The LegalZoom identity crisis: legal form provider or lawyer in sheep's clothing?

Author:Figueras, Isaac
 
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"[T]he legal profession of the future will be constituted of two tiers, not the solicitors and barristers of today, but the legal specialists and legal information engineers of the information society.... [L]egal systems of the information society will evolve rapidly under the considerable influence of ever more powerful information technologies." *

CONTENTS INTRODUCTION I. LEGALZOOM'S SELF-IDENTITY SENDS MIXED MESSAGES II. THE SIGNIFICANCE OF LEGALZOOM: BALANCING THE IMPORTANCE OF ACCESS TO JUSTICE IN A LEGAL GREY AREA III. FINDING (A LACK OF) CLARITY IN THE JUDICIAL SYSTEM: THE DEVELOPING JURISPRUDENCE OF LEGALZOOM CONCLUSION INTRODUCTION

LegalZoom, Inc., is easily described as a hybrid between a legal service provider and a source for blank legal forms. (1) At best, LegalZoom is simply an online provider of legal documents such as a company's articles of incorporation. (2) At worst, LegalZoom is an online legal service provider that regularly engages in the unauthorized practice of law. (3) Though scholars, courts, and LegalZoom itself debate which of these descriptions is correct, (4) one thing is clear: LegalZoom has the potential to transform traditional notions of legal services by providing an online forum whereby unrepresented persons obtain answers to legal questions and issues. (5) The extent of its impact, however, is unclear without a better understanding of LegalZoom itself.

The development of LegalZoom presents three large questions: First, what is the nature of LegalZoom's services and how could they impact the legal market? Second, how are courts reacting to LegalZoom? Third, what predictions can be made as to the actual impact of LegalZoom on traditional notions of legal services? The first question has been a source of debate for a number of years as scholars continue to discuss the phenomenon of online legal services and how they affect traditional attorney roles. (6) Now that more consumers and bar associations are challenging LegalZoom in court and more states are addressing these issues, (7) there is a clearer picture of the problems associated with the services provided by LegalZoom.

This Comment examines how recent state court opinions addressing LegalZoom demonstrate the difficulty of balancing the importance of providing access to justice for a greater number of people with the prohibition against the unauthorized practice of law. Part I discusses LegalZoom's own description of its services and how this blurs the line between self-help form provider and legal service provider. Part II evaluates the scholarly debate regarding the significance of LegalZoom's business model, the importance of its services for underrepresented portions of the population, and how it may be engaging in the unauthorized practice of law. (8) Finally, Part III reviews recent court opinions that address what exactly LegalZoom is and whether it is engaging in the unauthorized practice of law. This review confines its analysis to a series of cases decided in Ohio, (9) Missouri, (10) and North Carolina (11) and demonstrates that multiple states have found that LegalZooms' document preparation services are improper. (12) Part III concludes by comparing these court opinions to both LegalZoom's description of its services and the predictions of scholars. Such a comparison highlights significant themes in the court opinions, the important public policy reasons for attempting to retain LegalZoom's business model, and how difficult this is to reconcile with the unauthorized practice of law doctrine.

At a base level, LegalZoom could help provide greater ease of access to the justice system for a larger number of people. As LegalZoom's 2012 prospectus notes, "Despite the enormous amount spent on legal services, we believe that small businesses and consumers have not been adequately served by the options traditionally available to them." (13) Yet, as court opinions decide whether or not LegalZoom engages in the unauthorized practice of law, questions arise regarding LegalZoom's ability to maintain its business model and goals to adequately serve small businesses and consumers. Further, even if LegalZoom survives court scrutiny in some states, there are questions as to how to regulate this new industry and what traditional attorneys should expect.

