Jay Fleischman in a blog post entitled: “Is the Virtual Law Firm Model Coming up Short?”  states:

"The ABA elawyering Task Force tells us that, “[t]o be successful in the coming era, lawyers will need to know how to practice over the Web, manage client relationships in cyberspace, and ethically offer “unbundled” services.”

Bull---t.

Jay also states:

"Email doesn’t substitute for a phone call.  A phone call isn’t the replacement for a handshake."

"Those who offer the virtual law firm are selling something most people don’t want.  People want to be able to make a personal connection with other people, to build trust in a lawyer’s expertise.  They don’t want to be met with a password-encrypted firewall and triple-redundant backup systems.".

Unfortunately, like some commentators of a well known news network that make up facts and then offers opinions based on those false assumptions, Jay makes up facts to support his point of view.

Jay is entitled to opinion, but not to his own set of facts.

Here are some of the facts:

1. The ABA/LPM's eLawyering Task Force

The eLawyering Task Force , of which I am co-chair (with Marc Lauritsen), through it's web site, publications, and statements has never made the claim that delivering legal services online was the only way that law firms should  connect with clients. The value of an online platform depends on the kind of law practice and the kind of clients served. Clients obviously have preferences that lawyers who serve those clients must respect.

Many firms will have a "virtual component" incorporated into a traditional practice. As Marc Lauritsen puts it,  there will be:

" a shared online environment that is persistent across the life of a matter. For instance, providing interactive questionnaires on their web sites to gather information from prospects and clients, or supplying do-it-yourself document generators, checklists, or calculators.Or opening up a shared space for collaborative deliberation about a particular decision, using interactive visualizations like I 've been promoting under by 'choiceboxing" idea."

In fact, the firms that are getting the most successful results from the addition of a client portal are those that have a traditional practice and who add an interactive online component. 

We know this from the analysis that we have done from observing over 200 law firms that have subscribed to our DirectLaw virtual law firm service during the past two years. We have also learned why some law firms fail to successfully implement an online strategy. We also know that some lawyers have an unrealistic expectation of what it takes to be successful as a "pure play" virtual law firm.

To read the results of our analysis download our White Paper on Virtual Law Firms: Success Factors.

Also see these blog posts on this topic: Online Legal Services: Is it Hype or a New Way of Delivering Legal Services?;  Framing the Discussion About Virtual Law Firm Practice; and Defining the Virtual Law Firm .

2.    Affordable Legal Service and Access to the Legal System

The work of the eLawyering Task Force has always focused on identifying ways in which lawyers can become more productive and efficient by using the Internet as platform for the delivery of legal services and ways in which clients can benefit from the use of Internet technologies in terms of the fees they pay for legal services.

President Bill Paul of the American Bar Association, who created the Task Force, had the idea that through the use of Internet technologies it would be possible to lower the cost of legal fees to make the legal system more accessible to those who cannot afford typical attorney fees.

Instead, rather than the legal profession responding to this challenge, we see the emergence of companies like LegalZoom, SmartLegalForms, CompleteCase, LegacyWriter, Nolo, and the dozens of other non-lawyer internet-based legal solution providers who are responding to the need of consumers  for a ":good enough" legal result at the lowest possible cost. For millions of moderate and middle class consumers the purchasing of traditional high cost legal services delivered on a one to one basis is no longer an option. Their choice is to do the best they can with a legal solution provided by a non-lawyer provider, (which now may be a court or an online legal aid provider).

Jay seems to imply that if a client can't afford the profession's legal fees, then so be it.  Who cares?

My opinion is that it will be harder to justify the profession's monopoly on the delivering of legal services when it only serves a tiny portion of the US population.

The reality is that many of us didn't become lawyers just for the money. We want to serve people and help them with resolve their legal problems. Now there are technologies that can help us do that in a cost effective way and expand the market for legal services.  We shouldn't ignore these technologies, just because we are not practicing law like the last generation of lawyers.

3.  The "Secure Client Portal" Concept":

Examples of Internet based applications range from web enabled document automation, to paying legal bills online, to the provision of written legal advice online, to simply storing the clients legal documents online so they can be referenced later. All of these functions require that the client have access to a secure client portal within which these functions can take place.

It is indisputable that a secure client portal is necessary for secure and confidential activities and tasks between to take place between lawyer and client. This doesn't mean that a lawyer should not use email to provide confidential legal advice which I am sure happens all of the time, at whatever the risks.

On the other hand, it is not possible to pay your legal fee by credit card using email, and I have yet to see a web enabled document assembly solution being delivered through email. For legal work to be done securely online requires a secure client portal.

It us for this reason that the eLawyering Task Force included, as part of the definition of  what constitutes a virtual law practice, that the firm make available to its clients a secure client portal. This seems very obvious to us. Communicating with clients using a mobile phone and by email, is not the same thing as using legal applications online that do legal tasks.

Most people use some form of a secure portal everyday. We do our banking online, our stock brokerage online, buy insurance online, book travel online. It's not rocket science. Except that right now the legal profession is lagging behind every other service industry in the economy in its use of interactive web technology. According to Jay, we should stay where we are and eschew these web technologies. In my opinion, we do so at our peril.

4. Web-Enabled Document Automaton.

Jay seems to think that the use of a web enabled document automation application is not in a clients interest and has little value, or that client's don' t want "just forms."  (It is hard to really know what he believes because of the confused logic that is used to support his argument). 

I think he is wrong about this. He can read our White Paper on Web-Enabled Document Automation as A Disruptive Technology and these blog posts: Document Automaton as a Disruptive Technology  and What Every Lawyer Should Know About Document Assembly.

5  The Legal Profession is Losing Market Share.

Solos and small law firms, with existing methods of delivering legal services, are pricing themselves out of the middle class marketplace. This is the real reason that LegalZoom is rumored to be generating more than 100 million in revenues this year.  LegalZoom and other non-lawyer providers continue to increase their market share at the expense of solos and small law firms.  The assertion that lawyers don't need the people as clients that purchase forms from non-lawyer providers is a misrepresentation of what is really happening in the solo and small law firm marketplace. The clients that are turning away from law firms are clients that law firms need and who they previously served in an earlier, pre-Internet era.

6.     eLawyering Applications are Not Just Tools.

It is not accurate to see state that eLawyering applications are just "tools". In fact they are can be disruptive of the typical law firm business model.  If a consumer can get the result that they want by using a Internet-based legal solution, or "digital legal application" at a fraction of the cost of using an attorney, many will opt for that "good enough" solution. What is important to the consumer, is the legal result, not the fact that they have to go to an attorney to get it.

7.    A  New Generation of Clients is Coming Who Don't Like to Talk on the Phone or Shake Hands With Their Lawyers.

It's is true that many clients are not interested in working with their lawyers online, but we think that as a connected generation comes of age and they have legal problems that they will prefer to deal with their lawyers online and prefer to text rather than even talk on the telephone, much less meet with their attorney face-to-face, unless it is unavoidable.  For facts to support this assertion, see books like New Rules of Engagement: Understanding on How to Connect With Generation Y. and the work of Christine Hassler.

In a study conducted last year by YouGov, a UK-based research and opinion firm,  on consumer preferences for legal services, one of the conclusions was that:

"34% of respondents said they would be more likely to choose a law firm that offered the convenience of online access to legal documents over one that had no online capability; 22% disagreed and 37% neither agreed nor disagreed."

 Younger males were the most likely to choose a law firm with online services and access: 44% of 25-to-39 year-old males (and 40% of such women), along with 40% of 16-to-24 year-old males, would choose a law firm offering online access to documents over another law firm."

There is obviously a generational shift happening.  As a younger generation matures to the age where they have legal problems, their desire to deal with lawyers online becomes a requirement, not a preference.

Summary

These are serious issues for the legal profession. The American Bar Association Legal Technology Resource Center reported last year in one of its technology surveys of the legal profession that only 52% of solo practitioners have a web site. That means that almost half of solo practitioners don't even have a web site. Is it that these practitioners are making so much money that they don't have to even have a presence on the web? Or are we as a profession so out of touch with contemporary trends, that we will have to race even faster to catch up?

So where are we on this spectrum of evolution? Are we still stuck in Web 1.0 with brochure web sites, or are we evolving to interactive web sites that connect with clients who will want to work with their lawyers online or are we still stuck in Internet circa 2002?

Let's expand this discussion, so that lawyers, particularly solos and small law firms, can figure out how to utilize these new technologies to expand and sustain their law practices in an environment that will become increasing competitive. 

