4/22/14

LegalZoom Gets Nod From South Carolina Supreme Court

Image [cc] Rusty Tanton
The term "Access to Justice" (A2J) is tossed around a lot in the legal world, but as the old saying goes, talk is cheap. It is common for state bar associations to step up and use another phrase to shoot down A2J projects or non-lawyers' attempt to fill a gap in the legal process that is underserved. In most cases, it is seen as a ploy to protect the Bar Association's members… at the expense of those needing help with a complicated legal system. One of the most contentious issues is on basic legal forms. Companies like LegalZoom have stepped in to create forms for the individual citizen, and have found many states are very reluctant in approving of their products and services.

This morning, LegalZoom launched a press release that announced that the South Carolina Supreme Court approved of their business model and that its services of providing legal forms for individual citizens to use is not the unorthorized practice of law. The original lawsuit of T. Travis Medlock v. LegalZoom, Inc. brought the action requesting declaratory relief, injunctive relief and disgorgement of revenues, among other measures. This isn't the only UPL action that LegalZoom is facing, according to their SEC Filing, they are fighting UPL claims in Alabama, Ohio, Arkansas, Missouri, and North Carolina. On March 1, 2013, Nelson Mullins attorney, B. Rush Smith III, filed a pre-hearing brief that lays out what LegalZoom is doing is simply being "an online scrivener for a customer purchasing an online automated legal document."

Looks like, at least in South Carolina, LegalZoom has prevailed. The press release is listed below.




SOUTH CAROLINA SUPREME COURT APPROVES LEGALZOOM BUSINESS MODEL .
Apr 22 2014 11:00:10
 
South Carolina Supreme Court Approves LegalZoom Business Model

Demonstrates Commitment to Increase Access to the Justice System for all South Carolina Residents


GLENDALE, Calif., April 22, 2014 (GLOBE NEWSWIRE) -- The South Carolina Supreme Court reviewed LegalZoom.com, Inc.'s business practices and, in an order issued on March 11, 2014, found that LegalZoom does not engage in the unauthorized practice of law, ensuring South Carolina residents the continued ability to access LegalZoom's services.
"We are pleased that the South Carolina Supreme Court has approved LegalZoom's business model allowing access to online legal documents," said Ken Friedman, Vice President of Legal and Government Affairs at LegalZoom. "As with many state bars, when a record is made about LegalZoom's products and services, the result is that our fundamental business model is found to be legally sound."
"Everyone deserves access to the civil justice system. We look forward to continuing to serve our many customers in the State of South Carolina," added Friedman. "Whether our customers want one of the products reviewed by the Supreme Court, such as documents related to business formation, estate planning documents, or real estate leases, or they want the help of licensed South Carolina attorneys associated with LegalZoom's legal plans, LegalZoom will continue its business practices in South Carolina and all 50 states in which LegalZoom operates." The announcement follows the resolution of the lawsuit of T. Travis Medlock v. LegalZoom.com, Inc.

About LegalZoom.com
LegalZoom is the nation's leading provider of personalized, affordable online legal solutions for families and small businesses. Founded more than 12 years ago by attorneys with experience at some of the top law firms in the country, LegalZoom has helped over two million Americans become protected with binding legal documents. Although LegalZoom is not a law firm, it can help people access an attorney through its legal plans. The company has offices in Austin, Glendale, and Mountain View. For more information, visit  www.legalzoom.com.
CONTACT: Johanna Namir, (323) 337-0022

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8 comments:

Mark Mueller said...

I'm a business lawyer. A new client asked for help closing a deal to buy a business. They had used an online legal contract form that they bought from a LegalZoom competitor. Turned out that (1) neither the seller nor the buyer actually had any understanding of what the contract said, and (2) if the parties had followed the terms spelled out in the contract, the buyer would have paid tens of thousands of dollars for literally nothing and further would have been prohibited from actually operating the business.

Mind you, this wasn't the intent of the parties at all, but it was the result of non-lawyers trying to use tools that they don't know how to use.

It's been clear for a long time here in Michigan that our Supreme Court and our state bar association lack the will to do anything about unauthorized practice of law, or perhaps that they view such practice so narrlowly that it only applies to unlicensed imposters posing as real lawyers. Instead, maybe the companies like LegalZoom and RocketLawyer need to feel the pain of product liability lawsuits.

Until then, proceed at your own risk, and I'll gladly charge you 10 times as much to clean up your mess than I would to do it right in the first place.