As an initial matter, this Comment heavily revolves around the legal doctrine of the unauthorized practice of law. The practice of law is established by state law and often varies from state to state. (14) Importantly, under the law of some states, the practice of law includes the preparation of legal documents such as wills or divorces, or even the incorporation of a company. (15) As a general rule, an attorney or layperson may not engage in the practice of law without authorization. This could involve anything from offering specific advice to providing legal analysis to a client. (16) This exclusion extends to corporations: a lawyer may not "practice with or in the form of a professional corporation or association authorized to practice law for a profit" if a nonlawyer has any interest in the corporation. (17) Generally, therefore, corporations are not allowed to practice law. (18) The prohibition derives from the policy that the public should be protected from services from unqualified persons. (19)

Ultimately, there is one question to keep in mind going forward: Is LegalZoom a service that will open the door to justice for more of the population or will LegalZoom fail to convince courts that it is not a legal service provider at all?

  1. LEGALZOOM'S SELF-IDENTITY SENDS MIXED MESSAGES

    LegalZoom's own representations do not provide a clear answer as to whether it is a legal servicer or legal form provider. Even if LegalZoom's representations do not facially represent it as a legal service provider, the actual services LegalZoom provides still blur the line between form provider and service provider. LegalZoom's website, (20) its communications with the public, (21) and the prospectus it filed with the SEC in May of 2012 (22) all demonstrate fundamental ambiguities in its services. A closer look at LegalZoom's representations reveals two opposing self-images: (1) the company seeking to empower consumers by offering them legal tools and (2) the legal servicer hiding in form provider's clothing.

    The first image is the image that LegalZoom wishes the public to see, best described with their public motto: "[E]veryone deserves access to quality legal services so they can benefit from the full protection of the law." (23) The founding principle of the company was to provide a convenient and affordable method to resolve common legal problems. (24) LegalZoom backs this up with reviews from news providers that note the cost effectiveness of LegalZoom, the quality of its services, and more. (25)

    LegalZoom sought to meet its goal of providing more access to justice by merging the legal and technological fields in order to create an "easy-to-use, online service that helped people create their own legal documents." (26) The website offers forms for LLCs, estate planning, trademark and IP problems, and more. (27) Its services cover matters involving both the formation of a business as well as its later activities. (28) People can receive the forms necessary to plan for the end of their life, a real estate bargain, or even bankruptcy. (29) In theory, these practices are acceptable because providing blank legal self-help forms has long been accepted. (30)

    LegalZoom strives to present a simple, yet important, image--it is here to help the common person help himself. LegalZoom offers average people or businesses the legal tools to solve their own problems without attorneys. LegalZoom only "provide[s] self-help legal documents at [its] customers' specific direction and general information on legal issues generally encountered." (31) All necessary attorney work is available through LegalZoom's referral service. (32) LegalZoom is able to offer consumers who want more than legal forms inexpensive legal advice through its various subscription plans. (33) Thus, LegalZoom covers the consumer on both legal fronts: there are self-help documents online and, if necessary, legal service plans to put the consumer in touch with a licensed attorney who can provide further advice.

    In theory, this company provides consumers with an excellent alternative for dealing with most common legal concerns. Yet all of these services come with an important tagline:

    LegalZoom provides access to independent attorneys and self-help services at your specific direction. We are not a law firm or a substitute for an attorney or law firm. We cannot provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defenses, options, selection of forms or strategies. (34) This disclaimer describes the second face of LegalZoom. While LegalZoom wishes to make the solutions to everyday legal problems convenient and affordable, the company itself is not a law firm and it cannot provide legal advice. (35) Any and all legal advice must come by accessing one of its subscription plans or contacting an attorney. (36)

    This is where LegalZoom is the servicer in form-provider's clothing. Despite its representations that it seeks to help consumers help themselves and is not a law firm, and therefore cannot provide legal services, LegalZoom highlights its own concerns that it is practicing law. (37) The LegalZoom Prospectus identifies number of risks, including the uncertain legality of its business model:

    our business and services subject us to complex and evolving U.S. and foreign laws and regulations regarding the unauthorized practice of law, legal document processing and preparation, legal plans, privacy and other matters.... (38) The risk regarding the unauthorized practice of law is the first risk LegalZoom identifies in its prospectus. (39) This illustrates LegalZoom's own concern...

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