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

RocketLawyer, a consumer portal linked to a network of law firms has announced that they have secured $6.55 million out of a $7.55 million funding round, according to a regulatory filing.  This is in addition to an initial $2.9 million investment by LexisNexis. It would be interesting to know RocketLawyer's valuation. If the $7.55 million bought 25% of the firm, then RocketLawyer, would be worth upwards of $30,000,000, post-money. If RocketLawyer is generating $6.000,000 in annual volume, then the valuation would be 5 x revenue. Sounds pretty rich. Typically valuations are confidential, but this information could shed some light on how hot the "Software as a Service" legal industry is. 

Dan Nye, former CEO of LinkedIn, has assumed the role of CEO, replacing Charley Moore, the founder of RocketLawyer., who remains as Chairman. (I guess the old adage that the first thing that a VC does when investing in a company is to replace the CEO is true!).

It will be interesting to see how RocketLawyer scales its operation with this funding, and how it develops a strategy to differentiate itself from AVVO and LegalZoom.  As AVVO adds functions to link consumers with lawyers, and as LegalZoom moves towards expanding its referrals to law firms for consumers that need the assistance of lawyers, one can see a certain amount of convergence in these sites. Of course, neither RocketLawyer nor LegalZoom, actually rate or evaluate lawyers, so in my opinion, gives AVVO an upper hand.

Our own legal consumer portal at MyLawyer.com also offers to link consumers to law firms, but the MyLawyer.com Directory only contains virtual law firms that offer legal services online, a niche which we believe will continue to grow. MyLawyer.com's free legal forms and legal documents service is a disruptive move designed to undercut the RocketLawyer and LegalZoom, approach that a consumer should have to pay for a legal form. (Although, our own experience has demonstrated that consumers really like the idea of a person reviewing and creating a legal document even though the person is not a lawyer and can't function as much more than a "scrivener." )

Like "open source" code we believe that the cost of legal forms on the web will continue to decline until pricing approaches zero, and that the real value add while be an attorney's advice and review when it is needed. For an elaboration on this theory, see generally, Chris Anderson' work on , Free - the Future of a Radical Price.  Once a person's situation becomes a bit more complex that the simplest fact situation, it is arguable that some form of legal advice and guidance is required.

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Last Friday, We The People USA, , the legal document preparation company that operates through a network of franchisees,  voluntarily filed for chapter 11 bankruptcy protection.  The company and its affiliate, We The People LLC, are subsidiaries of Dollar Financial Group, Inc.  While the companies apparently had $24 million in sales and 138 franchised locations in 2006 , there are only eight remaining franchises and the companies lost $2.4 million on only $1.4 million in revenue in 2009.  By the end of 2009, operating revenues were less than $15,000 per month. For more information click here.

Several years ago I took a closer look at the We the People model and wondered how long it would take to fail. We the People established a network of physical retail stores, some run directly by the company, but most were franchised locations. Customers would complete a paper questionnaire, submit it to the store owner with full or partial payment. The store owner would fax the questionnaire to a central processing center where a paralegal or non-lawyer would input the data from the questionnaire into a desk-top document assembly program which would create the document ready for return to the customer.

Because there is so much friction in this system, the price per document was very high, when compared with comparable documents available over the Internet from either legal form web sites, or paralegal document preparation sites such as LegalZoom. The combination of the cost of real estate,  franchises  fee, the cost of advertising a physical location, and the consistent trend towards reduced pricing for common legal documents was obviously too much for the franchisees of We the People to bear. Plus some franchisees were being harassed by state bar UPL Committees. Because each franchisee purchased a dedicated territory it was never possible for the parent company to create an Internet-based strategy which would enable customers, for example, to purchases documents directly off the Internet, and then pick up the document at a local store, or simply effectively use the Internet to drive traffic to the physical locations maintained by We the People network.

