LegalZoom Sued for UPL in Missouri
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.
