Consumer Attorney Services, P.A. v. State of Indiana

FILED
May 23 2016, 9:04 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
Kevin P. Podlaski Gregory F. Zoeller
Micah J. Nichols Attorney General of Indiana
Beers Mallers Backs & Salin, LLP
Fort Wayne, Indiana David Lee Steiner
Aaron T. Craft
Deputy Attorneys General
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Consumer Attorney Services, May 23, 2016
P.A., The McCann Law Group, Court of Appeals Cause No.
LLP, and Brenda L. McCann, 49A05-1504-PL-274
individually and as owner Appeal from the Marion Superior
and/or officer of Consumer Court
Attorney Services, P.A. and the The Honorable John F. Hanley,
McCann Law Group, LLP, Judge
Appellants-Defendants, Trial Court Cause No.
49D11-1401-PL-1477
v.
State of Indiana,
Appellee-Plaintiff.
Barnes, Judge.
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Case Summary
[1] Consumer Attorney Services, P.A. (“CAS”), The McCann Law Group, LLP
(“MLG”), and Brenda McCann (“McCann”) (collectively “the Defendants”)
appeal the trial court’s denial of summary judgment against the Attorney
General of Indiana (“Attorney General”). We affirm in part and reverse in
part.
Issues
[2] The issues before us are:
I. whether MLG, CAS, and McCann are exempt from
liability under the Credit Services Organization Act under that
Act’s exemption for attorneys;
II. whether MLG, CAS, and McCann are exempt from
liability under the Mortgage Rescue Protection Fraud Act under
that Act’s exemption for attorneys;
III. whether MLG, CAS, and McCann are exempt from
liability under the Home Loan Practices Act; and
IV. whether MLG, CAS, and McCann are exempt from
liability under the Deceptive Consumer Sales Act.
Facts
[3] The evidence most favorable to the Attorney General as the summary judgment
nonmovant is that McCann, a Florida attorney, incorporated CAS in Florida in
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April 2011.1 Later, CAS was converted into MLG in Florida. On March 1,
2013, MLG registered with the Indiana Secretary of State as a foreign LLP.
From April 8 to September 9, 2013, MLG operated in Indiana under the CAS
name. MLG/CAS2 held itself out as a multi-jurisdiction consumer advocacy
law firm designed to assist homeowners who were facing foreclosure. It
advertised its services to Indiana residents regarding foreclosure defense or
home loan modification on the internet, television, and radio. Customers who
agreed to obtain MLG/CAS’s services were required to provide bank account
information from which monthly payments to MLG/CAS were withdrawn
automatically. MLG/CAS increased the monthly payment amount if a
customer’s mortgage company initiated foreclosure proceedings.
[4] McCann was never licensed to practice law in Indiana. MLG/CAS entered
into arrangements with five different licensed Indiana attorneys to carry out its
business here. All of these attorneys practiced law in Indiana separate and
apart from their affiliation with MLG/CAS. With attorney Justin Wall,
MLG/CAS originally entered into an “Associate Agreement,” and he later
executed a “Partners Addendum.” App. pp. 75, 441. The partnership
agreement granted Wall a one percent non-voting interest in MLG/CAS.
Under the agreement, Wall was to: provide legal representation, advice, and
1
McCann later was effectively disbarred by the Florida Supreme Court. See In re Petition for Disciplinary
Revocation of McCann, 153 So.3d 905 (Fla. 2014).
2
We will refer to MLG and CAS collectively as MLG/CAS, given that it was one single entity that used
both names at various times.
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supervision to clients on Indiana cases as assigned to him by MLG/CAS;
participate in client intake and make referrals to other attorneys as needed;
maintain knowledge of and advise MLG/CAS of Indiana professional
responsibility rules; review and audit monthly firm reports; and participate in
firm meetings and comply with firm rules. Wall’s employment with
MLG/CAS was described as an “at-will relationship.” Id. at 442.
[5] Attorneys Eric Jackson and Kimberly Vereb entered into “Of Counsel”
agreements with MLG/CAS. Id. at 81, 94. These agreements specified that
Jackson and Vereb were independent contractors and not employees of
MLG/CAS. Jackson’s agreement specified that he was retained for the
purpose of assisting firm clients in the filing of bankruptcy petitions, using
documentation provided solely by the firm.3 Vereb’s agreement was not so
limited. It did expressly acknowledge that Vereb was not intended to be
employed full-time, and that she was solely responsible for all overhead
expenses associated with her practice.
[6] Attorneys Jonathan Albright and Jeffrey Branstetter entered into “Associate”
agreements with MLG/CAS. Id. at 83, 86. These agreements specified that
Albright and Branstetter were considered independent contractors and detailed
the type and scope of legal work they were expected to perform.