There is a parallel between Turbotax which is a pure play Internet-based tax preparation service and H&R Block which maintains a comparable network of physical locations. Just this week, H& R Block reduced its projections for 2010, attributing the decline to the fact that more people are turning to do-it-yourself services due to the weak economy. This is despite the fact that H&R Block has an online offering. On the other hand, Intuit which operates Turbotax - reports an increased by 11% in projected usage in 2010, and has raised outlook and guidance for 2010 fiscal results. Web-based document preparation services, like LegalZoom, seem to be thriving, while land-based independent paralegals, where they exist, are hurting for business.

High pricing, expensive office space, fixed office hours, commoditized product offerings, expensive advertising, little or no interaction with customers over the Internet, obsolete technology, and low productivity --- all conspired to kill We the People.

Does this business model seem familiar? It looks like the same business model used by many (but obviously not all) community-based solo law firms who wait patiently for clients to knock on their doors to buy their services.  There are lessons to be learned  for "retail law firms" that serve moderate to middle income clients from the We the People failure.

Is it too late for solos and small law firms to change?

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Wizilegal,  a relatively new company based in San Diego is offering a virtual law firm service to solos and small law firms. The company recently relaunched its web site with a focus on enabling law firms to compete against LegalZoom.  Like DirectLaw, Wizilegal offers web-enabled document automation that enables law firms to offer  legal documents and forms through a law  firm's web site. It is good to see new competition come into this market space  because it is healthy sign that the "virtual law firm" concept is receiving wider acceptance among solos and small law firms.

We have previously defined the "virtual law firm" as a law firm that has a secure "client portal" integrated with its web site that is accessible by a client only with the use of a secure user name and password. From this "client portal", the  law firm is able to offer various legal services online.

A number of companies have emerged during the past two years that offer a "client portal" that can be branded with the law firm's logo and integrated seamlessly with the law firm's web site. Typically, the client portal is provided as a SaaS on a subscription basis. These companies include DirectLaw, Total Attorney's Virtual Law Office Technology, Clio's Web-based Practice Management Software, and now Wizilegal. These companies are to be distinguished from web-based practice management software companies like RocketMatter , that offer just "back-office" practice management tools, but no "client portal." application.

Here is a quick summary of key features of the Wizilegal offering:

• A web-enabled document authoring solution that is claimed to be very easy to use. (But no pre-automated legal documents or forms are included in their package). The document automaton function incorporates intelligent rule-based document assembly and can be applied to both text documents and .PDF forms. Interactive questionnaires appear within the web browser. I have not worked with this system, so I can't tell how easy it is to build out complex documents and forms. We welcome comments from users of Wizilegal about ease of use of the authoring system.
   
• The capability of offering document downloads and reviews;
   
• Integrated payment processing through PayPal. (but not through MC, VISA, or American Express);
   
• The capacity to create a law-firm branded client portal;
   
• Law firms can set up their own system almost immediately using the the company's web tools.
   
• Pricing is based on a $49.00 set up fee, plus $65.00 a month with no long term contract. In addition for every  document created by a client there is a $4.00 per document charge. There is no document charge for documents created internally, but for each administrative log-on there is a separate $55.00 administrative fee.
  

As competition increases in the virtual law firm provider space, it will be interesting to see how much market share Wizilegal will be able to capture with its approach. It will also be interesting to see whether a new cadre of web-enabled "virtual law firms" offering a true legal services  will be able to have an impact on LegalZoom's growth rate. With  LegalZoom's superior capital resources and national branding power, it may be hard for individual law firms operating online to capture mind share. Out of date ethical rules that govern the legal profession don't help the competitive position of law firms when they go up against new non-law firm players like LegalZoom. So the playing field is not level and the legal profession operates from a disadvantage.

It doesn't help when Robert Shapiro of OJ fame, is proclaiming every few hours on many cableTV channels that "The Law  is on Your SIde". What does that mean anyway?

