; 81,
{| 98). Moreover, the “testimony of various panel
attorneys reveals minimal independent consultation
with clients and heavy reliance on the communica
Lions between the client and the company’s salesper
on.” (App. 9)
Additionally, Petitioners fail to mention the fact
that UFSC admitted the very practices at issue in the
Kenforcement Action constitute UPL in Ohio. Ohto
State Bar Ass’n v. United Fin. Sys. Corp., 921 N E.2d
1054 (Ohio 2010) [hereinafter “Ohio Bar v. USC” |
UFSC apreed that its activities in Ohio involving the
sale and delivery of estate plans by non-attorneys and
“its activities at its principal place of business in the
state of Indiana designed and intended to take effect
in Ohio,” amounted to UPL. /d. at 1054-55. This
admission, which was not disclosed to the ISBA by
the Petitioners, came on March 31, 2009, nearly two
months before the hearing on the merits in the En-
forcement Action. Final Report of the Board on the
UPL at 1, 921 N.E.2d 1054 (No. 09-1645), available at
http://www.supremecourt.ohio.gov/tempx/65 1092.pdf.
Finally, the parties to the Enforcement Action
participated in settlement discussions. Some individ-
uals admitted violating Rule 24 and, jointly with the
ISBA, submitted settlement agreements for approval
to the Indiana Supreme Court, which were approved.
(App. 55, { 36). Petitioners and the ISBA did not
engage in settlement discussions that reached the
question of liability, but upon Petitioners’ invitation,
the ISBA proposed a settlement concept intended to
resolve a dispute over the scope of possible disgorge-
ment that could be ordered as a remedy by the Indi-
ana Supreme Court. (Petition 5; App. 62, { 45). While
Petitioners quote a portion of the letter sent, they
omit the portion that states it was written “on the
invitation extended in [Petitioners’ counsel’s] recent
letter to engage in the discussion of concepts for
resolving the historical issues in the case.” Reply
Brief in Support of Motion to Dismiss or, In the
Alternative, Motion to Strike, Ex. 1, State ex rel. Ind.
State Bar Ass’n v. United Fin. Sys. Corp., 926 N.E.2d
8 (Ind. 2010) (No. 94S00-0810-MS-551) [hereinafter
“Settlement Letter”.
>
6
REASONS FOR DENYING THE PETITION
The Enforcement Action concerns the regulation
of UPL — a matter reguiated exclusively by the states.
Petitioners’ due process rights were not violated by
the Disgorgement Order because: 1) Petitioners had
due notice under Indiana and federal law that their
actions constituted UPL and thus might result in an
order of disgorgement; 2) there is no evidence of
impermissible prosecutorial bias; and 3) Petitioners
each personally participated in UPL and can be held
jointly and severally lable for their actions. Accord-
ingly, Petitioners have not demonstrated any “compel-
ling reasons” to grant the Petition. See Sup. Ct. R. 10.
I. Those Committing UPL Are Not Entitled
to Retain Unlawfully Collected Fees.
The Indiana Supreme Court has no original
jurisdiction “except in admission to the practice of
law; discipline or disbarment of those admitted; the
unauthorized practice of law. ...” Ind. Const. Art. 7
$4. See also Ind. Code § 33-24-1-2. This Court has
repeatedly held that the regulation of the practice of
law is within the province of state courts. United
Mine Workers of America v. Illinots State Bar Ass’n,
389 U.S. 217, 222 (1967) (“That the states have the
broad power to regulate the practice of law is, of
course, beyond question.”); Brotherhood of Railroad
Trainmen v. Va. ex rel. Va. State Bar, 377 U.S. 1, 6
(1964) (“Virginia undoubtedly has broad powers to
regulate the practice of law within its borders”);
Sperry v. Florida, 373 U.S. 379, 383 (1963) (a state
has a “substantial interest in regulating the practice
of law within the state”).
The state interests implicated in this case
are particularly strong. In addition to its
general interest in protecting consumers and
regulating commercial transactions, the
State bears a special responsibility for main-
taining standards among members of the li-
censed professions.
Ohralitk v. Ohio State Bar Ass'n, 4386 U.S. 447,
(U.S. 1978) (internal citations omitted).
In this regard, the Indiana Supreme Court
defined the practice of law as follows:
The core element of practicing law is the giv-
ing of legal advice to a client and the placing
of oneself in the very sensitive relationship
wherein the confidence of the client, and the
management of his affairs, is left totally in
the hands of the attorney. The undertaking
to minister to the legal problems of another
creates an attorney-client relationship with-
out regard to whether the services are actu-
ally performed by the one so undertaking the
responsibility or are delegated or subcon-
tracted to another.
Miller v. Vance, 463 N.E.2d 250, 251 (Ind. 1984)
(quoting, In the Matter of Perrello, 386 N.E.2d 174,
179 (Ind. 1979)). Moreover, the Indiana Supreme
Court has determined that where the filling in of
blanks in legal documents prepared by attorneys
8
“involves considerations of significant legal refine-
ment, or the legal consequences of the act are of great
significance to the parties involved, such practice may
be restricted to members of the legal profession.”
Miller at 251. (quoting, State v. Indiana Real Estate
Ass’n, Inc., 191 N.E.2d 711, 715 (Ind. 1963)). See also
In the Matter of Thrasher, 661 N.E.2d 546, 549 (Ind.
1996) (“It is essential to the integrity of any legal
practice that lawyers maintain independent profes-
sional judgment and not fully abdicate the responsi-
bility of providing legal advice, guidance and
expertise to nonlawyers.”). Indeed, over seventy (70)
years ago, the Indiana Supreme Court noted:
The general meaning of the term, “practice
law” or “practice of law,” is of common
knowledge.... [I]t is not confined to per-
forming services in an action or proceeding
pending in courts of justice, and, in a larger
sense, it includes legal advice and counsel,
and the preparation of legal instruments and
contracts by which legal rights are secured,
although such matter may or may not be de-
pending in a court. To “practice law” is to
carry on the business of an attorney at law; to
do or practice that which an attorney or
counselor at law is authorized to do and
practice; to exercise the calling or profession
of the law, usually for the purpose of gaining
a livelihood, or at least for gain; to make it
one’s business to act for, and by the warrant
of, others in legal formalities, negotiations, or
proceedings.
