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LegalZoom Sued in Class Action for Unauthorized Law Practice


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
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Posted: February 9, 2010 @ 4:04 pm
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On December 18, 2009, LegalZoom was sued in the 19th Judicial Circuit Court in Cole County Missouri for engaging in the unauthorized practice of law (see Janson v. LegalZoom complaint).  The plaintiffs are also seeking to certify a class action against LegalZoom.  On February 5, 2010, LegalZoom filed a Notice of Removal, seeking to remove the case from State Court to the United States District Court for the Western District of Missouri.  LegalZoom invoked in its papers the Class Action Fairness Act (CAFA), codified at 28 USC 1332(d) and 28 USC 1453, to remove the action to federal court.  The CAFA provides that a district court has original jurisdiction over a class action with at least 100 plaintiffs, which involves an amount in controversy over $5,000,000 and in which minimal diversity exists between the defendant and at least one plaintiff.  In its removal papers LegalZoom vigorously denies “the allegations of wrongful conduct and intend to file at an appropriate time a dispositive motion showing that they are entitled to judgment as a matter of law.”

As far as I can tell, there are no allegations presented by the plaintiffs that relate to LegalZoom’s business practices relative to patents, copyrights or trademarks, but instead focus on other LegalZoom offerings such as wills and other court filings.  Nevertheless, this caught my attention because since the United States Patent and Trademark Office changed the rules of practice in September 2008 relative to patent and trademark matters pending before the Office I have believed, and openly expressed such belief, that the LegalZoom model is in fact a model that put LegalZoom squarely in the category of offering legal services without a law license, thus engaging in the unauthorized practice of law. For example, just over 1 year ago I wrote about e-mails being sent out to former LegalZoom customers by LegalZoom that explain what needs to be done moving forward in Trademark applications already filed.  Not only was the advice incorrect, but it seems to me to be utilizing legal information, synthesizing such information and making recommendations to another, which is what I have always understood to be the practice of law, and certainly is what I taught was the practice of law when I taught Legal Ethics at Syracuse University.  See LegalZoom Continues Unauthorized Practice of Law.

The complaint filed against LegalZoom explains that in May 2008 the North Carolina State Bar’s Unauthorized Practice Committee undertook an investigation of LegalZoom, and the complaint summarizes the charges as follows:

Among the documents LegalZoom prepares or offers to prepare are articles of incorporation, wills, trusts, divorce pleadings, and deeds.  LegalZoom represents that it  prepares the articles of incorporation and ‘customized bylaws and resolutions’ for its business formation customers.  The legal documents are prepared through LegalZoom’s website where, once the customer purchases the service, the customer is presented a questionnaire that the customer completes online.  LegalZoom transcribes the responses onto a form template that LegalZoom has determined appropriate for the customer’s legal document and in a form or manner determined by LegalZoom or through software developed by or on behalf of LegalZoom.  The customer is presented with a finished document that is represented to be legally sufficient for the customer’s needs without review or edit and has not been approved by an attorney.

In my opinion this is the part of the LegalZoom business that is on the strongest footing and most likely not going to be deemed the unauthorized practice of law.  The use of forms is not the practice of law, and to the extent there is any practicing of law here it would seem to me to be in the choice of form to be used.  I have always understood the LegalZoom process was dictated based on an attorney who created the form and then provided the created form to be used passively in defined circumstances.  I don’t see that as being the practice of law, although LegalZoom would certainly be better off if they did not have a real person doing the transcribing work.  Still, the work of a scribner has never been considered the practice of law.

Where LegalZoom is much more at risk is with respect to what their customer service representatives do, and follow up communications advising of what action need to be taken moving forward.  If you call LegalZoom (and I know this because I tried it several times) the customer service representatives will answer your questions and do seem to be providing legal advice, which would be the unauthorized practice of law. In some cases customer service representatives told me things that if done would immediately cause the loss of rights.  For example, I asked one representative whether I needed to file a patent application first or if I could just start selling the product.  I was told there was no reason why I couldn’t start selling immediately and filing a patent application first was of no importance insofar as the decision to sell was concerned.  Of course, if you followed this advice you would immediately lose any ability to obtain a patent outside the US.  In the US you can, in some circumstances, avail yourself of a 12 month grace period between public use or offers for sale and the filing of a patent application (see The Risk of Not Immediately Filing a Patent Application), but in virtually all places outside the US an absolute novelty rule is followed, which means you must apply for a patent before you sell or publicly use the invention.

So while the LegalZoom model is one that has a lot of appeal, it seems to me that it is just too difficult to pull off without engaging in the unauthorized practice of law.  I have no doubt that the customer service representatives want to do a good job, and try and do a good job, but if you are not trained in the law then you have no way of knowing whether what you are saying is always true, sometimes true or could be misinterpreted by the hearer on the other end of the phone.  The follow up e-mails that try and generate further work are certainly more troubling, even if they contain appropriate guidance and information.  It seems to me that there is no way to make follow-up suggestions on what needs to be done or should be done without offering legal advice, which when provided by those who are not attorneys would constitute the unauthorized practice of law.