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A new site called LawBidding.com was recently launched by Nick Cronin, CEO. The site enables potential clients to submit a description of their legal problem in a post,  and have law firms submit legal fee proposals to serve them.

This kind of reverse bidding process has been tried before in the legal industry during the early days of the Internet without success. But times have changed since 2000. The idea of providing "unbundled legal services" to clients for a fixed fee is more accepted now than it was ten years ago, and the current recession is forcing more solos and small law firms, as well as large law firms to become creative about their pricing structure. Its about time lawyers started thinking differently about pricing. Pricing every transaction by the hour doesn't make any sense. If a carpenter can give you a fixed price for a custom wall unit, a lawyer should be able to estimate a fixed price for standardized transactions where the costs are easily estimated and known. Not all transactions will lend itself to this approach. LawBidding.com also provides for fees based on hourly rates, so this could create a market for hourly rates for certain kinds of transactions. The analysis becomes more difficult when the matter is very complex requires a lawyer with very specialized knowledge or skill

This is an advertising driven web site, so its feasibility depends on traffic to the site which should grow as consumers and lawyers become more aware of it. Traffic could grow quickly which would attract advertisers.

I could see this idea being picked up by other law sites that already have traffic such as AVVO and Lawyers.com. But I right now LawBidding.com has a head start and we wish Nick good luck with his project.

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It seems like LegalZoom's practices are finally catching up with it. The company is being sued in Missouri on the grounds of unauthorized practice of law and the plaintiff's are requesting class certification. To give an example of how popular LegalZoom's services have become, LegalZoom in its petition for removal to Federal court claims that it has served over 14,000 Missouri residents in a five year period, generating over $5,000.000 in sales. Missouri is a relatively small state, so you can get some idea of what kind of business LegalZoom is doing nationwide. No wonder the legal profession is getting nervous and starting to pay attention to this disruptive player in the legal industry.

A good discussion of the case can be found on the IPWatchdog Blog in an article by the Blog's Founder Gene Quinn.

Click here for a copy of the Missouri Complaint,  LegalZoom's petition for removal to Federal court, and a copy of a letter from the North Carolina Bar requesting that LegalZoom Cease and Desist from operating within North Carolina because it is violating North Carolina's UPL statute when it prepares incorporation papers.

In its defense, LegalZoom in its removal petition,  claims that it is:

" a company whose principal business consists of providing an
online platform for customers to prepare their own legal documents. Customers choose a
product or service suitable to their needs and input data into a questionnaire. Where applicable,
the LegalZoom platform then generates a document using the product and data provided by the
customer."

It this were the case, LegalZoom would be functioning only as a "scrivener" transcribing the client's information into a form. It is well established in some states, including California, where LegalZoom is based, and also Florida for example, that non-lawyers, often called "legal technicians" can help consumers prepare legal documents, as long as they don't give legal advice.

The question of whether LegalZoom's  staff do more than they say, and actually provide legal advice, even if it is limited legal advice, is a question of fact to be determined. It  would be interesting to see what the discovery process turns up and what the  LegalZoom, "platform" actually does and how it works.

For comparison, We the People, a retail chain of 35  "Legal Document Preparation stores  operating in six states, operates under the same principles. Customers complete paper questionnaires which are faxed to a central processing center where a technician simply inserts the client's data into a desktop document assembly program which generates a form. (This is  the same process that many lawyer's use, except lawyers provide legal advice and analysis).  This document preparation process is essentially the same as LegalZoom's except that it takes place off the Internet through a network of retail stores. We the People has been attacked by the Bar in several states for UPL, but the company has worked hard to assure bar authorities that its staff and franchisees don't provide  legal advice.

In theory, We the People, stores are able to reach a market of customers that do not have Internet access and prefer to deal with a human being directly. This market base is likely to have even lower incomes, and ignored by  both attorneys as a target market, and have too much income to qualify for legal aid.  Ironically, however, the We the People pricing is even higher than the LegalZoom pricing, probably because of the cost of maintaining a  retail location. Yet the remaining We the People stores, ( down from a high of 140 stores), seem to be sustainable, if not thriving.