9
Fink v. Peden, 17 N.E.2d 95, 96-97 (Ind. 1938) (em-
phasis in original). To argue that the conduct prohib-
ited by Rule 24 is unclear and/or undefined is to
ignore nearly a century’s worth of Indiana jurispru-
dence regarding the practice of law.
The ISBA originally requested the disgorgement
of fees collected for the sale of estate planning ser-
vices dating back to 1995, when UFSC was founded
and began using the business model addressed in the
Enforcement Action. At oral argument before the
Indiana Supreme Court, counsel for Petitioners
argued that there was no notice that disgorgement of
fees could be a remedy for Petitioners’ actions occur-
ring prior to 2006, but admitted that Northouse, 848
N.E.2d at 675, gave notice that disgorgement could be
a remedy. Video of Oral Argument at 32:39, State ex
rel. Ind. State Bar v. United Fins. Sys. Corp., 926
N.E.2d 8 (No. 94S00-0810-MS-551), available at http://
mycourts.in.gov/arguments/default.aspx?view=detaill&
id=990, [hereinafter “Oral Argument”]. While the
Indiana Supreme Court noted that Petitioners could
be required to disgorge fees collected prior to 2006,
consistent with Petitioners’ arguments, the Court
limited the Disgorgement Order to those fees collect-
ed after the Northouse decision. (App. 22-23). The
main thrust of Petitioners’ argument is that they
were not on notice that disgorgement was a potential
remedy for their specific actions.
UFSC obtained legal advice in 1999 that the
practices at issue in the Enforcement Action violated
Rule 24. (App. 36, {| 17). At a minimum, Petitioners
10
learned in 2006 that non-lawyers may not sell estate
plans in Indiana and that the Indiana Supreme Court
cited with approval Ohio case law in defining the
term “practice of law.” Northouse, 848 N.E.2d at 672
(citing Cleveland Bar, 837 N.E.2d at 1186). The
Cleveland Bar case held in 2005 that it was UPL to
sell estate planning packages like Petitioners were
doing in Indiana since 1995. 837 N.E.2d at 1186. Just
recently, UFSC admitted the very practices at issue
in Indiana amounted to the UPL in Ohio. Ohio Bar v.
UFSC, 921 N.E.2d 1054. Thus, Petitioners’ use of
non-lawyers to give legal advice about estate plan-
ning and to market and sell estate planning packages
without attorney supervision in Indiana, as in Ohio,
constituted UPL. (App. 5 & 14). In light of these facts,
Petitioners’ attempt to attack the Disgorgement
Order on the basis of lack of notice defies logic and
raises the question of whether any justiciable case or
controversy actually exists here.
A. Disgorgement of Fees Collected by
Non-Lawyers for Legal Services Is Not
a Penalty Subject to Criminal Due
Process Standards, but a Restitutionary
Measure.
Disgorgement is not recognized as a punishment,
but rather is considered restitutionary. Tull v. United
States, 481 U.S. 412, 424 (1987): Porter v. Warner
Holding Co., 328 U.S. 395, 402 (1946) (restitution
serves the public interest by restoring the status quo
and ordering the return of that which rightfully
11
belongs to another; it is “within the highest recog-
nized power and within the highest tradition of a
court of equity.”).
Restitution [does not] qualify as a criminal
punishment. Restitution has _ traditionally
been viewed as an equitable device for re-
storing victims to the position they had occu-
pied prior to a wrongdoer’s actions. It is
separate and distinct from any punishment
visited upon the wrongdoer and operates to
ensure that a wrongdoer does not procure
any benefit through his conduct at the oth-
ers’ expense.
5 *
Restitution ts not “punishment” within the
meaning of the Ex Post Facto Clause.
United States v. Newman, 144 F.3d 531, 538-39 (7th
Cir. 1998) (internal citations omitted) (emphasis
added).
Indiana similarly holds disgorgement is an
equitable remedy designed to nullify any unjust
enrichment when fees or other property are improper-
ly acquired. Ind. Fam. and Social Servs. Admin. v.
Amhealth, 790 N.E.2d 162, 169 (Ind. Ct. App. 2003)
(Brook, C.J., concurring) (“Restitution is described as
a return or restoration of what the defendant has
gained in the transaction.”). Where the remedy of
disgorgement of fees is merited, such is not retribu-
tive in nature, but serves to “deter similar conduct in
the future.” Northouse, 848 N.E.2d at 674. Further,
“Cajn action to compel a restitution of benefits accrued
12
need not be founded upon any supposed wrong.”
Rollings v. Smith, 716 N.E.2d 502, 507 (Ind. Ct. App.
1999). Because both federal and Indiana courts
consider disgorgement to be restitutionary and not
punitive, the same due process considerations that
apply in the context of criminal and civil penalties do
not apply here.
B. Disgorgement Is a Long-Standing Rem-
edy in Indiana.
Although disgorgement of fees dating back to
1995 was at issue, Petitioners were ordered to dis-
gorge only those fees collected after the issuance of
the 2006 Northouse opinion (App. 23), which they
admitted put them on notice that disgorgement was a
potential remedy in cases involving UPL.’ Oral Ar-
gument at 32:39. There was no lack of notice to
Petitioners and thus no violation of due process.
Notwithstanding Petitioners’ admission that
Northouse put them on notice that disgorgement is a
potential remedy for Rule 24 violations, disgorgement
of fees collected for UPL in Indiana is not a recent
development. First, the Indiana Supreme Court
' The potential disgorgement aiiount is around $2.7 million
in fees for the sale of estate planning documents. The Disgorge-
ment Order notes that from October, 2006 through May, 2009,
UFSC collected more than $29 million, which includes invest
ments sold as a result of gaining access to the individual “cli-
ents” through the impermissible sale of estate planning
documents. (App. 140-141, 44] 252 & 255).