3
Most of Jackson’s agreement is not in the record before us.
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[7] The Attorney General began investigating MLG/CAS after receiving numerous
consumer complaints. The investigation focused on five particular Indiana
customers of MLG/CAS: James Vaughn, Terrance Hollowell, Tonya Green,
James Daughtery, and Petronie Paul. These five individuals executed
foreclosure defense agreements with MLG/CAS between January 9, 2012, and
August 29, 2012. The individuals have asserted that they had little to no
communication with any Indiana attorneys regarding their cases and, in some
instances, were never informed who their assigned Indiana attorney was.
Additionally, the individuals and the Attorney General have asserted that
MLG/CAS and the Indiana attorneys performed little to no actual legal
services on the individuals’ behalf, yet the individuals were required to pay fees
upfront to MLG/CAS that were never returned. The individuals and Attorney
General also claim that the individuals received little communication from
MLG/CAS, that the bulk of such communications was through persons other
than the Indiana attorneys, and that MLG/CAS representatives were evasive in
communicating when contacted by the individuals.
[8] Following the investigation, the Attorney General sued the Defendants for
purported violations of the Indiana Credit Services Organization Act
(“CSOA”), Indiana Code Chapter 24-5-15, the Mortgage Rescue Protection
Fraud Act (“MRPFA”), Indiana Code Article 24-5.5, the Home Loan Practices
Act (“HLPA”), Indiana Code Article 24-9, and the Deceptive Consumer Sales
Act (“DCSA”), Indiana Code Chapter 24-5-0.5. Specifically, the Attorney
General alleged the Defendants violated the CSOA by receiving payment for
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services before they were completed and by failing to post and file a surety bond
of $25,000 before conducting business in Indiana. The Attorney General
alleged the Defendants violated the MRPFA by receiving compensation before
full performance of contracted services and by failing to provide certain written
notices required by both the MRPFA and the CSOA. As for the HLPA, the
Attorney General alleged that the Defendants engaged in “deceptive acts”
prohibited by the HLPA specifically by violating the CSOA and the MRPFA.
Id. at 24. Finally, with respect to the DCSA, the Attorney General alleged that
the Defendants committed prohibited “deceptive acts” by violating the CSOA
and also by “representing to consumers that the Defendants had the
characteristics of experienced consultants with in-depth industry knowledge on
how to avoid and stop foreclosure . . . .” Id. at 25. The Attorney General
further claimed under the DCSA that the Defendants knowingly and
intentionally engaged in incurable deceptive acts, thus subjecting the
Defendants to fines of $500 per violation. The Attorney General’s lawsuit did
not name any of the individual Indiana licensed attorneys as defendants.
[9] The Defendants moved for summary judgment. They claimed they were
explicitly exempt from the scope of the CSOA and the MRPFA because those
Acts expressly do not apply to attorneys, and that attorneys are impliedly
exempt from the HLPA and DCSA, particularly given the nature of the
Attorney General’s allegations. The trial court denied the Defendants’
summary judgment motion but certified its order for interlocutory appeal,
which we have agreed to entertain pursuant to Indiana Appellate Rule 14(B).
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Analysis
[10] When we review a grant or denial of a motion for summary judgment, we apply
the same standard as the trial court. Knighten v. E. Chicago Hous. Auth., 45
N.E.3d 788, 791 (Ind. 2015). “The moving party must show there are no
genuine issues of material fact and it is entitled to judgment as a matter of law.”
Id. If this burden is met, the non-moving party must present evidence
establishing the existence of a genuine issue of material fact. Id. We must
consider only the evidence specifically designated by the parties in determining
whether summary judgment should have been granted or denied. Id. (citing
Ind. Trial Rule 56(C), (H)). “We construe all factual inferences in favor of the
non-moving party and resolve all doubts regarding the existence of a material
issue against the moving party.” Id. We may affirm the denial of summary
judgment on any legal theory or basis supported by the designated evidence. 4
Illinois Bulk Carrier, Inc. v. Jackson, 908 N.E.2d 248, 253 (Ind. Ct. App. 2009),
trans. denied.
4
The Defendants argue in their reply in brief that the Attorney General has improperly raised arguments for
affirming the denial of summary judgment that do not “focus on the actual issue that was certified on appeal,
which is whether a Law Firm Exception exists or should exist under Indiana’s Consumer Protection Laws.”
Reply Br. p. 3. Neither the trial court’s order certifying its denial of summary judgment for interlocutory
appeal nor this court’s order accepting jurisdiction narrowly limited the issue to be decided on appeal.