Disruptive web legal services such as AttorneyFee.com, Law Pivot,  LegalZoom, are not going away. They will expand and proliferate. The "new normal" is here.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

The legal profession has witnessed the rise of new players that are disruptive of existing patterns of law practice.

First came LegalZoom, AVVO, TotalAttorneys, Rocketlawyer, MyLawyer (our company), and Law Pivot, disrupters that are having an impact on the way legal services are identified and delivered to the broad middle class.

Now comes AttorneyFee.com that holds promise of making legal fees more transparent.

For many years I have been critical of the fact that lawyers charge widely differing legal fees for the same work. In a study I was involved at the University of Maryland Law school some years ago, we discovered that for simple family law actions, such as a no-fault divorce, lawyers would charge any where from $500.00 to $3,000.00 for essentially the same work. This variation in legal fees for the same work tasks is another cause of the distrust that the average consumer has of the legal profession.

AttorneyFee.com is a welcome development for law firms that are already experimenting with fixed fee legal services delivered online. Law firms that are using online delivery technology will in fact have a competitive advantage over law firms that use higher cost productive methods. Sites like AttorneyFee.com expand the reach of these firms by giving them another channel to advertise their fee information to consumers.

I registered my Maryland virtual law firm at AttorneyFee.com yesterday. I found the interface to be clean and simple and the registration process easy.

My only criticism was that there was no field to display a law firm's web address -- only an email address and a telephone number. This means that an interested prospect will have to contact the law firm to get more information by phone or email, without the opportunity of easily clicking through to the law firm's web site.

In my case, the page describing the pricing of my services does not provide enough information to the consumer about the scope of my services. There is no place to indicate that we offer "limited legal services" for pro se parties exclusively. For a new company that prides itself on transparency, this feature is less than transparent.

Moreover, when my firm comes up, a form also pops up that enables the prospect to ask for a free consultation. Except in our case, we don't provide free consultations. Since we sell a legal advice service by the question for a modest flat fee, offering a "free consultation" is not consistent with our business model. 

When I asked Robert Komaiko, one of the co-founders of AttorneyFee about these issues, he said they have other features planned for the site but they felt it was important to launch the site, get feedback, learn, and revise. As a believer in the lean startup method of starting a company, which is now all the rage in Silicon Valley, I agreed with Robert that it was important to get the concept launched and to work out the kinks later. There is certainly enough benefits and features already built into the site to see if this concept gets any traction. Better to launch the service , get feedback, and revise, as opposed to waiting for a year, adding every feature imaginable, and then discovering that consumers have no interest in the service.

AttorneyFee  using a proprietary search technology,has already  listed the prices that over 20,000 law firms are charging on their web sites.  The company plans to have over 70,000 law firm sites indexed within a relatively short period of time. This information alone will provide a useful consumer resource for comparing fees charged by law firms for similar tasks.

Some lawyers are bound to be critical of this web service as it is another indication of the commercialization of the legal profession but as Beibei Que, the other co-founder of AttorneyFee, and its CEO, told me: 

We have all known that this moment was coming for a long time.  The profession can no longer limp along with one foot in the for-profit economy and another in a quasi-clergy role.  If we wish to reap the benefits of the for-profit economy, we must be prepared to comport ourselves like private market actors, and this means not retreating from conversations about price or concealing them behind closed doors.

AttorneyFee.com is a welcome addition to the family of new disrupters shaking the legal profession to its core.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

An editorial appeared in today's (08/22/2011) Wall St. Journal , titled "Time to Deregulate the Practice of Law", by Clifford Winston and Robert W. Crandell, both Fellows at the Brookings Institution. [ Ungated version here ]. The editorial argues that it is time for the legal profession to be deregulated, as other industries have been, in order to create price competition for legal services, spur innovation in the delivery of legal services, and reduce the premium that lawyers get for pricing their services as a result of strict occupational licensing. The editorial is a summary of the conclusions of a book soon to be published by the authors, and Vikram Maheshri, titled, "First Thing We Do, Let's Deregulate All the Lawyers" (2011, Brookings Press). This book is the opening salvo it what is sure to be an expanded debate about who should be allowed to provide legal services to the general public.

New Methods of Legal Service Delivery

With online companies such as LegalZoom, RocketLawyer, JustAnswer, LawBidding, Law Pivot and our own MyLawyer.com, pushing the boundaries of new ways to delivery of legal services,  there is renewed pressure on the organized bar to respond to consumer demand for affordable, transparent, competent, and reliable legal services. Law firms are exploring ways to delivery legal services online to compete with non-lawyer providers, but are often constrained by bar regulations.

Essentially, the authors argue that lowering the barriers to entry into the legal profession would force lawyers to compete more intensely with each other, and  face competition from non-lawyers and firms not owned and managed by lawyers. The authors argue that legal fees are higher  because of occupational licensing and can be reduced by deregulation without sacrificing the quality of legal services.

Since heading the Philadelphia Institute for Paralegal Training, the nation's first paralegal school and the institution that pioneered the paralegal profession in the United States,  I have argued that you don't need a fully-trained and credentialed attorney to provide services to consumers for simpler, more routine legal problems, any more than you would need a brain surgeon to treat a headache, when a pharmacist will do. I am well aware of arguments that some lawyers make that there are no simple legal problems, but the reality is that many consumers will settle  for a "good enough" result, rather than spend thousands of dollars in legal fees.

On the other hand I am not comfortable with the idea that we should abandon all occupational licensing for legal professionals, lawyers and legal assistants, essentially converting the United States in a completely unregulated free market.

Arguments for a Regulated Legal Profession

1. The analogy between the legal profession to other deregulated industries, such as the airline industry, that the authors cite, is simply not relevant. There is fundamental differences between the manufacturing, mining, communication, transportation, and financial industries and the human service professions where the delivery of the service is expected to be of sufficient competence to accomplish the task at hand. If you follow the author's logic, we should also deregulate the dentists, the teachers, the nurses, the social workers, and the doctors because it results in lower pricing and therefore would increase the availability of those services. e.g., Instead of going to a "Dentist" to get your root canal work, you would have the option of going to the "Tooth Fairy."

2. The authors assume that the quality of legal services would not deteriorate any more than when the planes didn't stop flying when the airline industry was deregulated. Unfortunately the authors have no facts to back up this assertion. It is just wishful thinking.

3. When you look at the facts, however,  a more thoughtful response to reforming the delivery system for legal services is required.

On the anecdotal level, I can testify to the literally hundreds of botched legal matters that I have reviewed generated by "Immigration Specialists", Legal Technicians" and other non-lawyers operating in the grey area of offering document preparation services. In some instances, I have seen immigrants actually deported because of improperly prepared papers by "Immigration Specialists." I have reviewed "failure to discharge notices"  issued by U.S. Bankruptcy Court because of improperly prepared bankruptcy petitions. I have reviewed dozens of divorce petitions filed by "pro-se" parties, assisted by online document preparation companies that were rejected by the courts. I have seen enough of these cases to know that in many of these situations  incompetence and lack of knowledge and skill is evident. In some cases there is outright fraud and misrepresentation.

4. There have been almost no empirical studies that I know of that support the argument of the authors that the quality of legal services would not deteriorate in a completely deregulated marketplace - save one- and that study does not support the author's conclusions.

Legal Services Consumer Panel Study

Very recently the Legal Services Consumer Panel of the Legal Services Board in the United Kingdom, the agency in charge of deregulating the legal profession in the United Kingdom, conducted an empirical study of the quality of wills prepared by both solicitors and non-lawyers.

The Panel concluded that on the issue of quality:

 "one in four wills in the shadow shops were failed with more than one in three of all assessments scoring either poor or very poor. The same proportion of wills prepared by solicitors and will-writing companies were failed. Wills were almost just as likely to fail when the client had simple or complex circumstances. Key problems where the will was not legally valid or did not meet the client's stated requirements, were: inadequate treatment of the client's needs; the client's requests not being met; potentially illegal actions; inconsistent or contradictory language; insufficient detail; and poor presentation. Key problems relating to poor advice include: cutting and pasting of precedents; unnecessary complexity; and use of outdated terminology."

The United Kingdom has a legal market which is not only more deregulated that the US market, but will become even more deregulated in the future. Despite this more open environment, the Panel concluded that:

"Inherent features of will-writing services place consumers at risk of detriment. Consumers lack the knowledge to identify technical problems or assess whether the additional services offered are necessary or represent good value for money. The reliance on extracting good information about the consumer‟s circumstances and preferences, combined with the range of possible ways to deal with these in the will, means there is potentially wide scope to give bad advice."

and

"However, there is a need to make consumers better aware of the suitability of online services as these received the highest proportion of fail marks in the shadow shopping, but wills sold over the internet are difficult to regulate."