13
explained in Northouse, “[ajlthough the rule uses the
terms ‘enjoin’ and ‘injunction’ when referring to the
relief available and ‘injunctions typically order those
to whom they are directed to refrain from doing
something, the relief afforded by equity may be
extended to compel affirmative action when neces-
sary.” 848 N.E.2d at 674. Northouse provided notice
that “[aJn injunction is a formal command of the
court, directing the person named therein to refrain
from doing certain specified acts ... or, where the
relief is mandatory in form, directing such persons
to take certain steps to undo the wrong or injury
with which they are charged.” Id. (emphasis
added). Thus, even before the Northouse decision, the
Indiana Supreme Court had the authority pursuant
to Rule 24 to order the disgorgement of unlawfully
collected fees.
Moreover, Indiana courts have long recognized
that “a person who was not duly admitted to practice
law in this state, in conformity to the provisions of
the statute, could not recover for legal services ren-
dered.” See, e.g., Fink, 17 N.E.2d at 97; Harris uv.
Clark, 81 Ind. App. 494, 496 (Ind. 1924) (“where a
statute forbids carrying on a business without first
procuring a license, paying a tax, and complying with
prescribed tests, inspection, registration or the like
contracts made by persons in carrying on such busi-
ness are void, though the statute contains no express
provision to that effect”). Accordingly, it was foreseea-
ble that the Indiana Supreme Court would disgorge
fees in the Enforcement Action — it was not a novel or
14
unprecedented concept and as explained in more
detail below, Petitioners had notice that they were
violating Rule 24. Thus, the Disgorgement Order does
not violate Petitioners’ due process rights.
C. Rule 24 Is Not Imperniissibly Vague
and Petitioners Cannot Claim an Un-
witting Violation of Indiana’s Prohibi-
tion Against the UPL.
1. A Rule 24 enforcement action is not
criminal or quasi-criminal, thus the
vagueness doctrine is not applicable.
Petitioners’ argument that Rule 24 is impermis-
sibly vague fails because Petitioners advocate for a
level of specificity required only of criminal or quasi-
criminal statutes. For Fourteenth Amendment pur-
poses, courts demand less precision of statutes that
impose only civil remedies, in contrast to criminal
statutes, because their consequences are less severe.
The degree of vagueness that the Constitution
tolerates-as well as the relative importance of
fair notice and fair enforcement-depends in
part on the nature of the enactment. Thus,
economic regulation is subject to a less strict
vagueness test because its subject matter is
often more narrow, and because businesses,
which face economic demands to plan behav-
ior carefully, can be expected to consult rele
vant legislation in advance of action.
Hoffman Estates v. Flipside, Hoffman Estates, 455
U.S. 489, 498 (1982).
A Rule 24 enforcement action, by nature, is not
quasi-criminal, but is akin to an attorney or judicial
disciplinary action. Just as disciplinary actions are
intended to protect Indiana’s citizens and courts from
those who are not fit for membership in the bar, Rule
24 enforcement actions are intended to restrain or
enjoin those individuals from the practice of law who
are not qualified by virtue of the fact that they are
not attorneys. The Indiana Supreme Court has rec
ognized that:
[Djisbarment and suspension proceedings
are neither civil nor criminal in nature but
are special proceedings, sul generis, and re-
sult from the inherent power of courts over
their officers. Such proceedings are not law-
suits between parties litigant but rather are
in the nature of an inquest or inquiry as to
the conduct of the respondent. They are not
for the purpose of puntshment, but rather
seek to determine the fitness of an officer of
the court to continue in that capacity and
protect the courts and the public from the of-
ficial ministration of persons unfit to prac-
tice.
In the Matter of Roberts, 442 N.E.2d 986, 987 (Ind.
1983) (emphasis added). The Indiana Supreme Court
has held that “civil or criminal law definitions are
”
generally not controlling in [disciplinary] actions. . . .
In the Matter of Gerard, 634 N.E.2d 51, 53 (Ind.
1994).
16
Similarly, Rule 24 enforcement actions are not
intended “to find fault or assess liability but to pro
tect the public from those not properly licensed or
otherwise qualified to act as attorneys.” Northouse,
848 N.E.2d at 674. If Rule 24 enforcement actions
were indeed intended to punish those who practice
law without a license, criminal laws regarding UPL
in Indiana would be unnecessary. However, the
Indiana General Assembly enacted a criminal UPL
provision (Ind. Code § 33-43-2-1) and the Indiana
Supreme Court enacted Rule 24. Kach has its own
distinct procedures and remedies. Requiring the same
procedures and blurring the lines between the two
provisions would render one superfluous.’
