eLawyering Blog : Online Legal Services : DirectLaw : Document Automation, Web-Enabled Document Assembly, Virtual Lawyering

One of the winners of TechCrunch Disrupt Hackathon is a new, yet to be launched, legal document web site called, Docracy,  The idea is that members will contribute their legal documents to an open source site so that there would be a basis for comparison between  "open source" documents and the document that the member needs for their business. The theory is that by comparing documents, with the document that the member has on hand, there would be a basis for comparison, resulting in an informed decision, without the cost or benefit of legal advice.

In this model, legal advice from an attorney is worth zero. The model is designed to eliminate the attorney from the transaction.

The idea was developed by mobile app developers Matt Hall and John Watkinson ,from Larva Labs, who were faced with signing an NDA with a client and were unsure of some of the terms and concluded that the cost of legal advice was either unnecessary or prohibitive.

This is another example of the resentment that the average consumer  and small business person has towards the legal profession resulting in the rise of non-lawyer legal form web sites such as LegalZoom.

Another example of an open source legal document repository is Docstoc which we have used as a research source. It is useful for us, because as lawyers we understand what we are reading. I think simply accessing raw documents as a consumer would be a daunting exercise, although I am sure that many consumers and small business use the site.

The problem with any  legal document web site as a source for creating binding legal documents  is that the use of a particular clause may be rooted in case law in a particular jurisdiction.

Without understanding all of the implications of using particular language in an agreement, the "non-lawyer" moves into a danger zone, because he or she has no idea what they are signing. 

A better alternative is a "self-help" book from Nolo that contains both legal forms and explanations of the implications of each clause, but that often involves reading and understanding a 300 page book, which is beyond the attention span of most consumers.

Another solution is an automated document with extensive help screens that explain the implications of choosing one clause over the other.

A third alternative, is to purchase "unbundled and limited legal services" from an on-line law firm  for a fixed price with legal advice bundled into the transaction. In that case you get a certain level of accountability and guarantee that the legal advice is correct for the user's individual situation.

See for example the firms listed at DirectLaw's legal document portal , where you can access legal forms for free, or forms bundled with legal advice for a fixed fee.

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There has been much discussion recently in various venues about whether 5.4 of the US Rules of Professional Responsibility should be amended or revised to permit investment in law firms by non-lawyer, or non-lawyer entities, or even ownership of US law firms by non-lawyer entities. The ABA's Ethics 20/20 Commission is circulating a paper on the subject and is soliciting comments.

Known in the United Kingdom as Alternative Business Structures (ABS), this new form of law firm organization, authorized by the UK Legal Services Act of 2007,  will be permitted after October 6, 2011. Alternative Business Structures are already permitted in Australia, where several law firms have already gone public.

Other than the State of North Carolina where there is bill pending to permit non-lawyer ownership of up to 40% of a law firm, there has been little movement in the US to make change Rule 5.4 Some hybrid models are beginning to emerge in the US,  but they are a workaround the existing rules.

There is no clear path for non-lawyer ownership or investment in a law firm in the United States, and as a result it is arguable that the legal services delivery system lacks the capital necessary to innovate and create the efficient systems that are necessary to serve not only the "latent market for legal services", but existing legal markets more effectively.

Now comes Jacoby & Meyers, a law firm that has pioneered in changing the way legal services are delivered, filing multiple law suits in the Federal District courts of New York, New Jersey, and Connecticut against the presiding state justices in those states responsible for implementing and enforcing Rule 5.4, requesting that the Rule by overturned. The Complaint makes clear that Jacoby & Meyers "seeks to free itself of the shackles that currently encumber its ability to raise outside financing and to ensure that American law firms are able to compete on the global stage"

Click here for a complete version of the Complaint.

Andrew Finkelstein, the Managing Partner of Jacoby & Meyers, and also the Managing Partner of Finkelstein & Partners, said that "No legitimate rationale exists to prevent non-lawyers from owning equity in a law firm. The time has come to permit non-lawyers to invest in law firms in the United States,"

Now the fun begins!

Disclosure: Finkelstein and Partners is a subscriber to our  DirectLaw Virtual Law Firm Service.

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