What will ultimately happen as a result of this complaint is anyone’s guess, but it should be a case that is carefully watched throughout the business and legal community.  The relief that these plaintiffs are asking for in the complaint is real and substantial, including:

  1. Actual damages in the sum of the fees charged to the Plaintiffs.
  2. Punitive damages in a sum sufficient to punish LegalZoom for its misconduct and to deter if from such misconduct in the future.
  3. Reasonable attorneys fees and expenses, including the costs and expenses of the class notice and claim administration.

I also suspect that with this being forced into the spotlight there may be other plaintiff’s groups and classes that emerge, and perhaps even a State Attorney General or two become interested enough to take a look, which would be a very good thing indeed.  While many think that lawyers just complain about LegalZoom and others, the truth is that if there is the unauthorized practice of law those who ultimately suffer are the customers/clients.  The inescapable reality is that it is far more expensive to pay someone to do something incorrectly and then have to pay someone else later to fix it.  It is even more costly if in certain circumstances there is no fix that can be accomplished.

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About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

23 comments
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  1. Social comments and analytics for this post…

    This post was mentioned on Twitter by ipwatchdog: LegalZoom Sued in Class Action for Unauthorized Practice of Law. LZ seeking to remove to Western District of Missouri. http://bit.ly/bS1HPp

  2. ” but if you are not trained in the law then you have no way of knowing whether what you are saying is always true, sometimes true or could be misinterpreted by the hearer on the other end of the phone”

    Even those who are trained in the law often have no way of knowing whether what they are saying is always true, sometimes true or could be misinterpreted by the hearer on the other end of the phone. Many lawyers don;t know what they’re talking about.

  3. R Barrera-

    If the lawyers you know don’t know what they are talking about then you should find different lawyers who do. The fact that some lawyers are not as good or knowledgeable as others is hardly an argument for letting those who have no legal training offering legal advice. In fact, what you say explains exactly why you should hire a competent attorney. If the law is complicated for those who have been to 3+ years of law school and successfully passed a bar exam how difficult do you think it is for those who have no legal training?

    -Gene

  4. In today’s instant info gratification culture, the pressure is on for lawyers to give instant answers to their client’s questions.

    The problem is that even with the simplest of questions, the answer might be quite complicated.

    Example: When exactly do my patent rights expire?

  5. Step-

    In my experience the more simple the question seems the more complicated the answer. I can’t tell you how many times I have fielded calls and e-mails from people who have “just one simple question.” And then they get upset when you say you cannot answer the question for free. A popular one is “I just want to know if I can receive a patent on my invention.” The trouble with non-practitioners, particularly those who are commissioned or are being timed so as to not keep customers waiting on hold, the answers given are not given with an eye toward understanding the unique circumstances. Frequently the person giving the answer probably doesn’t even know what circumstances really matter. When the concern is getting a commission or getting to the next call so as to not keep people waiting on hold short-circuited answers are given. Compound that with no legal training and it is a disaster waiting to happen. Eventually the stories of non-practitioner malpractice will come to light, but in the case of wills and trusts it won’t be for years. Can you imagine the fighting that will ensue and the number of cases that will be spawned through cookie-cutter wills?

    -Gene

  6. This statement of yours is right on point: “The inescapable reality is that it is far more expensive to pay someone to do something incorrectly and then have to pay someone else later to fix it.” I have taken over prosecution of several trademark applications initiated by clients with LegalZoom. So far, fortunately for the clients, none of these have had fatal errors, but definitely errors and attendant expense that could have been avoided. I think this is because, as you note, “the customer is presented a questionnaire that the customer completes online.” However, the problem is, no further inquiry appears to be done and the information provided by the client is relied upon without question. If the client unwittingly provides incomplete, inadequate or erroneous information, then the client suffers, because the key element to be applied to that information, competent legal advice, was missing.

  7. [...] word comes from Inventblog and IPWatchDog that LegalZoom has been hit with a class action lawsuit in Missouri which alleges that [...]

  8. [...] good discussion of the case can be found on the IPWatchdog Blog in an article by the Blog’s Founder Gene Quinn and at [...]

  9. [...] over the formation of a last will and testament of someone. Link to Court Documents Here's another article on them. I would probably stay away from the for now until they prove their [...]

  10. [...] a law firm; it's a document delivery service. Not sure what the difference is? Neither are a handful of consumers in Missouri who decided to start a class action law suit against the company a few months [...]

  11. [...] suit against LegalZoom. In December 2009, a Missouri man who paid LegalZoom to prepare his will sued the company for engaging in the unauthorized practice of law (Janson v. LegalZoom). The lawsuit is also seeking [...]

  12. [...] a class action lawsuit in California.    The company is also the subject of at least one other lawsuit in [...]

  13. Use of the term “legal” in the name of the business, “LegalZoom,” appears to me to be totally deceptive. I have some knowledge and training in law (paralegal certificate) and consumer protection. Yet, on the basis of the name, I “assumed” that “LegalZoom” was a law firm. I wonder how many of their purported “Over 1 million customers” are similarly misled? Personally, I think that using the name “LegalZoom” is misleading and deceptive.
    One other thought, with over 1 million customers, can’t they at least hire a couple attorneys to validate the information they are providing?
    Fortunately, I always do my homework, especially when it comes to any online product or service. That is how I got to ipwatchdog.com.