The Indiana Supreme Court has also noted that
its “primary responsibility in admission and disci
pline matters is to protect the public against incom
petent and unscrupulous professionals.” /n the Matter
of Fletcher, 655 N.E.2d 58, 60 (Ind. 1995) (holding the
Indiana Supreme Court had the power to discipline
an individual who was licensed to practice law in
Illinois for UPL in Indiana). Individuals who purport
to provide legal advice, despite being unlicensed to
practice law in Indiana, are within the purview of
“incompetent and unscrupulous professionals” referred
In this regard, the Indiana Supreme Court has expressly
stated that a Rule 24 enforcement action “does not preclude, and
should not discourage, the State from filing criminal charges in
appropriate cases against those who violate the prohibition on
the unauthorized practice of law.” Northouse, 848 N.E.2d at 675
17
to by the Court in Fletcher. Moreover, the Indiana
Supreme Court directly compared Rule 24 enforce
ment actions to disciplinary actions in determining the
appropriate standard of proof in a Rule 24 enforce
ment action. Ind. State Bar Ass’n v. Diaz, 838 N.E.2d
433, 438 (Ind. 2005). Thus, Rule 24 enforcement
actions are not quasi-criminal and do not require the
same procedural safeguards as a criminal action
Petitioners base their vagueness challenge to
Rule 24 on City of Chicago v. Morales, 527 U.S. 41
(1999): Gonzales v. Carhart, 550 U.S. 124 (2007); and
Conally v. General Constr. Co., 269 U.S. 385 (1926)
Kach of these cases is inapplicable to the Enforce
ment Action because each addressed the due proces:
considerations at issue in enacting, interpreting, and
enforcing criminal statutes. Because Rule 24 is not a
criminal provision, these cases are inapposite
Petitioners also cite Klipside, 455 U.S. at 499
500, for the proposition that quasi-criminal statute
are subject to the same strict vagueness test a
criminal statutes. (Petition 14). This assertion over
states the Court’s conclusion in Flipside that the
admittedly “‘quasi-criminal’ |statute| and its prohibi
tory and stigmatizing effect may warrant a relatively
strict test.” Flipside, 455 U.S. at 499. In any event,
Similarly, Petitioners’ reliance on Sedima v. Imrex Co.,
473 U.S. 479, 492-93 (1985), is misplaced. The Court's concern in
that case was whether statutorily mandated civil penalties in a
RICO action could be limited to instances in which the defend
ant had previously been found yuilty in a criminal matter of a
(Continued on following pape)
Kule 24, which is grounded in Indiana’s Constitution
1s not quasi-criminal, but quasi-disciplinary. See Ind
Const. Art. 794. Thus, Petitioners’ argument that the
prohibition on UPL in Indiana is unconstitutionally
vague fail:
While courts have recognized a limited applica
Lion of the vaguens doctrine to cases involving
certain fundamental freedom Petitioners have not
asserted, nor can they, that Rule 24 affect these
rights. Petitioners seek review of Rule 24 under the
standard et forth in NAACP v. Button, 371 U.S. 415
(1963), and Vrainmenr, 377 U.S. 1. As asserted by
Petitioners, both cases apply the vayuene doctrine
to statutes poverning the practice of law. However,
Bullon analyzes a tatute which limited” First
Amendment nght:
The objectionable quality of vagueness and
overbreadth does not de pe nd on absence of
fair notice to a criminally accused or upon
unchanneled delegation of legislative power
hut upon the danger of tolerating in the
related violation. Sedima } (Court found, however!
criminal conviction was not nece iry im order » impart
penalties under a civil standard of proof. /d. at 491. Almost a
an aside, and without determining whether the availability of
treble damayes as a civil remedy was quasi-criminal in nature
this Court reasoned that the due proce concerns at issue could
be repaired by raring the standard of proof in the civil action
rather than by requiring: a previous criminal conviction in orders
to utilize the eivil remedy. /d. at 49'27-934
19
area of First Amendment freedoms, the
existence of a penal statute susceptible of
sweeping and improper application.
Button, 317 U.S. at 432-33 (emphasis added). Similar-
ly, Trainmen considers an injunction which limited
First and Fourteenth Amendment rights. Trainmen
at 1118. The scope of Rule 24 does not reach First or
Fourteenth Amendment freedoms, and Petitioners
present no argument that it does reach such free-
doms.’” Neither their life, liberty, or property is at risk
here. Disgorging ill-gotten gains is not the taking of
property. See, e.g., Porter, 328 U.S. at 402. Thus,
because Rule 24 enforcement actions are neither
criminal nor quasi-criminal, the vagueness doctrine
does not apply.
* Petitioners inexplicably exclude this critical reference to
the First Amendment in their analysis of Button. (Petition 14).
* Petitioners portray their conduct as that of a simple
lawyer-referral service, rather than owning up to the elaborate
scheme involving a sales force of non-lawyers who give legal
advice without attorney supervision. (Petition at 27). Such a
characterization of the UFSC model invites a misapplication of
many cases cited by Petitioners in their favor. Specifically,
United Transportation Union v. State Bar of Mich., 401 U.S. 576,
582-84 (1971); Button, 371 U.S. 415; Trainmen, 377 U.S. 1; and
United Mine Workers of America, 389 U.S. 217, 221-22, each
involve referral systems and First Amendment speech and
assembly issues. None of these cases are analogous to the UFSC
system of selling estate planning services without an initial
legal analysis conducted by a licensed attorney.
20
2. Even if the vagueness doctrine
were to apply to Rule 24, the rule is
not vague on its face, or as applied
to Petitioners’ conduct.
Petitioners’ attack on the alleged vagueness of
Rule 24 fails. First, Rule 24 is not facially vague
because, as outlined above, the Indiana Supreme
Court has defined Rule 24 through decades of case
law, and these definitions provide sufficient specifici-
ty as to the definition of the practice of law in Indi-
ana. Second, Rule 24 is not vague as applied to
Petitioners because their practices fell squarely
within the Indiana Supreme Court’s definition of the
practice of law. Moreover, UFSC’s recent admission
that identical practices amounted to the UPL in Ohio,
coupled with Petitioners’ employee training regarding
the practice of law, disclaimers regarding the practice
of law, and legal advice warning them that their
practices flirted with Rule 24 violations, defeat their
claim that they could not discern what conduct was
prohibited.
a. The Indiana Supreme Court has
defined UPL so that Rule 24 is
not unconstitutionally vague on
its face.
A statute is unconstitutionally vague where its
language does not convey a_ sufficiently definite
warning as to the proscribed conduct when measured
by common understanding and practices, or stated
otherwise, where its language is such that people of
21
common intelligence must necessarily guess at its
meaning. See Keyishian v. Board of Regents of Uni-
versity of State of N.Y., 385 U.S. 589 (1967). However,
a statute is not unconstitutionally vague when an
ordinary person exercising ordinary common sense
can sufficiently understand and comply with it. See
Broadrick v. Oklahoma, 413 U.S. 601 (1973).
