Online Legal Document Preparation and the Unauthorized Practice of Law

Prepared by the MSBA-UB Business Law Clerkship Fellows At the Request of the MSBA Business Law Section Council MSBA-UB Business Law Clerkship Fellows: Mallory Bitar, Matthew Cascio, Jordan Halle, J. Kieran Murphy, and Anna Sholl

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The advent of internet-based services has created a national marketplace in which once unattainable services are now accessible to even the least well-off in society.  However, this accessibility, while beneficial, has its disadvantages.  Nowhere are these disadvantages more readily apparent than in the online legal services market.  Several states have dealt with this issue and the potential ethical implications it may have for service providers.  As the following case law indicates, while simply providing legal forms does not constitute the unauthorized practice of law, preparation of legal forms generally does.

One of the first state courts to rule on this issue was the Supreme Court of Florida in The Florida Bar v. We The People Forms and Service Center of Sarasota, Inc.^[1]  In reviewing a referee’s report recommending that We The People be enjoined from engaging in the unauthorized practice of law, the court held that We The People engaged in the unauthorized practice of law when, amongst other violations, the business was found to advertise services beyond the mere preparation of legal forms.^[2]  The court found that We The People provided legal advice and personal legal assistance to several customers in bankruptcy and divorce actions.^[3]  The court approved the referee’s report enjoining We The People from engaging in the unauthorized practice of law and assessed a monetary penalty of $9,000.^[4]

Interestingly, We The People still exists as a company, but appears to have tweaked their business model in response to various legal challenges.^[5]Initially, the company offered legal document preparation services through its various brick and mortar stores.  The company now describes itself as a referral service which helps potential customers locate independently owned and operated legal document preparers.  However, based on the store locator function provided by We The People’s website as well as the websites of their various affiliates, it appears that many, if not all, of the independently owned and operated affiliates are run by some facet of We The People.

One of the next states to address the legality of online legal document preparation was Ohio in Ohio State Bar Assn. v. Cohen.^[6]  In that case, the Ohio State Bar Association filed suit against Randy Cohen, an employee at DocuPrep USA, a nationwide paralegal service, alleging that he engaged in the unauthorized practice of law when he completed various legal documents for customers.^[7]  As an employee of DocuPrep USA, Mr. Cohen advised customers as to what legal documents would be best for certain situations and produced them using computer software knowing that his customers would rely on them to protect their legal rights.  The court found that this constituted the unauthorized practice of law and enjoined Mr. Cohen from preparing legal documents for others.^[8]

More recently, the dilemma posed by online legal document preparers was addressed by the Federal District Court for the Western District of Missouri in Janson v. LegalZoom.com, Inc.^[9]  Consumers brought a class action suit in Missouri state court against LegalZoom, alleging claims for the unlawful practice of law under state law.^[10]  LegalZoom had the case removed to federal court.^[11]  On opposing motions for summary judgment from both parties, the court ruled that LegalZoom’s sale of blank legal forms over the Internet did not constitute the unauthorized practice of law under Missouri law, but that the website’s legal document preparation service did constitute the unauthorized practice of law.^[12]

Another notable case that was settled prior to trial is Webster v. LegalZoom.com, Inc.^[13]  The settlement resolved a 2010 class action lawsuit that alleged that LegalZoom not only misled consumers about the services it could provide, but also practiced law without authorization.^[14] It also claimed that LegalZoom failed to comply with the California Legal Document Assistant Act, California’s Consumers Legal Remedies Act, the California Unfair CompetitionLaw, and other state laws.^[15]  The settlement contained no admission of wrongdoing by LegalZoom.^[16]

With precedent beginning to mount against them, online legal document preparation websites took to the offensive.  In LegalZoom.com, Inc. v. N. Carolina State Bar, LegalZoom filed suit against the North Carolina State Bar Association, asserting state constitutional claims and a claim for commercial disparagement, seeking declaratory judgment to the effect that it was not engaging in the unauthorized practice of law.^[17]  The state bar association filed a motion to dismiss for failure to state a claim.  The court reserved ruling on the motion to dismiss to permit further response by the bar association because no administrative action or criminal charges had been commenced against LegalZoom.^[18]

The struggle between online documents preparers and state bar associations is not simply esoteric, however.  There are many situations that have caused genuine hardship for the consumers using these sites.  One recent example will suffice.  In        Litevich v. Probate Court, the Plaintiff, a proposed beneficiary, sought to probate a will created by LegalZoom despite the lack of both the witnessing and signature requirements.^[19]  The decedent completed and electronically signed the will online, but failed to sign the document in front of two witnesses as required by Connecticut law.^[20] Despite Plaintiff’s contention, the Connecticut Supreme Court declared the will invalid, holding that the electronic signature and online confirmation did not satisfy the statutory requirements.^[21]  Therefore, the administration of the testator’s estate was not completed in the fashion he desired.

States have pursued other means to deal with this issue aside from litigation.  For example, Washington state and LegalZoom reached an agreement in regards to the company’s practices in the state, signing an Assurance of Discontinuance which outlined prohibited practices of the online service provider.^[22] LegalZoom did not admit to having engaged in any of the acts described by the Attorney General’s office, however, and still offers its services to residents of Washington.

Other states have taken legislative action to deal with this issue.  Texas, for example, has carved out an exception to the unauthorized practice of law for the creation of legal documents via websites and computer software so long as the product in question clearly and conspicuously states that it is not a substitute for an attorney’s advice.^[23]  Additionally, Arizona has a Legal Document Preparer program which authorizes non-attorney individuals and business entities to prepare legal documents for clients provided they have obtained a valid certification from the Board of Legal Document Preparers.^[24]

Whatever the path chosen to protect consumers from the pitfalls of online legal document preparation, it is abundantly clear that the services provided online in place of the counsel of actual attorneys will continue to pose practical and ethical problems for licensed attorneys nationwide.