Signing documentDoes a company like LegalZoom, that provides low-cost do-it-yourself legal documents, necessarily stray into the unauthorized practice of law?  The ABA Journal reports here, summarizing recent salvos in the LegalZoom war.

Under LegalZoom’s business model, customers create legal documents by answering on-line questionnaires.  Then, LegalZoom employees review the answers, and out comes a will, or an LLC agreement, or whatever customers might identify as their legal needs.  You’ve probably heard or seen LegalZoom’s ads — they’re everywhere — and they disclaim any intention to practice law.

LegalZoom has indeed racked up a success record in the courts.

  • The South Carolina Supreme Court, for example, effectively gave LegalZoom a green light to operate in March of this year, adopting a referee’s report that ended by agreement a suit brought by a former state attorney general.  The referee wrote that LegalZoom was essentially a scrivener, as its software merely “records the customer’s original information verbatim,” without using any judgment or discretion, and that the documents worked like ones already offered by various state and local agencies.
  • In Ohio, a district court in 2012 dismissed a putative class action complaint alleging that LegalZoom violated Ohio’s statute against the unauthorized practice of law.  The court held that the plaintiff didn’t have a claim unless the Ohio Supreme Court declared that the company engaged in unauthorized practice.

But other jurisdictions have put up at least temporary roadblocks.  About two weeks after the referee’s report in South Carolina, a special superior court judge just across the border in North Carolina kept alive a suit that started in 2011 with LegalZoom suing the state bar following a cease-and-desist order against it. 

The North Carolina bar asserted that the guidance and review that LegalZoom provides means that it is acting as a legal advisor.  The North Carolina court dismissed LegalZoom’s constitutional claims against the bar, and said that it needed more information and briefing before deciding the bar’s claim against the company for unauthorized practice.

Over at The Legal Ethics Forum, law professor Andrew Perlman, of Suffolk University Law School, suggests that LegalZoom should be permitted to continue its work, but with some modest regulatory oversight to protect the public.

The jury is still out, and other jurisdictions will undoubtedly continue to try to define the boundaries of what LegalZoom can do.  What do you think — Is some deregulation a positive force that expands access for consumers who need it?  Is LegalZoom just document automation software?  Or does it cross the line into unauthorized practice territory?  Use Comments to weigh in.