Rather, consistent with the proper standard of review, we may affirm the denial of the Defendants’ motion
for summary judgment on any theory supported by the designated evidence.
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I. CSOA
[11] The CSOA prohibits certain actions by “credit service organizations,” which
are defined as persons (or companies) that promise to do things such as improve
credit scores, obtain credit for another person, or obtain a delay or forbearance
of a mortgage obligation. Ind. Code § 24-5-15-2(a). Among other things, a
credit service organization cannot charge or receive money before the complete
performance of services that the organization agreed to perform for a consumer
unless the organization has procured a surety bond of $25,000. I.C. §§ 24-5-15-
5, 24-5-15-8. The CSOA also requires detailed information to be provided to a
consumer before entering into a contract with a credit services organization,
and requires that consumers be informed of their right to cancel a contract with
the organization within three days. I.C. §§ 24-5-15-6, 24-5-15-7.
[12] The CSOA also explicitly states: “The term ‘credit services organization’ does
not include any of the following: . . . (6) A person admitted to the practice of
law in Indiana if the person is acting within the course and scope of the person’s
practice as an attorney.” I.C. § 24-5-15-2(b)(6). Also, “person” is defined under
the CSOA to mean “an individual, a corporation, a partnership, a joint venture,
or any other entity.” I.C. § 24-5-15-4. The CSOA does not explicitly state
whether it exempts law firms from the scope of its coverage. We must interpret
the statute to determine whether the Legislature also intended to include law
firms within this exemption. The Defendants argue that they ought to be
included within that exemption.
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[13] “The first step in interpreting a statute is to determine whether the Legislature
has spoken clearly and unambiguously on the point in question.” Basileh v.
Alghusain, 912 N.E.2d 814, 821 (Ind. 2009). If a statute is clear and
unambiguous, we apply no rules of construction other than to take words and
phrases in their plain, ordinary, and usual sense. Id. However, if a statute is
susceptible to more than one interpretation, it is deemed ambiguous and thus
open to judicial construction and application of rules of interpretation. Id.[14] If a statute is ambiguous, our goal in applying rules of statutory construction is
to determine and give effect to the Legislature’s intent. Adams v. State, 960
N.E.2d 793, 798 (Ind. 2012). Among other things, we must read statutes as a
whole, “avoiding excessive reliance on a strict, literal meaning or the selective
reading of individual words.” Id. Additionally, we will presume the
Legislature intended statutory language to be applied logically and consistently
with the statute’s underlying policy and goals, and we avoid construing a
statute so as to create an absurd result. Walczak v. Labor Works-Ft. Wayne LLC,
983 N.E.2d 1146, 1154 (Ind. 2013). We must assume that the Legislature used
all language in a statute intentionally, and we will strive to give effect to every
word. Pabey v. Pastrick, 816 N.E.2d 1138, 1148 (Ind. 2004). Statutes should be
given practical application and construed so as to prevent absurdity, hardship,
or injustice, and to favor public convenience. Id. Any exceptions to a statute’s
application generally should be strictly construed. Natural Res. Comm’n of
Indiana Dep’t of Natural Res. v. Porter County Drainage Bd., 576 N.E.2d 587, 589
(Ind. 1991).
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[15] The Attorney General and the Defendants are in full agreement that the CSOA
is ambiguous with respect to whether it exempts law firms from the definition
of a credit service organization. And, the Attorney General concedes on appeal
“that the law firm of an Indiana attorney exempt under the CSOA . . . is also
exempt from the CSOA.” Appellee’s Br. p. 34. The parties agree with the logic
of the Kansas Supreme Court’s decision in Hays v. Ruther, 313 P.3d 782 (Kan.
2013), which interpreted a similarly-worded attorney exemption under Kansas’s
Credit Services Organization Act (“KCSOA”), which also did not include an
express law firm exemption.
[16] In Hays, two Kansas residents brought suit in federal court against an out-of-
state limited liability company that they had hired to assist them with consumer
debt and dealing with creditors. The suit alleged violations of the KCSOA and
the Kansas Consumer Protection Act (“KCPA”). As with the Indiana CSOA,
the KCSOA exempted “[a]ny person licensed to practice law in this state” from
the definition of a credit services organization, and defined a “person” to
include corporations, partnerships, and other business organizations. Hays, 313
P.3d at 786 (citing Kan. Stat. Ann. §§ 50-1116(b) and 50-1117(f)). The Hays
court concluded that the KCSOA was ambiguous, noting there was a conflict
between the attorney exemption and the definition of a “person” because
business organizations cannot be licensed to practice law. Id. Engaging in
statutory construction, the court held, “the legislature intended the attorney
exception in KCSOA to apply to the law firm of an attorney who is exempt
from the provisions under the Act.” Id.Court of Appeals of Indiana | Opinion 49A05-1504-PL-274 | 49A05-1504-PL-274 Page 10 of 27
[17] The first reason the court gave for this conclusion was that “exempting
attorneys without exempting law firms may produce absurd results.” Id. The
court explained:
For example, attorneys often employ consultants and paralegals
who may engage in timekeeping for billing purposes. To exempt
attorneys from statutory requirements and penalties while
subjecting their support staff to such requirements and penalties
would at the very least vastly complicate the practice of law and
in many instances could render it impractical. Furthermore,
attorneys frequently set up their practices as business
organizations. Attorneys who elect to form limited liability
companies would find themselves in the peculiar situation of
being exempt as individuals from the reach of KCSOA but
subject to all the requirements of KCSOA in their business
organizational capacity.