Thus, the Panel proposes that:

"will-writing services should be made a reserved legal activity. Any business – not just a solicitors firm – satisfying an approved regulator‟s entry standards could provide will-writing services."

The UK approach is not to restrict will-writing just to lawyers, but to open up the system to any providers that can satisfy the educational, regulatory, and accountability standards within the reserved activity. This is a vastly different approach than eliminating standards all together, as the authors seem to suggest.

The compete UK Report on Regulating Will Writing can be downloaded here. See also our Resource Page on Regulation of the Legal Profession.  The Report is worth reading by any policy maker who is thinking about doing away with all regulation of the providers of legal services to the general public.

Some final thoughts:

The authors claims of the benefits of deregulation in general are not supported by current evidence.

Consider:

• Deregulation of the mortgage baking industry brought the American economy to its knees;
• Deregulation of the US banking industry has wreaked havoc on the world's economy;
• Lack of strong regulation of the proprietary higher education industry has resulted in thousands of graduates without an adequate education, low employment rates, and high default rates. (Of course, as the author's point out, you could say the same about law schools and law school graduates, but then again the accreditation of law schools by the American Bar Association, it can be argued is another example of an "unregulated activity" without substantive standards that are meaningful).

The list can go on.

Perhaps I am premature in my judgment as the book has not been released, and I have just reviewed the salient conclusions. I can't wait to give it a full read and review.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

On August 2, 2011, Federal District Judge Nanette K. Laughrey, for the Western District of Missouri, the Judge presiding over the class action case against LegalZoom for unauthorized practice of law, released an opinion denying, in part, Defendant's Motion of Summary Judgment. The Court held that document preparation by non-lawyers, under Missouri Law, is conduct, and not entitled to First Amendment protection. ( See full opinion here ).

This is consistent with my own view, expressed in a previous post. (Is LegalZoom just a self help legal software company?).

The court's opinion rejects the logic in an article authored by Professor Catherine J. Lanctot, titled, "Does LegalZoom Have First Amendment Rights: Some Thoughts About Freedom of Speech and the Unauthorized Practice of Law." , which doesn't surprise me, as it is hard to characterize LegalZoom's activities as "speech", when they have 500 employees working on customer's documents.

One paragraph in the Court's opinion is troubling. On Page 21, the Opinion states as follows:

"Furthermore, LegalZoom's branching computer program is created by a LegalZoom employee using Missouri law.  It is that human input that creates the legal document. A computer sitting at a desk in California cannot prepare a legal document without a human programming it to fill in the document using legal principles derived from Missouri law that are selected for the customer based on the information provided by the customer. There is little or no difference between this and a lawyer in Missouri asking a client a series of questions and then preparing a legal document based on the answers provided and applicable Missouri law. That the Missouri lawyer may also give legal advice does not undermine the analogy because legal advice and document preparation are two different ways in which a person engages in the practice of law. "

.....
"The Missouri Supreme Court cases which specifically address the issue of document preparation, First Escrow, Mid-America and Eisel, make it clear that this is the unauthorized practice of law. The fact that the customer communicates via computer rather than face to face or that the document prepared using a computer program rather than a pen and paper does not change the essence of the transaction."

This Opinion could be interpreted to mean that all legal software programs are a form of conduct, and not entitled to First Amendment protection. I would argue that the Court comes to this conclusion because the legal software is used in the context of a document preparation service, and is not a stand alone program. As the Court further explains that:

As in Hulse, First Escrow, Mid-America, and Eisel, LegalZoom's customers are rendered passive bystanders after providing the information necessary to complete the form. Yet LegalZoom charges a fee for its legal document preparation service. .....The customer merely provides information and "Legal takes over."

The facts of this case make a difference, I would argue, in understanding the scope of the Court's Opinion.

If we define a legal software program as a "product", where there is no service element and no conduct whatever, then it is hard for me to believe that the Court intended to ban legal software programs from distribution directly to consumers, whether on-line or off-line.

If that was the Court's intent, then companies like Nolo and Intuit, would have to pull their products off the shelves of Barnes & Noble and Staples and Amazon, programs like LawHelp Interactive, supported by the US Legal Services Corporation, would have to be terminated, and the many web sites that offer interactive forms, without any service component would have to be abandoned. Courts that are experimenting with distributing interactive forms from their web sites, would have to consider whether this activity is the "unauthorized practice of law", a strange result.

Law Schools like Chicago-Kent Law School that are experimenting with new legal software interfaces that connect citizens directly with legal help through software, might reconsider their efforts.

The only way that such legal software could be used, would be by attorneys in the context of delivering of legal service through their law firms. I think this would be an unfortunate result.

Other possible negative consequences of such an interpretation would be:

• The legal profession would be further attacked for attempts to restrict commerce and maintain higher legal pricing by the consuming public causing further damage to the profession's already declining reputation;
   
• Pro se litigants would not have access to tools that enable them to represent themselves, further restricting access to the legal system;

It would be helpful, if the Missouri District Court clarified its language on page 21 of the Court Order to distinguish between fact situations where interactive legal software is used as part of a document preparation service business and situations where the programs are distributed as stand alone programs -- products--  like a book or other publication. What do you think?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In a Fortune Magazine blog post by Roger Parloff just last week, entitled Can Software Practice Law?, writing about the class action suit against LegalZoom in Missouri for violating Missouri's UPL statute, Parloff argues that LegalZoom is no more than a self-help legal software company, and therefore entitled to the same protections as a self-help legal software publisher. The question of whether legal software constitutes the practice of law is a controversial one. When the Texas Bar won a suit against Nolo Press on the grounds that its WillMaker program constituted the practice of law, the Texas Legislature amended the UPL statute and further defined the practice of law  as follows:

Texas Code, 81.101 (c) the "practice of law" does not include the design, creation, publication, distribution, display, or sale, including publication, distribution, display, or sale by means of an Internet Web site, of written materials, books, forms, computer software, or similar products if the products clearly and conspicuously state that the products are not a substitute for the advice of an attorney. This subsection does not authorize the use of the products or similar media in violation of Chapter 83 and does not affect the applicability or enforceability of that chapter.

No other state has passed such an exemption, but there is a well-established line of cases that supports the position that the publication of information about the law, as well as self-help legal books, divorce forms with instructions, and do-it-yourself kits is not the practice of law and protected by the First Amendment of the U.S. Constitution and may be protected by state constitutions as well. See, e.g., New York County Lawyers’ Ass’n v. Dacey, 21 N.Y.2d 694, 234 N.E.2d 459 (N.Y. 1967), aff’ing on grounds in dissenting opinion, 283 N.Y.S.2d 984 (N.Y. App. 1967); Oregon State Bar v. Gilchrist, 538 P.2d 913 (Or. 1975); State Bar of Michigan v. Cramer, 249 N.W.2d 1 (Mich. 1976); The Florida Bar v. Brumbaugh, 355 So.2d 1186 (Fla. 1978); People v. Landlords Professional Services, 215 Cal. App.3d 1599, 264 Cal. Rptr. 548 (Cal. 1989). 

LegalZoom takes the position that it is no more than a self-help legal publisher and seeks to fall within this classification, as Roger Parloff argues in his blog post. This is also the position that Legal Zoom takes on its Web site and in its answer to the Missouri Complaint:

From the LegalZoom Web site:

"Is LegalZoom engaged in the practice of law?"

"No.  LegalZoom is the latest and natural evolution of the centuries-old legal self-help industry."

"No jurisdiction prohibits the sale of software that generates a legal document based on a customer’s unique input.  LegalZoom has never been prohibited from operating in any state."

"Should consumers be concerned about LegalZoom losing this case?"

"No.  If LegalZoom is found to be engaged in the unauthorized practice of law in Missouri, then every guide and legal formbook in libraries and bookstores in the state would also be engaging in the unauthorized practice of law.  These days, nearly all such books are packaged with computer software that works in a similar manner to LegalZoom.  Just like with a Nolo Press^® book or a preprinted form, LegalZoom customers have the ability to review and consider their legal form before committing to their purchase."

It is not possible to know how LegalZoom’s document technology actually works without further evidence. However, one can state with certainty that it doesn’t work like a true Web-enabled document automation technology which generates a document instantly from data entered into an on-line questionnaire that is presented through the Web browser.

