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

Legal forms, without the legal advice or assistance of a lawyer, continue to decline in value. As a pure digital product, a legal form follows the price curve of other digital goods eventually approaching zero.  Several new start-ups in the legal industry will accelerate this trend.

Docracy is a new legal document start-up, founded by Matt Hall and John Watkinson, that grew out of a TechCrunch Disrupt Hackathon in New York City. The idea is to provide a free depository of legal documents that meets the needs of small business and start-ups which are crowd sourced by individuals who register for the site. The concept is to provide an open source site for legal documents in the same way that GitHub is an open source site for code. The company is venture funded First Round Capital, Vaizra Seed Fund, Quotidian Ventures and Rick Webb by a group of investors who see opportunity in disrupting the legal profession. The documents are largely flat forms (MS Word or Adobe .PDF File format), with quality control provided by the "community." It's not clear yet what the business model for this site will be. Online signing of legal documents is coming.

A second legal document start-up has emerged out of the New York City start-up web scene called Paperlex  .  Paperlex is also targeting the small business market. This site will contain standardized legal documents that can be modified within the web browser. A user will be able to store all of their documents online in their own private and secure web space, will be able to collaborate with third parties, and will have the capacity to execute/sign documents online.

Rather than crowd sourcing the legal form content, Paperlex will provide their own libraries of standard forms. Alison Anthoine, Esq., the CEO and Founder, hopes to provide an accessible legal document portal that small business can easily use with their customers and other parties at a cost that is much less that the cost of a custom document crafted by an attorney. The business model for Paperlex is a Saas subscription service provided for a low monthly fee.

DocStoc is another document repository that includes not only collections of legal documents, but collections of documents in other categories as well, such as human resource, travel, and personal finance documents. Documents are for free or can be purchased. The site is also built on crowd sourcing principles. Users can contribute documents and sell them through the site, with DocStoc taking a cut. Most documents are not automated and are provided in either MS Word or Adobe .PDF file format. However, a new feature called "custom documents" enables the user to answer an online questionnaire which generates a more customized document. The user can view the assembled document before making a decision to purchase a monthly subscription.Monthly subscriptions range from $9.95 a month to $39.95. The site claims to have 20,000,000 users.

Docstoc, Inc., was founded by Jason Nazar (bio) and Alon Shwartz (bio). The company was selected in September of 2007 to debut its product at the prestigious TechCrunch40 Conference. The platform was subsequently launched to the public in October 2007.

Docstoc is a venture backed company (Rustic Canyon) and received funding from the co-founders/investors in MySpace, LowerMyBills, Mp3.com, PriceGrabber and Baidu.

WhichDraft.com , founded by Jason and Geoff Anderman, brothers, and both attorneys, offers free contracts that can be assembled within the web browser. Legal documents can be easily shared with third parties, and you can build your  own Question and Answer templates. A nice feature enables a user the compare any two versions to see new and deleted text in the fee legal form. 

MyLawyer.com, our  own consumer legal document portal, also offers legal document plans that are libraries of automated legal documents that when purchased in a bundle are less than the cost of a song on iTunes*.

In the nonprofit sector, LawHelp Interactive, a unit of LawHelp.org,with funding from the Legal Services Corporation, [ See Technology Initiative Grants ] has been working with a legal aid agencies nationwide to help the automate legal forms and publish them to state-wide legal form web sites which are available to any one within the state. The program is not limited to low income people. Hundreds of thousands of free legal forms are now created annually in more than 34 states. LSC has invested millions of dollars in the development of interactive legal form sites over the past 9 years.

Courts have also jumped into the free legal forms distribution game in response to the hoards of pro-se filers looking for free legal help. See for example: Online Court Assistance Program in Utah and Maryland Family Law Forms .

These free legal form web sites raise some interesting questions about the future role of the attorney and the changing nature of law practice.  What role will the lawyer play in this changing environment?  What is the impact of these relatively new sources of free or low cost legal forms on law practice, particularly the practice of solo and small law firms? Our own research provides support for the fact that solos and small law firms will continue to loose market share to these new providers.

"Unbundling" legal services by providing legal advice and legal document review for legal forms that clients secure from another source, may be a way of expanding access to the legal system, but it is also disruptive of law firm business models,  just like iTunes* was disruptive of the bundled album approach of the music industry. Value is shifting from the lawyer to the consumer and non-lawyer providers of legal forms. I can hear the sucking sound as law firm business models collapse.

Some questions to think about:

• What risk do consumers and small business assume when they use a legal form without the advice or review of an attorney? The answer depends on the type of form, its complexity and the complexity of the transaction. If a user represents themselves in their own relatively simple name change, and their name gets changed by the court successfully,  then one can assume that self-representation worked.
   
• But what about a Shareholder's Agreement, where terms have to be negotiated, and the standard document doesn't include the particular language required by the parties to reflect their intent? Should the parties now draft their own language? Should the parties simply ignore the need to include special language that reflects their intent hoping that there will be no situation in the future that will create a conflict between the shareholders because of a failure to include the language?
   
• Who should negotiate the terms of the Agreement? The lawyer or the principal? Who would do the better job? How much shuld be charged for a successful negotiation?
   
• How should the lawyer price services, when the client comes to the lawyer with their own standardized form and asks the lawyer to review it?
   
• Will the lawyer refuse to serve the client, unless the client uses the lawyer's form or document?
   
• How important is the insurance that a lawyer provides that the document or form is valid for the purpose intended, accurate, and reflects the intent of the parties?
   
• Lets assume that the 85% of the legal form content in many categories of documents is identical. [ This is what Kingsley Martin from KIIAC has concluded and he should know ! ] But 15% consisted of critical variable language not susceptible to easy document automation. Should the attorney charge on a fixed price for the entire project as if she drafted the entire agreement, although she only worked on several paragraphs? If the agreement fails because the variable paragraphs are incorrect for the particular case, why shouldn't the attorney charge as if she he worked on the entire agreement?

If you have thought about these questions, and have some ideas on the impact of free legal forms on the legal industry, please share them here.

*iTunes is a trademark of Apple, Inc.

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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?

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

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

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

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

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

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

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

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

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

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

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

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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).

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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.

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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.

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

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

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

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

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

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

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

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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."

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

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

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

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

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

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

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

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

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

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