Id. (citation omitted). The court held it would be impracticable and
unreasonable to interpret the KCSOA to not apply to a covered attorney’s law
firm. Id.[18] The court gave a second reason for its holding: after the filing of the suit in the
case, the Kansas Legislature amended the KCSOA to expressly include an
attorney’s law firm as being exempt from the Act’s coverage. Id. at 787.
Minutes from discussion of the amendment in the legislature indicated that this
amendment was intended as a clarification, not expansion, of the original
attorney exemption. Id.
[19] Our General Assembly has not enacted an express law firm exemption under
the CSOA, unlike the Kansas Legislature. However, the Attorney General
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nonetheless concedes that it would be absurd to exempt a licensed Indiana
attorney from the CSOA’s coverage, but not that attorney’s law firm. We
agree. It would be unreasonable to excuse an attorney from complying with the
CSOA in his or her individual capacity while simultaneously requiring him or
her to comply with it as an employee or member of a law firm. It also would
expose non-lawyer employees of a law firm to indirect liability for violations of
the CSOA for which the firm’s attorneys would be immune.
[20] Additionally, we presume that in enacting the CSOA and creating the attorney
exemption, the General Assembly was cognizant of the Indiana Supreme
Court’s traditional role in regulating the practice of law in this state through its
Disciplinary Commission, the Admission and Discipline Rules, and the Rules
of Professional Conduct. The constitutional basis of this role is found in Article
7, Section 4 of the Indiana Constitution, which vests the Indiana Supreme
Court with “original jurisdiction . . . in admission to the practice of law,
discipline or disbarment of those admitted; [and] the unauthorized practice of
law.” Additionally, Indiana Code Section 33-24-1-2(b) provides that our
supreme court “has exclusive jurisdiction to: (1) admit attorneys to practice law
in all courts of the state; and (2) issue restraining orders and injunctions in all
cases involving the unauthorized practice of the law; under rules and
regulations as the supreme court may prescribe.” Although this statute makes
specific reference only with respect to “restraining orders and injunctions in all
cases involving the unauthorized practice of law,” our supreme court seems to
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take a broader view of its exclusive jurisdiction in this area, as reflected in
Indiana Appellate Rule 4(B):
The Supreme Court shall have exclusive jurisdiction over the
following matters:
(1) The Practice of Law.
Matters relating to the practice of law including:
(a) Admissions to practice law;
(b) The discipline and disbarment of attorneys admitted to
the practice of law; and
(c) The unauthorized practice of law (other than criminal
prosecutions therefor).
Thus, our supreme court has exclusive jurisdiction to penalize lawyers for
ethical violations beyond issuing injunctions against the unauthorized practice
of law. We further note that, under Article 3, Section 1 of the Indiana
Constitution, the separation of powers provision, no member of the legislative,
executive, or judicial branches may exercise any of the functions of another
branch of government, except as expressly provided by the Constitution.
[21] Appellate Rule 4(B) does contain an express exemption from our supreme
court’s exclusive jurisdiction regarding lawyer discipline, with its reference to
“criminal prosecutions” for the unauthorized practice of law. Currently, such
prosecutions are expressly permitted by Indiana Code Section 33-43-2-1. It has
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been held that such prosecutions do not violate the separation of powers
doctrine. Levy v. State, 799 N.E.2d 71, 75-76 (Ind. Ct. App. 2003) (addressing
preceding version of statute, Ind. Code § 33-1-5-1), trans. denied; see also State ex
rel. Indiana State Bar Ass’n v. Northouse, 848 N.E.2d 668, 675 (Ind. 2006) (citing
Levy with approval). We conclude however, given the constitutional language
and the language of Appellate Rule 4(B), that any intrusions upon our supreme
court’s authority regulating the practice of law in this state must be expressed by
our General Assembly in clear and unmistakable language. Such language is
lacking under the CSOA. Moreover, we deem that the intent of the General
Assembly in exempting attorneys from coverage of the CSOA was to entrust
our supreme court to adequately police lawyers and their firms in this area.