Gotta go -- someone's coming in with a living trust their parents bought online. $$KA-CHING$$!

Toby Brown said...

After hearing this same story for 2 decades, I feel compelled to reply.

First - the basic argument here is that very limited, expensive access to legal services is much better than broad access at moderate quality levels. Frankly this attitude is what drove the Jackson reforms in the UK, which lead to the deregulation of the practice there. Good luck with that approach.

Second - the other argument against this is that it is just a bunch of profiteers out to screw clients out of a quick buck with low value services. Which, as in this case, is usually followed by a statement that this situation allows lawyers to continue to be profiteers offering low value services for a quick buck.

The reality is that providers like LegalZoom allow access to justice to an audience that currently has no access. Of course this access is not the same as that provided by a lawyer, just like an independent mechanic cannot provide the same level of service a dealership can. It's just a different level of value proposition. It is not a zero value proposition.

Anecdotally, a general counsel of a unified bar once told me they sent their adult children to LegalZoom for a basic will, noting a) they could not provide the same since they lack the expertise, and b) given the needs, they thought a lawyer would be overkill and way too expensive.

Keeping things the same in response to current market challenges, seems a poor choice. Unless lawyers are going to step up and provide price competitive services to LegalZoom, trying to block them from the market is effectively limiting access to justice. This runs counter to every mission statement I have ever seen from any bar association.

Mark Mueller said...

While some of my fellow counsel would certainly like to see such services banned, I am not among them. The focus should be on access to quality services. I want these companies to offer a better value proposition, because what I see now is often a negative value -- a product that makes the buyer worse off. I know there are many people who cannot afford to hire a lawyer -- that should not mean they should waste their limited resources on something useless.

The problem may be that in order to provide a better product, LegalZoom needs to edge ever closer to the line of practicing law. To provide affordable services, lawyers may need to be enabled to offer a limited scope of services. There is work to be done to close the gap.





Jordan Furlong said...

What Toby said.

It is completely unprofessional for lawyers to comfortably serve 15% of the market, block the other 85% from accessing whatever kind of help they can get, and then smugly feasting off the problems of those for whom even these efforts went wrong. This arrogant, "The wages of sin are death" attitude towards those for whom lawyers' services are hopelessly out of reach is appalling.

If these emerging services aren't good enough, then either let them get better at it, or price your own work to compete with them. If you're not going to do either, then get out of the way of those who will.

Toby Brown said...

Mark - thank you for the additional comment. However, I will disagree with your "negative value" assessment. Every provider is going to have situations where their customers are not well served. Having worked for a mandatory bar, I can attest to the fact that clients of lawyers make those claims on a very regular basis. Those living in a glass house should not pick up rocks.

The most recent stats I see on LegalZoom show its annual revenue is around $200m. This strongly suggests the vast majority of its clients are finding value in the service. Especially since this is recurring revenue.

Shirley Crow said...

TurboTax anyone? Not that I want to see my job go away. But really.

Randtke said...

Toby, the general counsel for a unified bar sending their children to LegalZoom is not the same as someone using forms prep as a starting place. The lawyer picked LegalZoom. It was intentional. A lawyer looked at the situation up front, and said how to handle it. The problem is not that a low end exists, but instead that there isn't a good mechanism to filter people toward the level of service that is best for them.

All the low level services - Nolo books, LegalZoom, etc - go straight into some level of service without sorting the person to what is best for the situation. It's not a new problem.

A lawyer in an initial consultation should be free to point someone to form preparation services, if a good option exists, and should be able to make that referral without liability and without forming any attorney client relationship. I think sometimes there is hesitancy to say anything substantive, because of not wanting to form the attorney client relationship. Lawyers could be the first contact and go-to place for legal issues, if there were clear guidance and education to lawyers on ethics, and a decision by the legal community to make referrals to form preparation services where appropriate. It's easy for a person to look up the state bar's referral service and get a short consultation with a lawyer. So things to look at are: Who goes to the state bar referral first and who doesn't and why? Is the state bar referral service useful for most people who use it? If a lawyer has a prospective client and it's not a case the lawyer should take, do they make the appropriate referral and if not why not?

The other way to get people to the appropriate level of service is if form preparation services do more sorting (and perhaps run the law practice and employ lawyers to handle the more complex cases).

Bobby Johnson said...

Anything that helps the citizen is cool, however, its always best to work with a lawyer to get a full under standing of legal matters.

 

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