Both companies provide a needed service in the sense that they provide an alternative to consumers who are willing to invest their own time and resources to make sure that the forms offered are the correct forms for their particular situation. Neither company can advise a consumer about what form they should use for their situation, as that would be a form of legal advice. Consumers may be taking a risk when they buy from a self-help document preparation forms company, but it seems this is a risk that consumers are willing to take to avoid what are perceived by many as high legal fees for the same  transaction. For these consumers, what they get is a "good enough" result at a price they can afford.

The other reality is that it is deceptive for LegalZoom and We the People , to claim that using their services will save hundreds or thousands of dollars in legal fees, when two very different category of services are being compared: 
 

• one a legal information service;
• and the other a true legal service from a licensed attorney.
  
  The content of the services are fundamentally different and to compare the services to each other is like comparing "apples' and " oranges". 
  
  Sometimes you get the same legal result when you use a document preparation service, but often you don't.  Apart from UPL issues, it seems to me that this is a misrepresentation in advertising and these claims should receive closer scrutiny from state consumer protection agencies. (Although I am sure that many of LegalZoom's satisfied customers would say that they don't need any protection).

Both companies demonstrate the principle that you can solve certain legal problems by having access to "legal information." Legal information by itself is a problem solver for many consumers, and the access to legal information and legal forms on the Internet, has simply accelerated this trend at a much faster rate in the last five years than the self-help law book industry has been able to accomplish in 30-35 years of its existence. This means that lawyers will have to do more to demonstrate their value to the consumer, particularly solos and smaller law firms that serve the broad middle class.

A better solution for consumers, as we have advocated in these pages, is for attorneys to offer legal forms bundled with legal advice at an affordable price, perhaps slightly higher than LegalZoom, but offering much greater value, over the Internet. This is often called. "unbundled legal services," enabling a consumer to purchase just the legal services they need, and no more.

Using virtual law firm technology, like DirectLaw's virtual law firm platform, lawyers can be even more efficient that the LegalZoom or We the People models, because the entire document assembly process is software driven creating a legal document instantly from the user's input, ready for the lawyers further review, drafting, and advice-giving. The increased productivity that results from a web-enabled document automation process enables the lawyer to offer a very price competitive service that in fact offers more value. The value of each sale is lower, from the attorney's point of view, but volume can be much higher if effectively marketed. (Neither LegalZoom nor We the People have such a technology in place. No wonder there prices are so high for what you get!).

As long as the legal document preparers don't give legal advice, they should be able to coexist with the legal profession, for certain kinds of common legal transactions, but not all.

But lawyers will have to work harder to provide their value and start offering true legal services online over the Internet. Driving non-lawyer legal document preparers out of business on UPL grounds is not an answer. At the end of the day prosecution efforts, will seem to the consuming public as just another attempt by the legal profession to maintain high legal fees for common transactions, while avoiding the cost of innovation.
 

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ABA President B. Lamm has created a new Commission on Ethics called Ethics 20/20 to review  ethics rules and regulation of the legal profession in the United States in the context of a global legal services marketplace. Hearings will be held at ABA Meetings to get input from various interests on how to reform or modify the ABA Code to enable US law firms to remain competitive in an age where Internet  technology is pervasive.

I have been invited by the Commission to testify and submit a statement at the ABA Mid-Year Meeting in Orlando, where the Commission is holding one of its first public hearings.

My statement will discuss the following topics:

• how the rules of professional responsibility function as a deterrent to innovation;
• issues relating to the unauthorized practice of law and the definition of "the practice of law;"
• legal referral concepts in the age of the Internet;
• state rules of professional responsibility that require a "physical" business office in order to practice law in that state;
• the potential for cloud computing;
• enabling the delivery of limited legal services online;
• law firm ownership structure as it relates to innovation in the delivery of legal services;
• and the eLawyering Task Force Recommended Guidelines for the Delivery of OnLine Legal Services.

