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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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.

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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". 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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DirectLaw is pleased to announce the opening of a new virtual law practice by Montreuil & Associates in Macon, Georgia.   The firm will provide services in the areas of business, family and divorce, estate planning, landlord/tenant, and name changes over the Internet throughout the state of Georgia.

The firm provides both traditional legal services and an online legal solution platform to serve new and existing clients. The online service allows the firm to provide cost-effective legal services so that everyone in the state can have access to affordable legal services. Ms. Montreuil says that she is committed to the idea of using the Internet to providing increased access to the legal system.

Renay Bloom Montreuil has an undergraduate degree, magna cum laude, from Youngstown State University and a law degree from Mercer University School of Law. Renay has been a Pro Bono Volunteer for Georgia Legal Services and has worked with Life support as a mentor for woman and youth.  She is licensed to practice law in Georgia and Florida.

For more information see website.

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 DirectLaw is pleased to announce the launching of SlatterLaw its third virtual law firm in the State of Georgia. SlatterLaw will provide online legal services to small businesses and individuals throughout Georgia.

Kerry Slatter founded the law firm with the goal of providing convenient and cost-effective legal services to small business owners and individuals across the state of Georgia. In addition to small business legal services, the Slatter Law Firm also provides counsel in various other areas, including estate planning, corporate law, and employment law.

From the web site:

 "Slatter Law provides the following core values for its clients:

• Customer Service – Provide value and legal solutions to exceed client’s expectations.
• Cost Efficiency – Provide cost efficiencies to enable clients to obtain more value from their legal budgets.
• Responsiveness – Limit attorney workload and the number of clients. The motivation to build long term relationships with clients drives this goal.
• Convenience – Utilize excellent customer services and technology to provide legal services in a convenient manner for the client (via secure online website client space, by email or by phone as needed).
• Innovation – Promote innovation for all aspects of client legal services, including the use of cutting edge technology, resources, and fixed fee arrangements."

Mr. Slatter has an undergraduate degree from Morehouse College and a law degree from State University of New York at Buffalo School of Law and is licensed to practice in Georgia.

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DirectLaw  has announced that the Law Office of Kyle Rhodes, based in Fort Worth, Texas has subscribed to DirectLaw's virtual law firm platform to enable the firm to offer legal services over the Internet to Texas residents. The firm focuses on offering Texas, Wills, Texas Trusts, and other asset protection documents for a fixed price, bundled with legal advice.

This law firm is not a pure virtual law firm as Attorney Rhodes maintains a downtown Ft. Worth office for clients who prefer to meet with him face-to-face. This is a good example of what I call, "click-and-mortal" - combining a virtual law practice with an off-line physical practice.  The market research that we have conducted suggests that the most effective implementation of the "virtual law firm" concept is as an add-on to a office-based practice, as this combines the best of both worlds.

For more information visit the website. The firm utilizes Rapidocs, DirectLaw's web-based document automation system to enable clients to complete online questionnaires which generate documents ready for lawyer review and editing.  This is DirectLaw's third law firm launch in the State of Texas. 

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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.

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