LegalZoom Has Carolina On Its Mind

May 20th, 2014

LegalZoom, which operates on that fine line of Unauthorized Practice of Law, has had mixed success in courts concerning the legality of their operations.

Last month LegalZoom declared victory when the South Carolina Supreme Court found that it was not engaged in the Unauthorized Practice of Law. Though, as I noted, the Court’s decision was quite narrow, and severely limited what LegalZoom could, and could not do.

The underlying report and recommendations for the agreement and order noted that, according to an affidavit by one South Carolina attorney, of 20 practice areas encompassed by LegalZoom’s document service, for 19 of them the same basic services “are available online to South Carolina citizens (and the public at large) via other self-help portals at websites maintained by various South Carolina governmental agencies.”
Only the document service’s Pet Protection Agreement is not.
The report determined that LegalZoom’s self-help documents do not provide legal advice, and the company does not provide legal assistance to its customers in creating the document, and thus do not engage in the unauthorized practice of law.
“LegalZoom’s software acts at the specific instruction of the customer and records the customer’s original information verbatim, exactly as it is provided by the customer,” Newman wrote in the report, adding that its “does not exercise any judgment or discretion, but operates automatically in the same fashion as a ‘mail merge’ program.”

So much of the services that LegalZoom, and others, want to provide must at some level offer some “judgment or discretion.”  A service without these elements is effectively worthless. Scott Greenfield sums up LegalZoom’s offerings under this regime:

So it’s a piece of paper with legalish sounding words on it which is neither better nor worse than the input of the person using it.

I understand LegalZoom will try and do as much stuff that approaches “judgment” as possible, within the meaning of this ruling as far as possible.

Yet, LegalZoom is having some troubles on the other side of South of the Border–North Carolina.

However, just two weeks later in neighboring North Carolina, a Superior Court judge handed the State Bar a partial victory in its six-year fight to shut down LegalZoom for unauthorized practice. That news seems to have slipped through the cracks.

In the North Carolina case, the court dismissed two counts in LegalZoom’s 2001 lawsuit against the bar, in which LegalZoom alleged that the bar’s efforts to shut it down violated the anti-monopoly and equal protection clauses of the state constitution.

At the same time, the court deferred ruling on the bar’s claim that LegalZoom is engaged in unauthorized practice, concluding that a more extensive factual record is required in order to explain questions such as how LegalZoom’s process prepares complex documents for its customers.

A separate issue also still pending in the North Carolina case involves LegalZoom’s application for approval to operate a prepaid legal services plan there. The company is registered to operate prepaid plans in 41 states and the District of Columbia.

Bob Ambrogi has a roundup of other cases pending with LegalZoom:

Meanwhile, LegalZoom continues to face challenges in other states, including Alabama and Arkansas. On Oct. 3, 2013, the Supreme Court of Arkansas granted LegalZoom’s request to send a lawsuit pending there to arbitration, pursuant to the mandatory arbitration clause in LegalZoom’s terms of service.

Elsewhere, LegalZoom has settled unauthorized practice lawsuits. In California in 2012, it settled two class actions. It also settled a class action in Missouri in 2012, agreeing to pay $1.9 million in attorneys’ fees and to modify certain aspects of its business, and in 2010, it settled a lawsuit brought by the state of Washington alleging violations of that state’s consumer protection law.