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To Win the Hearts and Minds of Consumers, Lawyers Need to Sell, Not Sue

by Carolyn Elefant on March 4, 2010 · 9 comments

in Client Service, Legal Profession Trends, Trends

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To date, we lawyers haven’t been able to effectively sell the public on the idea that document preparation services like Legal Zoom are a poor substitute for the services of a lawyer.  So, being lawyers, we’ve done the next best thing to selling:  suing.  Last month, a Missouri law firm filed a class action lawsuit against LegalZoom on behalf of three LegalZoom customers, alleging that LegalZoom violate Missouri’s unauthorized practice of law statute.  Likewise, several months back, the North Carolina Bar challenged LegalZoom for unauthorized practice of law.

What’s interesting about both actions is that neither cites specific incidents of harm to consumers, such as an individual winding up personally liable for business dealings because of an improperly formed corporation or LLC.  Or a widowed spouse losing an inheritance to her deceased husband’s ex, because LegalZoom botched the will.  In fact, in Estate of George Mounts v. Barrett, a Missouri Court of Appeals case from 2000 on UPL (note – I found it on GoogleLegal, haven’t shepardized it), a concurring judge expressed surprise at the relatively few complaints raised over unauthorized practice:

Even so, it appears to this writer there is an alarming increase in the unauthorized practice of law especially in the area of real estate law. Inexplicably, there does not appear to be a prevalence of complaints about this trend (if it is a trend)

So why the crackdown if apparently, there isn’t any problem?

Well, for starters, lack of complaints doesn’t mean that LegalZoom is either appropriate or adequate for consumers.  Texas Wills and Trusts lawyer Rania Combs explains that LegalZoom’s description of the law is outdated or just plain wrong, while Start Up Lawyer Ryan Roberts points out that the documents provided are inadequate for the needs of many start ups.  While both Combs and Roberts are one hundred percent correct, their arguments aren’t entirely persuasive to many consumers because the harm that Combs and Roberts describe is speculative.  As a result, it’s easier to ignore.

Moreover, telling consumers (many of whom are already skeptical about the value of legal services) that LegalZoom documents are inadequate doesn’t make much of an impression because many consumers realize (or have experienced first hand) that lawyers can also commit malpractice or overcharge for simple paperwork.  Thus, unless lawyers can show that a greater percentage of LegalZoom documents than lawyer-prepared documents are actually botched or more likely to give rise to  litigation or added costs or some other horrible down the road, then consumers would just as well take their chances with the lower priced option.

Still, there are other compelling rebuttals to LegalZoom.  And what’s worst about UPL actions is that in the rush to shut these companies down, those bringing the lawsuits overlook a far better remedy:  cracking down on LegalZoom’s deceptive advertising practices.  For example, the Ninety Five Years blog comments that LegalZoom claims that a lawyer would charge $780 for a copyright application – which is highly unlikely.  Why not require LegalZoom to produce evidence of these legal fees before allowing it to state that a lawyer would charge as much?

There’s another claim at the site that seventy percent of consumers who complete their own documents make mistakes.  What’s the support for those statistics?  And when consumers make mistakes, are they the kinds of mistakes (e.g., spelling errors or filing at the wrong agency) that LegalZoom can cure?  Or do the errors concern more substantive issues – inadvertently failing to list an LLC member – that even LegalZoom can’t correct?

Finally, Legal Zoom also cites several talk show celebrities as endorsers of the LegalZoom products.  Are those celebrities paid for giving endorsements?  The site doesn’t say (or I couldn’t find where it did) – but it should.

If the FTC or other body regulated LegalZoom ads as strictly as, say, cigarette advertisements or ads for pharmaceutical drugs, consumers could learn more about the potential drawbacks of these sites and make informed decisions.  In some instances – for example, an incorporation for a thirteen year old’s dog walking business business or a will for a $2500 estate – a consumer might legitimately decide that a Legal Zoom document would suffice.  But for more complicated matters, a consumer might realize that any promised savings from Legal Zoom (which are currently inflated by Legal Zoom) are not sufficient to justify the risk of not using a lawyer.

It seems unlikely that any of these lawsuits will prevail on UPL grounds.  As a general matter, most forms and kits do not fall within the category of the practice of law (courtesy of Google, this Missouri case has a pretty good round up), though offering personal advice on how to complete the forms could cross the line into UPL.  Though LegalZoom offers a customer service hot-line, the company is likely to argue that the help provided is not legal advice, but rather is more technical or administrative in nature.

The bottom line is that lawsuits aren’t likely to shut down companies like LegalZoom.  Worse, these suits send the message to consumers that lawyers are so fearful of competition from computerized form companies that they need to drive them out of business.

In addition, do lawyers really want to argue that an impersonal, fill in the blank form is, in fact, “the practice of law?”  Did we really go to law school three years of law school to help someone fill out a form?  From Abraham Lincoln (lawyer’s advice… is his stock in trade) to Richard Susskind (who emphasizes the continuing vitality of bespoke advice even in an automated world), our currency is our judgment and ability to counsel.  Why do we want to diminish that value by arguing, as these kinds of lawsuits do, that we’re nothing more than form-fillers or paper shufflers.

