In a 7-0 decision, the Court found that American Family Prepaid Legal Corporation and Heritage Marketing and Insurance Services Inc., their co-owners, Jeffrey and Stanley Norman, and multiple employees of those firms engaged in more than 3,800 acts of unauthorized law practice by virtue of their participation in a “trust mill” operation from March 2003 through March 2005.
The Court noted that American Family, Heritage, the Normans, and employees of the two companies had been the subject of a prior unauthorized practice of law complaint and investigation by the Columbus Bar Association (CBA) in 2002 that was resolved by the signing of a March 2003 consent agreement. In that agreement, the respondents acknowledged that providing estate planning advice and marketing and preparing trust agreements and other estate planning documents constitutes the practice of law, and promised to permanently cease and desist from such activities in Ohio.
The Court agreed with findings by its Board on the Unauthorized Practice of Law that, after signing the 2003 decree, American Family, Heritage and their owners used third-party marketing firms to send direct mail ads to lists of Ohioans 65 and older and also targeted senior citizens with magazine advertising containing exaggerated claims regarding the costs and complications of disposing of their assets through a will. Persons responding to the ads were subjected to high-pressure in-home presentations in which American Family’s non-attorney sales representatives provided them with legal advice including inflated “estimates” of the costs of probating their estates and the purported savings the customer would realize by purchasing American Family’s standardized living trust document – regardless of the size or composition of that individual’s estate or his/her existing estate planning documents.
In rejecting American Family’s claim that its actions were authorized because it had registered as the operator of a “prepaid legal services plan,” the Court wrote: “In arranging these appointments, American Family telemarketers did not refer to a prepaid legal plan and did not inform the customer that he or she would be solicited to buy a prepaid legal plan or living trust. The telemarketers did ask, however, whether the prospect already had a living trust. In sales presentations, usually occurring in a customer’s home, American Family’s agents focused on convincing a customer that he or she needed a living trust. If sold, the customer paid a $1,995 fee purportedly for an array of legal services relative to landlord/tenant law, businesses, domestic relations, bankruptcy, and other legal fields, at discounted fees, from a number of listed Ohio attorneys. Almost exclusively, however, the only legal service that the plan members received was the preparation of a living-trust document and related estate-planning instruments such as powers of attorney and a living will. For this reason, for the thousands of memberships sold, few if any members obtained legal assistance other than a living-trust portfolio.”
The Court noted that despite the fact that American Family used sales persons who had never been licensed as attorneys to “advise” customers about their estate planning needs and persuade them to purchase a trust, and that other non-attorneys in California actually prepared the trust documents, the company attempted to legitimize its unauthorized law practice by passing each transaction through a Columbus attorney, Edward P. Brueggeman. Brueggeman seldom spoke with the customers who were purported to be his “clients,” and was paid a flat fee by American Family for every trust document he approved.
In its decision, the Court wrote: “From the start of his employment until March 2005, Brueggeman had an office within American Family/Heritage offices on Citygate Drive in Columbus. Brueggeman did not pay rent and used the supplies and services provided by American Family and Heritage employees to perform his role. Brueggeman did not hire or supervise the American Family sales agents. Brueggeman, after receiving the agreement, sent a form letter to the purchasers of the plans thanking them for choosing him to prepare their living trusts and their estate-planning documents. The letter also stated that the drafting process would take four to six weeks and invited the customer to call him with questions. … Brueggeman rarely, if ever, actually met an American Family plan member in person.” A formal complaint alleging that Brueggeman’s conduct violated state attorney discipline rules is currently pending before the Board Of Commissioners on Grievances & Discipline (Disciplinary Counsel v. Brueggeman, Case No. 08-090).
The Court noted that the “trust mill” operated by American Family, Heritage and the Normans was similar to other such operations that the Court has found to be illegally engaged in the unauthorized practice of law at the expense of vulnerable consumers, usually senior citizens. The Court wrote: “A living-trust package is often not needed and may even be harmful for persons who are without significant assets, who have simple estates, or whose estates may need court supervision. A basic living-trust package, such as those sold by some of the respondents, may likewise be insufficient or even completely inappropriate for those having more substantial assets and who may need specific legal advice or even tax advice to meet their needs. For this reason, we have repeatedly held that these enterprises, in which the laypersons associate with licensed practitioners in various minimally distinguishable ways as a means to superficially legitimize sales of living-trust packages, are engaged in the unauthorized practice of law. We have also repeatedly held that by facilitating such sales, licensed lawyers violate professional standards of competence and ethics, including the prohibition against aiding others in the unauthorized practice of law. Today, we reaffirm these holdings and admonish those tempted to profit by such schemes that these enterprises are unacceptable in any configuration.”
In imposing a civil penalty of $6,387,990 jointly and severally against American Family, Heritage and their co-owners, the Court noted the aggravating factors that the respondents had been advised of and acknowledged the illegality of their involvement in the marketing and sale of trusts in the 2003 CBA consent agreement, but shortly thereafter resumed the same activities and engaged in thousands of acts of unauthorized practice that resulted in potential or actual harm to many of their customers for a period of two years. The Court also imposed civil penalties of $10,000 against American Family’s state marketing director, Paul Chiles, $7,500 against office manager Harold Miller, and $2,500 against multiple American Family and Heritage agents who continued to engage in the unauthorized practice of law after signing the 2003 consent agreement.
In its injunction, the Court permanently barred American Family, Heritage, Jeffrey and Stanley Norman, other named parties and “their successors, assigns, subsidiaries and affiliates” from marketing, selling or preparing wills, living trusts, durable powers of attorney, deed transfers or other legal products in Ohio; offering legal advice to anyone concerning estate planning or the execution of legal products; offering or selling prepaid legal plans of any kind to Ohio residents; and from engaging in a wide range of other enumerated activities.
I have had the opportunity to review the estate plans generated by American Family. With a "one-size-fits-all" mentality, all of the trusts are virtually identical, with clients running the risk that the particularly cumbersome and sophisticated estate tax planning trust, create for them and their families unnecessary burden. Of course, this is the essence of the attorney-client relationship. Your attorney should represent you, and should not represent other persons whose interests are in direct conflict with your interests. Only by having an attorney that is independent from others, and by that attorney discharging aggressively his or her obligation to provide for you specific advice and counsel based upon your specific circumstances, goals, and objectives, will your estate plan fit you.