Vendors of true Web-enabled document automation solutions, such as HotDocs, Exari, DealBuilder, WhichDraft and Rapidocs (our company) have document automation technologies that generate a document instantly after the user clicks on the submit button. Because LegalZoom’s technology seems to require a separate step that is executed off-line, it does not in my opinion, fit into the category of a Web-enabled document automation technology. [ For a more extensive discussion of Web-Enabled Document Automation as a Disruptive Technology, click here to download our white paper on the subject. ]

Instead, in the LegalZoom  business model, as described by LegalZoom, a data file is created, reviewed by a legal technician, and then imported into their - document assembly application utilizing some form of import mechanism. It is not clear whether the document is fully-assembled until this second step takes place, and it’s a distinction that makes a difference.

If LegalZoom were just a legal software company, it is hard to understand why it needs over 400 employees to provide services to its customers, other than the fact that these employees are conducting professional reviews and providing real service support. For these services, LegalZoom receives a substantially higher price than if they were just selling a self-help legal form. See for example on the LegalZoom Web site, the 30-point review of wills conducted by LegalZoom's "professional legal document assistants."

These more labor intensive, personal services makes LegalZoom a "service business" and not just a "legal software publisher" entitled to the First Amendment protections that are afforded to publishers.

Andrea Riccio, a Canadian lawyer who has commented about this subject, responds to some of the arguments that LegalZoom makes in its defense:

LegalZoom’s argument: "Typically, there is no interaction between the customer and the person reviewing the file."

Riccio’s response:

“The mere fact that the employee is granted access to the customer's response is an interaction between the employee and customer.”

LegalZoom’s argument: "If there is an inconsistency, it is NOT corrected by the employee – instead, it is brought to the attention of the customer." 

Riccio’s response:

“Whether it is the customer or the LegalZooM employee that physically changes the document is irrelevant. What is important is that it is the LegalZoom employee that has identified the inconsistency. That, in my opinion, goes beyond "self-help" and is an act of legal draftsmanship.”

LegalZoom’s argument: "no employee revises or corrects any portion of the customer’s self-created document." 

Riccio’s response:

“Identifying inconsistencies or errors in another person's document is in my opinion an act of revision and correction. Who physically makes the changes is irrelevant.”

It is for these reasons that LegalZoom was required to be licensed under California law as a registered and bonded legal document assistant (see footer LegalZoom Web site).

What is a Legal Document Assistant?

A "Legal Document Assistant", as defined by the California Business & Professions Code (Section 6400 (c)) is:

"Any person who is otherwise not exempted and who provides, or assists in providing, or offers to provide, or offers to assist in providing, for compensation, any self-help service to a member of the public who is representing himself or herself in a legal matter, or who holds himself or herself out as someone who offers that service or has that authority, or a corporation, partnership, association, or other entity that employs or contracts with any person who is not otherwise exempted who, as part of his or her responsibilities, provides, or assists in providing, or offers to provide, or offers to assist in providing, for compensation, any self-help service to a member of the public who is representing himself or herself in a legal matter or holds himself or herself out as someone who offers that service or has that authority."

This California statutory scheme is based on the idea that a non-lawyer can perform clerical support functions without violating the unauthorized practice of law statute in California. Only a few states have carved out this exception by statute (e.g., California, Florida, Arizona).  Missouri is not one of them.

Could LegalZoom operate in California, where it is headquartered, without being registered with the state as a Legal Document Assistant?  I think not.  

This is the category that LegalZoom fits into, not “self-help” software.

Otherwise, I suppose Nolo, a California-based self-help legal software publisher, and other California-based legal software publishers that sell directly to the public, would have to be licensed in California as Legal Document Assistants!!!  (See generally - http://en.wikipedia.org/wiki/Legal_document_assistant, for a more extensive discussion of what a Legal Document Assistant is, and is not.)

Just to be clear, I am personally in favor of both self-help legal software and paralegal-assisted document preparation services as a way of providing access to the legal system, and personally think there should be more choices for consumers.  But my personal opinions are not the issue.  The issue is: 

“What does the law in the different states now require, and what can we do to change it if we don’t like it?”

It is becoming clear that LegalZoom’s defense strategy in the Missouri case is to associate itself with “self-help software”.  I am sure that its well-financed publicity machine is already approaching bloggers and the business press to write stories about whether “legal software” should be prohibited or regulated, when the real issue is whether and under what conditions a legal document preparation service should be regulated, or immune from regulation.

Definitions of what is “legal self-help software”, and what is not, are critical for carving out safe harbors for innovation, particularly as legal software applications that are distributed over the Internet have potential for great impact and for providing access to the legal system for those who cannot afford full service legal representation.

For example, LawHelpInteractive, a non-profit pro bono support organization, with grants from the US Legal Service Corporation, has assisted in the creation of true Web-based document assembly Web sites in many states that provides free legal forms directly to consumers that can be assembled directly on-line. 

LawHelpInteractive has generated thousands of legal forms during the past few years that are instantly available and free to consumers throughout the United States. No one is arguing that these Web sites constitute the practice of law.

Because of the wider reach of the Internet, Web-enabled legal software applications are actually more of a threat to the legal profession, than desktop software, and the opportunity for over-regulation remains ever present. I would regret the day that courts prohibit the sale of self-help legal software because it is the unauthorized practice of law.

However, stronger arguments can be made for protecting from regulation the distribution of legal software applications, than there are for exempting from regulation a "service business", so I maintain that confusing one category with another is dangerous and takes us down a slippery slope.

Whether or not LegalZoom provides a valuable service; whether or not consumers have been harmed by LegalZoom; and whether or not the company provides some form of legal advice are questions of fact for the Missouri jury, and beyond the scope of this post.

The question for the U.S. District Court in Missouri is whether, as a matter of Missouri law, LegalZoom's document preparation service business constitutes the practice of law in Missouri, under the terms of the Missouri UPL statute.

I think it does. What do you think?

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

For years some law firms, but not all, have used some form of document automation in their law offices. Ranging from an MS Word macro to long standing programs such as HotDocs, as well as automated forms distributed by legal publishers such as Willmaker by Nolo, some law offices have incorporated some form of document automation in their law practices. Document automation of legal documents that are generated in high quantity by a law firm is an indispensable process for increasing law firm productivity and maintaining profit margins in an era of intense competition.

Legal Document Creation the Old Way

The manual process of cutting and pasting clauses from a master MS Word document into a new document, is a productivity process which is fast becoming out dated. It reminds me of the time before there were automated litigation support programs, and legal assistants would duplicate a set of case documents three or four times. The next step was filling one file cabinet with a set of documents in alpha order, filling another filing cabinet with a set of documents in date order, and finally, filling another filing cabinet with a set of documents in issue or subject order to enable "fast"   retrievable of relevant paper documents. It took awhile, but almost all litigation lawyers now use automated litigation support methods.. This is not true of transactional lawyers, many of whom still use out-dated methods of creating legal documents, as if each legal document were a unique novel, poem, or other work of fiction.

Barriers to Change

An obstacle to wider use of automated document assembly methods, is typically the lawyer's insistence on crafting the words in each clause to their own satisfaction. Because most lawyer's do not have the requisite programming skill to automate their own documents, law firms by default will opt to use their own non-automated documents, rather than risk using the legal documents automated by an independent provider, because by definition the content of the documents is "not their own." As a result, many law firms do not even use desk-top document assembly solutions when the forms are published by an independent provider or publisher, remaining stuck using more time consuming and less productive manual methods.

Typically, when a law firm does use document assembly methods, a paralegal inputs answers from a paper intake/questionnaire into a document assembly program running on a personal computer. This results in the extra time-consuming step of inputting data from the intake questionnaire to the document assembly program, but it is still more efficient than manual methods.

Web-Enabled Document Automation

Now comes, "web-enabled legal document automation" methods."  Web-enabled document automation is a process whereby the intake questionnaire is presented on-line to the client through the web browser to be completed directly.

When the client clicks the "Submit" button the document is instantly assembled, ready for the attorneys further review, analysis, revision, and customization if necessary.  The result is a further leap in productivity because the client is actually doing part of the work at no cost to the lawyer, freeing the lawyer up to focus on analysis and further customization of the document.

This is what the work flow looks like when using web-enabled document automation methods:

Unfortunately, lawyers have been slow to adapt to this process as well,  because of their reluctance to use legal documents drafted or automated by someone else. However in order to automate their own documents they must either acquire the skill to do the job, or commit the capital to have a skilled professional automate their documents for them. For solos and small law firms these two constraints create formidable obstacles to using more efficient methods.

Since neither condition is common within smaller law firms (programming skill, investment capital), the result is that the law firm gets stuck using older less productive methods of document creation.

