In October the NC State Bar and LegalZoom, Inc. announced a settlement in their long-running dispute over the latter’s online, self-help, legal document service. As Ben Barton describes it at Bloomberg’s Big Law Business blog, the terms of that settlement constitute a big win for LegalZoom and its attorneys at Nexsen Pruet:
LegalZoom has basically won the battle and the war.
LegalZoom agreed to have a licensed North Carolina attorney review its online forms and to inform potential customers that its forms are not a substitute for advice from a live attorney. LegalZoom says it was already doing that anyway. In return the State Bar … appears to be rolling over on the unauthorized practice of law ("UPL") fight, going so far as to support a change in North Carolina law to make LegalZoom and other forms providers 100 percent street legal.
As I explained in a previous newsletter, the State Bar’s campaign to drive LegalZoom out of North Carolina began in 2008 with a letter stating that LegalZoom’s document preparation service was "illegal and must end immediately" and threatening it with both civil and criminal action. LegalZoom refused to comply and went on defiantly offering its service in North Carolina, and, despite its bluster, the Bar took no action. However, when LegalZoom tried to register a new prepaid legal services plan in the state in 2010, the Bar withheld certification and cited LegalZoom’s unauthorized practice of law
as one of its reasons for doing so.
After several unsuccessful attempts at administrative resolution, in 2011 LegalZoom filed a state lawsuit in which, among other things, it asked the Wake County Superior Court to declare that it was "not engaged in the unauthorized practice of law by providing a ‘self help legal document service’ through the Internet." At the time of my newsletter (3-11-15) that lawsuit had been bogged down in motions for three and a half years. Rather than go on waiting, soon afterwards — as I reported at the Locker Room blog — LegalZoom filed an antitrust suit in US District Court in which it accused the Bar of "illegally and unreasonably restraining trade in the market for legal services" and requested more than $10 million in damages.
As Barton observes, the antitrust suit significantly upped the ante for both parties. On the one hand:
If LegalZoom had lost in North Carolina, it would have been a stinging defeat and might have even have provided a damaging precedent in other states.
On the other:
If LegalZoom prevailed on its antitrust suit the Bar might, as a practical matter, lose some or all of its regulatory power. The timing of the settlement (just four months after LegalZoom filed the antitrust suit) speaks volumes about how seriously the State Bar took this threat.
In the end, it was the State Bar that blinked:
The bottom line is that LegalZoom has plowed the road for other online forms providers and is likely now in the clear on UPL. … Given the existential threat that UPL seemed to present just a few years ago LegalZoom (and its lawyers) should take a victory lap.
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