Legalzoom Strikes Out In Declaratory Judgment Action Against NC State Bar

Sometimes you have a hard time telling who won and who lost a motion ruling.  That's true of Judge Gale's ruling on Monday in Legalzoom, Inc. v. The North Carolina State Bar, 2012 NCBC 47.

You are all undoubtedly familiar with Legalzoom, an on-line purveyor of do it yourself legal documents. This isn't the first time that I've written about Legalzoom. The NC State Bar has been making noise for several years that the vending of Legalzoom's documents is the unauthorized practice of law, and therefore illegal. 

This irked Legalzoom, so it hauled off and sued the Bar for a declaratory judgment in September 2011 seeking a ruling that it isn't engaged in the unauthorized practice of law.   It also made affirmative claims for "commercial disparagement" and for the Bar violating the Monopoly Clause of the state Constitution.  The State Bar made a motion to dismiss, arguing that all of Legalzoom's claims depended on it not being involved in the unauthorized practice of law.

So who won?  No one.  Judge Gale denied the motion to dismiss Legalzoom's claim for declaratory relief, and deferred ruling on the other claims.

The principal reason for the ruling was the Bar had not put the unauthorized practice issue in play by presenting a claim for unauthorized practice.  The Bar can do that by making a claim for injunctive relief to a Superior Court (per N.C. Gen Stat. §84-37), or a District Attorney can initiate misdemeanor proceedings against an unauthorized offender (per G.S. §§84-7, and 84-8).

Judge Gale said that "[a] declaratory judgment action is not generally envisioned as a proceeding to force a State agency or criminal authority to undertake an enforcement proceeding it has in its discretion to date elected not to take."  Op. 44.

Judge Gale said that a motion to dismiss "is seldom an appropriate pleading in actions for declaratory judgments."  Op. 28.

He invited the Bar to make a counterclaim raising the unauthorized practice of law issue.  I expect that will be coming soon, unless the Bar and Legalzoom patch up their differences.

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