Nolo is Acquired by Internet Brands as Part of Legal Roll Up

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).

The Law Wizard - from Great Britain

I discovered an interesting web site called The Law Wizard,  still in beta, for pro se parties doing their own probate, in the United Kingdom.  The site promises to offer a unique package of online interactive tools, guides and videos. The Probate Wizard is initially designed for individuals who want to probate their own estates, but the site states that the tools will be made available for law firms as well.

The site is scheduled for launch later n 2011. The site looks interesting because it combines a web-enabled document automation system with extensive video and other information guides that takes the user through a  complicated process step by step. We will see more web sites like this, both in the legal form market space and the virtual law firm space.

Increase in Self-Help Divorce in Detroit; Calibre Law Offers Limited Legal Services for Divorcing Couples

Detroit News just published an article on the decrease in divorces because of the recession - a national trend, and an increase in pro se divorces in Detroit, also a national trend. The article discussed the possibility that law firms could offer "unbundled legal services" as a way of reducing the cost of divorce, but apparently there are very few Michigan law firms that provide this kind of limited legal service.

One law firm in Michigan that is pioneering in offering a reasonably priced limited legal service for divorcing couples over the Internet is Calibre Law, PLC at  Michigan Virtual Law, one of the law firm;s in the DirectLaw network.  Calibre is Michigan's first virtual law firm.  Calibre offers no-fault divorce forms with legal advice for a reasonable fixed fee.

Calibre Law is lead by Edward F. Hudson II. a litigator with experience in estate planning, family law, and small business disputes. Based in Royal Oak, Michigan and launched only a few months ago, Attorney Hudson, plans to have an impact on making legal services affordable throughout the entire Detroit metropolitan area.

We the People Files for Chapter 11: Another Casualty of the Internet

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?

Chief Justices of New Hampshire and California Support the Concept of "Unbundled Legal Services"

Last week, in a New York Times Opinion article, entitled, A Nation of Do-It-Yourself Lawyers, Chief Justice John T. Broderick, Jr. of New Hampshire and Chief Justice Ronald M. George of California endorsed the concept of the legal profession offering "unbundled legal services" to the broad middle class. Recognizing that there is a large "justice gap" with the number of self-represented parties increasing monthly in the nation's court systems, the Justices called for the legal profession to provide limited legal services as a way of getting at least some representation to unrepresented parties.

They write, " Forty-one states, including California and New Hampshire, have adopted a model rule drafted by the American Bar Association, or similar provisions, which allow lawyers to unbundle their services and take only part of a case, a cost-saving practice known as “limited-scope representation” that, with proper ethical safeguards, is responsive to new realities."

State courts are facing severe budgetary cuts in staff and resources. The current recession has increased the level of disputes landing in those same court systems while at the same time stripping the ability of citizens to pay full service legal fees. Current circumstances make it  even more urgent that the legal profession provide innovative approaches to closing the gap between those who need access to the legal system but who cannot pay full service legal fees.

If citizens cannot access the legal system because they cannot afford it, our legal system will exist only for the "rich", resulting in further stratification of American society. As the Justices write:
"If we are to maintain public trust and confidence in the courts, we must keep faith with our founding principles and our core belief in equal justice under the law."

 

The "Good Enough" Legal Solution

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. 

 

LegalZoom.com Sued Over Trademark Filing Fees

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!!!