Vendors that provide web-enabled document platforms include, our own Rapidocs, and Exari, Brightleaf, HotDocs, DealBuilder, and Wizilegal, to name only a few, all claim that their authoring systems are easy to use, but I have yet to see lawyers without any kind of programming skill create their own automated legal documents in any quantity. Thus, law firms become stuck in a negative loop of their own creation which reduces productivity (and profitability) :

"My legal documents are better than yours; I can't automate them for the web because I don't know how; thus I will be less productive and be required to charge you more because of my own inefficiency."

Competition

In the consumer space, now comes the non-lawyer providers to take advantage of the solo and small law firm's competitive disadvantage. Research by companies like Kiiac provide support the conclusion that 85% of the language in transactional documents is actually the same. In more commoditized areas, where legal forms have been standardized,  the legal form content is 100% the same in all documents. Taking advantage of this consistency of legal form content,  companies like LegalZoom, Nolo, CompleteCase, SmartLegalForms, and LegacyWriter , with their superior on-line marketing and branding machines, now sell legal forms by the thousands at low cost which provide a "good enough" legal solution for consumers who would do any thing to avoid paying the higher fees to an attorney.

Its true that the consumer doesn't get the benefit of the attorney's legal advice and counsel, and the accountability and protection that dealing with an attorney provides, but consumers don't seem to care.

What can be done?

The "web-based legal document automation solution" , used by non-lawyer providers, is a disruptive technology  that is eating away at the core business base of the typical solo and small law firm practitioner. 

What can solos and small law firms do to compete in this challenging competitive environment?
The American Bar Association's Legal Technology Resource Center reported last year in their Annual Technology Survey that only 52.2% of solo practitioner's don't have a web site.  Even if this number is underestimated, it is shockingly low compared with web site utilization by other industries.  If you don't even have a web site, the idea of "web-enabled document automation" is still a "light year" away.

What can be done to encourage more wide-spread use of web-enabled document automation technology by law firms, particularly solos and small law firms? A follow-up post will explore some solutions, but I am open to ideas from anyone.

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

After 40 years of leading the self-help law movement, Nolo, is being acquired by Internet Brands an advertising driven Internet company. Nolo was created by two frustrated legal aid lawyers, Charles (Ed) Sherman and Ralph (Jake) Warner, who wanted to figure out a way to help the thousands of consumers with their legal problems who could not afford an attorney and were turned away by legal aid because their incomes were too high.

Based in Berkeley, California, the center of the counter cultural revolution of the 1960's, Nolo assembled a group of radical lawyers, editors, and writers who were determined to do something about a broken legal system where 90% of the US middle class were priced out of the legal system. Championing legal reforms that would make the U.S. justice system accessible to everyone, the company has seen these reforms become mainstream in the US.

Courts now offer their own automated self-help legal forms, legal aid agencies publish state-wide legal information web sites and also distribute automated legal forms, legal form web sites give away legal forms for free as a way to generate traffic, small claims court limits have been raised in many states, and lawyers are delivering "unbundled legal services" and creating virtual law firms,  figuring out ways to deliver legal services online for a fixed and affordable fee.

Its ironic that Nolo is being acquired by  Internet Brands, for an amount rumored to be in the range of $20,970,000, by an advertising company that is focused primarily on generating leads for law firms through their directories and advertising properties. How does self-help law fit into this business model?

The amount being paid is little more than one times revenue -- not exactly a premium.  Although, Nolo  publishes Willmaker and several other excellent web-based legal software programs, it is still primarily a book publisher. In its hey day, before the Internet penetrated almost every household in America, Nolo self-help law books were the primary source for accurate do it yourself legal information and forms.

As the web expanded hundreds of legal information and legal form web sites also emerged, plus national brands such as LegalZoom. These web-based alternatives also provided  legal solutions without the need to use a lawyer -- the same need that Nolo was meeting. Except that instead of reading a 200-300 page book in order to get to a legal solution --  web-based applications delivered a legal solution more efficiently, faster, and at less cost.

Nolo has migrated many of its legal forms online, too little and too late, and except for a few major products, non-automated forms. Here is another example of a print publisher whose business, despite the excellence of its product, has been eroded by the Internet.

It is well known that Nolo's book business actually declined during this recession and growth has been flat. The fastest growing area of Nolo's business is their Lawyer Directory. This is ironic for a company that prided itself in developing self-help legal solutions that don't require the assistance of an attorney.

The challenge for Internet Brands will be to figure out how to unlock the assets buried within Nolo's vast collection of self-help law books and turn these assets into web-based applications that can be distributed over the Internet. It remains to be seen whether the quality of Nolo's self-help legal content will deteriorate under the management of an advertising-driven company that measures results in page views and unique visitors.

Internet Brands, previously a public company, was recently taken private private when it was acquired by Hellman & Friedman, a private equity firm, based in San Francisco,  in December, 2010. Internet Brands has acquired over 70 vertical web sites in areas ranging from travel to cars to real estate. Internet Brands derives more than 70% of its revenues from advertising on its portfolio of web sites.

In December, 2010 Internet Brands also acquired ALLLAW.com , a consumer legal information portal and AttorneyLocate - an Attorney Directory Service. Both of these web sites are relatively weak properties. Compete.com shows that in March, 2011 Nolo had 498,769 unique visitors ( an 8% decline for the year), ALLLAW.com  had 190,069 unique visitors, (for the of March, 2011); AttorneyLocate.com was especially weak with only 18,277 unique visitors (for the month of March, 2011). Internet Brands also owns ExpertHub, which in turn manages web sites in verticals markets such as dentists, plastic surgery, accountants, tummy tuck, and of course lawyers. The ExpertHub site for lawyers only generates 96,289 unique visitors a month (March, 2011), so I wonder if that level of traffic is high enough to support their advertising rates.

There is irony in the fact that LegalZoom, a company that prides itself on offering  legal solutions from a non-law firm generates more traffic than any of the sites mentioned above at 889,762 unique visitors in March, 2011, trailing only Findlaw and Lawyers.com, (both of which offer similar services as the Internet Brands properties).  With the traffic that LegalZoom gets, maybe LegalZoom should consider creating their own lawyers directory for consumers who need just a bit of legal advice to go with their forms to keep them on the right track? I wonder what solos and small law firms would think if LegalZoom moved in that direction?.

It will be interesting to see how Internet Brands integrates these legal properties to leverage the assets in each acquisition as its tries to compete with the likes of Findlaw and Lawyers.com . It will also be interesting to see whether the quality of Nolo's self help legal content deteriorates under the management of an advertising company that measures results in impressions, clicks, and unique visitors. If Jake Warner, the present CEO stays involved, I am sure the quality of Nolo's products will remain "top of class."

It's an odd mix, --the best in class self-help legal book publisher with an excellent reputation, with some less than best in class lawyer directories and a legal information web site. Only time will tell whether this combination will work. (Although Internet Brands may intend to run each of these properties as separate brands, which would help Nolo maintain the quality of it self help legal content).

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

Apparently LegalZoom is in the early stages of planning an IPO, (going public),  according to an unnamed source at VentureBeat. Employing more that 500 employees, and having raised over $45 million in venture capital over the last few years, LegalZoom is clearly the leading non-lawyer legal document preparation web site. This is a good example of a disruptive innovation in the delivery of legal solutions by a non-lawyer provider that continues to eat away at the market share of solo practitioners and small law firms.

Focusing on a market that is not served well by the legal profession, in the same way that Southwest Airlines first targeted people who traveled by bus, rather than by air because air travel was too expensive, LegalZoom is will undoubtedly figure out a way to move up the value chain, capturing even more complex business from law firms, without actually giving legal advice.

In the United States, because the definition of what constitutes the "unauthorized practice of law" is so vague. (perhaps unconstitutionally vague),  it would seem that even though LegalZoom does not actually provide legal advice, it would be prohibited from assembling legal documents, even when the document assembly is purely software-driven. 

The reality is that bar associations have a tough case to make against a non-lawyer provider when no actual legal advice is given. UPL statutes haven't been truly tested on the issue of whether a non-lawyer can assemble legal documents without actually giving legal advice. In Florida, when the issue came up, there was a compromise between the bar and non-lawyer providers and non-lawyers can help a consumer complete court forms as long as no legal advice is provided. It gets murky when you move beyond courts forms, to more complex transactional documents such as a will,  a living trust, or a marital separation agreement, even if the user is making the selection through a software driven questionnaire. Some UPL advocates, have argued that the selection of alternative clauses is still UPL, because a person had to "program" the clauses. There is some precedent for this position, but the State of Texas on the other hand, specifically excludes software driven document assembly from the "unauthorized practice of law., provided there there are disclaimers which state "clearly and conspicuously that the products are not the substitute for the advice of an attorney."

