Comparing LegalZoom to a Law Firm: some significant differences, some criticisms and a compliment

1.  Price –  LegalZoom  claims its services cost less than those of a law firm:

Lawyer-Free Pricing

With LegalZoom’s lawyer-free service, you can save up to 85% off the rates an attorney would charge for the same procedure. In addition, LegalZoom guarantees honest, upfront pricing and our fees are “per project,” not “per hour.” You’ll know the total price before you place your order.

LegalZoom’s marketing on price is clever, contradictory and disingenuous.  LegalZoom is clever by comparing its services to those of a law firm as if the two services could fairly be compared one to other producing the inescapable conclusion that LegalZoom is a great deal.  LegalZoom continues the unwarranted comparison by guaranteeing that its fees are honest (implying lawyers are dishonest), upfront (which suggests lawyers’ fees come after the fact as a surprise), and “per project,” not “per hour.”  “You’ll know the total price before you place your order.”  This language constitutes fair criticism of some lawyers but ignores the fact that most lawyers are trustworthy and charge reasonable fees.   More importantly by appealing to the public’s anti-lawyer prejudices, LegalZoom draws attention away from the differences between LegalZoom’s services and those of a lawyer.

2.  Marketing –  Here there are some similarities and differences.  A similarity appears in LegalZoom’s first and most basic message:  “We put the law on your side.”  That is an advertisement for a law firm. In fact there are a number of law firms that use that exact language in their ads.  In my view, the purpose of that language is to begin the process of inducing reliance on LegalZoom’s ability to serve customers’ legal needs to the same extent as a law firm would.  But there is a fundamental difference between LegalZoom’s marketing and that of a law firm.  In general, the law of lawyering and ethics codes prohibit lawyer advertisements that are false or misleading in any material respect.  In my view, LegalZoom’s advertising is unfair and deceptive in that it touts the extensive knowledge and expertise of its lawyers on one hand, while claiming that its services are “lawyer-free” on the other.  How can both statements be true?

3.  Denial of responsibility –  LegalZoom seeks, unilaterally (without its customers’ consent) to deny virtually all responsibility for its services, which is something that lawyers may not do.  LegalZoom’s Full Disclaimer (aptly titled) is here. By contrast, Rule 1.8(h)1 of Connecticut’s Rules of Professional Conduct (which I believe is the same or similar to lawyer ethics rules in all states) provides:

(h) A lawyer shall not:

(1) Make an agreement prospectively limiting the lawyer’s liability to a client for malpractice the client is independently represented in
making the agreement.

One might reasonably conclude that LegalZoom as a business model is an example of sheer genius.  It identified the largest possible market for legal services in the country, i.e. the entire country.  Lawyers and therefore law firms are limited by state licensing requirements.  LegalZoom claims not to be subject to state licensing requirements on one hand and yet to have extensive knowledge of all relevant state laws on the other.  Having the largest market for legal services in the country, LegalZoom has, one imagines, an astonishingly low cost of doing business, making use of sophisticated technology and proof-readers, rather than lawyers.  LegalZoom is always paid in advance, and, like Dell, has money in hand before performing any service, a kind of just in time assembly line process.  In addition, it has managed (or attempted) to reduce its professional liability risk to near zero. (See its disclaimer).

By avoiding (or claiming that it is not subject to) ANY regulations that govern the practice of law, LegalZoom has opened a very wide, low cost pipeline to the largest market for legal services in the country.  Sheer genius.

But who bears the attendant risks?  Answer:   LegalZoom’s customers.   What are the attendant risks of using LegalZoom?  Answer:  The basic risk is that the forms LegalZoom has selected and that it offers to customers in all fifty states will not do what LegalZoom customers expect.  Another basic risk is that by offering the forms LegalZoom creates the impression that discussing one’s situation with a lawyer is not necessary when in fact such discussions are the key to value.  Whatever the risks are, LegalZoom has made it very clear in its fine print that it wants nothing to do with any of them. The bottom line is this:  LegalZoom’s form might work. They might not.  Whatever that risk is belongs entirely to LegalZoom’s customers.  

Does LegalZoom use deceptive marketing practices?  What does it mean to claim, boldly and loudly as LegalZoom does that, on one hand, it has expert attorneys with extensive knowledge of state and federal law while claiming on the other hand that it is not responsible for anything that happens when a customer uses its services?  Is that fair?  Or is it a smokescreen behind which there is the bait and switch?

Lastly,  could it be that LegalZoom has planted the seed for the transformation of how legal services could be responsibly and efficiently delivered by lawyers who are willing to (a) identify themselves and their credentials, (b) engage in conversations with clients and (b) take responsibility for the services they provide?  The key is LegalZoom’s technology platform.