There also is the potential for conflicting obligations between the CSOA and the
Rules of Professional Conduct regarding matters such as attorney fees and
obligations to clients; it makes sense that lawyers and their firms should
concern themselves with having to comply with one set of rules, not multiple
sets.
[22] Although the Attorney General agrees that licensed Indiana attorneys and their
law firms are both exempt from the CSOA, it contends that MLG/CAS does
not actually qualify as a “law firm,” or at least that there are questions of fact as
to whether it does so. The Attorney General notes that much of the
complained-of activity in this case occurred out-of-state (such as
communication or lack thereof), that the Indiana attorneys had very little actual
involvement in providing legal representation to Indiana clients of MLG/CAS,
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and that much of the document preparation was handled by non-Indiana
attorneys or employees of MLG/CAS and not the Indiana attorneys.
[23] The Attorney General notes that in Hays, the Kansas Supreme Court stated that
it was “not asked to define a law firm, and we take no position on whether the
defendant Consumer Law Associates, LLC is an exempt law firm under the
KCSOA.” Hays, 313 P.3d at 787. The Attorney General then directs us to
Parks v. Persels & Associates, LLC, 509 B.R. 345 (D. Kan. 2014). In that case, a
heavily-indebted Kansas individual contacted a debt settlement company that
advertised on the internet; that company in turn referred the individual to
Persels and Associates, LLC (“Persels”), a Maryland-based law firm with no
Kansas-based partners or employees. Persels, however, had an independent
contractor relationship with a Kansas attorney, Stan Goodwin, who was
supposed to provide debt settlement services for the individual. The vast
majority of the actual work related to the case, however, was performed by
Persels’s staff and attorneys other than Goodwin. After the individual had
made many months of payment on a debt settlement plan, his total debt had
barely been paid down because most of the payments went toward legal fees for
Persels and Goodwin. One of the individual’s creditors brought suit against the
individual, who then filed for bankruptcy. The bankruptcy trustee then filed an
adversarial action against Persels and Goodwin to recover payments made to
them, pursuant to the KCSOA and the KCPA, and also alleged legal
malpractice and breach of fiduciary duty.
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[24] Persels and Goodwin moved for summary judgment; the bankruptcy court
recommended denial of this motion, which the district court adopted. With
respect to claims under the KCSOA versus Persels, the court declined to allow
the firm to invoke the attorney exemption based upon its independent
contractor relationship with Goodwin. The court noted that none of Persels’s
members or staff attorneys were admitted to practice law in Kansas, which was
the reason it entered into an independent contract arrangement with Goodwin
in order to represent the individual debtor. Parks, 509 B.R. at 352-53. The
court concluded with respect to Persels:
If anything, the court finds that the problem of the “absurd
result” identified in Hays would arise only if the court were to
adopt Persels’ argument relating to the exemption. If the court so
held, it would mean that Kansas attorneys and their law firms
would be subject to regulation by the Kansas Supreme Court,
while non-lawyer credit services organizations were subject to the
KCSOA. But out-of-state attorneys, such as Persels, would
remain wholly unregulated under Kansas law.
Id. at 353.
[25] The court also concluded that even Goodwin was not necessarily entitled to the
attorney exemption under the KCSOA. It noted the lack of work he performed
on the case and lack of advice given and that fees were paid solely to Persels,
who in turn paid Goodwin. The court held:
The facts set forth by the bankruptcy court would support the
conclusion that Goodwin is not entitled to the exemption. As
noted earlier, the KCSOA exemption applies only to an attorney
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“acting within the course and scope of such person's practice as
an attorney.” Here, the [sic] Goodwin’s departure from the
minimal expectations of any attorney is so complete that a
rational fact finder could determine that he was not acting as an
attorney at all. The bankruptcy court correctly observed, “If this
is the extent of what Goodwin does for his ‘clients,’ whether he is
‘practicing law’ as that term is commonly understood is
questionable.”
Id.
[26] The Attorney General urges us to find this case parallel to Parks and to hold
that there are genuine issues of material fact as to whether MLG/CAS actually
was the “law firm” of the Indiana lawyers so as to warrant application of the
CSOA attorney exemption. We decline to do so. First, the Parks court’s
decision not to exempt Persels from coverage of the KCSOA seems to have
been based in large part on the perception that if the exemption was invoked,
Persels could evade both compliance with the KCSOA and regulation by the
Kansas Supreme Court because it was an out-of-state law firm.
