Webster v. LegalZoom.com, Inc.

The following is from the FAQ section of this website

2. What is this lawsuit about?

This lawsuit was filed in 2010 in Los Angeles Superior Court on behalf of a nationwide class of persons who purchased a legal document or legal document assistant service from LegalZoom.  The lawsuit is against LegalZoom and claims that LegalZoom’s website and advertising contain statements that are misleading and over-promise what LegalZoom will deliver to its customers including the unauthorized practice of law.  It also claims that LegalZoom failed to comply with the following: the California Legal Document Assistant Act; California’s Consumers Legal Remedies Act; the California Unfair Competition Law; California Welfare and Institutions Code § 15610.30; and the common law.



Why did LegalZoom’s in-house counsel go to law school?

The following excerpt from the LegalZoom website about its in-house counsel can be found here.

This is why we went to law school

Each day, we help shape and guide the company and its mission to empower people to handle legal matters. We love knowing that our work is ultimately about helping people.

An example of the work presumably done by LegalZoom’s in-house counsel can be found – if one looks carefully – in LegalZoom’s Terms of Use, which can be found here in the very small print.  One of LegalZoom’s terms of use is entitled “Indemnification,” which reads as follows:

11. Indemnification. You agree to defend, indemnify and hold harmless LegalZoom, our officers, directors, shareholders, employees and agents from and against any and all claims                                                                          liabilities, damages, losses or expenses, including reasonable attorneys’ fees and costs, arising out of or in any way connected with your access to or use of the Site and the Materials.

LegalZoom frequently advertises “We put the law on your side.”  Well, the indemnification provision in its terms of use is an example of LegalZoom attempting to put the law – every little bit of it – on its side.  Rough translation:  if you, dear LegalZoom customer, should find it necessary to sue LegalZoom, you will protect LegalZoom in all of its various manifestations from your own lawsuit by, among other things, paying LegalZoom’s legal fees for defending itself from your claim.

For a picture of LegalZoom’s in-house counsel enjoying their work click here.





LegalZoom and other sellers of legal services who deny all responsibility

For the sake of argument, let’s assume that the risk, if any, of relying on legal documents selected, prepared and sold by LegalZoom does not extend beyond the purchaser. Then, what’s the problem?  Shouldn’t consumers be free to decide for themselves whether or not to take the risk, if there is one? Let the marketplace – imperfect and sometimes slow to catch on to reality – be the principal regulator.

But, again, just for the sake of discussion, assume there are risks and that those risks affect not only the purchasers of legal documents over the Internet but also third parties.  For example, assume someone purchases a document for use in a court proceeding, for example in a divorce or bankruptcy proceeding, and that the document is defective.  What should the court do?  Often courts give more latitude to people who represent themselves, allowing pro se litigants a “do-over” or more time.  If that were to happen because of a defective legal document purchased over the Internet, then the harm caused by the Internet legal document has spread beyond harm to the purchaser and extended to the court and to the other parties to the case.  Is that fair?  In my opinion, the answer is no.

A fundamental problem with LegalZoom is that lawyers use their status as lawyers to attract customers.  They tout their expertise.  LegalZoom’s chief spokesman – its marketer in chief – is well known as the general manager of the OJ Simpson defense team. But, having touted their expertise, the LegalZoom lawyers, in the difficult to find fine print, deny all responsibility.  Before the purchase, LegalZoom’s lawyers are  “expert attorneys with experience at the most prestigious law firms in the country.”  After the purchase those same “expert attorneys with experience at the most prestigious law firms in the country” adopt the attitude of used car salesmen.  (Who would rely on a used car salesman for estate planning documents?)

Direct purchasers of LegalZoom documents have a choice, in theory.  They can – and certainly should – read the fine print and decide whether to buy and rely on the document.  But third parties do not have that choice.  They may become “victims” of “bad” documents sold by annonymous, responsibility-denying lawyers.  That is unfair and should not be permitted.

LegalZoom: The World’s Most Expensive Vending Machine

LegalZoom is an Internet vending machine, the largest, most expensive vending machine on planet earth.  Touting the excellence of its lawyers on one hand and disclaiming all responsibility on the other, LegalZoom dispenses legal products and services far and wide never having to send out a bill or listen to a client.

Perhaps the founders/owners of LegalZoom deserve credit for identifying a huge, previously untapped, unregulated market, consumers who are drawn to the relatively low-cost and convenience offered by LegalZoom, consumers who feel confident and comfortable buying legal services in much the same way one buys a drink from a vending machine at a rest stop on the highway.

With more technological advances, perhaps the day is not long off when there will be drive through legal centers (“I’ll have a big Mac, fries, diet coke and lease) and actual vending machine dispensing legal documens at gas stations, convenience stores and highway rest stops.

Regulation?  Sure, LegalZoom should be regulated.  It’s advertising is slick, too slick.  But the best regulation is common sense.  One gets what one pays for.  If people demand  low cost and convenience, they will get it.  The marketplace, in the first instance, doesn’t much care what is offered for sale.  It only cares that the sale takes place.

Three Connecticut Lawyers Caught Stealing: would the FTC object if disbarred lawyers started offering the kind of “document preparation services” that LegalZoom offers?

Click here for Hartford Courant article by Jon Lender on March 29th.

Editor’s Note:  Under the Federal Trade Commission’s view of promoting competition for licensed lawyers by allowing non-lawyers to perform services traditionally performed by lawyers, the three lawyers mentioned in the article could start an online document preparation service – like LegalZoom – charge fees for taking customer information, incorporating it into legal document, proof-reading the documents, and return them to customers ready for execution.  Using the “it’s not the practice of law” argument championed by the FTC  disbarred lawyers could prepare and charge fees for estate planning documents, incorporation documents, real estate documents, divorce agreements, partnership agreements and hundreds upon hundreds of other legal documents all over the country, i.e. a market thousands of times larger than the market from which they have just been barred from practicing law. 

Does the FTC regulate the so-called document preparation business at all or does it only prohibit states from so-called anti-competitive regulation of the unauthorized practice of law?

Of course there is an anti-competitive element to professional regulation. That is the whole point of licensing, namely, that it is in the public interest to prevent unqualified, untrained or otherwise unfit people from selling certain services to the pubic.  Law, medicine, accounting, nursing, teaching, plumbers, electricians, builders, car repair shops, sellers of liquor and many, many activities require a license and are regulated in order to protect the public interest.

The FTC has begun the process of de-regulating the practice of law in order to promote competition, i.e. lower prices.  Lower prices may appear to be in the interest of the consumer.  But lower quality and total freedom from responsibility – see, for example, LegalZoom’s extensive disclaimer – are not.  It is questionable public policy to permit non-lawyers or lawyers – LegalZoom  claims that it was developed by expert lawyers with experience at the most prestigious firms in the country – to offer what are obviously legal services without any regulation or responsibility.  

For people attracted by the advertising and price of online legal service providers such as LegalZoom and We The People, two lessons from the current financial crisis might be worth bearing in mind:

1.  If it seems too good to be true, it probably is.

2. Buyer Beware.  (And if you are harmed by a LegalZoom or We The People or some similar anonymous, “inexpensive” provider of legal services, the FTC may not be the best place to lodge a complain).