Generally the decisions of this Court “upholding
statutes as sufficiently certain, rested upon the
conclusion that they employed words or phrases
having a technical or other special meaning ... or a
well-settled common law meaning, notwithstanding
an element of degree in the definition as to which
estimates might differ.” Cline v. Frink Dairy Co., 274
U.S. 445, 459 (1927) (citing Nash v. United States,
229 U.S. 373, 377 (1918)). Judicial interpretations of
a statute can settle the meaning of terms employed
therein. Jerman v. Carlisle, McNellie, Rint, Kramer &
Ulrich LPA, 130 S. Ct. 1605, 1616 (2010). See also
Bellows v. Merchants Despatch Transp. Co., 257 A.D.
15, 16 (N.Y. App. Div. 1939) Gf the meaning of terms
employed in the statute “have long been recognized in
law and life”, they will be considered sufficiently
definite), judgment aff'd, 27 N.E.2d 440 (1940);
Associated Builders and Contractors, Saginaw Valley
Area Chapter v. Director, Dept. of Consumer & Indust.
Serv., 705 N.W.2d 509 (Mich. Ct. App. 2005) (a statute
is sufficiently definite for purposes of due process if
its meaning can be fairly ascertained by reference to
judicial interpretations, the common law, dictionaries,
22
treatises, or the commonly accepted meanings of
words).
In this regard, “{fJor the purpose of determining
whether a state statute is too vague and indefinite to
constitute valid legislation ‘[this Court] must take the
statute as though it read precisely as the highest
court of the State has interpreted it.’” Wainright v.
Stone, 414 U.S. 21, 22-23 (1973). “When a state
statute ‘has been construed to forbid identifiable
conduct so that ‘interpretation by [the state court]
puts these words in the statute as definitely as if it
had been so amended by the legislature,’ claims of
impermissible vagueness must be judged in that
light.” Id. a 23.
As noted previously herein, Northouse is the most
recent pronouncement of the parameters of the defi-
nition of the practice of law in Indiana, which has
long been defined to include giving “legal advice and
counsel”. Fink, 17 N.E.2d at 96. Northouse specifical-
ly addressed a situation in which a non-lawyer met
with clients and discussed the clients’ current estate
planning efforts, collected information, and discussed
the idea of estate planning documents such as living
trusts, wills, and powers of attorney with clients. 848
N.E.2d at 670. During this same visit, the non-lawyer
collected payment from the clients for the estate
planning documents he had recommended during
their meeting. Jd. The non-lawyer then modified
forms that had been previously drafted by an attor-
ney and met with the clients again to assist them
in executing the legal documents. /d. at 671. The
23
Indiana Supreme Court cited prior Indiana case law
in finding that the practices described in the
Northouse opinion amounted to UPL. Id. at 672
(citing Miller, 463 N.E.2d at 251 (giving legal advice,
managing the affairs of a client, and ministering to
the legal affairs of another is the practice of law);
State ex rel. Pearson v. Gould, 487 N.E.2d 41, 42 (Ind.
1982) (giving advice as to the contents and legal effect
of a will is the practice of law)). The Northouse opin-
ion recognized decisions from other jurisdictions in
finding UPL where non-lawyers sold estate planning
services. Jd. (citing among others, Cleveland Bar, 837
N.E.2d at 1186). See also Hackin v. Arizona, 389 U.S.
143 (1967) (appeal dismissed for “want of a federal
question” on a claim that Arizona UPL statute was
“too vague and indefinite” to meet Constitutional
standards).
b. In addition to the plethora of case
law defining UPL in Indiana, Peti-
tioners knew that their conduct
was prohibited because they ob-
tained legal advice as to legality
of their practices and admitted
that identical conduct constitut-
ed UPL in Ohio.
Petitioners’ dismay and surprise that their
actions in Indiana amounted to UPL is not credible
because UFSC admitted in Ohio that the identical
business scheme was UPL. The model is recited at
Ohio Bar v. UFSC, 921 N.E.2d at 1054-55. (Cf App.
24
30, ¥ 2-36, { 16). The Supreme Court of Ohio accepted
and approved the proposed consent decree submitted
by UFSC and the Ohio State Bar Association setting
forth the essential elements of UFSC’s estate plan-
ning practices, which closely mirror the practices
recited in the Commissioner’s Findings of Fact and
the Disgorgement Order.° Given UFSC’s admission
that virtually the same conduct at issue here was
UPL in Ohio, Petitioners’ claim that they could not
have known their conduct in Indiana was UPL is
dubious at best.
Moreover, Petitioners solicited (and ignored) legal
advice from Attorney Bruce Kotzan, who advised in
1999:
It is my opinion that you can employ attor-
neys to represent individuals in the course of
your marketing of estate planning products,
but the lawyer’s representation of the clients
must truly be independent. The attorney
must represent the client and not the com-
pany. There must be contact between the cli-
ent and the attorney. In the event employees
* The Ohio rules prohibiting UPL, like Indiana’s are
judicially defined. While Ohio’s Gov. Bar R. VII(2)(A) defines the
UPL as “the rendering of legal services for another person by
any person not admitted to practice in Ohio,” the Supreme Court
of Ohio turns to its own precedent to further specify that
definition. See, e.g., Cincinnati Bar Ass’n v. Kathman, 748
N.E.2d 1091, 1095 (Ohio 2001) (citing Trumbull Cty. Bar Ass’n v.
Hanna, 684 N.E.2d 329, 331 (Ohio 1997) for the proposition that
non-attorneys engage in UPL when they market and sell living
trusts).
25
of the company engage in the gathering of in-
formation for the preparation of documents,
these employees must be acting under the
direction of the attorney.
(App. 36, | 17). The Indiana Supreme Court agreed
that “UFSC’s business model has marginalized the
attorney’s role to such a degree as to cross the line of
permissible practices.” (App. 13-14).
In advising UFSC about its business model and
practices, UFSC’s inside and outside counsel could
have easily found Indiana case law such as State ex
rel. Pearson v. Gould, 437 N.E.2d 41, 42 (Ind. 1982),
which held that preparing and drafting a will, and
giving legal advice about the contents and effect of a
will, constitute the practice of law. Petitioners simi-
larly could have reviewed Northouse, which held that
“siving advice as to the contents and legal effect of a
will constitute the practice of law.” 848 N.E.2d at 672.
