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LegalZoom Asks to Employ Lawyers Under New Arizona Rules

Aug. 16, 2021, 8:08 PM

The large consumer-focused legal services website LegalZoom has applied to become the next alternative business structure in Arizona, the state that now boasts the country’s most lenient law firm ownership rules.

The move would allow LegalZoom to hire lawyers as employees to provide legal advice directly to customers, instead of having to rely solely on an independent network of attorneys who contract with the company.

LegalZoom’s ABS application, if approved, could be the most significant test to date for the Arizona rule reform. This is in part because of LegalZoom’s size and reach as a company that went public just two months ago.

The ABA Journal was first to report on LegalZoom’s application. Arizona Supreme Court official Suzanne Porter and LegalZoom General Counsel Nicole Miller confirmed that the company has applied to part of the program.

“State-level Alternative Business Structure licenses allow for greater technological innovation in the delivery of legal services and encourage investment in providing legal services at affordable prices,” said Miller in a written statement. “Too many people don’t have access to the legal system either because they can’t afford an attorney or are not familiar with how to use the law to protect their businesses, families or intellectual property.”

One year ago, Arizona became the first state to formally allow nonlawyers to co-own law firms and other legal service operations through changes approved by the state’s supreme court.

The regulatory reforms were designed to increase the public’s access to legal services and to spur new legal tech innovations.

Rocket Lawyer, which is testing non-lawyer ownership of legal services through Utah’s regulatory sandbox program, several months ago also applied to join Arizona’s ABS experiment—the first company to pursue the new expanded approach in both states.

Like Rocket Lawyer, LegalZoom offers a variety of legal services through its online platform, including everything from helping individuals design wills and prenuptial agreements, to assisting small businesses with devising contracts and filing for bankruptcy.

LegalZoom’s successful IPO in late June placed valuation of the company at $7 billion.

Arizona has approved three entities so far through its ABS program, an Arizona court official has confirmed, and 10 additional businesses or law firms, including LegalZoom’s Arizona entity, LZ Legal Services, also have applied to the program.

Roughly 30 participants are taking part in Utah’s sandbox, a seven-year pilot program through which data is being collected that will help inform whether a new state office will recommend whether the nonlawyer-owned entities should be licensed by the Utah Supreme Court.

To contact the reporter on this story: Sam Skolnik in Washington at sskolnik@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; Rebekah Mintzer at rmintzer@bloomberglaw.com