I am looking for suggestions and ideas about other issues that relate to the delivery of online legal services and the rules of professional responsibility. Any ideas are welcome. Just comment on this blog.

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When we designed the DirectLaw web service we relied on theories developed by W. Chan Kim and Renee Mauborgne in their best selling book Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant .

Our concept is that a technology platform that enables law firms to offer limited legal services over the Internet could tap into the "latent markets" for legal services.

We also used this analytical approach to develop our online non-lawyer document preparation service approach and our approach to offering automated legal forms over the Internet which are also designed to serve the "latent market for legal services". LegalZoom is demonstrating that there is a huge latent market that is satisfied with a "good enough" solution.

Nicole Garton-Jones, a lawyer based in Vancouver, Canada, and a user of our DirectLaw platform has posted a detailed analysis of how her law firm development strategy is an example of Blue Ocean Strategy in action. See her blog post on this subject. Its worth reading.
 

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Attorney Louis Pepe, a Connecticut attorney and Chair of a Connecticut Bar Task Force examining non--lawyer legal information web sites, believes that these web sites are breaking the law by providing legal services in a state in which they're not licensed to practice, as reported in the Connecticut Law Tribune.

There are differences between  legal information web sites that provide legal information and legal forms only, and web sites that offer something called "legal document preparation services" where a paralegal or other non-lawyer reviews a document and assists in preparation prior to sending the form back to the client.  Rather than making a distinction between the different kinds of web sites, Pepe's  Task Force lumps them altogether into a single "evil" category. If it's not a  law firm web site, it has no place on the web, at least as far as the Connecticut Bar is concerned.

As reported by the Tribune, "the task force filed its report with the Department of Consumer Protection alleging that the on-line legal providers also were engaged in deceptive advertising because the companies are offering legal advice by providing relevant legal documents."

Can it be that the provision of just a legal form constitutes the "unauthorized practice of law?"  If that were the case why don't we just ban self-help legal software and self-help law books from Barnes & Nobles book shelves? All of the legal information web sites that I know of,  have a clear disclaimer that they are not a law firm and do not purport to give legal advice.

Does Pepe think that a consumer can't tell the difference between an attorney and a legal information web site? Is any publication - whether print-based or web-based -  that is a legal form the "unauthorized practice of law?"

In my opinion, there is a good argument to be made that a legal information web site that states that it's services and products are the equivalent to what a lawyer provides is a misrepresentation. It would be a misrepresentation in advertising, and consumer protection agencies should monitor the claims made by these providers. However, the claim that the mere provision of a legal form is the "unauthorized practice of law" is an abuse of the legal profession's self-regulatory power to protect the consumer from harm.

Catherine J. Lanctot has written an interesting article on the subject in “SCRIVENERS IN CYBERSPACE: ONLINE DOCUMENT PREPARATION AND THE UNAUTHORIZED PRACTICE OF LAW,” 30 Hofstra Law Review 811 (2002, 44 pp, pdf), where she argues that those who wish to apply UPL enforcement against such software products or document preparers ”must not lose sight of the broader implications.”  Not only do they risk constitutional challenges, but :

“[W]e must consider the ramifications of such enforcement. The public reaction would likely be negative. Enforcing unauthorized practice of law statutes against online document preparation services would be neither painless nor popular. The lay public, which already detests lawyers, generally perceives unauthorized practice of law enforcement as yet another way for the legal profession to line its collective pockets at the expense of consumers. . . .

“In addition, it is at least possible that these websites are managing to provide some consumers with a necessary service—basic legal documents at an affordable price. At a time when the bar seems to have abdicated its responsibility to provide routine, noncomplex legal services to the poor and middle class, it could well be counterproductive to try to shut down one vehicle for serving those unmet needs.”