I think the risk portion of the prospectus will make for fascinating reading, particularly since in many states UPL is a felony. I can just visualize this language: "Investors should be aware that the company may be violating unauthorized practice of law statutes in many states, and as a result, if convicted, one or more executive officers may be required to serve time in the pokey."

In the interest of full disclosure,  Epoq US,  of which I am President, and which is the parent company of DirectLaw, also provides legal document preparation services over the web directly to consumers through a network of legal web sites    So perhaps I should be worried as well.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Private capital is beginning to flow into companies that are operating at the intersection of the delivery of legal services and the Internet.

Total Attorneys, a Chicago-based company,  just announced that they received a multimillion dollar investment from BIA Digital Partners, a Virginia-based venture capital firm. Total Attorneys is most known for the marketing services that it provides to law firms and the recent ethical controversy in some states surrounding the use of pay-per-click advertising on behalf of law firms. (Apparently this controversy has been resolved in favor of Total Attorneys in every state where it was considered by bar ethics committees.)

The company plans to extend its technology assisted services to law firms by expanding its virtual law firm Software as a Service offerings (SaaS).   Total Attorneys mission is to become a leading provider of elawyering Services to solos and small law firms by providing a comprehensive suite of outsourced technology services, from marketing to web-based practice management tools to a robust client portal.

The company licenses virtual law office technology to solos and small law firms as a subscription service, that now consists primarily of a robust suite of "back-office" practice management tools. The pan is to expand the service into a more comprehensive "front-office" client portal, providing a total solution to solos and small law firms.

This expansion would entitle the company to claim that it is a leading provider in the eLawyering space  and it would compete more directly with our own DirectLaw virtual law firm platform service and other web-based companies moving in the same direction.  [ See:  Legal Vendors Cloud Computing Association ] .

The concept of "technology-assisted service" is an interesting category for  the legal industry for it describes a form of outsourcing which combines both a digitally-based service combined with human service. Thus Total Attorneys also provides "virtual receptionist services", and at one point virtual support services to bankruptcy law firms. One management solution for solos and small law firms it to out source to independent specialized companies functions which can be done more effectively and at less cost than the law firm can do itself using internal resources.

It is good to see competition heating up in the eLawyering space, which has been moribund for a long period of time.  The eLawyering Task Force of the Law Practice Management Section of the ABA was created in 2000, more than a decade ago. For many  years there was not much to report in terms of the innovative delivery of on-line legal services by law firms. The last 2 years has witnessed an explosion in elawyering industry developments as lawyers adapt to change -- caused by a severe recession, widespread unemployment of recent law school graduates, and the challenges created by consumers who are seeking lower-cost and "good enough" alternatives to lawyers, [such as LegalZoom.]

Competition among a variety of vendors provides choices to law firms.  Competition focuses attention on the fact that delivering legal applications as a SaaS is emerging as a new paradigm for enabling solos and small law firms to access complex Internet technologies at a fraction of the capital cost of developing these applications internally.  Private capital moving into the legal industry will create more choices for law firms, and as a consequence more choices for consumers.

Creative legal outsourcing will enable solos and small law firms to become more productive and survive in an increasingly competitive environment.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (5)
• Trackbacks
• Share Link

Unless you've been asleep for the last five years, you have probably heard of LegalZoom, the California-based, non-lawyer legal document preparation company that claims it has delivered over 1,000,000 wills to consumers, and that it is the largest incorporation company in the country.

LegalZoom is only one of hundreds of Internet-based legal form web sites that have emerged during the last 10 years and which are eating away at the market share of solos and small law firms. LegalZoom has been challenged by some state bars with the unauthorized practice of law, but hasn’t lost a case yet. They are serving thousands of customers who ordinarily would be served by solos and small law firms. They must be doing something that is in demand because they continue to grow at the expense of solos and small law firms.

LegalZoom, and non-lawyer legal form web sites like it, have a business model that consists of the following elements:

• A legal service delivered purely over the Internet;
• No physical offices, and thus no extensive rental costs to pass on to customers;
• Limited services offered at a fixed price that can be easily compared with other providers including law firms;
• The use of web-enabled document automation technology to reduce costs and increase productivity;
• A secure customer portal where clients can execute legal tasks in their own personalized web space;
• Access on their web site to thousands of pages of free legal information on hundreds of subjects;
• Money-back guarantees to comfort consumers; and
• Reliance on informed consumers to do part of the work, often called co-production, such as filing their own documents or executing their documents on their own based on provided instructions to keep costs down.

Consumers don’t seem to care that they are not dealing with a law firm. As lawyers, we know the service they are selling is risky for consumers, but for consumers it delivers a “good enough” result. LegalZoom would not be growing at this fast a rate if they weren’t offering something that consumers want and value.

How to Compete Against Legal Zoom and Other Non-Lawyer Providers

In the new, competitive environment that solos and small law firms face in the current economy, the keys to law firm survival are to expand the strategic options available by opening new client markets, reducing the cost of services, and delivering legal services in a way that distinguishes your firm from other firms in the pack. These strategic options should be mixed with more traditional approaches to differentiation such as specialization within a niche practice area.

It is time for solos and small law firms that offer personal legal services to the broad middle class to rethink their law firm business models. There are many opportunities for incorporating some of the elements of the LegalZoom business model into a more traditional law practice.

To name a few:

• Consider offering "unbundled" limited legal services at a fixed price, both on-line and off-line;
• Leverage a reputation in your local community and a physical office into an on-line brand that is both local to your community and extends throughout your state;
• Add virtual law office functionality to your web site so that your clients can have the option of interacting with you on-line;
• Figure out ways of using Internet-based technologies, such as web-enabled document automation to strip out costs from your overhead structure increasing profitability;
• Figure out how to segment the market offering lower priced services for more routine matters in order to build trust so that when a client has amore complex problems they will turn to you for assistance;
• Emphasize all of the advantages of using an attorney over a non-lawyer forms provider in your marketing materials and your elevator speech. Click here to see one such comparison.
• Use web-based technologies to respond to both prospects and clients within hours rather than days.
• Reduce the perceived risk that consumers have in retaining a lawyer by increasing transparency and structuring forms of performance guarantees.
• Adopt project management technologies to better estimate costs and fees on more complex projects, translating that data into communications that clients understand.

The current depressed economy and its affect on the broad middle class is not going to change tomorrow. It is likely that solos and small law firms, will have to adjust to new pricing and market realities in the future as competition from non-lawyer providers of legal solutions continues to increase. Large law firms serving large corporations may be immune from these developments, at least for a few years any way, but the fact that Big Law is changing relatively slowly should not mask the rapid changes happening to solos and small law firm practitioners that serve consumers and small business.

I heard a report the other day that the volume of wills and estates practice in one state declined by 50% during the past year. I predict that this trend will continue and not reverse itself, despite any improvements in the economy.

Some commentators think that the monopoly will hold. History and the experience of other countries in deregulating the legal profession suggests otherwise.

Welcome to the "new normal."
 

• Email This
• Print
• Comments (6)
• Trackbacks
• Share Link

Washington State's Attorney General has entered into a settlement agreement with LegalZoom , requiring that LegalZoom cease comparing its fees to attorneys' fees unless the company clearly discloses that its service isn't a substitute for a law firm. The agreement also prohibits LegalZoom from engaging in the unauthorized practice of law, selling personal information obtained from Washington customers or misrepresenting the benefits of any estate distribution agreement. LegalZoom is also the subject of a class action suit in Missouri for the unauthorized practice of law.

This action has been a long time coming, but much of the damage to solos and small law firms has already been done, as LegalZoom, with its substantial venture capital backing, has already imprinted itself on the minds of America's middle class consumers that it offers a better alternative that seeking the advice of an attorney.

Even Polaris Investors - the VC firm that backs LegalZoom - claims on its web site that:

"Legalzoom is the nation’s largest online legal service center.  The company helps its consumer and small business customers quickly and affordably create estate planning documents, form businesses, and protect valuable intellectual property such as trademarks and provisional patents through their easy-to-use website thus avoiding costly attorney fees." (Our emphasis).

There is a value in having non-lawyer, trained paralegals assist consumers in completing legal forms, but LegalZoom's consumer practices have set this reform movement back.  If an attorney claimed that his practice, "put the law on your side," as Robert Shapiro of OJ fame has done on every Cable-TV channel, that lawyer would probably be subject to disciplinary action for an advertising claim that is a material misrepresentation.

