Is Illegally Practicing Law?

July 2nd, 2011

A must-read post from Larry Ribstein about allegations that is engaged in the unauthorized practice of law in Missouri. Here is the gist of the suit:

Specifically, the plaintiffs allege that LegalZoom, a do-it-yourself online legal document service that launched in 2001 and was co-founded by O.J. Simpson lawyer Robert L. Shapiro, is engaged in the unauthorized practice of law. The case asks whether, under Missouri law, LegalZoom’s server-based decision-tree software is providing services that really ought to be performed only by chin-stroking counselors-at-law licensed by the Missouri state bar.

U.S. District Judge Nannette Laughrey, sitting in Jefferson City, Missouri, will rule on LegalZoom’s legality within the next few weeks, or she could kick the question over to a jury to decide after trial, which would begin in late summer. Either way, the case will produce what appears to be just the second court ruling ever on the legality of legal self-help software. The first one, by a federal judge in Dallas in 1999, ruled that the Quicken Family Law software package did violate Texas law, but the ruling was set aside on appeal after Texas amended its laws to permit such products. (Definitions of law practice vary from state to state; California and Arizona, for instance, have provisions authorizing nonlawyers to prepare legal documents under specified circumstances.)

How exactly is the practice of law defined in the Show-Me State:

Missouri’s statutes define law practice as, among other things, “the drawing or the . . .  assisting in the drawing for a valuable consideration of any paper, document or instrument affecting . . . [legal] rights.”

I have no doubt a lawyer, seeking to protect his rents, drafted that overly broad, restrictive statute.

On its face that language certainly sounds broad enough to cover what LegalZoom does. But in 1978 the Missouri Supreme Court effectively narrowed that language when it reviewed a case in which Missouri bar authorities sought to punish the sellers of a divorce kit that consisted of nothing but blank legal forms and instruction booklets for filling them out. The court ruled that merely marketing such materials did not amount to practicing law absent “personal advice as to legal remedies or the consequences of flowing therefrom.”

Accordingly, the opposing parties in Janson v. LegalZoom now attempt to describe LegalZoom’s service in words that tend to squeeze it either into or out of this precedent’s safe harbor. In legal filings, the plaintiffs say LegalZoom “prepares customized legal documents, tailored for the use of individual customers.”

Not at all, responds LegalZoom. Rather, it “provides an online platform for customers to select and create their own legal documents.”

Ribstein [who for purposes of full disclosure has agreed to join Legal Zoom’s “legal advisory counsel”] makes a number of important points (and really points he has been making for a decade, long before this new position). Most salient, is how the Bar is attempting to fight back against technology, rather than embracing it.

Cases like the one in Missouri represent the last gasp of a dying approach to the transmission of legal information — the exclusive reliance on one-to-one customized personal communication of information in the Internet and computer age.  In the long run markets and superior technology will win this battle — they always do.  In the short run, millions of ordinary consumers are locked out of low-cost ways of contending with an increasingly regulated and legalized society.

Lawyers should have to demonstrate in the marketplace and explain to consumers why they should be consumers only way of getting legal information. This isn’t even about replacing lawyers.  LegalZoom at least gives consumers the views of the lawyers who helped develop the product as to how legal documents should be prepared, which the consumers can then compare with the work of a lawyer they may have gotten from their brother-in-law or the Internet.

From an “Access to Justice” perspective (certainly the buzz word of the day), these types of service allow those without means to afford an expensive cartelized attorney the ability to protect their rights and property interests.

Moreover, lawyer licensing has a greater effect on availability of legal services for low-income people or those involved in smaller transactions.  Forcing these economically marginal clients to buy Cadillacs when they only need Chevrolets may cause them to rely on self-help, and thereby reduce the quality of services these clients actually receive.  The impact has been ameliorated somewhat by exempting legal assistance for the poor from unauthorized practice laws.  But since these exemptions leave the least sophisticated and therefore most vulnerable clients exposed to supposedly unqualified practitioners, they suggest that lawyer licensing is more concerned with protecting lawyers’ profits than with protecting the public.

Attorneys should recognize the trends, and try to incorporate these technologies into their practice to make them better able to serve their clients–don’t fight the future; the future always wins (even if you don’t win the future). In fact, as Ribstein argues, these types of technology can actually create lawyer jobs!

And in Practicing Theory I show how the development of these products could open up new, high-end design-type jobs for people with legal skills to replace jobs that could be replaced by machines.  Although I don’t view lawyer protectionism an appropriate regulatory goal, it’s worth noting that this isn’t about whether machines will replace lawyers.  Rather, it’s about whether new technologies will channel legally trained people toward more socially productive activities.

I initially used to incorporate the Harlan Institute in Pennsylvania. I found their services exemplary. In fact, I originally wanted to call it the Harlan Institute for Constitutional Studies, but one of the Legal Zoom employees tipped me off that in Pennsylvania, if you put the word “studies” in the name, you needed approval from the State Department of Education (which they never gave). That is the type of thing I thought an online service would miss, and I would need a lawyer to know the ins and outs of local law. I eventually reincorporated with a Pro Bono Law Firm (that we could never have actually afforded) in the District of Columbia for some other reasons, but I would highly recommend for people looking for high quality level services at a great price.

Stay tuned. Lawyers will soon get desperate, and I predict they will eventually lose.