How Will LegalZoom Put You Out of Business?

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Customer: I’d like my ____________ (insert “divorce,” “estate plan,” “construction litigation,” “personal injury matter,” etc.) handled by LegalZoom. The company has really nice TV ads. I like them.

Lawyer: Sorry, the company can’t do that. That would be the unauthorized practice of law.

Legislator: I can see Russia from my house.

BOOM!!! There’s a big, blank spot where the unauthorized practice of law statute used to be. The customer’s happy. The legislator gets reelected. You’re working for LegalZoom (if you’re lucky), and the unauthorized practice of law people get used to asking, “Would you like fries with that?”

I laugh out loud when I hear the “unauthorized practice of law” line. Have those of you uttering that line ever met a real-life legislator? I have.

Just for your information, most of them aren’t Harvard-educated lawyers on the fast track to become President of the United States. Most of them didn’t go to Harvard. Most of them aren’t lawyers. Lately, Russia has been getting a lot of visibility.

LegalZoom is considering an initial public offering. It has already raised $45 million in venture capital. Most of that money has been spent building the brand. What will a few hundred million more dollars mean for its business? More importantly, what will it mean for yours?

So what are we doing about it?

Here’s my take:

When I write about lawyers being polite and having good manners, I get great feedback. You send e-mails, post blog comments, and tweet my article.

When, however, I write about changing your practice, becoming unique, and doing things differently, you evaporate. I’ve had some readers go so far as to ridicule some of my proposals. I’m okay with being ridiculed (I live with teenagers, so I’m used to it).

But it strikes me that we’re change resistant. We don’t want to hear about it. It seems like we’re going to ignore the ideas that would allow us to adapt and keep doing what we’re doing.

Right up until the point when we can see Russia from our houses.

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  • http://www.GrahamLawCollaborative.com Kimberly

    I don’t plan to give up the in-person part of my practice, including family law mediation, but a medium-range goal is to see if there is way to automate simple divorces without children enough to make them inexpensive for the client, efficient, and profitable for my firm. It would be a start. I do get a lot of clients who try to do it themselves a la Legal Zoom, then realize the Iowa Courts don’t allow the forms they are trying to file. Or they miss deadlines or neglect to file certain court-required documents… then they need me to fix things and finish their divorce.

    Maybe other states are more Legal Zoom document friendly, but Iowa has 99 counties and there are 99 ways of practicing law here, as I always like to say. (That statement is virtually always met with knowing nods and laughter, by the way.) To have a real Iowa lawyer draft documents that will be acceptable here would be a boon to people who want to get divorced inexpensively and as quickly as possible. The more automated it would be, the less expensive.

    • http://divorcediscourse.com Lee Rosen

      Sounds like a plan. Our experiments in that arena confirm our sense that now is the time to get the work done. Development costs are low and the world truly is flat.

      Lee

  • Susan Cartier Liebel

    Lee, I don’t think being change-averse is unique to lawyers. Some will heed the call, the majority won’t and we will be back to quoting Darwin: “In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.”

    • http://divorcediscourse.com Lee Rosen

      I don’t think we’re unique, but we’re pretty extreme. I hope solo practice university is teaching some things that might result in adaptation.

      Lee

  • http://profiles.google.com/tobinbrown Toby Brown

    Nice post. Reminds my of a past bar president of mine (I used to work for the Utah State Bar). In a presentation to a group of members, he asked how many would be OK if we raised dues $100 a year to fund UPL efforts. No hands went up. So much for aggressive prosecution on that front.

    • http://divorcediscourse.com Lee Rosen

      Toby,

      That’s hysterical but totally reflects my sense of things. Thanks for jumping in.

      Lee

  • http://www.clearviewdivorce.com Tim

    Susan – Surprisingly you are right. It’s too bad the legal profession cannot seem to get itself out of its own predicament while its tries to figure out which way the world goes round, each day its competitors are taking an increasingly larger slice of the legal industries pie.

