Will LegalZoom Become the Largest Law Firm in the US?
LegalZoom has been beta testing a concept which links its marketing capabilities to a network of law firms that offer legal services under the LegalZoom brand. With some state bar associations accusing LegalZoom of the unauthorized practice of law, it might makes sense for the company to seek deeper alliances with networks of attorneys who are able to offer a full and ethically compliant legal service. Solos and small law firms, leveraging off the visibility and prominence of the LegalZoom brand, could reduce their marketing costs and enable these firms to better capture consumers who are part of the “latent legal market” on the Internet. It could be a win/win for both parties.
Unfortunately, linking the capital and management resources of profit-making organization with private law firms is almost impossible in the United States, given the regulatory framework that governs law practice. Unlike, the United Kingdom, which is in the process of deregulating the legal profession, enabling profit-making companies, from banks and insurance companies to retail chains like Tesco, to actually own a law firm, and/or split legal fees with a non-law firm, these practices in the US are strictly taboo.
In the US, law directories can charge a flat marketing fee for a listing, but sharing legal fees with a marketing organization can get you disbarred.
During the dot-com boom around 1999-2000, a company emerged by the name of AmeriCounsel that tried to create a hybrid organizational structure similar to the LegalZoom experiment. The company sought to enable a network of attorneys to offer legal services at a fixed and reasonable price and to mediate between the consumer and the law firm in terms of guaranteeing the quality of the legal services offered. The company failed during the dot-com bust for various reasons, including lack of financing, but on the way to failure, secured some opinions from state bar associations that blessed their model and provides a blue print for hybrid delivery systems which combine the expertise of a law firm with the marketing, management, and technological resources of a non-law firm.
One such opinion was issued by the Nassau County Bar Association New York State.
The Bar Association reasoned that the AmeriCounsel scheme was permissible because:
[S]ince AmeriCounsel does not charge attorneys any fee and since AmeriCounsel does not “recommend” or “promote” the use of any particular lawyer ’s services, it does not fall within the purview of DR 2-103(B) or (D). Rather, AmeriCounsel is a form of group advertising permitted by the Code of Professional Responsibility and by ethics opinions interpreting the Code.
In this model, AmeriCounsel provided technology and administrative services to link the client with the lawyer, but the law firm made no payment to AmeriCounsel. Instead, a separate administrative/technology fee was paid by the consumer to AmericCounsel for using the web site and gaining access to the lawyer. (This is not a practical scheme in today’s web environment, in my opinion), Moreover, AmeriCounsel did not choose the lawyer. The client was able to compare the credentials of different attorneys and choose their own lawyer. Thus no legal referral was involved, which would not be permitted in New York, as only an approved non-profit organization can make legal referrals.
In my opinion, this model, forced on AmeriCounsel, by the Rules of Professional Responsibility, is cumbersome, hard to implement, and was not economically viable for AmeriCounsel. Perhaps this was one of the causes of its failure.
Almost a decade later, companies that want to enter into this kind of hybrid relationship with lawyers, have to follow the same rule structure, as the ABA Model Rules of Professional Responsibility as the rules have not changed in any significant way. changed. It will be interesting to see whether the ABA Ethics 20/20 Commission, which was set up just last year, will address these issues at all.
Perhaps there should be a “safe harbor” that enables organization’s like LegalZoom to experiment with new patterns of legal service delivery that could operate for a limited period of time in a specific state, like California, The experience would be evaluated carefully as a basis for rule and policy change. The evaluation would be aimed to see if client's interests are compromised in any way, and whether the delivered legal service is less expensive, without compromising the quality of legal service.
Instead of creating legal profession regulatory policies that are based on the legal profession's idea about what is good for the consumer, policy could be based on real experience and facts. Experimentation is good. It leads to change, and in other industries improvement of methods and approaches over a period of time.
Of course, I don’t believe that this will ever happen in the US, at least not in my professional lifetime.
As an Englishman with 30+ years experience of the legal profession it is amost unbelievable that the US - that bastion of free enterprise - would seek to perpetuate unsustainable working practices in the law. What on earth is wrong either business wise or ethically from seeking to attempt to direct willing purchasers of legal services in a particular direction. If an organisation can seek to offer a common brand that is able to deliver certainty of outcome (at least in terms of price) for specified services then who loses? Not the Bar Association(s) the individual law firms or the customer. The frustration of this kind of business is nothing short or an unfair restraint of trade. Isn't this why the US has such robust anti-trust laws? were they really designed to stifle competition - surely not. The Bar Association and the PI insurance market are there to ensure legal services are delivered to an agreed standard. Does the customer care whether the supplier is a law firm, a chain store, or any other well run business? Research confirms the customer has greater affinity with a quality brand than a any single law firm. That same research also confirms that at least 60% of all legal services can be delivered using IT driven work-flow systems. Many services no longer require a lawyer. Get real - the revolution is here already.
I spent most of last year building a web site that would deliver the low cost and convenience that most consumers seem to want. I looked into the success of LegalZoom and other legal form document companies and thought that their success had a lot to do with low cost and convenience. So I concluded that these consumers would probably be willing to pay for the same low cost convenience offered by a virtual law firm with the added peace of mind of having an attorney review their chosen legal documents. However, my experience has proven otherwise.
It appears that these legal form companies have done a lot more damage to the legal profession than merely taking away a chunk of the small firm and solo practice business. They have convinced many consumers, along with the world wide web in general, that they do not need a lawyer and are competent enough to handle many legal issues on their own.
One of the biggest advantages LegalZoom has is its national branding and name recognition. Something that could only be accomplished through a deregulated industry. The restraint of trade imposed on the legal profession in the U.S. through regulation is hurting both lawyers and consumers alike. I like to tell my colleagues in Florida that the Florida Bar is in existence to bar us from succeeding as attorneys in the 21st Century. Their latest attack imposed on regulating law firm web sites places yet another limitation on free market competition.
I agree with Mr. Granat. Experimentation is good. Policy should be based on real experience and facts gathered from consumers rather than the legal profession's idea of what is good for the consumer. The legal profession needs to really focus on the best interest of the consumer and experiment with new patterns of legal service delivery. It's time to embrace change and take the chains off of the legal markets. I hope to see this happen in my professional lifetime.
Alex:
I think you make some good points.
One impact of the LegalZoom marketing juggernaut, is the reshaping of consumer behavior so that consumers think they can solve all of their legal problems without a lawyer.
After all, if Robert Shapiro says, "The Law is on Your Side", isn't that to be believed? Shapiro defended O.J. and got him off, so that makes him an credible "expert" in the minds of many consumers.
If a lawyer used the slogan that "Law is on Your Side" about his practice, he would probably brought up on disciplinary charges for violating the advertising prohibition against making material misrepresentations!
On the other hand some legal problems can be resolved by just having access to the correct legal information. The Internet now makes it easy to get access to legal information and use it effectively.
Lawyers no longer can build a law practice based on just having exclusive access to certain kinds of legal information. This is the "new normal" that requires that some lawyers change their practice model.
The LegalZoom controversy has hit Virginia. The position of the Virginia State Bar is anti consumer.
This video explains:
http://www.vamedmal.com/library/legalzoom-the-unauthorized-practice-of-law-in-virginia.cfm
But is does satisfy the "instant gratification" needs.