Rather than sue, lawyers need to sell the idea that document preparation services are a waste of money and don’t always offer the benefits (e.g., cost or time savings) that they claim.  Gregory Luce  of the Practice Blawg is doing a bang-up job on that front with a detailed video showing exactly what happens when you sign up for Legal Zoom and how that experience compares, in cost and quality, to a sit down meeting with a lawyer (and perhaps, also, a virtual, unbundled legal service provider).

Ultimately, even if lawyers manage to shut down LegalZoom, there’s no guarantee that clients will choose to retain a lawyer over a DIY alternative.  Unless we lawyers can win over the hearts and minds of clients by showing that we can bring value to basic transactions without much added cost, then even if lawyers manage to win a UPL case, we still lose in the long run.

  • http://solopracticeuniversity.com Susan Cartier Liebel

    Interestingly, I decided to test out LegalZoom myself several months ago. First, their prices were higher than several experienced and reputable solos charged. Second, they upsell for services the lawyer would have included as a matter of due diligence. Third, I never followed through and they consistently bombard me with e-mails.
    There is much to be said for educating the consumer, not suing, because it does send the message lawyers are fearful. The committed DiYers will never hire lawyers first. Good is good enough for them and quite often they will outsmart themselves with their frugality. Those on the fence can definitely be convinced because most do want to deal with a human being they can hold accountable, relate to and who will appreciate their issues.

  • http://www.gallingerlaw.com Todd Gallinger

    My problem with websites like LegalZoom is that consumers savvy enough to figure out their own legal issues and most of the times savvy enough to find the information about how to do it for free. Those who end up using the paid services like LegalZoom will not follow through on properly funding a trust, or having an operating agreement for their LLC, or filing an S-Corp Election or application for Non-Profit Status. As primarily a transactional lawyer, working with small companies and start-ups, each month I come across one or two clients who’ve used LegalZoom to their detriment, and they often have to pay additional legal fees to clean up the mess in addition to what would have been necessary in the first place.

  • http://www.lawoutsidethebox.com Luke Enno

    A very well-written article on a number of levels. One of the key challenges in the legal profession is offering value-added service to the client while still providing a fair and reasonable price. Many people are afraid of lawyers because of the perception that they are going to overcharge them else charge them an unfair rate for the relative amount of work that is done. A trained monkey can crank out a form such as a Will.
    The real value of a lawyer in an estate planning context for example, is to help the client see the whole picture and educate them on a practical level that they can relate to and understand. Hopefully, the perception of stuffy emotionless lawyers will then melt away and change to a paradigm of approachable attorneys who have their client’s interests first at heart.

  • Kevin Caiaccio

    I agree with the points you make in your post and don’t feel that I’m losing any quality clients to LegalZoom. If the consumer doesn’t want to pay for the advice of an atty, they get what they pay for. It’s a little like insurance: some people would rather pay a small premium for very little coverage and others would rather pay and be covered. And in some cases, maybe the former approach is OK.

  • http://www.godfreadlaw.com Paul Godfread

    Great article. I tested LegalZoom for trademark registrations to see what they offer for $179. I typically charge about $500 for the initial application and with that provide counseling and advice about trademark usage and protection.
    After trying LegalZoom, I can say they really aren’t practicing law and they are overcharging for what they offer. Not only do they charge you more for the filing fees than the USPTO does, they really only guide you through the USPTO’s own form. So, $179-300 plus a little extra on the filing fees for what exactly? I am not sure that an average user would gain anything over just filing at the USPTO website directly. Certainly no advice about what to do with your registered mark.
    Not only do they upsell on additional services (some of which might be UPL), they also stated that an average attorney would charge about $2000 for the same service. Now I know I am cheap because I am a solo, so I asked other trademark attorneys and only a few biglaw attorneys were over $1500. Most solos were well under $1000. I don’t know where they get their averages.
    If only people knew how little LegalZoom is offering.

  • http://www.coloradoetrust.com Clinton Hooker

    I reviewed a Revocable Living Trust by LegalZoom and found it very lacking. It did help avoid probate if the person were to fund their own trust, which I put that burden on the person who used LegalZoom. What I did not like about the service was how little benefit they received from their trust: no asset protection, no generation skipping transfer tax benefit, no special needs trust language and no see-through trust language. Like what others have said is LegalZoom overcharges to a degree and it overstates what attorneys actually charge in the real world. I also did not like how LegalZoom tries to get around the legal advice issue by providing as a form of guidance percentages on how others had answered the same question. Instead of complaining, I started my own version of LegalZoom in Colorado, as an attorney, but only for estate planning.

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  • Jeffrey

    Customers need to be informed and ensure they are going to a place that is legally operating first. In California, this requires compliance with Business and Professions Code 6400-6415. Legitimate Legal Document Assistants (as they are called in California) are not a threat or competitor to Lawyers but actually give a useful benefit as properly prepared documents don't bog down the court and allow better access to the legal system for the public. Per the governing law, if an LDA believes someone needs legal advice or representation, i.e. to talk to a lawyer, they are required to direct them to do so.

    The real problem is companies illegally operating, which is bad for everyone, and those doing an incredibly bad job (LegalZoom), which you have some of in every profession.

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