  14. [...] suit against LegalZoom. In December 2009, a Missouri man who paid LegalZoom to prepare his will sued the company for engaging in the unauthorized practice of law (Janson v. LegalZoom). The lawsuit is also seeking [...]

  15. [...] LegalZoom Sued in Class Action for Unauthorized Practice of Law (15,277) [...]

  16. The LegalZoom controversy has hit Virginia. The position of the Virginia State Bar is anti consumer.

    This video explains:

    http://www.vamedmal.com/library/legalzoom-the-unauthorized-practice-of-law-in-virginia.cfm

  17. Ben-

    Your position is extraordinarily naive. How much experience do you have with LegalZoom and working with former LegalZoom clients?

    Once upon a time LegalZoom was legitimate, but over time they started to do more and more and are quite clearly engaging in the unauthorized practice of law. All you have to do to verify this is select a series of legal questions and call their customer service number. You will get answers, which is the practice of law. You are likely not to get the right answers, which is tragic when people rely on them.

    The unauthorized practice of law rules and statutes is not about lawyer protectionism, it is about protecting the public. You need to wake up.

    -Gene

  18. They’re still advertising on TV, couldn’t have been much to the lawsuit.

  19. Richard-

    The fact that LegalZoom is advertising on TV doesn’t mean there isn’t validity to the lawsuit. Lawsuits are not resolved over night.

    I have also heard that LegalZoom’s trademark business is in jeopardy with relevant authorities looking closely.

    -Gene

  20. Any updates in the case? I would really like to see how this plays out.

  21. This lawsuit is over (has been for about a year), and LegalZoom is still available to Missouri residents.

  22. Human lawyers will not be replaced by robots. http://www.operationlegaldoom.com

  23. I am a semi-retired attorney who got sucked into the LegalZoom sales pitch…. since I no longer employ paralegals and associate attorneys, I thought LegalZoom would be great to perform clerical and ministerial paperwork which does not require an attorney…. as I got sucked further in by LegalZoom’s “we can do that for you” paralegal services, as what happens so often, certain complexities arise that necessitate the intervention of any experienced attorney. As LLCs were new to me, having been on medical leave for many years, I borrowed money from my mother and tried to form three (3) new State of California LLCs and two trademark dbas. As I placed each order, I made numerous telephone contacts to LegalZoom to request draft copies of the paperwork that was being provided by them. They always said “we’ll email you a copy”… and, no email would ever arise. I was very concerned because in my 25+ years of actively practicing law, I was always inspecting the paperwork that my paralegals and associate attorneys prepared. It is what we like to call “Quality Control”…. well, after placing five (5) total business orders with LegalZoom over a nine (9) week period starting from December 2012 to March 2013, I was becoming more and more concerned that I had paid several thousand dollars to LegalZoom.com Inc. and had absolutely nothing to show for it. I was refused Draft Copies of paperwork that was supposedly prepared on my behalf. Everytime I would inquire of LegalZoom what was happening, they would tell me that “the Secretary of State of California is very slow and backlogged”… finally, on or about March 11, 2013, after MY PERSISTENT INQUIRY (not any contact from LegalZoom), I was told that My Very First LLC ordered from them on or about December 27, 2013 for approximately $447 U.S. Dollars had been “rejected by the California Secretary of State.” What for !!?!! Oh, LegalZoom accidentally listed my brother’s Home Address as Registered Agent in the Articles of Formation. I was told that they would have to start all over again from the beginning….. I am very worried about this project, for which I was ready to receive Venture Capital Funding of $350,000+ upon formation of my LLC for which I own the dba, internet domain and trademark rights. The best they could offer was “cancellation of the order with a full refund”… I asked them to pay for an EXPEDITED FILING with the Secretary of State, which requires an additional $350 fee to the California Secretary of State. LegalZoom had me on the telephone for what seemed like an eternity as some non-lawyer “manager” in their “Escalations Department” reviewed my complaint. The manager gave the word that LegalZoom would not pay for an Expedited Filing, even though the error was clearly GROSS MALPRACTICE BY LEGALZOOM. Having been an Attorney and Counselor at Law since 1981, and a Judge Pro Tem in the Los Angeles Judicial District, I can see clearly now that LegalZoom is doing a lot more than just filling in the blanks on legal forms. They are definitely engaged in the practice and malpractice of law. IN MY PERSONAL OPINION, THE GENERAL PUBLIC IS IN EXTREME LEGAL DANGER BY PUTTING THEIR FAITH IN LEGALZOOM.COM INC.!!! Ya, Robert Shapiro MY ASS….. Saturday afternoon, 4:31 pm PDT, March 16, 2013, – Sir Dr. Mark D Olson, J.D., M.A., M.B.A., Attorney and Counselor at Law, Morro Bay, San Luis Obispo County, California.