Supreme Court Ruling Reduces Options, Raises Costs For Indiana Residents

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United Financial Systems, Corporation reacts to Supreme Court Ruling. Middle Income Consumers Likely to Be Hardest Hit by New Limitations

Nonlawyer professionals now have extra cause to hesitate before, or avoid, helping their clients obtain legal services to address estate planning needs. That’s because, by doing so, they may be charged with practicing law without a license, according to a recent decision by Indiana’s highest court. The decision, supposedly designed to protect the state’s consumers, actually reduces their choices for estate planning, and increases the cost of these services.

On April 14, 2010, the Indiana Supreme Court issued its decision in State ex rel. Indiana State Bar Association v. United Financial Systems, Corporation. (Case Number: 94S00-0810-MS-551) In that opinion, the Court concluded that United Financial, an insurance agency in business since 1982, engaged in the impermissible practice of law, although the company did not prepare legal documents, repeatedly informed its customers that it was not a law firm and did not provide legal advice.

In addition to offering insurance products, United Financial also offered educational and planning-related information to many of its Indiana customers. This information addressed the need to create an estate plan that addresses life events such as mental incapacity as well as dying, and was geared toward the company’s predominantly lower and middle income retiree customer base.

United Financial also offered to refer interested customers to independent attorneys in Indiana who would prepare estate plans for those customers. The practice grew out of the company’s fundamentally held belief that, as stated in its web site, the “reality is that the individual with modest assets is the one who can least afford to neglect to plan.”

The company consulted numerous expert attorneys regarding the legality of its business practices. United Financial has always “respected the rules involved in meeting the difficult challenges within a multi-disciplinary professional business environment,” according to President Richard L. Follett.

W. William Hodes, a law professor for 20+ years and the co-author of The Law of Lawyering, the pre-eminent text on issues of legal ethics and the practice of law, concluded that the Company’s practice was legal. In fact, Hodes testified on behalf of the company at trial. Nevertheless, the Court said that the business practice constituted illegally practicing law.

Historically, Indiana law defined practicing law as giving legal advice, preparing legal documents or representing someone in court. Despite an absence of direct evidence showing that United Financial performed these prohibited activities, the Court nevertheless ruled against the company, heavily basing its conclusion on the reduced legal fees the independent Indiana attorneys agreed to charge United Financial’s customers.    

The Bar Association’s pursuit of this case represented the latest in long line of efforts to root competitors from the marketplace. In 2003, the Bar Association sought to change the rules governing the practice of law. At that time, the Court decided not to go along with the Bar.

Even the U.S. Department of Justice and the Federal Trade Commission took notice, expressing serious concern that the Bar Association’s proposal would “harm consumers, and not serve the public interest.” More specifically, the FTC concluded “that consumers could be adversely impacted … because it is … likely to prevent nonlawyers from providing, in competition with lawyers, services that Indiana law currently permits. If implemented as written, the … rule would likely raise costs for consumers and limit their competitive choices.”

The ripple effects of this decision stand to be felt across the marketplace in Indiana. Any nonlawyer, 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.
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.

As a result, the outcome the FTC feared in 2003 has come to fruition in Indiana in 2010. Nonlawyers are now foreclosed from activities previously allowed in Indiana, thus restricting competition and raising costs for consumers, even in these extremely difficult economic times. While the Bar Association considers this a great victory for its members, the Court’s ruling is regrettably a defeat for the interest of Indiana’s working families.    

Contact: Sharon M. Dorsey, C.O.O.
sdorsey(at)unitedfin(dot)com
6510 Telecom Drive, Suite 310
Indianapolis, IN 46278
(800) 860-8275, ext. 176     

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Sharon M. Dorsey, C.O.O.
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