Indeed, because of the similarity of the facts in
Northouse to Petitioners’ business scheme, the Indi-
ana Supreme Court noted that Northouse “should
have put UFSC on clear notice that its practices were
unlawful. Regardless of whether UFSC acted proper-
ly prior to Northouse to ascertain whether its practic-
es were lawful, the illegality of UFSC’s business
model certainly should have been apparent after
Northouse.” (App. 22-23).
Apparently in anticipation of litigation, UFSC
hired Professor William Hodes. (App. 52). Hodes
testified at length that Petitioners’ business model
26
and practices did not violate Rule 24. (App. 52, 44 26,
28). The Commissioner then admitted rebuttal testi-
mony by Sarah McShea, who testified that Petition-
ers’ practices amounted to UPL. (App. 52, { 26).
Petitioners’ argument that the testimony of Ms.
McShea proves the confusing nature of Indiana’s UPL
restriction is a non sequitur, as borne out by UFSC’s
admission in Ohio that it knew its business practices
amounted to UPL. Ohio Bar v. UFSC, 921 N.E.2d at
1054-55.
In addition to the fact that UFSC admitted its
practices violated the prohibition on UPL in Ohio,
UFSC devoted substantial resources to training its
employees as to the boundaries of the practice of law
and included disclaimers in its consumer materials,
purportedly to alert customers that its representa-
tives were not engaging in the practice of law. (App.
70, | 62; 78, { 88). If the definition of the practice of
law in Indiana is truly so mystifying that Petitioners
could not discern the line dividing permissible and
prohibited conduct, it is incredible that they would
tread so close to the line and train employees as to
where that boundary lies. See Nash v. United States,
229 U.S. 373, 377 (1913) (“the law is full of instances
where a man’s fate depends on his estimating rightly
. some matter of degree”).
Petitioners’ argument that not even the facts of
Northouse put them on notice that their practices
were illegal essentially advocates for a legal standard
requiring an Indiana case presenting the exact same
facts at issue for a Rule 24 violator to have received
27
sufficient notice that its actions may lead to dis-
gorgement of fees. (Petition at 21). Northouse already
presented the similar situation of a non-attorney
providing legal advice and selling legal documents,
including wills and trusts, to individuals. (App. 13).
The Ohio cases from 1997, 2001, and 2005 also pre-
sented similar sales of estate plan packages as those
sold by Petitioners. The due process requirements
applicable to a state’s governance of the practice of
law within its boundaries do not require further
specificity of the offense in this context. Flipside, 455
U.S. at 498 (“The degree of vagueness that the Con-
stitution tolerates-as well as the relative importance
of fair notice and fair enforcement-depends in part on
the nature of the enactment.”). Petitioners had fair
notice and received all the process that was due. Rule
24, and the definition of the practice of law in Indiana
are sufficiently specific that Petitioner’s request for
certiorari should be denied.
II. The Indiana Supreme Court Found Peti-
tioners’ Accusations of Prosecutorial Mis-
conduct by the ISBA to be Without Merit.
The ISBA’s settlement demand did not violate the
Petitioners’ due process rights. Though not mentioned
in the Petition, Petitioners’ argument of prosecutorial
misconduct has already been deemed “baseless” and
“without merit” by the Indiana Supreme Court. While
Petitioners contend that the ISBA’s settlement pro-
posal evidences prosecutorial bias, the Indiana Su-
preme Court specifically found that the effort was not
28
“indicative of any improper self-interest by the ISBA
in bringing unauthorized practice action under Rule
24.” (App. 17). In an attempt to resolve some of the
issues in the case, and in response to an “invitation
extended” by counsel for Petitioners, the ISBA pro-
posed various settlement concepts which would
ultimately be presented to the Indiana Supreme
Court for approval if they evolved into an agreement
between the parties. The Petitioners rejected this
effort. Settlement Letter at 1.
The ISBA had no authority to independently
resolve the Enforcement Action. The Indiana Su-
preme Court’s Order of January 30, 2009, encouraged
settlement and specifically required the Court’s
approval of any settlement. January 30, 2009 Order,
{| 7. In essence, the settlement process was akin to a
consent judgment — the parties were to present an
agreement as to the violation and appropriate sanc-
tion to the Indiana Supreme Court, which retained
the ultimate discretion to accept or reject that agree-
ment. The notion that the ISBA was improperly
attempting to use Rule 24 for financial benefit is
directly at odds with the reality that the Indiana
Supreme Court approved all settlements. Moreover,
this assertion was flatly rejected by the Commission-
er and the Indiana Supreme Court. (App. 16-18; 61-
63, 9 41-47). There was no basis for Petitioners’
claim that this action was predicated on such an
attempt. (App. 16-18; 61-63, | 41-47).
29
The parties’ settlement discussions did not reach
the merits of the charged Rule 24 violations. Al-
though the ISBA has the authority to bring a Rule 24
enforcement action, the Indiana Supreme Court is the
entity that ultimately decides whether Rule 24 was
violated and the appropriate remedy. The ISBA was
not in a position to drop all the claims, it was merely
able to stipulate certain facts and issues, in a joint
effort to streamline litigation and curtail the expendi-
tures of time and resources by the Indiana Supreme
Court, the Commissioner, and the parties. The set-
tlement discussions at no point contemplated that the
alleged rule violations would be reduced. Indeed,
there is no concept such as a “lesser included charge”
for which Petitioners could have bargained. A re-
spondent to a Rule 24 enforcement action has either
violated Rule 24 or has not; there is no middle
ground.
The primary case Petitioners rely on in support
of their position, Marshall v, Jerrico, Inc., 446 U.S.