If  the Connecticut Bar can't distinguish between their self-interest in maintaining a monopoly over the delivery of legal services and the public's right to legal information whether in the form of a book, a desk-top software program, or a web-based software program, perhaps the citizens  of Connecticut should either strip the bar of its self-regulatory power, or further define what the "practice of law" means. That is what the citizens of Texas did, when the Texas Bar attempted to ban self-help law books and self-help legal software from being sold in the State of Texas.

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We have been observing the dip in employment of recent law school graduates and the number of lawyers being terminated from mid and large size law firms. We think this will result in a resurgence of start-ups of solo and small law practices, as traditional employment opportunities for lawyers dry up.

To help these lawyers get their law practices up and running with a virtual law firm component, DirectLaw, our company which offers a turnkey virtual law firm solution for solos and small law firms announced today a new discounted program for new lawyers during their first year of practice, and lawyers who are leaving their law firm employers to start up their own law firm. The program is described in detail here.

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The month's WIRED Magazine, (September 2009) has an interesting article on how the Internet is enabling "Good Enough" solutions, (when cheap and simple is just fine). I have maintained for a long time that often there is a certain amount of overkill when lawyers tackle a problem, when consumers really want a quick and reasonably priced result. Consumers will often sacrifice securing every "right" they have in order to save thousands of dollars in legal fees. I see this in the divorce area in my online practice all of the time. Often the divorcing parties want to get on with their life at the lowest possible cost. Rather than spend $15,000 in legal fees pursuing every right that the parties think they have, often the best solution is to use the funds that would have been spent on legal fees to invest in their individual futures. The present recession is accelerating these trend.

Lawyers are taught to represent a client "zealously". In fact they are required by the ethical codes of professional conduct to do so -- but at what price. Pursuing every legal angle results in prohibitive legal fees that the average consumer or small business can't afford. There must be a better way to practice law without breaking the bank.

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LegalZoom has a clever plan to create an Attorney Directory for visitors to its web site that supports its market position. LegalZoom now attracts the most web traffic of any legal web site so this is an attempt to squeeze more value from this traffic.  Attorneys who enroll in the Directory, which is free except of a $99.00 set-up fee, are required to give users who are sent their way, a free 30 minute consultation. This enables LegalZoom to provide legal advice to augment its legal form document preparation services. The only lawyers who would participate in this Directory are those who are hoping to capture a case with a large fee, for either a complex matter or a personal injury matter --- cases which LegalZoom can't service with its legal form business.

These lawyers are not threatened by the fact that LegalZoom is offering an alternative, non-lawyer service that is eating away at the market share of solos and small law firms that provide legal services to the broad middle class in such areas as wills, incorporation, no-fault divorce, trademark, and name change, to name only a few. The reality is that these common transactions also require the legal advice of an attorney, but if lawyers are to keep their fees low, how can they give legal advice away for free?

Attorneys who are offering lower cost "unbundled legal services" which consist of legal forms together with legal advice for a fixed fee would not be motivated to provide 30 minutes of free advice. Many of these firms can charge a small fee for this legal advice. 

Nolo, one of LegalZoom's competitors, also offers an Attorney Directory, but these attorneys are not required to provide a free 30 minute consultation. As a result law firm's in the Nolo Directory are more oriented towards providing limited legal services to clients of moderate means. Nolo is the second highest traffic legal web site.

Disclosure: My Maryland-based virtual law firm which offers limited legal services for a fixed fee is a member of the Nolo Lawyer Directory. We are pleased with the results we are getting, even though we pay advertising fees to participate.

With this move, venture-backed LegalZoom, with its superior market position, will continue to increase its market share of common legal services at the expense of the legal profession.

With this new Lawyer Directory, LegalZoom can buttress its claim that it "puts the law on your side."

