LegalZoom.com sued in Missouri class action: maybe now we’ll find out what the practice of law really is

What do lawyers do? In other words, what is the scope of the lawyer racket?

A suit filed in December 2009 in Cole County Circuit Court in December 2009 may give us some idea of whether LegalZoom’s document-generation service overlaps the practice of law in Missouri. LegalZoom has filed a motion to move the suit into federal court.

LegalZoom.com., Inc. takes information from its customers and uses that information to complete documents, which it sells to those customers. In some ways, it’s a web-based version of the books of forms that have been available in paper form for hundreds of years and in digital form for 30 years or more.

The lawsuit was filed by persons who used LegalZoom for the preparation of a will and organizational documents for a limited liability company. The plaintiffs asked the court to certify that they were representatives of all Missouri residents who have done business with LegalZoom. The plaintiffs and their lawyers want

• a determination that LegalZoom’s activities violate Missouri’s statute against unauthorized practice of law (UPL)
• an injunction against continued violations
• a refund of all–times three, as allowed by Missouri’s UPL statute —the money collected by LegalZoom for unauthorized practice of law in Missouri.

You can read about the suit  at Law Vibe, which has links to the petition initiating the suit and other commentary.

For lawyers, the hard part of producing documents is gathering information from clients and creating workable structures for their business relationships and their property. This process requires several steps, some of which may be often repeated:

• the client develops an idea of what the client wants to achieve (to create a partnership, to convey property, to create a transfer of property effective on the clients death, etc.)
• the client must gather documents and other information to provide to the lawyer
• the lawyer reviews the information, verifies what can be verified, and talks to the client  about alternatives for reaching the client’s goals
• the lawyer and the client agree on an alternative and hammer out a document, sometimes in conjunction with a party on the other side of the transaction.

The process can be unpleasant: often the client is required to confront and attempt to resolve difficult aspects of family and business relationships. It’s no wonder that people just want to obtain and sign some kind of form without going through the agony. The actual word-processing is the easy part.

Many kinds of forms have little variation–articles of organization for limited liability companies, warranty deeds, and residential leases, for example. But for each of these things, a good lawyer will ask a bunch of questions that probably aren’t in the LegalZoom script. A good lawyer has deep knowledge about his or her area of practice and of the community in which transactions are made and contracts are performed. Part of this community knowledge is knowing people and institutions of the community, how they have handled their affairs and where they fit in the economic, social and cultural network that comprises the community. Preparing legal documents should  involve consideration of more information than a client inserts into blanks in a questionnaire.

It makes a difference whether the LLC is member-managed or manager-managed. Often a decision needs to be made whether LLC membership should be owned by a husband and wife or a living trust.

For deeds, the legal description and the names of the grantor and grantee must be correct and the deed needs to be recorded in the proper place. In my firm, we also check to see whether the property being conveyed seems to be owned by the person who will sign the deed and whether a due-on-sale clause could be triggered by the new deed. Legal descriptions can be tricky, and many people want to subdivide land by making deeds, even though the resulting parcels do not comply with local subdivision regulations. We may want to mention recorded easements affecting the property or make other clarifications, like adding a reference to the recording data of a plat or the death of a joint tenant.

Obviously, LegalZoom’s products are attractive to many people, to some extent because people do not want to spend their time and money in dealing with lawyers. I’m not personally worried about competition from LegalZoom, because I know that my clients value what I know about them and about my community. If practicing law is community-based, it’s not much like a racket.