Judge says ‘Internet medium’ doesn’t change DIY legal forms

Has the Internet really changed the “do-it-yourself” legal landscape?

Not really, says a federal judge overseeing an impending trial in Missouri against LegalZoom, one of the country’s largest online legal document services.

LegalZoom faces a class action lawsuit in U.S. District Court in Jefferson City, which is set for trial beginning Aug. 22. The plaintiffs claim LegalZoom’s business constitutes the unlawful practice of law, and they are seeking statutory damages of three times the amount the plaintiffs paid to have documents prepared.

LegalZoom, an online legal document service, faces a trial in Jefferson City later this month for unlawful practice of law. The judge overseeing this case said that just because LegalZoom prepares documents “using a computer program rather than a pen and paper” doesn’t protect it from liability. Photo by Scott Lauck

Last month, after Judge Nanette Laughrey issued an order that denied LegalZoom’s motion for summary judgment, the Glendale, Calif.-based company issued a press release saying the lawsuit threatened to take a “historic right away from Missourians.” It noted that Missouri’s statutes regarding unlawful practice of law date to 1939, a time when “law was practiced using typewriters … the Xerox photocopy machine had yet to be invented — and the Internet wouldn’t come around for another 50 years.”

Laughrey’s brief order on July 21 promised that a full order explaining her rationale would follow. That follow-up order, issued Tuesday afternoon, shoots down the notion that “the novelty of the technology at issue here” changes the legal issue.

“The fact that the customer communicates via computer rather than face to face or that the document is prepared using a computer program rather than a pen and paper does not change the essence of the transaction,” Laughrey wrote.

LegalZoom’s customers can purchase blank legal forms, or they can go to sections of the website specific to their needs, such as creating a last will and testament or setting up a limited liability company.

Users answer a series of questions on the company’s website. The process is automated, and a software program creates the document containing the customer’s responses. LegalZoom employees review the documents, but only to catch factual errors or inconsistencies, which the customer must then correct. The final document is then shipped to the customer.

LegalZoom compares its service to that of divorce “kits” and similar products that the Missouri Supreme Court approved in a 1978 opinion. Laughrey said LegalZoom is free to provide such products, but its Internet portal is not “do-it-yourself;” it’s “we’ll do it for you.”

There is “little or no difference,” she said, between LegalZoom’s interactive website and a lawyer’s asking questions of a client and creating a document as a result.

“LegalZoom’s legal document preparation service goes beyond self-help because of the role played by its human employees, not because of the internet medium,” Laughrey wrote. “It is that human input that creates the legal document. A computer sitting at a desk in California cannot prepare a legal document without a human programming it to fill in the document using legal principles derived from Missouri law that are selected for the customer based on the information provided by the customer.”

Although Laughrey’s order came down hard on LegalZoom’s business model, it didn’t resolve all of the issues for trial.

An attorney for the plaintiffs, David Butsch, of Butsch Simeri Fields in St. Louis, said the jury will still be charged with determining exactly what role LegalZoom plays in drafting the documents. But, he said, that task will be “relatively simple.”

“The evidence is overwhelming,” Butsch said.

Chas Rampenthal, LegalZoom’s general counsel, could not be reached for comment. In a July 26 press release, he said a loss at trial could be costly for small businesses and individuals.

“We believe the people of Missouri will ultimately understand that banning self-help legal software that is available in every other state would be absurd,” Rampenthal said.

The case is Janson et al. v. LegalZoom.com Inc., 2:10-cv-4018.