238 (1980), concludes that the strict requirements
against the impermissible risk of bias “designed for
officials performing judicial or quasi-judicial func-
tions, are not applicable to those acting in a prosecu-
torial or plaintiff-like capacity.” /d. at 248. The
requirements against bias have been extended to
prosecutors and those in quasi-prosecutorial roles in
instances where the decision whether to initiate or
reduce criminal charges can result in some pecuniary
gain to the prosecutor. See, e.g., Young v. United
States ex rel. Vuitton Et Fils S.A., 481 U.S. 787, 805
30
(1987). As explained in Young, a prosecutor represent
ing the interests of a private party in a related civil
action “may be tempted to bring a tenuously support
ed prosecution if such a course promises financial or
legal rewards for the private client. Conversely, a
prosecutor may be tempted to abandon a meritorious
prosecution if a settlement providing benefits to the
private client is conditioned on a recommendation
against criminal charges.” /d.
The ISBA’s role in a Rule 24 enforcement action
is not subject to these concerns because the ISBA
could not have unilaterally settled this Enforcement
Action. The ISBA had not previously engaged in
settlement negotiations presenting an opportunity for
financial gain via a Rule 24 enforcement action. (App.
16-18; 61-63, 7] 41-47). The appearance of improprie-
ty warned against in Young does not exist because the
Indiana Supreme Court ordered that it must approve
all settlement agreements. This arrangement guards
against even the appearance of impropriety. Young,
481 U.S. at 811.
This case does not present a situation akin to
Young, in which an individual prosecuting an action
could realize a private benefit from the result. Rather,
as in Marshall, “no governmental [or other] official
stands to profit economically from vigorous enforce-
ment” of Rule 24. 446 U.S. at 239. In Marshall, this
Court upheld the propriety of a statutory provision
requiring civil penalties be returned to the govern-
mental agency charged with investigating and enforc-
ing child labor violations as reimbursement for the
expenses incurred in the enforcement process. /d. at
247. As explained in Tumey v. Ohto “the legislature of
a State may, and often ought to, stimulate prosecu
tions for crime by offering to those who shall initiate
and carry such prosecutions rewards for thus acting
in the interest of the State and the people.” Tumey ¢
Ohio, 273 U.S. 510, 535 (1927) (emphasis added). As
in Marshall, the ISBA does not ultimately assess a
Rule 24 violation or determine the appropriate sanc
tion; the Indiana Supreme Court reserves this func
tion to itself. See Marshall 446 U.S. at 247 (“The
function of assessing a violation is akin to that of a
prosecutor or civil plaintiff, and the alleged violator
is entitled to a hearing before a judge)
The ISBA is merely the relator of the State’
interest in protecting Indiana citizens from the harm
ful effects of UPL. To the extent that the ISBA’s role
in the Rule 24 proceedings can be deemed analogous
to that of a criminal prosecutor, Petitioners failed to
develop any facts or law demonstrating that the ISBA
was unfairly interested in the outcome of this action
The ISBA had no expectation that initiating the
Enforcement Action would result in financial pain
and there was no evidence of prosecutorial bias
il. The Indiana Supreme Court Correctly
Held the Individual Petitioners Jointly
and Severally Liable for the Disyvoryge
ment of Fees and Payment of Costs.
Petitioners incorrectly argue that the Indiana
Supreme Court did not enter any findings to support
the imposition of joint and several hability for the
disgorgement of fees and costs over the individual!
Petitioners. (Petition, 35). Both the Commissioner
Findings of Fact and the Indiana Supreme Court’
opinion offer generous factual support for finding the
individual Petitioners just as lable as UFSC for
engaging in the UPL. Indeed, contrary to the Pets
lioners argument, this 1s not a case of “guilt by
association rather, the individual Petitioners here
are the “association.” (Petition, 38)
In a practical sense, UFSC cannot sit for the bar
exam, and thus, technically cannot practice law. See
Cincinnati Ins. Co. v. Wills, 717 N ke 2d 151. 158 (Ind
1999) (noting that “only a natural person c; he
The cases cited by Petitioners in upport of this argument
NAACT v. Clatborne Tlardware Co 1654 US. BRE (1982) and
Rizzo v. Goode, 2. S 642 (1976 i Inapposite ‘The
Claiborne case + with the exeremse of First Amendment
lrecdoms ip connection with legitimate activity Here, there
ire no First Amendment concerns and the activity at issue is not
lawtlul : imilarly, the ei: @ Cast involved thie | thiitiee ol iT)
injunction against persons who had no connection with the
activity being enjoined. Here, the individual Petitioners are not
innocent bystander: they were the individuals at UFSC© that
orchestrated, participated in, and profited from, the unlawful
wctivily
33
admitted to the bar”). However, the Indiana Supreme
Court has noted that, in the context of the practice of
law, “agency doctrine permits an unlicensed legal
entity to employ licensed agents to perform those acts
requiring a license.” Jd. at 160 (internal citation
omitted). In other words, to the extent a corporation
is said to practice law, it does so through its agents.
On this point, the Court stated:
Regardless of whether a partnership, a pro-
fessional corporation, an insurance company,
or any other legal entity may be said to be
practicing law in some sense, we believe
the proper focus of the unauthorized
practice inquiry is whether the chal-
lenged activity results in the “unauthor-
ized” practice by the _ individuals
involved.
Id. (emphasis added). Ignoring this precedent, the
individual Petitioners engage in misdirection by
attempting to now distance themselves from the
UFSC entity — the very entity they owned, managed,
worked for, and/or profited from. Consistent with the
standard set forth in Wills, the examination of
UFSC’s business model and practices in the underly-
ing Enforcement Action necessarily centered around
the activities being performed by the _ individual
Petitioners who acted on behalf of UFSC.
During the course of the proceedings, including
the 3-day evidentiary hearing, the ISBA proved that
UFSC’s business model and practices constituted
UPL. For instance, it was established that non-lawyer
34
salespeople without attorney supervision engaged in
UPL by, among other things, marketing and selling
estate plans, providing legal advice, and explaining
the relevance and purpose of legal documents to
customers. (App. 29-38, |J 1-23). It logically follows
that Petitioners Jody Waugh, Raymond Phillips and
James Boyles, who worked as non-lawyer salespeople
for UFSC, engaged in acts constituting UPL in their
respective capacities.