It is time to level the playing field by requiring LegalZoom to disclose clearly the limitations of the services it provides.

Other State Attorney General's with responsibility for enforcing consumer protection legislation should take notice.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

There is a thoughtful discussion going on about the value of adding the capability of offering legal services online to a law firm's business model that was started by Lee Rosen's blog post titled, "What the Virtual Office Advocates Aren't Telling You."  Responses, so far,  include a post by Carolyn Elefant, an astute observer of solo practice, a post from Susan Carter Liebel, the  Founder of Solo Practice University, and a comment by Stephanie Kimbro, the founder of Virtual Law Office Technology, now owned by TotalAttorneys and the author of the recently published book, Delivering Legal Services Online. Lee Rosen is the winner of the ABA/LPM James Keane Memorial Award for Excellence in eLawyering in 2010, and Stephanie Kimbro won the same Award in 2009 for her work in creating her virtual law firm at KimbroLaw. Donna Seyle, a member of the ABA/LPM eLawyering Task Force and a consultant to solo law firms on law practice strategy, also commented on Lee Rosen's blog arguing that there is a great demand for "unbundled" legal services by the middle class.

Lee's argues that in his opinion there isn't much demand by clients for virtual services and that many clients if they want a virtual service are perfectly happy with LegalZoom. He says he has seen, "a survey indicating that many clients prefer a paralegal-provided service to an attorney-provided service, even when both are offered at the same price." Moreover it will be very hard to turn around consumer preferences now that LegalZoom has established a nationwide legal brand.
He also argues that it is very difficult, or not impossible, for a lawyer to generate a stream of income from a purely virtual practice and that a low-end practice doesn't generate the kind of clients that a law firm needs to be successful. Carolyn Elefant makes a similar argument that it is very difficult to generate significant profits from a low end practice unless you have volume which is difficult for the average solo practitioner to create without some capital and the skills to market their legal services on the Internet. I would agree with these points, but whether a solo or small law firm should consider adding a virtual law firm presence to their web site and modifying their business model is really a more complex discussion than can be easily done within the context of a blog post. There is much wisdom in Lee's observations, but the story is more complicated than he makes out.

I would make the following additional points:

1. A virtual law firm as we define it, is one that has a “client portal” where clients can interact with their attorneys online, view copies of their documents, pay their bills online, communicate with their lawyer in a secure space where their attorneys responses are archived and available, assemble documents through an online questionnaire, and access other digital applications. In my opinion, the benefit of using a virtual law firm platform is to increase law firm productivity, law firm transparency, client retention, and client acquisition. These are all positive values that studies of consumers indicate that they want.  It is not the case, as Lee argues, that there is little demand for by consumers for online legal services.  The 1,000,000 wills that LegalZoom claims it has created during the past five years or so, and the dozens (hundreds ?)  of other non-lawyer legal form sites is ample evidence that the legal profession has abandoned the online legal services market to non-lawyer providers.

2. A “client portal” concept is just another tool that enables a law firm to have an interactive presence on the Web which has certain productivity and client communication benefits. It is not a substitute for a law firm developing its own unique business model and market positioning approach which identifies a group of prospects and converts them into clients. Each law firm has to figure out how to integrate these tools into their own business model. For some law firms, this concept is not relevant to their type of practice. For others, it can be another basis for differentiation,  for choosing one law firm over another.  For many law firms, a virtual capability becomes an important adjunct to the regular office based practice, creating efficiencies that only can be created by using the web as a platform for delivery.

Here are a few examples of law firms that are experimenting with online marketing of legal services, offering "unbundled" legal services in a niche area for a fixed price:

• Practical Plans- an On-Line Estate Planning Practice
• Hedeker & Perrilli - SmarterWill - an Online Wills Service of a high end estate planning firm.
• Estate Planning for Single Parents - an Online Wills Service in Tampa, Florida serving a distinct population.
• GranatDivorceOnline.com - an online no-fault divorce service service pro se litigants in Maryland. (one of my web sites).

For other examples, see the Law Firm Directory at MyLawyer.com.

3. If a law firm wants to market to web-based consumers, including members of what we now call the “connected generation” a law firm needs to have a virtual law firm platform in place, as one option for relating and working with clients.  The cost of adding this functionality is now trivial, so there is little excuse for not trying it. We know from our own experience that there are benefits to this approach, as a complement to a traditional office-based practice.

4. LegalZoom and other non-lawyer legal form sites can’t provide legal advice. I can give you many examples from my own virtual law practice where legal advice makes a major difference in legal outcome. Providing just legal forms alone, can sometimes solve a legal problem, but often they do not. The challenge for us lawyers,  is to figure out a way to provide an offering that is price competitive with LegalZoom, but which offers more value.

Moreover, as a profession we should not walk away from the legal problems of moderate income clients. We have skills that will result in better legal outcomes for moderate and middle income clients. As a profession we have an obligation to provide services at a lower price to individuals who can’t afford higher fees and we should figure highly productive methods of serving them. Are we only to serve the wealthy? If so perhaps the legal profession should be deregulated, as it is being done in the United Kingdom, and legal services regulated just like any another service business. This would provide opportunities for many different kinds of providers to provide legal advice and other services which the legal profession now monopolizes. This is the direction that we are heading.

5. Providing a low end, lower priced legal service can be a marketing strategy for providing higher end, higher fee services. A client of http://www.directlaw.com, that is a personal injury firm, is using a low end service to build relationships with prospects so that the prospects turn to the law firm when they have a high value PI case. Some of the DirectLaw law firms give away free legal forms as an inducement to enter into a relationship that results in the purchase of a broader array of legal services.

6. Some lawyers are able to attract a clientele that will be willing to pay $400.00 an hour for a divorce lawyer, but there are not enough of these clients to go around to satisfy all of the divorce lawyers in a state. The broad middle class is seeking less costly alternatives as this level of pricing, and pricing by the hour,  is more than they can afford. There is real demand for "unbundled legal services" at a fixed price. We can see this directly from the weekly increase in traffic at MyLawyer.com , since a Spring, 2010 launch, where virtual law firms offer their services at a fixed price. The success of RocketLawyer , operating in the same market space, is another example that there is real demand for this type of legal service.

7. For many law firms, a virtual offering becomes an important adjunct to the regular office based practice, creating efficiencies that only can be created by using the web as a platform for delivery. It is a component of an office-based practice that can be used to enhance the experience of existing clients with their lawyers.

8. Finally, the cost of adding these technologies to even a solo practice is becoming trivial. We tested a free version of DirectLaw this summer and experienced great demand, so we decided to end it on September 1, 2010, and offer in the future, what we call DirectLaw Basic for a subscription fee of only $49.00 a month for a solo practitioner.

$49.00 a month is not a significant cost for a solo practitioner to acquire a virtual law firm capability. It is low enough for a solo practitioner to experiment and test out the benefits. 

There will come a time, when thousands of solos and small law firms will add a “client portal” to their web sites to power and extend their marketing programs and to enhance the client experience for those clients that are looking for a way to work with their lawyers online. Lee Rosen is correct,  that simply adding a “virtual law firm” capability does not make a marketing strategy, but there are online marketing strategies that can’t be executed without a virtual law firm platform in place.

The delivery of online legal services will continue to expand, I predict, but it is not going to happen tomorrow. As a new generation of clients mature to the point where they have legal problems of their own,  the need of delivering legal services online will intensify.

New innovations take time to reach a tipping point. I remember, very clearly,  when lawyers would not think of using a paralegal, and I remember how long it took for the innovation to mainstream and reach a tipping point. These times are not dissimilar, as the platform for the delivery of legal services is changing, as Jordon Furlong observes.   In all things innovative, patience is a virtue.

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

The DirectLaw Virtual Law Platform is evolving into what is called a multi-sided and open platform. Our latest feature enables the sales of non-Rapidocs documents and HOTDOCS templates, in addition to Rapidocs automated document templates.

We added this functionality in response to our #1 question from law firms -- "Can I use my own documents?" While this option doesn't have the benefits and efficiencies that our libraries of Rapidocs-based documents provide -- i.e., clients won't be immediately presented with an on-line Questionnaire that will automatically create their docs – firms now have the flexibility to easily put their own documents on the "menu" and convert them to sales.

Moreover, beginning in mid-June, 2010, law firms who have invested in automating their legal forms and documents in HOTDOCS for use on the desktop will be able to serve HOTDOCS Questionnaires through the Web browser via the DirectLaw Platform and charge clients for legal forms bundled with legal advice. We are also in the process of identifying other legal applications created by independent developers that can be served from DirectLaw’s Virtual Law Firm Platform.