[27] In Indiana, however, our supreme court has been very clear that it has the
authority to regulate both entities not admitted to the Indiana bar, as well as
out-of-state lawyers. See In re Coale, 775 N.E.2d 1079, 1081 (Ind. 2002)
(“Notwithstanding the fact that the respondents hold no Indiana law licenses
and therefore are not subject to this Court’s usual disciplinary sanctions for
licensed Indiana attorneys who engage in professional misconduct, any acts
which the respondents take in Indiana that constitute the practice of law are
subject to our exclusive jurisdiction to regulate professional legal activity in this
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state.”), cert. denied; Northouse, 848 N.E.2d at 671-72 (disciplining non-attorneys
located in Indiana for the unauthorized practice of law). Thus, even if
MLG/CAS is exempt from the scope of the CSOA, our supreme court
possesses the authority to take disciplinary action against the firm. Such
authority does not appear to be dependent upon whether or when MLG/CAS
registered as a law firm with either the Indiana Secretary of State or the Board
of Law Examiners; at least, our supreme court has never mentioned such a
requirement. Additionally, our supreme court has imposed remedies for ethical
violations against lawyers and non-lawyers that include return of unreasonable
fees or fees collected for the unauthorized practice of law. See In re Hailey, 792
N.E.2d 851, 864 (Ind. 2003); State ex rel. Indiana State Bar Ass’n v. United Fin. Sys.
Corp., 926 N.E.2d 8, 18 (Ind. 2010), cert. denied.
[28] Second, to the extent the Parks court found it relevant to delve into Goodwin’s
lack of actual legal work as an indication that both he and Persels were not
entitled to the KCSOA attorney exemption, we decline to apply such a holding.
We acknowledge the evidence in the record that the bulk of the actual work
performed for and communication with Indiana residents originated in
MLG/CAS’s Florida offices. Still, one of the Indiana attorneys with which
MLG/CAS contracted was assigned to represent each Indiana resident; both
the contracts between MLG/CAS and the attorneys, and those between
MLG/CAS and the consumer residents, were related to the provision of legal
services and thus within the scope of the CSOA attorney exemption. Whether
those attorneys actually provided a minimally-acceptable level of legal services
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to those residents is precisely the type of ethical question that ordinarily is
entrusted exclusively to our supreme court, unless there is a question of legal
malpractice or the unauthorized practice of law.
[29] Indeed, one of those attorneys, Jackson, has been disciplined for precisely that
reason regarding his association with MLG/CAS. Specifically, Jackson agreed
that he violated the following ethical rules:
1.4(a)(1): Failure to promptly inform a client of circumstance
(limited scope of employment) to which the client’s informed
consent is required.
1.4(a)(2): Failure to reasonably consult with a client about the
means by which the client’s objectives are to be accomplished.
1.4(a)(3): Failure to keep a client reasonably informed about the
status of a matter.
1.4(a)(5): Failure to consult with client about any relevant
limitation on the lawyer’s conduct when the lawyer knows that
the client expects assistance.
1.4(b): Failure to explain a matter to the extent reasonably
necessary to permit a client to make informed decisions.
1.5(e): Failure to obtain a client’s required approval of a fee
division.
5.3(b) and Guideline 9.1: Failure to discharge responsibilities
regarding supervision of non-lawyers.
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5.4(c): Permitting a person who recommends, employs, or pays
the lawyer to render legal services for another to direct or
regulate the lawyer's professional judgment in rendering such
legal services.
5.5(a): Assisting in the unauthorized practice of law.
8.4(a): Knowingly assisting another to violate the Rules of
Professional Conduct.
8.4(c): Engaging in conduct involving dishonesty, fraud, deceit or
misrepresentation.
8.4(d): Engaging in conduct prejudicial to the administration of
justice.
[30] In re Jackson, 24 N.E.3d 419, 420 (Ind. 2015). Jackson was suspended from
practice for 120 days as a result of this unethical conduct. Id. at 420-21.
[31] Given that Jackson has been penalized by our supreme court for his
MLG/CAS related work, and given that our supreme court has previously
penalized out-of-state lawyers and/or unlicensed persons for practicing law in
this state, it begs the question of why our supreme court should not be entrusted
to take any necessary action against MLG/CAS. We acknowledge that the
arrangements between the Indiana attorneys and MLG/CAS were perhaps not
indicative of a traditional law firm-lawyer relationship, particularly because
each of the Indiana attorneys maintained law practices completely separate
from MLG/CAS. There is nothing in the record to indicate that the contracts
between the Indiana attorneys and MLG/CAS were invalid or unenforceable.