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There is a blog post at For Connecticut Lawyers which analyzes LegalZoom's deceptive advertising practices that are designed to persuade consumers that purchasing legal documents from LegalZoom is the same as a service from an attorney. The post examines the hidden nature of the disclaimer notice that LegalZoom cannot give legal advice, and questions what "Put the Law on Your Side" - [ Legal Zoom's tagline] means when proclaimed by a non-lawyer, legal document preparation services organization. Since LegalZoom's staff members cannot provide legal advice  when they review a document one could ask the question:  What they really do and what justifies the relatively high cost of a LegalZoom's services? How are LegalZoom's services different from a legal form that is purchased from an on-line legal form web site such as US Legal Forms, which are available at much less cost?

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Richard Susskind, in his new book, The End of Lawyers? Rethinking the Nature of Legal Services, devotes a chapter to disruptive legal technologies and identifies automated document assembly as a leading example. A related analysis can be found in a paper produced by Darryl Mountain, a Vancouver attorney, that is titled "Disrupting Conventional Law Firm Business Models Using Document Assembly" Both authors make the point that automating legal documents is one of the major ways that a lawyer can increase productivity, particularly for document intensive practices. Offering these documents over the web directly to clients through a secure client area, where the client completes an online questionnaire increases productivity even more. It is much more efficient than a process where a lawyer or paralegal types data into a desktop windows application manually.

Once the user answers a series of questions that appear in the web browser, a document is instantly created ready for the lawyer's further review and analysis. If the client misses a question, the lawyer can easily communicate by email and request additional information or provide a clarification on how a question should be answered. But that is much more efficient that jotting down the client's answers to the attorney's questions on a yellow pad.

This is consistent with Susskind's analysis that lawyers should automate what they can, leaving to human intelligence what it does best, which is providing legal advice and more customized and individualized drafting. Today automated document assembly solutions  are very robust and can automate very complex documents with multiple levels of "if-then" clauses to accommodate hundreds of different fact situations. Automation of more standardized legal documents should be a "no-brainer."  Using automated document assembly reduces greatly the amount of time the attorney has to spend on an individual document project enabling alternative billing systems that yield a higher margin for the law firm and also potentially lower pricing to the client.

We have seen these efficiencies in our own business activities. Through our affiliate company, Epoq, US, we sell thousands of standardized legal documents a month directly to consumers. Many of these documents are court documents, available for free from court sites, in Adobe .PDF format. Examples are non-contested divorce actions, name change actions, child support modification actions, incorporation documents, and other corporate filings.  By automating these documents and legal forms and adding extensive help screens we add value and make it easier for self-help ("pro se"  parties to complete online.

We know that our legal forms business is taking away market share from law firms, even though we do not provide legal advice and we are selling legal forms only. This is a classic case of "pure-play" disruption. Because the user is "doing"  the work by completing an online questionnaire, and the software does the rest, we have a very high profit margin on these forms, once they are automated. I call this, "making money while I am sleeping."

We also know the limitations of a "forms only" , self-help approach. Our DirectLaw, virtual law office platform, makes our legal forms and automated document assembly technology, available to law firms as a hosted service.  In the law firm configuration, the lawyer can bundle legal advice for legal forms offering a much valued-added offering at a price point which is significantly higher that the sale of automated legal forms only. The lawyer still provides a personal service element, but the document assembly technology enables the lawyer to spend more time with the client because creating the first draft of the document is instantaneous. Moreover, the client is doing part of the work as the lawyer doesn't have to waste time gathering basic factual information which is captured online within a web page. This also can be a very profitable business model. I know from operating my own Maryland virtual law firm , from my home in Palm Beach Gardens, Florida,  just how profitable and satisfying this can be.

I have heard some critics of automated methods remark that lawyers were not trained to be "robots." This perspective misses the point by a mile. By figuring out what parts of a legal process can be efficiently automated, and which parts need to remain the domain of human intelligence, the productivity of the lawyer is greatly enhanced. In the future automated document assembly over the web will become the norm, as it offers the promise of greater value and lower fees or prices.  If not through law firms, then through non-lawyer legal form publishers who have migrated their legal form content to a dynamic and interactive format.