    The financial services profession experienced the same thing decades ago when tens of thousands of advisers across the country refused to accept change arguing instead change was not needed, as the any newcomers would “dilute” the quality of advice and service offered to consumers. “Surely nobody could do a better job than themselves” was the belief shared by all those who drank that cool aid.

    It was not until on January 1, 2000 did the market cap of the newly formed Charles Schwab and Co’s. (then the laughing joke of Wall St. trying innovate the financial services industry) market cap pass that of Merrill Lynch – the change resistant Goliath that is now dead (and least in terms of its corporate structure when it recently failed in the banking crisis) did it seem to catch that attention of those who said change was not needed or wanted or that change could not happen.

    Today the legal industry is much like the financial services industry 20 years ago. Many of the professionals who make up the industry continue to resist change and deny its value to the ultimate beneficiary – the consumer. Instead, arrogance, ignorance and an old way of thinking that includes prohibiting outsiders from owing and joining law firms to help bring necessary innovation and new ideas to an old system. What is most surprising is that consumers are telling the industry exactly what they need and want but sadly, it appears only a few are listening. I am confident at least one firm is listening and executing – Legalzoom.com. How long before they become the next Charles Schwab of the financial services industry?

    I recently wrote an article that touches on some of the innovation within the legal industry. It is worth the five minute read. Here is the link: http://bit.ly/f7RIrd

    • http://divorcediscourse.com Lee Rosen

      Timothy,

      Great article on your site. I’ve been watching your progress. Keep in touch.

      Lee

  • Terri Weiss

    I really don’t think LegalZoom will put good lawyers out of business, especially for those with high-end, complex or contested matrimonial matters. This kind of junk software competes for the 1-800-DIVORCE clientele.

    I’m not sure it represents a violation of legal ethics, either. I mean, who is the one practicing law? The lay person preparing his own separation agreement? I don’t think so – everyone has the right (not saying the ability, mind you) to represent themselves in legal matters. Or is the violation being committed by the company putting together the legal forms for other people to complete? If so, what does that make the Blumberg Forms company, or the Intuit-based companies that have fill-in forms for wills, corporate formations, or the NYS Office of Court Administration that posts standard forms online for anyone to download and complete, etc.?

    I’m thinking the real lessons to be learned from these kinds of companies are: (1) everyone loves something of value at discount prices (who doesn’t?); (2) everyone thinks lawyers are both overpaid and worthless (what a surprise, right?); and (3) many lay people believe that divorce work requires no special intellectual skills (see some of the comments on HuffPo Divorce) — this all translates to lawyers not being necessary for small, uncontested divorces in short-term marriages with few assets and no kids. I don’t see that these conclusions pose a serious risk to most practitioners.

    But on the other hand, they also speak loud and clear that for most lawyers, who do not service bottomless-pit richer-than-Croesus clients willing to heap money at their lawyers’ feet without glancing at their bills (Query: do those clients still exist? Even the richest ones usually have financial managers of some kind or another to keep a hawk’s eye on their legal fees), the days of minimum/maximum fee arrangements may be imminent.

    • http://divorcediscourse.com Lee Rosen

      Terri,

      I don’t think we’re connecting on this one.

      I’m not suggesting that LegalZoom will provide your high end clients some kind of “junk software.” I’m suggesting that they’ll provide exactly what your clients want and need and they’ll do it better than we’re doing it now.

      What’s your budget for marketing, improving your offering, training, customer service enhancements, etc?

      How will you compete with a profitable, well funded, public company with thousands of employees, systems, outstanding marketing, etc? It’s about time to answer that question because the IPO is coming soon.

      Lee

  • Bob Blumberg

    It’s rumored that Legal Zoom forms about 6,000 entities a month. That’s about $35,000,000 of legal billings lost annually. Small law firms can’t compete with the big advertising budgest of Legal Zoom and other non-lawyer document sources. However, bar associations can and should promote the added value one gets working with lawyers.

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