We're Gonna Zoom A Zoom A Zoom in North Carolina

You probably know that there is a fight afoot between the North Carolina State Bar and the do-it-yourself vendor of legal documents, LegalZoom. The simmering dispute has been covered in the Wall Street Journal, the ABA Journal, and the case is now in the Business Court over Legalzooom's vitriolic objections.  The issue is whether LegalZoom's offerings constitute the unauthorized practice of law.

LegalZoom bills itself as “transform[ing] the way people think about and fulfill common legal needs.” It says that it has made its mission “to simplify the process and to set new standards for convenience and service in an industry not typically known for great customer care.” The company basically sells legal forms to non-lawyers (and helps its customers to fill them out by computer) which enable them to form their own corporations, write their own wills, and get their own divorces, while at the same time avoiding what LegalZoom condemns as the high cost of attorneys’ fees.

It’s said pretty often that “you get what you pay for,” so it’s not surprising that LegalZoom has taken some heat (like from Consumer Reports) for the quality of its services, even though it advertises that 94% of its customers "recommend LegalZoom to friends and family." The lawyers who provide the same services as those offered by LegalZoom, such as estate planning lawyers, and lawyers filing trademark applications, aren’t keen on the service. 

Not much has happened in the Business Court so far, except for LegalZoom’s strident efforts to stay out of the Business Court. Those began with the filing of the case by LegalZoom against the State Bar. LegalZoom immediately asked the Chief Justice of the NC Supreme Court for an exceptional case designation to Superior Court Judge Paul Gessner. That was granted back in October, apparently without notice to the NC Bar.  The Bar then designated the case to the Business Court as a mandatory complex business case, which LegalZoom opposed, saying its case was not a " complex business case" within the mandatory jurisdiction of the Business Court.

LegalZoom has lost Round 1.  Judge Jolly (who decides all designation motions as the Chief Judge of the Business Court) ruled that the claims made by LegalZoom in its Complaint are squarely within the jurisdiction of the Business Court. Count 1 of the Complaint is for a violation of the Monopoly Clause of the North Carolina Constitution, saying that the State Bar has interfered with LegalZoom’s constitutional right to freely do business in North Carolina. Count 2 says that the State Bar has also violated the state Constitution by excluding LegalZoom from “register[ing] its legally compliant prepaid legal services plan.” (That's a whole different LegalZoom service).  The third count is for “commercial disparagement,” alleging that the State Bar has made false statements to the public which caused the public “to regard [LegalZoom’s] product as legally unauthorized, and imputing illegal conduct to [LegalZoom].”

 In opposing the Bar’s designation as a mandatory business case, LegalZoom argued that its case was “exceptional,” but not a “complex business case.”  Judge Jolly didn’t spill much ink in denying the Opposition in an Order on January 9th. He said:

Plaintiff's Complaint specifically alleges that "this case includes claims that involve a material issue relating to . . . [a] anti-monopoly, anti-competition, and antitrust law claims that are not based solely on N.C. Gen. Stat. § 75-1.1; [b] unfair competition law claims that are not based solely on N.C. Gen. Stat. § 75-1.1; and [c] the Internet and electronic commerce." These allegations are substantially identical with three separate statutory grounds for designation of a civil action as a mandatory complex business case under the Removal Statute.

Order ¶3.  So that's that.  The case has been assigned to Judge Gale and will be resolved in the Business Court.

Where was the vitriol?

LegalZoom’s Reply Brief called out the State Bar, saying it “presumptively mischaracterizes LegalZoom’s motivation in opposing this case’s designation as a mandatory complex business case.” Reply at 8. It turned up that volume, saying that the State Bar’s assertions that LegalZoom did not want to be in the Business Court were “incorrect, and made with reckless disregard to the truth of the matter asserted.” Those are fighting words, and so are the remaining statements in this diatribe, that the Bar’s position was “grossly negligent, if not intentionally wrong,” which were unnecessarily harsh. Reply at 9.

The Brief in Support of its Opposition was also salted by LegalZoom with pejorative terms stating that the Bar had “incorrectly interpret[ed]” the statute governing the process of opposing a Business Court designation (Opp. Brf. at 1), that its interpretation was a “fallacy,” (Opp. Brf. at 2), and that the Bar had “made a series of unfounded, presumptive and incorrect characterizations and assertions against LegalZoom,” Opp. Brf. at 5.

I don't care much about the ultimate resolution of this case.  I don't feel threatened by LegalZoom.  But I'm not real keen on people using LegalZoom to replace the advice they would get from a lawyer. LegalZoom in fact warns against that repeatedly on its website. Its disclaimer says that "[t]he information provided in this site is not legal advice, but general information on legal issues commonly encountered. LegalZoom is not a law firm and is not a substitute for an attorney or law firm."

Would I refer a client to LegalZoom? Possibly, if I was sure that all that the client needed was a basic form which LegalZoom would assist him in filling out on line. But I would have to have some assurance of the quality of the form and the assistance provided before I did that.  A North Carolina Power of Attorney is probably a good example.  The statute (G.S. §32A-1) has an approved form which is pretty easy to complete.

But it's hard to feel much sympathy for LegalZoom. It has been markedly successful so far.  It is reported to have raised $100 million in funding, and is said to be looking ahead to a public offering.

The case will turn on whether LegalZoom's service is the unauthorized practice of law, which is illegal in North Carolina and many other states. The definition of "practice of law" varies from state to state, so LegalZoom's activity without much objection in 49 other states doesn't mean it will be permitted in North Carolina. Actually, North Carolina isn't alone in its concerns. The Bars of Connecticut and Pennsylvania also have raised questions whether Legalzoom is engaged in the unauthorized practice of law.

The controlling statute in North Carolina is N.C. Gen. Stat. §84-2.1 which says in part that the "practice of law" includes:

performing any legal service for any other person, firm or corporation, with or without compensation, specifically including the preparation or aiding in the preparation of deeds, mortgages, wills, trust instruments, inventories, accounts or reports of guardians, trustees, administrators or executors, or preparing or aiding in the preparation of any petitions or orders in any probate or court proceeding; abstracting or passing upon titles, the preparation and filing of petitions for use in any court, including administrative tribunals and other judicial or quasi-judicial bodies, or assisting by advice, counsel, or otherwise in any legal work;

That definition seems to cover whatever LegalZoom is selling like a blanket. I would be antsy if I were them.

Do any of you have strong feelings about LegalZoom?

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