Solos and small law firms ignore these developments at their peril. While many solos practitioners ponder these developments, non-lawyer operated web sites like SmartLegalForms, Wills Online, the Name Change Law Center [ disclosure: We also operate these aforementioned legal form web sites ], Nolo, and LegalZoom, and other non-lawyer sites, will continue to eat away at the market share of the legal profession, particularly solos and small law firms.

It is time for the legal profession to catch up and not cede this piece of business to non-lawyer operators. At the end of the time day, it is the consumer who will suffer by not having access to the legal profession.

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LegalZoom is a California-based company that offers on-line paralegal document preparation services on a nationwide basis.  A nationwide advertising program, financed in part by a relatively large capital investment from Polaris Venture Partners,  is now underway in major national media markets with the goal of branding LegalZoom as the leading legal services web site on the Internet. With Robert Shapiro of OJ fame,  as the company's leading spokesperson, LegalZoom uses the  tag line: "We Put the Law on Your Side", a claim that the company could not make if it were a law firm under the marketing roles that govern the legal profession in all states. LegalZoom, as it is not a law firm, is not bound by these rules, Nevertheless, the company claims to be the leading legal web site. Is there something wrong with this picture?

When a customer arrives at the LegalZoom web site they are presented with a menu of legal documents that are sold for a fixed price. The documents are common legal documents that range from wills, powers of attorney, living wills, and no-fault divorce, on hand to business documents such as incorporation, trademark, and copyright on the other. The customer completes a web form and pays with a credit card. From the data inserted by the customer into the web form, a paralegal aided by document assembly software of some kind, generates a legal document or form, which is returned to the customer in paper format by regular mail.

Under long standing bar rules that are operative in every jurisdiction in the U.S, LegalZoom as a non law firm,  cannot give legal advice of any kind, cannot modify a customer's answers in any way, and cannot do any custom drafting that is responsive to a customer's particular set of facts. The company in a very fine print disclaimer makes clear that it is not a law firm and that" "LegalZoom is prohibited from providing any kind of advice, explanation, opinion, or recommendation to a consumer about possible legal rights, remedies, defenses, options, selection of forms or strategies. " The company does do a review which has to be limited to making sure that all answers are completed in the Questionnaire, that the spelling is correct, and minor tasks that are limited to very narrow role of being a proof-reader of the customer's data entries.

The company claims that: "With LegalZoom's lawyer-free service, you can save up to 85% off the rates an attorney would charge for the same procedure. " This comparison misrepresents the contribution that an attorney makes when serving a client. It suggests that the LegalZoom service is equivalent to the services of an attorney, when it clearly isn't. The representation suggests that a consumer will receive the same result that they would get if they went to an attorney, which is clearly not the case. Moreover, there are many attorneys who charge fees which compare favorably with LegalZoom's fee structure, so the fees that lawyers charge for comparable transactions which are published on the LegalZoom web site are true of some law firms, but not all solo and small firms.

LegalZoom's prices are in fact not cheap, when you consider that with a bit of effort searching  on Google a customer can find identical forms on the Internet that are either free, or which are sold for a modest fee, when compared to the "document preparation fees" that LegalZoom charges for very common legal documents.

But if the role of LegalZoom is really limited to data input and some minor editing and proofing, where's the beef?

There is no doubt that this service concept has been successful, because the company has claimed to have served 500,000 customers. LegalZoom's customers may believe that they are getting a service that is equivalent to the service that they would get from an attorney.

As a disruptive innovation, LegalZoom is demonstrating that there is room for competition in the delivery of legal services and that there are other way's to solve people's legal problems than going to an attorney, despite the very real limitations of the LegalZoom service.

It will be interesting to see how the organized bar responds to LegalZoom as the company becomes more dominant and continues to eat away at the legal profession's dominance in helping people solve their everyday legal problems.

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