Washington State's Attorney General has entered into a settlement agreement with LegalZoom, requiring that LegalZoom cease comparing its fees to attorneys' fees unless the company clearly discloses that its service isn't a substitute for a law firm. The agreement also prohibits LegalZoom from engaging in the unauthorized practice of law, selling personal information obtained from Washington customers or misrepresenting the benefits of any estate distribution agreement. LegalZoom is also the subject of a class action suit in Missouri for the unauthorized practice of law.
This action has been a long time coming, but much of the damage to solos and small law firms has already been done, as LegalZoom, with its substantial venture capital backing, has already imprinted itself on the minds of America's middle class consumers that it offers a better alternative that seeking the advice of an attorney.
Even Polaris Investors – the VC firm that backs LegalZoom – claims on its web site that:
“Legalzoom is the nation’s largest online legal service center. The company helps its consumer and small business customers quickly and affordably create estate planning documents, form businesses, and protect valuable intellectual property such as trademarks and provisional patents through their easy-to-use website thus avoiding costly attorney fees.” (Our emphasis).
There is a value in having non-lawyer, trained paralegals assist consumers in completing legal forms, but LegalZoom's consumer practices have set this reform movement back. If an attorney claimed that his practice, “put the law on your side,” as Robert Shapiro of OJ fame has done on every Cable-TV channel, that lawyer would probably be subject to disciplinary action for an advertising claim that is a material misrepresentation.
It is time to level the playing field by requiring LegalZoom to disclose clearly the limitations of the services it provides.
Other State Attorney General's with responsibility for enforcing consumer protection legislation should take notice.