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They did in fact create employment relationships between the attorneys and the
firm—four of whom were specified to be independent contractors, like the
Kansas attorney in Parks, but one of whom was specified to be a partner with a
one-percent ownership stake in MLG/CAS, unlike in Parks.
[32] Indiana Rule of Professional Conduct 1.0(c) defines a “law firm” as “a lawyer
or lawyers in a law partnership, professional corporation, sole proprietorship or
other association authorized to practice law; or lawyers employed in a legal
services organization or the legal department of a corporation or other
organization.” We note that the official commentary to this rule states:
Whether two or more lawyers constitute a firm within paragraph
(c) can depend on the specific facts. For example, two
practitioners who share office space and occasionally consult or
assist each other ordinarily would not be regarded as constituting
a firm. However, if they present themselves to the public in a
way that suggests that they are a firm or conduct themselves as a
firm, they should be regarded as a firm for purposes of the Rules.
The terms of any formal agreement between associated lawyers
are relevant in determining whether they are a firm, as is the fact
that they have mutual access to information concerning the
clients they serve.
Ind. Professional Conduct Rule 1.0(c), cmt. Here, there is no doubt the Indiana
attorneys presented themselves to the public, and in particular to clients of
MLG/CAS, as conducting business as part of a law firm. The relationship
between the Indiana attorneys and MLG/CAS for the provision of legal
services was cemented in the formal, detailed agreements they entered into.
We conclude that the undisputed designated evidence clearly demonstrates as a
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matter of law that MLG/CAS was the law firm of the Indiana attorneys for
purposes of the CSOA attorney exemption. Thus, the trial court should have
granted summary judgment in favor of MLG/CAS on the Attorney General’s
claims under the CSOA.
[33] We note, however, that McCann herself has never been a member of the
Indiana bar, nor is she a “law firm.” We do not believe that the express
Indiana attorney exemption in the CSOA and the implied exemption for an
attorney’s law firm should be extended to individual attorneys within the firm
who have never been licensed in Indiana. Although her firm and its employees
may be exempt from CSOA liability, McCann in her personal capacity is not
entitled to the protection of the CSOA attorney exemption, and summary
judgment properly was denied as to McCann.
II. MRPFA
[34] Next, we address whether MLG/CAS and McCann were entitled to summary
judgment as to the Attorney General’s claims under the MRPFA. The MRPFA
imposes certain requirements upon “foreclosure consultants” who represent to
homeowners that they can do things such as prevent, postpone, or reverse the
effects of foreclosure. See I.C. § 24-5.5-2-2. Those requirements do not apply to
any “attorney licensed to practice law in Indiana who is representing a
mortgagor.” I.C. § 24-5.5-1-1(6). The Attorney General points out that this
attorney exemption is worded differently than the one under the CSOA, in that
it expressly refers to “attorneys,” and not “persons,” and the MRPFA does not
contain a further definition of “person” that includes business organizations.
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The Attorney General thus contends that unlike the CSOA, the MRPFA
exempts only individual attorneys from its coverage and not law firms.
[35] However, we find it would be equally absurd under the MRPFA to exclude an
attorney from its requirements while subjecting his or her law firm to them.
The vast majority of lawyers work within some form of law firm organization,
ranging from sole proprietorships to multi-jurisdictional firms with hundreds of
lawyers. As with the CSOA, it would make little sense to exempt attorneys
from the MRPFA while simultaneously requiring them to comply with it, or
else subject their law firm to sanctions—thus penalizing attorneys and their staff
for failing to comply with a statute they are supposedly exempt from complying
with. And as with the CSOA, the evidence demonstrates that MLG/CAS was
the law firm of the Indiana attorneys, and thus exempt from coverage of the
MRPFA. McCann herself, though, is still subject to liability under that act, for
similar reasons as explained under the CSOA. MLG/CAS is entitled to
summary judgment on the Attorney General’s claims under the MRPFA, while
McCann is not.
III. HLPA
[36] The HLPA prohibits certain lending practices in connection with home loans,
including the commission of “a deceptive act in connection with a mortgage
transaction or a real estate transaction.” I.C. § 24-9-3-7(c)(3). A “deceptive
act” is one in which a person knowingly or intentionally makes a material
misrepresentation, knowingly or intentionally conceals material information, or
violates the MRPFA. I.C. § 24-9-2-7. In its complaint for violations of the
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HLPA, the Attorney General alleged that the “deceptive acts” committed by
MLG/CAS and McCann were the previously-stated violations of both the
CSOA and the MRPFA. There was no other basis for any alleged violation of
the HLPA. Because we have held that MLG/CAS is exempt from the coverage
of both the CSOA and the MRPFA, any purported violations of those acts also
cannot form the basis of any claim under the HLPA. However, again, McCann
in her individual capacity may be held liable for violations of the HLPA.