The launch of our new consumer portal, MyLawyer.com, provides another side to DirectLaw’s Virtual Law Firm Platform. MyLawyer.com contains a searchable Law Firm Directory, legal information, legal tools such as calculators, and a limited number of free legal forms. 

The inclusion of free legal forms enhances DirectLaw's ability to promote the site most effectively through search engines.  DirectLaw also markets this site via press releases and articles/interviews in relevant media channels to drive traffic to DirectLaw’s network of virtual law firm web sites.  

Designed around the concept of limited ("unbundled") legal services, MyLawyer.com compares the differences between limited legal services provided through a law firm vs. a non-lawyer entity like LegalZoom.com. 

Consumers can easily search for a law firm in their state offering on-line, unbundled legal services, clicking directly through to the firm's MyLegalAffairs "menu of services". 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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?

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

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?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

There has been some recent blog comments [See: Carolyn Elefant 's Blog  [about  the meaning of Robert Capps article  in this month's WIRED Magazine, (September 2009) about the concept of "Good Enough",  "Good Enough" solutions, (when cheap and simple is just fine). , and my quote about how this concept applies to the legal profession.

When I was interviewed for the Wired Article, I didn't know the focus of the article, and I was simply reporting my experience in offering limited legal services to consumers for a fee they can afford. I wasn't saying at all that lawyer's should do less competent or less excellent work. Rather I was thinking about how legal transactional events between consumer and lawyer can be restructured to get to the "good enough result" that many consumers seem to want.

My best example is one that I participate in daily, and which I mentioned in previous blog post. Divorcing couples opt for a quick settlement, even if they don't get "every right" they are entitled to in the interest of reducing their legal fees and getting on with their lives.

Divorce lawyers can charge from $5,000 - $10,000 (low-end of fee schedule) for even a relatively simple divorce. case. The lawyers will say there are no simple divorce cases. But that is from the the viewpoint of the lawyer. From the consumer point of view, they have a choice to spend $5,000 for each counsel who is representing either party- or to take the money and use it to get on with their lives. The question is--  what is the ROI from the consumer's point of view?  Sometimes the investment of $5,000.00 in legal fees is worth it. ($5,000.00 is really a low end estimate). Consumers don't think so, or there would not be thousands of pro se litigants representing themselves in family court. Pro Se Representation is a good example of a restructuring of the lawyer/client relationship to get a "good enough result." The success of LegalZoom -  admittedly a service which is a very small step above a bare legal forms service is more evidence of consumer preferences.

So is the movement towards "limited legal services." Lawyers, mostly solos and small law firms, that think that otherwise and think that full service representation is the only way to go are not facing consumer reality. These lawyers are living in a dream world.

Consumers want solutions to their legal problems. If they can get legal solutions in a different form than a traditional legal service from an attorney that is "good enough" at much less cost, they will turn away from the legal profession and seek those alternatives if they get a result that satisfies their expectations. 

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

Legal Zoom has been challenged by the North Carolina Bar which claims that Legal Zoom is violating the unauthorized practice of law statute in North Carolina. The essence of the Bar's complaint is that even though Legal Zoom asserts that their legal documents are created by a web-based software system,  this constitutes the practice of law because Legal Zoom selects the content that is incorporated into the system. The Unauthorized Committee of the Bar cites  In re Reynoso, 477 F.3d 1117 (9th Cir. 2007) , a case that was decided by a Federal court in California on a different set of facts. In fact, in the case of Legal Zoom, a paralegal or legal technician, conducts something called a "review" , which Legal Zoom uses as a rationale to charge a higher fee. This review is not supposed to be "legal advice", but apparently this gives the North Bar UPL Committee problems as well. We think the In re Reynoso decision is limited to the particular facts of that case, which the Court notes, so it can be argued that is not appropriate for the North Carolina UPL Committee to cite this as precedent,  We also that in California there are many non-lawyer providers who provide alternatives to lawyers, including Legal Zoom , which is based in Hollywood, California. So what is the unauthorized practice of law in North Carolina, is not in California. This doesn't make sense.

This is an ominous development as it indicates that the organized bar will go to any  length to maintain its monopoly over the delivery of legal services, even redefining what is essentially a "legal information service" as  the practice of law.  The legislature of the State of Texas was faced with a similar situation several years ago, when the Bar was trying to shut down a legal software publisher on the theory that the purchase of a  legal software program from Staples was the practice of law, and responded by passing a statute in response to consumer demand that exempted legal software programs as falling within the definition of the practice of law.

This is not an issue that will stir North Carolina's citizens to rise up in anger at the organized bar for restricting their choices and keeping legal fees unnecessarily excessive, but they should. They should follow the path of Texas's citizen's and put the North Carolina bar in its place.

• Email This
• Print
• Comments (7)
• Trackbacks
• Share Link

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."

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

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?

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

Apparently LegalZoom has been advertising to its customers that the trademark filing fee is $325.00, when it was actually $275.00,  an obvious misrepresentation. Apparently they have been doing this since 2005. This has resulted in a consumer class action suit to recover the $50.00 overcharge on behalf of all customers who have paid the higher fee. Here is a good summary of the details of the case.  LegalZoom has since changed its web site to characterize the additional $50.00 fee as an administrative fee. If a law firm made this kind of misrepresentation on its web site it would receive a sanction from the bar for misrepresentation. This is another example of the lack of regulatory control over non-lawyer providers of legal services and the absence of any accountability other than the response of the market -- which is in inefficient as consumers  rarely have sufficient knowledge to understand the nature of a misrepresentation.  LegalZoom's claim that a consumer can save thousands of dollars by using its service, rather than lawyer, assumes that somehow the services of LegalZoom and an attorney are identical. Nothing could be further from the truth. Caveat Emptor!!!

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

Recently a prospect for our DirectLaw Web Service asked me whether it was the unauthorized practice of law for a law firm to use a legal document that is generated by our web-enabled document automation system (Rapidocs), because the legal form did not originate within the law firm itself. In this model, a client completes an on-line questionnaire which generates a legal form or legal document instantly ready for attorney review and further modification. I asked my colleague Will Hornsby, who is Counsel to the Standing Committee on the Delivery of Legal Services, American Bar Association, and a leading expert on ethical issues that arise from delivering legal services over the Internet.

Hornsby says that a lawyer commits the unauthorized practice of law when the lawyer assists a non-lawyer, whether that is a person or a corporation, to undertake the practice of law. This leads to the question of whether online document automation that creates a legal form or document from data provided by the client is the practice law. The definition of “the practice of law” varies from state-to-state but frequently includes the drafting of legal documents and the use of legal knowledge or skill. (For specific state definitions of what is the practice of law, or the unauthorized practice of law, click here.

However, the question here revolves around whether the lawyer is “assisting” the software vendor in practicing law when the document preparation is provided as a legal service of the law firm. This is analogous to services provided by paralegals and other outsourced services. In most states, for example, paralegals have no independent authority to provide legal services. If they independently provide document preparation or use their legal skills in serving clients, they may be deemed in violation of their state’s UPL laws, as are any lawyers who assist them in providing those services. [This is the LegalZoom model ]. However, if paralegals provide those same services under the direction of a lawyer and the lawyer assumes supervisory obligations, the paralegal is not practicing law and is not violating UPL laws, nor is the lawyer who provides the supervision “assisting” in the unauthorized practice of law.

ABA Formal Opinion 08-451 (Aug. 5, 2008) clarifies that a lawyer may outsource legal services, subject to several considerations. The opinion directly addresses independent contractors, such as temporary lawyers, but also mentions sources of tasks such as a photocopy shop, a document management company and a third-party vendor for the firm’s computer services. In its discussion of Model Rule 5.5 and the unauthorized practice of law, the Opinion states, “Ordinarily, an individual who is not admitted to practice law in a particular jurisdiction may work for a lawyer who is so admitted, provided that the lawyer remains responsible for the work being performed and that the individual is not held out as being a duly admitted lawyer.”

Therefore, according to Hornsby, and I agree, even if a document automation application would be deemed the unauthorized practice of law if its services were provided independently of a lawyer’s services, once those service or the documents produced by the software application are provided under the lawyer’s direction and supervision, within the scope of the lawyer’s services, the lawyer can no longer be assisting the document preparation in the practice of law and no longer has a risk of assisting in the unauthorized practice of law.

• Email This
• Print
• Comments
• Trackbacks
• Share Link