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“Online Law: Has LegalZoom Gone Too Far?”, KC Bar Bulletin, by Stacey Romberg

By March 22, 2011 No Comments

LegalZoom’s vision is to provide “an easy-to-use online service that help[s] people create their own reliable legal documents.”1 Of its four founders, attorney Robert Shapiro — of the O.J. Simp­son trial and prominently featured on the website’s home page and television commercials — is the most well known.

LegalZoom performs services traditionally done by law firms, including forming business entities, generating estate planning documents, providing intellectual property services (trademark and copyright registration, along with patent applications), preparing dissolution pleadings, and creating deeds and leases. For most services, Legal-Zoom offers different packages. For example, a will costs $69 for a “Standard” package and $99 for the “Gold” package, including the “LegalZoom peace of mind review.”2

How does it work? The customer fills out an online questionnaire. When confused, the customer can click on a help button that provides a few sentences explaining the law. In addition, the customer can also call LegalZoom’s “World-Class Customer Support” with questions.3

However, LegalZoom’s customer support team, consisting of workers paid $11/hour, likely fails in providing quality advice to consumers so that they truly understand the legal issues presented by the questionnaire’s choices. Once the questionnaire is done, LegalZoom generates documents that are either emailed or snail-mailed to the customer, depending on the package purchased.

As an estate planning attorney, I focused on LegalZoom’s will preparation services. Numerous red flags are readily apparent upon reviewing the online questionnaire.4 For example, the $69 package can include “Credit Shelter Trust provisions enabling married couples to minimize estate taxes” — regardless of whether the customer has a potentially taxable estate. The consumer simply checks a box indicating their desire for a credit shelter trust, without having any meaningful information as to what it involves. Also, consumers may name a “Pet Guardian” in their wills, even though Washington law does not recognize pet guardians.

LegalZoom offers additional services by connecting consumers to law firms. For example, a potential bankruptcy client can click on LegalZoom’s bankruptcy page, review Dennis Miller’s endorsement, and then fill out a free questionnaire to be reviewed by the site’s bankruptcy legal provider, Macey & Aleman.

Is it legal? Or the unauthorized practice of law? LegalZoom uses a disclaimer at the bottom of each web page, in small, light typeface, indicating that it does not provide legal advice.5 However, the site prominently boasts of the quality of the legal documents produced.

LegalZoom markets itself to the general public as being a highly reliable alternative to retaining counsel, with statements throughout the site such as: “LegalZoom was developed by expert attorneys with experience at the most prestigious law firms in the country.”6 The dissolution page quotes a satisfied customer: “The actual response from the judge concerning my divorce papers was ‘Everything looks excellent, in order and correct. This is the best I’ve seen.’”7

On May 5, 2008, the North Carolina State Bar’s Unauthorized Practice Committee sent a letter to LegalZoom, concluding it engaged in the unauthorized practice of law and ordering LegalZoom to immediately cease and desist its activities in North Carolina:

Legal advice includes the selection of terms and clauses within a legal document as well as the selection of which template to use. Accordingly, legal advice is inherently given by one who prepares a legal document for another. Once the customer has selected the type of document available through Legalzoom [sic], the content is determined by LegalZoom. [T]he North Carolina statutes do not permit legal document preparation services even if they are not accompanied by “legal” advice. … LegalZoom’s conduct … is illegal in North Carolina and must end immediately.8

On December 17, 2009, Jansen v. LegalZoom was initiated in the 19th Judicial Circuit Court in Cole County, Missouri.9 The plaintiffs hired Legal­Zoom to prepare a will and form a limited liability company, and now claim that LegalZoom engaged in the unauthorized practice of law. The lawsuit seeks class certification for all Missouri customers of LegalZoom since December 18, 2004.

The plaintiffs seek three times the amounts paid to LegalZoom, per the Missouri unauthorized practice of law statute, plus injunctive relief and punitive damages for violating the Missouri Merchandising Practices Act. The suit alleges:

LegalZoom violated the Missouri Merchandising Practices Act by falsely enticing customers through representations about the legality and validity of the services they were performing and accepting money in return from those customers. More specifically, LegalZoom suggested that its customers did not need to consult a lawyer in order to receive a variety of legal services and documents which LegalZoom provided when, in fact, Missouri law specifically prohibits anyone other than a licensed attorney from accepting money in return for preparation of legal documents.10

On February 5, 2010, LegalZoom filed a notice of removal, seeking removal of the case to the U.S. District Court for the Western District of Missouri. In support, LegalZoom produced documents showing that, during the time frame in question, more than 14,000 orders were placed from Missouri, demonstrating the volume of work performed by LegalZoom in a state less populated than Washington.11

How many of those 14,000 customers have completely inappropriate estate planning documents for their financial circumstances? How many of them formed corporations, but still entered into contracts as individuals, because no one advised them how to do business properly once they were incorporated?

In this challenging economy, many consumers, at their peril, choose to obtain legal services via LegalZoom. The LegalZoom website fails to provide any meaningful information to these consumers about the numerous risks involved and how severe the consequences might be. If the consumers were fully informed, LegalZoom would not be doing such a high volume of business — even if it is cheaper than retaining a lawyer.

If the Jansen plaintiffs succeed, more litigation will undoubtedly follow and the definition of “practice of law” will hopefully be honed so that consumers will be better informed and protected.

Stacey L. Romberg, Attorney at Law, practices in the areas of business law, estate planning and probate — www.staceyromberg.com.

1 March 28, 2010, www.LegalZoom.com, “Our Story” page.

2 March 28, 2010, www.LegalZoom.com, “Wills” page. Note that the consumer can also purchase a $119 “Premier” package featuring “Express Email Delivery.”

3 March 28, 2010, www.LegalZoom.com. See www.lawvibe.com. Also see www.RipOffReport. com, describing a high turnover rate among LegalZoom workers.

4 See www.PracticeBlawg.com to view an 18-minute video entitled “Purchasing a $69.00 Will,” which shows an attorney working through Legal­Zoom’s Will Questionnaire.

5 The LegalZoom disclaimer states, “The 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. LegalZoom cannot provide legal advice and can only provide self-help services at your specific direction.”

6 March 31, 2010, www.LegalZoom.com, “Wills” page.

7 March 29, 2010. LegalZoom website, Divorce Overview Page.

8 May 5, 2008 letter from the North Carolina State Bar Unauthorized Practice Committee to Mr. Charles E. Rampenthal of LegalZoom.com, Inc.

9 Case No. 09AC-CC00737.

10 Complaint, Jansen v. LegalZoom.com, Inc., Count 48.

11 Notice for Removal, Jansen v. LegalZoom. com, Inc., U.S. District Court, Western District of Missouri, Central Division. According to figures from the U.S. Census Bureau, July 2009, Missouri’s population was 5,987,580, while Washington’s population was 6,664,195.

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Reprinted from May 2009, King County Bar Association Bulletin, by Stacey Romberg – KCBB Link

This post is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting with an attorney.

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