MLG/CAS is entitled to summary judgment on the HLPA claims, while
McCann is not.
IV. DCSA
[37] Finally, we address the Attorney General’s claims against MLG/CAS and
McCann under the DCSA. The DCSA generally prohibits a “supplier” from
committing an “unfair, abusive, or deceptive act, omission, or practice in
connection with a consumer transaction.” I.C. § 24-5-0.5-3(a). A “supplier” is
defined as:
(A) A seller, lessor, assignor, or other person who regularly
engages in or solicits consumer transactions, including soliciting
a consumer transaction by using a telephone facsimile machine
to transmit an unsolicited advertisement. The term includes a
manufacturer, wholesaler, or retailer, whether or not the person
deals directly with the consumer.
(B) A person who contrives, prepares, sets up, operates,
publicizes by means of advertisements, or promotes a pyramid
promotional scheme.
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(C) A debt collector.
I.C. § 24-5-0.5-2(a)(3). Attorneys are expressly exempt from the definition of
“debt collector” but are otherwise not mentioned in the DCSA. I.C. § 24-5-0.5-
2(a)(15). A “consumer transaction” is defined as “a sale, lease, assignment,
award by chance, or other disposition of an item of personal property, real
property, a service, or an intangible . . . .” I.C. § 24-5-0.5-2(a)(1). The Attorney
General notes that MLG/CAS fits within the definition of a “supplier” under
the DCSA because it regularly solicited and engaged in business related to the
sale of services. In its reply brief, MLG/CAS does not refute this assertion or
make any separation of powers argument regarding regulation of the legal
profession by our supreme court or in any way explain why it would not be
covered by the DCSA.
[38] In his complaint, the Attorney General alleged that MLG/CAS and McCann
violated the DCSA by (1) violating the CSOA, and (2) “representing to
consumers that Defendants had the characteristics of experienced consultants
with in-depth industry knowledge on how to avoid and stop foreclosure . . . .”
App. p. 25.5 As with the HLPA claims, because MLG/CAS is exempt from the
requirements of the CSOA, it likewise cannot be held liable for any violations of
5
The Attorney General also alleged that the Defendants committed deceptive acts “with knowledge and
intent to deceive . . . .” App. p. 25. On appeal, the Attorney General characterizes this as a separate
allegation of deceptive conduct by the Defendants under the DCSA; however, this does not appear to be a
separate allegation, as opposed to a necessary mens rea element that would justify the imposition of civil
penalities against the Defendants for the other stated violations of the DCSA. See I.C. § 24-5-0.5-4(g).
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the CSOA under the DCSA. However, as noted by the Attorney General, there
is a freestanding claim for a violation of the DCSA that is not dependent upon
violation of the CSOA. As with the definition of a “supplier” governed by the
DCSA, the Defendants offer no argument as to why they could not be held
liable for violating the DCSA by making deceptive representations to
consumers. Such representations may constitute a “deceptive act” related to a
“consumer transaction” as defined by statute if they were intended to convey
that the services to be provided had “sponsorship, approval, performance,
characteristics, accessories, uses, or benefits it does not have which the supplier
knows or should reasonably know it does not have” or if the services were “of a
particular standard, quality, grade, style, or model, if it is not and if the supplier
knows or should reasonably know that it is not.” I.C. § 24-5-0.5-3(b)(1), (2).
[39] We conclude that MLG/CAS is entitled to summary judgment on the claim
under the DCSA related to alleged violations of the CSOA, but not on the
claim alleging an independent violation of the DCSA. McCann is not entitled
to summary judgment for DCSA claims related to either the CSOA—because
she personally was not exempt from that act—or to the independent DCSA
violation.
Conclusion
[40] MLG/CAS is entitled to summary judgment on the Attorney General’s claims
against it under the CSOA, the MRPFA, and the HLPA, and as to the claim
under the DCSA based upon violations of the CSOA. We reverse the denial of
summary judgment with respect to those claims and direct that summary
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judgment be entered in MLG/CAS’s favor. MLG/CAS is not entitled to
summary judgment on the independent DCSA claim for deceptive
representations, and we affirm the denial of summary judgment as to
MLG/CAS to that extent. McCann personally is not entitled to summary
judgment on any of the Attorney General’s claims, and we affirm the denial of
summary judgment as to her in its entirety. In conclusion, we presume the
Indiana Supreme Court Disciplinary Commission is well aware of
MLG/CAS’s and McCann’s activities in this state, given its punishment of
Jackson for his association with MLG/CAS.
[41] Affirmed in part and reversed in part.
Robb, J., and Altice, J., concur.
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