Moreover, several of the individual Petitioners
owned and/or managed the UFSC enterprise and
facilitated UPL. Since the company’s inception in
1995 to late 2008, Petitioners Richard Follett and
Jayne Follett were principals of UFSC, whose sole
shareholder was the Jayne A. Follett Family Limited
Partnership (“Follett Family L.P.”). (App. 71, 4 63).
Then, after a curious corporate restructuring of UFSC
during the pendency of the Enforcement Action,
UFSC became owned by United Financial Resources,
which in turn, was held by the Follett Family L.P.
(App. 71, 4 64). The members of the Follett Family
L.P. include Petitioners Dick Follett, Jane Follett,
Richard L. Follett II, Beau Follett, and James Boyles.
(App. 71, 964). These individuals (who have an
ownership interest in UFSC), in addition to Petition-
ers Raymond C. Phillips, Gary Lovelady, Sharon
Dorsey, and Sherry Jordan, formed UFSC’s home
* Each of these Petitioners was specifically implicated in
UPL activities concerning certain UFSC customers that were
named in the ISBA’s Petition. (App. 98-138, 134-248).
35
office senior management during the relevant time
period — a fact stipulated by the parties. (App. 72,
{| 65). John Joyce was subsequently hired as a Panel
Attorney for UFSC in February 2000.” (App. 74, 4 79).
Referring to non-lawyer salespeople and Panel
Attorneys, the Indiana Supreme Court noted that “all
of these persons are essential to UFSC’s core business
model.” (App. 7). In like fashion, each of the individu-
al Petitioners also played a role in the UFSC business
model, whether in training, managing and/or aiding
non-lawyer salespeople, or in marketing and selling
estate plans to customers while dispensing legal
advice in the process. Ultimately, all of the Petition-
ers share at least one thing in common — they each
personally profited from the unlawful activities of the
UFSC enterprise, whether in the form of a dividend,
distribution, salary, or commission. As the Disgorge-
ment Order recognizes, the individual Petitioners
should not be allowed to profit from these illicit gains.
Notwithstanding Petitioners’ argument to the
contrary, the State is not required to pierce the corpo-
rate veil in order to impose liability on an individual
that engages in UPL on behalf of a corporation.
Petitioners cite to no authority for this proposition.
Individuals, just like the entities they work for, are
* On April 17, 2609, the ISBA moved to amend its Petition
to include claims against the named Panel Attorneys, including
John Joyce, for aiding or assisting non-lawyers in the UPL. The
Commissioner granted the ISBA’s motion on May 18, 2000
36
equally subject to the restrictions Rule 24 imposes
and cannot shield themselves from hability by simply
hiding behind a corporate structure. Indeed, in the
context of a UPL action, it is not unique to hold
individual violators liable despite the fact they were
acting on behalf of a corporation. See, e.g., Cleveland
Bar, 837 N.E.2d at 1187-88 (imposing joint and
several liability on the individual respondents of a
trust mill in a UPL action). Like the individual re-
spondents’ relationship with the entity in Cleveland
Bar, the individual Petitioners here were under
contract with UFSC, were agents of UFSC, and
“received extensive training from [UFSC] on market-
ing and selling trust and estate plans to customers.”
Id. at 1187.
In imposing joint and several liability, the Ohio
Supreme Court in Cleveland Bar noted, inter alia,
that the respondents’ violations “were flagrant be-
cause they aggressively targeted customers even after
[a prior 2001 Ohio decision], which warned that trust-
mill operations are UPL violations.” Jd. at 1188. The
Court also held that the individual respondents had
“willfully defrauded their customers by selling trusts
and estate documents without authorization.” Jd. The
instant case is analogous in virtually every way. The
individual Petitioners were agents of UFSC, they
continued to aggressively target customers despite
the decision in Northouse in 2006. As in Cleveland
Bar, joint and several liability is warranted here.
Finally, the notion that the individual Petitioners
were not afforded “even the basic procedural safe-
guards” and were given “little if any opportunity to
conduct discovery” (Petition, 39) is unsupported by
the record. First, counsel for Petitioners admitted
during oral argument before the Indiana Supreme
Court that formal discovery in this matter was not
necessary and that the parties fully cooperated in
informal discovery efforts. Oral Argument at 45:19.
Further, these individuals were named respondents
in the ISBA’s Petition since its inception and were
represented by the same counsel that defended
UFSC. Through their counsel, they participated in
the proceedings, engaged in discovery, and had an
opportunity to present their defense at the 3-day
evidentiary hearing.” Prior to the hearing, they filed
seven (7) pre-trial motions, including a motion to
dismiss the Enforcement Action, which was denied.
(App. 57, ¥ 40).
After conducting the evidentiary hearing includ-
ing three days of testimony and hundreds of UFSC’s
internal documents, the Commissioner correctly
entered findings detrimental to the Petitioners. The
Indiana Supreme Court reviewed the record and held
that Petitioners engaged in UPL. The individual
'° Despite being individually named as respondents in the
enforcement action, Petitioners Jayne A. Follett, Sharon Dorsey,
Sherry Jordan, and Gary Lovelady did not personally appear for
the evidentiary hearing. (App. 56, 4] 37).
38
Petitioners received appropriate due process, proce-
dural and substantive, and cannot now argue other-
wise.
CONCLUSION
For all of the foregoing reasons, Respondent
respectfully requests that Petitioners’ request for
certiorari be denied.
Respectfully submitted,
KEVIN P. McGOFF
Counsel of Record
KARL L. MULVANEY
RAFAEL A. SANCHEZ
MARGARET M. CHRISTENSEN
BINGHAM MCHALE LLP
2700 Market Tower
10 West Market Street
Indianapolis, Indiana 46204
317-635-8900
kmegoff@binghammchale.com
Attorneys for Respondent
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